Trademark Application Tainted in Bad Faith

The Supreme Court has rejected a trademark application for the Greek restaurant "Cyma" filed by Manuel T. Zulueta. The Court ruled that Mr Zulueta's application was done in bad faith, as he was aware of the prior use of the trademark by Cyma Partnership, the entity behind the restaurant. Zulueta's knowledge of the prior use, creation, or registration of the trademark by Cyma Partnership prompted the Court to deny his trademark application, emphasizing that registrations resulting from applications tainted with bad faith or fraud are void ab initio.

Mr. Zulueta asserted that he extended an invitation to Raoul Roberto P. Goco to collaborate on crafting the menu for the inaugural Cyma restaurant in Boracay, which launched on December 28, 2005. To solidify their collaboration, Mr. Zulueta and Mr. Goco established a partnership known as the "Cyma Greek Taverna Company", formalizing the arrangements by registering it as a partnership with the Securities and Exchange Commission (SEC) in 2006. Subsequently, Mr. Zulueta and Mr. Goco, in pursuit of expanding the Cyma brand, made the joint decision to establish a Cyma branch in EDSA Shangri-la Plaza Mall. To facilitate this expansion, they founded and duly registered the "Cyma Greek Taverna Shangri-La Corporation" with the SEC.

On September 25, 2006, Mr. Zulueta filed, in his own name, Trademark Application No. 4-2006-010623 for the mark “CYMA & LOGO". Mr. Zulueta alleged that while he was abroad, Mr. Goco executed a fraudulent Deed of Assignment where Mr. Zulueta assigned all his interest in CYMA Partnership to Mr. Goco's sister. 

On March 13, 2007, Cyma Partnership filed its own trademark application for the mark “CYMA GREEK TAVERNA AND LOGO” with Trademark Application No. 4-2007-002633. Cyma Partnership filed a Verified Notice of Opposition claiming that Mr. Zulueta falsely represented himself to have been the originator of the trademark when the truth was that it had been copied from Cyma Partnership’s trademark which Mr. Goco created while he was vacationing in Greece. CYMA Partnerships application was granted by the Intellectual Property Office, while Mr. Zulueta's application was denied. 

Mr. Zulueta's petition for review on certiorari challenging the decision of the Intellectual Property Office was denied by the Supreme Court. The court highlighted that Cyma Partnership, the entity behind the restaurant, had presented substantial evidence to prove ownership over the trademark and was the first to have bona fide used the Cyma mark, predating Zulueta's trademark application.

The Court emphasized the importance of genuine use and good faith in trademark applications, stressing that trademarks play a crucial role in preserving the goodwill and reputation of a business. It clarified that ownership of a mark is generally acquired through registrations made in accordance with the Intellectual Property Code of the Philippines (IPC). The first-to-file rule, which generally grants priority to the first application filed, was acknowledged by the court but with the caveat that applications tainted with bad faith or fraud are inherently unregistrable and do not confer any priority rights. The Court ruled in this wise: 

"Where in the course of a trademark application, it is found that: (i) the entity has prior use, creation, and/or registration of a trademark; and (ii) the applicant has knowledge of the said prior use, creation, and/or registration - the trademark application is unregistrable due to the attendance of bad faith on the part of the applicant, and the same should be denied."

In applying this principle, the Court found that Mr. Zulueta's trademark application was done in bad faith, as he was aware of the prior use of the trademark by Cyma Partnership. Even if Mr.  Zulueta claimed to have conceived the mark, the Court noted that it was intended for the exclusive use of the partnership and its sister company. Despite being the first to file a trademark application, Mr. Zulueta's knowledge of the prior use by Cyma Partnership meant that his application was filed in bad faith, and therefore, he did not obtain any priority rights.