ZUNECA PHARMACEUTICAL, AKRAM ARAIN AND/OR VENUS ARAIN, M.D.

, which intellectual property rights impact on the viability of businesses, a common

AND STYLE OF ZUNECA PHARMACEUTICAL, PETITIONERS, VS. controversy in the field of intellectual property law is to whom these rights pertain.
NATRAPHARM, INC., RESPONDENT.
In this case of first impression, this is precisely the issue at hand. This case concerns
DECISION trademarks which are used for different types of medicines but are admitted by both parties to
be confusingly similar. Exacerbating this controversy on the issue of ownership, however, are
CAGUIOA, J.:
conflicting interpretations on the rules on the acquisition of ownership over trademarks,
muddled by jurisprudential precedents which applied principles inconsistent with the current
Businesses generally thrive or perish depending on their reputation among customers.
law. Thus, in resolving this issue, the Court needed to examine and ascertain the meaning and
Logically, consumers gravitate towards products and services they believe are of a certain
intent behind the rules that affect trademark ownership.
quality and provide perceived benefits. Thus, entrepreneurs and businesses actively seek to
set apart their reputation and goodwill from every other enterprise with the goal of being the
Facts
top-of-mind choice for the consumers. As signs differentiating the wares or services offered
by enterprises, trademarks serve this purpose of making the products and services of each This is a Petition for Review on Certiorari (Petition) under Rule 45 with Prayer for
business uniquely memorable. Trademarks have several functions: they indicate the origin or Temporary Restraining Order (TRO) and/or Preliminary Injunction filed by petitioners
ownership of the articles or services in which they are used; they guarantee that the articles or Zuneca Pharmaceutical, Akram Arain and/or Venus Arain, M.D., and Style of Zuneca
services come up to a certain standard of quality; and they advertise the articles and services Pharmaceutical (collectively, Zuneca) assailing the Decisio dated October 3, 2013 and
they symbolize. Indeed, the goodwill of a business, as symbolized and distinguished by its Resolution dated March 19, 2014 of the Court of Appeals (CA) in CA-G.R. CV No. 99787.
trademarks, helps ensure that the enterprise stands out, stays afloat, and possibly flourish The CA denied Zuneca's appeal and affirmed the Decision dated December 2, 2011 of the
amidst the sea of commercial activity where the consumers' continued patronage is a lifebuoy Regional Trial Court of Quezon City, Branch 93 (RTC) in Civil Case No. Q-07-61561, which
that may determine life or death. found Zuneca liable for trademark infringement under Sections 155 to 155.27 of Republic
Act No. (R.A.) 8293, also known as the Intellectual Property Code of the Philippines (IP
Faced with this intrinsic need to survive, enterprises are becoming increasingly aware of the
Code), and awarded damages in favor of respondent Natrapharm, Inc. (Natrapharm).
need to protect their goodwill and their brands. The State, too, is interested in the protection
of the intellectual property of enterprises and individuals who have exerted effort and money PETITIONER ZUNECA PHARMACEUTICAL has been engaged in the importation,
to create beneficial products and services. In line with this, and considering the extent to marketing, and sale of various kinds of medicines and drugs in the Philippines since 1999. It
imports generic drugs from Pakistan and markets them in the Philippines using different
brand names. Among the products it has been selling is a drug called carbamazepine under In its Answer (With Compulsory Counterclaim and Prayer for Preliminary Injunction),
the brand name "ZYNAPS", which is an anti-convulsant used to control all types of seizure Zuneca claimed that it has been selling carbamazepine under the mark "ZYNAPS" since
disorders of varied causes like epilepsy. Petitioner Venus S. Arain, M.D. (Dr. Arain) was the 2004 after securing a Certificate of Product Registration on April 15, 2003 from the Bureau
proprietor of Zuneca Pharmaceutical before Zuneca, Inc. was incorporated. Akram Arain, of Food and Drugs (BFAD, now Food and Drug Administration). It alleged that it was
meanwhile, is the husband of Dr. Arain, who later on became the President of Zuneca, Inc. impossible for Natrapharm not to have known the existence of "ZYNAPS" before the latter's
registration of "ZYNAPSE" because Natrapharm had promoted its products, such as
NATRAPHARM, on the other hand, is a domestic corporation engaged in the business of
"Zobrixol" and "Zcure", in the same publications where Zuneca had advertised
manufacturing, marketing, and distribution of pharmaceutical products for human relief. One
"ZYNAPS". Further, Zuneca pointed out that both Natrapharm and Zuneca had advertised
of the products being manufactured and sold by Natrapharm is citicoline under the trademark
their respective products in identical conventions. Despite its knowledge of prior use by
"ZYNAPSE", which is indicated for the treatment of cerebrovascular disease or stroke. The
Zuneca of "ZYNAPS", Natrapharm had allegedly fraudulently appropriated the "ZYNAPSE"
trademark "ZYNAPSE" was registered with the Intellectual Property Office of the
mark by registering the same with the IPO. As the prior user, Zuneca argued that it is the
Philippines (IPO) on September 24, 2007 and is covered by Certificate of Trademark
owner of "ZYNAPS" and the continued use by Natrapharm of "ZYNAPSE" causes it grave
Registration No. 4-2007-005596.
and irreparable damage.

