Superior Commercial Enterprises, Inc. vs. Kunnan Enterprises Ltd.

A final judgment cancelling a trademark registration deprives the registrant of the right to sue for infringement from the moment the cancellation becomes final, rendering any pending infringement claim moot and academic. The identity of the true owner of the trademark, as finally adjudicated in a cancellation proceeding, bars re-litigation of ownership in a subsequent infringement suit under the doctrine of conclusiveness of judgment.

KUNNAN, a Taiwanese corporation, manufactured sporting goods under the "KENNEX" and "PRO KENNEX" trademarks since 1976. In 1982, KUNNAN appointed SUPERIOR as its exclusive distributor in the Philippines. Under the Distributorship Agreement, SUPERIOR was obligated to assign ownership of the KENNEX trademark to KUNNAN. Under a subsequent Assignment Agreement, SUPERIOR acknowledged KUNNAN as the real and truthful owner of the PRO KENNEX marks and agreed to return them upon request. Notwithstanding these agreements, SUPERIOR registered the trademarks in its own name. Upon the distributorship's termination in 1991, KUNNAN appointed Sports Concept & Distributor, Inc. as its new distributor and published a public notice asserting its ownership of the marks, prompting SUPERIOR to file a complaint for trademark infringement and unfair competition.

• The Trademarks and Distributorship: KUNNAN created and used the "PRO KENNEX" trademark since 1976, registering it in 31 countries. In 1982, KUNNAN appointed SUPERIOR as its exclusive distributor in the Philippines. The Distributorship Agreement stated that KUNNAN intended to acquire ownership of the KENNEX trademark registered by SUPERIOR, and that SUPERIOR was "desirous of having been appointed as the sole distributor."
• The Assignment Agreement: In 1983, KUNNAN assigned its trademark applications to SUPERIOR. However, the Agreement explicitly required SUPERIOR to acknowledge KUNNAN as the "real and truthful owner" and to return the trademarks to KUNNAN upon request, clean and without incumbency.
• Fraudulent Registration: Despite the agreements, SUPERIOR registered the marks in its own name. KUNNAN alleged that SUPERIOR's President, Mr. Tan Bon Diong, misled KUNNAN's officers into believing that KUNNAN was not qualified to hold the certificates of registration due to requirements set by the Philippine Patent Office.
• Termination and Dispute: The distributorship ended on December 31, 1991. KUNNAN appointed SPORTS CONCEPT as its new distributor and published a Notice and Warning in the Manila Bulletin on January 29, 1993, asserting its ownership of the marks and terminating SUPERIOR's authority to sell. This prompted SUPERIOR to file the infringement and unfair competition case.
• The Registration Cancellation Case: Prior to and during the pendency of the RTC case, KUNNAN filed petitions for cancellation with the IPO. The IPO Bureau of Legal Affairs and the Director General granted the petitions, finding that SUPERIOR was a mere distributor who fraudulently registered the marks. The CA affirmed this ruling in CA-G.R. SP No. 87928, which became final and executory on December 3, 2007, resulting in the effective cancellation of SUPERIOR's trademark registrations.

• Ownership of Trademarks: Petitioner argued that it is the true and rightful owner of the KENNEX and PRO KENNEX trademarks based on its prior use and its valid Principal and Supplemental Registrations.
• Status as Owner, Not Mere Distributor: Petitioner maintained that the "whereas clause" of the Distributorship Agreement expressly recognized its ownership of the KENNEX trademark, and the CA erred in interpreting the entirety of the agreement to conclude it was a mere distributor.
• Liability for Infringement and Unfair Competition: Petitioner asserted that respondents committed infringement and unfair competition by using the disputed trademarks after the distributorship ended, causing confusion and deceiving the public.

• Fraudulent Registration: Respondent countered that Petitioner fraudulently registered the trademarks in its name, as Petitioner was merely a distributor and not the lawful owner.
• True Ownership: Respondent argued that it was the creator, prior user, and true owner of the marks, as evidenced by the Assignment Agreement where Petitioner explicitly acknowledged Respondent's ownership and agreed to return the marks upon request.
• No Valid Cause of Action: Respondent maintained that Petitioner, as a mere distributor, acquired no proprietary interest in the trademarks and thus had no standing to sue for infringement or unfair competition.

