Deceptive Imitation: Unfair Competition Claims Without Trademark Registration

The Supreme Court’s 2014 ruling in Roberto Co v. Keng Huan Jerry Yeung and Emma Yeung (G.R. No. 212705) clarifies an important distinction in Philippine intellectual property law: a business can be held liable for unfair competition even when it cannot prove trademark infringement. This matters to every business owner because it means protection against counterfeiters and copycats does not always depend on having a registered trademark.

The Case: Counterfeit Medicated Oil

The dispute involved Greenstone Medicated Oil, a traditional Chinese medicine manufactured in Hong Kong and exclusively imported and distributed in the Philippines by Taka Trading, owned by the spouses Keng Huan Jerry Yeung and Emma Yeung.

In April 2000, Emma’s brother bought a bottle of Greenstone from a drug store in Binondo, Manila. He doubted its authenticity because the product smelled different and produced less heat than the genuine Greenstone he regularly used. When Yeung investigated, he found seven bottles of counterfeit Greenstone on display. The store’s proprietor said the items came from Roberto Co, who had offered them as “Tienchi Fong Sap Oil Greenstone.”

The spouses filed a civil complaint for trademark infringement and unfair competition against the drug store owners and Co. The trial court found them guilty of unfair competition but not trademark infringement, because the “Greenstone” trademark was not registered at the time the acts occurred. The Court of Appeals affirmed, and Co appealed to the Supreme Court.

The Issue

The sole issue was whether the Court of Appeals correctly upheld Co’s liability for unfair competition.

The Ruling

The Supreme Court denied the petition and affirmed Co’s liability. The Court noted that a petition for review under Rule 45 generally bars questions of fact, and Co failed to show any exception warranting a review of the factual findings. When the trial court’s findings are affirmed by the appellate court, they are entitled to great weight and are deemed final and conclusive when supported by the evidence on record.

Unfair Competition vs. Trademark Infringement

The Court defined unfair competition as the passing off (or palming off) of one person’s goods as the goods of another, with the end and probable effect of deceiving the public. This occurs when a defendant gives his goods the general appearance of a competitor’s goods, intending to deceive the public into believing they are the competitor’s products.

The Court found that Co conspired with the drug store owners in selling counterfeit Greenstone products packaged in bottles identical to the original, which gave rise to a presumption of fraudulent intent. This made Co liable for unfair competition.

The Court also clarified the key distinctions between the two causes of action:

• Trademark infringement is the unauthorized use of a trademark; unfair competition is the passing off of one’s goods as those of another.
• Fraudulent intent is unnecessary in infringement but essential in unfair competition.
• Prior registration of the trademark is a prerequisite to an infringement action but is not necessary for unfair competition.

Because the “Greenstone” trademark was not proven to be registered in May 2000, the infringement claim failed — but the unfair competition claim stood.

Damages Awarded

The Court upheld the awards of:

• P300,000 as temperate damages, appropriate because the pecuniary loss involved damage to goodwill, which cannot be proved with certainty (Article 2224, Civil Code)
• P200,000 as moral damages
• P100,000 as exemplary damages
• P100,000 as attorney’s fees
• Costs of suit

Practical Takeaways

• Unfair competition protection does not require trademark registration. Even unregistered marks are protected against deceptive imitation and passing off.
• Fraudulent intent is presumed when a product is passed off using imitative devices, signs, or marks that mislead purchasers, or when the similarity in packaging is striking.
• Trademark infringement and unfair competition are distinct claims. Businesses should plead both where applicable, since one may succeed even if the other fails.
• Document the deception. Evidence of a consumer being confused or deceived, and proof of the counterfeit goods’ appearance, strengthens an unfair competition case.
• Damages for goodwill loss are recoverable even when the exact amount cannot be proven, through temperate damages.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.