Innolab Industries, Inc. vs. United Laboratories, Inc.

In an administrative trademark opposition before the IPOPHL, the oppositor bears the burden of proving by substantial evidence not only that the marks are similar but also that the similarity is likely to confuse the ordinary purchaser; a mere degree of similarity is insufficient, and an administrative appeal should not be dismissed outright for nonpayment of the appeal fee where no due process violation results.

United Laboratories, Inc. is the proprietor of the registered trademark "UNILAB" and related marks covering goods under NCL Class 5. Innolab Industries, Inc. sought registration of a competing mark in the same commercial field. The Intellectual Property Code prohibits registration of a mark that nearly resembles a registered mark as to likely deceive or cause confusion, and allows any person who believes they would be damaged to oppose registration; IPOPHL inter partes proceedings are governed by IPO Memorandum Circular No. 16-007.

On July 29, 2015, Innolab filed Trademark Application No. 4-2015-008549 with IPOPHL for registration of "INNOLAB," covering goods under NCL Class 3 (soaps, perfumery, oils, cosmetics and cosmetic preparations, personal care, skin care and hair products) and NCL Class 5 (pharmaceutical and sanitary preparations, food supplements, cosmetics and household hazardous substance products). The mark appeared as an image in the records. IPOPHL issued a notice of allowance, and the mark was published in the Electronic Gazette.

Unilab filed a Verified Notice of Opposition, claiming that use of petitioner's mark would cause damage to its existing registered marks by their confusing similarity. Unilab attached registered marks covering its goods also under NCL Class 5. To prove damage, Unilab presented a certification from the Philippine Patent Office on the registration of the mark "UNILAB" on May 25, 1983; certificates of renewal of registration, including for NCL Classes 03, 05, 30, and 32; affidavits and declarations as to use of the registered mark "UNILAB"; and scanned images of some of Unilab's products bearing the "UNILAB and LOGO" mark.

IPOPHL sent Innolab a Notice to Answer. Innolab failed to file an answer, although the Notice was recorded with IPOPHL as received by Innolab. In an Order dated February 28, 2017, the BLA declared Innolab in default. Innolab claimed that the Notice to Answer was never recorded, logged, and/or transmitted to its appropriate officers for immediate action as in previous Notices to Answer in other Oppositions filed by Unilab. Upon receipt of the Order, Innolab coordinated with its counsel.

In a Decision dated April 19, 2017, the BLA sustained Unilab's opposition, denied Innolab's trademark application, and ordered the return of the filewrapper to the Bureau of Trademarks. Innolab filed an Appeal Memorandum with the BLA. In an Order dated June 13, 2017, the BLA director denied the appeal, citing IPO Memorandum Circular No. 16-007, which states that an appeal shall be immediately denied if filed out of time and/or not accompanied by payment of the applicable fee; the director found that the appeal was not accompanied by the filing fee. Innolab then filed an Appeal Memorandum with the ODG on July 3, 2017, praying that the case be heard on the merits and explaining that the failure to pay the appeal fee was due to its counsel's failure to verify if the fee had indeed been paid, caused by the sheer number and volume of intellectual property cases and transactions handled by counsel and through mere inadvertence.

In a Decision dated December 20, 2019, the ODG affirmed the BLA and dismissed the appeal outright. Considering Innolab's proffered reason for the procedural lapse, the director general ruled that liberal interpretation and application of the rules may be allowed only in case of demonstrable merit and under justifiable causes and circumstances; counsel's negligence was held inexcusable. Consequently, the ODG did not rule on the substantive aspect of the appeal. Innolab filed a Petition for Review under Rule 43 before the CA. In a Decision dated December 4, 2020, the CA denied the petition, ruling that the right to appeal is neither a natural right nor part of due process but merely a statutory privilege, and that failure to pay the appeal fee made the BLA ruling final and executory; counsel's failure bound its client. At any rate, the CA held that even if the rules were relaxed, the petition must still be denied, finding confusing similarity between "INNOLAB" and "UNILAB" because the marks sound the same; the second letter "N" and the last three letters "LAB" are identical; both marks have three syllables; and both are pronounced with the same intonation. Innolab sought reconsideration, which the CA denied in a Resolution dated June 23, 2021.

