By: Bayani B. Loste

When the Philippine Supreme Court rendered judgment in Pearl & Dean (Phil.), Inc. vs. Shoemart, Inc. and North EDSA Marketing, Inc. (G.R. No. 148222, August 15, 2003) back in 2003, the local Intellectual Property (IP) community let out a sigh of relief that, finally, more people would be aware not only of the existence of IP rights but, more importantly, the distinction between patents, trademarks, and copyrighted works.

Pearl & Dean was not the first case where the Supreme Court laid down the basic differences between these fundamental IP rights, as it cited Elidad C. Kho vs. The Honorable Court of Appeals Summerville General Merchandising and Company, and Ang Tiam Chay (G.R. No. 115758, March 19, 2002). In Kho, the Supreme Court defined patents, trademarks, and copyrights in the following manner:

“A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.”

Pearl & Dean improved upon Kho and categorically differentiated these IP rights in terms of the subject of protection by explaining why such protection is being given and the importance of securing a registration to formally acknowledge the existence of said rights.

So, for patents, inventions in particular, because the objective is to bring new designs and technologies into the public domain through disclosure in order to solve technical problems in human activity, a certificate of registration defining the scope of the invention is required before protection against infringement is given.

For copyrights, the law protects the artistic or literary expression of the idea and not the idea per se so copyright exists over the copyrightable work immediately upon the instance of such expression; the deposit and registration of a sample of the work with the National Library merely showing a presumption of authorship of the creator.

For trademarks, the use in commerce and registration of the sign or symbol covering the goods or services as these are used are important to ascribe ownership of the trademark or service mark unto the owner of the mark.

Seeing Light in Boxes

In Pearl & Dean, Pearl & Dean (Phil.) was engaged in the business of manufacturing electrically operated backlit advertising units (or light boxes) and selling advertising space thereon. It had secured a copyright registration certificate over the design of the light boxes and a trademark registration certificate for the words ‘POSTER ADS’ as a trademark for letterheads, envelopes, calling cards and newsletters. However, such registration did not include light boxes.

Shoemart, on the other hand, a company that builds and operates department stores and shopping malls, contracted Pearl & Dean to manufacture and supply its stores and malls with the light boxes. The deal apparently fell through and Shoemart outsourced the project to North EDSA, which purportedly used the design and fabricated light boxes for Shoemart.  When Pearl & Dean got wind of the North EDSA’s light boxes, it sued both Shoemart and North EDSA for copyright and trademark infringement, unfair competition and damages.

The Supreme Court absolved Shoemart and North EDSA for such charges as Pearl & Dean only managed to prove copyright ownership over the expression of the design of the light boxes and a trademark registration on the ‘POSTER ADS’ mark. Pearl & Dean failed to secure any patent grant over how the light boxes work and the process in making these devices. It was also ruled that North EDSA’s act of fabricating a light box similar to the design of Pearl & Dean’s copyrighted design and Shoemart’s procuring and using the light boxes of North EDSA were activities not covered by the trademark registration of Pearl & Dean. The Supreme Court reasoned that had Pearl & Dean patented the light box aside from getting the copyright, there could have been grounds to hold Shoemart and North EDSA liable for infringement.

From the explanation of the Supreme Court in Pearl & Dean, the way to move forward would be having more cases explaining the aspects of patentability or further applications of the fair use doctrine in copyright. These issues are rarely raised in new cases before the High Tribunal.

Then Sison Olaño, et al. vs. Lim Eng Co (G.R. No. 195835, March 14, 2016), and Fernando U. Juan vs. Roberto U. Juan (substituted by his son Jeffrey C. Juan) and Laundromatic Corporation (G.R. No. 221732, August 23, 2017) happened.

Revolving Hatch Door Theory

Olaño is about a case concerning hatch doors used in houses and condominium units. The owner of the intellectual property, LEC Steel Manufacturing Corporation (LEC), got a contract for the design and manufacturing of hatch doors from a condominium developer and, as part of such contract, LEC submitted the designs to the latter. LEC, and soon its competitor Metrotech Steel Industries, Inc. (Metrotech), got the same contract for the same hatch door design which involved the other floors in the same condominium project. LEC confronted Metrotech, saying that Metrotech had violated its intellectual property rights by using its hatch door design and fabricating numerous units to supply the developer. Metrotetch denied LEC’s allegation and pointed to the developer as the source of the hatch door designs it used.

LEC deposited its hatch door designs with the National Library and was able to get certificates of registrations over the designs under works of “illustrations, maps, plans, sketches, charts and three-dimensional works relative to geography, topography, architecture or science” and “original ornamental designs or models for articles of manufacture, whether or not registrable as an industrial design, and other works of applied art.”