On November 29, 2007, Natrapharm filed with the RTC a Complaint against Zuneca for
On the basis of such arguments, Zuneca insisted that it is Natrapharm which should be liable
Injunction, Trademark Infringement, Damages and Destruction with Prayer for TRO and/or
for damages. On this score, Zuneca prayed that its counterclaims against Natrapharm be
Preliminary Injunction, alleging that Zuneca's "ZYNAPS" is confusingly similar to its
granted by the RTC, namely, the cancellation of Natrapharm's "ZYNAPSE" registration; the
registered trademark "ZYNAPSE" and the resulting likelihood of confusion is dangerous
prohibition of Natrapharm from manufacturing, advertising, selling, and distributing
because the marks cover medical drugs intended for different types of
"ZYNAPSE" products; the destruction of "ZYNAPSE" products and labels; the payment of
illnesses. Consequently, Natrapharm sought to enjoin Zuneca from using "ZYNAPS" or other
Two Million Pesos (P2,000,000.00), or double such amount, in the discretion of the court, as
variations thereof, in addition to its demand for Zuneca's payment of Two Million Pesos
damages for fraudulent registration; and the payment of Five Million Pesos (P5,000,000.00)
(P2,000,000.00) in damages; Five Million Pesos (P5,000,000.00) in exemplary damages; and
as moral damages, Two Million Pesos (P2,000,000.00) as exemplary damages, Three
Three Hundred Thousand Pesos (P300,000.00) as attorney's fees, expenses of litigation, and
Hundred Thousand Pesos (P300,000.00) as attorney's fees, and Fifty Thousand Pesos
costs of suit. Further, it prayed that all infringing goods, labels, signs, etc. of Zuneca be
(P50,000.00) as costs of suit.
impounded and destroyed without compensation.
Subsequently, after a summary hearing, the prayer for TRO was denied. The preliminary by Patriot Pharmaceutical [(Patriot)] and this formulation is marketed by Natrapharm through
injunction and counter preliminary injunction prayed for by the parties were likewise the brand name "ZYNAPSE".
rejected.
On re-direct, the witness clarified that she did not conduct any field survey to find if there
As summarized by the CA, the following evidence were presented during the trial: [we]re similar brand names as "ZYNAPSE", because of the difficulty posed by inquiring
from each [of the 3,000 to 4,000 drug stores] nationwide. In addition, it was x x x
First to testify on the part of Natrapharm was Cristina Luna Ravelo who is the vice president
Natrapharm's strategy to remain quiet about [its] product.
for marketing of Natrapharm. According to her, she was the one who conceptualized the
name "ZYNAPSE"[,] taking it from "Synapse" which was a publication she sponsored when Next to testify was Jeffrey Silang, the Analyst Programmer of Natrapharm. His function
she was the product manager of [the Philippine] Neurological Association. Further[,] [was] to create a system and generate reports for accounting, inventory and sales for
"Synapse" is a neurological term referring to the junction between 2 nerves where nerve Natrapharm. The witness stated that Patriot is a mere supplier of Natrapharm and that
signals are transmitted, hence appropriate for a medicine for stroke. Afterwardfs], the witness Natrapharm has other suppliers. The witness then identified a sales report which indicate[d]
verified using the research tool IMS-PPI, which lists the pharmaceutical products marketed in that WMMC Hospital bought several quantities of "ZYNAPSE" products from Natrapharm.
the Philippines, any other cerebroprotective products (CO4A) that [are] confusingly similar Also included in said report [was] an entry "non-psyche Patriot" which represented] its
with "ZYNAPSE". Finding none in the list covering the period of the fourth quarter of 2004 supplier.
up to the first quarter of 2007, the witness proceeded with the registration of "ZYNAPSE"
On cross-examination, the witness reiterated that Patriot supplies the raw materials to
with the IPO. After the IPO issued a [certificate of trademark registration], the BFAD, in
Natrapharm. Natrapharm, in turn, repackage[s] these materials to bear the brand
turn, released a Certificate of Product Listing for "ZYNAPSE". The witness likewise
"ZYNAPSE". The witness also admitted that he d[id] not know exactly why "ZYNAPSE" is
revealed that she was informed in late September 2007 of the existence of "ZYNAPS" after a
qualified as non-psyche, as he is a mere Information Technology expert.
sales personnel had informed her of such drug being sold in Visayas and Mindanao. After
learning this, the witness brought the matter to Dr. Arain, but no resolution was agreed upon
Last to testify was Atty. Caesar J. Poblador who identified his Judicial Affidavit dated
by the parties due to a difference in opinion.
[November 4, 2009 which contained] the several invoices charged by his law firm to
Natrapharm in consideration of the law firm's legal service.
On cross-examination, the witness averred that she did not check with drugstores and other
publications for similar brand names as "ZYNAPSE", as she only relied with [the] IMS[-
On the part of [Zuneca], Dr. Arain took the stand and identified her Supplemental Affidavit
PPI]. Further, the witness explained that the formulation of the drug "ZYNAPSE" is owned
dated [February 12, 2010. On said Affidavit, it [was] stated that Dr. Arain established Zuneca
[Pharmaceutical] in 1999. Subsequently, [Zuneca, Inc.] was incorporated on [January 8, 2008
and [it] took over the business of Zuneca Pharmaceutical. Verily, among the products that Thereafter, the said pharmaceutical companies started advertising with Medicomm for a fee
Zuneca sells is [carbamazepine] with the brand name "ZYNAPS" for which Zuneca applied which then became the source of revenues for Medicomm. The witness also affirmed that
for a Certificate of Product Registration (CPR) from BFAD. On [April 15, 2003, Zuneca was Zuneca, Natrapharm and Patriot are advertisers of PPD.
able to obtain a CPR over its [carbamazepine] product valid for five (5) years which was
However, the witness admitted that "ZYNAPSE" [was] not listed in the PPD.
[then] renewed for another five (5) years or until [April 15, 2013. Zuneca then started
importing [carbamazepine] "ZYNAPS" in December 2003 and began promoting, marketing
ISSUE 1:
and selling them in 2004. In order to promote "ZYNAPS", Zuneca advertised it through paid
HOW IS OWNERSHIP OVER A TRADEMARK ACQUIRED?
publications such as the (1) Philippine Pharmaceutical Directory or PPD; (2) PPD's Better
Pharmacy; and (3) PPD's Philippine Pharmaceutical Directory Review (PPDr). Apparently,
ELEMENTS OF TRADEMARK INFRINGEMENT
said publications also cover[ed] the different products of Natrapharm and its affiliate
To establish trademark infringement, the following elements must be proven:
[Patriot]. Allegedly, the two companies (Natrapharm and Patriot) participated as partners in a
1) the trademark being infringed is registered in the IPO;
medical symposi[um] on [October 22 to 23, 2009.
2) the trademark is reproduced, counterfeited, copied, or colorably imitated by the infringer;
3) the infringing mark is used in connection with the sale, offering for sale, or advertising of
When asked why she did not register her trademark with the IPO, x x x [Dr.] Arain answered
any goods, business, or services; or the infringing mark is applied to labels, signs, prints,
that she could not find the time because of the illness of her father.
packages, wrappers, receptacles, or advertisements intended to be used upon or in
On cross-examination, Dr. Arain testified that she remained as an adviser of Zuneca, Inc., connection with such goods, business, or services;
after its incorporation. She then told her husband, who became the President of Zuneca, Inc. 4) the use or application of the infringing mark is likely to cause confusion or mistake or to
and the vice president about the dispute with Natrapharm. Further, the witness admitted that deceive purchasers or others as to the goods or services themselves or as to the source or
she did not secure an advertising page for "ZYNAPS" in the [PPD]. origin of such goods or services or the identity of such business; and
5) it is without the consent of the trademark owner or the assignee thereof.
Last to testify was Emmanuel Latin, the president of Medicomm Pacific (Medicomm). The
witness attested that Medicomm is engaged in the publication of lists of drugs which it gives
ACQUISITION OF OWNERSHIP
to doctors as reference in the preparation of prescriptions for their patients. The witness then
i. The language of the IP Code provisions clearly conveys the rule that ownership of a mark
enumerated their publications as PPD, PPDr, and PPD's Better Pharmacy which the company
is acquired through registration;
publishes annually and distributes to doctors for free. According to the witness, several years
ii. The intention of the lawmakers was to abandon the rule that ownership of a mark is
ago, Medicomm invited pharmaceutical companies to list with its publications for free.
acquired through use; and
iii. The rule on ownership used in Berris and E.Y. Industrial Sales, Inc. is inconsistent with Civil Code; 1950
the IP Code regime of acquiring ownership through registration. When the Civil Code took effect in 1950, it included the rule that the owner of the trademark
was the person, corporation, or firm registering the same, but said rule was made subject to
RA 166; June 20, 1947 the provisions of special laws. Hence, the manner of acquiring ownership was still through
It is worth noting that the Trademark Law, as clarified through its subsequent amendment, actual use because the special law in effect at that time was the Trademark Law, viz.:
explicitly stated that actual use was a prerequisite for the ownership of marks.
ART. 520. A trademark or tradename duly registered in the proper government bureau or
Section 4 of the Trademark Law stated that the owner of the mark had the right to register the office is owned by and pertains to the person, corporation, or firm registering the same,
same. Despite not categorically defining who the owner of the mark was, the same section subject to the provisions of special laws.
also provided that one could not register a mark that was previously used and not abandoned
by another. Consequently, prior use and non-abandonment determined the ownership of the RA 638; 1951

