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SHANG PROPERTIES REALTY CORP. v. ST. FRANCIS DEV. CORP.

FACTS:

This case involves a petition for review on certiorari filed by Shang Properties Realty Corporation and Shang Properties, Inc. (petitioners) against the decision of the Court of Appeals (CA) affirming the denial of their application for registration of the mark "ST. FRANCIS TOWERS" and finding them guilty of unfair competition for using the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE." The CA also ordered petitioners to cease and desist from using the mark "ST. FRANCIS" and to pay respondent St. Francis Square Development Corporation (respondent) a fine of ?200,000.00.

The complaint was filed by respondent, a domestic corporation engaged in the real estate business, against petitioners before the Intellectual Property Office (IPO) - Bureau of Legal Affairs (BLA). Respondent alleged that it has used the mark "ST. FRANCIS" to identify its various property development projects located at Ortigas Center, Mandaluyong City. It claimed that it has gained substantial goodwill with the public and that consumers and traders closely associate the mark "ST. FRANCIS" with its projects. On the other hand, petitioners argued that "ST. FRANCIS" is geographically descriptive and that respondent is not entitled to exclusive use of the mark.

The BLA rendered its decision finding petitioners guilty of unfair competition for using the mark "THE ST. FRANCIS TOWERS" but not "THE ST. FRANCIS SHANGRI-LA PLACE." The BLA refused to award damages in favor of respondent due to lack of evidence. It found that "ST. FRANCIS" is an arbitrary mark and not geographically descriptive. The BLA acknowledged that respondent has gained goodwill and reputation for its mark within the Ortigas Center vicinity. The BLA also denied petitioners' application for registration of the mark "THE ST. FRANCIS TOWERS" due to its confusing similarity with respondent's registered marks.

The case involves a dispute between St. Francis Square Realty Corporation (respondent) and Megaworld Corporation and Megaworld Central Properties, Inc. (petitioners) over the use of the mark "ST. FRANCIS" in relation to their respective real estate development projects. Respondent has been using the mark "ST. FRANCIS" for its project located in St. Francis Avenue and St. Francis Street in Ortigas Center, while petitioners sought to register the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" for their projects. The Bureau of Legal Affairs (BLA) of the Intellectual Property Office (IPO) initially ruled in favor of respondent, finding that it had a better right over the use of the mark due to its long-standing appropriation and continuous usage. However, the BLA later allowed petitioners' registration of the mark "THE ST. FRANCIS SHANGRI-LA PLACE," stating that it sufficiently distinguished it from respondent's mark to avoid confusion. Both parties appealed the decisions, and the IPO Director-General affirmed that petitioners cannot register the mark "THE ST. FRANCIS TOWERS" but dismissed the charge of unfair competition against them. The Court of Appeals (CA) disagreed with the IPO Director-General's ruling and found petitioners guilty of unfair competition with respect to both marks, ordering them to cease using "ST. FRANCIS" and pay a fine. The sole issue before the court is whether or not petitioners are guilty of unfair competition in using the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE."

ISSUES:

  1. Whether there is unfair competition under Section 168 of the Intellectual Property Code of the Philippines (IP Code).

  2. Whether the mark "ST. FRANCIS" is geographically descriptive and thus not entitled to exclusive appropriation.

  3. Whether the mark "ST. FRANCIS" has acquired secondary meaning and is eligible for trademark registration.

  4. Whether petitioners committed unfair competition.

  5. Whether the use of the name "Megaworld" constitutes unfair competition.

  6. Whether the name "Megaworld" is registrable as a trademark.

RULING:

  1. The Court finds that there is no unfair competition in this case because the element of fraud is lacking.

  2. The mark "ST. FRANCIS" is geographically descriptive and therefore cannot be exclusively appropriated unless a secondary meaning is acquired.

  3. The mark "ST. FRANCIS" has not acquired secondary meaning and is not eligible for trademark registration. The use of the mark has been limited to a specific locality and there is no substantial commercial use recognized throughout the country. There is also no mental recognition in buyers' and potential buyers' minds that products connected with the mark are associated with the same source. Therefore, the mark is geographically-descriptive and cannot be registered as a trademark.

  4. Petitioners did not commit unfair competition. There is no evidence showing that petitioners gave their goods/services the appearance that it was respondent offering the same. There was no employment of means to induce the public towards a false belief or any false statement or acts to discredit the goods/services offered by respondent. The element of fraud, which is the core of unfair competition, was not established.

  5. The Court granted the petition and exonerated the petitioners from the charge of unfair competition.

  6. The Court reversed the decision of the Court of Appeals and reinstated the decision of the Intellectual Property Office-Director General.

PRINCIPLES:

  • Unfair competition under Section 168 of the IP Code refers to the passing off or attempting to pass off one person's goods or business as those of another with the intent to deceive the public.

  • The test for unfair competition is whether the defendant's actions have the intent to deceive or are calculated to deceive ordinary buyers under ordinary trade conditions.

  • To establish unfair competition, it is essential to prove the existence of fraud or the intent to deceive.

  • A geographically descriptive term cannot be exclusively appropriated unless it acquires secondary meaning, which means that the term has become distinctively associated with the goods or services of a particular seller.

  • Secondary meaning is established when a descriptive mark no longer causes the public to associate the goods with a particular place, but with a particular source.

  • A geographically-descriptive mark may be denied registration if the public does not make a goods/place association, or if the geographical place is obscure or remote.

  • The requirements for a geographically-descriptive mark to acquire secondary meaning include substantial commercial use in the Philippines, distinctiveness of the mark in relation to the goods or products, and proof of substantially exclusive and continuous commercial use in the Philippines for five years before the claim of distinctiveness is made.

  • A mark consisting exclusively of signs or indications that may serve to designate the geographical origin of the goods or services may not be registered as a trademark, unless secondary meaning has been established.

  • Unfair competition requires the element of fraud, which includes false representation of goods or services, inducement of false belief, or any other acts tending to discredit the goods or services of a competitor.

  • The use of geographical names in trademarks may be allowed if there is a clear connection between the goods or services and the place named.

  • In order for a trademark to be deemed registrable, it must not be prohibited by law and it must not cause confusion or deceive the public.