• Strict Application of Procedural Rules: Petitioner argued that the IPOPHL erred in strictly applying its rules of procedure when it dismissed the appeal outright.
• No Confusing Similarity: Petitioner maintained that its "INNOLAB" mark is not confusingly similar to respondent's "UNILAB" mark.
• No Free Riding: Petitioner claimed that its mark will not ride on the goodwill of respondent's mark.
• Excusable Nonpayment: Petitioner explained that the failure to pay the appeal fee was due to its counsel's failure to verify whether the fee had been paid, caused by the sheer number and volume of intellectual property cases and transactions handled by counsel and mere inadvertence.

• Pro Forma Petition: Respondent pointed out that the arguments raised in the Petition merely repeated the arguments raised before the IPOPHL and the CA, making the petition pro forma in nature.
• Confusing Similarity: Respondent echoed the CA in finding that the marks are confusingly similar due to the phonetic and visual similarities between them.
• Damage to Registered Marks: In its opposition, respondent claimed that use of petitioner's mark would cause damage to its existing registered marks by their confusing similarity.

• Procedural Liberality: Whether the CA erred in affirming the IPOPHL's dismissal of petitioner's appeal for nonpayment of the appeal fee.
• Likelihood of Confusion: Whether the CA erred in affirming the denial of registration based on confusing similarity between "INNOLAB" and "UNILAB," considering the burden to prove likelihood of confusion by substantial evidence.

• Procedural Liberality: Yes. The IPOPHL should have allowed petitioner to rectify its error and belatedly pay the appeal fee; nonpayment did not breach due process, and administrative rules are liberally construed.
• Likelihood of Confusion: No. The CA erred in finding confusing similarity; similarity alone is insufficient, and respondent failed to prove by substantial evidence that the resemblance was likely to confuse the ordinary purchaser.

