8. Unfair Competition

UNFAIR COMPETITION

A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. (Sec. 168.1, IP Code)¹

Any person who shall 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. (Sec. 168.2, IP Code)²

Any conduct the end and probable effect of which is to deceive the public or pass off the goods or business of a person as that for another constitutes actionable unfair competition. (Alhambra Cigar and Cigarette Manufacturing Co v. Mojica, G.R. No. L-8937, 21 March 1914)³

Essentially, what the law punishes is the act of giving one’s goods the general appearance of the goods of another, which would likely mislead the buyer into believing that such goods belong to the latter. (Espiritu v. Petron Corporation and Carmen J. Doloiras, G.R. No. 170891, 24 November 2009)⁴

The “true test” of unfair competition is whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to recover can exist. (Superior Commercial Enterprises, Inc. v. Kunnan Enterprises Ltd. and Sports Concept & Distributor, Inc., G.R. No. 169974, 20 April 2010)⁵

Updated: However, actual fraudulent intent need not be proven directly as the intent to deceive may be inferred from the similarity of the appearance of goods offered for sale (Asia Pacific Resources International Holdings, Ltd. v. Paperone, Inc., G.R. No. 96161, 2 December 2019). Verify the reported G.R. No. 213365 and the decision date before correcting the citation.

Trademark Infringement vs. Unfair Competition

The law on unfair competition is broader and more inclusive than the law on trademark infringement. Trademark infringement is more limited, but it recognizes a more exclusive right derived from the trademark adoption and registration by the person whose goods or business is first associated with it. The law on trademarks is a specialized subject distinct from the law on unfair competition, although the two subjects are entwined with each other and are dealt with together in the IP Code⁶.

Hence, even if one fails to establish his exclusive property right to a trademark, he may still obtain relief on the ground of his competitor's unfairness or fraud. Conduct constitutes unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. It is not necessary that any particular means should be used to this end. (Mighty Corporation and La Campana Fabrica De Tabaco, Inc. v. E. & J. Gallo Winery and the Andresons Group, Inc., G.R. No. 154342, 14 July 2004)⁷