Zulueta vs. Cyma Greek Taverna Co.

An applicant who files a trademark application with knowledge of another entity's prior creation and use of the same or similar mark files in bad faith; such an application is unregistrable and does not obtain the priority right under Section 123(d) of the Intellectual Property Code, even if the applicant was the first to file.

Manuel T. Zulueta and Raoul Roberto P. Goco formed Cyma Greek Taverna Company, a partnership registered with the Securities and Exchange Commission in 2006, to operate the Cyma Greek restaurant; a sister corporation, Cyma Greek Taverna Shangri-La Corporation, was later formed to manage a branch at Edsa Shangri-La Plaza Mall. The respondent in this case is the partnership, while Zulueta is one of its partners. The dispute is governed by Republic Act No. 8293, the Intellectual Property Code of the Philippines, which regulates the acquisition and registration of trademark rights through the Intellectual Property Office of the Philippines, including marks under Class 43 of the Nice Classification.

Zulueta claimed to have conceptualized the Greek restaurant "Cyma." To set up the first branch in Boracay, he invited Raoul Roberto P. Goco to help put together the menu. The Cyma Boracay restaurant was launched at D'Mall, Boracay on December 28, 2005. To formalize the arrangements, Zulueta formed a partnership with Raoul Goco called "Cyma Greek Taverna Company" (Cyma Partnership), the respondent, which was registered with the Securities and Exchange Commission (SEC) in 2006. As Cyma Boracay became successful, Zulueta and Raoul Goco decided to open a branch in Edsa Shangri-La Plaza Mall; to manage this branch, "Cyma Greek Taverna Shangri-La Corporation" was formed and registered with the SEC.

On September 25, 2006, Zulueta filed, in his own name, Trademark Application No. 4-2006-010623, claiming that he had done so as he was certain that the mark was solely his own creation. On October 19, 2006, Zulueta went to the United States with a trade delegation for business and a brief vacation, returning to the Philippines on November 26, 2006. Zulueta averred that while he was away, Raoul Goco, along with his sister Maria Anna Eugenia P. Goco (Anna Goco), issued an allegedly fraudulent Deed of Assignment dated November 21, 2006 wherein Zulueta supposedly assigned all his partnership interests to Anna Goco in consideration of ₱500,000.00. The deed was signed by Zulueta, Anna Goco, and Raoul Goco; Zulueta emphasized that it was physically impossible for him to have signed the document because he was in the United States at the time of its execution.

On March 13, 2007, five months after Zulueta filed his application, Cyma Partnership filed its own trademark application for the mark "CYMA GREEK TAVERNA AND LOGO" with Trademark Application No. 4-2007-002633, also under Class 43 of the Nice Classification. On August 13, 2007, Zulueta's application was published by the IPOPHL for opposition. On October 15, 2007, after several prayers for extension duly granted by IPOPHL, Cyma Partnership filed a Verified Notice of Opposition. In its opposition, Cyma Partnership claimed that Zulueta falsely represented that he was the originator of the trademark when in truth it had been copied from Cyma Partnership's trademark, which Raoul Goco had created while on vacation in Greece. The opposition averred that Cyma Partnership was the first to use the Cyma trademark, the same having been used on a test kitchen restaurant in Boracay around December 2005 by Cyma Partnership's director, founder, and executive chef, Raoul Goco.

On November 7, 2007, Zulueta received a copy of the Notice to Answer the opposition from the IPOPHL-BLA and was directed to file his answer within 30 days from receipt. On December 30, 2007, during the pendency of the proceedings on Zulueta's trademark application, the IPOPHL approved Cyma Partnership's Trademark Application No. 4-2007-002633, and Cyma Partnership was given Registration No. 2633. No opposition was filed against Cyma Partnership's trademark application; Zulueta alleged that he failed to oppose the application as he had been unaware that it existed. On March 4, 2008, after several motions for extension duly approved by the IPOPHL-BLA, Zulueta filed his Verified Answer. The IPOPHL-BLA set a Preliminary Conference on April 8, 2008; as the parties failed to reach settlement, the IPOPHL-BLA issued an Order dated October 15, 2008 directing the parties to file their respective position papers within ten days from receipt, and the parties seasonably filed their position papers.

