FIRST DIVISION

G.R. No. 143993 August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners,

vs.
L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY,
JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the Decision dated 26 November 1999 of the Court of Appeals2 finding
respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and
ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000
denying reconsideration. The Court of Appeals' Decision reversed the 5 September 1994 Decision3 of the
Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for
trademark infringement and unfair competition.

The Facts

Petitioner McDonald's Corporation ("McDonald's") is a corporation organized under the laws of

Delaware, United States. McDonald's operates, by itself or through its franchisees, a global chain of fast-
food restaurants. McDonald's4 owns a family of marks5 including the "Big Mac" mark for its "double-
decker hamburger sandwich."6 McDonald's registered this trademark with the United States Trademark
Registry on 16 October 1979.7 Based on this Home Registration, McDonald's applied for the registration
of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and
Technology ("PBPTT"), now the Intellectual Property Office ("IPO"). Pending approval of its application,
McDonald's introduced its "Big Mac" hamburger sandwiches in the Philippine market in September 1981.
On 18 July 1985, the PBPTT allowed registration of the "Big Mac" mark in the Principal Register based
on its Home Registration in the United States.

Like its other marks, McDonald's displays the "Big Mac" mark in items8 and paraphernalia9 in its
restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonald's spent P10.5 million
in advertisement for "Big Mac" hamburger sandwiches alone.10

Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's

Philippine franchisee.11

Respondent L.C. Big Mak Burger, Inc. ("respondent corporation") is a domestic corporation which
operates fast-food outlets and snack vans in Metro Manila and nearby provinces.12 Respondent
corporation's menu includes hamburger sandwiches and other food items.13 Respondents Francis B. Dy,
Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto ("private
respondents") are the incorporators, stockholders and directors of respondent corporation.14

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big
Mak" mark for its hamburger sandwiches. McDonald's opposed respondent corporation's application on
the ground that "Big Mak" was a colorable imitation of its registered "Big Mac" mark for the same food
products. McDonald's also informed respondent Francis Dy ("respondent Dy"), the chairman of the Board
of Directors of respondent corporation, of its exclusive right to the "Big Mac" mark and requested him
to desist from using the "Big Mac" mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the
Regional Trial Court of Makati, Branch 137 ("RTC"), for trademark infringement and unfair competition.

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In its Order of 11 July 1990, the RTC issued a temporary restraining order ("TRO") against respondents
enjoining them from using the "Big Mak" mark in the operation of their business in the National Capital
Region.15 On 16 August 1990, the RTC issued a writ of preliminary injunction replacing the TRO.16

In their Answer, respondents admitted that they have been using the name "Big Mak Burger" for their
fast-food business. Respondents claimed, however, that McDonald's does not have an exclusive right to
the "Big Mac" mark or to any other similar mark. Respondents point out that the Isaiyas Group of
Corporations ("Isaiyas Group") registered the same mark for hamburger sandwiches with the PBPTT on
31 March 1979. One Rodolfo Topacio ("Topacio") similarly registered the same mark on 24 June
1983, prior to McDonald's registration on 18 July 1985. Alternatively, respondents claimed that they are
not liable for trademark infringement or for unfair competition, as the "Big Mak" mark they sought to
register does not constitute a colorable imitation of the "Big Mac" mark. Respondents asserted that they
did not fraudulently pass off their hamburger sandwiches as those of petitioners' Big Mac
hamburgers.17 Respondents sought damages in their counterclaim.

In their Reply, petitioners denied respondents' claim that McDonald's is not the exclusive owner of the
"Big Mac" mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the "Big Mac"
mark ahead of McDonald's, the Isaiyas Group did so only in the Supplemental Register of the PBPTT and
such registration does not provide any protection. McDonald's disclosed that it had acquired Topacio's
rights to his registration in a Deed of Assignment dated 18 May 1981.18

The Trial Court's Ruling

On 5 September 1994, the RTC rendered judgment ("RTC Decision") finding respondent corporation
liable for trademark infringement and unfair competition. However, the RTC dismissed the complaint
against private respondents and the counterclaim against petitioners for lack of merit and insufficiency of
evidence. The RTC held:

Undeniably, the mark "B[ig] M[ac]" is a registered trademark for plaintiff McDonald's, and as
such, it is entitled [to] protection against infringement.