mark because it effectively barred someone else from registering the mark and representing In 1951, the Trademark Law was amended by R.A. 638,74 which added Section 2-A, among

himself to be the owner thereof. In other words, the only person who was entitled to register others. As previously mentioned, this amendment explicitly provided that ownership over a

the mark, and therefore be considered as the owner thereof, was the person who first used mark was acquired through actual use, viz.:

and who did not abandon the mark, viz.: Sec. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired. -

SECTION 4. Registration of Trade-marks, Trade-names and Service-marks. - The Anyone who lawfully produces or deals in merchandise of any kind or who engages in any

owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business lawful business, or who renders any lawful service in commerce, by actual use thereof in

or services from the goods, business or services of others shall have the right to register the manufacture or trade, in business, and in the service rendered, may appropriate to his

same, unless it: exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another,

xxxx to distinguish Ms merchandise, business or service from the merchandise, business or

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade- services of others. The ownership or possession of a trade-mark, trade-name, service-mark,

name registered in the Philippines or a mark or trade-name previously used in the heretofore or hereafter appropriated, as in this section provided, shall be recognized and

Philippines by another and not abandoned, as to be likely, when applied to or used in protected in the same manner and to the same extent as are other property rights known to

connection with the goods, business or services of the applicant, to cause confusion or the law.

mistake or to deceive purchases.

IP CODE; January 1, 1998
Forty-seven years later, upon the effectivity of the IP Code on January 1, 1998, the manner of future acquisition of rights in - an identical or a confusingly similar mark, in respect of the
acquiring ownership of trademarks reverted to registration. This is expressed in Section 122 same or closely-related goods or services, if the resemblance will likely deceive or cause
of the IP Code, viz.: confusion.

SECTION 122. How Marks are Acquired. - The rights in a mark shall be acquired The current rule under the IP Code is thus in stark contrast to the rule on acquisition of
through registration made validly in accordance with the provisions of this law. (Sec. 2-A, ownership under the Trademark Law, as amended. To recall, the Trademark Law, as
R.A. No. 166a) amended, provided that prior use and non-abandonment of a mark by one person barred the
future registration of an identical or a confusingly similar mark by a different proprietor
Related to this, Section 123. l(d) of the IP Code expresses the first-to-file rule as follows: when confusion or deception was likely. It also stated that one acquired ownership over a
SECTION 123. Registrability. - 123.1. A mark cannot be registered if it: mark by actual use.
xxxx
(d) Is identical with a registered mark belonging to a different proprietor or a mark with an Once the IP Code took effect, however, the general rule on ownership was changed and
earlier filing or priority date, in respect of: repealed. At present, as expressed in the language of the provisions of the IP Code, prior use
(i) The same goods or services, or no longer determines the acquisition of ownership of a mark in light of the adoption of the
(ii) Closely related goods or services, or rule that ownership of a mark is acquired through registration made validly in accordance
(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion[.] with the provisions of the IP Code. Accordingly, the trademark provisions of the IP Code use
the term "owner" in relation to registrations. This fact is also apparent when comparing the
To clarify, while it is the fact of registration which confers ownership of the mark and
provisions of the Trademark Law, as amended, and the IP Code, viz.:
enables the owner thereof to exercise the rights expressed in Section 147 of the IP Code,
THE FIRST-TO-FILE RULE NEVERTHELESS PRIORITIZES THE FIRST FILER
OF THE TRADEMARK APPLICATION AND OPERATES TO PREVENT ANY
SUBSEQUENT APPLICANTS FROM REGISTERING MARKS DESCRIBED
UNDER SECTION 123.1(D) OF THE IP CODE.

Reading together Sections 122 and 123. l(d) of the IP Code, therefore, a registered mark or a
mark with an earlier filing or priority date generally bars the future registration of- and the
Subparagraph (d) of the above provision of the Trademark Law was amended in the IP Code
to, among others, remove the phrase "previously used in the Philippines by another and not
abandoned." Under the Trademark Law, as amended, the first user of the mark had the right
to file a cancellation case against an identical or confusingly mark registered in good faith by
another person. However, with the omission in the IP Code provision of the phrase
"previously used in the Philippines by another and not abandoned,,"said right of the first user
is no longer available. In effect, based on the language of the provisions of the IP Code, even
if the mark was previously used and not abandoned by another person, a good faith applicant
may still register the same and thus become the owner thereof, and the prior user cannot ask
for the cancellation of the latter's registration. If the lawmakers had wanted to retain the
regime of acquiring ownership through use, this phrase should have been retained in order to
avoid conflicts in ownership. The removal of such a right unequivocally shows the intent of
the lawmakers to abandon the regime of ownership under the Trademark Law, as amended.