• Procedural Liberality: The general rule in proceedings before administrative agencies is liberality. Rules of procedure are tools for the administration of justice and must not be strictly and rigidly applied when doing so would frustrate the ends of justice and deprive substantive rights. Birkenstock Orthopaedie GmbH and Co. KG vs. Philippine Shoe Expo Marketing Corp. emphasized that quasi-judicial and administrative bodies such as the IPOPHL are not bound by technical rules of procedure, subject only to the requirements of due process. Besaga vs. Spouses Acosta held that liberal construction of administrative rules of procedure is generally allowed; strict application is called for only when the gravity of the violation is such that due process is breached. Here, petitioner filed its appeal but failed to pay the filing fee required by Rule 9, Section 2(a) of IPO Memorandum Circular No. 16-007. Although an appeal unaccompanied by payment of the filing fee is a ground to dismiss the appeal outright, nonpayment did not breach the due process rights of any party. The ODG therefore erred in dismissing the appeal outright and rigidly applying administrative rules, sacrificing the purpose of those rules to assist the parties in obtaining a just, speedy, and inexpensive determination of their claims and defenses. By dismissing the appeal outright, the IPOPHL denied the parties a genuine opportunity to be heard by a tribunal that possesses the unique and technical expertise to resolve their issues. The IPOPHL should have allowed petitioner to rectify its error and belatedly pay the appeal fee and heard the parties on appeal. The nonpayment of the appeal fee at the time of the filing of the appeal should not have resulted in the BLA ruling becoming final, and the CA erred in affirming the IPOPHL's dismissal of petitioner's appeal.
• Likelihood of Confusion: Section 123.1(d) of the Intellectual Property Code prohibits registration of a mark that nearly resembles a registered mark belonging to a different proprietor as to be likely to deceive or cause confusion. A close reading shows two elements: similarity and likelihood of confusion. It is not enough that the marks nearly resemble each other; the assailed mark must nearly resemble the protected mark as to likely deceive or cause confusion. Any person who believes they would be damaged may file a verified opposition stating the grounds and surrounding facts; in an administrative case, the opposition must be supported by substantial evidence, and the oppositor bears the burden of evidence. Apart from proving similarity, respondent had to present evidence that the similarity was likely to confuse the ordinary purchaser. The CA and IPOPHL correctly used the dominancy test, which is preferred over the holistic test and bears the imprimatur of the Legislature, but their correctness ended there. The Court observed a degree of similarity: both marks end with the syllable "-LAB" and have the letter "N" in their first two syllables. However, the vowels differ, leading to differences in how the marks are spoken except for "-LAB"; Senior Associate Justice Leonen and Associate Justice Lazaro-Javier pointed to visual and aural differences. Senior Associate Justice Leonen also noted that, given Unilab's presence in the market for almost 60 years, it was not impossible that some would be aware of the proper pronunciation of "UNILAB." While the dominancy test identifies dominant features, likelihood of confusion is another matter. Simply alleging or pointing out similarities is insufficient; otherwise the issue would rest on subjective perceptions and unsupported assumptions. The 2020 Revised Rules of Procedure for Intellectual Property Rights Cases, Rule 18, Section 5, provides a multifactor test, and foreign jurisdictions similarly require evidence-based assessment. The Court clarified that it was not applying foreign law outright, but showing that likelihood of confusion cannot be determined merely by pointing out similarities in sound or appearance. The law presumes likelihood of confusion only for identical marks; for similar marks, there is no presumption, and the assertion must be supported by evidence. Degree of similarity is but one factor, and a finding of similarity is not equal to a finding of similarity likely to confuse. Here, respondent offered no evidence beyond alleging that the marks sound confusingly similar. Its assertion that confusion is likely because both marks pertain to goods under NCL Class 5 is untenable; Kolin held that the jurisdiction abandoned product or service classification as a factor in determining relatedness. Relying solely on classification may create problems under stare decisis. The record also showed that respondent's goods do not bear solely the "UNILAB" mark but also the "UNILAB and LOGO" mark, which is even more strikingly different from "INNOLAB." Petitioner also filed its own trademark for a logo in Trademark Application No. 04-2015-008547 at the same time as the "INNOLAB" mark; although the records do not show whether the logo was registered, the application showed an intent to use the logo to identify its products, and the difference between that logo and the "UNILAB and LOGO" mark was too striking to ignore. Associate Justice Caguioa noted that this intent showed good faith on petitioner's part in intending to differentiate its mark from respondent's. Given the foregoing, respondent failed to present substantial evidence that the similarities were of such a degree as to likely cause confusion among consumers. The IPOPHL and CA failed to specify which evidence supported their finding because there was none. Their denial of registration was therefore reversed. Additionally, the Court recognized that no rigid set of rules can be deduced because each trademark case must be decided on its merits; precedent must be studied in light of the facts. The issue of likelihood of confusion is highly fact-specific, and past cases have resorted to unsubstantiated assumptions and arbitrary categorizations. Senior Associate Justice Leonen, in his separate concurring opinion in Kolin and during deliberations, maintained that evaluations of likelihood of confusion cannot be left to subjective determination and that there should be evidence-based standards, including testimonies of stringently qualified witnesses and market surveys with appropriate methodology, sampling, scope, and relevant market conditions. The Court agreed, citing Ginebra San Miguel Corp. vs. Director of the Bureau of Trademarks, which affirmed the reliability and admissibility of survey evidence in establishing likelihood of confusion, subject to factors ensuring objectivity, because empirical results provide an objective analysis. Finally, the quantum of evidence in administrative cases is substantial evidence. A party opposing registration may not rely solely on similarities; if it invokes multifactor test factors, it must present substantial evidence for those factors, and the tribunal must ensure its conclusions are supported by evidence and avoid inferences where no evidence exists.