xxxx

There exist some distinctions between the names "B[ig] M[ac]" and "B[ig] M[ak]" as appearing
in the respective signages, wrappers and containers of the food products of the parties. But
infringement goes beyond the physical features of the questioned name and the original name.
There are still other factors to be considered.

xxxx

Significantly, the contending parties are both in the business of fast-food chains and restaurants.
An average person who is hungry and wants to eat a hamburger sandwich may not be
discriminating enough to look for a McDonald's restaurant and buy a "B[ig] M[ac]" hamburger.
Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into his pocket and
order a "B[ig] M[ak]" hamburger sandwich. Plaintiff McDonald's fast-food chain
has attained wide popularity and acceptance by the consuming public so much so that its air-
conditioned food outlets and restaurants will perhaps not be mistaken by many to be the same as
defendant corporation's mobile snack vans located along busy streets or highways. But the thing
is that what is being sold by both contending parties is a food item – a hamburger sandwich which
is for immediate consumption, so that a buyer may easily be confused or deceived into thinking
that the "B[ig] M[ak]" hamburger sandwich he bought is a food-product of plaintiff McDonald's,
or a subsidiary or allied outlet thereof. Surely, defendant corporation has its own secret
ingredients to make its hamburger sandwiches as palatable and as tasty as the other brands in the
market, considering the keen competition among mushrooming hamburger stands and
multinational fast-food chains and restaurants. Hence, the trademark "B[ig] M[ac]" has been
infringed by defendant corporation when it used the name "B[ig] M[ak]" in its signages,
wrappers, and containers in connection with its food business. xxxx

Did the same acts of defendants in using the name "B[ig] M[ak]" as a trademark or tradename in
their signages, or in causing the name "B[ig] M[ak]" to be printed on the wrappers and containers

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 of their food products also constitute an act of unfair competition under Section 29 of the
Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more inclusive than
the law concerning the infringement of trademark, which is of more limited range, but within its
narrower range recognizes a more exclusive right derived by the adoption and registration of the
trademark by the person whose goods or services are first associated therewith.
xxx Notwithstanding the distinction between an action for trademark infringement and an action
for unfair competition, however, the law extends substantially the same relief to the injured party
for both cases. (See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public
the goods of one man as the goods of another. The choice of "B[ig] M[ak]" as tradename by
defendant corporation is not merely for sentimental reasons but was clearly made to take
advantage of the reputation, popularity and the established goodwill of plaintiff McDonald's. For,
as stated in Section 29, a person is guilty of unfair competition who in selling his goods shall give
them the general appearance, of goods of another manufacturer or dealer, either as to the goods
themselves or in the wrapping of the packages in which they are contained, or the devices or
words thereon, or in any other feature of their appearance, which would likely influence
purchasers to believe that the goods offered are those of a manufacturer or dealer other
than the actual manufacturer or dealer. Thus, plaintiffs have established their valid cause of
action against the defendants for trademark infringement and unfair competition and for
damages.19

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonald's Corporation and

McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount
of P400,000.00, exemplary damages in the amount of P100,000.00, and attorney's fees and
expenses of litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy,
Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed
for lack of merit as well as for insufficiency of evidence.20

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment ("Court of Appeals' Decision") reversing
the RTC Decision and ordering McDonald's to pay respondents P1,600,000 as actual and compensatory
damages and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use
of defendants-appellants of its corporate name – the whole "L.C. B[ig] M[ak] B[urger], I[nc]."
which appears on their food packages, signages and advertisements is an infringement of their
trademark "B[ig] M[ac]" which they use to identify [their] double decker sandwich, sold in a
Styrofoam box packaging material with the McDonald's logo of umbrella "M" stamped
thereon, together with the printed mark in red bl[o]ck capital letters, the words being separated
by a single space. Specifically, plaintiffs-appellees argue that defendants-appellants' use of their
corporate name is a colorable imitation of their trademark "Big Mac".

