In a landmark ruling that reinforces the primacy of good faith in intellectual property (IP) law, the Supreme Court has ruled in favor of Gloria Maris Shark’s Fin Restaurant Inc. in its prolonged dispute with Pacifico Q. Lim, one of its own incorporators.

The decision (Gloria Maris v. Lim, G.R. 264919-21, 20 May 2024), penned by Associate Justice Maria Filomena Singh, categorically affirms that trademarks registered in bad faith constitute unfair competition under the Intellectual Property Code.

The case revolved around the ownership of the Gloria Maris logo — a shark fin enclosed in a distinctive plate — which had become a recognizable symbol of the restaurant’s brand since its inception. Gloria Maris was incorporated in 1994, with Lim and four others as founding stockholders. Lim was tasked with registering the company’s trademark with the Intellectual Property Office (IPO).

In a surprising twist, the board discovered in 2005 that Lim had registered three trademarks under his own name: “GLORIA MARIS WOK SHOP & DESIGN,” “GLORIA MARIS KITCHEN WITH LOGO AND DESIGN,” and “GLORIA MARIS SHARK’S FIN RESTAURANT.” He had even franchised these marks to third parties, profiting from the brand’s goodwill at the company’s expense.

Gloria Maris filed cancellation petitions before the IPO. Lim claimed ownership of the logo, arguing that he had conceptualized it before the restaurant’s incorporation. In contrast, the company asserted that a graphic designer was commissioned by Gloria Maris to create the logo, which the board later approved. Lim’s role, the company argued, was purely ministerial — to register the trademark on behalf of the corporation.

The Bureau of Legal Affairs (BLA) initially sided with Lim, noting his claim to have coined the marks predated the company’s SEC registration and citing Gloria Maris’ lack of written authority allowing him to file the application. The BLA also observed that the company failed to oppose the published application.

However, this was reversed by the IPO’s Office of the Director General (ODG), which found that Gloria Maris had been using the marks well before Lim’s registration, casting serious doubt on Lim’s claims. But the Court of Appeals overturned the ODG ruling and reinstated the BLA’s findings, citing alleged insufficiency of evidence to disprove Lim’s prima facie ownership.

Eventually, the case reached the Supreme Court, which ruled decisively in favor of Gloria Maris. The Court found that Lim’s conduct amounted to bad faith and enumerated three compelling grounds: (1) he was fully aware that the company had long used the marks; (2) he was an insider — both incorporator and director — who had fiduciary duties to the corporation; and (3) he exploited the goodwill built collectively by Gloria Maris for his benefit.

The Court emphasized that under Section 168.2 of the IP Code, unfair competition includes acts that deceive or mislead consumers into believing that goods or services emanate from a business with established goodwill. By appropriating the marks for himself, Lim passed off the company’s identity as his own. His conduct, the Court held, falls squarely within the ambit of unfair competition and justifies cancellation under Section 151 of the IP Code, which allows revocation of trademarks fraudulently obtained.

More broadly, the ruling sends a strong message: incorporators and directors must act in utmost good faith when dealing with corporate assets, especially intangible ones like trademarks. Bad faith registration by insiders seeking to personally benefit from corporate goodwill will not be tolerated.

This decision is a timely and important reminder to business owners to establish clear documentation of trademark ownership and delegation of registration authority. It also affirms that the Supreme Court stands ready to protect companies against internal acts of unfair competition that could compromise brand integrity and corporate equity.

For more of Dean Nilo Divina’s legal tidbits, please visit www.divinalaw.com. For comments and questions, please send an email to cad@divinalaw.com.