Kabushi Kaisha Isetan vs. The Intermediate Appellate Court

Actual use in commerce in the Philippines is a prerequisite to the acquisition of ownership over a trademark or tradename; a foreign corporation that has not used or promoted its mark locally acquires no goodwill or exclusive right entitled to protection, and the Paris Convention does not automatically bar local registration of a similar tradename absent internationally well-known status.

Petitioner Kabushi Kaisha Isetan is a Japanese corporation that owns the “Isetan” and “Young Leaves Design” marks, registered in Japan and used internationally; private respondent Isetann Department Store, Inc. is a Philippine domestic corporation using “Isetann” as its corporate name and store mark. The dispute arises under Republic Act No. 166, as amended, which governs registration of trademarks and tradenames, and the Paris Convention for the Protection of Industrial Property, to which both the Philippines and Japan are parties. A parallel petition to cancel “ISETAN” as part of respondent’s corporate name was also filed with the Securities and Exchange Commission.

Petitioner Kabushi Kaisha Isetan, also known and trading as Isetan Co., Ltd., is a foreign corporation organized and existing under the laws of Japan with business address at 14-1 Shinjuku, 3-Chrome, Shinjuku, Tokyo, Japan. It owns the trademark “Isetan” and the “Young Leaves Design.” It alleges first use of the trademark “Isetan” on November 5, 1936; the name was a combination of “Ise,” taken from “Iseya,” the first name of the rice dealer in Kondo, Tokyo where the establishment was first located, and “Tan,” taken from “Tanji Kosuge the First.” It claims to have expanded its line of business internationally from 1936 to 1974, and its “Isetan” and “Young Leaves Design” marks were registered in Japan covering more than 34 classes of goods. On October 3, 1983, it applied for registration of “Isetan” and “Young Leaves Design” with the Philippine Patent Office under Permanent Serial Nos. 52422 and 52423.

Private respondent Isetann Department Store, Inc. is a domestic corporation organized and existing under Philippine laws with business address at 423-430 Rizal Avenue, Sta. Cruz, Manila. It claims to have used the word “Isetann” as part of its corporate name and on its products, particularly shirts in Joymart Department Store, sometime in January 1979. The suffix “Tann” means an altar, the place of offering in Chinese, and was adopted to harmonize the corporate name and the corporate logo of two hands in a cup symbolizing the act of offering to the Supreme Being for business blessing. On May 30, 1980 and May 20, 1980, it registered “Isetann Department Store, Inc.” and “Isetann and Flower Design” in the Philippine Patent Office under SR. Reg. No. 4701 and 4714, respectively, as well as with the Bureau of Domestic Trade under Certificate of Registration No. 32020.

On November 28, 1980, petitioner filed with the Philippine Patent Office two petitions for cancellation of Certificates of Supplemental Registration Nos. SR-4714 and SR-4701. It alleged that except for the additional letter “N” in the word “Isetan,” the mark registered by respondent was exactly the same as petitioner’s trademark “ISETAN,” and that the young leaves registered by respondent were exactly the same as petitioner’s “Young Leaves Design.” Petitioner further alleged that respondent’s act of registering a trademark exactly the same as its trademark and adopting a corporate name similar to its own was with the illegal and immoral intention of cashing in on the long-established goodwill and popularity of petitioner’s reputation, causing great and irreparable injury and damage. It argued that both parties’ goods moved in the same channels of trade and that ordinary people would be misled to believe that respondent’s products originated or emanated from, were associated with, or were manufactured or sold or sponsored by petitioner by reason of the challenged trademark. Petitioner also invoked the Paris Convention of March 20, 1883 for the Protection of Industrial Property, of which the Philippines and Japan are both members, stressing that the Philippines’ adherence committed the government to protect trademarks belonging not only to Filipino citizens but also to nationals of other member countries who may seek protection in the Philippines. The petitions were docketed as Inter Partes Cases Nos. 1460 and 1461.

