SEC En Banc Case No. 05-13-290 MICROTEL INNS AND SUITES (PILIPINAS) INC. Appellant, -Versus- MICROTEL GLOBAL SOLUTIONS, INC. Appellee.

PICC Secretariat Building, PICC Complex, Pasay City. Securities and Exchange Commission Republic of the Philippines Department of Finance

MICROTEL INNS AND SUITES (PILIPINAS), INC. - versus - Appellant. Change of Corporate Name SEC En Banc Case No. 05-13-290

MICROTEL GLOBAL SOLUTIONS, INC. Appellee.

DECISION

by Microtel Global Solutions, Inc. [MICROTEL GLOBAL], which seeks to reverse the Order dated 19 March 2013 of the Commission's 0ffice of the General Counsel (0GC), as well as the Reply Memorandum filed on 16 May 2013 by Microtel Inns and Suites (Pilipinas), Inc directed MICROTEL GLOBAL to change its corporate name for being confusingly similar to that of MICROTEL INNS which has a prior right to use such name. [MICROTEL INNS]1 and the Rejoinder filed 26 June 2013 by MICROTEL GLOBAL. The OGC For the consideration of the En Banc is the Appeai Memorandum filed on 2 May 2013

RELEVANT FACTS

primary purpose is: MICROTEL INNS is a domestic corporation, registered on 11 December 1998.2 Its

provide professional management for these businesses.3 [T]o engage in, conduct and carry-on the business of franchising hotels and tourism-related businesses and to operate and

primary purpose is: MICROTEL GLOBAL is a domestic corporation, registered on 7 May 2008.4 Its

inbound and outbound calls, marketing and survey campaigns, knowledge management support.5 To engage in, conduct, operate, and carry on the operation of a Business Process Outsourcing (BPO)/Call Center including both data communications and IT support, professional services, and

Name. It argued that: (1) It acquired a prior right over the name MICROTEL INNS AND SUITES (PILIPINAS) On 25 August 2011, MICR0TEL INNS filed its Petition for Change of Corporate (2) It also registered the Business Name "MICROTEL INNS AND SUITES" with the INC., where the dominant term is "MICROTEL"; Department of Trade and Industry (DTI);

3 MICROTEL INNS' Articles of Incorporation 5 MICROTEL GLOBAL's Articles of Incorporation 2 Company Reg. No. A199816935 4 Company Reg. No. CS200806908 1 During the pendency of this case, MICROTEL INNS amended its corpora name to PHINMA MICROTEL HOTELS, INC.

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(3) MICROTELL INNS extends franchises to hotel operators across the Philippines

and has thus acquired goodwill over the name "MICROTEL":; (4) The name MICROTEL GLOBAL SOLUTIONS, INC. is confusingly similar to its own,

(5) The SEC Guidelines on Corporate Names disallows the addition of one or more (6) Even though they are engaged in different industries, the public would be led to believe that MICROTEL INNS, the older and more established company, has distinctive words to a unique name, and "MICROTEL" is a unique name; since the dominant term is also "MICROTEL";

branched out into the Business Process Outsourcing/Call Center business.

it argued that: the name "MICROTEL INNS AND SUITES (PILIPINAS), INC." was registered earlier. However, On 16 September 2011, MICROTEL GLOBAL filed its Answer. It did not contest that (1) Generic names cannot be appropriated and "MICROTEL" is merely a combination (2) The SEC Guidelines on Corporate Names allow the use of a similar name if one or of and "TEL" (an abbreviation of "telecommunication"); two generic terms, "MICRO" (meaning "small"

more distinctive words are added, such as "GLOBAL SOLUTIONS"; (3) The names of the parties are not confusingly similar, because they are engaged in different industries--MICROTEL INNS is in the hotel industry, while MICROTEL

GLOBAL is in the business process outsourcing industry.

declaring that: On 19 March 2013, after notice and hearing, the 0GC issued the assailed Order,

(1) MICROTEL INNS acquired a prior right over the name because: a. MICROTEL INNS adopted it as early as its incorporation in 1998, whereas b. The dominant term "MICROTEL" is unique; C. "MICROTEL INNS" is also registered with the DTI as a Business Name. MICROTEL GLOBAL only adopted the name upon its incorporation in 2008;

(2) MICROTEL GLOBAL SOLUTIONS, INC. is confusingly similar to MICROTEL INNS AND SUITES (PILIPINAS), INC. because: b. The addition of one or more distinctive words shall not be allowed if the a. Both corporate names contain the dominant term "MICROTEL": registered name is unique, unless the Board of Directors of MICROTEL

INNS consents--and it does not consent; C. Although the principal businesses are different, there is a likelihood of

there is a connection between them, i.e. MICROTEL INNS hotel business "confusion of affiliation" since the public may be misled into thinking

may include "managing inbound/outbound calls" and "handling marketing and survey campaigns", which is MICROTEL GLOBAL's business.

