Republic of the Philippines Court of Appeals Manila. FIFTH (5 th ) DIVISION. SAO PAOLO ALPARGATAS S. A., Petitioner, CA-G.R. SP No.

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1 Republic of the Philippines Court of Appeals Manila FIFTH (5 th ) DIVISION SAO PAOLO ALPARGATAS S. A., Petitioner, CA-G.R. SP No * -versus- Hon Secretary LEILA C. DE LIMA, in her capacity as Secretary of the Department of Justice, ONG KING GUAN and MARY GRACE CHING, as Treasurer/General Manager and Corporate Secretary of KENTEX MANUFACTURING CORPORATION, Respondents. Members: REYES, Jr., J.C., Chairperson, CRUZ, S.C., and HERNANDO, R.P.L., J.J. PROMULGATED: OCTOBER 14, 2015 x x HERNANDO, R.P.L., J.: Before Us is a Petition for Certiorari 1 instituted by Sao Paolo Alpargatas S.A. seeking to reverse and set aside the Resolutions dated May 28, 2013 and December 5, 2013, both issued by Honorable Leila de Lima in her capacity as the Secretary of Justice, in NPS Docket No. XV-02-INV-10J The Antecedents * Unloaded as a replacement case to the ponente, Justice Ramon Paul L. Hernando, on July 27, 2015 by virtue of Sec. 4 (b), Rule III of the 2009 Internal Rules of the Court of Appeals (IRCA). 1 Amended Petition for Certiorari dated February 8, 2014, Rollo, pp

2 CA-G.R. SP No Page 2 of 10 Petitioner Sao Paolo Alpargatas S.A. (SPASA) is a corporation organized and existing under the laws of Brazil, not doing business in the Philippines but has the capacity to sue under Republic Act No. 8293, as amended. SPASA is the registered owner of the mark HAVAIANAS. Havaianas products are made by SPASA in Brazil and are made available to the Philippine market through Terry S.A. Inc., SPASA's exclusive distributor in the Philippines. SPASA filed a complaint 2 before the Office of the City Prosecutor of Caloocan City against herein private respondents Ong King Guan and Mary Grace Ching, owners/officers/employees of Kentex Manufacturing Corporation (Kentex), for trademark infringement and damages. Petitioner alleged that private respondents violated Section 155 (1) in relation to Section 170, both of Republic Act No. 8293, as amended, when they offered and sold to the public their sandals branded as HAVANA, knowing fully well that the same were colorable imitations or copies of the Havaianas sandals and bearing petitioner's registered trademarks Havaianas Greek Pattern Logo and Havaianas Rice Pattern Logo without securing petitioner's prior consent. Private respondents denied all the allegations of SPASA. 3 They countered that HAVANA is not a colorable imitation of the marks owned and registered under the name of SPASA. HAVANA is allegedly a trademark owned by Kentex under a Certificate of Copyright Registration dated June 16, 1995 issued by the National Library. 4 Copies of trademark applications before the Intellectual Property Office (IPO) filed by Kentex for the mark HAVANA were presented, 5 and the designs of the slippers bearing the mark HAVANA were patterned after original industrial designs registered with the IPO. 6 Private respondents further assert that Kentex has been using the mark HAVANA since the early 1990s and preceded the arrival of the mechandise owned by SPASA. They also claim that even if there are similarities between the slippers manufactured and distributed by SPASA and Kentex, the likelihood of confusion is speculative at best, on the following grounds: (1) SPASA and Kentex target different markets; (2) the selling price range between SPASA and Kentex' merchandise is very different; and (3) SPASA and Kentex cater to different sets of purchasers who are clearly smart and discerning enough to distinguish their goods. In reply to the counter-allegations of private respondents, 7 SPASA 2 Affidavit-Complaint dated October 18, 2010 filed before the OCP-Caloocan City, Rollo, pp See Joint Counter-Affidavit dated January 12, 2011 filed before the OCP-Caloocan City, Rollo, pp Rollo, p Rollo, pp Rollo, pp See Reply-Affidavit dated January 26, 2011 filed before the OCP-Caloocan City, Rollo, pp

