PRINCIPLE OF RECIPROCITY
G.R. Nos. L-27425 & L-30505 April 28, 1980
CONVERSE RUBBER CORPORATION and EDWARDSON MANUFACTURING
CORPORATION, plaintiffs-appellants,
vs.
JACINTO RUBBER & PLASTICS CO., INC., and ACE RUBBER & PLASTICS
CORPORATION, defendants-appellants.
Sycip, Salazar, Luna & Associates plaintiff-appellants.
Juan R. David for defendants-appellants.
BARREDO, J.:
Direct appeal in G.R. No. L-27425 by both plaintiffs and defendants from the decision of the Court of
First Instance of Rizal in its Civil Case No. 9380, a case alleged unfair competition, the dispositive
part of which reads:
Upon the foregoing, judgment is hereby rendered:
1. Permanently restraining the defendants, their agents, employees and other
persons acting in their behalf from manufacturing and selling in the Philippines
rubber shoes having the same or confusingly similar appearance as plaintiff
Converse Rubber's Converse Chuck Taylor All Star' rubber shoes, particularly from
manufacturing and selling in the Philippines rubber Shoes with (a) ankle patch with a
five-pointed blue star against a white background, (b) red and blue bands, (c) white
toe patch with raised diamond shaped areas, and (d) brown sole of the same or
similar design as the sole of "Converse Chuck Taylor All Star" rubber-soled canvas
footwear;
2. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to change the design
and appearance of "Custombuilt" shoes in accordance with the sketch submitted by
defendant Jacinto Rubber to plaintiff Converse Rubber on October 3, 1964 and to
desist from using a star both as a symbol and as a word;
3. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to pay plaintiffs the
sum of P160,000.00 as compensatory damages for the years 1962 to 1965 plus 5%
of the gross sales of "Custombuilt" shoes from 1966 until defendant Jacinto Rubber
& Plastics Company, Inc. stop selling "Custombuilt" shoes of the present design and
appearance;
4. Ordering defendants jointly and severally to pay plaintiffs P10,000.00 as attorney's
fees.
SO ORDERED. (Pages 228-229, Record on Appeal.)
plaintiffs praying for a bigger amount of damages and defendants asking that the decision be
declared null and void for lack of jurisdiction, or, alternatively, that the same be reversed completely
by dismissing the complaint; and another direct appeal, in G. R. No. L-30505 by above defendant
Jacinto Rubber & Plastics Co., Inc. and, a new party, Philippine Marketing and Management
Corporation from the same trial court's order in the same main civil case finding them in contempt of
court "in disregarding the permanent injunction" contained in the appealed decision.
RE G. R. NO L-27425
Being comprehensive and well prepared, We consider it sufficient to quote the following portions of
the impugned decision as basis for the resolution of the conflicting appeals aforementioned:
This is an action for unfair competition. Plaintiff Converse Rubber Corporation, (is) an
American Corporation, manufacturer (of) canvas rubber shoes under the trade name
"Converse Chuck Taylor All Star"; in the Philippines, it has an exclusive licensee,
plaintiff Edwardson Manufacturing Corporation, for the manufacture and sale in the
Philippines of its product. Plaintiff Converse is the owner of trademarks and patent,
registered with United States Patent Office, covering the words. "All Star", the
representation and design of a five-pointed star, and the design of the sole. The
trademark "Chuck Taylor" was registered by plaintiff Converse with the Philippines
Patent Office on March 3, 1966. Since 1946, "Chuck Taylor" is being sold in the
Philippines. It has been used exclusively by Philippine basketball teams competing in
international competitions. It is also popular among players in various basketball
leagues, like the MICAA and the NCAA, because of its high quality and attractive
style. "Chuck Taylor" currently retails at P46.00 per pair.
Defendant Jacinto Rubber & Plastics Company, Inc., a local corporation, likewise,
manufactures and sells canvas rubber shoes. It sells its product under the trade
names "Custombuilt Viscount", "Custombuilt Challenger", and "Custombuilt
Jayson's". Its trademark "Custombuilt Jayson's" was registered by the Philippines
Patent Office on November 29, 1957. The gross sales from 1962 to 1965 of
"Custombuilt" shoes total P16,474,103.76."Custombuilt" is retailed at P11.00.
