Unfair Competition: Likelihood of Confusion vs. Actual Deception in Philippine Trademark Cases

The Supreme Court's 2008 decision in Levi Strauss (Phils.), Inc. v. Tony Lim (G.R. No. 162311) clarifies two important points for businesses and practitioners: first, the proper procedural remedy for questioning a Department of Justice (DOJ) resolution in a preliminary investigation, and second, the substantive elements of unfair competition under Philippine law—particularly the distinction between mere likelihood of confusion and actual intent to deceive.

The Facts of the Case

Levi Strauss (Phils.), Inc. is the exclusive licensee of the LEVI'S trademarks in the Philippines. In 1995, it lodged a complaint against Tony Lim, who manufactured and sold denim products under the brand name "LIVE'S." Levi Strauss alleged that Lim's products bore colorable imitations of its trademarks, including the arcuate backpocket stitching design, the "501" mark (which Lim allegedly copied as "105"), the two-horse patch design, and the red tab on the backpocket.

A search warrant was served on Lim's premises, and several items were seized. The PNP Criminal Investigation Command filed a complaint for unfair competition under Article 189 of the Revised Penal Code (before its repeal by the Intellectual Property Code, RA 8293).

The DOJ's Conflicting Resolutions

The investigating prosecutor dismissed the complaint, finding that Lim's products were not clothed with an appearance likely to deceive the ordinary purchaser. On appeal, then-Secretary of Justice Teofisto Guingona affirmed the dismissal, noting that "LIVE'S" and "LEVI'S" have different spellings, meanings, and pronunciations. He also observed that no one was actually deceived and that Lim had registered his own trademark.

However, Guingona's successor, Secretary Silvestre Bello III, reversed and directed the filing of an information against Lim. Bello reasoned that exact similarity is not required and that Lim had clearly given his products the general appearance of LEVI'S jeans. But after another motion for reconsideration, a new Secretary of Justice, Serafin Cuevas, reinstated the dismissal.

The Procedural Issue: Rule 43 vs. Rule 65

Levi Strauss elevated the case to the Court of Appeals via a petition for review under Rule 43 of the Rules of Civil Procedure. The CA affirmed the dismissal. Before the Supreme Court, the pivotal procedural question was whether Rule 43 was the proper remedy.

The Supreme Court held that it was not. The DOJ is not among the quasi-judicial agencies enumerated in Rule 43 whose resolutions may be appealed to the CA. When the Secretary of Justice resolves an appeal from a preliminary investigation, that resolution is final. The aggrieved party's remedy is a petition for certiorari under Rule 65, but only on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction.

This procedural distinction matters: courts cannot substitute their judgment for that of the prosecutor on the factual question of probable cause. Judicial review is limited to whether the DOJ acted arbitrarily or despotically.

The Substantive Issue: Elements of Unfair Competition

Even if the Court had treated the petition as one under Rule 65, it still would have failed. The Court reiterated the four elements of unfair competition under Article 189(1) of the Revised Penal Code:

1. The offender gives his goods the general appearance of another's goods;
2. This general appearance appears in the goods, packaging, device, words, or other features;
3. The offender offers to sell or sells those goods; and
4. There is actual intent to deceive the public or defraud a competitor.

All four elements must be proven. The Court emphasized that mere confusing similarity is not enough—the resemblance must be such that it is likely to deceive the ordinary purchaser exercising ordinary care.

The Court found no grave abuse of discretion in the DOJ's findings. It noted the differences between the marks, including spelling and pronunciation, the distinct backpocket designs, and the different patch designs (three men versus two horses). It also observed that jeans are not inexpensive items, so buyers are more cautious and discerning—making confusion and deception less likely, consistent with earlier rulings in Emerald Garment Manufacturing Corporation v. Court of Appeals and Del Monte Corporation v. Court of Appeals.

The Court also rejected the consumer survey submitted by Levi Strauss, noting that it was conducted with products shown from approximately five feet away, which discounted the buyer's ability to scrutinize the goods and ignored the significant price difference between the two brands.

Practical Takeaways

• Unfair competition requires actual intent to deceive, not just a likelihood of confusion. While striking similarity may allow intent to be inferred, the resemblance must be such that it would deceive an ordinary purchaser exercising ordinary care.
• The proper remedy to question a DOJ resolution in a preliminary investigation is a petition for certiorari under Rule 65, not an appeal under Rule 43. The petitioner must show grave abuse of discretion, not mere error.
• Trademark registration can indicate good faith, though it does not automatically negate unfair competition where goods are passed off as another's.
• The nature and cost of the product matter. Courts consider the attitude of the purchaser, which is largely determined by the price of the goods. Expensive items warrant more caution from buyers.
• Courts defer to prosecutors on probable cause. Judicial review of a prosecutor's determination is limited to whether there was grave abuse of discretion.

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