Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Trading Corp.

In determining trademark infringement under Section 155 of the Intellectual Property Code, the Dominancy Test—which focuses on the similarity of the prevalent or dominant features of competing trademarks that might cause confusion in the mind of the purchasing public—should be applied over the Holistic Test when the dominant feature of the registered mark has been copied; furthermore, the existence of dissimilarities in labels, packaging, or price does not negate a finding of colorable imitation if the overall appearance and dominant features of the products are confusingly similar.

The case arose from the enforcement of intellectual property rights involving registered trademarks for athletic footwear, specifically concerning the unauthorized manufacture and distribution of rubber shoes bearing a stylized "S" logo by local trading companies, which allegedly imitated the distinctive features and trade dress of petitioner's internationally recognized "Skechers" footwear line.

• Petitioner Skechers, U.S.A., Inc. is the registered owner of the trademark "SKECHERS" and the stylized "S" within an oval design, registered with the Intellectual Property Office under Registration Nos. 63364 and 4-1996-110182 respectively.
• In the course of its business, petitioner discovered that respondents Inter Pacific Industrial Trading Corp., et al. were operating an outlet and warehouse selling rubber shoes bearing a stylized "S" logo similar to petitioner's registered mark.
• Petitioner filed an application for search warrants with the RTC of Manila, Branch 24, alleging trademark infringement under Section 155 in relation to Section 170 of Republic Act No. 8293 (the Intellectual Property Code of the Philippines).
• The RTC issued two search warrants which were served on respondents' premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, leading to the seizure of over 6,000 pairs of shoes bearing the unauthorized "S" reproductions.
• Respondents moved to quash the search warrants, arguing that there was no confusing similarity between petitioner's "Skechers" rubber shoes and their "Strong" rubber shoes, citing differences such as the absence of an oval design around the "S," the conspicuous placement of the word "Strong" at the backside and insoles, different hang tags and labels, and the modest pricing of Strong shoes compared to Skechers.
• The RTC granted the motion to quash, finding that the products had "glaring differences" and that an ordinary prudent purchaser would not be misled or confused.
• The CA affirmed the RTC's order, noting that the letter "S" could hardly be considered highly identifiable to petitioner's products alone, citing other uses of the letter "S" in trademarks such as the Superman logo.
• Upon review, the Supreme Court found that respondents' "Strong" shoes bore striking similarities to petitioner's "Energy" model, including the use of the same color scheme (blue, white, and gray), similar wavelike patterns on the midsole and outer sole, identical placement and size of the stylized "S" on the side and tongue of the shoes, and the use of "Strong Sport Trail" written in the same white lettering, font size, direction, and orientation as petitioner's "Skechers Sport Trail."
• Petitioner-intervenor Trendworks International Corporation claimed to be the sole licensed distributor of Skechers products in the Philippines.

• The Court of Appeals committed grave abuse of discretion in considering matters of defense in a criminal trial for trademark infringement when it should have limited itself to determining whether the trial court committed grave abuse of discretion in quashing the search warrants.
• The Court of Appeals committed grave abuse of discretion in finding that respondents were not guilty of trademark infringement when the sole triable issue was the existence of probable cause to issue a search warrant.
• Commercial quantities of the seized items bearing unauthorized reproductions of the "S" trademark were intended for distribution in the Philippine market, and returning the goods to respondents would adversely affect petitioner's goodwill and reputation.
• The search warrant court and the Court of Appeals both acted with grave abuse of discretion and did not properly re-evaluate the evidence presented during the search warrant application proceedings.
• The Dominancy Test should be applied, not the Holistic Test, as the law is clear that the dominant feature of the mark determines infringement.
• The preliminary finding of guilt (or absence thereof) made by the lower courts was improper in a search warrant proceeding.

• There is no confusing similarity between "Skechers" and "Strong" rubber shoes because the mark "S" in Strong Shoes is not enclosed in an oval design.
• The word "Strong" is conspicuously placed at the backside and insoles of the shoes, and hang tags and labels clearly identify the products as "Strong" rather than "Skechers."
• Strong shoes are modestly priced compared to Skechers shoes, targeting different market segments.
• The letter "S" is commonly used in many existing trademarks and is not highly identifiable to petitioner's products alone, as evidenced by its use in other well-known marks such as the Superman logo.

• Procedural Issues:
  • Whether the Court of Appeals committed grave abuse of discretion in considering matters of defense in a criminal trial for trademark infringement when passing upon the validity of the search warrant, instead of limiting itself to determining whether the trial court committed grave abuse of discretion in quashing the search warrants.
  • Whether the Court of Appeals committed grave abuse of discretion in making a preliminary finding that respondents are not guilty of trademark infringement when the sole issue in a search warrant application is the existence of probable cause.
• Substantive Issues:
  • Whether there exists probable cause for trademark infringement under Section 155 of Republic Act No. 8293 based on the similarity between petitioner's registered stylized "S" trademark and respondents' use of the same.
  • Whether the Dominancy Test or the Holistic Test should be applied in determining confusing similarity between competing trademarks.
  • Whether the differences in packaging, labeling, and price between petitioner's and respondents' products negate a finding of colorable imitation and trademark infringement.

