Trademark Ownership in the Philippines: First-to-File Rule Explained

The Supreme Court's 2020 decision in Zuneca Pharmaceutical v. Natrapharm, Inc. (G.R. No. 211850) settles a critical question for businesses: who owns a trademark when one party used the mark first, but another registered it earlier? The answer, under the Intellectual Property Code of the Philippines (IP Code), is clear—registration, not prior use, is the operative act that confers ownership. This ruling has significant implications for businesses that rely on unregistered marks.

The Facts of the Case

Zuneca Pharmaceutical had been selling carbamazepine under the brand name "ZYNAPS" since 2004, after securing a Certificate of Product Registration from the Bureau of Food and Drugs. Natrapharm, Inc., meanwhile, registered the trademark "ZYNAPSE" with the Intellectual Property Office of the Philippines (IPO) in September 2007 for citicoline, a drug used for stroke treatment.

Natrapharm later sued Zuneca for trademark infringement, arguing that "ZYNAPS" was confusingly similar to its registered mark "ZYNAPSE." Zuneca countered that it was the prior user of the mark and that Natrapharm had fraudulently appropriated it. Both the Regional Trial Court and the Court of Appeals ruled in favor of Natrapharm, holding that as the first registrant in good faith, it had superior rights.

The Issue

The central question before the Supreme Court was: How is ownership over a trademark acquired under Philippine law? Specifically, does the first-to-file registrant in good faith defeat the rights of a prior user in good faith?

The Court's Ruling

The Supreme Court affirmed the lower courts' decisions, ruling in favor of Natrapharm. The Court held that under the IP Code, rights in a mark are acquired through registration made validly in accordance with the law. This principle is expressed in Section 122 of the IP Code, which states that rights in a mark shall be acquired through registration. The Court emphasized that this provision explicitly abandoned the prior rule under the old Trademark Law (R.A. 166, as amended), which required actual use of a mark to acquire ownership.

The Court traced the history of trademark law in the Philippines, from the Spanish Royal Decree of 1888 (which required registration) to Act No. 666 and R.A. 166 (which adopted the use-based system), and finally to the IP Code, which reverted to a registration-based system. The Court emphasized that the language of the IP Code is clear: registration is the mode of acquiring ownership.

The Court also addressed Zuneca's reliance on earlier jurisprudence, such as Berris Agricultural Co., Inc. v. Abyadang and E.Y. Industrial Sales, Inc. v. Shen Dar Electricity and Machinery Co., Ltd., which applied the use-based rule. The Court clarified that these cases are inconsistent with the IP Code regime and no longer control.

Good Faith and the First-to-File Rule

On the issue of good faith, the Court found that Natrapharm had no knowledge of Zuneca's "ZYNAPS" mark when it registered "ZYNAPSE." Natrapharm's witness testified that she checked the IPO database and found no similar marks. The Court noted that good faith is presumed, and Zuneca failed to present sufficient evidence to rebut this presumption.

The Court also applied the dominancy test in determining confusing similarity. Under this test, the marks "ZYNAPS" and "ZYNAPSE" are confusingly similar because they share the dominant feature "ZYNAP." Given that both are pharmaceutical products, the Court emphasized the public interest in preventing confusion that could lead to disastrous errors in medication.

Practical Takeaways

• Register trademarks promptly. Under the IP Code, ownership is acquired through registration, not use. A business that uses a mark without registering it risks losing its rights to a later registrant in good faith.
• Conduct thorough searches. Before filing a trademark application, search the IPO database and other relevant sources to ensure the mark is not confusingly similar to existing marks.
• Act quickly against infringement. A prior user who fails to register or oppose a conflicting application may be barred by laches and deemed to have abandoned the mark.
• Good faith is presumed. The burden of proving bad faith in registration lies with the party challenging the registration.
• Seek professional advice. Trademark disputes are highly technical. Consult an intellectual property lawyer to navigate the registration process and protect your brand.

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