R. F. & J. Alexander & Co., Ltd. vs. Jose Ang

The test for unfair competition under Section 29 of Republic Act No. 166 is whether the general appearance of the goods, packaging, or indicia is likely to mislead the ordinary or casual purchaser of ordinary caution and prudence, not the expert or intelligent buyer; a vendor who sells goods with such deceptive appearance may be held liable even absent manufacture; and prior registration of a trademark does not preclude a finding of unfair competition.

For over fifty years, Scottish manufacturer R. F. & J. Alexander & Co., Ltd., and its Philippine distributor Ker & Co., Ltd. sold “Alexander” sewing thread in the Philippines. The thread was wound into seventy-five-yard balls, packed in distinctive blue cardboard boxes of forty balls apiece, and prominently marked with the trademark “Alexander” in red on a white label and with red center-ball tickets reading “Alexander’s Glassgow.” Respondents, local merchants in Bacolod City, retailed competing threads under the names “Aurora,” “Mayflower,” and “Agatonica,” using labels and boxes whose color, size, typography, and decorative elements were virtually identical to those of “Alexander.”

• The “Alexander” Trade Dress: Petitioners’ “Alexander” sewing thread was seventy-five yards long per ball (No. 80), wound into balls and packed in blue cardboard boxes holding forty balls each. Each ball bore a red center-ball ticket with “Alexander’s Glassgow” printed in black. A similar ticket was pasted on one end of the box. The box lid carried a label on a white background with a decorative border, a description of the contents, and the trademark “Alexander” in red. The trademark “Alexander” was registered in the Bureau of Commerce on 15 May 1934 (No. 11728) and later with the Patent Office on 2 July 1949 (No. 1371-S) under Republic Act No. 166; the “Alexander’s Glassgow” center-ball ticket was likewise registered (No. 1375-S).

• The Competing Threads: Respondents Jose Ang (Hua Hing Trading) and Sy Bok (China Rose) sold sewing threads under the names “Aurora,” “Mayflower,” and “Agatonica.” The threads were approximately sixty yards long per ball (No. 80), wound into balls, and packed in cardboard boxes lined with a lighter shade of blue paper, each holding forty balls. The boxes were slightly smaller than petitioners’. Each ball had a red center-ball ticket printed in black. The labels bore the brand names in the same red color, typeface, size, and position as “Alexander,” flanked by the identical words “Hilo para coser,” “Marca,” and “La Mejor calidad,” in the same color, type, and size. The enclosing decorative border created the same overall impression.

• Stipulated Facts and Defenses: It was stipulated that both respondents were merely wholesalers and retailers, not the sole distributors or manufacturers of the threads. Respondents denied any intent to deceive and specifically asserted two defenses: they were sellers, not manufacturers; and the trade names “Aurora,” “Mayflower,” and “Agatonica” were duly registered.

• Lower Rulings: The trial court dismissed the complaints. The Court of Appeals affirmed, adopting the three propositions that the test is deception of intelligent buyers, the action must be against the manufacturer, and trademark registration precludes unfair competition.

• Standard of Deception: Petitioners argued that the correct test for unfair competition is likelihood of confusion of the ordinary or casual purchaser, not the intelligent buyer, as supported by Section 29 of Republic Act No. 166 and prevailing jurisprudence.
• Liability of Sellers: Petitioners maintained that under Section 29, any person who sells goods with the general appearance of another’s goods is liable, regardless of whether they are the manufacturer or a subsequent vendor.
• Effect of Trademark Registration: Petitioners contended that registration of a trademark does not legalize acts that otherwise constitute unfair competition; prior registration cannot immunize a competitor from suit.

• Deception of the Intelligent Buyer: Respondents asserted, and the Court of Appeals adopted, that the test of unfair competition is the possibility of deception of the intelligent buyer, not the ignorant purchaser.
• Liability of the Seller: Respondents argued that an action for unfair competition should be directed against the manufacturer, not against a mere seller who retails various brands, including the plaintiffs’ own thread.
• Trademark Registration: Respondents maintained that the labels were registered trademarks, which precludes a finding of unfair competition.

• Standard for Deception: Whether the test of unfair competition is likelihood of confusion of the ordinary or casual purchaser, or of the intelligent buyer.
• Liability of Vendor: Whether a merchant who merely sells, but does not manufacture, goods bearing deceptive packaging may be held liable for unfair competition.
• Effect of Trademark Registration: Whether the registration of a trademark precludes an action for unfair competition.

