Did Supreme Court Signal a Wide Open Door For Trademark Piracy?

June 8, 2015

In a recent decision, the Supreme Court allowed the registrations owned by two competing companies, for an identical trademark, used in connection with goods in the same Class, thereby effectively throwing the doors wide open to trademark copying and creating a climate for potential consumer confusion.

This baffling decision stemmed from the decades old dispute between a local company, Kolin Electronics Co., Inc. (“KE”), and a foreign company, Taiwan Kolin Corporation (“TK”), over the use and registration of the trademark KOLIN for electronic goods.

The relevant facts leading up to the Supreme Court decision are: In December 2002, TK applied to register KOLIN for use on television sets, cassette recorder, and VCD amplifiers, which fall under Class 9 of the Nice Classification (the “Application”). In July 2006, KE opposed claiming that the applied mark is confusingly similar to its KOLIN trademark, which was already registered in November 2003 for automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated power supply, step-down transformer, and PA amplified AC-DC under Class 9 of the Nice Classification. Ironically, KE’s KOLIN registration was also the subject of a prior legal dispute between the same parties, in which TK opposed said application, but was denied by the Bureau of Legal Affairs and subsequently affirmed by the Director General of the IPO and the Court of Appeals. Thus, KE was able to register the KOLIN for various products under Class 9 and is now using the said registration to oppose TK’s application for the KOLIN mark for use on goods under Class 9.

In reaching a decision, the Supreme Court relied on the factors set forth in the case of Mighty Corporation vs. E. & J Gallo Winery (G.R. No. 154342, July 14, 2004) to determine if the parties’ goods are related. The emphasis, the Supreme Court noted, should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. In fact, the Supreme Court deemed insufficient the argument that the parties’ goods are both electronic products under Class 9. The Supreme Court agreed with TK’s assertion that (1) TK’s goods are classified as home appliances as opposed to KE’s goods, which are power supply and audio equipment accessories; (2) TK’s TV and DVD players perform distinct function and purpose from KE’s power supply and audio equipment; and (3) TK sells and distributes various home appliance products on wholesale and to accredited dealers, whereas KE’s goods are sold and flow through electrical and hardware stores. Based on the foregoing arguments, the Supreme Court found error in the Court of Appeal’s conclusion that all electronic products are related and that the coverage of one electronic product necessarily precludes the registration of a similar mark over another.

In addition, the Supreme Court compared the parties’ marks and found that there are distinct visual and aural differences between them. KE’s mark is italicized and colored black, while that of TK’s is white in pantone red color background. The differing features between the two, though minimal, were deemed sufficient to distinguish one brand from the other. Moreover, the Supreme Court found that the products are considered relatively luxurious items, not easily considered affordable. Accordingly, a casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his or her purchase. Thus, the Supreme Court concluded that confusion and deception is unlikely and allowed the registration of TK’s identical “KOLIN” mark also covering goods under Class 9.

This decision is in stark contrast to how courts in other jurisdictions determine the relatedness of goods for likelihood of confusion analysis. In the United States, for example, the Trademark Trial and Appeal Board (TTAB) ruled that differing goods under Class 9 are considered related and therefore likely to cause consumer confusion. (See Hewlett-Packard Development Company, L.P. vs. Vudu, Inc. (Opposition No. 91185393, October 26, 2009). The TTAB found that the computer goods covered by the mark “VOODOO” are related to the software goods covered by the “VUDU” mark, and therefore found likelihood of confusion between the two similar marks. In reaching this result, the TTAB noted that because the identification of goods in opposer’s registration is not limited to specific types of computers, it must be presumed that opposer’s computers encompass computers, which would use applicant’s software products. Therefore, the TTAB concluded that applicant’s software products and opposer’s computer products are complementary goods and found that there is a likelihood of confusion as to the parties’ marks with respect to Class 9.

In the Philippine case, the Supreme Court did not even consider that fact that KE’s power supply and audio equipment products are complementary to TK’s television sets, cassette recorder and VCD amplifier products. In fact, because KE’s registration does not limit its products to be used for only a certain kind of home appliance goods, it should have been assumed that the products could be used on TK’s appliance products. Moreover, it is not farfetched to believe that consumers would encounter TK’s appliance products and KE’s power source and audio equipment products in home goods and appliances stores, thus increasing the likelihood that consumers will associate the products as coming from the same source.

This Supreme Court decision has effectively made it very difficult to show that products classified under the same Class of goods are related. It also throws the door wide open for the use of identical trademarks by competing companies producing different but complementary goods, thus increasing the likelihood of consumer confusion. Moreover, the decision wreaks havoc on a lot of well-established doctrines, especially the dilution principle, where even non-competing goods are prohibited from copying to protect marks that are famous and those already having established goodwill. The real winner in this case are the trademark pirates who can now use a mark identical to a registered mark on goods that are complementary to goods covered by the registered mark. It appears then that the real losers in this case are the consumers.

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