• Liberal Construction of Administrative Rules of Procedure — In proceedings before administrative agencies, the general rule is liberality; rules of procedure must not be strictly and rigidly applied when doing so would frustrate the ends of justice and deprive substantive rights. Quasi-judicial and administrative bodies such as the IPOPHL are not bound by technical rules, subject only to due process. Strict application is warranted only when the gravity of the violation breaches due process. Applied: petitioner's nonpayment of the appeal fee did not breach any party's due process, so the IPOPHL should have allowed belated payment and heard the appeal instead of dismissing it outright.
• Two Elements of the Section 123.1(d) Prohibition — Under the Intellectual Property Code, a mark cannot be registered if it nearly resembles a registered mark as to be likely to deceive or cause confusion. The provision requires both (a) similarity between the marks and (b) likelihood of confusion. It is not enough that the marks nearly resemble each other; the assailed mark must nearly resemble the protected mark as to likely deceive or cause confusion. Applied: respondent proved only a degree of similarity, not likelihood of confusion.
• Oppositor's Burden of Proof by Substantial Evidence — In an administrative trademark opposition, the oppositor bears the burden of evidence to prove by substantial evidence not only that the competing marks are similar but also that the similarity is likely to confuse the ordinary purchaser. Applied: Unilab offered no evidence beyond alleged aural similarities and failed to discharge its burden.
• Dominancy Test — The preferred test for determining similarity of marks is the dominancy test, which considers the dominant features of the competing marks and weighs visual, aural, and connotative comparisons, as well as the general impression of the ordinary purchaser, giving little weight to prices, quality, sales outlets, and market segments. The holistic test has been abandoned. Applied: the IPOPHL and CA correctly used the dominancy test but erred by limiting their analysis to aural similarities and by treating similarity as sufficient proof of likelihood of confusion.
• Multifactor Test for Likelihood of Confusion — Rule 18, Section 5 of the 2020 Revised Rules of Procedure for Intellectual Property Rights Cases enumerates factors for determining likelihood of confusion, including the strength of the plaintiff's mark, degree of similarity, proximity of products or services, likelihood of bridging the gap, evidence of actual confusion, defendant's good faith, quality of defendant's product or service, and sophistication of buyers. No rigid set of rules can be deduced; each case must be decided on its merits, and the factors invoked must be supported by substantial evidence. Applied: respondent did not present evidence on the multifactor test and could not rely on mere similarity.
• Product Classification Not Determinative of Relatedness — In Kolin, the Court held that the jurisdiction has abandoned the use of product or service classification as a factor in determining the relatedness or nonrelatedness of goods represented by competing marks. Applied: respondent's assertion that confusion was likely because both marks pertain to goods under NCL Class 5 was untenable.
• Presumption of Likelihood of Confusion Only for Identical Marks — The law presumes likelihood of confusion only in the case of identical marks. For similar marks, there is no such presumption; an assertion of likelihood of confusion must be supported by evidence and is not proven simply by pointing out similarities. Applied: "INNOLAB" and "UNILAB" are not identical, so no presumption arose.
• Survey Evidence in Trademark Cases — Consumer or market surveys are reliable and admissible to establish likelihood of confusion, subject to factors ensuring objectivity of the survey process; empirical results provide an objective analysis of whether confusion is likely. Applied: the Court agreed with the need for evidence-based standards and cited Ginebra San Miguel Corp. vs. Director of the Bureau of Trademarks.

