Supreme Court rules on trade mark use

On December 2 2005, Starwood filed before the Intellectual Property Office (IPO) an application for registration of the trade mark W for Classes 43 (services for providing food, drink; temporary accommodation) and 44 (medical services; veterinary services; hygienic and beauty care for human beings or animals; agriculture, horticulture and forestry services) of the International Classification of Goods and Services for the Purposes of the Registration of Marks (Nice Classification). On February 26 2007, Starwood's application was granted and the W mark was registered in its name.

On May 29 2009, W Land, whose application for registration of the W mark was successfully opposed by Starwood in 2006, filed a petition for cancellation of Starwood's mark for non-use under Section 151.1 of Republic Act No. 8293 or the Intellectual Property Code of the Philippines (IP Code), claiming that Starwood had failed to use its mark in the Philippines because it has no hotel or establishment in the Philippines rendering the services covered by its registration and that Starwood's W mark application and registration barred its own W mark application and registration for use on real estate.

In its defence, Starwood denied having abandoned the subject mark on the ground of non-use, asserting that it filed with the director of trade marks a notarised Declaration of Actual Use (DAU) with evidence of use on December 2 2008, which was not rejected. Starwood argued that it conducts hotel and leisure business both directly and indirectly through subsidiaries and franchisees, and operates interactive websites for its W Hotels in order to accommodate its potential clients worldwide.

It should be noted that RA 8293 or the IP Code was adopted and came into force on January 1 1998. It followed the first to file system which provided that rights in a mark shall be acquired through registration made validly in accordance with the provisions of the IP Code.

The IP Code however requires use to maintain the application (§124.2) and the registration (§145).

Thus §124.2 and §145 of the IP Code provide:

SECTION 124. Requirements of Application. –

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124.2. The applicant or the registrant shall file a declaration of actual use of the mark with evidence to that effect, as prescribed by the Regulations within three (3) years from the filing date of the application. Otherwise, the application shall be refused or the mark shall be removed from the Register by the Director.

SECTION 145. Duration. – A certificate of registration shall remain in force for ten (10) years: Provided that the registrant shall file a declaration of actual use and evidence to that effect, or shall show valid reasons based on the existence of obstacles to such use, as prescribed by the Regulations, within one (1) year from the fifth anniversary of the date of the registration of the mark. Otherwise, the mark shall be removed from the Register by the Office.

It bears asking, what is the value of requiring the submission of a DAU? Its importance lies in its ability to prevent the abuse of the system of trade marks, such that protection is only granted to trade marks actually being used in commerce in the Philippines. The requirement of the submission of the DAU prevents the stagnation of trade marks which would have otherwise remained registered with owners who cannot or do not have the intention of making use of them, depriving other legitimate business proprietors from using the marks. This may be considered anti-competitive conduct.

The Supreme Court said the following:

"Based on the amended Trademark Regulations, it is apparent that the Intellectual Property Office (IPO) has now given due regard to the advent of commerce on the internet. Specifically, it now recognises, among others, "downloaded pages from the website of the applicant or registrant clearly showing that the goods are being sold or the services are being rendered in the Philippines," as well as "for online sale, receipts of sale of the goods or services rendered or other similar evidence of use, showing that the goods are placed on the market or the services are available in the Philippines or that the transaction took place in the Philippines," as acceptable proof of actual use. Truly, the Court discerns that these amendments are but an inevitable reflection of the realities of the times. In Mirpuri v. CA, this Court noted that "[a]dvertising on the Net and cybershopping are turning the Internet into a commercial marketplace:"

The Internet is a decentralized computer network linked together through routers and communications protocols that enable anyone connected to it to communicate with others likewise connected, regardless of physical location. Users of the Internet have a wide variety of communication methods available to them and a tremendous wealth of information that they may access. The growing popularity of the Net has been driven in large part by the World Wide Web, i.e., a system that facilitates use of the Net by sorting through the great mass of information available on it. Advertising on the Net and cybershopping are turning the Internet into a commercial marketplace. (Emphasis and underscoring supplied).

The fact that Starwood’s websites are directed towards Philippine consumers may be sufficient to establish that they are doing business in the Philippines. However, this is not commensurate with actual use of the mark

Thus, as modes of advertising and acquisition have now permeated into virtual zones over cyberspace, the concept of commercial goodwill has indeed evolved:

In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the marked article has been fixed in the public mind through advertising. Whether in the print, broadcast or electronic communications medium, particularly on the Internet, advertising has paved the way for growth and expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the whole world into one vast marketplace. (Emphasis and underscoring supplied).

Cognizant of this current state of affairs, the Court therefore agrees with the IPO Director General (DG), as affirmed by the Court of Appeals (CA), that the use of a registered mark representing the owner's goods or services by means of an interactive website may constitute proof of actual use that is sufficient to maintain the registration of the same.

It must be emphasized, however, that the mere exhibition of goods or services over the internet, without more, is not enough to constitute actual use. To reiterate, the "use" contemplated by law is genuine use – that is, a bona fide kind of use tending towards a commercial transaction in the ordinary course of trade. Since the internet creates a borderless marketplace, it must be shown that the owner has actually transacted, or at the very least, intentionally targeted customers of a particular jurisdiction in order to be considered as having used the trade mark in the ordinary course of his trade in that country. A showing of an actual commercial link to the country is therefore imperative."

