The In-House Lawyer

As in most other developing countries, the enforcement of intellectual property (IP) rights in the Philippines can be challenging. Registration and prosecution is fairly straightforward and efficient, but the time, expense and complexity involved in enforcing IP rights against infringers often leave IP rights (IPR) owners frustrated. This is not new – the Philippines remains on the US Trade Representative (USTR) 2010 Special 301 Report on IPR’s Watch List and, as such, is subject to an ‘out-of-cycle’ review. ‘Ineffective enforcement of IPRs’ and ‘inefficiencies of the judicial system’ were among the issues raised by the USTR. Nevertheless, if IPR owners understand the culture of contradiction and unpredictability that is inherent in the system, they will have a better understanding of what can be achieved. 


Cultural environment 


The fact that the English language is widely spoken and used in the Philippines, and that established laws and regulations are in place, might create a false sense of security. In the Philippines, however, nothing is ever certain. Although it may seem that a particular situation is clear on the facts and law, there is always room for creative arguments and interpretation. 


An example of this can be seen in the recent controversy regarding judicial appointments. In the two months immediately prior to the 2010 presidential election, President Gloria Macapagal Arroyo appointed a member of the Supreme Court. This was apparently contrary to s15, Article XII of the Philippine Constitution, which states:


‘Two months immediately before the next presidential elections and up to the end of his term, a President or Acting President shall not make appointments, except temporary appointments to executive positions when continued vacancies therein will prejudice public service or endanger public safety.’


While the constitutional prohibition seems clear, the Supreme Court concluded that the prohibition did not extend to Supreme Court appointments. It applied s4(1), Article VIII of the Constitution, which states that:


‘The Supreme Court shall be composed of a Chief Justice and 14 Associate Justices. It may sit en banc or in its discretion, in division of three, five, or seven Members. Any vacancy shall be filled within 90 days from the occurrence thereof.’


The Supreme Court reasoned that: 


‘Had the framers intended to extend the prohibition contained in s15, Article VII to the appointment of Members of the Supreme Court, they could have explicitly done so.’ 


The Supreme Court then expanded the exclusion further to all members of the judiciary, in the process overturning a 1998 decision, which found that the prohibition did apply to judicial appointments made by the President.¹


This illustrates how unpredictable the Philippine systems can be. Not only must legal parameters be considered, but also the personalities and politics. 


It does not help that most Filipinos seem indifferent to such vagaries. For example, former President Joseph Estrada was prosecuted by President Arroyo’s government and found guilty of corruption, only to be pardoned six weeks later. Estrada then proceeded to run for the presidency, achieving the second-highest number of votes after current President Benigno Aquino III. Many Filipinos were obviously willing to overlook the fact that Estrada, the first Philippine president to be convicted of a crime, had been found guilty of corruption. 


IPR owners looking to enforce their rights in the Philippines need to be aware of this backdrop of inconsistency and unpredictability that exists on a national level. 


effect on IP enforcement


Court and administrative decisions on IP are, unsurprisingly, equally afflicted with uncertainties and inconsistencies. 


It may be argued that a degree of uncertainty is inevitable in trade mark matters, given that it is not possible to follow fixed rules in determining confusing similarity: each case is decided on its own merits. As a result, there have been inconsistencies in Supreme Court decisions.


Historically, the court has applied either the ‘dominancy’ test (which focuses on the similarity of the main features of the competing trade marks) or the ‘holistic’ test (which considers the entirety of the marks, including labels and packaging) when assessing whether two marks are confusingly similar, and there has been ambiguity as to which test should prevail. While each case must indeed be decided on its merits, this judicial approach has resulted in the Supreme Court finding the mark LC Big Mak confusingly similar to Big Mac (for burgers), but two years later finding that the mark Live’s was not confusingly similar to Levi’s (for jeans).²



Given the inconsistencies in Supreme Court decisions, opposing counsels have often relied on apparently compelling precedents, resulting in long, drawn-out contested cases of unpredictable outcomes. 


This lack of predictability has made enforcement difficult. In an environment where cases take an average of six years to be decided at first instance, and the outcome is so uncertain, it has been difficult for any business to justify litigation. 


Signs of change in the next decade?


2010 brought changes in the leadership of the Philippine government. The newly-elected President Aquino III came into power after delivering the strongest anti-corruption message during his presidential campaign. Many believe that, being the son of Philippine democracy icons former President Corazón Aquino and Benigno Aquino Jr, he has the political fortitude to institute needed changes in the government. 


The new presidency seems to have galvanised government organisations into action and the results, thus far, have been encouraging. 


National Bureau of Investigation


The IPR Division of the National Bureau of Investigation (NBI) stepped up its enforcement actions and conducted several well-publicised raids on counterfeits in the last half of 2010. Headed by its director, Aquino-appointee Magtanggol Gatdula, the NBI has even gone a step further by taking the initiative to recommend prosecution following successful raid operations directly to the Department of Justice (DoJ), with the objective of facilitating the commencement of criminal proceedings against the targets. This is a new development: historically, it was usually left to brand owners to initiate criminal prosecution. 


Border measures


Steps have been taken to improve border control measures. 


