Stichting BDO vs. BDO Unibank, Inc.

August 12, 2013 SEC EN BANC CASE NO. 11-11-249 STICHTING BDO , petitioner-appellant , vs. BDO UNIBANK, INC. , respondent-appellee . FOR : Violation of the Corporation Code of the Philippines, SEC Memorandum No. 14, Series of 2000, the Intellectual Property Code, et al. DECISION For consideration of the Commission En Banc is the Memorandum of Appeal 1 dated 23 November 2011 filed by STICHTING BDO (petitioner-appellant) assailing the Decision dated 3 November 2011 of the Company Registration and Monitoring Department (CRMD) of the Commission in favor of then Banco de Oro Unibank, Inc.,now BDO Unibank, Inc. 2 (respondent-appellee),the dispositive portion of which reads: ASHaDT "WHEREFORE, premises considered, the instant Petition is hereby DENIED for lack of merit. The Corporate and Partnership Registration Division of this Department is directed to process and act on the application for amendments of the articles of incorporation and by-laws of the respondent accordingly." The petitioner-appellant is a foundation duly organized and existing under laws of the Netherlands. 3 It maintains a network of independent accounting firms around the world, all of which are allegedly uniformly identified by the mark BDO placed immediately before the local name or Member Firm name. 4 Its mark BDO & DESIGN was registered with the Intellectual Property Office (IPO) on 5 August 2004. 5 The respondent-appellee registered with the Commission under SEC Registration No. 34001. 6 Its purpose is mainly to engage in the banking business. 7 On 2 March 2011, the respondent-appellee filed an express reservation of the corporate name "BDO Unibank, Inc." and the business names "BDO","BDO Unibank" and "BDO Banco de Oro" with the Commission. On 19 July 2011, the petitioner-appellant filed a Petition to Deny Application to Amend Corporate Name or Cancel Amended Corporate Name and Deny Application for Registration of Business Names or Cancel their Registration dated 21 June 2011 (Petition to Cancel Amended Corporate Name) with the CRMD, alleging that: (1) the mark BDO & Design has been continuously and extensively used by it around the world since 1988; 8 (2) these marks are covered by over three hundred (300) certificates of registration all over the world; 9 (3) these marks are internationally well-known; 10 (4) it started using the mark BDO in the Philippines on 26 March 1997 through BDO Alba Romeo & Co.; 11 (5) it was granted a Certificate of Registration from the IPO on 5 August 2004; 12 and (6) because of this, the respondent-appellee may not use the mark BDO as part of its corporate and business names. 13 Thus, the petitioner-appellant prayed that the Commission render a judgment denying the respondent-appellee's application to amend and/change its corporate name; or if it had been allowed, that it be revoked or cancelled. 14 In its Answer ,the respondent-appellee claims that: (1) it is the owner of the name and mark BDO and has the right to use and register the same with the Commission; 15 (2) the trade names and trademarks "BANCO DE ORO","BDO" and "BDO Logo" were used by the respondent-appellant in commerce and trade in the Philippines since 1977; 16 (3) the IPO, acting through the Bureau of Legal Affairs (BLA),rendered a Decision dated 24 April 2009 granting the respondent-appellee's Petition for Cancellation of Trademark Registration (Petition for Cancellation of Trademark) 17 and declaring the Certificate of Registration for the mark BDO & DESIGN of the petitioner-appellant cancelled. 18 The IPO-BLA held that, through prior use in the Philippines, the respondent-appellee had a better right over the said mark 19 and that the petitioner-appellant's mark cannot be considered a well known mark. 20 During the appeal to the Director General of the IPO, the IPO-BLA issued a Writ of Execution 21 and the Bureau of Trademarks of the IPO issued a Cancellation Order dated 26 March 2010 ordering the cancellation of the trademark BDO & DESIGN. 22 The appeal from the Decision of the IPO-BLA was dismissed by the Director General of the IPO, through his Decision dated 17 July 2012. 