The Court found that this was readily established as Starwood was able to show that it owns Philippine registered domain names, i.e. www.whotels.ph, www.wreservations.ph, www.whotel.ph, www.wreservation.ph which displayed the W trade mark. Further, it was shown that the websites were accessible by residents and citizens in the Philippines, and through such websites, they were able to make bookings and reservations with Starwood. Even further, Starwood's websites also provided a Philippine local number, which consumers could reach for inquiries and other concerns. Finally, such websites were in English, a language which is commonly understood in the Philippines, and the prices displayed could be converted into Philippine peso denominations. The Court found that all these factors taken together were sufficient to establish a discernible doing of business by Starwood in the Philippines through the use of such websites. As such, these websites which prominently displayed the subject W trade mark constituted sufficient evidence of use for the purposes of the DAU.

The cancellation case was thus dismissed by the Court. This ruling was promulgated on December 4 2017.

It is rather problematic that the Court ruled in this manner in this case. A more careful examination of the facts and the law would reveal that the websites presented by Starwood do not actually qualify as sufficient evidence of use.

The pertinent rules on which the decision relies are as follows:

RULE 205. Contents of the Declaration and Evidence of Actual Use.

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(c) The following shall be accepted as proof of actual use of the mark: (1) labels of the mark as these are used; (2) downloaded pages from the website of the applicant or registrant clearly showing that the goods are being sold or the services are being rendered in the Philippines; (3) photographs (including digital photographs printed on ordinary paper) of goods bearing the marks as these are actually used or of the stamped or marked container of goods and of the establishment/s where the services are being rendered; (4) brochures or advertising materials showing the actual use of the mark on the goods being sold or services being rendered in the Philippines; (5) for online sale, receipts of sale of the goods or services rendered or other similar evidence of use, showing that the goods are placed on the market or the services are available in the Philippines or that the transaction took place in the Philippines; (6) copies of contracts for services showing the use of the mark. Computer printouts of the drawing or reproduction of marks will not be accepted as evidence of use.

What the law requires under item (2) is that the service should be rendered in the Philippines. The fact that Starwood's websites are directed towards Philippine consumers may be sufficient to establish that they are doing business in the Philippines. However, this is not commensurate with actual use of the mark. The decision itself emphasises that the use contemplated by law is genuine use – that is, a bona fide kind of use tending towards a commercial transaction in the ordinary course of trade. It thus bears asking why the Court considered evidence that the website intentionally targeted consumers in the Philippines. What the law requires is actual use, that actual transactions (for example, bookings) occurred on Starwood's website, not evidence showing that the website intentionally targeted consumers in the Philippines.

It must be noted that Starwood's W mark is registered for Classes 43 and 44, which are services. As such, the service for which the mark is registered for must be performed within the Philippines, which is not the case for Starwood as it had no hotel or establishment in the Philippines rendering the services covered by its registration. The website cannot be considered sufficient evidence of use for the purpose of the DAU. It would be a different story if the mark was registered for goods, as goods may be shipped to the Philippines after a consumer has ordered them online via the proprietor's website, which is not the case for services.

Starwood may argue that the bookings facilitated by its website may be considered under item (5) as a transaction that took place in the Philippines. However, in such a case, they should have presented receipts of said bookings. In this case, only the website itself was discussed, and no mention of the receipts was taken up.

It must be remembered that trade mark law rests on the doctrine of nationality or territoriality. Trade mark protection may only be granted to those marks actually being used in the Philippines.

As much as the case is one step forward towards modernisation in its recognition of the internet as a growing platform for commerce changing the field of intellectual property law, it seems it has also taken two steps back as it has compromised an essential principle underlying trade mark law.

Ignacio Sapalo
		Ignacio S Sapalo is the managing partner at Sapalo Velez Bundang & Bulilan. He obtained a Bachelor of Science in engineering in 1963 and a Bachelor of Laws from Ateneo de Manila in 1967. He was the director of the Philippine Bureau of Patents, Trade Marks and Technology Transfer from 1987 to 1996. During this time, he led the group that drafted the 1998 IP Code of the Philippines. He is the author of Background Reading Material on the Intellectual Property System of the Philippines (WIPO, 1994) and has been a professor of IP at the Ateneo School of Law since 1991 and at the Jose Rizal University since 2016. He has been a pre-bar reviewer since 1994, also at Ateneo School of Law. He is the founder and president of the Intellectual Property Foundation, and the president of IProbe (an IP investigation and consulting firm). He is also a member of the Integrated Bar of the Philippines, the Philippine Bar Association, the Association Internationale pour la Protection de la Propriété Industrielle, the Asian Patent Attorneys Association and the Intellectual Property Association of the Philippines.

Kristine Sherika P Chy
		Kristine Sherika P Chy is a junior associate at Sapalo Velez Bundang & Bulilan. She obtained a Bachelor of Arts in Political Science in 2013 from the Ateneo de Manila University, and a Juris Doctor degree in 2017 from the Ateneo Law School. In 2018, she was successfully admitted to the Philippine Bar. She primarily handles intellectual property cases, as well as maritime, civil and litigation cases.