Societe Des Produits Nestle v. Dy
REITERATIONFacts
The Antecedents: Petitioner Societe Des Produits Nestle, S.A. (Nestle), a Swiss corporation, owns the registered trademark "NAN" for its line of infant powdered milk products, including PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Nestle has invested significantly in promoting its products, which are distributed and sold throughout the Philippines. Respondent Martin T. Dy, Jr. (Dy, Jr.), through his company 5M Enterprises, imports and repacks powdered milk from Australia under the brand name "NANNY." These "NANNY" products are sold in plastic packs of varying sizes and are classified as full cream milk for adults. Procedural History: Nestle initially requested Dy, Jr. to cease using the "NANNY" mark in 1985. When Dy, Jr. did not comply, Nestle filed a complaint for trademark infringement in 1990. The initial trial court dismissed the complaint, but the Court of Appeals reversed this dismissal and remanded the case. Following a transfer to a special court for intellectual property rights, the Regional Trial Court (RTC) ruled in favor of Nestle in 1998, finding Dy, Jr. liable for infringement. Dy, Jr. appealed this decision to the Court of Appeals. The Petition: The Court of Appeals, in its 2005 decision and 2006 resolution, reversed the RTC's ruling, finding Dy, Jr. not liable for infringement. Nestle then filed this petition for review on certiorari under Rule 45 of the Rules of Court, challenging the appellate court's decision. Nestle argues that the Court of Appeals erred in not applying the dominancy test and in finding that the "NANNY" mark was not confusingly similar to its registered "NAN" trademark, despite the prevalent use of "NAN" as a dominant feature in its infant milk products and the aural similarity between the marks.
Issue(s)
Whether Dy, Jr. is liable for trademark infringement of Nestle's "NAN" mark. Whether the "NANNY" mark is a colorable imitation of the "NAN" mark, likely to cause confusion or mistake among purchasers. Whether the goods sold under "NAN" and "NANNY" are so related as to give rise to confusion of business.
Ruling
The petition is meritorious. The Supreme Court GRANTED the petition, SET ASIDE the Court of Appeals' decision and resolution, and REINSTATED the Regional Trial Court's decision finding Dy, Jr. liable for infringement.
Ratio Decidendi
On the issue of trademark infringement and likelihood of confusion: The Court reiterated the elements of trademark infringement under both Republic Act No. 166 and Republic Act No. 8293, emphasizing that the likelihood of confusion is the gravamen of infringement. It distinguished between confusion of goods and confusion of business. The Court found that the "dominancy test" is applicable in this case, focusing on the prevalent features of the marks. The Court held that "NAN" is the dominant feature of Nestle's infant milk products, and "NANNY" contains this prevalent feature, with the first three letters being identical. Pronouncing both "NAN" and "NANNY" results in a confusingly similar aural effect. The Court cited precedents like Prosource International, Inc. v. Horphag Research Management SA and McDonald’s Corporation v. MacJoy Fastfood Corporation where the dominancy test was applied based on visual and aural similarities. On the applicability of the "concept of related goods" and scope of protection: The Court clarified that the scope of protection afforded to registered trademark owners extends to goods that are related, even if non-competing, and to market areas that represent the normal expansion of business. Section 138 of R.A. No. 8293 explicitly states that a certificate of registration is evidence of the registrant's exclusive right to use the mark on goods "and those that are related thereto." The Court noted that "NANNY" and "NAN" share the same classification (Class 6), are both milk products in powder form, and are displayed in the same section of stores. While "NAN" is for infants and "NANNY" is for adults, and "NAN" is more expensive, the Court held that the registered owner may use its mark on similar products in different market segments and price levels as part of the normal potential expansion of its business. This principle was supported by cases like Mighty Corporation v. E. & J. Gallo Winery and McDonald’s Corporation v. L.C. Big Mak Burger, Inc., which affirmed that protection extends to normal potential expansion of business. On the differences between the marks and products: While acknowledging the differences in packaging (tin cans vs. plastic packs), colors, label designs, specific wording (NAN vs. NANNY), and intended consumers (infants vs. adults), the Court found these dissimilarities insufficient to overcome the confusing similarity based on the dominant feature "NAN" and the aural effect. The Court reasoned that the cheaper price of "NANNY" might serve as a warning, but this does not negate the likelihood of confusion in the source or origin of the products, especially considering the "nanny" meaning a "child's nurse," which could be associated with infant formula. The Court found the CA's reliance on these dissimilarities to dismiss the infringement claim misplaced, particularly in light of the dominancy test and the concept of related goods.
Main Doctrine
The dominancy test is applicable in determining trademark infringement, focusing on the prevalent features of the marks and their aural effect, and the scope of protection extends to normal potential expansion of business, even for non-competing but related goods.