• "The general rule in proceedings before administrative agencies is liberality." — States the procedural doctrine that governed the appeal-fee issue and supported reversal of the outright dismissal.
• "A mark cannot be registered if it nearly resembles a registered mark belonging to a different proprietor as to be likely to deceive or cause confusion. A close reading of this provision yields that it is not enough that the marks nearly resemble each other; instead, the assailed mark must nearly resemble the mark sought to be protected as to likely deceive or cause confusion. Apart from the element of similarity, therefore, there is also the element of likelihood of confusion." — Defines the two elements required under Section 123.1(d) of the Intellectual Property Code.
• "To prove that the similarities are likely to confuse or deceive, simply alleging or pointing out the similarities between the marks is insufficient." — States the evidentiary requirement that an oppositor must do more than assert similarity.
• "Given the foregoing, the Court finds that respondent failed to present substantial evidence that the similarities between the "INNOLAB" mark and the "UNILAB" mark is of such a degree as to likely cause confusion among consumers. In ruling that a likelihood of confusion exists, the IPOPHL and the CA failed to specify which evidence supports this legal finding because there is none. Thus, their denial of petitioner's registration for the "INNOLAB" mark must be reversed." — Applies the substantial-evidence standard and constitutes the core substantive conclusion.

• Birkenstock Orthopaedie GmbH and Co. KG vs. Philippine Shoe Expo Marketing Corp., 721 Phil. 867 (2013) — Emphasized liberal application of rules in quasi-judicial and administrative proceedings, noting that bodies such as the IPOPHL are not bound by technical rules of procedure subject only to due process; relied on to reverse the outright dismissal of petitioner's appeal.
• Besaga vs. Spouses Acosta, 758 Phil. 339 (2015) — Held that liberal construction of administrative rules is generally allowed and strict application is called for only when the gravity of the violation breaches due process; applied to petitioner's nonpayment of the appeal fee.
• Kolin Electronics Co., Inc. vs. Kolin Philippines International, Inc., 896 Phil. 190 (2021) — Clarified that the holistic test was abandoned in favor of the dominancy test; held that product or service classification is not a factor in determining relatedness of goods; discussed the multifactor test for likelihood of confusion.
• CMTC International Marketing Corporation vs. Bhagis International Trading Corporation, 700 Phil. 575 (2012) — Recognized that issues such as similarity of trademarks require examination of factual and legal issues that still need to be threshed out; cited on the Court's general inability to resolve factual questions.
• Mighty Corporation vs. E. & J. Gallo Winery, 478 Phil. 615 (2004) — Listed exceptional circumstances that warrant the Court's review of factual findings, including when findings are grounded on speculation or lack citation of specific evidence; cited in the Court's factual review.
• Seri Somboonsakdikul vs. Orlane, 805 Phil. 37 (2017) — Held that aural similarity cannot be based on unsupported generalizations about pronunciation; noted that long market presence may mean some consumers know the proper pronunciation; cited in assessing "UNILAB."
• Ginebra San Miguel Corp. vs. Director of the Bureau of Trademarks, 927 Phil. 355 (2022) — Affirmed the reliability and admissibility of survey evidence in establishing likelihood of confusion, subject to factors ensuring objectivity; cited to support evidence-based standards.
• Marvex Commercial Co., Inc. vs. Petra Hawpia, Co., 125 Phil. 295 (1966) — Cited by the IPOPHL and CA for the idem sonans rule and a list of aurally similar marks; the majority noted its use but did not rely on it to find likelihood of confusion.
• Philip Morris, Inc. vs. Fortune Tobacco Corporation, 526 Phil. 300 (2006) — Stated that factual findings of the appellate court are respected unless mistaken, absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary to findings of the court of origin; cited in the discussion of exceptions to the factual-review rule.
• Taiwan Kolin Corporation, Ltd. vs. Kolin Electronics Co., Inc., 757 Phil. 326 (2015) — Held that no rigid set of rules can be deduced in trademark cases and each case must be decided on its merits; cited for the fact-specific nature of likelihood of confusion.
• Société des Produits Nestlé, S.A. vs. Dy, Jr., 641 Phil. 345 (2010) — Held that in trademark cases, precedent must be studied in light of the facts of the particular case; cited for the fact-specific approach.
• AMF, Inc. vs. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979) — Foreign precedent cited for the "Sleekcraft factors" used in other jurisdictions to determine likelihood of confusion; the Court clarified it was not applying foreign law outright.

