The Facts

Petitioner McDonald's Corporation ("McDonald's") is a US corporation that operates a

global chain of fast-food restaurants, with Petitioner McGeorge Food Industries
("McGeorge"), as the Philippine franchisee.

McDonald's owns the "Big Mac" mark for its "double-decker hamburger sandwich." with the
US Trademark Registry on 16 October 1979.

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 IPO). On 18 July 1985, the PBPTT allowed registration of the
"Big Mac."

Respondent L.C. Big Mak Burger, Inc. is a domestic corporation which operates fast-food
outlets and snack vans in Metro Manila and nearby provinces. Respondent corporation's
menu includes hamburger sandwiches and other food items.

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of
the "Big Mak" mark for its hamburger sandwiches, which was opposed by McDonald's.
McDonald's also informed LC Big Mak chairman 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, petitioners sued L.C. Big Mak Burger, Inc. and its directors before
Makati RTC Branch 137 ("RTC"), for trademark infringement and unfair competition.

RTC rendered a Decision finding respondent corporation liable for trademark infringement
and unfair competition. CA reversed RTC's decision on appeal.

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 MCDONALDS 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 Courts 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 corporations 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 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 Appeals[27] 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 plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use ofthe 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 MacMark

and McDonalds Ownership of such Mark

A mark is valid if it is distinctive and thus not barred from

registration under Section 4[36] of RA 166 (Section 4). However, once registered, not only

the marks validity but also the registrants ownership of the mark is prima facie presumed.[37]

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 beer[41] 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 McDonalds exclusive

ownership of the Big Mac mark. Although Topacio and the Isaiyas Group registered the Big

Mac mark ahead of McDonalds, Topacio, as petitioners disclosed, had already assigned his

rights to McDonalds. 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 registrants

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 defendants 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 McDonalds 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)

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
McDonalds nor its licensee/franchisee, plaintiff McGeorge, and in clear
violation of plaintiffs exclusive right to use and/or appropriate the McDonalds
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 defendants 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
McDonalds 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 McDonalds
and McGeorge as the real owner and rightful proprietor, and the
licensee/franchisee, respectively, of the McDonalds 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 McDonalds
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 McDonalds 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:

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 determiningwhether 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 Nestl, 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)
 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 Dys 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 fathers name ahead of his mothers, 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], 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]

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 McDonalds to identify its

double decker hamburger sandwich. The packaging material is a styrofoam
box with the McDonalds 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 McDonalds, 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 petitioners 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.

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 23[83] (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 corporations 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 good[85] in view of the finding of unfair competition where intent to deceive the

public is essential. The award of attorneys 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.

ANTONIO T. CARPIO

Associate Justice