In 1963, plaintiff Converse and defendant Jacinto entered into protracted
negotiations for a licensing agreement whereby defendant Jacinto would be the
exclusive license of plaintiff Converse in the Philippines for the manufacture and sale
of "Chuck Taylor" shoes but with the right to continue manufacturing and selling its
own products. One of the points taken up by parties was the design and general
appearance of "Custombuilt" shoes. Plaintiff Converse insisted on the condition that
defendant Jacinto change the design of "Custombuilt" shoes so as to give
"Custombuilt" a general appearance different from "Chuck Taylor." After an extensive
discussion, defendant Jacinto gave into to the demand of plaintiff Converse; it
submitted to plaintiff Converse for the latter's approval a sketch of a new design for
"Custombuilt". This design was accepted by plaintiff Converse. Defendant Jacinto
Rubber then proposed that the licensing agreement be made in favor of its affiliates,
defendant Ace Rubber. On January 22, 1965, defendant Ace Rubber signed the
licensing agreement while defendant Jacinto Rubber and Arturo Jacinto signed the
guarantee agreement to secure the performance by defendant Ace Rubber of its
obligations under the licensing agreement. Both documents, it should be noted,
contained the following covenants:
9. (a) Ace acknowledges that Converse is the exclusive owner of the
said Converse - names and design, as used in connection with the
manufacture, advertising and sale of footwear: that Converse has the
exclusive right to use said Converse names in such connection
throughout the world. subject to the terms of this Agreement; and that
neither Ace nor any person acting by, through or under Ace will, at
anytime, question or dispute said ownership or the exclusive rights of
Converse with respect thereto
(b) Nothing herein shall be deemed to constitute a warranty by
Converse as to the non-existence of infringements of Conversenames in the Republic of the Philippines. The term "infringement"as
used in this Agreement shall include practices which give rise to a
cause of action for damages or to injunctive relief under Sections 23
and 29 of R. A. No. 166 of the Republic of the Philippines or any
other applicable law of said Republic. During the term thereof, Ace at
its expense shall diligently investigate all infringements of the use of
said Converse-names, whether or not such infringements violate laws
pertaining to the registration of trademarks or trade names, and shall
notify Converse promptly as to any infringements of said Converse
names within said territory, and shall at its expense use its best
efforts to prevent such infringements by an reasonable means,
including the prosecution of litigation where necessary or advisable.
Any award for damages which Ace may recover in such litigation
shall accrue to the benefit of, and shall be owned and retained by
Ace.
14. Ace shall not,during the term hereof, manufacture or sell footwear which would,
by reason of its appearance and/or design, be likely, or tend, to be confused by the
public with any of the Converse-named products to be manufactured and sold
hereunder, or shall in any manner, infringe Converse designs. If at any time and from
time to time the manufacture of footwear under Converse-names for sale hereunder
does not fully utilize Ace's production capacity, Ace shalt on Converse's order, within
the limits of such surplus capacity, manufacture footwear of kinds and in amounts
specified by Converse, at a price no higher than the lowest price at which similar
footwear has been sold to customer of Ace during the period of one (1) year
immediately preceding the date of such order, and upon no less favorable discounts
and terms of sale than similar footwear is customarily offered by Ace to its most
favored customer, payable in United States funds, if the earned royalty hereunder is
then so payable, otherwise in Republic of the Philippines funds.
20. It being the mutual intention of the parties that Converse's exclusive property
interests in the Converse-names shall at all times be protected to the full extent of
the law, Ace agrees that it will execute all amendments to this Agreement which may
be proposed from time to time by Converse for the purpose of fully protecting said
interests.
However, the licensing agreement did not materialize, because Hermogenes Jacinto
refused to sign the guarantee.
Plaintiff Converse and plaintiff Edwardson then executed licensing agreement,
making plaintiff Edwardson the exclusive Philippine licensee for the manufacture and
sale of "Chuck Taylor." On June 18, 1966, plaintiffs sent a written demand to
defendants to stop manufacturing and selling "Custombuilt" shoes of Identical
appearance as "Chuck Taylor". Defendants did not reply to plaintiffs' letter. Hence,
this suit.
