Sapolin Co., Inc. vs. Balmaceda

The Court held that Section 4 of Act No. 666, as amended by Act No. 3332, which requires prior registration in the Philippine Bureau of Commerce and Industry as a condition precedent for maintaining an action for trademark infringement, applies only to marks registered under Philippine law and does not affect rights acquired under the Act of Congress of February 20, 1905, which extends protection to United States-registered trademarks in the Philippine Islands.

Sapolin Co., Inc., successor to Gerstendorfer Bros. of New York, held certificates of registration from the United States Patent Office for the trademark and trade-name "Sapolin," covering paints, varnishes, and related products, issued on February 13, 1923. The company used the mark in the Philippine Islands beginning September 28, 1923, and registered it with the Philippine Bureau of Commerce and Industry on March 8, 1928. Germann & Co., Ltd. had previously imported paints under the name "Hawelit" but ceased during the First World War. In 1932, Co Lu So, who had previously sold Sapolin products, applied for and obtained Philippine trademark certificate No. 11237 for "Lusolin," which he transferred to Germann in 1935. Germann thereafter resumed sale of the paints (identical to the former "Hawelit" products) under the "Lusolin" mark, which bore striking similarity to "Sapolin" in color, design, and pronunciation.

• On February 13, 1923, the United States Patent Office issued certificates Nos. 164274, 164275, and 164277 to Sapolin Co., Inc. (successor to Gerstendorfer Bros.) for the trademark "Sapolin" covering paints, enamels, varnishes, and floor wax.
• Use of the "Sapolin" mark in the Philippine Islands commenced on September 28, 1923, initially by Gerstendorfer Bros., and subsequently by Sapolin Co., Inc. beginning March 8, 1928, evidenced by Bureau of Commerce and Industry certificates Nos. 8983 and 8984.
• On October 4, 1927, Sapolin Co., Inc. recorded its United States certificates with the Collector of Customs in the Philippines.
• From 1929 to 1931, sales of Sapolin paints in the Philippines generated between $70,000 and $80,000 in revenue, with five percent allocated to local advertising.
• On December 27, 1932, the Bureau of Commerce and Industry issued trademark certificate No. 11237 for "Lusolin" to Co Lu So, who transferred the right to Germann & Co., Ltd. on January 2, 1935.
• The "Lusolin" paints sold by Germann were identical to paints previously imported under the name "Hawelit" prior to 1914.
• In a letter dated April 30, 1934 (Exhibit 9), Germann admitted that the "Lusolin" and "Sapolin" marks were strikingly similar "in shape, design, color and printing as to deceive the public, specially that both are being used for paints."
• The marks "Sapolin" and "Lusolin" are idem sonans (similar in sound) and nearly identical in color, design, size, and the pronunciation of their names.

• The trial court erred in not holding that the trade-mark "Lusolin" constitutes an infringement of the trade-mark "Sapolin" because the marks are confusingly similar.
• The trial court erred in ruling that Section 4 of Act No. 666 bars the action, contending that the provision is inapplicable to trademarks registered in the United States Patent Office.
• The trial court erred in not holding that Sapolin Co., Inc. has a right of action based upon unfair competition against Germann & Co., Ltd.
• The trial court erred in not holding that Act No. 3332, amendatory of Section 4 of Act No. 666, is unconstitutional as applied to United States-registered trademarks.
• The trial court erred in not rendering judgment for the cross-plaintiff.

• Respondent maintained that Section 4 of Act No. 666, as amended by Act No. 3332, requires registration in the Philippine Bureau of Commerce and Industry as a condition precedent for any action for damages for trademark violation, and that the dismissal was proper because petitioner failed to comply with this requirement.
• Respondent argued that its Philippine registration of the "Lusolin" mark (Certificate No. 11237) was valid and precluded petitioner's claim.

• Procedural Issues: Whether the Court of First Instance erred in dismissing the cross-complaint on the sole ground that the trademark alleged to have been infringed was not registered in the Philippine Bureau of Commerce and Industry.
• Substantive Issues:
  1. Whether Section 4 of Act No. 666, as amended by Act No. 3332, applies to trademarks duly registered in the United States Patent Office, or only to those registered under Philippine law.
  2. Whether the trade-mark "Lusolin" constitutes an infringement of the trade-mark "Sapolin".
  3. Whether an action for unfair competition can coexist with an action for trademark infringement.
  4. Whether Act No. 3332 is unconstitutional insofar as it amends Section 4 of Act No. 666.