xxxx

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To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the
definition dictates, it is not sufficient that a similarity exists in both names, but that more
importantly, the over-all presentation, or in their essential, substantive and distinctive parts is
such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the
genuine article. A careful comparison of the way the trademark "B[ig] M[ac]" is being used by
plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants,
would readily reveal that no confusion could take place, or that the ordinary purchasers would be
misled by it. As pointed out by defendants-appellants, the plaintiffs-appellees' trademark is used
to designate only one product, a double decker sandwich sold in a Styrofoam box with the
"McDonalds" logo. On the other hand, what the defendants-appellants corporation is using is not
a trademark for its food product but a business or corporate name. They use the business name
"L.C. Big Mak Burger, Inc." in their restaurant business which serves diversified food items such
as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish burger and
hamburger. Secondly, defendants-appellants' corporate or business name appearing in the food
packages and signages are written in silhouette red-orange letters with the "b" and "m" in upper
case letters. Above the words "Big Mak" are the upper case letter "L.C.". Below the words "Big
Mak" are the words "Burger, Inc." spelled out in upper case letters. Furthermore, said corporate
or business name appearing in such food packages and signages is always accompanied by the
company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper case
"m" appearing therein and a blue lower garment. Finally, the defendants-appellants' food
packages are made of plastic material.

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance
of the product and the manner that the tradename "Big Mak" is being used and presented to the
public. As earlier noted, there are glaring dissimilarities between plaintiffs-appellees' trademark
and defendants-appellants' corporate name. Plaintiffs-appellees' product carrying the trademark
"B[ig] M[ac]" is a double decker sandwich (depicted in the tray mat containing photographs of
the various food products xxx sold in a Styrofoam box with the "McDonald's" logo and trademark
in red, bl[o]ck capital letters printed thereon xxx at a price which is more expensive than the
defendants-appellants' comparable food products. In order to buy a "Big Mac", a customer needs
to visit an air-conditioned "McDonald's" restaurant usually located in a nearby commercial
center, advertised and identified by its logo - the umbrella "M", and its mascot – "Ronald
McDonald". A typical McDonald's restaurant boasts of a playground for kids, a second floor to
accommodate additional customers, a drive-thru to allow customers with cars to make orders
without alighting from their vehicles, the interiors of the building are well-lighted, distinctly
decorated and painted with pastel colors xxx. In buying a "B[ig] M[ac]", it is necessary to specify
it by its trademark. Thus, a customer needs to look for a "McDonald's" and enter it first before he
can find a hamburger sandwich which carry the mark "Big Mac". On the other hand, defendants-
appellants sell their goods through snack vans xxxx

Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find
the same untenable.

Unfair competition is defined as "the employment of deception or any other means contrary to
good faith by which a person shall pass off the goods manufactured by him or in which he deals,
or his business, or service, for those of another who has already established good will for his
similar good, business or services, or any acts calculated to produce the same result" (Sec. 29,
Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must necessarily follow that there was malice and
that the entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-
appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-
appellees. The mere suspected similarity in the sound of the defendants-appellants' corporate
name with the plaintiffs-appellees' trademark is not sufficient evidence to conclude unfair
competition. Defendants-appellants explained that the name "M[ak]" in their corporate name was
derived from both the first names of the mother and father of defendant Francis Dy, whose names
are Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad

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 faith on the part of defendants-appellants. It is a settled rule that the law always presumes good
faith such that any person who seeks to be awarded damages due to acts of another has the burden
of proving that the latter acted in bad faith or with ill motive. 21

Petitioners sought reconsideration of the Court of Appeals' Decision but the appellate court denied their
motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS' CORPORATE

NAME "L.C. BIG MAK BURGER, INC." IS NOT A COLORABLE IMITATION OF THE
MCDONALD'S TRADEMARK "BIG MAC", SUCH COLORABLE IMITATION BEING
AN ELEMENT OF TRADEMARK INFRINGEMENT.

A. Respondents use the words "Big Mak" as trademark for their products and not merely
as their business or corporate name.

B. As a trademark, respondents' "Big Mak" is undeniably and unquestionably similar to

petitioners' "Big Mac" trademark based on the dominancy test and the idem sonans test
resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT

SIMILARITY BETWEEN THE MARK "BIG MAK" AND THE WORD MARK "BIG MAC"
AS AN INDICATION OF RESPONDENTS' INTENT TO DECEIVE OR DEFRAUD
FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.22

Petitioners pray that we set aside the Court of Appeals' Decision and reinstate the RTC Decision.

In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises
only questions of fact. On the merits, respondents contend that the Court of Appeals committed no
reversible error in finding them not liable for trademark infringement and unfair competition and in
ordering petitioners to pay damages.

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under
Rule 45.