The administrative bodies and the CA found that Cyma Partnership had been consistent in using the Cyma Greek Taverna mark and logo in its trade and commerce and that the mark had been the symbol of the partnership's group of restaurants since 2005. The records showed that the trademark was not personally used by Zulueta but by Cyma Partnership, in which he was one of the partners. The records were bereft of evidence that Zulueta coined the word "Cyma," as opposed to Cyma Partnership's claim that Raoul Goco came up with the name while on vacation in Greece in 2002 after meeting a child with the same name. Zulueta, for his part, maintained that he had conceived the mark on his own and had been unlawfully excluded from the partnership.

• Priority Right: Petitioner asserted that his earlier application gave him a priority right which rendered Cyma Partnership's subsequent trademark application, and IPOPHL's grant thereof, void.
• Conception and Exclusion: Petitioner reiterated that he had conceived of the Cyma mark on his own and that he had been unlawfully excluded from the partnership.

• Valid Registration and Prior Use: Cyma Partnership asserted that it had obtained a valid Certificate of Registration as it had been the only entity ever to use the mark and the mark had been conceptualized by Raoul Goco, not Zulueta.
• Prior and Continuous Use: Cyma Partnership cited E.Y. Industrial Sales, Inc. vs. Shen Dar Electricity and Machinery Co., Ltd. (Shen Dar), which states that "[e]vidence of prior and continuous use of the mark or trade name by another can overcome the presumptive ownership of the registrant and may very well entitle the former to be declared owner in an appropriate case."

• Trademark Registration: Whether the CA correctly affirmed the denial of Zulueta's application for registration of Trademark Application No. 4-2006-010623 for the mark "CYMA & LOGO" under Class 43 of the Nice Classification.
• Jurisdiction over Deed of Assignment and Partnership Rights: Whether the validity of the Deed of Assignment in favor of Anna Goco and Zulueta's rights to Cyma Partnership should be determined in the trademark application proceeding or in a separate proceeding.

• Trademark Registration: No. The CA correctly affirmed the denial; Zulueta's application was filed in bad faith because he knew of Cyma Partnership's prior creation and use of the mark, rendering it unregistrable and without priority right under Section 123(d) of the IPC.
• Jurisdiction over Deed of Assignment and Partnership Rights: No. The IPOPHL had no jurisdiction to determine the validity of the Deed of Assignment or Zulueta's partnership rights; those matters should be resolved in a proper separate proceeding, and no valid joinder of causes of action existed.

• Trademark Registration: Ownership of a mark is acquired through registration validly made under the IPC, and the first-to-file rule generally bars a later identical or confusingly similar mark. Prior use is no longer required to obtain ownership. The first-to-file rule, however, is not absolute: where the first application is unregistrable, it does not obtain the priority right under Section 123(d). Registrations tainted by bad faith or fraud are void ab initio and confer no priority rights. Bad faith means knowledge of another's prior creation, use, and/or registration of an identical or similar mark, i.e., copying and using another's trademark; fraud may involve false claims on origin, ownership, or use. Bad faith is a question of fact, and IPOPHL findings are respected. Although Shen Dar was abandoned, prior use remains relevant to bad faith and registrability. The two-part test is: (i) an entity has prior use, creation, and/or registration; and (ii) the applicant knows of such prior use, creation, and/or registration. Here, Zulueta, as a partner, knew of the partnership's prior use and that Raoul Goco conceptualized the mark for the partnership. Even under Zulueta's version, the mark was conceived for the exclusive use of the partnership and its sister company; only Cyma Partnership used it commercially, and Zulueta never used it individually. His first filing therefore did not confer priority. Cyma Partnership, by contrast, validly obtained Certificate of Registration No. 2633, which under Section 138 is prima facie evidence of validity, ownership, and exclusive right to use. The denial of Zulueta's application was thus correct.
• Jurisdiction over Deed of Assignment and Partnership Rights: The validity of the Deed of Assignment and Zulueta's rights to Cyma Partnership should be determined in a proper separate proceeding. Although joinder of causes of action is allowed, it is subject to the condition that neither action is governed by special rules. A trademark application is governed by IPOPHL rules, such as IPOPHL Memorandum Circular No. 17-010, not the Rules of Court. The case was originally filed with the IPOPHL, which has no jurisdiction to determine the validity of the Deed of Assignment, and not with the RTC as the Rules of Court require. There was therefore no valid joinder. In any event, Zulueta filed the application in his own name, not on behalf of the partnership; because partnerships have a separate juridical personality, whether Zulueta has rights to Cyma Partnership does not affect his rights to the Cyma trademark.