3 CA-G.R. SP No Page 3 of 10 asseverated that the right to a trademark cannot be set up by using a copyright registration by reason of difference of the two intellectual property rights, and that trademark applications do not prove ownership of a trademark. SPASA presented evidence that private respondents' trademark applications had been refused registration by the Bureau of Trademarks of the IPO. 8 Moreover, according to SPASA, its Havaianas Greek Pattern Logo and Havaianas Rice Pattern Logo have earlier filing dates than the industrial designs of private respondents, which allegedly lack novelty and made subject of cancellation proceedings before the IPO. Citing jurisprudence, SPASA maintains that there can be a likelihood of confusion despite the differences in prices and target markets. Unswayed, 9 private respondents mainly insisted that (1) HAVANA and HAVAIANAS are far from identical as HAVANA has thicker and bolder letters than HAVAIANAS ; (2) Havana is phonetically different than Havaianas, distinguishable and not confusing at all; (3) it was a legal impossibility that they are passing or attempting to pass off Havana slippers for that of Havaianas since the design of Havana slippers were merely patterned after the industrial designs registered before the IPO; (4) the conclusion that the marks of Kentex and SPASA are identical or very similar had no leg to stand on, since HAVANA has the word Sandals underneath it; (5) Kentex had been in the operation and business of manufacturing footwear bearing the HAVANA mark prior to the date that SPASA's products officially arrived in the country; (6) the denial of the trademark applications for HAVANA has not attained finality; and (7) absent any declaration by a competent government authority nullifying the industrial design registrations, the same remain to be valid and effective. After the filing by SPASA of its Sur-rejoinder, 10 the Office of the City Prosecutor of Caloocan City (OCP-Caloocan City), through Prosecutor Bayani M. Jamias, disposed of SPASA's complaint by ruling in favor of private respondents, 11 to wit: x x x After carefully evaluating the evidence as well as the arguments raised by the parties, we find merit for the respondents. We find merit to the defense of the respondents that they cater to a different class of buyers from that of the complainant. Buyers from the lower bracket of our society such as those buying the HAVANA slippers in public markets cannot be fooled into believing that what they are buying is the imported HAVAIANAS slippers. The law 8 Rollo, pp See Rejoinder dated February 23, 2011 filed before the OCP-Caloocan City, Rollo, pp Dated March 16, 2011 filed before the OCP-Caloocan City, Rollo, pp Resolution issued by the OCP-Caloocan City dated June 8, 2011, Rollo, pp

4 CA-G.R. SP No Page 4 of 10 requires that the buying public are misled into believing that what they are buying is the original one when in truth, it is just a colorable imitation of the original. In this instant complaint, it is clear that respondents' slippers are properly labelled HAVANA sandals and there is no evidence that they are selling their sandals with intent to deceive the buying public. Respondents never sold their product by making it appear that what they are selling is a HAVAIANAS sandal because by labelling it as HAVANA sandal, the buying public is already sufficiently informed that if they buy the HAVANA sandal, they are aware that it is only a cheap sandal made in the Philippines and is different from HAVAIANAS which is imported from Brazil. In short, clearly the element of deceit is not present on the part of the respondents. WHEREFORE, premises considered, it is respectfully recommended that this instant complaint be dismissed for lack of probable cause. The Motion for Reconsideration 12 of the said Resolution having been denied by the OCP-Caloocan City, 13 SPASA filed a Petition for Review 14 before the Department of Justice (DOJ). However, through its assailed Resolution dated May 28, 2013, 15 the DOJ affirmed the findings of the OCP- Caloocan City, the decretal portion of which states as follows: WHEREFORE, the petition for review is dismissed. The DOJ denied SPASA's Motion for Reconsideration 16 through its likewise disputed Resolution dated December 5, worded in the following tenor: WHEREFORE, the Motion for Reconsideration is hereby DENIED with finality. Hence, this Petition for Certiorari. The Assignment of Errors Dated July 11, 2011 filed before the OCP-Caloocan City, Rollo, pp Resolution issued by the OCP-Caloocan City dated September 5, 2011, Rollo, p Dated December 1, 2011 filed before the DOJ, Rollo, pp Rollo, pp Dated July 30, 2013 filed before the DOJ, Rollo, pp Rollo, pp Issues raised by SPASA in the Amended Petition for Certiorari, supra, Note 1, Rollo, pp

