For foreign companies looking to expand into Southeast Asia, the Philippines offers exciting commercial opportunities. Its growing consumer market, vibrant cities, and openness to international brands make it an attractive destination. But there is a legal twist that many companies overlook: the Philippines follows a first-to-file trademark system. Under this regime, ownership of a trademark generally belongs to the party who files the application first – even if another company has been using the mark abroad for years.

When Squatters Move In

This system has opened the door to what is commonly referred to as trademark squatting. Squatting occurs when an individual or entity registers a foreign brand locally, not to use it commercially, but to exploit its reputation or demand payment from the rightful owner. What was intended to simplify trademark administration has, in some cases, been misused to block legitimate brand owners from operating freely in the market.

Good Faith and Actual Use Protect Rights

Fortunately, Philippine trademark law does not leave honest companies defenseless. Ownership is grounded not only in registration but also in good faith and actual commercial use. The law, together with the updated rules issued in 2023, makes clear that trademark protection grants exclusive rights to use the mark and prevent confusingly similar uses, but these rights are conditional. Registrants must comply with the Declaration of Actual Use (DAU) requirement, showing that the mark is actively used in commerce. Failure to do so can result in cancellation of the registration, making the DAU a practical safeguard against squatting.

DAUs are required at specific intervals: three years from the application date, within one year of the fifth anniversary of registration or renewal, and within one year following subsequent renewals. Limited exceptions exist, such as when legal restrictions or pending disputes prevent use, but these are strictly regulated. This system ensures that trademark rights remain with businesses genuinely operating in the market rather than speculative registrants.

What to Do When Squatting Happens

Despite these safeguards, disputes can arise. If a foreign company discovers that its mark has been registered by another party in the Philippines, the law provides several remedies.

• Opposition: If the application is still pending, the rightful owner may file an opposition, citing grounds such as prior ownership, likelihood of confusion, or bad faith.
• Cancellation: If the mark has already been registered, a petition for cancellation may be filed for similar reasons or based on noncompliance with the DAU requirement.
• Infringement and unfair competition: In serious cases, administrative, civil, or even criminal actions may be pursued for infringement and unfair competition.

Some companies opt to negotiate with the squatter, but while this may seem expedient, it can unintentionally encourage more bad faith filings.

Courts and IPOPHL Are Watching

Philippine courts have made it clear that bad faith will not be rewarded. Recent rulings demonstrate that the first-to-file principle is not absolute. In Edmond Lim and Gerd Paland v. Catalina See, the Supreme Court held that a trademark registration obtained in bad faith can be invalidated even if the registrant was technically first to file. The decision emphasized that good faith is essential to acquiring trademark rights.

This principle was reinforced in Emzee Foods Inc v. Elarfoods Inc, where the Court defined bad faith as registering a mark with knowledge of another party’s prior use or ownership. Importantly, courts have distinguished bad faith from fraud: bad faith involves opportunistic registration, while fraud entails deliberate false statements about ownership or use during registration.

At the same time, the Intellectual Property Office of the Philippines (IPOPHL) has taken a more proactive stance. It strictly enforces compliance with the DAU requirement, has modernized procedures through digital systems, and strengthened recognition of well-known marks. Together, these changes offer stronger protection to legitimate brand owners and make it increasingly difficult for bad faith registrants to retain control over marks they do not genuinely own.

A More Balanced Trademark Landscape

Taken together, these developments show that while the Philippine trademark system still operates on a first-to-file basis, the environment has become more balanced. Foreign companies that register their marks early, maintain consistent use, and actively enforce their rights can enter the Philippine market with greater confidence. Trademark protection is no longer just about being first; it is about being genuine, active, and prepared to defend your brand against opportunistic squatters.