23 The matter is now pending before the Court of Appeals. Thus, the respondent-appellee prayed that the Petition to Cancel Amended Corporate Name be dismissed and that it be allowed to amend its corporate name from "Banco de Oro Unibank, Inc." to "BDO Unibank",and to register the business names BDO, BDO Unibank and BDO Banco de Oro. 24 The CRMD rendered a Decision dated 3 November 2011 denying the Petition to Cancel Amended Corporate Name for lack of merit. In its Decision, the CRMD stated that the term BDO is generic and incapable of exclusive appropriation; that there was priority of adoption of the corporate name by the respondent-appellee through its subsidiaries; that the petitioner-appellant failed to discharge the burden of proof in establishing its mark's international fame in order to be entitled to protection under Article 6bis of the Paris Convention; that the petitioner-appellant failed to substantiate its claim that the corporate name of the respondent-appellee is deceptively or confusingly similar to that of the former; and that the services of the respondent-appellee are different from those of the petitioner-appellant such that it is highly improbable that a person using ordinary care and prudence would be misled into thinking that the two corporations are the same or somehow related or connected. Hence, this appeal. In its Memorandum on Appeal, the petitioner-appellant argues that: (1) the CRMD erred in appreciating Section 18 of the Corporation Code and the Circular which should have been interpreted and applied in its favor; 25 (2) the respondent-appellee's business names are deceptively and confusingly similar to the petitioner-appellant's name and marks; 26 (3) the CRMD erred in ruling that the term BDO is generic and incapable of exclusive appropriation when the petitioner-appellant has acquired a second meaning of the term through its long and extensive use of the same all over the world; 27 (4) the CRMD erred in ruling that respondent-appellee acquired a prior right over the use of the term BDO; 28 (5) the CRMD erred in ruling that the petitioner-appellant's mark is not internationally well-known; 29 and (6) the CRMD erred in ruling that both parties are not engaged in the same services. 30 aCIHAD In response, the respondent-appellee, in its Reply Memorandum , 31 claims the following: (1) that CRMD correctly applied Section 18 of the Corporation Code and the Circular in its Decision; (2) that the rule prohibiting the registration of identical or deceptively or confusingly similar names is not applicable in this case since there is no other corporation, other than the respondent-appellee and its subsidiaries, which uses "BDO" as part of its corporate name; (3) that the Commission has allowed the registration and use of the name "BDO" by the respondent-appellee's subsidiaries; (4) that the respondent-appellee has a total of fourteen (14) subsidiaries bearing the "BDO" name; (5) that the CRMD correctly ruled that the respondent-appellee is the prior user of the name and mark BDO; (6) that the CRMD correctly held that the petitioner-appellant's mark is not well-known; (7) that the petitioner-appellant has not acquired a secondary meaning over its cancelled mark BDO; and (8) that there will be no confusion arising from the services offered by the parties. 32 The issue to be resolved is whether the respondent-appellee has the right to use and register its amended corporate name with the Commission. Section 18 of the Corporation Code provides that no corporate name may be allowed by the Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. To fall within the prohibition of the law, two requisites must be proven, to wit: (1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2) the proposed name is either: (a) identical or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law ;or (c) patently deceptive, confusing or contrary to existing law. 33 As to the first requisite, it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption. 34 Here, the petitioner-appellant's case does not meet the first requisite because it is the respondent-appellee that acquired a prior right over the use of the term "BDO".This is because respondent-appellee's subsidiaries were incorporated with the Commission prior to the registration by the petitioner-appellant of its trademarks abroad and with the IPO. As to the concept of a "parent corporation",it is one which controls another as a subsidiary or affiliate by the power to elect its management. 35 It is one which is so related to another corporation that it has the power either, directly or indirectly, to elect the majority of the directors of such other corporation. 36 It can also be defined as a corporation organized to hold the stock of another or other corporations enabling it to control or substantially influence the policies and management of such corporation or corporations. 37 On the other hand, a "subsidiary corporation" is one which is so related to another corporation that the majority of its directors can be elected, either directly or indirectly, by such other corporation. It is one which another corporation owns at least a majority of the shares and thus has control. 