SHANGRI-LA is paradise lost for hotel chain

In Developers Group of Companies v Shangri-La International Hotel Management Ltd (CA GR CV 53351), the Court of Appeals for the Philippines has ruled that the plaintiff has superior rights to the service mark SHANGRI-LA and an 'S' logo.

Shangri-La International Hotel Management is part of the multinational Kuok Group, which has been using the service mark SHANGRI-LA and an 'S' logo since 1962. The mark and logo have been used for hotels outside the Philippines since 1975. However, Shangri-la International first used the mark and logo, under licence from the Kuok Group, for hotels in the Philippines in 1987. Developers Group of Companies registered a SHANGRI-LA mark and 'S' logo with the Philippines Bureau of Patents Trademarks and Technology Transfer (BPTTT) (now known as the Intellectual Property Office) in 1983.

Shangri-La International filed an action with the BPTTT requesting (i) the cancellation of Developers Group's SHANGRI-LA and 'S' logo registrations, and (ii) registration of its own marks. Developers Group opposed the application for registration and then filed a trademark infringement action against Shangri-La International. The proceedings in the cancellation and opposition actions were suspended upon the filing of the infringement lawsuit with the Quezon City Regional Trial Court.

The court ruled in favour of Developers Group and Shangri-La International appealed.

The Court of Appeals upheld the lower court's decision. It determined that Developers Group has superior rights in the mark and logo by virtue of its 1983 registration. It noted that the right to exclusive use of a trademark grows out of its actual use in commerce and not through mere adoption. The court highlighted that "adoption is not equivalent to use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use". Shangri-La International had merely adopted the SHANGRI-LA mark and 'S' logo, said the court, as it was using them under licence. The court reasoned that this was not equivalent to use of the mark and logo in the Philippines. It also noted that the Kuok Group was not a party to any of the proceedings (including the cancellation and opposition actions) and that even though it had used the mark and logo since 1962, there had been no actual use in the Philippines until 1987.

It rejected the claim that the Kuok Group's SHANGRI-LA mark and 'S' logo are well-known marks meriting protection under the Paris Convention for the Protection of Industrial Property. It ruled that national laws, such as the Trademark Law of the Philippines, have priority over international agreements. The court further stated that the provisions of the Paris Convention protecting internationally well-known marks regardless of whether the foreign corporation is registered, licensed or doing business in the Philippines cannot be enforced as it is contrary to Philippine trademark law that only protects trademarks that are in actual use in commerce in the Philippines.

Accordingly, the Court of Appeals affirmed the lower court's order enjoining Shangri-La International from using its SHANGRI-LA mark and 'S' logo for hotel and related services. It also awarded Developers Group Ps2,000,000 in actual and compensatory damages.

The decision of the Court of Appeals in this case appears to unduly expand the protection afforded to registrants of a trademark beyond the confines of the registration. Here, Developers Group's registration covers only restaurant services, yet Shangri-La International was enjoined from using the service mark SHANGRI-LA and the 'S' logo in respect of hotel and related services.

The case is currently awaiting review by the Supreme Court.

Mary Rose Tan, SyCip Salazar Hernandez & Gatmaitan, Manila