Supreme Court Holds that Prior Use No Longer Determines the Acquisition of Ownership Over a Mark
In Zuneca Pharmaceutical vs. Natrapharm, Inc. [G.R. No. 211850, 08 September 2020], the Supreme Court held that, under the Intellectual Property Code of the Philippines, prior use no longer determines the acquisition of ownership over a mark. This landmark decision overturns and abandons the rulings in previous cases such as Berris Agricultural Co., Inc. v. Abyadang [G.R. No. 183404, 13 October 2010] and E. Y. Industrial Sales, Inc. et al. v. Shen Dar Electricity and Machinery Co., Ltd. [G.R. No. 184850, 20 October 2010] stating that the rights of a prior user of a mark prevail over the rights of a first registrant of a confusingly similar mark. The decision unequivocally pronounced that, under the Intellectual Property Code, the ownership of a trademark is acquired by its registration.
The Supreme Court emphasized that the language of the Intellectual Property Code (unlike its predecessor, the Trademark Law) clearly conveys the rule that ownership of a mark is acquired through registration. Even if a mark was previously used and not abandoned by another person, a good faith applicant may still register the same and thus become the owner thereof, and the prior user cannot ask for the cancellation of the latter’s registration. While the Intellectual Property Code mandates that the applicant or registrant of a mark must prove continued actual use of such mark, this does not imply that actual use is still a recognized mode of acquisition of ownership. Rather, this requirement is put in place in order for the registered owner of a mark to maintain his ownership.
Similarly, the prima facie nature of the certificate of registration is not indicative of the fact that prior use is still a recognized mode of acquiring ownership under the Intellectual Property Code. Rather, it is meant to recognize the instances when the certificate of registration is not reflective of ownership of the holder thereof, such as when: (1) the first registrant has acquired ownership of the mark through registration but subsequently lost the same due to non-use or abandonment; (2) the registration was done in bad faith; (3) the mark itself becomes generic; (4) the mark was registered contrary to the Intellectual Property Code (e.g., when a generic mark was successfully registered for some reason); or (5) the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used.
Nevertheless, under the Intellectual Property Code, the existence of bad faith in trademark registrations may be a ground for its cancellation at any time by filing a petition for cancellation, bad faith being defined as knowledge of prior creation, use and/or registration by another of an identical or similar trademark. Thus, the first-to-file registrant must be in good faith to allow such registrant to acquire all the rights in a mark. In the same vein, prior users in good faith are also protected under the Intellectual Property Code in the sense that they will not be made liable for trademark infringement even if they are using a mark that was subsequently registered by another person.
In arriving at this decision, the Supreme Court considered the following undisputed facts: (1) Respondent Natrapharm was the registrant of the “ZYNAPSE” mark which was registered on 24 September 2007; (2) Petitioner Zuneca has been using the “ZYNAPS” brand as early as 2004; and (3) “ZYNAPSE” and “ZYNAPS” were confusingly similar and both were used for medicines. It was clear that Respondent Natrapharm was the first-to-file registrant of “ZYNAPSE” mark and that Petitioner Zuneca was the prior user of a confusingly similar mark, “ZYNAPS”. What remained contentious was Respondent Natrapharm’s good or bad faith in registering its “ZYNAPSE” mark, and the Supreme Court affirmed the findings of the lower courts that Petitioner Zuneca failed to show Respondent Natrapharm’s bad faith.
Since Natrapharm was not shown to have been in bad faith, it was considered to have acquired all the rights of a trademark owner upon the registration of the “ZYNAPSE” mark. However, under the Intellectual Property Code, a prior user in good faith may continue to use its mark even after the registration of the mark by the first-to-file registrant in good faith, subject to the condition that any transfer or assignment of the mark by the prior user in good faith should be made together with the enterprise or business or with that part of his enterprise or business in which the mark is used. Thus, the Supreme Court found that Petitioner Zuneca was exempted from liability for trademark infringement for being a prior user in good faith.