2. On the merits, (a) whether respondents used the words "Big Mak" not only as part of the corporate
name "L.C. Big Mak Burger, Inc." but also as a trademark for their hamburger products, and (b) whether
respondent corporation is liable for trademark infringement and unfair competition.23

The Court's Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition
for review under Section 1 of Rule 45 ("Section 1")24 raising only questions of law. A question of law
exists when the doubt or difference arises on what the law is on a certain state of facts. There is a question
of fact when the doubt or difference arises on the truth or falsity of the alleged facts. 25

Here, petitioners raise questions of fact and law in assailing the Court of Appeals' findings on respondent
corporation's non-liability for trademark infringement and unfair competition. Ordinarily, the Court can
deny due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and

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Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to
Section 1.26 We took a similar course of action in Asia Brewery, Inc. v. Court of Appeals27 which also
involved a suit for trademark infringement and unfair competition in which the trial court and the Court of
Appeals arrived at conflicting findings.

On the Manner Respondents Used

"Big Mak" in their Business

Petitioners contend that the Court of Appeals erred in ruling that the corporate name "L.C. Big Mak
Burger, Inc." appears in the packaging for respondents' hamburger products and not the words "Big Mak"
only.

The contention has merit.

The evidence presented during the hearings on petitioners' motion for the issuance of a writ of
preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for their
hamburger sandwiches bore the words "Big Mak." The other descriptive words "burger" and "100% pure
beef" were set in smaller type, along with the locations of branches.28 Respondents' cash invoices simply
refer to their hamburger sandwiches as "Big Mak."29 It is respondents' snack vans that carry the words
"L.C. Big Mak Burger, Inc."30

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their
hamburger sandwiches relied on by the Court of Appeals.31 Respondents' plastic wrappers and bags were
identical with those petitioners presented during the hearings for the injunctive writ except that the letters
"L.C." and the words "Burger, Inc." in respondents' evidence were added above and below the words "Big
Mak," respectively. Since petitioners' complaint was based on facts existing before and during the
hearings on the injunctive writ, the facts established during those hearings are the proper factual bases for
the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 ("Section 22) of Republic Act No. 166, as amended ("RA 166"), the law applicable to this
case,32 defines trademark infringement as follows:

Infringement, what constitutes. — Any person who [1] shall use, without the consent of the
registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or
trade-name in connection with the sale, offering for sale, or advertising of any goods, business or
services on or in connection with which such use is likely to cause confusion or mistake or to
deceive purchasers or others as to the source or origin of such goods or services, or identity of
such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-
name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used upon or in
connection with such goods, business or services, shall be liable to a civil action by the registrant
for any or all of the remedies herein provided.33

Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used,
without petitioners' consent, a colorable imitation of the "Big Mac" mark in advertising and selling
respondents' hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on
the source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's
mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by
the alleged infringer results in "likelihood of confusion."34 Of these, it is the element of likelihood of
confusion that is the gravamen of trademark infringement.35

On the Validity of the "Big Mac"Mark

and McDonald's Ownership of such Mark

A mark is valid if it is "distinctive" and thus not barred from registration under Section 436 of RA 166
("Section 4"). However, once registered, not only the mark's validity but also the registrant's ownership of
the mark is prima facie presumed.37

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Respondents contend that of the two words in the "Big Mac" mark, it is only the word "Mac" that is valid
because the word "Big" is generic and descriptive (proscribed under Section 4[e]), and thus "incapable of
exclusive appropriation."38

The contention has no merit. The "Big Mac" mark, which should be treated in its entirety and not
dissected word for word,39 is neither generic nor descriptive. Generic marks are commonly used as the
name or description of a kind of goods,40 such as "Lite" for beer41 or "Chocolate Fudge" for chocolate
soda drink.42 Descriptive marks, on the other hand, convey the characteristics, functions, qualities or
ingredients of a product to one who has never seen it or does not know it exists,43 such as "Arthriticare"
for arthritis medication.44 On the contrary, "Big Mac" falls under the class of fanciful or arbitrary marks as
it bears no logical relation to the actual characteristics of the product it represents.45 As such, it is highly
distinctive and thus valid. Significantly, the trademark "Little Debbie" for snack cakes was found
arbitrary or fanciful.46

The Court also finds that petitioners have duly established McDonald's exclusive ownership of the "Big
Mac" mark. Although Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of
McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to McDonald's. The Isaiyas
Group, on the other hand, registered its trademark only in the Supplemental Register. A mark which is not
registered in the Principal Register, and thus not distinctive, has no real protection.47 Indeed, we have held
that registration in the Supplemental Register is not even a prima facie evidence of the validity of the
registrant's exclusive right to use the mark on the goods specified in the certificate.48

