G.R. No. L-6707 and L-6708, May 31, 1955.
R. F. & J. ALEXANDER & CO., LTD., and KER & CO., LTD., petitioners, vs. JOSE ANG, doing business under the name and style of “HUA HING TRADING”, and SY BOK, doing business under the name and style of “CHINA ROSE”, respondents.

FACTS

Petitioners, R. F. & J. Alexander & Co., Ltd. (manufacturer) and Ker & Co., Ltd. (distributor), filed separate complaints in Negros Occidental against respondents Jose Ang and Sy Bok, who were sellers of general merchandise. The petitioners alleged that the respondents were selling sewing thread named “Aurora,” “Mayflower,” and “Agatonica” with labels and in boxes that closely resembled in color, design, and general appearance those of the petitioners’ “Alexander” thread, which had been distributed in the Philippines for about 50 years. The respondents denied the similarity and any intent to deceive, specifically defending that (1) they were merely sellers, not manufacturers, of the thread, and (2) the trade names “Aurora,” etc., had been duly registered. The cases were tried jointly. A partial stipulation of facts established, among other things, the registration of the “Alexander” trademarks, the packaging details of the “Alexander” thread (e.g., 40 balls per blue box, 75 yards per ball for No. 80, specific labels and tickets), and that the respondents’ threads were similarly packaged (40 balls per box lined with lighter blue paper, 60 yards per ball for No. 80, with center ball tickets). The trial court dismissed the complaints, and the Court of Appeals affirmed the dismissal based on three legal propositions: (a) the test of unfair competition lies in the possibility of deception of the intelligent, not the ignorant, buyer; (b) an action for unfair competition should be directed against the manufacturer, not the seller; and (c) there is no unfair competition when a product is sold under a registered trademark.

ISSUE

The main issues, as framed by the Supreme Court’s review of the Court of Appeals’ decision, are:
1. Whether the test for unfair competition is the possibility of deception of the intelligent buyer or the ordinary purchaser.
2. Whether an action for unfair competition can be maintained against a seller who is not the manufacturer.
3. Whether the registration of a trademark precludes an action for unfair competition.

RULING

The Supreme Court reversed the decision of the Court of Appeals.
1. On the test for unfair competition, the Court held that the statute (Section 29 of Republic Act No. 166 ) refers to the “ordinary purchaser” or “casual purchasers” who know the goods only by name, not the intelligent buyer or experts. The requisite similarity is that which is likely to mislead purchasers of ordinary caution and prudence. Upon comparison, the Court found that except for the names, the respondents’ labels and boxes had the general appearance of the petitioners’ and were likely to induce ordinary purchasers to buy them as “Alexander” thread, especially given the similar size, color, type, decorative designs, and arrangement of elements.
2. On liability of the seller, the Court held that Section 29 of Republic Act No. 166 expressly makes liable not only the manufacturer but also “any subsequent vendor of such goods” who sells goods giving them the general appearance of goods of another. Therefore, the action was properly directed against the respondent sellers.
3. On the effect of trademark registration, the Court held that registration of a trademark does not preclude an action for unfair competition, citing previous decisions. Registration might prima facie show good faith and minimize damages but does not bar such actions.
The Court concluded that unfair competition was present and enjoined the respondents from selling the said goods, with costs against them.