• Standard for Deception: The test is likelihood of confusion of the ordinary or casual purchaser, not the intelligent or expert buyer. Section 29 of Republic Act No. 166 refers to “purchasers” and “public,” which courts have consistently interpreted to mean the ordinary buyer. A brief departure in Dy Buncio v. Tan Tiao Bok (referring to the “ordinarily intelligent buyer”) was corrected in E. Spinner & Co. v. Neuss Hesslein, which reaffirmed the “casual purchaser” standard. The similarity need only be such as to mislead a purchaser of ordinary caution and prudence; it need not deceive experts. Applying that standard, the labels and boxes of respondents’ threads were substantially identical in color, typeface, size, placement of words, and decorative elements, rendering confusion likely. An ordinary buyer who had previously purchased “Alexander” would mistake “Agatonica” or the other brands for the same product, especially when offered at a lower price, thereby diverting trade through deceptive devices.
• Liability of Vendor: A vendor may be held liable for unfair competition even if he is not the manufacturer. Section 29 itself imposes liability on “any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer,” and expressly includes “any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose.” The defense of being a mere seller was therefore unavailing.
• Effect of Trademark Registration: Registration of a trademark does not bar an unfair competition suit. Consistent with precedents such as Parke, Davis & Co. v. Kim Foo and Ed. A. Keller & Co. v. Kenkwa Meriyasu Co., one may be declared an unfair competitor even if his competing trademark is registered. Registration may at most be relevant to good faith and mitigation of damages, but it does not preclude injunctive relief or a finding of unfair competition.

• Test of Unfair Competition (Ordinary Purchaser Rule) — Under Section 29 of Republic Act No. 166, the decisive question is whether the overall appearance of the goods, packaging, labels, or other indicia is likely to mislead the ordinary or casual purchaser of ordinary caution and prudence, not the intelligent or expert buyer. It is immaterial that a side-by-side inspection would reveal differences; the test is the impression made on the average consumer who knows the goods only by name or general appearance. Application: The Court found that respondents’ labels and boxes, despite different brand names, were so similar in color, typeface, size, placement, and decorative border that an ordinary buyer would mistake them for petitioners’ “Alexander” thread.
• Vendor Liability for Unfair Competition — Section 29 imposes liability not only on the manufacturer but also on any person who sells goods and gives them the general appearance of another’s goods, as well as on subsequent vendors or agents who sell with a like purpose. Mere status as a seller or retailer does not insulate a party from liability. Application: The contention that the action should be directed against the manufacturer was rejected; respondents, as wholesalers and retailers selling the confusingly similar goods, were within the statute’s coverage.
• Registration as No Bar to Unfair Competition — The registration of a trademark does not legalize otherwise unfair competitive acts. A defendant may simultaneously hold a registered trademark and be guilty of unfair competition if the overall appearance of its goods or packaging deceives or is likely to deceive the public. Application: The defense that the labels were registered was dismissed; registration could at best affect the question of damages but could not defeat the unfair competition claim.

• “It stands to reason that when the law speaks of ‘purchasers’ it generally refers to ordinary or average purchasers.” This passage anchors the ordinary-purchaser standard, negating the Court of Appeals’ “intelligent buyer” criterion.
• “…in cases of unfair competition, while the requisite degree of resemblance … is not capable of exact definition, it may be stated generally that the similarity must be such, but need only be such, as is likely to mislead purchasers of ordinary caution and prudence, or in other words, the ordinary buyer, into the belief that the goods or wares are those … of another producer or tradesman. It is not necessary … that the resemblance be sufficient to deceive experts, dealers, or other persons specially familiar with the trademark or goods involved.” Cited from 52 American Jurisprudence, this statement defines the controlling legal standard.
• “Unfair competition is not confined to the adoption of the same or similar names.” The use of the same colors, layout, and general appearance, even with different words, may constitute unfair competition.
• “We have held in several decisions that one may be declared unfair competitor even if his competing trade-mark is registered.” This confirms that trademark registration does not immunize a party from unfair competition liability.

• E. Spinner & Co. v. Neuss Hesslein, 54 Phil. 224 — Followed; returned to the ordinary-purchaser test and discarded the “intelligent buyer” variant briefly used in Dy Buncio v. Tan Tiao Bok.
• Dy Buncio v. Tan Tiao Bok, 42 Phil. 190 — Distinguished; its reference to the “ordinarily intelligent buyer” was not the prevailing doctrine.
• La Yebana Co. v. Chua Seco & Co., 14 Phil. 534 — Followed; held that use of a trademark in the same colors and form so as to deceive constitutes unfair competition, even if different words are used.
• Sapolin Co. v. Balmaceda, 67 Phil. 705 — Followed; affirmed that the same words need not be used to establish unfair competition.
• Brook Bros. v. Froelich, 8 Phil. 580 — Compared; the Court found the present case even stronger on similarity of competing thread labels.
• Parke, Davis & Co. v. Kim Foo, 60 Phil. 928; Ed. A. Keller & Co. v. Kenkwa Meriyasu Co., 57 Phil. 262 — Followed; established that registration of a trademark does not preclude a finding of unfair competition.

• Section 29, Republic Act No. 166 (Trademark Law) — Defines unfair competition and imposes liability on any person who, in selling goods, gives them the general appearance of another’s goods, or clothes them with such appearance as to deceive the public and defraud another of legitimate trade. The provision expressly includes subsequent vendors and agents selling with a like purpose. Application: The Court relied on this section to hold that the ordinary-purchaser test applies, that sellers are covered, and that the defendants’ packaging and labels created the prohibited deceptive appearance.

Pablo, Acting C.J., Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ., concurred.