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation
marks, namely, confusion of goods (product confusion) and confusion of business (source or origin
confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer
Aktiengesellschaft, et al.,49 the Court distinguished these two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the confusion of goods "in which
event the ordinarily prudent purchaser would be induced to purchase one product in the belief that
he was purchasing the other." xxx The other is the confusion of business: "Here though the goods
of the parties are different, the defendant's product is such as might reasonably be assumed to
originate with the plaintiff, and the public would then be deceived either into that belief or into
the belief that there is some connection between the plaintiff and defendant which, in fact, does
not exist."

Under Act No. 666,50 the first trademark law, infringement was limited to confusion of goods only, when
the infringing mark is used on "goods of a similar kind."51 Thus, no relief was afforded to the party whose
registered mark or its colorable imitation is used on different although related goods. To remedy this
situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of
RA 166 deleted the requirement in question and expanded its scope to include such use of the mark or its
colorable imitation that is likely to result in confusion on "the source or origin of such goods or services,
or identity of such business."52 Thus, while there is confusion of goods when the products are competing,
confusion of business exists when the products are non-competing but related enough to produce
confusion of affiliation.53

On Whether Confusion of Goods and

Confusion of Business are Applicable

Petitioners claim that respondents' use of the "Big Mak" mark on respondents' hamburgers results in
confusion of goods, particularly with respect to petitioners' hamburgers labeled "Big Mac." Thus,
petitioners alleged in their complaint:

1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of
plaintiffs in the McDonald's Marks, particularly the mark "B[ig] M[ac]". Defendants'
unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into
believing that the products and services offered by defendant Big Mak Burger, and the business it
is engaged in, are approved and sponsored by, or affiliated with, plaintiffs.54 (Emphasis supplied)

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Since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that
petitioners' "Big Mac" mark is used, trademark infringement through confusion of goods is a proper issue
in this case.

Petitioners also claim that respondents' use of the "Big Mak" mark in the sale of hamburgers, the same
business that petitioners are engaged in, results in confusion of business. Petitioners alleged in their
complaint:

1.10. For some period of time, and without the consent of plaintiff McDonald's nor its
licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs' exclusive right to
use and/or appropriate the McDonald's marks, defendant Big Mak Burger acting through
individual defendants, has been operating "Big Mak Burger", a fast food restaurant business
dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food
products, and has caused to be printed on the wrapper of defendant's food products and
incorporated in its signages the name "Big Mak Burger", which is confusingly similar to and/or is
a colorable imitation of the plaintiff McDonald's mark "B[ig] M[ac]", xxx. Defendant Big Mak
Burger has thus unjustly created the impression that its business is approved and sponsored
by, or affiliated with, plaintiffs. xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and
infringe upon the property rights of plaintiffs McDonald's and McGeorge as the real owner and
rightful proprietor, and the licensee/franchisee, respectively, of the McDonald's marks, and which
are likely to have caused confusion or deceived the public as to the true source, sponsorship
or affiliation of defendants' food products and restaurant business, plaintiffs have suffered
and continue to suffer actual damages in the form of injury to their business reputation and
goodwill, and of the dilution of the distinctive quality of the McDonald's marks, in particular, the
mark "B[ig] M[ac]".55 (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same food product that
petitioners sell using the "Big Mac" mark. Thus, trademark infringement through confusion of business is
also a proper issue in this case.

Respondents assert that their "Big Mak" hamburgers cater mainly to the low-income group while
petitioners' "Big Mac" hamburgers cater to the middle and upper income groups. Even if this is true, the
likelihood of confusion of business remains, since the low-income group might be led to believe that the
"Big Mak" hamburgers are the low-end hamburgers marketed by petitioners. After all, petitioners have
the exclusive right to use the "Big Mac" mark. On the other hand, respondents would benefit by
associating their low-end hamburgers, through the use of the "Big Mak" mark, with petitioners' high-end
"Big Mac" hamburgers, leading to likelihood of confusion in the identity of business.