38 Moreover, a corporation may be engaged in its business transactions through the agency of a subsidiary corporation as through any other agency. 39 In the case at bar, the respondent-appellee, as the parent corporation, caused the registration of the corporate name "BDO" through its subsidiaries, so that it can engage in its business transactions through and with the help of said subsidiary corporations. Thus, in ruling that respondent-appellee has a prior right over the name, we adopt with approval the following finding of the CRMD, to wit: "In the case of Philips ,it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption. In this case, some of the [respondent-appellee's] subsidiaries with the word BDO as part of the corporate names were incorporated earlier than the registration of the BDO mark of the [petitioner-appellant's] member firms all over the world and with the IPO. Per records, BDO Forex, Inc. (now merged with BDO Strategic Holdings) was registered on December 3, 1996, BDO Insurance Brokers, Inc. was registered on July 10, 1997 and BDO Capital and Investment Corporation was registered on September 8, 1998 while the earliest BDO mark registration of [petitioner-appellant] is its Benelux BDO Trademark dated August 8, 2001. In the Philippines, its Certificate of Registration No. 4-2002-000146 with the [IPO] was approved only on August 5, 2004. Being the first to register through its subsidiaries, [respondent-appellee] has acquired the right to use the acronym BDO as part of its corporate and business name ." 40 (Emphasis ours) The petitioner-appellant cannot rely on its trademark registration because the same is no longer registered with the IPO based on the Decision dated 17 July 2012 of its Director-General, albeit on appeal before the Court of Appeals. In the case at bar, the IPO-BLA, as adverted to above, issued a Writ of Execution, and the Bureau of Trademarks of the IPO issued a Cancellation Order dated 26 March 2010 ordering the cancellation of the petitioner-appellant's trademark BDO while the case was pending appeal with the IPO Director General. The petitioner-appellant has not presented any evidence that it stayed the execution of the IPO-BLA through the filing of a counter-bond pursuant to Section 10, Rule of the Regulations on Inter Partes Proceedings of the IPO. Moreover, the petitioner-appellant has not presented any evidence to establish that the Court of Appeals stayed the Decision of the Director General affirming the judgment of the IPO-BLA. Clearly, the petitioner-appellant's mark is, at the moment, no longer registered with the IPO. HEISca The petitioner-appellant's contention that its mark "BDO" is internationally well-known also holds no water. Article 6bis of the Paris Convention for the Protection of Industrial Property (Paris Convention) states that: "(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods ...." (emphasis ours) This treaty obligation for the protection of well-known marks is now being implemented through Sec. 123.1 (e) and (f) in relation to Sec. 147.2 of the Intellectual Property Code (IP Code). 41 The Supreme Court, in the case of Mighty Corporation, et al. v. E. & J. Gallo Winery, et al. , 42 adopted certain guidelines/conditions before one may invoke Article 6bis and be entitled to its protection, to wit: a) the mark must be internationally known ; b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar kinds of goods; and d) the person claiming must be the owner of the mark. As correctly pointed out by the CRMD, the first requirement was not complied with herein. Anent the first requirement, whether a mark is internationally well-known or not is a question of fact that must be determined/declared by competent domestic/local authority. This is because the essential requirement under Article 6bis is that the trademark to be protected must be well-known in the country where protection is sought. 43 Indeed, if a foreign trademark is not proven to be well-known under the criteria which Article 6bis concedes to be subject to the determination of competent local authority, the courts may still refuse to give it extraterritorial protection such as in the Philippines. 44 In the case at bar, the petitioner-appellant argues that it is an internationally known foreign corporation based on the following: (1) it has 1,082 offices in 119 countries; (2) the creation of an international training programme; (3) the regular distribution of BDO international Pacts publication to its Member Firms; (4) the dissemination of the BDO Corporate Visual Identity and Brand Strategy Launch Manuals; (5) Trademark portfolio; (6) registration of the marks BDO in many countries; (7) it is allegedly widely shown in commercials or advertisements sponsored by BDO Member Firms in various countries; (8) it is an active sponsor of World Hockey events; (9) use of the mark BDO in the letterhead, business cards, Tax Digest, brochure and website of Alba Romeo & Co.;and (10) it has over 800 clients in the Philippines. 