GR 184850; (October, 2010) (Digest)
G.R. No. 184850; October 20, 2010
E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, Petitioners, vs. SHEN DAR ELECTRICITY AND MACHINERY CO., LTD., Respondent.
FACTS
Petitioner E.Y. Industrial Sales, Inc. (EYIS) and respondent Shen Dar Electricity and Machinery Co., Ltd., a Taiwan-based corporation, both sought registration for the trademark “VESPA” for air compressors. Shen Dar filed its application first on June 9, 1997, while EYIS filed on July 28, 1999. The Intellectual Property Office (IPO) eventually issued certificates of registration to both parties. Shen Dar petitioned for the cancellation of EYIS’s certificate, claiming prior right as the first applicant and true owner, alleging EYIS was merely its distributor. EYIS countered that it was the true owner and prior user, asserting that the compressors it imported from Shen Dar bore the mark “SD,” not “VESPA.”
The Bureau of Legal Affairs (BLA) and the IPO Director General ruled in favor of EYIS, upholding its registration and ordering the cancellation of Shen Dar’s certificate. They found Shen Dar failed to prove prior commercial use of the “VESPA” mark in the Philippines. The Court of Appeals reversed this, applying the “first-to-file” rule under the Intellectual Property Code and ruling that Shen Dar, as the first applicant, had a superior right to registration.
ISSUE
Whether the Court of Appeals erred in applying the “first-to-file” rule to grant registration priority to Shen Dar over EYIS.
RULING
Yes. The Supreme Court reversed the Court of Appeals and reinstated the IPO decisions. The legal logic centers on the fundamental principle in trademark law that ownership is acquired by prior use, not mere registration. The “first-to-file” rule under Section 123.1(d) of the Intellectual Property Code grants a prima facie right to the first applicant, but this is not absolute. This presumptive right yields to evidence of prior use by another party. Registration merely recognizes a pre-existing right derived from actual use in commerce.
The Court found that Shen Dar failed to substantiate its claim of prior commercial use of the “VESPA” mark in the Philippines before its 1997 application. The sales contracts and bills of lading presented only referred to generic “air compressors” or models identified as “SD,” with no specific reference to goods marked “VESPA.” Consequently, Shen Dar could not establish ownership by appropriation. In contrast, EYIS successfully demonstrated prior and continuous use of the mark. Therefore, as the true prior user, EYIS is the lawful owner of the trademark and is entitled to its registration, notwithstanding Shen Dar’s earlier filing date. The first-to-file rule cannot confer rights where no ownership through use has been established.