Respondents further claim that petitioners use the "Big Mac" mark only on petitioners' double-decker
hamburgers, while respondents use the "Big Mak" mark on hamburgers and other products like siopao,
noodles and pizza. Respondents also point out that petitioners sell their Big Mac double-deckers in a
styrofoam box with the "McDonald's" logo and trademark in red, block letters at a price more expensive
than the hamburgers of respondents. In contrast, respondents sell their Big Mak hamburgers in plastic
wrappers and plastic bags. Respondents further point out that petitioners' restaurants are air-conditioned
buildings with drive-thru service, compared to respondents' mobile vans.

These and other factors respondents cite cannot negate the undisputed fact that respondents use their "Big
Mak" mark on hamburgers, the same food product that petitioners' sell with the use of their registered
mark "Big Mac." Whether a hamburger is single, double or triple-decker, and whether wrapped in plastic
or styrofoam, it remains the same hamburger food product. Even respondents' use of the "Big Mak" mark
on non-hamburger food products cannot excuse their infringement of petitioners' registered mark,
otherwise registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments
of the market, and at different price levels depending on variations of the products for specific segments
of the market. The Court has recognized that the registered trademark owner enjoys protection in product
and market areas that are the normal potential expansion of his business. Thus, the Court has declared:

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 Modern law recognizes that the protection to which the owner of a trademark is entitled is not
limited to guarding his goods or business from actual market competition with identical or similar
products of the parties, but extends to all cases in which the use by a junior appropriator of a
trade-mark or trade-name is likely to lead to a confusion of source, as where prospective
purchasers would be misled into thinking that the complaining party has extended his business
into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the
activities of the infringer; or when it forestalls the normal potential expansion of his business (v.
148 ALR, 77, 84; 52 Am. Jur. 576, 577).56 (Emphasis supplied)

On Whether Respondents' Use of the "Big Mak"

Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the
holistic test.57 The dominancy test focuses on the similarity of the prevalent features of the competing
trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the
entirety of the marks as applied to the products, including the labels and packaging,
in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use
of respondents' "Big Mak" mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals
ruled that "it is not sufficient that a similarity exists in both name(s), but that more importantly,
the overall presentation, or in their essential, substantive and distinctive parts is such as would likely
MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article." The holistic
test considers the two marks in their entirety, as they appear on the goods with their labels and packaging.
It is not enough to consider their words and compare the spelling and pronunciation of the words.58

Respondents now vigorously argue that the Court of Appeals' application of the holistic test to this case is
correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test
considers the dominant features in the competing marks in determining whether they are confusingly
similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the
product arising from the adoption of the dominant features of the registered mark,
disregarding minor differences.59 Courts will consider more the aural and visual impressions created by
the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market
segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,60 the Court ruled:

xxx It has been consistently held that the question of infringement of a trademark is to
be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not
conclusive. If the competing trademark contains the main or essential or dominant features
of another, and confusion and deception is likely to result, infringement takes place.
Duplication or imitation is not necessary; nor is it necessary that the infringing label should
suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489,
495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases
of infringement of trademarks is whether the use of the marks involved would be likely to cause
confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber
Corporation vs. Honover Rubber Co., 107 F. 2d 588; xxx) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 Phil. Nut Industry, Inc. v.
Standard Brands Inc.,62 Converse Rubber Corporation v. Universal Rubber Products, Inc.,63 and Asia
Brewery, Inc. v. Court of Appeals.64 In the 2001 case of Societe Des Produits Nestlé, S.A. v. Court of
Appeals,65 the Court explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on
trademarks and unfair competition that confusing similarity is to be determined on the basis
of visual, aural, connotative comparisons and overall impressions engendered by the marks in
controversy as they are encountered in the realities of the marketplace. (Emphasis supplied)

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The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property
Code which defines infringement as the "colorable imitation of a registered mark xxx or a dominant
feature thereof."

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in
likelihood of confusion. First, "Big Mak" sounds exactly the same as "Big Mac." Second, the first word in
"Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in "Mak" are the
same as the first two letters in "Mac." Fourth, the last letter in "Mak" while a "k" sounds the same as "c"
when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in spelling, thus
"Caloocan" is spelled "Kalookan."

In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and
the second word of both marks also phonetically the same. Visually, the two marks have both two words
and six letters, with the first word of both marks having the same letters and the second word having the
same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are
the same.

Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the features
of "Big Mac." Applied to the same food product of hamburgers, the two marks will likely result in
confusion in the public mind.