On 2 May 2013, MICR0TEL GLOBAL filed the instant Appeal Memorandum.

Names, viz. MICROTEL GLOBAL reiterated that it complied with the SEC Guidelines on Corporate

As readily observed, two (2) added distinctive words in respondent's corporate name are added: "GLoBAL" and

meanings from any word in the petitioner's name "MICROTEL "SOLUTIONS" which have different spelling, terminology, and

INNS AND SUITES (PILIPINAS), INC.6

6 Page 5 of Appeal Memorandum

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MICROTEL GLOBAL also reiterated that the two corporations are engaged in different businesses, viz.

Undoubtedly, the respective business of herein parties do not belong in the same class, category, or even general classification They are completely dissimilar, unrelated, and not competing [with] each other.7

MICROTEL GLOBAL further reiterated that "MICROTEL" is a generic name, viz.

The word "MICROTEL" is a derivative or combination of two words: "micro" and "tel." The word "micro" is a common generic that enlarges in size and volume." word which is defined under [the] Webster English Dictionary [as]: "combining form in metric" or "an apparatus or instrument

Under common understanding, parlance, usage, and practice, the word "tel" is the abbreviation of "telephone."

Separately or individually, either "micro" or "tel" cannot be registered nor appropriated by anyone for his own exclusive use.

Corollary, a combination of "micro" and "tel" leading to and cannot be registered not appropriated for the exclusive benefit of any party.: "Microtel" cannot be considered as a coined or unique [name],

it is unlikely for a hotel to enter into the call center business, or vice-versa. Finally, MICROTEL GLOBAL argued that there will be no confusion of affiliation since

On 16 May 2016, MICROTEL INNS filed its Reply Memorandum

MICROTEL INNS reiterated that it is the prior registrant and that it has acquired goodwill, viz.

of hotels under the internationally-known "Microtel" name.9 been engaged in the business of franchising hotels and tourism related businesses, [as well as] operating and providing professional management for their businesses. In particular, Since its incorporation in 1998. Appellee [MICROTEL INNS] has Appellee grants franchises in the Philippines for the operation

appropriation, viz. MICROTEL INNS reiterated that "MICROTEL" is a unique name, capable of

The word "microtel" is a coined or unique word which is not

dictionary word.10 and it is not commonly known to be an abbreviation of any found in any English Dictionary. It has no particular meaning

" Page 3 of Reply Memorandum 10 Supra note 9 7 Page 6 of Appeal Memorandum 8 Page 7 of Appeal Memorandum

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In a desperate attempt to evade the legal import of [the SEC Guidelines on Corporate Names], Appellant [MICROTEL GLOBAL] foists the hair-splitting and self-declared proposition that [neither] "micro" or "tel" [can] be registered separately or individually, ergo, a combination of "micro" and "tel" leading to

be registered or appropriated.11 "Microtel" cannot be considered as coined or unique, and cannot

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"combination" words. As against Appellant's hair-splitting The said [SEC Guidelines on Corporate Names] do not proposition, nothing can change the fact that the word indisputably a coined or unique word. That fact that a non- "microtel" cannot be found in any dictionary and thus it is distinguish ormake exceptions for"derivative" o0

dictionary word may be a combination or derivative of other known words does not change the fact that it is a coined or unique word. To illustrate, the fact that "Starbucks" may be a combination of "star" and "bucks" or that "Jollibee" is a derivative of "jolly" and "bee" does not alter their character as

Guidelines on Corporate Names].12 coined or unique words within the contemplation of [the SEC

MICROTEL INNS agreed with the OGC ruling that distinctive words cannot be added to a unique name and expressly declared that it does not give consent to such use, viz.

The wordings of [the SEC Guidelines on Corporate Names] are

registered by another party.13 plain, simple, and unequivocal in providing that if a registered mark consists of a "coined or unique word", it cannot be

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Appellee [MICROTEL INNS] has not authorized nor consented to

corporate name.14 the Appellant's use of the word "Microtel" in the latter's

Finally, MICROTEL INNS argued with the OGC reasoning that there is a likelihood of confusion as to source, because a hotel/tourism business may include call center operations

Memorandum). It rephrased, for emphasis, the main arguments in its Appeal Memorandum, i.e. "microtel" is generic and there is no likelihood of confusion. On 26 June 2013, MICROTEL GLOBAL filed its Rejoinder (to MICROTEL INN's Reply

Hence this Appeal.

11 Page 8 of Reply Memorandum 12 d 14 Supra note 9 13 Id

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DISCUSSION

In order for a Petition for Change of Corporate Name to prosper, the two (2) requisites laid-down in the Supreme Court case of Philips Export B.V. y. Courts of Appeals, G.R. No. 96161 21 February 1992 (Philips case), must be satisfied, to wit:

Our own Corporation Code, in its Section 18, expressly provides that:

No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing law. Where a change in a corporate name is approved, the commission shall issue an amended certificate of incorporation under the amended name. (Emphasis supplied)

The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely:

(1) that the complainant corporation acquired a prior right over the use of such corporate name; and

(2) the proposed name is either:

(a) identical; or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or

(c) patently deceptive, confusing or contrary to existing Iaw.