• First-to-File Rule — Under the IPC, ownership of a mark is acquired through registration validly made in accordance with the Code, and a registered mark or a mark with an earlier filing or priority date generally bars future registration of, and future acquisition of rights in, an identical or confusingly similar mark for the same or closely related goods or services if the resemblance will likely deceive or cause confusion. Prior use is no longer required to obtain ownership. The rule is not absolute: where the first application is unregistrable, it does not obtain the priority right under Section 123(d). Applied: Zulueta was first to file, but his application was unregistrable due to bad faith, so it conferred no priority right and did not bar Cyma Partnership's registration.
• Bad Faith in Trademark Applications — Bad faith means the applicant or registrant has knowledge of prior creation, use, and/or registration by another of an identical or similar trademark; it is copying and using somebody else's trademark. Fraud may be committed by false claims in the application or registration, particularly on origin, ownership, and use. Where (i) an entity has prior use, creation, and/or registration of a trademark and (ii) the applicant has knowledge of such prior use, creation, and/or registration, the trademark application is unregistrable due to bad faith and should be denied. Applied: Zulueta, as a partner, knew of the partnership's prior use and Raoul Goco's creation of the mark; even under his version, the mark was conceived for the partnership, and he never used it individually. His application was therefore in bad faith.
• Prior Use After Shen Dar — Although the Court abandoned Shen Dar's ruling that prior use determines ownership and defeats the prima facie ownership conferred by registration, prior use may still be considered in determining the existence of bad faith and the registrability of trademark applications. Applied: Cyma Partnership's prior and continuous use of the mark since 2005 was considered to establish Zulueta's bad faith, even though prior use alone no longer determines ownership.
• Prima Facie Validity of a Certificate of Registration — Under Section 138 of the IPC, a certificate of registration is prima facie evidence of the validity of the registration, the registrant's ownership of the mark, and the registrant's exclusive right to use the same in connection with the goods or services specified. Applied: Cyma Partnership's Certificate of Registration No. 2633 was prima facie evidence of its ownership and exclusive right to use the mark, reinforcing the denial of Zulueta's application.
• Separate Juridical Personality of Partnerships — Partnerships have a separate juridical personality from their partners. Applied: Zulueta filed the trademark application in his own name, not on behalf of the partnership; whether he had rights to Cyma Partnership did not affect his rights to the Cyma trademark, and those partnership issues belonged to a separate proceeding.
• Functions of Trademarks — Trademarks perform three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they symbolize. Applied: the Court used these functions to frame the protective purpose of trademark law before analyzing ownership and registrability.

• "Where the first application is unregistrable, it will not obtain the priority right provided for under Section 123(d) of the IPC. Registrations resulting from trademark applications which are tainted with bad faith or fraud are void ab initio; thus, it follows that such trademark applications are inherently unregistrable and do not confer any priority rights on the part of the applicant." — This passage states the exception to the first-to-file rule and the basis for denying Zulueta any priority right despite his earlier filing.
• "Where in the course of a trademark application, it is found that: (i) an entity has prior use, creation and/or registration of a trademark; and (ii) the applicant has knowledge of the said prior use, creation and/or registration—the trademark application is unregistrable due to the attendance of bad faith on the part of the applicant, and the same should be denied." — This is the Court's canonical two-part test for bad faith in trademark applications.
• "As a partner, Zulueta, was without a doubt aware of the prior use of the trademark by the partnership, and that it had been Raoul Goco who conceptualized the mark for the partnership while on vacation in Greece." — This passage applies the bad-faith test to the facts and explains why Zulueta's first filing did not entitle him to registration.
• "Although party litigants have the option to join causes of action, this is subject to the condition that neither action should be governed by special rules. A trademark application is governed by rules duly promulgated by the IPOPHL, such as IPOPHL Memorandum Circular No. 17-010, and not the Rules of Court." — This passage explains why the validity of the Deed of Assignment and Zulueta's partnership rights could not be joined in the trademark proceeding and had to be resolved separately.