In 2008 a National Committee on IPR (NCIPR) was established, comprising members of the Department of Trade & Industry, Intellectual Property Office, DoJ, Department of Interior and Local Government, Bureau of Customs (BoC), NBI, Philippine National Police, Optical Media Board, National Book Development Board, the Bureau of Food and Drugs, and the Office of the Special Envoy on Transnational Crimes. In September 2010 the NCIPR, in co-operation with the World Customs Organization/IPR Business Partnership, held a workshop on counterfeiting, piracy and border measures. The aim was to share information across agencies and to obtain practical assistance from brand owners to identify counterfeit products. Although the BoC has, for some time, had an IP unit where brand owners can record their IPRs, it has not been as effective as it might be. IPR recordals are not computerised and there has been a lack of administrative consistency. 


intellectual property office (IPO)


The IPO is one of the most progressive institutions within the Philippine government. It has embraced technology by computerising its systems (online filing is available for trade marks, trade mark records are searchable online, and databases for the rest of the bureaus are currently being updated), and has taken a leadership role in co-ordinating inter-agency efforts against piracy and counterfeiting. Simplified procedures for dealing with administrative disputes, such as oppositions and cancellations, have also been introduced, as well as a mandatory mediation programme (IPO Office Order No 154, Series of 2010). If the mediation is successful, the compromise agreement, on approval of the Bureau of Legal Affairs, has the effect of a judgment. If no agreement is reached after 90 days of referral, the mediation will be terminated and the case set for preliminary conference. 


In relation to well-known marks, the Bureau of Legal Affairs continues to set a high bench mark in declaring that a mark is well known. Recently, the Botox trade mark was declared a well-known mark. 


It is hoped that, in future, further improvements in IPO procedures will be introduced, including abolition of the requirement to submit original documents or certified true copies of overseas documents in opposition or cancellation cases, as well as a notarised and legalised secretary’s certificate evidencing a corporation’s right to commence legal action. The high evidentiary requirement is costly and time consuming to bigger and non-Philippine corporations. 


The IPO’s new officers, headed by Ricardo Blancaflor, are also promising a more dynamic IP programme for the country, aiming, among other things, to take a more active role in IP enforcement by co-ordinating raids and providing storage facilities for brand owners. Some concerns have been raised in relation to this initiative; most importantly, that the laws do not expressly give the IPO enforcement powers. IPO officers are said to be working with congress to amend the IP code to address these concerns. 


The IPO’s enforcement initiative, along with pending legislative initiatives to reorganise the IPO to include a Bureau of Copyright, has the potential to make the IPO a one-stop shop for IP matters (copyright recordal is currently made with the National Library or the Supreme Court library). This is likely to benefit IPR owners, as IPO officers have demonstrated a better understanding of IP laws and issues than prosecutors and judges, and have shown themselves to be less susceptible to integrity issues. 


Supreme Court 


There has recently been increasing consistency in Supreme Court trade mark decisions. Applying the ‘dominancy’ test, the Supreme Court ruled that Dermaline (for various skin treatments) was confusingly similar to Dermalin (for pharmaceutical products related to skin treatment).³
 It also found that Nan (for full cream milk for adults) infringed the mark Nanny (for diatetic preparations for infant feeding), even though the products and packaging were arguably dissimilar.⁴ 


These two cases appear to indicate that the test to be applied in assessing confusing similarity is the ‘dominancy’ test. 


It took Dermalin three years from the date of filing of the opposition to be decided – fast by Philippine standards. The case benefited from the fact that it originated in the IPO, which is able to decide cases quicker than regular courts. The Nan decision originated in an infringement case filed before a regular court and took 20 years to be judged. 


In 2009 the IPO submitted proposed special rules on IP litigation to the Supreme Court. These have yet to be approved. The rules aim to streamline the litigation process by designating special IP courts to try IPR violations nationwide and by limiting the pleadings that can be submitted. They also provide for the earlier destruction of goods, which will avoid storage costs, and for the destruction of goods when the accused has absconded. 


Although there have been positive changes, the fact remains that the institutions concerned are still obliged to operate within the milieu of the Philippine judicial system. Decisions rendered by the IPO are routinely appealed to the Court of Appeals, then to the Supreme Court, with both courts having the power to re-examine factual and legal issues already dealt with by the IPO. There is also a tendency for both the courts and the IPO to focus on technicalities rather than substance. 


Conclusion


Despite improvements to the system, the Philippines remains one of those jurisdictions in which it is difficult for IP owners to enforce their rights. The general public remains sadly indifferent to IPR violations, and enforcement remains both expensive and uncertain. Yet with its population of almost 100 million, the Philippines is an increasingly attractive market with great potential for growth. Businesses deciding to operate here must take steps to protect and enforce their IPRs. While government agencies are working towards change, the IPR owners must do their best to understand the system and develop their strategies accordingly. Only in that way will enforcing IPRs be as predictable as it can be. 


By Lisa Yong, executive, Rouse, and Laxmi Rosell, partner, Taw & Associates (Taw & Associates is a correspondent law firm of Rouse).


E-mail: lyong@iprights.com;


lrosell@iprights.com.