McDonald's swallows up BIG MAK infringer - at last

In McDonald's Corporation v LC Big Mak Burger Inc (Case GR 143993, August 18 2004), the Philippine Supreme Court has ruled that (i) the mark BIG MAK for hamburgers infringes McDonald's Corporation's BIG MAC mark, and (ii) the use of packaging similar to that of McDonald's constitutes unfair competition.

After discovering that LC Big Mak Burger Inc was using the mark BIG MAK for hamburgers, McDonald's demanded that LC Big Mak desist from using the mark, which it claimed was similar to its earlier BIG MAC registration for the same goods. LC Big Mak did not reply and McDonald's filed suit with the Regional Trial Court of Makati City for trademark infringement as well as unfair competition on the basis that LC Big Mak also used wrappers and bags similar to those of McDonald's.

The court upheld McDonald's claims, finding that the use of BIG MAK on the same goods as McDonald's was likely to confuse or deceive the public into thinking that BIG MAK hamburgers were produced by McDonald's, or a subsidiary or affiliated business. The court held that LC Big Mak clearly chose the mark BIG MAK to take advantage of McDonald's reputation, popularity and established goodwill. Accordingly, the court enjoined LC Big Mak from using the BIG MAK mark.

The Court of Appeals reversed. To determine whether the marks were confusingly similar, the court applied the holistic test, which consists of considering the dominant features of the marks and disregarding minor differences. Comparing the overall presentation of the marks, the court found that there were dissimilarities between the presentation and the manner the marks were used on the products, and thus held that no colourable imitation of the mark BIG MAC existed. It further held that there was not enough evidence to support a passing off claim. McDonald's appealed.

The Supreme Court upheld the appeal. It reasoned that the marks were confusing in respect of the goods (product confusion) and the business (source or origin confusion), even though BIG MAK hamburgers were aimed at low-income customers, while customers for McDonald's products were found among the middle and upper income groups. The court recognized that "the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of [its] business". Further, the court held that the Court of Appeals had erroneously applied the holistic test. Prevailing jurisprudence rejected the holistic test and instead adopted the test of dominancy, which had been codified in Section 155(1) of the Intellectual Property Code. That provision defines 'infringement' as the "colourable imitation of a registered mark or a dominant feature thereof".

Applying the dominancy test, the court found that the marks were aurally identical. It also held that they were visually similar as only the last letter of the second word differed. However, the difference disappeared when the marks were transliterated into the Filipino language. Accordingly, the court concluded that the marks were confusingly similar.

The court also found that LC Big Mak's use of wrappers and bags similar to those of McDonald's without using the LC Big Mak name on them amounted to unfair competition. Expounding on the difference between unfair competition and trademark infringement, the court held that:

"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. Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception of the public because of the general appearance of the goods. There can be trademark infringement without unfair competition … when the infringer discloses [its name] ... thus preventing the public from being deceived."

Llewellyn L Llanillo and Mary Eloise L Uychiat, SyCip Salazar Hernandez & Gatmaitan, Manila