• Trademark Ownership: Whether Petitioner is the true and rightful owner of the KENNEX and PRO KENNEX trademarks.
• Distributor Status: Whether Petitioner is a mere distributor of Respondent KUNNAN in the Philippines.
• Trademark Infringement: Whether the CA erred in reversing the RTC and dismissing the complaint for trademark infringement, particularly in light of the final cancellation of Petitioner's trademark registrations.
• Unfair Competition: Whether Respondent KUNNAN is liable for unfair competition.

• Trademark Ownership: Ownership was conclusively settled against Petitioner in the final Registration Cancellation Case. The doctrine of conclusiveness of judgment bars re-litigation of the ownership issue, as the parties and the core factual matter—ownership of the marks—are identical.
• Distributor Status: Petitioner was a mere distributor, as established by the Distributorship and Assignment Agreements, and finally adjudged in the cancellation case. An exclusive distributor does not acquire any proprietary interest in the principal’s trademark and cannot register it in its own name.
• Trademark Infringement: The infringement claim was rendered moot and academic by the final cancellation of Petitioner's trademark registrations. Under Section 19 of Republic Act No. 166, any right conferred by such registration terminates upon the finality of the cancellation judgment. Because title to the trademark is indispensable to a valid cause of action for infringement, the loss of registration divested Petitioner of protection from infringement.
• Unfair Competition: Unfair competition was not established because there was no evidence that Respondent attempted to pass off its goods as Petitioner's or possessed the intent to deceive the public. Respondent's published notice explicitly identified itself as the manufacturer and owner of the marks, thereby preventing public deception as to the origin of the goods.

• Conclusiveness of Judgment — A final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters actually and directly resolved in the former suit, even if the subsequent suit involves a different cause of action. Applied to bar re-litigation of the issue of trademark ownership, which was directly resolved in the prior Registration Cancellation Case.
• Effect of Cancellation of Trademark Registration — Under Section 19 of Republic Act No. 166, when an order or judgment of cancellation becomes final, any right conferred by such registration upon the registrant terminates. Applied to divest Petitioner of its rights and render the infringement claim moot and academic.
• Rights of an Exclusive Distributor — In the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary rights over the trademark, and any registration by the distributor belongs to the manufacturer. Applied to establish that Petitioner lacked a proprietary interest to assert an infringement claim.

• "In a trademark infringement, title to the trademark is indispensable to a valid cause of action and such title is shown by its certificate of registration."
• "Under the concept of res judicata by conclusiveness of judgment, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit."
• "The cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final."

• Gabriel v. Perez, G.R. No. L-24075 — Followed. Established the rule that a mere distributor of a product bearing a trademark has no right to register the trademark, and an exclusive distributor does not acquire any proprietary interest in the principal’s trademark.
• McDonald's Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993 — Followed. Cited for the elements of trademark infringement and the principle that trademark infringement can exist without unfair competition if the infringer discloses manufacturing origin, preventing public deception.
• Heirs of Crisanta Y. Gabriel-Almoradie v. Court of Appeals, G.R. No. 91385 — Followed. Cited for the proposition that cancellation of registration deprives the registrant of protection from infringement from the moment the judgment of cancellation becomes final.

• Section 22, Republic Act No. 166 — Defines trademark infringement as the use, without the consent of the registrant, of any reproduction or colorable imitation of a registered mark in connection with the sale or advertising of goods, likely to cause confusion or mistake. Applied to emphasize that only a registrant can file a case for infringement.
• Section 19, Republic Act No. 166 — Provides that when an order of cancellation becomes final, any right conferred by such registration upon the registrant terminates. Applied to strip Petitioner of its rights upon the finality of the cancellation of its registrations.
• Section 4, Republic Act No. 166 — States that the owner of a trademark, trade-name, or service mark used to distinguish his goods, business, or services from those of others shall have the right to register the same. Applied to support the ruling that Petitioner, as a mere distributor, had no right to register the marks.
• Section 29, Republic Act No. 166 — Defines unfair competition as passing off goods or business as those of another through deception or any means contrary to good faith. Applied to delineate the elements of unfair competition, which Petitioner failed to prove.

Carpio, A.T. (Chairperson), Del Castillo, M.C., Abad, R.A., Perez, J.P.