To protect its work, LEC demanded from Metrotech to stop making and supplying the hatch doors to the developer. As Metrotech refused to budge, LEC’s Chairman, Lim Eng Co, sued Metrotech’s officers and directors Sergio Ong, Marilyn Go and Jap Fuk Hai before the Department of Justice for copyright infringement.

Metrotech officers and directors admitted that the company used LEC’s hatch door design. They, however, denied the infringement claim. They explained that the hatch doors were functional objects that should be covered by patents for which neither LEC nor Lim Eng Co had no registration with the Intellectual Property Office of the Philippines (IPOPHL) be it for an invention, utility model or industrial design.

Here’s where the fun begins.

The investigating prosecutor dismissed Lim Eng Co’s criminal complaint after finding that there is no probable cause to hold Metrotech’s officers and directors liable for infringement. Lim Eng Co appealed the investigating prosecutor’s findings to the Department level, through the Office of the Secretary of Justice, but it affirmed the dismissal of the complaint.

Lim Eng Co asked for reconsideration and the Department granted the request. The Department directed its Chief State Prosecutor to indict Metrotech’s officers and directors. To the Department’s mind, the hatch doors were artistic or ornamental with distinctive hinges, door and jamb, and mere denial of the officers and directors of the lack of artistic expression of these objects is insufficient to overcome the allegation that they have committed infringement.

It was Metrotech’s turn to request a reconsideration of the Department’s findings and, curiously enough, they got what they asked: the Department reversed itself and dismissed the complaint for the second time.

Lim Eng Co’s efforts to have the Department reconsider, again, its resolution to dismiss the criminal case failed to pan out so he assailed the dismissal of his infringement complaint before the Court of Appeals.

The appellate court granted Lim Eng Co’s petition, reversed the resolution of the Department and made its own finding of probable cause. To the Appeals Court, Lim Eng Co’s copyright over the hatch door design extends to the hatch doors itself so the act of Metrotech of using the same design and manufacturing hatch doors without the consent of Lim Eng Co was sufficient to reason for the indictment.

In good measure, the Supreme Court affirmed the Department’s dismissal findings. The High Court found that hatch doors, by its nature, were indeed objects of utility, and therefore, cannot by protected by copyright. It used the dictionary meaning of a ‘hatch door’ as ‘a small door, small gate or an opening that resembles a window equipped with an escape for use in case of fire or emergency’ and declared that, because of its functional and utilitarian nature, hatch doors are

 

(N)ot primarily an artistic creation but rather an object of utility designed to have aesthetic appeal ***(therefore)*** (i)t is intrinsically a useful article, which, as a whole, is not eligible for copyright.

Exposing Dirty Laundry

Juan, on the other hand, is all about who could have had a better right over the use of the service mark ‘LAVANDERA KO’ (English translation: ‘MY LAUNDRYWOMAN’).

In 1994, Roberto Juan opened a laundry business and used the service mark ‘LAVANDERA KO.’ Instead of getting a trademark registration, Roberto secured a copyright registration over the name and the mark. When his business flourished, he set up a company Laundromatic Corporation to manage the business and had the ‘LAVANDERA KO’ registered as a trade name with the Department of Trade and Industry.

Roberto then discovered that his very own brother Fernando had registered the same service mark with the Intellectual Property Office and was issued a Certificate of Registration for the same business. Not only that, Fernando had been selling franchises of the laundry business to third parties using the same service mark.

Roberto sued his brother for copyright infringement, unfair competition, and cancellation of trademark before the Regional Trial Court of Makati City. Roberto also requested for the issuance of an injunctive writ to stop Fernando from further using the service mark, which the court granted. During the pendency of the case, Roberto died so his son, Christian Juan, substituted him as a party.

After trial on the merits, the court dismissed Roberto’s case as it found independently while surfing the internet that, apparently, ‘LAVANDERA KO’ was the name of a Filipino musical composition of a certain Santiago S. Suarez which had been copyrighted in 1942. The trial court, citing Pearl & Dean, reasoned that since Suarez was the originator of the mark ‘LAVANDERA KO’ as part of his composition, neither of the brothers could claim any right over the same service mark. Consequently, the trial court directed the cancellation of the copyright registration of Roberto and the trademark registration of Fernando.

Fernando appealed the decision of the trial court cancelling his trademark registration of ‘LAVANDERA KO’ with the Court of Appeals, arguing that a copyrighted work is different from a trademark or service mark. He also raised that the trial court erred in using evidence (the webpage showing the 1942 ‘LAVANDERA KO’ folk song) not presented by any of the parties during the trial as basis of a decision.