On this point, our esteemed colleagues Associate Justices Leonen and Lazaro-Javier have
expressed their doubts regarding the abandonment of the ownership regime under the
Trademark Law, as amended, because of the continued requirement of actual use under the
IP Code and because of the prima facie nature of a certificate of registration. In particular,
Sections 124.2 and 145 of the IP Code provide that the applicant/registrant is required to file
a Declaration of Actual Use on specified periods, while Section 138 provides that a
certificate of registration of a mark shall be prima facie evidence of the validity of the
registration, the registrant's ownership of the mark, and of the registrant's exclusive right to
use the same in connection with the goods or services and those that are related thereto
specified in the certificate.
Certainly, while the IP Code and the Rules of the IPO mandate that the applicant/registrant mark, and of the registrant's exclusive right to use the same in connection with the goods or
must prove continued actual use of the mark, it is the considered view of the Court that this services and those that are related thereto specified in the certificate. [The IP Code], however,
does not imply that actual use is still a recognized mode of acquisition of ownership under requires the applicant for registration or the registrant to file a declaration of actual use
the IP Code. Rather, these must be understood as provisions that require actual use of the (DAU) of the mark, with evidence to that effect, within three (3) years from the filing of the
mark in order for the registered owner of a mark to maintain his ownership. application for registration; otherwise, the application shall be refused or the mark shall be
removed from the register. In other words, the prima facie presumption brought about by the
In the same vein, the prima facie nature of the certificate of registration is not indicative of registration of a mark may be challenged and overcome, in an appropriate action, by proof of
the fact that prior use is still a recognized mode of acquiring ownership under the IP Code. the nullity of the registration or of non-use of the mark, except when excused. Moreover, the
Rather, it is meant to recognize the instances when the certificate of registration is not presumption may likewise be defeated by evidence of prior use by another person, i.e., it will
reflective of ownership of the holder thereof, such as when: controvert a claim of legal appropriation or of ownership based on registration by a
1. the first registrant has acquired ownership of the mark through registration but subsequent user. This is because a trademark is a creation of use and belongs to one who first
subsequently lost the same due to non-use or abandonment (e.g., failure to file the used it in trade or commerce.
Declaration of Actual Use);
2. the registration was done in bad faith; FIRST-TO-FILE RULE LEGAL BASIS UNDER IP CODE
3. the mark itself becomes generic; [The IP Code] espouses the "first-to-file" rule as stated under Sec. 123.1 (d) which states:
4. the mark was registered contrary to the IP Code (e.g., when a generic mark was Section 123. Registrability. - 123.1. A mark cannot be registered if it:
successfully registered for some reason); or xxxx
5. the registered mark is being used by, or with the permission of, the registrant so as to (d) Is identical with a registered mark belonging to a different proprietor or a mark with an
misrepresent the source of the goods or services on or in connection with which the earlier filing or priority date, in respect of:
mark is used. (i) The same goods or services, or
OWNERSHIP OF TRADEMARK (ii) Closely related goods or services, or
The ownership of a trademark is acquired by its registration and its actual use by the (iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion, x x x
manufacturer or distributor of the goods made available to the purchasing public. Section 122
of [the IP Code] provides that the rights in a mark shall be acquired by means of its valid Under this provision, the registration of a mark is prevented with the filing of an earlier

registration with the IPO. A certificate of registration of a mark, once issued, constitutes application for registration. This must not, however, be interpreted to mean that ownership

prima facie evidence of the validity of the registration, of the registrant's ownership of the should be based upon an earlier filing date. While [the IP Code] removed the previous
requirement of proof of actual use prior to the filing of an application for registration of a
mark, proof of prior and continuous use is necessary to establish ownership of a mark. xxxx
Such ownership constitutes sufficient evidence to oppose the registration of a mark.
By itself, registration is not a mode of acquiring ownership. When the applicant is not the
Sec. 134 of the IP Code provides that "any person who believes that he would be damaged owner of the trademark being applied for, he has no right to apply for registration of the
by the registration of a mark x x x" may file an opposition to the application. The term same. Registration merely creates a prima facie presumption of the validity of the
"any person" encompasses the true owner of the mark - the prior and continuous user. registration, of the registrant's ownership of the trademark and of the exclusive right to the
use thereof. Such presumption, just like the presumptive regularity in the performance of
Notably, the Court has ruled that the prior and continuous use of a mark may even overcome official functions, is rebuttable and must give way to evidence to the contrary.106 (Citations
the presumptive ownership of the registrant and be held as the owner of the mark. As aptly omitted and emphasis supplied)
stated by the Court in [Shangri-la]:
However, a careful reading of Shangri-la will unmistakably show that, despite having been
Registration, without more, does not confer upon the registrant an absolute right to the promulgated in 2006, the applicable law of the case was the Trademark Law, as amended,
registered mark. The certificate of registration is merely a prima facie proof that the registrant considering the following excerpts:
is the owner of the registered mark or trade name. Evidence of prior and continuous use of
the mark or trade name by another can overcome the presumptive ownership of the registrant While the present law on trademarks has dispensed with the requirement of prior actual use at
and may very well entitle the former to be declared owner in an appropriate case. the time of registration, the law in force at the time of registration[, i.e., the Trademark Law,
as amended,! must be applied, and thereunder it was held that as a condition precedent to
xxxx registration of trademark, trade name or service mark, the same must have been in actual use
in the Philippines before the filing of the application for registration. Trademark is a creation
Ownership of a mark or trade name may be acquired not necessarily by registration but by of use and therefore actual use is a prerequisite to exclusive ownership and its registration
adoption and use in trade or commerce. As between actual use of a mark without registration, with the Philippine Patent Office is a mere administrative confirmation of the existence of
and registration of the mark without actual use thereof, the former prevails over the latter. For such right.
a rule widely accepted and firmly entrenched, because it has come down through the years, is In a bid to invalidate Natrapharm's rights as first registrant, Zuneca further argues that
that actual use in commerce or business is a pre-requisite to the acquisition of the right of Natrapharm had registered the mark fraudulently and in bad faith.108
ownership. PETITION FOR CANCELLATION
The existence of bad faith in trademark registrations may be a ground for its cancellation at Notably, this ground for cancelling marks was already present under the Trademark Law, as
any time by filing a petition for cancellation under Section 151 (b) of the IP Code, viz.: amended. The table below shows how the language in the IP Code provision mirrors the
SECTION 151. Cancellation. - 151.1. A petition to cancel a registration of a mark under provision under the Trademark Law, as amended:
this Act may be filed with the Bureau of Legal Affairs by any person who believes that he
is or will be damaged by the registration of a mark under this Act as follows:

(a) Within five (5) years from the date of the registration of the mark under this Act.

(b) At any time, if the registered mark becomes the generic name for the goods or services,
or a portion thereof, for which it is registered, or has been abandoned, or its registration
was obtained fraudulently or contrary to the provisions of this Act, or if the registered mark
is being used by, or with the permission of, the registrant so as to misrepresent the source
of the goods or services on or in connection with which the mark is used. If the registered
mark becomes the generic name for less than all of the goods or services for which it is
registered, a petition to cancel the registration for only those goods or services may be
filed. A registered mark shall not be deemed to be the generic name of goods or services
solely because such mark is also used as a name of or to identify a unique product or
service. The primary significance of the registered mark to the relevant public rather than
purchaser motivation shall be the test for determining whether theregistered mark has
become the generic name of goods or services on or in connection with which it has been
used, (n)