Meanwhile, petitioner also filed with the Securities and Exchange Commission (SEC) a petition to cancel the mark “ISETAN” as part of the registered corporate name of Isetann Department Store, Inc., docketed as SEC Case No. 2051. On May 17, 1985, this petition was denied in a decision rendered by SEC Hearing Officer Atty. Joaquin C. Garaygay. On appeal, the Commission reversed the Hearing Officer on February 25, 1986 and directed private respondent to amend its Articles of Incorporation within 30 days from finality of the decision. On April 15, 1986, respondent filed a motion for reconsideration. On September 10, 1987, the Commission reversed its earlier decision and affirmed the Hearing Officer’s May 17, 1985 decision, stating that since petitioner’s trademark and tradename had never been used in commerce on petitioner’s products marketed in the Philippines, they had not acquired a reputation and goodwill deserving of protection from usurpation by local competitors. This SEC decision, which denied and dismissed the petition to cancel, was submitted to the Director of Patents as part of the evidence for private respondent.

On January 24, 1986, the Director of Patents, after notice and hearing, rendered a joint decision in Inter Partes Cases Nos. 1460 and 1461, dismissing the petitions. The Director held that petitioner had not successfully made out a case of cancellation, ordered respondent’s Certificate of Supplemental Registration No. 4714 to remain in full force and effect for the duration of its term unless sooner or later terminated by law, and gave due course to the corresponding applications for registration in the Principal Register of the trademark and tradename. The records were transmitted to the Trademark Examining Division for appropriate action. On February 21, 1986, Isetan Company Limited moved for reconsideration, but the motion was denied on April 2, 1986. Petitioner appealed to the Intermediate Appellate Court (now Court of Appeals). On June 2, 1986, the Intermediate Appellate Court dismissed the appeal on the ground that it was filed out of time. Petitioner’s motion for reconsideration was denied in a resolution dated July 11, 1986. Hence, this petition.

Initially, the Supreme Court dismissed the petition in a resolution dated July 8, 1987 on the ground that it was filed fourteen (14) days late. On motion for reconsideration, petitioner appealed on equitable grounds, stating that it had a strong and meritorious case, and the petition was given due course in a resolution dated May 19, 1988 to enable the Court to examine more fully any possible denial of substantive justice. The parties were required to submit their memoranda. After considering the records, the Court reiterated its July 8, 1987 resolution dismissing the petition. It found no compelling equitable considerations that would call for the application of Serrano vs. Court of Appeals and Orata vs. Intermediate Appellate Court. There was no dispute that the appeal was filed out of time. Not only was the appeal filed late in the Court of Appeals, the petition for review was also filed late with the Supreme Court; the case was “twice dead.” The Court of Appeals correctly rejected the appeal on the sole ground of late filing, holding that perfection of an appeal within the time provided by law is jurisdictional and failure to observe the period is fatal. The decision sought to be appealed was rendered by the Philippine Patent Office, a quasi-judicial body, so under Section 23(c) of the Interim Rules of Court the appeal was governed by Republic Act No. 5434, Section 2, which requires an appeal to be filed within fifteen (15) days from notice of the ruling or, if a motion for reconsideration is filed within that period, within ten (10) days from notice of the resolution denying the motion. Petitioner received a copy of the Court of Appeals’ resolution denying its motion for reconsideration on July 17, 1986, and had only until August 1, 1986 to file a petition for review with the Supreme Court. The present petition was posted on August 2, 1986. The Patent Office decision and the Court of Appeals decision had long become final and executory.