Roberto, curiously enough, opposed his brother’s appeal and said that the trial court correctly cancelled Fernando’s trademark registration because of the prior use of ‘LAVANDERA KO’ in a folk song back in 1942. Roberto also asked the denial of the appeal for procedural defects. The appellate court agreed with Roberto’s position and dismissed the appeal because of the defects.

Fernando petitioned the dismissal of his appeal to the Supreme Court and the High Tribunal found his petition meritorious.

The High Court took the opportunity to explain, and again illustrate, the difference between copyright to and rights over trademarks (and service marks, as in this case) by re-defining the issue raised in the lower court. The case, according to the Supreme Court, was about whom between the two brothers had a better right to the use of the service mark ‘LAVANDERA KO’ given that, for a case to exist, there must be (i) an allegation of a right belonging to either one, (ii) the violation of the same right by the other, and (iii) the harm brought about by the violation. Juan being a trademark case, the High Court found that the lower court committed error in bringing the issue of a copyrighted work that used the same name as the subject of the case. The Supreme Court reasoned:

“By their very definitions, copyright and trade or service name are different. Copyright is the right of literary property as recognized and sanctioned by positive law. An intangible, incorporeal right granted by statute to the author or originator of certain literary or artistic productions, whereby he is invested, for a limited period, with the sole and exclusive privilege of multiplying copies of the same and  publishing and selling them.  Trade name, on the other hand, is any designation which (a) is adopted and used by person to denominate goods which he markets, or services which he renders, or business which he conducts, or has come to be so used by other, and (b) through its association with such goods, services or business, has acquired a special significance as the name thereof, and ( c) the use of which for the purpose stated in (a) is prohibited neither by legislative enactment nor by otherwise defined public policy.”

The musical composition entitled ‘LAVANDERA KO’ then, said the Supreme Court, is a copyrighted work and is covered by copyright law under the Intellectual Property Code. The ‘LAVANDERA KO’ that the brothers were fighting over was a service mark or trade name that should be regulated under the trademark law of the same Code. The High Tribunal thus remanded the case back to the trial court for reception of evidence to determine who has a better right as between the brothers in the use of the service mark or trade name.

Coming Full Circle: 3 Takeaways

After the Supreme Court explained the key differences between patents, trademarks, and copyright in Kho in 2002 and Pearl & Dean in 2003, one would have assumed that the legal authorities could decide these intellectual property cases with definitiveness. Reading from Olaño and Juan, however, we need to recognize key takeaways so that we will not let the mistake repeat itself:

  1. Acknowledge the Expertise of the Intellectual Property Office as Quasi-Judicial Body

The IPOPHL, aside from being granted by law the power to issue certificates of IP registrations, has the concurrent power with regular courts to decide conflicts between owners and users of IP. In numerous cases, the Supreme Court has recognized the expertise of the IPOPHL in resolving these conflicts and, where both the IPOPHL’s Bureau of Legal Affairs (BLA) and its Office of Director General (ODG)are in consistent with their decisions, the High Tribunal generally affirms the findings of IPOPHL.

Of course, there were instances where the findings of the BLA and the ODG differ, if not contradict each other, usually in applying the tests of confusion in trademark cases, but at least these rarely involve confusing the different kinds of IP subjects. Thus, IP litigants’ causes may be served better, at this time, if they bring their cases before the BLA. If litigants are unsatisfied with the outcome of their cases before the BLA and the ODG, they can ultimately expect their cases resolved by the Supreme Court.

  1. Support IP Immersion of Regular Court Judges

Because of the concurrent power of regular courts to decide intellectual property cases, learned judges highly trained in fields other than science, technology, and other technical areas are given the task of resolving cases involving probable infringement of patents similar to Olaño. The Supreme Court had already organized the lower courts in terms of expertise so that judges with commercial and corporate practical experience get to resolve IP controversies. While this effort is a step in the right direction, this should be complemented with a program to consistently immerse judges in the IP environment, possibly in collaboration with the IPOPHL, the Department of Science and Technology, and the National Commission on the Culture and the Arts to expand their outlook in hearing these IP cases.

  1. Start IP Education with Young Ones

Future lawyers and judges start their legal education like everyone else: as kindergartners. Learning the basics of IP should therefore begin as children learn their reading, ‘riting, and ‘rithmetic and not when multimillion-peso cases are already brought before the courts for resolution. When children recognize the importance of IP and the differences between IP rights, they become more sensitive about the importance of protecting their intellectual creations. Hopefully, this early education in IP will not only help enhance their creativity but also translate in better decisions involving IP when they decide to pursue a career as judges.

(Bay Loste heads the Intellectual Property practice group of the Firm. He may be reached at bbloste@fnslaw.com.ph.)


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