(c) At any time, if the registered owner of the mark without legitimate reason fails to use
the mark within the Philippines, or to cause it to be used in the Philippines by virtue of a
license during an uninterrupted period of three (3) years or longer Resultantly - unlike the rule on acquisition of ownership - the pronouncements of the Court
relative to registrations obtained in bad faith under the Trademark Law, as amended, still
subsist even after the effectivity of the IP Code. Thus, the following cases where the Court
defined bad faith and fraud, although decided under the regime of the Trademark Law, as PRIOR REGISTRATION AND PRIOR USE IN GOOD FAITH
amended, are still applicable. Concurrent with these aims, the law also protects prior registration and prior use of
trademarks in good faith.
The concepts of bad faith and fraud were defined in Mustang-Bekleidungswerke GmbH +
Co. KG v. Hung Chiu Ming, a case decided by the Office of the Director General of the IPO Being the first-to-file registrant in good faith allows the registrant to acquire all the rights in a
under the Trademark Law, as amended, viz.: mark. This can be seen in Section 122 vis-a-vis the cancellation provision in Section 155.1 of
the IP Code. Reading these two provisions together, it is clear that when there are no grounds
BAD FAITH/FRAUD for cancellation - especially the registration being obtained in bad faith or contrary to the
What constitutes fraud or bad faith in trademark registration? Bad faith means that the provisions of the IP Code, which render the registration void - the first-to-file registrant
applicant or registrant has knowledge of prior creation, use and/or registration by another of acquires all the rights in a mark, thus:
an identical or similar trademark. In other words, it is copying and using somebody else's
trademark. Fraud, on the other hand, may be committed by making false claims in connection SECTION 122. How Marks are Acquired. - The rights in a mark shall be acquired
with the trademark application and registration, particularly, on the issues of origin, through registration made validly in accordance with the provisions of this law. (Sec. 2-A,
ownership, and use of the trademark in question, among other things. R.A. No. 166a)

The same principle applies in the context of trademark registrations: fraud is intentionally SECTION 151. Cancellation. - 151.1. A petition to cancel a registration of a mark under

making false claims to take advantage of another's goodwill thereby causing damage or this Act may be filed with the Bureau of Legal Affairs by any person who believes that he

prejudice to another. Indeed, the concepts of bad faith and fraud go hand-in-hand in this is or will be damaged by the registration of a mark under this Act as follows:

context. There is no distinction between the concepts of bad faith and fraud in trademark
registrations because the existence of one necessarily presupposes the existence of the other. (a) Within five (5) years from the date of the registration of the mark under this Act.

Shangri-la supports the definition of bad faith in trademark registrations as knowledge by the
registrant of prior creation, use, and/or registration by another of an identical or similar (b) At any time, if the registered mark becomes the generic name for the goods or services,

trademark. or a portion thereof, for which it is registered, or has been abandoned, or its registration
was obtained fraudulently or contrary to the provisions of this Act, or if the registered mark

To emphasize, the presence of bad faith alone renders void the trademark registrations. is being used by, or with the permission of, the registrant so as to misrepresent the source
 of the goods or services on or in connection with which the mark is used. If the registered
mark becomes the generic name for less than all of the goods or services for which it is The resolution of the controversy
registered, a petition to cancel the registration for only those goods or services may be
filed. A registered mark shall not be deemed to be the generic name of goods or services At this point, it is important to highlight that the following facts were no longer questioned
solely because such mark is also used as a name of or to identify a unique product or by both parties: (a) Natrapharm is the registrant of the "ZYNAPSE" mark which was
service. The primary significance of the registered mark to the relevant public rather than registered with the IPO on September 24, 2007; (b) Zuneca has been using the "ZYNAPS"
purchaser motivation shall be the test for determining whether the registered mark has brand as early as 2004; and (c) "ZYNAPSE" and "ZYNAPS" are confusingly similar and
become the generic name of goods or services on or in connection with which it has been both are used for medicines.
used,(n)
In light of these settled facts, it is clear that Natrapharm is the first-to-file registrant of
(c) At any time, if the registered owner of the mark without legitimate reason fails to use "ZYNAPSE". Zuneca, on the other hand, is a prior user in good faith of a confusingly similar
the mark within the Philippines, or to cause it to be used in the Philippines by virtue of a mark, "ZYNAPS". What remains contentious is Natrapharm's good or bad faith as Zuneca
license during an uninterrupted period of three (3) years or longer contends that the mark was registered in bad faith by Natrapharm. Indeed, if Zuneca's
In the same vein, prior users in good faith are also protected in the sense that they will not be contention turns out to be true, Natrapharm would not be the owner of "ZYNAPSE" and it
made liable for trademark infringement even if they are using a mark that was subsequently would not have the right under Section 147.1 of the IP Code to prevent other entities,
registered by another person. This is expressed in Section 159.1 of the IP Code, which reads: including Zuneca, from using confusingly similar marks for identical or similar goods or
services. Further, Natrapharm's infringement case would fail because its "ZYNAPSE"
SECTION 159. Limitations to Actions for Infringement. - Notwithstanding any other registration would then be voided.
provision of this Act, the remedies given to the owner of a right infringed under this Act
shall be limited as follows: To be sure, the finding of good faith or bad faith is a matter of factual determination.
Considering that a petition for review on certiorari under Rule 45 should only raise questions
159.1. Notwithstanding the provisions of Section 155 hereof, a registered mark shall have of law, it is improper to put into issue at this juncture the existence of bad faith in
no effect against any person who, in good faith, before the filing date or the priority date, Natrapharm's registration.
was using the mark for the purposes of his business or enterprise: Provided, That his right
may only be transferred or assigned together with his enterprise or business or with that Further, it is a well-recognized rule that the factual findings of the RTC, its calibration of the
part of his enterprise or business in which the mark is used. testimonies of the witnesses, and its assessment of their probative weight are given high
respect, if not conclusive effect, unless cogent facts and circumstances of substance, which if Likewise, the defendants claim that in some medical conventions where Patriot, the sister
considered, would alter the outcome of the case, were ignored, misconstrued or company of the plaintiff, attended, the ["ZYNAPS"] product of the defendants was
misinterpreted. advertised and displayed.

