July 22, 2015

The Japanese company, Kawasaki, and its Philippine subsidiaries, filed suit to stop a local company (Eastworld) from manufacturing and selling Sapphire 125 model motorcycles. Kawasaki complained that this motorcycle copies the design elements of its own motorcycle model Fury 125.

Kawasaki alleged that the design elements of its Fury 125 motorcycle are protected by a design patent which was issued a year prior to the launching of Sapphire 125. Kawasaki also claimed that its Fury 125 was launched one year before Sapphire 125 began selling in the local market.

The suit was lodged as an administrative action with the Bureau of Legal Affairs, and relied on two causes of action, patent infringement and unfair competition. The complaint asked for preliminary injunction.

The Bureau refused to issue a preliminary injunction and ruled against Kawasaki’s charges of infringement and unfair competition. The Bureau pointed out that infringement is committed only when one uses, makes, sells or imports patented design without the consent of the patentee. In this case, Eastworld did not need to get the consent of Kawasaki because its Sapphire 125 motorcycle used design elements that were covered by its own design patent.

On defense, Eastworld presented a design patent issued in its name which covered design elements which Kawasaki claimed to have been copied from the design elements covered by Kawasaki’s earlier-issued design patents.

Kawasaki argued that Eastworld’s patent copied their patented designs, pointing particularly to the timing of Eastworld’s patent filing. Kawasaki claimed that Eastworld’s application was filed only after Kawasaki has already launched its Fury 125 motorcycle.

The Bureau was not persuaded, however, and reminded Kawasaki that it neither filed an adverse information nor petitioned to cancel Eastworld’s design patent, something which could have been done if it wanted to question the validity of the design patent.

According to the Bureau, the invalidity of the patent under Section 81 of the IP Code can only be raised as a defense in an infringement action filed in court. It explained that even assuming the Bureau could apply Section 81 on account of Section 10.2(b) which discusses invalidation as one of the reliefs available in an administrative action, invalidation will still be denied in this case. The Bureau’s position is that invalidation can only be an accessory relief to a finding of infringement. Since Eastworld is not guilty of infringement, invalidation must be denied according to the Bureau.

On Kawasaki’s claim that Eastworld was in bad faith and was passing off its motorcycles as those of Kawaski’s, the Bureau disagreed. Citing the Supreme Court case of Kenneth Roy Savage/K Angeline Export Trading vs. Judge Aproniano Taypin [G.R. No. 134217, May 11, 2000] the Bureau ruled that unfair competition does not apply in a patent infringement case.

The Bureau’s approach in this case is confusing partly because it appears to lack consistency. After dismissing Kawasaki’s claims that Eastworld’s patent copied Kawasaki’s patented designs on the ground that Kawasaki did not file an adverse information or petitioned to cancel the patent, the Bureau nevertheless proceeded to resolve the issue of the validity of Eastworld’s patent.

Had the Bureau simply let Eastworld off the hook by being technical in its approach, namely, by denying invalidation because defendant did not infringe and did not set up invalidity as a defense, the conclusion would have been consistent overall.

The logical takeaway would have been that if the first patentee tries to stop the second patentee from making the product through an infringement action, the invalidation of the second patent will not be granted because as a defendant he must first raise invalidity as a defense. Such defense, however, will likely not be raised because the second patentee can rely on its own patent to deflect the charge of infringement.

Following the logic in the Bureau’s reasoning, the conclusion seems to be that infringement will the wrong cause of action if the suspected infringer holds a design patent in its name.

In this case, any hope that was possibly entertained by Kawasaki for a second shot at invalidating Eastworld’s patent through a cancellation petition, has been doused when the Bureau proceeded to rule on whether Eastworld’s patended designs were substantially similar to those of Kawasaki’s.

The Bureau primarily looked towards the test for design patent infringement laid down in the United States case of Gorham Company v. White, which states the following:

“…if, in the eye of an ordinary observer, giving such attention as a person usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.”

The Bureau also relied on Rule 302 of the Rules and Regulations on Utility Models and Industrial Designs, which provides that “An industrial design shall not be considered new if it differs from prior designs only in minor respects that can be mistaken as such prior designs by an ordinary observer.”

In this regard, the Bureau found that to the ordinary observer, the overall design of Eastworld’s Sapphire 125 is not identical or substantially similar to Kawasaki’s motorcycle design. While the Bureau observed that the locations of the muffler, signal light and daylight lamp may be similar, it found that these aspects are “generic” to most motorcycle designs. Furthermore, the Bureau noted that the ornamental designs of the gear indicator, speed meter design, location of fuel cock, headlight, brake disk, are not the same in the two designs. In fact, the Bureau emphasized that the engine stop switch is absent in Eastworld’s design, but present in Kawasaki’s design. Moreover, the design of the side cover of Eastworld’s motorcycle bears the mark “Motorstar”, which distinguishes it instantly from Kawasaki’s motorcycle.

In addition to comparing the designs, the Bureau also noted that the products in this case are motorcycles, which consumers meticulously assess and compare with each other, while keeping in mind that it has features or parts which although it appears to be similar, are necessarily present because they serve or are necessitated by a technical function. As such, taking into consideration the contour, shape and holistic design, the Bureau found that the designs were not substantially similar.

This case will likely serve as a reminder for owners to be vigilant in watching published design patent applications, and to timely file an adverse information. Under the amended rules, an interested party has thirty days only, from publication, in which to file an adverse information. This period has been substantially shortened from the two-month window that was previously observed before the amendment.

At a public hearing conducted by the Bureau of Patents late last year, it was announced that the goal is to approve a design patent application five days from the date of filing. As we see consistent implementation of this policy, stakeholders will feel more pressure to act quickly to prevent copycats from obtaining their patents, and to file cancellation petitions without delay.

The shortened period for adverse information has created greater burden on companies who are watching design copycats.

A practice tip: a lawyer should not advise the filing of infringement when the defendant has secured a patent in its name. According to this decision, the recommended approach is to first file an adverse information or a petition to cancel the defendant’s patent before considering filing of an infringement action. And unfair competition under Section 168? Not when patent infringement is an issue.