5 CA-G.R. SP No Page 5 of 10 Petitioner SPASA poses its issues in the following manner: I Whether Public Respondent Hon. Secretary Leila de Lima acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in issuing Resolutions dated May 28, 2013 and December 5, 2013 x x x and holding that there is no probable cause to indict private respondents x x x for trademark infringement because there is no confusing similarity between the HAVANA sandals and petitioner's HAVAIANAS slippers/sandals; II Whether Public Respondent Hon. Secretary Leila de Lima acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in ruling that there is no probable cause to indict private respondents for trademark infringement because there is no likelihood of confusion between the HAVANA and HAVAIANAS slippers; III Whether Public Respondent Hon. Secretary Leila de Lima acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in ruling that there is no probable cause to indict private respondents for trademark infringement because private respondents' copyright registration of the HAVANA FOR SHOES term (as issued by the National Library) is evidence of its use of the HAVANA trademark since the [1990s; and] IV Whether Public Respondent Hon. Secretary Leila de Lima acted with grave abuse of discretion amounting to lack or in excess of jurisdiction in ruling that private respondents have acquired trademark rights over the Havana brand by virtue of its copyright registration for HAVANA FOR SHOES.

6 CA-G.R. SP No Page 6 of 10 Briefly stated, the primary issue is whether or not the DOJ committed grave abuse of discretion in finding no probable cause to indict private respondents for trademark infringement. The Court's Ruling The Petition is meritorious. It must be emphasized at the outset that what is necessary for the filing of a criminal information is not proof beyond reasonable doubt that the person accused is guilty of the acts imputed on him, but only that there is probable cause to believe that he is guilty of the crime charged. 19 The following pronouncements by the Supreme Court in the case of Skechers, U.S.A., Inc. v. Inter Pacific Industrial Trading Corp. 20 is instructive on the matter of trademark infringement, viz: The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No Specifically, Section 155 of R.A. No states: 19 PNB v. Tria, G.R. No , April 25, G.R. No , March 28, Remedies; Infringement. Any person who shall, without the consent of the owner of the registered mark: Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or

7 CA-G.R. SP No Page 7 of 10 to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material. The essential element of infringement under R.A. No is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed tests the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments. In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words, but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other. Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent. (Emphasis supplied and citations omitted.) Private respondents maintain that their and SPASA's buyers are clearly intelligent enough to distinguish their products, which target different markets. Havana slippers are allegedly sold for less than one hundred pesos

