Levi Strauss & Co. vs. Antonio Sevilla and Antonio L. Guevarra

The Court held that the assignment of a trademark registration pendente lite does not moot a cancellation proceeding, as the transferee stands in the shoes of the transferor and remains bound by the final judgment. Furthermore, a prosecutor’s dismissal of a criminal complaint for lack of probable cause constitutes an administrative, inquisitorial function that does not amount to a judgment on the merits and cannot bar a subsequent quasi-judicial trademark cancellation suit under the doctrine of res judicata. On the merits, the Court ruled that under the Dominancy Test, the “LIVE’S” mark is confusingly similar to the “LEVI’S” mark because it is a mere anagram sharing identical dominant features, thereby justifying its cancellation.

Petitioner Levi Strauss & Co., a foreign corporation, has owned the “LEVI’S” word mark since 1946 and licensed its commercial use in the Philippines through Levi Strauss Phils., Inc. (LSPI). Respondents Antonio Sevilla and Antonio L. Guevarra registered the stylized mark “LIVE’S” for goods under Class 25 of the Nice Classification. In 1995, LSPI commissioned “Project Cherokee 5,” a consumer survey revealing that 86% of participants associated “LIVE’S” with “LEVI’S” and 90% misread the stylized mark as “LEVI’S.” Consequently, petitioner filed a Petition for Cancellation with the Bureau of Patents, Trademarks, and Technology Transfer, alleging confusing similarity. Respondents defended by asserting material differences in spelling, pronunciation, pricing, trade dress, and purchaser sophistication, arguing that the marks were sufficiently distinguishable and that their prior registration vested enforceable rights.

• Petitioner is a foreign corporation that has continuously used the “LEVI’S” word mark since 1946 for Class 25 goods, licensing LSPI to manufacture and distribute the products in the Philippines.
• Respondents originally registered the stylized mark “LIVE’S” for identical Class 25 goods, later assigning registration rights to Guevarra, doing business as Vogue Traders Clothing Company.
• A 1995 consumer survey commissioned by petitioner demonstrated that 86% of respondents associated “LIVE’S” with “LEVI’S,” and 90% visually misread the stylized “LIVE’S” mark as “LEVI’S.”
• The IPO-BLA denied the cancellation petition in 2009, finding no confusing similarity based on differences in pronunciation, spelling, meaning, design, pricing, and trade channels.
• The IPO-DG affirmed the IPO-BLA in 2012, relying heavily on a prior Supreme Court ruling (G.R. No. 162311) that purportedly resolved the similarity issue.
• During the pendency of the CA proceedings, respondents assigned the LIVE’S registration to Dale Sy on July 31, 2012. The CA dismissed the petition on mootness and res judicata grounds.
• The registration remained valid and subsisting, with an expiration date in 2022, despite the assignment.

• Petitioner maintained that the case was not moot because the trademark registration remained valid and the transferee pendente lite is legally bound by the outcome of the pending cancellation proceeding.
• Petitioner argued that G.R. No. 162311 does not operate as res judicata because it originated from a preliminary investigation, which is an administrative and inquisitorial proceeding that does not yield a final judgment on the merits.
• Petitioner contended that the LIVE’S mark is confusingly similar to LEVI’S under the Dominancy Test, emphasizing that it is a mere anagram sharing identical letters, possessive apostrophes, and lowercase “e” stylization.
• Petitioner asserted that the consumer survey and actual marketplace confusion established a high likelihood of deception, satisfying the threshold for colorable imitation and warranting cancellation.

• Respondents argued that the marks are sufficiently distinguishable due to differences in spelling, phonetic pronunciation, meaning, and overall trade dress.
• Respondents maintained that purchasers of jeans exercise a high degree of caution and scrutiny, reducing the probability of confusion, and that significant price disparities and distinct distribution channels further mitigate any risk of deception.
• Respondents contended that the prior Supreme Court ruling in G.R. No. 162311, which upheld the DOJ’s finding of lack of probable cause for unfair competition, conclusively resolved the similarity issue and barred relitigation.
• Respondents asserted that their long-standing use and prior registration vested enforceable rights that should not be disturbed absent clear proof of bad faith or identical duplication.

• Procedural Issues:
  • Whether the Court of Appeals correctly dismissed the petition on the grounds of mootness and res judicata.
• Substantive Issues:
  • Whether respondents’ “LIVE’S” mark is confusingly similar to petitioner’s “LEVI’S” marks, warranting the cancellation of its registration under the Intellectual Property Code.

• Procedural:
  • The Court held that the case is not moot. The trademark registration remains valid and subsisting, and the assignment pendente lite does not extinguish the controversy because the transferee stands in the shoes of the transferor and is bound by the final judgment under Rule 3, Section 19 of the Rules of Court.
  • The Court ruled that G.R. No. 162311 is not res judicata. A preliminary investigation is purely administrative and inquisitorial, intended only to determine probable cause for indictment. It does not adjudicate rights and obligations, nor does it constitute a judgment on the merits. Consequently, a prosecutor’s dismissal of a criminal complaint cannot bar subsequent civil or quasi-judicial proceedings.
• Substantive:
  • The Court applied the Dominancy Test, definitively abandoning the Holistic Test following Kolin Electronics Co., Inc. v. Kolin Philippines International, Inc. The Dominancy Test prioritizes the similarity of prevalent features and the aural/visual impressions created on the purchasing public.
  • The Court found that LIVE’S and LEVI’S share identical dominant features: five letters, a possessive apostrophe before the terminal “S,” and the same lowercase “e” stylization. The only variation is the transposition of the second and fourth letters, rendering LIVE’S a mere anagram of LEVI’S.
  • Given the striking structural similarity and the consumer survey results demonstrating high rates of misidentification, the Court concluded that the LIVE’S mark constitutes a colorable imitation likely to deceive ordinary purchasers. Accordingly, the Court ordered the cancellation of Registration No. 53918.