• Procedural:
  • The Supreme Court reconsidered its earlier decision dismissing the petition, finding that the primary issue raised by the motions for reconsideration warranted a re-examination of the substantive issue of trademark infringement.
  • The Court clarified that while the determination of guilt is proper only during trial on the merits, the existence of probable cause for trademark infringement could be determined based on the similarity of the marks, and the lower courts erred in applying the wrong test and in finding no confusing similarity.
• Substantive:
  • The Court applied the Dominancy Test, which focuses on the similarity of the prevalent or dominant features of competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public.
  • The Court found that the stylized "S" is the dominant feature of petitioner's trademark, not the oval design, as it is the element that catches the eye of the purchaser.
  • Respondents' use of the same stylized "S" on their Strong rubber shoes constitutes infringement under the Dominancy Test, even without the oval design, because the font and size of the lettering appear to be identical to petitioner's registered mark.
  • The Court found extensive similarities between petitioner's Energy model and respondents' Strong shoes, including the color scheme (blue, white, and gray), the wavelike pattern of the midsole and outer sole, the placement of the stylized "S" on the side and tongue, the use of "Strong Sport Trail" mimicking "Skechers Sport Trail," and the presence of two grayish-white semi-transparent circles on the heel collar.
  • The Court rejected the Holistic Test applied by the lower courts, noting that the dissimilarities cited (absence of oval design, different labels, price difference) were too trifling and frivolous to outweigh the stark similarities in general features.
  • The Court held that price difference is not a complete defense in trademark infringement, as the registered trademark owner may use its mark on similar products in different market segments, and the public might be mistaken into thinking petitioner had ventured into a lower market segment.
  • The Court found that respondents deliberately attempted to copy petitioner's mark and overall design, constituting colorable imitation, and that the likelihood of confusion was present as purchasers would associate respondents' use of the stylized "S" as having been authorized by petitioner or that respondents' product was connected with petitioner's business.

• Dominancy Test — A test for trademark infringement that focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public, giving little weight to factors like prices, quality, sales outlets, and market segments. The Court applied this test to find that the stylized "S" was the dominant feature of petitioner's mark.
• Holistic or Totality Test — A test that necessitates consideration of the entirety of the marks as applied to the products, including labels and packaging. The Court rejected the application of this test by the lower courts because it improperly focused on minor dissimilarities rather than the dominant features.
• Confusion of Goods vs. Confusion of Business — Two types of confusion recognized in trademark law: (1) confusion of goods, where a purchaser is induced to buy one product believing it is another; and (2) confusion of business, where the public is deceived into believing that the goods of one party originate from or are connected with the registrant of an earlier product. The Court found both types of confusion likely in this case.
• Colorable Imitation — The imitation of a trademark with enough points of similarity to confuse the public, with enough points of difference to confuse the courts. The Court found that respondents engaged in colorable imitation by copying the dominant features of petitioner's shoes while making minor changes to avoid exact duplication.

• "The most successful form of copying is to employ enough points of similarity to confuse the public, with enough points of difference to confuse the courts."
• "The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion."
• "The protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods."
• "Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source."

• Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc. — Cited for the principle that even if not all details are identical, as long as the general appearance of the two products is such that any ordinary purchaser would be deceived, the imitator should be held liable for unfair competition and trademark infringement.
• McDonald's Corporation v. L.C. Big Mak Burger, Inc. — Cited for the principle that modern trademark protection extends beyond actual market competition to cases where the use of a mark is likely to lead to confusion of source, and that price difference is not a complete defense in trademark infringement.
• Prosource International, Inc. v. Horphag Research Management SA — Cited as authority for the definition and application of the Dominancy Test.
• Philip Morris, Inc. v. Fortune Tobacco Corporation — Cited as authority for the definition of the Holistic or Totality Test.
• Del Monte Corporation v. Court of Appeals — Cited for the principle that defendants in infringement cases do not normally copy but only make colorable changes, and for the quote regarding the most successful form of copying.
• Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft — Cited for the distinction between confusion of goods and confusion of business.
• Dermaline, Inc v. Myra Pharmaceuticals, Inc. — Cited for the principle that the registered trademark owner may use its mark on the same or similar products in different segments of the market at different price levels.
• Berris Agricultural Co., Inc., v. Norvy Abyadang — Cited for the purpose of trademark protection in preserving goodwill and safeguarding the public against confusion.

• Section 155 of Republic Act No. 8293 (Intellectual Property Code of the Philippines) — Defines trademark infringement as the use in commerce of any reproduction, counterfeit, copy, or colorable imitation of a registered mark or a dominant feature thereof in connection with the sale, offering for sale, distribution, or advertising of any goods or services where such use is likely to cause confusion, or to cause mistake, or to deceive.
• Section 170 of Republic Act No. 8293 — Cited in relation to Section 155 regarding the penalties and remedies for infringement.