Shang Properties Realty Corporation and Shang Properties, Inc. vs. St. Francis Development Corporation

Use of a geographically descriptive mark does not constitute unfair competition where the prior user has not acquired secondary meaning establishing exclusive rights to the mark, and where the subsequent user's adoption of the mark was intended solely to identify the geographical location of its goods or services without intent to deceive the public. Secondary meaning requires proof of: (a) substantial commercial use of the mark in the Philippines; (b) resulting distinctiveness of the mark in relation to the goods; and (c) substantially exclusive and continuous commercial use for five years before the claim of distinctiveness is made.

St. Francis Development Corporation (respondent) engaged in real estate development in Ortigas Center, Mandaluyong City, utilizing the mark "ST. FRANCIS" for its projects since 1992, including the St. Francis Square Commercial Center and a mixed-use project plan. Shang Properties Realty Corporation and Shang Properties, Inc. (petitioners) later developed real estate projects in the same vicinity, specifically along St. Francis Avenue and St. Francis Street (Bank Drive), adopting the names "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE."

• The Complaints: Respondent filed an intellectual property violation case (IPV Case No. 10-2005-00030) for unfair competition, false or fraudulent declaration, and damages, alongside two inter partes cases (Case No. 14-2006-00098 and IPC No. 14-2007-00218) opposing petitioners' applications for registration of the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" before the IPO Bureau of Legal Affairs (BLA).
• Respondent's Claims: Alleged continuous use of the mark "ST. FRANCIS" since 1992 for various property development projects in Ortigas Center, including the St. Francis Square Commercial Center, St. Francis Square mall, and a planned St. Francis Towers, claiming substantial goodwill and reputation with the public.
• Petitioners' Defense: Contended that "ST. FRANCIS" is geographically descriptive of St. Francis Avenue and St. Francis Street (now Bank Drive), Ortigas Center, where both parties' projects are located, and denied any fraudulent intent or false declaration.
• BLA Rulings: In the IPV Case (Dec 19, 2006), the BLA found unfair competition regarding "THE ST. FRANCIS TOWERS" but not "THE ST. FRANCIS SHANGRI-LA PLACE," noting the latter's distinction via the "Shangri-La" appendage. In the St. Francis Towers IP Case (March 28, 2007), registration was denied due to confusing similarity with respondent's DTI-registered marks. In the St. Francis Shangri-La IP Case (March 31, 2008), registration was allowed, finding no exclusivity in respondent's use.
• IPO Director-General Ruling: In a consolidated decision (Sept 3, 2008), the IPO Director-General affirmed the denial of registration for "THE ST. FRANCIS TOWERS" but reversed the unfair competition finding, holding that "ST. FRANCIS" is geographically descriptive and that respondent failed to prove exclusive rights via secondary meaning.
• CA Ruling: The Court of Appeals (Dec 18, 2009) found petitioners guilty of unfair competition for both marks, ordered them to cease and desist from using "ST. FRANCIS," and imposed a ₱200,000.00 fine, applying the Doctrine of Secondary Meaning and finding respondent entitled to protection based on goodwill established over more than a decade.

• Geographical Descriptiveness: "ST. FRANCIS" constitutes a geographically descriptive mark referring to St. Francis Avenue and St. Francis Street (Bank Drive) in Ortigas Center, placing it in the public domain under Section 123.1(j) of the IP Code and incapable of exclusive appropriation by respondent.
• Absence of Fraudulent Intent: No intent to deceive the public existed; the mark was adopted bona fide solely to identify the geographical location of their real estate projects, and the notoriety of the "Shangri-La" brand negated any propensity to ride on respondent's goodwill.
• Failure to Establish Secondary Meaning: Respondent failed to satisfy the requisites under Section 123.2 of the IP Code for secondary meaning, as its use of the mark was confined to Ortigas Center without substantial commercial use nationwide or proof that the public associated the mark exclusively with respondent as a single source.

• Prior Use and Established Goodwill: Continuous and exclusive use of "ST. FRANCIS" since 1992 for real estate projects in Ortigas Center established substantial goodwill and reputation, entitling it to protection against unfair competition under Section 168 of the IP Code.
• Confusing Similarity: Petitioners' marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" are confusingly similar to respondent's registered marks, constituting passing off calculated to deceive the public.
• Acquisition of Secondary Meaning: Even assuming "ST. FRANCIS" is geographically descriptive, it acquired secondary meaning through long-standing use, such that the public associates "ST. FRANCIS" real estate projects exclusively with respondent as the developer.

