What Are Criminal Liabilities for Substituting Trademarks?

Introduction

Replacing an original product label with a fake trademark is a form of product counterfeiting that may mislead buyers about the product’s source, quality, or authenticity. Philippine law treats these acts as serious intellectual-property offenses when they involve the unauthorized use of a registered mark or the passing off of goods as those of another business.

The offense was historically punished under Article 188 of the Revised Penal Code, as amended by Republic Act No. 172. However, Article 188 has been repealed by the Intellectual Property Code of the Philippines. Current prosecutions involving counterfeit trademarks are generally based on the applicable provisions of Republic Act No. 8293, particularly Sections 155, 168, and 170.

What Did Article 188 of the Revised Penal Code Prohibit?

Article 188 originally punished the substitution or alteration of the trademark or trade name of another manufacturer or dealer on an article of commerce. It covered the sale or offering for sale of goods bearing a fraudulently used mark and the reproduction of a trademark or trade name for another person’s fraudulent use.

Republic Act No. 172 expanded Article 188 by expressly including service marks. It punished a person who substituted another’s trademark, trade name, or service mark, or a colorable imitation thereof, in connection with the sale or advertising of goods or services.

The provision also covered a person who knowingly printed, reproduced, or otherwise copied another’s trademark, trade name, or service mark to enable its fraudulent use on goods or in the advertising of services. The law defined a trademark or trade name as a word, name, symbol, emblem, sign, device, or combination used to distinguish one business from another.

These provisions reflected the State’s policy against deceptive commercial conduct. They were applied in cases involving goods packaged or marked in a manner likely to make consumers believe that counterfeit products were genuine products of the trademark owner.

Is Article 188 Still the Current Basis for Prosecution?

No. Article 188, together with Article 189 of the Revised Penal Code, was repealed by Section 239.1 of Republic Act No. 8293, also known as the Intellectual Property Code of the Philippines.

The current statutory provisions are Sections 155, 168, and 170 of Republic Act No. 8293. Although older cases may refer to Article 188 or Article 189, conduct occurring after the effectivity of the Intellectual Property Code must generally be assessed under the applicable provisions of that Code.

The Supreme Court recognized this statutory transition in Samson v. Daway, G.R. No. 160054-55 (2004), which discussed the repeal of inconsistent portions of Republic Act No. 166 and Articles 188 and 189 of the Revised Penal Code, while also explaining the continuing jurisdiction of the Regional Trial Court over intellectual-property cases under the applicable jurisdictional provisions.

What Current Offenses May Apply to Product Counterfeiting?

Trademark infringement

Section 155 of Republic Act No. 8293 covers the unauthorized use in commerce of a reproduction, counterfeit, copy, or colorable imitation of a registered mark, including the same container or a dominant feature of the mark.

The use must be connected with the sale, offering for sale, distribution, advertising, or other preparatory acts involving goods or services, and must be likely to cause confusion, mistake, or deception. Applying the counterfeit mark to labels, signs, prints, packages, wrappers, receptacles, or advertisements is also covered.

Infringement takes place when the prohibited act is committed. Actual sale of the goods is not always necessary where the statutory elements are otherwise present.

The elements of infringement discussed in Ong v. People of the Philippines, G.R. No. 169440 (2011), include the validity and ownership of the mark and the unauthorized use of the mark or its imitation in a manner likely to cause confusion.

Unfair competition

Section 168 of Republic Act No. 8293 protects the goodwill associated with goods, businesses, and services, whether or not a registered mark is used. It prohibits deception or other conduct contrary to good faith by which a person passes off his goods, business, or services as those of another.

Section 168.3(a) specifically covers the sale of goods bearing the general appearance of another manufacturer’s or dealer’s goods. The deception may arise from the goods themselves, their packaging, wrappers, devices, words, or any other feature of their appearance.

Unfair competition is therefore distinct from trademark infringement. Trademark infringement focuses on the unauthorized use of a registered mark. Unfair competition focuses more broadly on passing off and the deception of the purchasing public.