• Procedural: The Court reversed the judgment of dismissal and remanded the case to the Court of First Instance for further proceedings. The trial court's interpretation of Section 4 as an absolute bar to the action was erroneous because it failed to distinguish between trademarks registered under Philippine law and those protected under United States federal law.
• Substantive:
  1. Applicability of Section 4: Section 4 of Act No. 666 applies exclusively to trademarks registered under the Philippine registration system. It does not apply to trademarks registered in the United States Patent Office, which are protected in the Philippines pursuant to Sections 16, 17, 22, and 29 of the Act of Congress of February 20, 1905, and Section 10 of the Jones Law. The Philippine Legislature could not have intended Section 4 to trench upon rights secured by United States law.
  2. Trademark Infringement: The Court found that "Lusolin" infringes "Sapolin." The test for infringement is resemblance, not identity. The marks are confusingly similar in appearance, design, color, and sound (idem sonans), and are used on identical goods (paints). Respondent's admission of similarity (Exhibit 9) confirms the likelihood of deception.
  3. Unfair Competition: An action for trademark infringement and an action for unfair competition cannot coexist. Trademark infringement is a statutory remedy that does not require proof of fraud or deceit; unfair competition requires fraud and deceit as essential elements. Because the dispute involves registered marks, only the statutory infringement action lies.
  4. Constitutionality: Act No. 3332 is constitutional. It is consistent with the Act of Congress of February 20, 1905, and serves the legitimate purpose of protecting diligent registrants under the Philippine system, without affecting rights acquired under United States law.

• Protection of United States Registered Trademarks in the Philippines — Trademarks duly registered in the United States Patent Office are protected in the Philippine Islands under the Act of Congress of February 20, 1905, and the Jones Law. Consequently, the requirement of prior registration in the Philippine Bureau of Commerce and Industry under Section 4 of Act No. 666 does not apply as a condition precedent to actions involving such United States-registered marks.
• Test for Trademark Infringement (Resemblance vs. Identity) — To establish trademark infringement, it is not necessary to prove that an exact copy was made or that identical words were used. It is sufficient to prove that the essential characteristics of the mark have been imitated or copied. Resemblance that is likely to deceive the public constitutes infringement, and idem sonans trade-names (those similar in sound) may violate trademark rights.
• Mutual Exclusivity of Trademark Infringement and Unfair Competition — An action for violation of a trademark or trade-name cannot be brought simultaneously with an action for unfair competition. The two remedies are incompatible because trademark infringement does not require fraud or deceit as an element, whereas unfair competition requires fraud and deceit as essential and indispensable conditions.

• "Without the said legal provision, one may in no case register with impunity in his name in the Bureau of Commerce and Industry a trade-mark or trade-name selected by him for his trade or goods, if another has already been using the same although he has not taken the trouble of registering it in his name, to avail himself of the advantages conferred upon him by law. Under the provisions thereof, one who is using a trade-mark or trade-name in his goods or products who has not been negligent in registering the same in the Bureau of Commerce and Industry, may complain against another who makes use of or imitates the same mark or name although the latter's use thereof may be of prior date, because the purpose of the said section, by its spirit and letter, is to stimulate, encourage and protect the diligent and not the neglectful."
• "To hold that there is a violation of a trade-mark, it is not necessary to prove either that an exact copy thereof was made or that the same words appearing therein were used. It will be sufficient to prove that its essential characteristics have been imitated or copied."
• "The two actions cannot coexist because the first does not require, like the second, as an essential and indispensable condition that there be fraud or deceit. An act cannot at once constitute a violation of a trade-mark or trade-name and an unfair competition, because in the former the idea of fraud or deceit does not enter inasmuch as there is filed with the Bureau of Commerce and Industry the questioned mark or name for the registration thereof; whereas in the later, fraud and deceit are an essential condition..."

• Forbes, Munn & Co. vs. Ang San To, 40 Phil. 272 — Cited for the rule that resemblance, not identity, between marks constitutes trademark infringement.
• Compañia Gral. de Tabacos vs. Alhambra Cigar & Cigarette Manufacturing Co., 33 Phil. 485 — Cited for the principle that actions for trademark infringement and unfair competition cannot coexist.
• Queen Manufacturing Co. vs. Isaac Ginsberg & Bros., 25 Fed. (2d) 284 — Cited for the proposition that imitation of essential characteristics suffices to establish infringement.
• Saxlehner vs. Eisner & Mendelson Co., 179 U.S. 19, 33 — Cited regarding the test for trademark infringement.
• N. K. Fairbanks Co. vs. Ogden Packing and Provision Co., 220 Fed. 1002 — Cited for the doctrine that idem sonans trade-names constitute trademark violation.

• Section 4 of Act No. 666, as amended by Section 1 of Act No. 3332 — Requires registration in the Bureau of Commerce and Industry before bringing actions for damages or criminal proceedings for trademark violation; interpreted by the Court as applicable only to Philippine-registered marks.
• Section 14 of Act No. 666, as amended by Act No. 2460 — Contains a proviso saving rights acquired by virtue of registration under United States laws.
• Sections 16, 17, 22, and 29 of the Act of Congress of February 20, 1905 — United States Trademark Act providing for registration, jurisdiction, remedies for infringement, and territorial application to territories under United States jurisdiction.
• Section 10 of the Jones Law (Act of Congress of August 29, 1916) — Provides that trade relations between the Philippine Islands and the United States shall continue to be governed exclusively by laws of the Congress of the United States.