• Section 123.1(d) (or Section 123(d)(iii)), Republic Act No. 8293 (Intellectual Property Code of the Philippines) — Prohibits registration of a mark that nearly resembles a registered mark belonging to a different proprietor as to be likely to deceive or cause confusion. Applied: the provision requires both similarity and likelihood of confusion; respondent failed to prove the latter.
• Section 134, Republic Act No. 8293 — Allows any person who believes they would be damaged by registration of a mark to file a verified opposition stating the grounds and surrounding facts on which they rely. Applied: Unilab filed the opposition and, as oppositor, bore the burden of evidence.
• Rule 133, Section 6, 2019 Amendments to the Revised Rules on Evidence — Defines substantial evidence as the kind of evidence a reasonable person would consider adequate to support a conclusion; applied to require respondent to support its claim of likelihood of confusion.
• Rule 9, Section 2(a), IPO Memorandum Circular No. 16-007 (Revised Rules and Regulations on Inter Partes Proceedings (2016)) — Provides that an appeal shall be immediately denied if filed out of time and/or not accompanied by payment of the applicable fee. Applied: petitioner failed to pay, but the Court held outright dismissal improper absent a due process violation.
• Rule 18, Section 5, 2020 Revised Rules of Procedure for Intellectual Property Rights Cases (A.M. No. 10-3-10-SC) — Sets out the likelihood-of-confusion standard and multifactor test, including visual, aural, and connotative comparisons and factors such as strength of mark, degree of similarity, proximity of goods, evidence of actual confusion, good faith, quality, and buyer sophistication. Applied: factors must be supported by substantial evidence; mere similarity is insufficient.
• Section 147.1, Republic Act No. 8293 — Provides that the law presumes likelihood of confusion in the case of identical marks. Applied: because "INNOLAB" and "UNILAB" are not identical, no presumption arose and respondent had to prove likelihood of confusion by evidence.

Chief Justice Gesmundo and Justices Hernando, Lazaro-Javier, Inting, Gaerlan, Rosario, and J. Lopez concurred. Senior Associate Justice Leonen and Justice Dimaampao filed separate concurring opinions, and Justice Caguioa filed a concurring opinion. Justices Zalameda, Marquez, and Villanueva were on official business, and Justice Singh was on leave.

• Senior Associate Justice Leonen — Concurred and voted to grant. Advocated that likelihood of confusion should be evaluated from the consumer's perspective using scientific methodologies from competition and economics, not merely the adjudicator's lens. Noted that the IPOPHL's finding that "INNO" sounds like "UNI" was a general assertion without evidence and appeared based on subjective impressions. Cited Seri Somboonsakdikul vs. Orlane and observed that Unilab's long market presence made it not impossible that some consumers knew the proper pronunciation of "UNILAB." Stated that in trademark analysis the visual aspect should carry greater weight than the aural because a trademark's primary purpose is to distinguish goods. Voted to grant the Petition.
• Justice Caguioa — Concurred in the result. Agreed that the BLA and CA did not properly apply the dominancy test because they limited their analysis to aural similarities; the dominancy test requires visual, aural, and connotative comparisons of dominant features when available. Observed that mechanically applying the Marvex list of aurally similar marks from 1947 may no longer be appropriate due to the internet and current market conditions. Also noted that Innolab's separate application for its own logo showed an intent to differentiate its mark and good faith.
• Justice Dimaampao — Concurred. Opined that the sophistication of buyers is a relevant factor and that consumers of pharmaceuticals—physicians, pharmacists, and patients—are an amply sophisticated demographic. Cited Republic Act No. 9502 and the Generics Act of 1988, as amended, which require generic names and aid in shifting consumer focus from brand names to generic names. Concluded that the lack of dominant similar features and the high sophistication of pharmaceutical buyers reduced the likelihood of confusion.