The Court has taken into account the aural effects of the words and letters contained in the marks
in determining the issue of confusing similarity. Thus, in Marvex Commercial Co., Inc. v. Petra Hawpia
& Co., et al.,66 the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled from
Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that
"SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop";
"Jantzen" and "Jass-Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite";
"Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and
"Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-Mark
Law and Practice", pp. 419-421, cities, as coming within the purview of the idem sonans rule,
"Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-Up" and "Lemon-
Up". In Co Tiong vs. Director of Patents, this Court unequivocally said that "Celdura" and
"Cordura" are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67
Phil. 795 that the name "Lusolin" is an infringement of the trademark "Sapolin", as the sound of
the two names is almost the same. (Emphasis supplied)

Certainly, "Big Mac" and "Big Mak" for hamburgers create even greater confusion, not only aurally but
also visually.

Indeed, a person cannot distinguish "Big Mac" from "Big Mak" by their sound. When one hears a "Big
Mac" or "Big Mak" hamburger advertisement over the radio, one would not know whether the "Mac" or
"Mak" ends with a "c" or a "k."

Petitioners' aggressive promotion of the "Big Mac" mark, as borne by their advertisement expenses, has
built goodwill and reputation for such mark making it one of the easily recognizable marks in the market
today. This increases the likelihood that consumers will mistakenly associate petitioners' hamburgers and
business with those of respondents'.

Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their
hamburger sandwiches indicates their intent to imitate petitioners' "Big Mac" mark. Contrary to the Court
of Appeals' finding, respondents' claim that their "Big Mak" mark was inspired by the first names of
respondent Dy's mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative
choice for a corporate name by using the names of his parents, especially since he was allegedly
driven by sentimental reasons. For one, he could have put his father's name ahead of his mother's,
as is usually done in this patriarchal society, and derived letters from said names in that order. Or,
he could have taken an equal number of letters (i.e., two) from each name, as is the more usual
thing done. Surely, the more plausible reason behind Respondents' choice of the word "M[ak]",

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 especially when taken in conjunction with the word "B[ig]", was their intent to take advantage of
Petitioners' xxx "B[ig] M[ac]" trademark, with their alleged sentiment-focused "explanation"
merely thought of as a convenient, albeit unavailing, excuse or defense for such an unfair choice
of name.67

Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was
fortuitous,68 the inescapable conclusion is that respondents adopted the "Big Mak" mark to "ride on the
coattails" of the more established "Big Mac" mark.69 This saves respondents much of the expense in
advertising to create market recognition of their mark and hamburgers.70

Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners' claim of
trademark infringement.

On the Lack of Proof of

Actual Confusion

Petitioners' failure to present proof of actual confusion does not negate their claim of trademark
infringement. As noted in American Wire & Cable Co. v. Director of Patents,71 Section 22 requires the
less stringent standard of "likelihood of confusion" only. While proof of actual confusion is the best
evidence of infringement, its absence is inconsequential.72

On the Issue of Unfair Competition

Section 29 ("Section 29")73 of RA 166 defines unfair competition, thus:

xxxx

Any person who will employ deception or any other means contrary to good faith by which
he shall pass off the goods manufactured by him or in which he deals, or his business, or services
for those of the one having established such goodwill, or who shall commit any acts calculated to
produce said result, shall be guilty of unfair competition, and shall be subject to an
action therefor.

In particular, and without in any way limiting the scope of unfair competition, the
following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of goods of
another manufacturer or dealer, either as to the goods themselves or in the wrapping of the
packages in which they are contained, or the devices or words thereon, or in any feature of their
appearance, which would be likely to influence purchasers to believe that the goods offered are
those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise
clothes the goods with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in
selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to
induce the false belief that such person is offering the services of another who has identified such
services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or
who shall commit any other act contrary to good faith of a nature calculated to discredit the
goods, business or services of another. (Emphasis supplied)

The essential elements of an action for unfair competition are (1) confusing similarity in the general
appearance of the goods, and (2) intent to deceive the public and defraud a competitor.74 The confusing
similarity may or may not result from similarity in the marks, but may result from other external factors
in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the
similarity of the appearance of the goods as offered for sale to the public.75 Actual fraudulent intent need
not be shown.76

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Unfair competition is broader than trademark infringement and includes passing off goods with or without
trademark infringement. Trademark infringement is a form of unfair competition.77 Trademark
infringement constitutes unfair competition when there is not merely likelihood of confusion, but
also actual or probable deception on the public because of the general appearance of the goods. There can
be trademark infringement without unfair competition as when the infringer discloses on the labels
containing the mark that he manufactures the goods, thus preventing the public from being deceived that
the goods originate from the trademark owner.78

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off
their hamburgers as "Big Mac" hamburgers. Petitioners add that respondents' fraudulent intent can be
inferred from the similarity of the marks in question.79

Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors.80 Thus, the defendant gives his goods the general
appearance of the goods of his competitor with the intention of deceiving the public that the goods are
those of his competitor.

