In Forietrans Manufacturing Corp. v. Davidoff Et. Cie SA, the Supreme Court held that the Secretary of Justice committed grave abuse of discretion by disregarding evidence of trademark infringement and false designation of origin. The Court emphasized that determining probable cause for filing a criminal case is distinct from assessing probable cause for issuing a search warrant. This ruling underscores the judiciary’s power to intervene when executive decisions on probable cause are made arbitrarily, impacting businesses by ensuring that potential infringers are held accountable and preventing consumer deception through counterfeit products.

Counterfeit Cigarettes: When is a Brand ‘Confusingly Similar’ Enough to Prosecute?

The case revolves around Davidoff and Japan Tobacco, Inc. (JTI), who alleged that Forietrans Manufacturing Corporation (FMC) was producing counterfeit cigarettes. Acting on this suspicion, authorities executed search warrants on FMC’s premises, leading to the seizure of cigarettes labeled ‘DAGETA’ and ‘DAGETA International,’ along with cigarettes bearing similarities to JTI’s ‘Mild Seven’ brand. Davidoff and JTI filed complaints alleging trademark infringement and false designation of origin under the Intellectual Property Code of the Philippines. These complaints sparked a legal battle concerning the determination of probable cause and the extent of the Secretary of Justice’s discretion in evaluating evidence.

The Provincial Prosecutor initially dismissed the complaints, a decision affirmed by the Secretary of Justice, Raul M. Gonzalez. However, the Court of Appeals (CA) reversed these dismissals, finding that Secretary Gonzalez had gravely abused his discretion. The CA argued that Secretary Gonzalez improperly weighed evidence, a function reserved for trial courts. The central legal question thus became whether the CA erred in overturning the Secretary of Justice’s determination of no probable cause, thereby questioning the boundaries of executive discretion in preliminary investigations.

The Supreme Court sided with the Court of Appeals. It reiterated the definition of probable cause as facts sufficient to create a well-founded belief that a crime has been committed and that the respondent is likely guilty. It emphasized that only prima facie evidence is needed, meaning evidence that is facially sufficient to establish a claim or defense, unless rebutted. The Court acknowledged the general policy of non-interference with the executive branch’s determination of probable cause, stemming from the doctrine of separation of powers. However, this policy is not absolute.

The Supreme Court emphasized that courts can intervene when there is a clear showing of grave abuse of discretion. The term grave abuse of discretion refers to an exercise of judgment that is capricious, whimsical, or arbitrary, essentially equivalent to lacking jurisdiction. The Court cited Unilever Philippines, Inc. v. Tan, which established that dismissing a complaint despite ample evidence supporting probable cause constitutes grave error justifying judicial intervention. The Supreme Court found that Secretary Gonzalez’s actions met this threshold.

The Court criticized the Secretary of Justice for essentially reviewing the judge’s determination of probable cause for issuing search warrants, rather than focusing on the evidence presented during the preliminary investigation. The Supreme Court emphasized the distinct roles of a judge, who determines probable cause for issuing warrants, and a prosecutor, who assesses probable cause for filing a criminal case. The Court quoted the Joint Resolution:

As can be seen supra, Trocio’s affidavit was clearly insufficient to show probable cause to search FMC’s premises and look for fake JTI or [Davidoff] products.

x x x

It would seem that reason had taken leave of the senses. The undeniable fact, standing out like a sore thumb, is that the applicants never presented a single shred of proof to show probable cause for the issuance of a search warrant. It would have been laughable if not for the fact that persons were arrested and detained and properties were confiscated.

As can be seen, what began as a search for fake JTI and [Davidoff] products changed into a search for fake Dageta International cigarettes, then shifted to a sea[r]ch for fake Dageta cigarettes confusingly similar to Davidoff and finally shifted to fake mislabeled Dageta cigarettes. One can only wonder why the applications were granted without a shred of proof showing probable cause. The exception against unreasonable searches and seizures became the very weapon to commit abuses that the provision was designed to prevent.

The Court found that a prima facie case existed for both trademark infringement and false designation of origin. Section 155 of the Intellectual Property Code (IP Code) defines trademark infringement:

Sec. 155. Remedies; Infringement.- Any person who shall, without the consent of the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.

The crucial element of infringement is the likelihood of confusion. The Court noted the complaint-affidavit alleged confusing similarity between Davidoff and Dageta cigarette packs. Samples presented during the preliminary investigation revealed notable similarities in the packaging:

While the names ‘Davidoff’ and ‘Dageta’ were distinct, the Court emphasized the similarities in packaging, indicating potential for consumer confusion. Successful infringement often involves subtle changes that confuse consumers while appearing different to courts. Similar logic applied to the JTI infringement case, where FMC allegedly manufactured cigarettes deceptively similar to ‘Mild Seven’ without authorization.

Concerning the charge of false designation of origin, Section 169 of the IP Code states:

Sec. 169. False Designations of Origin; False Description or Representation. –

1691. Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which:

(a) Is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person; or

(b) In commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable to a civil action for damages and injunction provided in Sections 156 and 157 of this Act by any person who believes that he or she is or is likely to be damaged by such act.

Respondents claimed FMC illegally manufactured ‘DAGETA’ cigarettes labeled ‘Made in Germany’ despite being produced in the Philippines. Supporting this, they presented samples and an inventory of seized items, including manufacturing equipment. While FMC argued these were genuine imported cigarettes, the Court found enough evidence to suggest local manufacturing with misrepresented origin. Secretary Gonzalez’s dismissal of this charge, without factual or legal basis, further highlighted the abuse of discretion.

FAQs

The Supreme Court’s decision underscores the importance of thoroughly evaluating evidence in intellectual property cases. It reinforces the judiciary’s role in checking potential abuses of discretion by executive officials. This ruling has significant implications for businesses seeking to protect their trademarks, ensuring that the authorities seriously consider evidence of infringement and false advertising. This decision promotes fair competition and prevents consumer deception in the marketplace.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Forietrans Manufacturing Corp. v. Davidoff Et. Cie SA, G.R. No. 197482, March 06, 2017