45 However, the petitioner-appellant's argument is baseless since it failed to establish that its mark "BDO" was well-known internationally and here in the Philippines, as determined by a competent domestic/local authority .It failed to proffer proof of such determination/declaration by competent domestic/local authority such as Minister of Trade (as in the case of La Chemise Lacoste, S.A. v. Fernandez ), 46 or the court of proper adjudication of infringement or unfair competition cases or the pertinent department of the IPO in the exercise of its quasi-judicial powers in inter-parte and ex-parte cases. 47 On the contrary, the IPO-BLA found that the mark of the petitioner-appellant is not internationally well-known, which decision has not been stayed and has in fact been implemented pending appeal. Even if were to independently consider the evidence of the petitioner-appellant to prove that its mark "BDO" was internationally well-known, we agree with the CRMD that such evidence is not convincing. The petitioner-appellant failed to discharge the heavy burden of proof to establish its mark's international fame. In fact, the petitioner-appellant failed to prove that its trademark has been in commercial use in the Philippines nor did it prove that commercials and advertisements, which are allegedly shown in various countries abroad, were shown in the Philippines. Likewise, the registration of the petitioner-appellant's mark in some jurisdictions or the fact that it has several member firms does not, by itself, suffice for the purpose. There must be a showing that its mark is used in commerce and promoted/advertised, either by the petitioner-appellant or by its member firms, on such international scale, such as that its fame could reasonably be expected to trickle down locally. Further, the petitioner-appellant has not established that it attained such status before 3 December 1996. Thus, assuming that the petitioner-appellant is internationally well-known, it did not establish that it was internationally well-known when BDO Forex, the first subsidiary of the respondent-appellee, was registered on 3 December 1996. HCSAIa As to the second requisite, in determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person, using ordinary care and discrimination. In so doing, the Court must look to the record as well as the names themselves. 48 It is now settled that proof of actual confusion need not be shown and it suffices that confusion is probably or likely to occur. 49 In this connection, the term "BDO" is not a generic term. Generic terms are those which constitute "the common descriptive name of an article or substance",or comprise the "genus of which the particular product is a species",or are "commonly used as the name or description of a kind of goods",or "imply reference to every member of a genus and the exclusion of individuating characters",or "refer to the basic nature of the wares or services provided rather than to the more idiosyncratic characteristics of a particular product",and are not legally protectable. 50 Tested by the above, "BDO" in itself cannot be considered generic in that it is neither the genus nor the common name or description of the basic nature of the business of the respondent-appellee, which is to engage in the banking business. However, there is no gainsaying that the term "BDO" is composed of three (3) letters from the English alphabet which are commonly available to all who may use said letters as acronym for their names, titles, designations, denotations, and the like. It is in light of the above that the nature of the word "BDO" should be construed. Otherwise stated, "BDO" is generic not in the technical sense but in the loose sense, that is, it may be an ordinary or common acronym in usage. To be sure, although common dictionary words are generic in that they are freely used in communication, they may be used as trademarks in a fanciful or arbitrary, in contrast to the their dictionary, sense. 