8 CA-G.R. SP No Page 8 of 10 (Php ) in markets and general department stores, whereas Havaianas slippers are initially priced at eight hundred pesos (Php ) and consigned with high-end malls and separate/stand-alone stores. Thus, private respondents claim that confusion between Havana and Havaianas slippers are remote, if not impossible. We side with petitioner. To establish trademark infringement, the following must be shown: (1) the validity of plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion." Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement. 21 Essentially, what the law punishes is the act of giving one's goods the general appearance of the goods of another, which would likely mislead the buyer into believing that such goods belong to the latter. 22 Difference in pricing, target markets, or avenues of sale is not an element of the offense of trademark infringement. We find that there is more than sufficient evidence to warrant the prosecution of private respondents for trademark infringement. Here, as shown by Certificates of Registration 23 before the IPO, petitioner has presented ample proof of its ownership and the corresponding validity of the trademark HAVAIANAS. As to the third element, a likelihood of confusion may arise from a grant of trademark application, since a registered trademark owner, by virtue of such grant, is allowed use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. 24 The purchasing public still might be mistaken in thinking that petitioner had ventured into a lower market segment. 25 It is not inconceivable for the public to think that the private respondents' brand Havana might be associated or connected with petitioner's brand Havaianas, which scenario is plausible especially since both petitioner and respondent manufacture rubber slippers. 26 A thorough inspection of the HAVAIANAS and HAVANA marks need not be conducted for one to conclude that both look almost alike, and that one may probably have imitated the other. Withal, it is quite unfathomable how the public prosecutor and the DOJ ruled that there was no probable cause for trademark infringement against private respondents, when it cannot be any more glaring and apparent to this Court 21 McDonald's Corporation and McGeorge Food Industries, Inc. v. L.C. Big Mak Burger, Inc., G.R. No , August 18, Espiritu, Jr. v. Petron Corp., G.R. No , November 24, Rollo, pp Skechers, U.S.A., Inc. v. Inter Pacific Industrial Trading Corp., id; citing Dermaline, Inc. v. Myra Pharmaceuticals, Inc., G.R. No , August 16, See Skechers, U.S.A., Inc. v. Inter Pacific Industrial Trading Corp., supra, Note Id.

9 CA-G.R. SP No Page 9 of 10 that, besides proof of ownership of an existing HAVAIANAS trademark, there appears colorable imitation of the same. 27 The alleged dissimilarities are too trifling and frivolous that it is indubitable that private respondent's products emanate distinct features and overall design that are so similar and alike with those of petitioner's slippers that confusion is highly likely. 28 Based on the foregoing, public respondent committed grave abuse of discretion in affirming the dismissal of petitioner's criminal complaint before the OCP-Caloocan City. To justify the issuance of the writ of certiorari, the abuse of discretion must be grave, as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined, or to act at all, in contemplation of law, as to be equivalent to having acted without jurisdiction. 29 In the present case, We are convinced that there clearly exist facts sufficient to engender a well-founded belief that the offense of trademark infringement has been committed and that private respondents are probably guilty thereof. A finding of probable cause needs only to rest on evidence showing that, more likely than not, a crime has been committed and that it was committed by the accused. 30 A prima facie case has been established by petitioner against private respondents, to which the DOJ merely turned a blind eye. A full-blown trial is to be preferred to ferret out the truth, 31 and the DOJ unjustly withheld this from petitioner. This act can only be attributable to grave abuse of discretion. WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions of the Department of Justice dated May 28, 2013 and December 5, 2013 in NPS Docket No. XV-02-INV-10J is REVERSED and SET ASIDE. The Office of the City Prosecutor of Caloocan City is ORDERED to file an Information charging private respondents Ong King Guan and Mary Grace Ching, as owners/officers/employees of Kentex Manufacturing Corporation (Kentex), with trademark infringement under Sec. 155 of Republic Act No. 8293, as amended. SO ORDERED. ORIGINAL SIGNED RAMON PAUL L. HERNANDO Associate Justice 27 Skechers, U.S.A., Inc. v. Inter Pacific Industrial Trading Corp., supra, Note Id. 29 Julie's Franchise Corp., et al. v. Ruiz, et al., G.R. No , August 28, Borlongan v. Peña, G.R. No , November 23, 2007; citing Sarigumba v. Sandiganbayan, G.R. Nos , February 16, AAA v. Carbonell, G.R. No , June 8, 2007; citing Abugotal v. Tiro, No. L-40552, August 20,

10 CA-G.R. SP No Page 10 of 10 WE CONCUR: ORIGINAL SIGNED JOSE C. REYES, Jr. Associate Justice ORIGINAL SIGNED STEPHEN C. CRUZ Associate Justice C E R T I F I C A T I O N Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ORIGINAL SIGNED JOSE C. REYES, Jr. Associate Justice Chairperson, Fifth Division