Consider the brands “ZYNAPS” and “ZYNAPSE.” Are these two related? Do they refer to the same product? These were the questions that hounded a recent decision of the Supreme Court (SC) in Trademark Law which once and for all settled the rule on whose trademark shall prevail between the “first filer” and the “first user.”
In Zuneca Pharmaceutical vs Natrapharm Inc. (GR 211850, 8 September 2020), the two competing marks involved were “ZYNAPS” and “ZYNAPSE.” They were admitted by both parties to be confusingly similar with each other.
“ZYNAPS” (without an e) is owned by Zuneca. It is a drug for the treatment of seizures like epilepsy. On the other hand, Natrapharm owns “ZYNAPSE” (with an e), which is also a medicine, but for stroke.
This is the interesting part. Zuneca never registered its trademark “ZYNAPS” with the Intellectual Property (IP) Office, but it has been using it since 2004. Meanwhile, Natrapharm has registered its trademark “ZYNAPSE” on 24 September 2007.
With that, Natrapharm sued Zuneca for trademark infringement for using a confusingly similar trademark in the same field of drugs or medicine.
Zuneca counter-sued and alleged that Natrapharm was the one in bad faith since it (Natrapharm) knows Zuneca’s usage of “ZYNAPS” as a mark since 2004 considering that they both presented their products in the same pharmaceutical convention years prior.
The trial court found Zuneca liable for trademark infringement, essentially saying that Natrapharm was the first one to register the trademark in good faith. The trial court found no bad faith on the part of Natrapharm either since Zuneca failed to prove that Natrapharm actually knew the existence of Zuneca’s “ZYNAPS.” The Court of Appeals affirmed this decision.
The SC partly affirmed the lower courts’ decision. It definitively ruled that the only mode of acquiring ownership of a trademark is through registration (and not use).
According to the SC: “(i) the language of the IP Code provisions clearly conveys the rule that ownership of a mark is acquired through registration; (ii) the intention of the lawmakers was to abandon the rule that ownership of a mark is acquired through use; and (iii) the rule on ownership used in Berris and E.Y.
Industrial Sales Inc. (cases) is inconsistent with the IP Code regime of acquiring ownership though registration.”
Indeed, Section 122 of the IP Code states, “(T)he rights in a mark shall be acquired through registration made validly in accordance with the provisions of this law.”
In effect, the SC abandoned its previous rulings that the first user in good faith defeats the right of the first filer in good faith. Trademark is acquired solely through registration.
To this decision, a couple of Justices dissented. They could not accept interpretation that the present IP Code abandoned “use” as a mode of acquiring ownership of a trademark.
They said that that the IP Code equally requires the registered owner of the mark to file a Declaration of Actual Use (Sec. 124.2, IP Code) and the law expressly states that the certificate of registration shall be “ prima facie evidence of the validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the same….” (Sec. 138, IP Code). According to the dissenters, these provisions show that prior use is still required before an entity could acquire ownership of a mark.
To these objections, J. Caguioa (ponente) stated that the requirement of filing a Declaration of Actual Use does not refer to the mode of acquisition but is a requirement to maintain ownership of a mark.
The rule on the prima facie validity of a certificate of registration is merely meant to recognize the instances when such certificate is not reflective of ownership such as, among others, when the registration was done contrary to the IP Code.
In order to erase doubts, the SC unearthed Congress’ deliberations when it was crafting the present IP Code. The SC quoted the late Senator Raul Roco’s sponsorship speech to show that it was Congress’s intent to abandon “use” as a mode of acquiring ownership of a mark in order to be consistent with the Paris Convention and other Trademark Laws of the world.
In short, the SC held that Natrapharm’s “ZYNAPSE” must prevail over Zuneca’s “ZYNAPS” since the former was first registered.
Although, the SC absolved Zuneca from being liable for trademark infringement because SC found Zuneca to be a prior user in good faith. According to the SC, Section 159.1 of the IP Code contemplates that 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.
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