51 Being generic and common terms, their appropriation as trademarks, albeit in a fanciful manner in that they bear no relation to the products they identify, is valid. However, the degree of exclusiveness accorded to their users is closely restricted. Thus, in one case, such a word may be appropriated by a junior user for ham despite its earlier appropriation by the prior user for lard, butter, cooking oil and soap. 52 In this case, confusing similarity exists considering that the word "BDO" is the dominant term in the parties' corporate names. Further, the parties have similar/related purposes. The petitioner-appellant was registered under International Class 36 of the Nice Classification of Goods and Services, which is substantially financial and monetary affairs, before the IPO. On the other hand, the respondent-appellee has pending applications for marks containing the dominant element "BDO" with the IPO for services under same International Class 36. 53 Moreover, both are engaged in the financial sector industry ( i.e. ,accounting for the petitioner-appellant and banking for the respondent-appellee). But even though confusing similarity may exist, the petitioner-appellant failed to hurdle the other requirement of prior right, and thus enjoys no superior right to the use of the name "BDO". WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit. Let a copy of this Decision be furnished to the Company Registration and Monitoring Department for proper notation and action. SO ORDERED. Mandaluyong City, August 12, 2013. (SGD.) TERESITA J. HERBOSA Chairperson (SGD.) MA. JUANITA E. CUETO Commissioner (SGD.) ANTONIETA F. IBE Commissioner (SGD.) MANUEL HUBERTO B. GAITE Commissioner (SGD.) ELADIO M. JALA Commissioner Footnotes 1. Filed on 24 November 2011. 2. As of 4 November 2011. 3. Memorandum on Appeal, par. 1. 4. Memorandum on Appeal, par. 5. 5. Petition to Cancel Amended Corporate Name ,Annex "G" (Trademark Portfolio). 6. Certification of Filing Amended Articles of Incorporation dated 4 November 2011. 7. Second Article of its Amended Articles of Incorporation. 8. Petition to Cancel Amended Corporate Name ,pars. 15-16. 9. Id. ,par. 3. 10. Id. ,p. 5. 11. Id. ,par. 26. 12. Id. ,par. 25. 13. Id. ,pp. 28-34. 14. Id. ,p. 34. 15. Answer ,par. 36. 16. Id. ,par. 26.2. 17. Petition for Cancellation of Trademark filed on 24 January 2008 by the respondent-appellee against the petitioner-appellant in which the former sought the cancellation of the registration of the trademark BDO & DESIGN issued to the latter. 18. Answer ,par. 11. 19. Id. ,Annex "1" (Decision of IPO-BLA dated 24 April 2009, p. 44). 20. Id. ,Annex "1" (Decision of IPO-BLA dated 24 April 2009, p. 48). 21. Id. ,par. 11.2. 22. Id. ,par. 11.3. 23. Motion to Resolve filed by BDO Unibank dated 17 July 2012, Annex "A" (Decision of the Office of the Director General dated 11 June 2012). 24. Id. ,p. 49. 25. Memorandum on Appeal, p. 8. 26. Id. ,p. 11. 27. Id. ,p. 15. 28. Id. ,p. 17. 29. Id. ,p. 21. 30. Id. 31. Reply Memorandum of BDO Unibank dated 22 December 2011 filed with the Commission on even date. 32. Id. ,p. 16. 33. Industrial Refactories Corporation of the Philippines v. Court of Appeals, et al. ,G.R. No. 122174, 3 October 2002, citing Philips Export B.V., et al. v. Court of Appeals, et al. ,G.R. No. 96161, 21 February 1992. 34. Industrial Refactories Corporation of the Philippines v. Court of Appeals, et al. ,citing Philips Export B.V., et al. which cited 1 Thomson, p. 80 citing Munn v. Americana Co. ,82 N.,Eq. 63, 88 Atl. 30; San Francisco Oyster House v. Mihich ,75 Wash, 274, 134 Pac. 921. 35. SEC Opinion addressed to Atty. Abbas M. Basman dated 10 September 1980. 36. De Leon, Corporation Code of the Philippines, 1993 ed., p. 43. 37. Id. 38. Id. 39. 18A Am. Jur. 2d, Corporations p. 641. 40. Decision of the CRMD dated 3 November 2011, p. 10. 41. INTEL CORPORATION v. Umali-Paco, in her capacity as the General Counsel of the Securities and Exchange Commission, & INTELPORTS SERVICES, INC. ,SEC En Banc Case No. 07-06-83, 11 July 2008. 42. G.R. No. 154342, 14 July 2004. In this case, the Supreme Court did not consider "Gallo" as a well-known mark within the contemplation and protection of the Paris Convention since wines and cigarettes are not identical or similar goods. 43. Mirpuri v. Court of Appeals, et al. ,G.R. No. 114508, 19 November 1999. 44. INTEL CORPORATION v. Umali-Paco case, citing Amador, Trademarks Under Intellectual Property Code, 1999 Ed., p. 66. 45. Memorandum on Appeal, pp. 25-27. 46. G.R. Nos. 63796-97, 2 May 1984. 47. BPTTT Admin. Or. No. 2, Series of 1996, New Rule 45. 48. Philips Export B.V., et al. v. Court of Appeals, et al. case, citing Ohio Nat. Life Ins. Co. vs. Ohio Life Ins. Co. ,210 NE 2d 298. 49. Philips Export B.V., et al. v. Court of Appeals, et al. case. 50. Societe des Produits Nestle, S.A. v. Court of Appeals, et al. ,G.R. No. 112012, 4 April 2001. 51. Amador, Trademarks Under the Intellectual Property Code, 1999 Ed., p. 21. 52. Ibid. ,p. 18, citing Philippine Refining Co., Inc. v. Ng Sam and the Director of Patents ,G.R. No. L-26676, 30 July 1982. 53. Memorandum on Appeal, p. 23.