Assuming, however, that the Court should still review this factual issue, it finds no reason to It was, however, clearly shown that Patriot is not the same company as the plaintiff. It could
depart from the findings of facts of the RTC, which findings were affirmed by the CA. In not be safely concluded that [the plaintiff] knew of ["ZYNAPS"] through Patriot.
fact, the Court also conducted a review of the testimonies and evidence presented by the
parties and finds that the RTC and the CA were correct in their factual findings. In both arguments, this Court finds no sufficient evidence to convince it that there was bad
faith in the registration made by the plaintiff.
The RTC ruled that there was no sufficient evidence to convince it that Natrapharm had
acquired the registration in bad faith. The RTC ruled as follows: The CA thereafter upheld the finding of the RTC that Natrapharm was not aware of the
existence of "ZYNAPS" prior to the registration of "ZYNAPSE". The CA quoted and
Apparently claiming an exception to the first-to-register rule, the defendants [Zuneca] insist affirmed the foregoing findings of the RTC.
that the plaintiff [Natrapharm] knew of the existence of ["ZYNAPS"] at the time the plaintiff
filed its application for registration. The defendants support this position by presenting a The CA added that Natrapharm's good faith was established through the testimony of
copy of the Philippine Pharmaceutical Directory (PPD) where ["ZYNAPS"] is listed on the Natraphann's witness, Ravelo, whose testimony essentially contained the following points:
same page as the other brand names of the plaintiff. (a) Natrapharm had used the BFAD and IPO databases and the Philippine Pharmaceutical
Index (PPI) - a research tool accepted by the Philippine pharmaceutical industry which
However, defendant Arain admitted on cross[-]examination that even if ["ZYNAPS"] was contains pharmaceutical products marketed in the Philippines in determining whether
listed in the PPD, this does not give her complete knowledge of the brand names of the other "ZYNAPSE" was confusingly similar to an existing brand name in the market; (b) only
pharmaceuticals also listed in the same Directory. [Consistent] with this admission, plaintiff Ravelo, Mr. Gasgonia, Natraphann's Chief Operations Officer, and Mrs. Agnes Casiding,
should also be accorded the benefit of the doubt that it could not have complete knowledge of Natraphann's Regulatory Manager, knew about the launch of the new product; (c) she had
the other brand names listed in the PPD. based the name "ZYNAPSE" from an internal newsletter in the Philippine Neurological
Association as well as from the neurological term "synapse" - the junction between two
nerves where they transmit nerve signals - which relates to the neurological problem of
stroke; (d) she had checked the PPI as far back as fourth quarter of 2004 and found that there
was no confusingly similar name; and (e) she had then submitted the name to Natrapharm's Zuneca's evidence clearly falls short of establishing that Natrapharm had knowledge of the
trademark lawyers who had it registered with the IPO and then with the BFAD. prior creation or use by Zuneca of the "ZYNAPS" mark. Zuneca's evidence only tends to
prove that there was a possibility that someone from Natrapharm might have known of
The CA thus concluded that Zuneca failed to prove that Natrapharm had registered Zuneca's use of "ZYNAPS" because Natrapharm and Zuneca attended the same conferences
"ZYNAPSE" in bad faith, viz.: and that Zuneca had listed "ZYNAPS" in the PPD publication.

This Court would also like to add that even if both Zuneca and Natrapharm have interacted Such possibility is not, however, sufficient to prove bad faith, especially when weighed
with each other through a convention, it does not automatically mean that Natrapharm against Natrapharm's evidence and explanation on how it coined "ZYNAPSE" and the steps
already acted in bad faith in registering "ZYNAPSE". First, just like the PPD, it is highly it took to ensure that there were no other marks that were confusingly similar to it. Not only
unlikely that the participants would remember each and every medicine or drug exhibited was Natrapharm able to explain the origin of the name, it was also able to show that it had
during said convention. Secondly, the convention happened two (2) years prior to the checked the IMS-PPI, IPO, and BFAD databases and found that there was no brand name
registration of "ZYNAPSE" and it is not proven that those who attended the convention on which was confusingly similar to "ZYNAPSE".
the part of Natrapharm were the same people who were responsible for the creation of
"ZYNAPSE" or that they were still connected with Natrapharm in 2007. As a rule, good faith Since Natrapharm was not shown to have been in bad faith, it is thus considered to have
is always presumed, and upon him who alleges bad faith on the part of a possessor rests the acquired all the rights of a trademark owner under the IP Code upon the registration of the
burden of proof. The appellants, however, miserably failed to carry that burden. "ZYNAPSE" mark.

The Court affirms the factual findings of the lower courts. Since Zuneca is making the Consequently, Zuneca's counterclaims against Natrapharm were correctly dismissed by the
allegations of bad faith, it was incumbent on Zuneca to overcome the evidence that lower courts. To be sure, Zuneca did not have any right to prevent third parties, including
Natrapharm was the owner of the mark "ZYNAPSE" and to show that Natrapharm had Natrapharm, from using marks confusingly similar to its unregistered "ZYNAPS" mark
registered "ZYNAPSE" in bad faith. However, Zuneca failed to show that the registration because it is not an "owner of a registered mark" contemplated in Section 147.1 of the IP
was made fraudulently or in bad faith. In contrast, Natrapharm was able to convince the Code.
lower courts, as it likewise convinces this Court, that it had acted in good faith when it came
up with the name "ZYNAPSE" and that it had no knowledge of Zuneca's use of "ZYNAPS" In any event, while Natrapharm is the owner of the "ZYNAPSE" mark, this does not,
after it had checked the PPI, BFAD, and IPO databases. however, automatically mean that its complaint against Zuneca for injunction, trademark
infringement, damages, and destruction with prayer for TRO and/or preliminary injunction
should be granted. The application of Section 159.1 of the IP Code in the case at bar results been registered, the registrant may file an infringement case against third parties using an
in Zuneca's exemption from liability for trademark infringement. identical or confusingly similar mark in commerce without its consent, when such use results
in a likelihood of confusion. Even without Section 159.1 of the IP Code, a third party's prior
On the interpretation of Section 159.1 of the IP Code, Natrapharm argues that the limitation use of an unregistered mark, if said mark subsequently becomes registered by another, could
to actions for infringement under this section means that only acts prior to the filing and/or not be considered as trademark infringement because there was no trademark registration - a
claim of priority of the registered mark are exempted. The good faith prior user's use of the requirement for a trademark infringement action to prosper - when the third party was using
mark subsequent to the filing and/or registration date is, however, no longer exempted and its mark.
makes the prior user liable for infringement. This echoes the CA which held that:
More importantly, the proviso of Section 159.1 of the IP Code states: "[t]hat [the good faith
Moreover, the supremacy of the prior registrant over the prior user is further elucidated in prior user's] right may only be transferred or assigned together with his enterprise or
Section 159.1 of the same law x x x. business or with that part of his enterprise or business in which the mark is used." To
adhere to the theories of the CA and Natrapharm that the prior user's use of the identical or
xxxx confusingly similar mark subsequent to the filing or registration date of the registered mark
should be considered as trademark infringement renders this proviso useless and nugatory
Based on [said] provision, it is manifest that the prior-registrant (sic) cannot run after the and logically subjects the possible transferee or assignee to inevitable liability for trademark
prior-user (sic) for any usage before the registration, but not after, as indicated by the helping infringement. The lawmakers could not have intended this absurd outcome.
verb "was" in the phrase "was using the mark for the purposes of his business or enterprise".
(Emphasis supplied) Read as a whole, Section 159.1 of the IP Code clearly contemplates that a prior user in good
faith may continue to use its mark even after the registration of the mark by the first-to-file
The Court believes, and so holds, that the above interpretation is erroneous. registrant in good faith, subject to the condition that any transfer or assignment of the mark
by the prior user in good faith should be made together with the enterprise or business or with
If Section 159.1 of the IP Code is only meant to exempt from an action for infringement the that part of his enterprise or business in which the mark is used. The mark cannot be
use in good faith prior to the filing or priority date of the subsequently registered mark, then transferred independently of the enterprise and business using it.
this entire provision would be rendered useless and a mere surplusage. Stated otherwise,
there is no point in adding Section 159.1 of the IP Code as an exception under "Limitations to From the provision itself, it can be gleaned that while the law recognizes the right of the prior
Actions for Infringement" because it merely repeats the general rule that, after the mark has user in good faith to the continuous use of its mark for its enterprise or business, it also
respects the rights of the registered owner of the mark by preventing any future use by the
transferee or assignee that is not in conformity with Section 159.1 of the IP Code. Notably, One Million Pesos (P1,000,000.00) as damages; One Million Pesos (P1,000,000.00) as
only the manner of use by the prior user in good faith - that is, the use of its mark tied to its exemplary damages;Two Hundred Thousand Pesos (P200,000.00) as attorney's
current enterprise or business - is categorically mentioned as an exception to an action for fees;and the Costs.
infringement by the trademark owner. The proviso in Section 159.1 of the IP Code ensures
that, despite the transfer or assignment of its mark, the future use by the assignee or Defendants are further enjoined from henceforth using Zynaps or any other variations thereto
transferee will not go beyond the specific confines of such exception. Without the proviso, which are confusingly similar to the plaintiffs Zynapse.
the prior user in good faith would have the free hand to transfer or assign the "protected use"
of its mark for any purpose to a third person who may subsequently use the same in a manner It is likewise ordered that all infringing goods, labels, signs, prints, packages, wrappers,
unduly curtailing the rights of the trademark owner. Indeed, this unilateral expansion of the receptacles, and advertisements in possession of the defendants, bearing the registered mark
exception by a third person could not have been intended, and is guarded against, by the or any reproduction, counterfeit, copy, or colourable imitation thereof, all plates, molds,
legislature through the foregoing proviso. matrices and other means of making the same, implements, machines, and other items related
to the conduct, and predominantly used, by the defendants in such infringing activities, be
In any event, the application of Section 159.1 of the IP Code necessarily results in at least disposed of outside the channels of commerce or destroyed, without compensation.
two entities - the unregistered prior user in good faith or their assignee or transferee, on one
hand; and the first-to-file registrant in good faith on the other - concurrently using identical or The counterclaim of the defendants is DISMISSED for lack of merit.
confusingly similar marks in the market, even if there is likelihood of confusion. While this
situation may not be ideal, as eruditely explained in the Concurring Opinion of Justice Perlas- Because Zuneca is not liable for trademark infringement under Section 159.1 of the IP Code,
Bernabe, the Court is constrained to apply Section 159.1 of the IP Code as written. the Court finds that there is no basis for the above imposition of penalties.