On the merits, the Court declined to disturb the rulings of the Patent Office and the Court of Appeals. It stated that a fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a prerequisite to the acquisition of ownership over a trademark or tradename. Republic Act No. 166, as amended, provides in Section 2 that trademarks, tradenames, and service marks may be registered only if actually in use in commerce and services not less than two months in the Philippines before the applications for registration are filed, and in Section 2-A that ownership is acquired by actual use in manufacture or trade, business, or service. The records showed that petitioner had never conducted any business in the Philippines, never promoted its tradename or trademark in the Philippines, had absolutely no business goodwill in the Philippines, was unknown to Filipinos except the very few who may have noticed it while travelling abroad, and had never paid a single centavo of tax to the Philippine government. Petitioner’s witnesses, Mr. Mayumi Takayama and Mr. Hieoya Murakami, admitted that the petitioner’s company was not licensed to do business in the Philippines, that its trademark was not registered under Philippine law, and that its trademark was not being used on products in trade, manufacture, or business in the Philippines. Atty. Villasanta, petitioner’s witness, testified that petitioner had never engaged in promotional activities in the Philippines to popularize its trademark because, not being engaged in business in the Philippines, there was no need for advertising. Petitioner’s claim that millions of dollars had been spent in advertising its products referred to advertising in Japan or other foreign places. No promotional activities had been undertaken in the Philippines by petitioner’s own admission. Any goodwill, reputation, or knowledge regarding the name Isetann was purely the work of private respondent, and evidence was introduced on the extensive promotional activities of private respondent. The Court noted that what was involved was not so much a trademark as a tradename: Isetann Department Store, Inc. is the name of a store and not of a product sold in various parts of the country. This case was differentiated from cases involving products bearing familiar names such as “colgate,” “Singer,” “Toyota,” or “Sony,” where the products are marketed widely in the Philippines. There was no product with the name “Isetann” popularized with that brand name in the Philippines. Unless one goes to the store called Isetann in Manila, he would never know what the name means; similarly, until a Filipino buyer steps inside a store called “Isetan” in Tokyo or Hongkong, that name would be completely alien to him. The records showed that among Filipinos, the name could not claim to be internationally well-known. The Court also held that the findings of fact of the Director of Patents are conclusive on the Supreme Court provided they are supported by substantial evidence, and that the Director’s conclusions were based on applicable law and jurisprudence. The Court cited the principle of territoriality of trademark law: what is to be secured from unfair competition in a given territory is the trade which one has in that particular territory, where the business is carried on and where the goodwill symbolized by the trademark has immediate value and where the infringer may profit. Mere origination or adoption of a particular tradename without actual use in the market is insufficient to give any exclusive right to its use, even though such adoption is publicly declared, such as by use of the name in advertisements, circulars, price lists, and on signs and stationery. The Paris Convention does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. As stated by the Director of Patents, the Philippines must honor its obligations concerning internationally known or well-known marks, but the conditions must exist: (a) the mark must be internationally known or well known; (b) the subject of the right must be a trademark, not a patent or copyright or anything else; (c) the mark must be for use in the same or similar kinds of goods; and (d) the person claiming must be the owner of the mark. Respondent registered its trademark in 1979, continuously used that name in commerce, and established goodwill through extensive advertising. The people who buy at Isetann Store do so because of Isetann’s efforts. There was no showing that the Japanese firm’s registration in Japan or Hongkong had any influence whatsoever on the Filipino buying public.

• Confusing Similarity: Petitioner alleged that except for the additional letter “N,” respondent’s registered mark was exactly the same as its “ISETAN” trademark and that respondent’s young leaves design was exactly the same as its “Young Leaves Design.”
• Bad Faith and Unfair Competition: Petitioner alleged that respondent registered the mark and adopted a similar corporate name with the illegal and immoral intention of cashing in on the long-established goodwill and popularity of petitioner’s reputation, causing great and irreparable injury and damage.
• Likelihood of Confusion: Petitioner argued that both parties’ goods moved in the same channels of trade and that ordinary people would be misled to believe that respondent’s products originated or emanated from, were associated with, or were manufactured or sold or sponsored by petitioner.
• Paris Convention: Petitioner invoked the Paris Convention of March 20, 1883, stressing that the Philippines’ adherence committed the government to protect trademarks belonging not only to Filipino citizens but also to nationals of other member countries who may seek protection in the Philippines.
• Substantial Justice and Late Appeal: On motion for reconsideration before the Supreme Court, petitioner appealed on equitable grounds, stating that it had a strong and meritorious case, to relax the stringent application of technical rules.

• Prior and Continuous Local Use: Respondent claimed it used “Isetann” as part of its corporate name and on its products, particularly shirts in Joymart Department Store, sometime in January 1979, and registered the mark in 1980.
• Goodwill and Advertising: Respondent maintained that it continuously used the name in commerce and established goodwill through extensive advertising, such that people who buy at Isetann Store do so because of Isetann’s efforts.
• No Local Use or Goodwill by Petitioner: Respondent relied on the SEC decision, submitted as evidence, which held that petitioner’s trademark and tradename had never been used in commerce on petitioner’s products marketed in the Philippines and had not acquired a reputation and goodwill deserving of protection from usurpation by local competitors.
• No Influence on Filipino Buying Public: Respondent argued there was no showing that the Japanese firm’s registration in Japan or Hongkong had any influence whatsoever on the Filipino buying public.

