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”, respondent. (and a consolidated case with SY BOK, doing business under the name and style of “CHINA ROSE”, respondent).

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 for selling sewing thread named “Aurora,” “Mayflower,” and “Agatonica.” Petitioners alleged that the labels and boxes of these threads closely resembled those of their “Alexander” thread in color, design, and general appearance. Respondents denied the similarity and disclaimed any intent to deceive, raising two specific defenses: (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 that respondents were wholesalers and retailers, not sole distributors; petitioners’ “Alexander” trademarks were registered; petitioners’ thread (75 yards for No. 80) was packed in blue cardboard boxes with specific labels and center ball tickets; and respondents’ threads (60 yards for No. 80) were packed in slightly smaller cardboard boxes lined with lighter blue paper, with center ball tickets printed in black on red-colored paper. The trial court dismissed the complaints, and the Court of Appeals affirmed based on three propositions: (a) the test of unfair competition lies in the possibility of deceiving the intelligent, not the ignorant, buyer; (b) an action for unfair competition should be against the manufacturer, not the seller; and (c) there is no unfair competition when a product is sold under a registered trademark.

ISSUE

Whether the Court of Appeals erred in its three main propositions, thereby incorrectly dismissing the complaints for unfair competition.

RULING

Yes. The Supreme Court reversed the decision of the Court of Appeals.
1. On the Test of Deception: The Court held that the test for unfair competition under Section 29 of Republic Act No. 166 is whether the similarity is likely to deceive the “ordinary purchaser” or “purchasers of ordinary caution and prudence,” not the “intelligent buyer.” Comparing the labels and containers, the Court found that except for the names, respondents’ labels and boxes had the general appearance of petitioners’ and were likely to induce ordinary purchasers to buy them as “Alexander” thread, especially given the price difference and the shorter yardage of respondents’ thread.
2. On Liability of the Seller: The Court ruled that Section 29 of Republic Act No. 166 explicitly makes liable not only the manufacturer but also any person selling goods that give them the general appearance of another’s goods, “or any subsequent vendor of such goods.” Therefore, the action was properly directed against the respondent sellers.
3. On Effect of Trademark Registration: The Court held that registration of a competing trademark does not preclude an action for unfair competition. One may be declared an unfair competitor even if the competing trademark is registered, though registration may prima facie show good faith and minimize damages.
The Court declared that respondents’ goods competed unfairly with petitioners’, enjoined respondents from selling said goods, and ordered them to pay costs.