• Unfair Competition: Whether petitioners committed unfair competition under Section 168 of the Intellectual Property Code by using the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE."

• Unfair Competition: No unfair competition was committed. The element of fraud or intent to deceive, which is essential under Section 168 of the IP Code, was absent. The mark "ST. FRANCIS" is geographically descriptive of the streets where the projects are located (St. Francis Avenue/St. Francis Street), placing it in the public domain under Section 123.1(j) of the IP Code. Without proof of secondary meaning under Section 123.2—requiring substantial commercial use in the Philippines, resulting distinctiveness, and five years of substantially exclusive and continuous use—respondent possessed no exclusive right to the mark that could be violated. Petitioners' use was bona fide, intended only to identify the geographical location, and the notoriety of the "Shangri-La" brand negated any intent to ride on respondent's goodwill.

• Unfair Competition (Section 168, IP Code) — Defined as the passing off of one's goods or business as those of another with intent to deceive. The true test is whether the acts have the intent or are calculated to deceive the ordinary buyer making purchases under ordinary conditions of the trade. Fraud is the core element.
• Geographically Descriptive Marks — Terms designating geographical location (such as streets, cities, or regions) are in the public domain, and every seller has the right to inform customers of the geographical origin of goods. Such marks cannot be exclusively appropriated or registered unless they acquire secondary meaning.
• Secondary Meaning (Section 123.2, IP Code) — A descriptive mark acquires protection when it becomes distinctive in relation to the applicant's goods. Requisites: (a) the secondary meaning must have arisen as a result of substantial commercial use of a mark in the Philippines; (b) such use must result in the distinctiveness of the mark insofar as the goods or products are concerned; and (c) proof of substantially exclusive and continuous commercial use in the Philippines for five years before the date on which the claim of distinctiveness is made. The public must associate the mark with a particular source, not merely a place.

• "The ‘true test’ of unfair competition has thus been 'whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates.' Based on the foregoing, it is therefore essential to prove the existence of fraud, or the intent to deceive, actual or probable..."
• "[D]escriptive geographical terms are in the ‘public domain’ in the sense that every seller should have the right to inform customers of the geographical origin of his goods."
• "Secondary meaning is established when a descriptive mark no longer causes the public to associate the goods with a particular place, but to associate the goods with a particular source."
• "Under Section 123.2 of the IP Code, specific requirements have to be met in order to conclude that a geographically-descriptive mark has acquired secondary meaning, to wit: (a) the secondary meaning must have arisen as a result of substantial commercial use of a mark in the Philippines; (b) such use must result in the distinctiveness of the mark insofar as the goods or the products are concerned; and (c) proof of substantially exclusive and continuous commercial use in the Philippines for five (5) years before the date on which the claim of distinctiveness is made."

• Republic Gas Corporation v. Petron Corporation, G.R. No. 194062, June 17, 2013 — Cited for the classic definition of unfair competition as passing off with intent to deceive.
• Great Southern Bank v. First Southern Bank, 625 So.2d 463 (1993) — Cited for the principle that geographically descriptive terms are in the public domain and require secondary meaning for protection.
• Burke-Parsons-Bowlby Corporation v. Appalachian Log Homes, Inc., 871 F.2d 590 (1989) — Cited for the definition of secondary meaning as the point where the public associates the goods with a particular source rather than a particular place.

• Section 168, Republic Act No. 8293 (Intellectual Property Code of the Philippines) — Defines unfair competition as any person employing deception or means contrary to good faith to pass off his goods or business as those of another having established goodwill, and requires proof of intent to deceive or fraud.
• Section 123.1(j), Republic Act No. 8293 — Disqualifies from registration marks consisting exclusively of signs or indications that may serve to designate the geographical origin of goods or services.
• Section 123.2, Republic Act No. 8293 — Provides for the acquisition of distinctiveness (secondary meaning) for otherwise unregistrable descriptive marks upon proof of substantial exclusive and continuous use for five years.

Antonio T. Carpio (Chairperson), Arturo D. Brion, Diosdado M. Peralta, Jose Portugal Perez.