Parke, Davis & Company v. Kiu Foo & Co.
REITERATIONFacts
The Antecedents: Parke, Davis & Company (Plaintiff) had manufactured and sold a tonic medicine known as 'Palatol' (English/Spanish) and 'Pai Li To' (Chinese) for over twenty years globally and in the Philippines. On April 16, 1931, Kiu Foo & Co. (Defendant) registered a trademark for a similar medicine named 'Blandol,' which prominently featured the Chinese characters 'Pu Li To.' Plaintiff subsequently registered its 'Palatol' trademark in the Philippines on May 22, 1933. Plaintiff alleged that the defendant's use of 'Pu Li To' was a phonetic imitation of 'Pai Li To' intended to deceive Chinese customers and requested the cancellation of the defendant's trademark. Procedural History: The Plaintiff filed an action for 'cancellation of trade mark' in the Court of First Instance (CFI) of Manila, naming the Director of the Bureau of Commerce as a nominal defendant. The Director's demurrer was overruled. The trial court found that the plaintiff had been selling 'Palatol' for nineteen years and that the defendant's packaging and Chinese characters were likely to mislead customers. Consequently, the trial court decreed the cancellation of the defendant's trademark registration. The Appeal: Sy Yoco & Sons, Inc., representing Kiu Foo & Co., appealed to the Supreme Court. They argued priority of registration, as their 1931 registration predated the plaintiff's 1933 registration. They also challenged the trial court's authority to cancel an administrative registration without proof of fraud or illegality on the part of the Director of Commerce.
Issue(s)
Whether the trial court erred in ordering the cancellation of a trademark registration without proof that the Director of Commerce acted illegally, capriciously, or fraudulently. Whether the defendant is liable for unfair competition despite having priority in trademark registration.
Ruling
The judgment of the trial court is MODIFIED. The decree for the cancellation of the registration is set aside, but a perpetual injunction is granted restraining and prohibiting the defendants and its agents from selling or offering for sale any product under its trademark registered on April 16, 1931, Serial No. 10,507.
Ratio Decidendi
On Issue 1: The Supreme Court held that the trial court erred in decreeing the cancellation of the registration. Under Section 13 of Act No. 666, the Director of the Bureau of Commerce is tasked with deciding the presumptive lawfulness of a trademark claim. Since the Director decided the lawfulness of Kiu Foo & Co.'s claim in 1931 and there was no allegation or proof that his act was illegal, capricious, arbitrary, or fraudulent, there was no basis for a court to nullify the administrative act. The Court further noted that making the Director a 'nominal party defendant' was an illogical innovation upon the Code of Civil Procedure. Consequently, the court cannot nullify what was done by the Director in accordance with law simply because a private dispute exists. On Issue 2: The Court ruled that while the defendant might prevail on a strict trademark infringement claim due to priority of registration, Act No. 666 also provides remedies against unfair competition. Under Section 7, liability arises if a seller gives their goods the general appearance of another's goods to deceive the public and defraud a competitor. The evidence showed that 'Palatol' was well-established in the Philippines long before the defendant's application. The defendant's product used a substantially identical formula, similar bottle shapes, and prominently displayed the Chinese characters 'Pu Li To,' which are phonetically similar to the plaintiff's 'Pai Li To.' The Court inferred the intent to defraud from these striking similarities and the fact that the defendant's applications for similar marks had been rejected in Shanghai and Hong Kong. Therefore, while the registration remains, the defendant is perpetually enjoined from using it to sell the imitation product.
Main Doctrine
The protection of intellectual property under Philippine law extends beyond technical trademarks to include the prevention of unfair competition. Even where a defendant holds a prior registration for a trademark, they may be perpetually enjoined from using it if the overall presentation of their product—including phonetic translations and packaging—is designed to capitalize on the goodwill of a competitor and deceive the public. The Court maintains that administrative registrations by the Director of Commerce are presumed lawful and cannot be cancelled by a court absent specific proof of illegality, fraud, or caprice, but the use of such registered marks can still be restrained under the principles of equity and unfair competition.