To recall, the RTC imposed on Zuneca the following penalties in light of its finding that The penalties ordered by the lower courts - that is, the payment of damages, injunction, and
Zuneca had committed trademark infringement, which penalties were later affirmed by the destruction of goods of Zuneca - are based on Sections 156 and 157 of the IP Code, which
CA: provide:

Defendants, jointly and severally, are hereby directed to pay the plaintiff the following SECTION 156. Actions, and Damages and Injunction for Infringement. - 156.1. The
amounts, to wit: owner of a registered mark may recover damages from any person who infringes his rights,
and the measure of the damages suffered shall be either the reasonable profit which the or colorable imitation thereof, all plates, molds, matrices and other means of making the
complaining party would have made, had the defendant not infringed his rights, or the same, shall be delivered up and destroyed.
profit which the defendant actually made out of the infringement, or in the event such
A plain reading of the above provisions reveals that that these remedies may only be ordered
measure of damages cannot be readily ascertained with reasonable certainty, then the court
by the court if there was a finding that a party had committed infringement. Here, because of
may award as damages a reasonable percentage based upon the amount of gross sales of
the application of Section 159.1 of the IP Code, Zuneca is not liable for trademark
the defendant or the value of the services in connection with which the mark or trade name
infringement. Consequently, it follows that the award of damages, issuance of an injunction,
was used in the infringement of the rights of the complaining party. (Sec. 23, first par.,
and the disposition and/or destruction of allegedly infringing goods could not be ordered by
R.A. No. 166a)
the court.

156.2. On application of the complainant, the court may impound during the pendency of
Indeed, directing the foregoing remedies despite a finding of the existence of a prior user in
the action, sales invoices and other documents evidencing sales, (n)
good faith would render useless Section 159.1 of the IP Code, which allows the continued
use and, in certain situations, the transfer or assignment of its mark by the prior user in good
156.3. In cases where actual intent to mislead the public or to defraud the complainant is
faith after the registration by the first-to-file registrant. To reiterate, Section 159.1 of the IP
shown, in the discretion of the court, the damages may be doubled. (Sec. 23, first par., R.A.
Code contemplates a situation where the prior user in good faith and the first-to-file registrant
No. 166)
in good faith concurrently use identical or confusingly similar marks in the market, even if
there is likelihood of confusion.
156.4. The complainant, upon proper showing, may also be granted injunction. (Sec. 23,
second par., R.A. No. 166a)
While Section 147.1 of the IP Code provides that the owner of a registered mark shall have
SECTION 157. Power of Court to Order Infringing Material Destroyed. - 157.1 In the exclusive right to prevent third parties' use of identical or similar marks for identical or
any action arising under this Act, in which a violation of any right of the owner of the similar goods where such use would result in a likelihood of confusion, this provision should
registered mark is established, the court may order that goods found to be infringing be, be interpreted in harmony with Section 159.1 of the IP Code, especially the latter's proviso
without compensation of any sort, disposed of outside the channels of commerce in such a which allows the transfer or assignment of the mark together with the enterprise or business
manner as to avoid any harm caused to the right holder, or destroyed; and all labels, signs, of the prior user in good faith or with that part of his enterprise or business in which the mark
prints, packages, wrappers, receptacles and advertisements in the possession of the is used. The lawmakers intended for the rights of the owner of the registered mark in Section
defendant, bearing the registered mark or trade name or any reproduction, counterfeit, copy 147.1 to be subject to the rights of a prior user in good faith contemplated under Section
159.1. Essentially, therefore, Section 159.1 is an exception to the rights of the trademark describes an effective intellectual and industrial property system as one that "attracts foreign
owner in Section 147.1 of the IP Code. investments."