• E.Y. Industrial Sales, Inc. vs. Shen Dar Electricity and Machinery Co., Ltd. (Shen Dar), 648 Phil. 572 (2010) — Cited by Cyma Partnership for the proposition that prior and continuous use of a mark by another can overcome the registrant's presumptive ownership. The Court expressly abandoned this ruling, holding that prior use no longer determines ownership and no longer defeats the prima facie assumption of ownership conferred by registration, but prior use may still be considered in determining bad faith and registrability.
• Zuneca Pharmaceutical vs. Natrapharm, Inc., G.R. No. 211850, September 8, 2020 — Cited for the rule that ownership of a mark is acquired through registration under Section 122 of the IPC, for the first-to-file rule under Section 123, and for the principle that registrations tainted with bad faith or fraud are void ab initio and do not confer priority rights.
• UFC Philippines, Inc. vs. Barrio Fiesta Manufacturing Corp., 778 Phil. 763 (2016) — Cited for the principle that trademark controversies must be scrutinized according to their peculiar circumstances and that jurisprudential precedents apply only if specifically in point; also cited for according respect to the factual findings of the IPOPHL.
• Medina/Rackey Crystal Top Corporation vs. Global Quest Ventures, Inc., G.R. No. 213815, February 8, 2021 — Cited for the definition of bad faith and fraud in trademark registration and for the rule that the presence of bad faith is a question of fact.
• Kolin Electronics Co., Inc. vs. Kolin Philippines International, Inc., G.R. No. 228165, February 9, 2021 — Cited for the rule that registrations resulting from trademark applications tainted with bad faith or fraud are void ab initio.
• W Land Holding, Inc. vs. Starwood Hotels and Resorts Worldwide, Inc., 822 Phil. 23 (2017) — Cited for the three functions of trademarks: indicating origin or ownership, guaranteeing quality, and advertising the articles they symbolize.
• Saludo, Jr. vs. Philippine National Bank, 839 Phil. 37 (2018) and Guy vs. Gacott, 778 Phil. 308 (2016) — Cited for the separate juridical personality of partnerships under Article 1768 of the New Civil Code.

• Section 122, Republic Act No. 8293 (Intellectual Property Code of the Philippines) — Provides that ownership of a mark is acquired through registration made validly in accordance with the IPC. Applied: Cyma Partnership's valid registration gave it ownership; Zulueta's first filing did not automatically confer ownership.
• Section 123(d), Republic Act No. 8293 — Governs the priority right of an earlier trademark application. Applied: because Zulueta's first application was unregistrable due to bad faith, it did not obtain the priority right under this provision.
• Section 138, Republic Act No. 8293 — Provides that a certificate of registration is prima facie evidence of the validity of the registration, the registrant's ownership of the mark, and the registrant's exclusive right to use the same in connection with the goods or services specified. Applied: Cyma Partnership's Certificate of Registration No. 2633 was prima facie evidence of its ownership and exclusive right to use the mark.
• Article 1768, New Civil Code — Provides that partnerships have a separate juridical personality from their partners. Applied: Zulueta's alleged rights to Cyma Partnership did not affect his rights to the Cyma trademark, and the application was filed in his own name.
• Section 5(b) and (c), Rule 2, A.M. No. 19-10-20-SC (2019 Amendments to the 1997 Rules of Civil Procedure) — Allows joinder of causes of action subject to the condition that neither action is governed by special rules and requires that the action be filed with the proper court. Applied: no valid joinder existed because a trademark application is governed by IPOPHL rules, not the Rules of Court, and the IPOPHL had no jurisdiction over the Deed of Assignment.
• IPOPHL Memorandum Circular No. 17-010 (Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers of 2017) — Governs trademark applications before the IPOPHL. Applied: the trademark application was governed by these special rules, not the Rules of Court, so the validity of the Deed of Assignment and partnership rights could not be joined in the trademark proceeding.

Leonen, SAJ. (Chairperson), Lazaro-Javier, M. Lopez, and J. Lopez, JJ., concur.