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AT A GLANCE:
Unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. (Coca-Cola Bottlers, Phils., Inc. v. Gomez, G.R. No. 154491, November 14, 2008)
In a competitive marketplace, businesses are expected to thrive through innovation, quality, and honest dealings. However, when competition is carried out through deception or bad faith, the law steps in to protect both businesses and consumers. This is the essence of unfair competition.
What is Unfair Competition?
In Coca-Cola Bottlers, Phils., Inc. v. Gomez, G.R. No. 154491, November 14, 2008, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public.
Similarly, in Ginebra San Miguel, Inc. v. Director of the Bureau of Trademarks, G.R. Nos. 196372, 210224, 216104 & 219632, August 09, 2022, the Supreme Court held that the passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors. Thus, the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor.
Who has the right to file a claim?
Under Section 168.1 of the Intellectual Property Code of the Philippines provides that a person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights.
Who commits Unfair Competition?
Section 168.2 of the Intellectual Property Code of the Philippines, unfair competition is committed by any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
Who shall be deemed guilty of unfair competition under the law?
Section 168.3 of the Intellectual Property Code states that:
“168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;
(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or
(c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.”
The Test of Unfair Competition
It formulated the “true test” of unfair competition: whether the acts of defendant are such as are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions which prevail in the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive must be shown before the right to recover can exist. The advent of the IP Code has not significantly changed these rulings as they are fully in accord with what Section 168 of the Code in its entirety provides. Deception, passing off and fraud upon the public are still the key elements that must be present for unfair competition to exist. (Coca-Cola Bottlers, Phils., Inc. v. Gomez, G.R. No. 154491, November 14, 2008)
Essential elements of Unfair Competition
In Ginebra San Miguel, Inc. v. Director of the Bureau of Trademarks, G.R. Nos. 196372, 210224, 216104 & 219632, August 09, 2022, the Supreme Court listed the essential elements of an action for unfair competition, as follows:
(1) confusing similarity in the general appearance of the goods, and
(2) intent to deceive the public and defraud a competitor.
Intent to Deceive the Public and Defraud a Competitor
In the same case of Ginebra San Miguel, Inc. v. Director of the Bureau of Trademarks, the Supreme Court held that as to the second element of unfair competition, there must be intent to deceive the public and defraud a competitor. The element of intent to deceive and to defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown; probable intent to deceive the consuming public is sufficient.
The Court further emphasized that protection against unfair competition is not intended to create or foster a monopoly and the court should always be careful not to interfere with free and fair competition, but should confine itself, rather, to preventing fraud and imposition resulting from some real resemblance in name or dress of goods. Nothing less than conduct tending to pass off one man’s goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendant’s practices must always appear.
The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. Likelihood of confusion of goods or business is a relative concept, to be determined only according to peculiar circumstances of each case. The element of intent to deceive and to defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public.
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