Bearing in mind the current ownership regime based on registration under the IP Code which In the same vein, those who do not have the resources to apply for trademark registrations are
likewise protects and respects the rights of prior users in good faith, it is thus reasonable to protected from infringement cases and may exercise certain rights under the law, albeit their
infer that the new system of acquiring ownership effectively protects potential entrants in the rights under the IP Code are more limited compared to the owners of the mark.
market. Consistent with the expressed State policy142 under the law, the system under the IP
Code encourages potential market entrants who may lack resources to venture into business Lastly, as additional rationale for initiating the complaint for trademark infringement against
with the assurance that their intellectual property rights are protected and may be enforced Zuneca and presumably to prevent the coexistence of the subject marks in the market,
under the law, especially if they register their marks. Natrapharm points out the dire consequence of the possibility of medical switching in the
case at bar, especially since "ZYNAPSE" and "ZYNAPS" are admitted to be confusingly
By having a uniform, easily-verifiable system of acquiring ownership, potential similar. Allegedly, if a stroke patient who is supposed to take citicoline ("ZYNAPSE")
entrepreneurs have the guarantee that once they avail in good faith of the relatively mistakenly ingests carbamazepine ("ZYNAPS"), said patient will not only be not cured of
inexpensive procedure of registration with the IPO, they already have the upper-hand against stroke but also be exposed to the risk of suffering Stevens-Johnson syndrome, a side effect of
someone who could make a claim of ownership based on a supposed "prior use" - an issue carbamazepine, which is a serious systemic body-wide allergic reaction with a characteristic
that may entail expensive and extensive litigation effectively favoring those who have more rash which attacks and disfigures the skin and mucous membrane.
resources. As explained, due to the change in the language of Section 123.1 of the IP Code,
the registered owners in good faith who dutifully maintain their registrations generally do not While there is no issue as to the likelihood of confusion between "ZYNAPSE" and
have to worry that their rights over the registered mark may one day be subject to a "ZYNAPS", the Court believes that the evil of medical switching will likely not arise,
cancellation proceeding by someone with claims of prior actual use. This uniform system of considering that the law requires the generic names of drugs to be written in prescriptions.
ownership also gives a sense of stability to potential foreign entrepreneurs wanting to offer R.A.6675 (Generics Act of 1988), as amended by R.A. 9502 or the Universally
their products and services in the Philippines because, if they register their marks in good Accessible Cheaper and Quality Medicines Act of 2008, reads:
faith and diligently maintain said marks, they no longer have to worry about their ownership
over the mark being attacked by someone appearing out of the blue claiming to be a local SEC. 6. Who Shall Use Generic Terminology. - (a) All government health agencies and
prior user of the mark all along. Such sense of stability given by the current system of their personnel as well as other government agencies shall use generic terminology or
acquiring trademark ownership is in consonance with the expressed State policy that generic names in all transactions related to purchasing, prescribing, dispensing and
administering of drugs and medicines. profession for one (1) year or longer at the discretion of the court.

(b) All medical, dental and veterinary practitioners, including private practitioners, shall xxxx
write prescriptions using the generic name. The brand name may be included if so desired.
(Emphasis supplied) (C) The Secretary of Health shall have the authority to impose administrative sanctions
such as suspension or cancellation of license to operate or recommend suspension of
Pertinently, the said law also provides for the appropriate penalties for failure to comply license to practice profession to the Professional Regulation Commission as the case may
with these requirements. Section 12 of the Generics Act of 1988, as amended, reads: be for the violation of this Act.

SEC. 12. Penalty. - (A) Any person who shall violate Section 6(a) or 6(b) of this Act shall The administrative sanctions that shall be imposed by the Secretary of the Department of
suffer the penalty graduated hereunder, viz.: Health shall be in a graduated manner in accordance with Section 12.A.

An administrative case may be instituted independently from the criminal case: Provided,
(a) for the first conviction, he shall suffer the penalty of reprimand which shall be officially
That, the dismissal of the criminal case or the withdrawal of the same shall in no instance be
recorded in the appropriate books of the Professional Regulation Commission.
a ground for the dismissal of the administrative case.

(b) for the second conviction, the penalty of fine in the amount of not less than Ten
Still, even as the Generics Act of 1988, as amended, provides protection to the consumers -
thousand pesos (Php10,000.00) but not exceeding Twenty- five thousand pesos
and despite the Court's recognition of the respective rights under the IP Code of the first
(Php25,000.00), at the discretion of the court.
registrant in good faith and the prior user in good faith - the Court is nonetheless mindful of
potential switching of medicines. As amply elaborated by Justice Gesmundo in his
(c) for the third conviction, the penalty of fine in the amount of not less than Twenty-five
Concurring Opinion, the issue on likelihood of confusion on medicines may pose a
thousand pesos (Php25,000.00) but not exceeding Fifty thousand pesos (Php50,000.00) and
significant threat to public health, hence, there is a need to improve our intellectual property
suspension of his license to practice his profession for sixty (60) days at the discretion of
laws and the government's manner of regulation of drug names to prevent the concurrent use
the court.
in the market of confusingly similar names for medicines.

(d) for the fourth and subsequent convictions, the penalty of fine of not less than One
hundred thousand pesos (Php100,000.00) and suspension of his license to practice his
To further reduce therefore, if not totally eliminate, the likelihood of switching in this case, ZUNECA PHARMACEUTICAL AND/OR AKRAM ARAIN AND/OR VENUS ARAIN,
the Court hereby orders the parties to prominently state on the packaging of their respective M.D., AND STYLE OF ZUNECA PHARMACEUTICAL and NATRAPHARM, INC. are
products, in plain language understandable by people with no medical background or likewise ORDERED to: (1) indicate on their respective packaging, in plain language
training, the medical conditions that their respective drugs are supposed to treat or alleviate understandable by people with no medical background or training, the medical conditions
and a warning indicating what "ZYNAPS" is not supposed to treat and what "ZYNAPSE" is that their respective drugs are supposed to treat or alleviate and a warning indicating what
not supposed to treat, given the likelihood of confusion between the two. "ZYNAPS" is not supposed to treat and what "ZYNAPSE" is not supposed to treat; and (2)
submit to the Court a written report showing compliance with this directive within thirty (30)
As well, by this Decision, the Court furnishes the Food and Drug Administration a copy of days from receipt of this Decision.
this decision, and accordingly directs it to monitor the continuing compliance by the parties
of the above directives. Let a copy of this Decision be furnished the Food and Drug Administration which is, by this
Decision, directed to monitor the parties' continuing compliance with the above directives.
WHEREFORE, premises considered, the petition is PARTLY GRANTED and the Court
hereby declares petitioners ZUNECA PHARMACEUTICAL AND/OR AKRAM ARAIN Let copies of this Decision likewise be forwarded to the Senate President, the Speaker of the
AND/OR VENUS ARAIN, M.D., AND STYLE OF ZUNECA PHARMACEUTICAL as the House of Representatives, and the Intellectual Property Office, for their information and
prior users in good faith of the "ZYNAPS" mark and accordingly protected under Section guidance.
159.1 of the Intellectual Property Code of the Philippines.
SO ORDERED.
The assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 99787,
which affirmed the Decision of the Regional Trial Court of Quezon City, Branch 93 dated Peralta, C.J., Perlas-Bernabe, Leonen, Gesmundo, Reyes, Jr., Hernando*, Carandang,
December 2, 2011, are AFFIRMED insofar as they declared respondent NATRAPHARM, Lazaro-Javier, Inting, Zalameda, Lopez, Delos Santos, Gaerlan and Baltazar-Padilla**, JJ.,
INC. as the lawful registrant of the "ZYNAPSE" mark under the Intellectual Property Code concur.
of the Philippines, and are SET ASIDE insofar as they hold petitioners liable for trademark
infringement and damages, directed the destruction of petitioners' goods, and enjoined
petitioners from using "ZYNAPS". Petitioners' application for the issuance of a Temporary
Restraining Order and/or Preliminary Injunction is DENIED.