The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark "B[ig] M[ac]" is used by plaintiff McDonald's to identify its double decker hamburger
sandwich. The packaging material is a styrofoam box with the McDonald's logo and trademark in
red with block capital letters printed on it. All letters of the "B[ig] M[ac]" mark are also in red
and block capital letters. On the other hand, defendants' "B[ig] M[ak]" script print is in orange
with only the letter "B" and "M" being capitalized and the packaging material is plastic wrapper.
xxxx Further, plaintiffs' logo and mascot are the umbrella "M" and "Ronald
McDonald's", respectively, compared to the mascot of defendant Corporation which is a chubby
boy called "Macky" displayed or printed between the words "Big" and "Mak."81 (Emphasis
supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the general
appearance of petitioners' "Big Mac" hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in the words that give
respondents' "Big Mak" hamburgers the general appearance of petitioners' "Big Mac" hamburgers.
Section 29(a) expressly provides that the similarity in the general appearance of the goods may be in the
"devices or words" used on the wrappings. Respondents have applied on their plastic wrappers and bags
almost the same words that petitioners use on their styrofoam box. What attracts the attention of the
buying public are the words "Big Mak" which are almost the same, aurally and visually, as the words
"Big Mac." The dissimilarities in the material and other devices are insignificant compared to the glaring
similarity in the words used in the wrappings.

Section 29(a) also provides that the defendant gives "his goods the general appearance of goods of
another manufacturer." Respondents' goods are hamburgers which are also the goods of petitioners. If
respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the "Big Mak" mark
would not give their goods the general appearance of petitioners' "Big Mac" hamburgers. In such case,
there is only trademark infringement but no unfair competition. However, since respondents chose to
apply the "Big Mak" mark on hamburgers, just like petitioner's use of the "Big Mac" mark on
hamburgers, respondents have obviously clothed their goods with the general appearance of petitioners'
goods.

Moreover, there is no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak
Burger, Inc." Respondents introduced during the trial plastic wrappers and bags with the words "L.C. Big
Mak Burger, Inc." to inform the public of the name of the seller of the hamburgers. However, petitioners
introduced during the injunctive hearings plastic wrappers and bags with the "Big Mak" mark without the
name "L.C. Big Mak Burger, Inc." Respondents' belated presentation of plastic wrappers and bags bearing
the name of "L.C. Big Mak Burger, Inc." as the seller of the hamburgers is an after-thought designed to
exculpate them from their unfair business conduct. As earlier stated, we cannot consider respondents'
evidence since petitioners' complaint was based on facts existing before and during the injunctive
hearings.

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Thus, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big
Mak Burger, Inc." and not those of petitioners who have the exclusive right to the "Big Mac" mark. This
clearly shows respondents' intent to deceive the public. Had respondents' placed a notice on their plastic
wrappers and bags that the hamburgers are sold by "L.C. Big Mak Burger, Inc.", then they could validly
claim that they did not intend to deceive the public. In such case, there is only trademark infringement but
no unfair competition.82 Respondents, however, did not give such notice. We hold that as found by the
RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 2383 ("Section 23") in relation to Section 29 of RA 166, a plaintiff who successfully
maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary
reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its
Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of
petitioners. The injunctive writ is indispensable to prevent further acts of infringement by respondent
corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of respondent
corporation's gross sales for three (1988-1989 and 1991) of the six years (1984-1990) respondents have
used the "Big Mak" mark.84

The RTC also did not err in awarding exemplary damages by way of correction for the public good85 in
view of the finding of unfair competition where intent to deceive the public is essential. The award of
attorney's fees and expenses of litigation is also in order.86

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November
1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision dated
5 September 1994 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak
Burger, Inc. liable for trademark infringement and unfair competition.

SO ORDERED.

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