Trademark Ownership: Prior Use Trumps Earlier Filing in Philippine Law

The Supreme Court's 2010 ruling in E.Y. Industrial Sales, Inc. v. Shen Dar Electricity and Machinery Co., Ltd. (G.R. No. 184850) settled an important question in Philippine trademark law: who owns a mark when one party files first but another party used the mark earlier in commerce? The Court held that actual prior use in trade, not the filing date, determines true ownership.

The Dispute Over "VESPA"

Two companies claimed rights to the trademark "VESPA" for air compressors. The respondent, Shen Dar, a Taiwan-based manufacturer, filed its trademark application on June 9, 1997. The petitioner, E.Y. Industrial Sales, Inc. (EYIS), a domestic corporation, filed its own application on July 28, 1999. The Intellectual Property Office (IPO) issued certificates of registration to both parties.

Shen Dar filed a petition to cancel EYIS's registration, arguing that it had filed first and that EYIS was merely its distributor. EYIS countered that it had been using the "VESPA" mark in the Philippines since the early 1990s, well before Shen Dar's claimed first use.

The Issue

The central question was whether the first-to-file rule under the Intellectual Property Code (RA 8293) automatically grants ownership to the party that files first, or whether actual prior use in commerce determines true ownership.

The Ruling: Prior Use Prevails

The Supreme Court ruled in favor of EYIS, holding that while RA 8293 espouses the first-to-file rule, this does not mean ownership is based solely on an earlier filing date. The Court explained that the first-to-file rule prevents registration of an identical mark when there is an earlier application, but it does not displace the fundamental principle that ownership of a mark is acquired through adoption and use in trade or commerce.

The Court emphasized that registration merely creates a prima facie presumption of ownership, which can be rebutted by evidence of prior and continuous use by another party. Citing Shangri-la International Hotel Management, Ltd. v. Developers Group of Companies, Inc., the Court reiterated that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership. Registration, without more, does not confer an absolute right to the registered mark; evidence of prior and continuous use by another can overcome the presumptive ownership of the registrant.

Evidence of Prior Use

The Court found that EYIS presented substantial evidence of its prior use, including hundreds of sales invoices and bills of lading showing sales of "VESPA" air compressors across the Philippines since the early 1990s. One invoice dated March 27, 1995 predated Shen Dar's claimed first use in June 1996. Shen Dar, by contrast, failed to present sufficient evidence of its own prior use.

The Court also rejected the Court of Appeals' conclusion that EYIS was merely an importer or distributor. The fact that EYIS described itself as an "importer, wholesaler and retailer" on its invoices did not preclude it from being a manufacturer, as invoices need not state the full nature of a seller's business.

Procedural Points

The decision also addressed two procedural matters. First, the Court held that evidence attached to a verified petition before the IPO Bureau of Legal Affairs need not be formally offered, as long as it is properly marked under the applicable regulations. Second, the IPO Director General validly ordered the cancellation of Shen Dar's certificate of registration even without a separate cancellation petition, since Shen Dar had full opportunity to present its case and due process was observed.

Practical Takeaways

• Filing first is not enough. Under Philippine law, actual prior use in commerce is the foundation of trademark ownership. An earlier filing date creates a presumption, but it can be overcome by evidence of another party's prior and continuous use.
• Document your use. Maintain complete records of sales invoices, bills of lading, advertisements, and other commercial documents showing use of your mark. These are critical evidence in ownership disputes.
• A declaration of actual use is not conclusive. While a notarized Declaration of Actual Use is a public document, it must be supported by proof of actual use as of the date claimed.
• Registration is prima facie, not absolute. A certificate of registration is rebuttable evidence of ownership. It does not confer an absolute right if another party can prove prior use.
• Be mindful of distributor relationships. A distributor who uses a mark in the Philippines may acquire ownership rights if it uses the mark in the concept of an owner, particularly if the foreign manufacturer fails to prove its own prior use.

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