(Emphasis supplied)

Prior Right

According to the Philips case, the test of prior right is priority of adoption.

on 8 May 2008. December 1998, while MICROTEL GLOBAL only adopted its name upon its incorporation Here, MICROTEL INNS adopted its name as early as its incorporation on 11

English dictionary. It is a combination of the word "micro" and the suffix "tel". and thus capable of appropriation. The dominant term "MICROTEL" does not appear in any The name "MICROTEL INNS AND SUITES (PILIPINAS), INC." is unique, not generic,

Name, since it is registered with the DTI. Section 18 of the Corporate Code prevents the Besides being protected as a Corporate Name, "MICROTEL" is protected as a Business

registration of a "name already protected by law," which includes business names, viz.

proposed name is identical or deceptively or confusingly similar Section 18. Corporate name. - No corporate name may be allowed by the Securities and Exchange Commission if the

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to that of any existing corporation or to any other name already protected by Iaw or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name.

Therefore, having earlier adopted its unique name, MICROTEL INNS has a prior right OVer MICROTEL GLOBAL.

Confusingly Similar

According to the Philips case, the test of whether a name is confusingly similar is "whether the similarity is such as to mislead a person, using ordinary care and discrimination. In so doing, the Court must look to the record as well as the names themselves." The case adds that "proof of actual confusion need not be shown. It suffices that confusion is probably or likely to occur."

Here, it is evident, even to an ordinary person, that "MICROTEL" is the dominant phrase in both of the parties' names and that the spelling is identical in both corporate names. The word "MICROTEL" does not appear in any English dictionary. "MICRO" is not necessarily related to the suffix "TEL" and thus the combination is unique, leading an ordinary person to assume that MICROTEL INNS and MICROTEL GLOBAL are related.

The OGC correctly ruled that there is a likelihood of confusion, viz.

[E]ven though the businesses of both corporations are different from each other, confusion of business may exist when products are non-competing but related enough to produce confusion of affiliation.15 (Emphasis supplied)

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Varies, i.e. [MICROTEL iNNS is engaged in the hotel business In the instant case, the primary purpose of [each corporation] while [MICROTEL GLOBAL] is engaged in the call center businesses. It cannot be denied that in hotel and tourism-related business. However, based on its Articles of Incorporation, [MICROTEL INNS] may engage in tourism-related businesses and operate professional management services of said

businesses, professional management services may include managing inbound and outbound calls [as well as] handling services being provided by [MICROTEL GLOBAL]. Consequently, allowing the use of the word "MICROTEL" in [MICROTEL management businesses. (Emphasis supplied) marketing and survey campaigns, which are majority of the GLOBALl's name may thwart the potential expansion of [MICROTEL INNS] into tourism-related and professional

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Moreover, it is likely possible that the public may be misled [into] thinking that [MICROTEL INNS], being engaged in the

15 Page 5 of assailed OGC Order

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hotel and tourism-related businesses, and Ihaving an international brand, has expanded its business in the same field as[MICROTEL GLOBAL], considering the_services.that [MICROTEL GLOBAL]_provides are necessary in [MICROTEL INNS]' business.16 (Emphasis supplied)

"MICROTEL INNS AND SUITES (PILIPINAS), INC." Therefore, "MICROTEL GLOBAL SOLUTIONS, INC." is confusingly similar to

No Consent

Procedures on the Use of Corporate and Partnership Names) requires the consent of the prior registrant in order to use a unique name, viz. SEc Memorandum Circular No. 17-2017 (Consolidated Guidelines and

consent to the applied name.17 allowed if the registered name is coined or unique, unless the [T]he addition of one or more distinctive words shall not be Board of Directors xxx of the subject corporation xxx gives its

consent to MICROTEL GLOBAL's use of the word "Microtel," viz. Here, MICROTEL INNS, the prior registrant of a coined or unique name, does not

the Appellant's use of the word "Microtel" in the latter's Appellee [MICROTEL INNS] has not authorized nor consented to corporate name.18

Therefore, MICROTEL GLOBAL should not be allowed to use the word "MICROTEL" in its corporate name, since it is confusingly similar to MICROTEL INNS.

WHEREFORE, the 19 March 2013 Order of the OGC is hereby AFFIRMED.

SO ORDERED.

Pasay City, Philippines; 24 January 2019.

EMY. QUINC

Chail rsor

ANTONIETA F. IBE EPHYRO LUIS B. AMATONG JAVEY PAUL D. FRANCISCO

Commissioner Commissioner Commissioner

17 2nd Paragraph of Number 3(b) 18 Supra note 9 16 Page 6 of assailed OGC Order