In Republic Gas Corporation v. Petron Corporation, G.R. No. 194062 (2013), the Supreme Court described unfair competition as passing off, or attempting to pass off, one person’s goods or business as those of another, with the probable effect of deceiving the public.

False designation of origin or false representation

Section 169.1 of Republic Act No. 8293 covers the use in commerce of a false designation of origin, false or misleading description of fact, or false or misleading representation of fact that is likely to cause confusion or deception regarding the affiliation, connection, association, origin, sponsorship, or approval of goods or services.

This provision may apply when counterfeit labeling falsely suggests that the goods were manufactured, sponsored, approved, or distributed by the legitimate trademark owner.

What Are the Criminal Penalties?

Section 170 of Republic Act No. 8293 imposes, independently of civil and administrative sanctions, imprisonment of two years to five years and a fine of ₱50,000 to ₱200,000 on a person found guilty of violating Section 155, Section 168, or Section 169.1.

The criminal penalty applies to the acts specified in those provisions. Civil actions for damages, injunction, and other remedies may proceed independently, subject to the requirements of the Intellectual Property Code and the Rules of Court.

In Samson v. Daway, the Supreme Court explained that the criminal penalties under Section 170 do not remove the possibility of civil and administrative remedies. The case also addressed the proper court for actions involving intellectual-property violations.

What Conduct May Establish Criminal Liability?

Potentially prosecutable conduct may include:

• Removing an authentic label and replacing it with a counterfeit label;
• Placing counterfeit labels, packaging, or containers on goods that are not manufactured by the trademark owner;
• Refilling genuine containers with unauthorized or inferior products;
• Selling goods whose packaging gives the impression that they came from the legitimate manufacturer;
• Printing or reproducing a registered mark for use on counterfeit goods; and
• Possessing or distributing counterfeit goods as part of a commercial operation.

In Uy, et al. v. Adriano, et al., G.R. No. 159098 (2006), the charge involved soy sauce placed in bottles bearing another company’s mark, with the alleged effect of making consumers believe that the products were genuine goods of the trademark owner.

Similarly, in Summerville General Merchandising Co. v. Court of Appeals, G.R. No. 158767 (2007), goods placed inside another company’s branded containers were treated as the subject of the offense because the packaging was intended to make the goods appear to be those of the trademark owner.

How Is Likelihood of Confusion Determined?

The question is not limited to whether the competing marks are identical. The inquiry is whether the overall impression created by the marks, packaging, or product presentation is likely to confuse an ordinary purchaser about the source or origin of the goods.

In Del Monte Corporation v. Court of Appeals, G.R. No. 78325 (1990), the Supreme Court explained that the comparison should consider the general impression created upon the ordinary purchaser, rather than a purely side-by-side comparison made by a careful expert.

The dominancy test may also be applied. Under this approach, attention is directed to the dominant visual and aural features of the competing marks and whether those features are likely to mislead consumers.

In Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073 (2009), the Court recognized that marks need not be identical for infringement to exist. Similarity in their dominant features may be sufficient if the resulting impression is likely to cause confusion or deception.

What Must the Prosecution Prove?

For a criminal prosecution based on trademark infringement, the prosecution must establish the existence and ownership of the registered mark, the accused’s unauthorized use or imitation, and the likelihood that the use would cause confusion, mistake, or deception.

For unfair competition, the prosecution must prove the accused’s conduct in giving the goods the general appearance of another’s goods, together with the legally required connection to deception, confusion, or the defrauding of another’s legitimate trade.

The prosecution must prove all elements beyond reasonable doubt. The mere fact that two products look alike does not automatically establish criminal liability. Evidence should connect the accused to the manufacture, possession, sale, distribution, labeling, refilling, or other commercial use of the counterfeit goods.

Can Corporate Officers Be Held Personally Liable?