• Late Appeal: Whether the Court of Appeals correctly dismissed petitioner’s appeal from the Director of Patents on the ground that it was filed out of time.
• Relaxation of Technical Rules: Whether the Supreme Court should relax the reglementary period for appeal on equitable grounds and substantial justice.
• Actual Use in Commerce: Whether actual use in commerce in the Philippines is a prerequisite to the acquisition of ownership over a trademark or tradename.
• Cancellation of Respondent’s Registration: Whether respondent’s Certificates of Supplemental Registration for “Isetann” and Flower Design should be cancelled for being confusingly similar to petitioner’s “Isetan” and Young Leaves Design.
• Paris Convention: Whether the Paris Convention obligates the Philippines to protect petitioner’s trademark/tradename despite petitioner’s lack of local use and the mark’s lack of internationally well-known status among Filipinos.

• Late Appeal: Yes. The Court of Appeals correctly dismissed the appeal; perfection of an appeal within the time provided by law is jurisdictional, and failure to observe the period is fatal. The petition for review was also late, making the case “twice dead.”
• Relaxation of Technical Rules: No. No compelling equitable considerations existed to relax the stringent application of technical rules; the Patent Office and Court of Appeals decisions had become final and executory.
• Actual Use in Commerce: No. Actual use in commerce in the Philippines is a prerequisite to acquisition of ownership over a trademark or tradename; petitioner never used or promoted its mark locally.
• Cancellation of Respondent’s Registration: No. The cancellation petitions were properly dismissed; respondent had prior and continuous local use and goodwill, while petitioner had no business goodwill in the Philippines.
• Paris Convention: No. The Paris Convention does not automatically protect a foreign tradename absent internationally well-known status and the conditions stated; petitioner’s mark was not shown to be internationally well-known among Filipinos.