• Dominancy Test — The test focuses on the similarity of the prevalent or dominant features of competing trademarks that might cause confusion, mistake, or deception, prioritizing aural and visual impressions over factors like price, quality, or market segment. The Court applied this test to determine that the shared letters, apostrophe placement, and stylization between LIVE’S and LEVI’S established a likelihood of confusion, rendering the Holistic Test obsolete in Philippine trademark jurisprudence.
• Transferee Pendente Lite — A party who acquires an interest in the subject matter of a pending case steps into the shoes of the transferor and is bound by the proceedings and final judgment. The Court relied on this doctrine to rule that the assignment of the trademark registration during litigation did not render the cancellation case moot, as the transferee’s interests are legally represented by the original parties.
• Administrative Nature of Preliminary Investigation — A preliminary investigation is an executive, inquisitorial function that determines probable cause for criminal prosecution, not a quasi-judicial adjudication of substantive rights. Because it does not resolve the merits or bind the parties with finality, its outcomes cannot trigger res judicata in subsequent civil or administrative actions. The Court invoked this doctrine to sever the binding effect of G.R. No. 162311 from the present cancellation proceeding.

• "As a transferee pendente lite, the Court agrees with the CA that petitioner need not be a party to the main case... Discretion is permitted because, in general, the transferee's interest is deemed by law as adequately represented and protected by the participation of his transferors in the case." — The Court utilized this passage to establish that litigation over a transferred interest continues unabated, thereby negating the CA’s mootness ruling and ensuring the judgment binds the new registrant.
• "Investigation for the purpose of determining whether an actual charge shall subsequently be filed against the person subject of the investigation is a purely administrative, rather than a judicial or quasi-judicial, function. It is not an exercise in adjudication: no ruling is made on the rights and obligations of the parties, but merely evidentiary appraisal to determine if it is worth going into actual adjudication." — The Court cited this principle to clarify why a prosecutor’s finding of lack of probable cause lacks the finality and adjudicatory character required to invoke res judicata.
• "Simply put, respondents’ LIVE'S mark is but a mere anagram of petitioner's 'LEVI'S' marks. It would not be farfetched to imagine that a buyer, when confronted with such striking similarity would be led to confuse one over the other." — This formulation anchored the Court’s application of the Dominancy Test, demonstrating how structural and visual overlap between the marks directly triggers the likelihood of confusion standard.

• Sunfire Trading, Inc. v. Guy — Cited to establish the legal principle that a transferee pendente lite is bound by the pending action and final judgment, thereby preventing the assignment of a contested trademark from mooting the cancellation case.
• Imingan v. The Office of the Honorable Ombudsman — Cited to reinforce the rule that preliminary investigation proceedings are administrative, not judicial, and that a prosecutor’s dismissal of a complaint does not constitute a final judgment on the merits for res judicata purposes.
• Kolin Electronics Co., Inc. v. Kolin Philippines International, Inc. — Cited as the controlling En Banc precedent that definitively abandoned the Holistic Test and mandated the exclusive application of the Dominancy Test under Section 155 of the Intellectual Property Code.
• Levi Strauss (Phils.) Inc. v. Lim (G.R. No. 162311) — Cited as the prior proceeding that the lower tribunals erroneously treated as res judicata. The Court distinguished it, clarifying that it only reviewed the DOJ’s probable cause determination and did not adjudicate trademark cancellation on the merits.

• Rule 3, Section 19 of the 1997 Rules of Civil Procedure — Governs the transfer of interest pendente lite and authorizes courts to continue an action with or without substituting the transferee, forming the procedural basis for rejecting the mootness defense.
• Section 155.1 of Republic Act No. 8293 (Intellectual Property Code) — Defines trademark infringement and explicitly references the use of a “dominant feature” of a registered mark, which the Court interpreted as statutory endorsement of the Dominancy Test over the Holistic Test.
• Section 4, Rule 18 of the Rules of Procedure for Intellectual Property Rights Cases — Directs courts to evaluate visual, aural, and connotative comparisons under normal trade conditions when determining confusing similarity, providing the procedural framework for the Court’s trademark analysis.

• Lazaro-Javier, J. — Concurred that the case was not moot and that res judicata did not strictly apply, but dissented on the merits. The dissent argued that G.R. No. 162311 remains highly persuasive, as it previously found no intent to deceive. Justice Lazaro-Javier emphasized that the consumer survey methodology was flawed, discounting the ordinary purchaser’s ability to closely examine products and consider price differentials. The dissent maintained that the significant price gap, distinct retail channels, and purchaser sophistication for denim goods preclude a likelihood of confusion, rendering cancellation unwarranted.