Corporate officers and directors are not automatically criminally liable merely because they hold corporate positions. Personal liability may arise when the evidence shows that an officer directly participated in, controlled, authorized, or supervised the infringing acts.

In Republic Gas Corporation v. Petron Corporation, the Supreme Court held that corporate officers may be held liable when they had direct control or supervision over the corporation’s infringing activities. The separate juridical personality of the corporation cannot be used as a shield for personally committed criminal acts.

What Is the Significance of Search and Seizure?

Counterfeit goods, fake labels, containers, printing materials, and related equipment may become the subject of a search warrant application when probable cause exists that they are connected with an offense.

Under Century Chinese Medicine Co. v. People of the Philippines, G.R. No. 188526 (2013), the governing procedure for a search warrant in a criminal intellectual-property case is Rule 126 of the Rules of Criminal Procedure. Probable cause requires facts and circumstances supporting a reasonable belief that an offense was committed and that the objects sought are connected with it.

Not every item found in a searched establishment may be lawfully seized. In Summerville General Merchandising Co. v. Court of Appeals, the Court stressed that the seized property must be the subject of the offense, its fruits, or an instrument used or intended to be used in committing the offense.

Which Court Has Jurisdiction?

Criminal and civil actions involving violations of the Intellectual Property Code are brought before the proper court with jurisdiction under existing laws. The Supreme Court has held that jurisdiction over these actions remains with the Regional Trial Court under the applicable special jurisdictional provisions.

In Samson v. Cabanos, G.R. No. 161693 (2005), the Court ruled that the special jurisdiction over intellectual-property cases prevails over the general jurisdiction of first-level courts, even when the penalty appears to fall within the ordinary jurisdictional range of a Municipal Trial Court.

How Should Businesses Respond to Counterfeit Labels?

Trademark owners should preserve evidence showing ownership, registration, actual commercial use, and the distinctive features of the genuine products. They should also document test purchases, photographs, packaging comparisons, invoices, online listings, witness statements, and the chain of custody of seized or purchased items.

Businesses discovering suspected counterfeiting should avoid altering or destroying the suspected goods. They should coordinate with counsel and the appropriate law-enforcement or intellectual-property authorities before conducting an operation that may affect the admissibility or preservation of evidence.

Manufacturers and distributors should maintain records identifying authorized sellers, distributors, refilling facilities, and packaging suppliers. These records may help establish that the accused had no authority to use the mark or that the counterfeit goods originated from a particular source.

Typical Examples

Example 1: Replaced product label. A seller removes the label from an ordinary bottle and applies a counterfeit label bearing a registered brand. If the goods are sold or offered for sale in a manner likely to make consumers believe they are genuine, the conduct may constitute trademark infringement and unfair competition.

Example 2: Refilling genuine containers. A business refills authentic branded containers with an unauthorized product and sells them as genuine. The use of the genuine container does not necessarily make the transaction lawful; the conduct may create confusion as to the product’s source and quality.

Example 3: Counterfeit packaging without completed sale. A person reproduces a registered mark on packages intended for commercial use. Actual sale may not be necessary for infringement under Section 155 when the statutory requirements are otherwise satisfied.

Final Observations

Article 188 of the Revised Penal Code is important for understanding the historical development of Philippine rules against trademark substitution, but it is no longer the principal statutory basis for current prosecutions. The governing provisions today are Sections 155, 168, 169.1, and 170 of Republic Act No. 8293.

Product counterfeiting may expose an offender to criminal prosecution, civil liability, administrative proceedings, seizure of counterfeit goods, and other legal consequences. The decisive issues are usually the ownership and validity of the mark, the accused’s unauthorized commercial conduct, the likelihood of confusion or deception, and the sufficiency and integrity of the evidence.

Trademark owners should promptly secure documentary and physical evidence, identify the precise offense involved, and obtain advice on the appropriate criminal, civil, administrative, and enforcement remedies. Sellers and business operators should verify the source of branded products and maintain authorization and supply records to avoid liability arising from unauthorized labels, containers, or packaging.

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