• Late Appeal: The decision sought to be appealed was rendered by the Philippine Patent Office, a quasi-judicial body. Under Section 23(c) of the Interim Rules of Court, the appeal was governed by Republic Act No. 5434, Section 2, which requires an appeal to the Court of Appeals to be filed within fifteen (15) days from notice of the ruling, or, if a motion for reconsideration is filed within that period, within ten (10) days from notice of the resolution denying the motion. Petitioner received the Court of Appeals’ resolution denying its motion for reconsideration on July 17, 1986, giving it until August 1, 1986 to file a petition for review with the Supreme Court. The petition was posted on August 2, 1986. The appeal was therefore late. The Court of Appeals correctly held that perfection of an appeal within the time provided by law is jurisdictional and failure to observe the period is fatal. The Patent Office decision and the Court of Appeals decision had become final and executory. The Supreme Court had initially dismissed the petition on July 8, 1987 for being fourteen (14) days late and reiterated that dismissal.
• Relaxation of Technical Rules: The Court considered Serrano vs. Court of Appeals and Orata vs. Intermediate Appellate Court, which recognize that considerations of substantial justice may relax the stringent application of technical rules so as not to defeat an exceptionally meritorious petition. However, no compelling equitable considerations existed. The appeal was not only late in the Court of Appeals; the petition for review was also late in the Supreme Court. The case was “twice dead” and could no longer be reviewed. The Court declined to disturb the rulings of the Patent Office and the Court of Appeals.
• Actual Use in Commerce: Republic Act No. 166, as amended, Section 2, provides that trademarks, tradenames, and service marks may be registered only if actually in use in commerce and services not less than two months in the Philippines before the applications for registration are filed. Section 2-A provides that ownership is acquired by actual use in manufacture or trade, business, or service. Sterling Products International, Inc. vs. Farbenfabriken Bayer Actiengesellschaft held that actual use in commerce or business is a prerequisite to the acquisition of ownership over a trademark; adoption alone is not use and does not give exclusive right. Pagasa Industrial Corporation vs. Court of Appeals held that the Trademark Law requires actual commercial use prior to registration and that samples are not use. The records showed petitioner never conducted business in the Philippines, never promoted its tradename or trademark, had no business goodwill, was unknown to Filipinos except the very few who may have noticed it abroad, and never paid taxes. Petitioner’s witnesses admitted the company was not licensed to do business in the Philippines, its trademark was not registered under Philippine law, and its trademark was not used on products in trade, manufacture, or business in the Philippines. Atty. Villasanta testified no promotional activities were undertaken in the Philippines because petitioner was not engaged in business. Advertising expenditures referred to Japan or other foreign places. Thus, petitioner had no right to the remedy it sought.
• Cancellation of Respondent’s Registration: Any goodwill, reputation, or knowledge regarding the name Isetann was purely the work of private respondent. Evidence showed extensive promotional activities by private respondent. The case involved a tradename, not a product trademark. Isetann Department Store, Inc. is the name of a store, not a product sold in various parts of the country. Unlike widely marketed products such as “colgate,” “Singer,” “Toyota,” or “Sony,” there was no product with the name “Isetann” popularized in the Philippines. Unless one goes to the store called Isetann in Manila, the name would be unknown; similarly, until a Filipino buyer steps inside a store called “Isetan” in Tokyo or Hongkong, that name would be alien. Among Filipinos, the name could not claim to be internationally well-known. The findings of fact of the Director of Patents are conclusive on the Supreme Court if supported by substantial evidence. The Director’s conclusions were based on applicable law and jurisprudence. The principle of territoriality of trademark law means protection is secured in the territory where trade is carried on and where the goodwill symbolized by the trademark has immediate value. Mere origination or adoption of a tradename without actual use in the market is insufficient to give exclusive right, even if adoption is publicly declared through advertisements, circulars, price lists, signs, and stationery.
• Paris Convention: The Paris Convention does not automatically exclude all countries that signed it from using a tradename that happens to be used in one country. The Director of Patents stated that while the Philippines must honor its obligations concerning internationally known or well-known marks, the conditions must exist: (a) the mark must be internationally known or well known; (b) the subject of the right must be a trademark, not a patent or copyright or anything else; (c) the mark must be for use in the same or similar kinds of goods; and (d) the person claiming must be the owner of the mark. Respondent registered its trademark in 1979, continuously used the name in commerce, and established goodwill through extensive advertising. There was no showing that the Japanese firm’s registration in Japan or Hongkong had any influence on the Filipino buying public. Thus, the Paris Convention did not afford petitioner the relief sought.

• Actual Use in Commerce as Prerequisite to Trademark/Tradename Ownership — Under Republic Act No. 166, as amended, actual use in commerce in the Philippines is a prerequisite to the acquisition of ownership over a trademark or tradename. Adoption alone, including advertisements, circulars, price lists, signs, and stationery, does not constitute use. The Court applied this doctrine to hold that petitioner, which never conducted business or used its mark in the Philippines, acquired no ownership or exclusive right.
• Territoriality of Trademark Law — Trademark protection is territorial; what is secured from unfair competition in a given territory is the trade which one has in that particular territory, where the business is carried on and where the goodwill symbolized by the trademark has immediate value. The Court applied this to hold that petitioner’s Japanese registration and international use did not create Philippine goodwill.
• Paris Convention Conditions for Protection of Foreign Marks — The Paris Convention does not automatically protect a foreign tradename. For a foreign mark to be protected, the following conditions must exist: (a) the mark must be internationally known or well known; (b) the subject of the right must be a trademark, not a patent or copyright or anything else; (c) the mark must be for use in the same or similar kinds of goods; and (d) the person claiming must be the owner of the mark. The Court found these conditions not met.
• Perfection of Appeal Within Reglementary Period is Jurisdictional — Compliance with the period for perfecting an appeal is mandatory and jurisdictional; failure to observe it renders the judgment final and executory and the appellate court acquires no jurisdiction. The Court applied this to both the appeal to the Court of Appeals and the petition for review to the Supreme Court, both filed late.
• Findings of Fact of Director of Patents Conclusive if Supported by Substantial Evidence — The findings of fact of the Director of Patents are conclusive on the Supreme Court provided they are supported by substantial evidence. The Court relied on this to uphold the Director’s factual conclusions.
• Relaxation of Technical Rules for Substantial Justice — The Court may relax the stringent application of technical rules in exceptionally meritorious petitions, as in Serrano vs. Court of Appeals and Orata vs. Intermediate Appellate Court, but no compelling equitable considerations existed in this case. The Court applied this to decline relaxation.

