Societe Des Produits Nestle, S.A. vs. Dy, Jr.

The dominancy test determines confusing similarity by focusing on the prevalent features of competing marks, and trademark protection extends to related goods and normal market expansion despite differences in price or target consumer.

Societe Des Produits Nestle, S.A., a Swiss corporation, owns the registered trademark "NAN" for its line of infant powdered milk products. Martin T. Dy, Jr., doing business as 5M Enterprises, imports and repacks Australian powdered milk under the name "NANNY," selling it in plastic packs in the Visayas and Mindanao. Nestle demanded Dy, Jr. cease using "NANNY," but he refused.

• The Registered Mark: Nestle owns "NAN" (Certificate of Registration No. R-14621, issued 1969) for infant powdered milk (Pre-NAN, NAN-H.A., NAN-1, NAN-2), classified under Class 6. NAN products are sold in tin cans, use blue and white labels with a nestling birds logo, and feature the word "NAN" in large block letters.
• The Challenged Mark: Dy, Jr. sells "NANNY" powdered milk for adults, also classified under Class 6. NANNY is sold in plastic packs of varying sizes (80g, 180g, 450g) at lower prices (₱8.90, ₱17.50, ₱39.90). The packaging uses blue and green colors, features a drawing of milking cows, and spells "NANNY" in small, irregular letters with curved ends.
• The Dispute: Nestle sent a cease-and-desist letter on August 1, 1985. Dy, Jr. did not comply, prompting the infringement suit.

• Dominancy Test Over Holistic Test: Petitioner maintained that the Court of Appeals erred in applying the holistic test; the dominancy test is the appropriate standard for determining confusing similarity in this factual milieu.
• Confusing Similarity: Petitioner argued that "NANNY" contains the dominant feature "NAN," resulting in confusing similarity, particularly in aural impact.
• Scope of Protection for Related Goods: Petitioner contended that because both products are milk under Class 6, they are related goods, and the scope of trademark protection extends to related goods and areas of normal business expansion, rendering differences in price and target market irrelevant to infringement.

• Holistic Test Application: Respondent countered that the holistic test should apply, which reveals glaring dissimilarities in the entirety of the marks, including packaging, colors, logos, and lettering.
• Absence of Confusion: Respondent argued that the differences in target market (infants vs. adults) and price (expensive vs. cheap) preclude likelihood of confusion, as the ordinary purchaser would be warned by the price and packaging disparities.
• Misapplication of Related Goods Doctrine: Respondent asserted that the concept of related goods requires identical or highly similar marks (as in Esso Standard), and cannot be utilized where, as here, the marks themselves are dissimilar.

• Trademark Infringement: Whether respondent is liable for trademark infringement for using "NANNY" on powdered milk products.
• Applicable Test for Confusion: Whether the dominancy test or the holistic test applies in determining confusing similarity.
• Related Goods and Market Expansion: Whether trademark protection extends to related goods despite differences in target market and price.

• Trademark Infringement: Respondent was found liable for infringement. The mark "NANNY" is confusingly similar to "NAN" because it incorporates the dominant feature of the registered mark and produces a confusingly similar aural effect.
• Applicable Test for Confusion: The dominancy test applies. It focuses on the similarity of the main, prevalent, or essential features of the competing marks, considering visual, aural, and connotative comparisons. This test is explicitly incorporated into Section 155.1 of the Intellectual Property Code, which penalizes colorable imitation of a "dominant feature" of a registered mark. The holistic test, which relies primarily on visual comparison, is unsuitable.
• Related Goods and Market Expansion: Protection extends to related goods. Under Section 138 of the IP Code, registration grants exclusive rights over the mark in connection with the goods and those related thereto. NAN and NANNY share the same classification, nature, physical attributes, and retail display area. Differences in target market and price do not excuse infringement, as the registered owner is entitled to use the mark on similar products in different market segments and is protected in areas of normal potential business expansion.

• Dominancy Test — Determines likelihood of confusion by focusing on the similarity of the main, prevalent, or essential features of competing trademarks. Imitation is unnecessary; the question is whether the use is likely to cause confusion or deceive purchasers. Unlike the holistic test, which relies on visual comparison of the entirety of the marks, the dominancy test relies on visual, aural, and connotative comparisons and overall impressions. Applied to find "NANNY" confusingly similar to "NAN" because "NAN" is the dominant feature and the aural effect is similar.
• Normal Potential Expansion of Business — The protection afforded to a registered trademark owner is not limited to guarding against actual market competition with identical or similar products. It extends to cases where the use by another is likely to lead to confusion of source, or where it forestalls the normal potential expansion of the registrant's business into other market segments or price levels.

• "The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the 'colorable imitation of a registered mark x x x or a dominant feature thereof.'"
• "The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business."

• McDonald's Corporation v. L.C. Big Mak Burger, Inc. — Followed for the application of the dominancy test and the doctrine that trademark protection extends to areas of normal potential business expansion.
• McDonald's Corporation v. MacJoy Fastfood Corporation — Followed for the application of the dominancy test over the holistic test in determining confusing similarity.
• Societe Des Produits Nestle, S.A. v. Court of Appeals — Followed for the application of the dominancy test, emphasizing that the test relies on visual, aural, and connotative comparisons, unlike the holistic test.
• Marvex Commercial Co., Inc. v. Petra Hawpia & Co. — Followed for the principle that aural effects (idem sonans) of marks are considered in determining confusing similarity.
• Mighty Corporation v. E. & J. Gallo Winery — Followed for the factors in determining whether goods are related and the concept of confusion of business.
• Prosource International, Inc. v. Horphag Research Management SA — Followed for the elements of trademark infringement under R.A. Nos. 166 and 8293.

• Section 22, Republic Act No. 166 — Defines what constitutes trademark infringement, including the unauthorized use of a reproduction, counterfeit, copy, or colorable imitation of a registered mark likely to cause confusion.
• Section 155, Republic Act No. 8293 — Defines infringement and available remedies; Section 155.1 explicitly incorporates the dominancy test by penalizing colorable imitation of a registered mark or a "dominant feature thereof."
• Section 138, Republic Act No. 8293 — Provides that a certificate of registration is prima facie evidence of the exclusive right to use the mark in connection with the goods or services and those that are related thereto. Used to justify extending protection to related goods.

Antonio Eduardo B. Nachura, Diosdado M. Peralta, Roberto A. Abad, Jose C. Mendoza.