• “A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a tradename.” — States the ratio decidendi on the substantive issue.
• “The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country.” — Defines the limited effect of the Paris Convention in this case.
• “a) the mark must be internationally known or well known; b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar kinds of goods; and d) the person claiming must be the owner of the mark” — Sets out the conditions for protection of a foreign mark under the Paris Convention as stated by the Director of Patents.
• “Perfection of an appeal within the time provided by law is jurisdictional, and failure to observe the period is fatal.” — States the procedural ratio for dismissing the appeal.

• Sterling Products International, Inc. vs. Farbenfabriken Bayer Actiengesellschaft, 27 SCRA 1214 [1969] — Controlling precedent cited for the rule that actual use in commerce or business is a prerequisite to acquisition of ownership over a trademark; adoption alone is not use.
• Pagasa Industrial Corporation vs. Court of Appeals, 118 SCRA 526 [1982] — Followed; held that the Trademark Law requires actual commercial use prior to registration and that samples are not use.
• Serrano vs. Court of Appeals, 139 SCRA 179 [1985] and Orata vs. Intermediate Appellate Court, 185 SCRA 148 [1990] — Cited as exceptions allowing relaxation of technical rules for substantial justice; distinguished because no compelling equitable considerations existed.
• Chua Che vs. Phil. Patent Office, 13 SCRA 67 [1965]; Chung Te vs. Ng Kian Giab, 18 SCRA 747 [1966]; Marvex Commercial Co., Inc. vs. Petra Hawpia & Co., 18 SCRA 1178 [1966]; Lim Kiah vs. Kaynee, Co., 25 SCRA 485 [1968]; Kee Boc vs. Dir. of Patents, 34 SCRA 570 [1970] — Cited for the rule that findings of fact of the Director of Patents are conclusive on the Supreme Court if supported by substantial evidence.
• Ingenohl vs. Walter E. Olsen, 71 L. ed. 762 — Cited for the principle of territoriality of trademark law.
• Johnson Mfg. Co. vs. Leader Filling Stations Corp., 196 N.E. 852, 291 Mass. 394 and Consumers Petrolum Co. vs. Consumers Co. of ILL., 169 F 2d 153 — Cited for the rule that mere origination or adoption of a tradename without actual use is insufficient to give exclusive right, even if adoption is publicly declared.

• Section 2, Republic Act No. 166, as amended (by R.A. No. 865) — Requires trademarks, tradenames, and service marks to be actually in use in commerce and services not less than two months in the Philippines before applications for registration are filed. The Court applied this to hold petitioner’s mark not entitled to registration/protection because it was not used locally.
• Section 2-A, Republic Act No. 166, as amended (by R.A. No. 638) — Provides that ownership of trademarks, tradenames, and service marks is acquired by actual use in manufacture or trade, business, or service. The Court applied this to hold petitioner acquired no ownership or exclusive right.
• Section 23(c), Interim Rules of Court — Provides that appeals from the Philippine Patent Office, a quasi-judicial body, are governed by Republic Act No. 5434. The Court used this to determine the reglementary period for appeal.
• Section 2, Republic Act No. 5434 — Appeals to the Court of Appeals shall be filed within 15 days from notice of the ruling, award, order, decision, or judgment; if a motion for reconsideration is filed within that period, then within 10 days from notice of denial. The Court applied this to find the appeal late.
• Paris Convention for the Protection of Industrial Property (March 20, 1883) — Invoked by petitioner; the Court held it does not automatically protect a foreign tradename absent internationally well-known status and the conditions stated by the Director of Patents.

Fernan, C.J., Paras and Bidin, JJ., concur. Padilla, J., filed a Separate Opinion concurring in the result. He would affirm the Court of Appeals decision and dismiss the petition solely on the ground that the appeal was filed out of time; he held that perfection of an appeal within the reglementary period is mandatory and jurisdictional, citing Bello vs. Fernando and Aguilar vs. Blanco, and saw no need to reach the merits of the abortive appeal.