Plaintiffs contend that "Custombuilt" shoes are Identical in design and General
appearance to "Chuck Taylor" and, claiming prior Identification of "Chuck Taylor" in
the mind of the buying public in the Philippines, they contend that defendants are
guilty of unfair competition by selling "Custombuilt" of the design and with the general
appearance of "Chuck Taylor". The design and appearance of both products, as
shown by the samples and photographs of both products, are not disputed.
Defendants insist that (a) there is no similarity in design and general appearance
between "Custombuilt" and "Chuck Taylor", pointing out that "Custombuilt" is readily
Identifiable by the tradename "Custombuilt" appearing on the ankle patch, the heel
patch, and on the sole. It is also vigorously contended by defendants that the
registration of defendant Jacinto Rubber's trademark "Custombuilt" being prior to the
registration in the Philippines of plaintiff Converse Rubber's trademark "Chuck
Taylor", plaintiffs have no cause of action. It appears that defendant started to
manufacture and sell "Custombuilt" of its present design and with its present
appearance in 1962. On the other hand, as earlier mentioned, "Chuck Taylor" started
to be sold in the Philippines in 1946 and has been enjoying a reputation for quality
among basketball players in the Philippines.
The Court sees no difficulty in finding that the competing products are Identical in
appearance except for the trade names. The respective designs, the shapes and the
color of the ankle patch, the bands, the toe patch and the sole of the two products
are exactly the same. At a distance of a few meters, it is impossible to distinguish
Custombuilt' from "Chuck Taylor". The casual buyer is thus liable to mistake one for
the other. Only by a close-examination and by paying attention to the trade names
will the ordinary buyer be able to tell that the product is either "Custombuilt" or
"Chuck Taylor", as the case may be. Even so, he will most likely think that the
competing products, because they are strikingly Identical in design and appearance
are manufactured by one and the same manufacturer. Clearly, this case satisfied the
test of unfair competition. Priority in registration in the Philippines of a trademark is
not material in an action for unfair competition as distinguished from an action for
infringement of trademark. The basis of an action for unfair competition is confusing
and misleading similarity in general appearance, not similarity of trademarks.
The Court is not impressed by defendants' good faith in claiming that they have the
right to continue manufacturing "Custombuilt" of Identical design and appearance as
"Chuck Taylor". While it is true that the licensing agreement between plaintiff
Converse and defendant did not materialize, the execution of the documents by the
defendants constitute an admission on the part of plaintiff Converse Rubber's
property right in design and appearance of "Chuck Taylor". The covenants, quoted
above, show that defendants acknowledged that plaintiff Converse Rubber "is the
exclusive owner of the said Converse-names and design." Defendants further
covenanted not to "manufacture or sell footwear which would by reason of its
appearance and/or design, be likely, or tend, to be confused by the public with any of
the Converse-named products ... or shall, in any manner, infringe Converse designs".
That defendants are fully aware that "Custombuilt" is Identical in design and
appearance to "Chuck Taylor" has conclusively been admitted by them in their
correspondence with plaintiff Converse leading to the submission by defendants to
plaintiff Converse of a sketch of a new design that should give "Custombuilt" an
appearance different from that of "Chuck Taylor".
Aside from the written admission of defendants, the facts clearly indicate that
defendants copied the design of "Chuck Taylor" with intent to gain "Chuck Taylor", as
has been noted earlier, was ahead ot Custombuilt' in the Philippines market and has
been enjoining a high reputation for quality and style. Even defendants' own exhibits
leave no room for doubt that defendants copied the design and appearance of
"Chuck Taylor" for the purpose of cashing in on the reputation of "Chuck Taylor". The
samples of defendants' product show, indeed, as announced by defendants' counsel
the "metamorphosis" of defendants' product. In the beginning, the design of
defendants' product was entirely different from its present design and the design of
"Chuck Taylor". It was only in 1962, or 16 years after "Chuck Taylor" has been in the
market, that defendants adopted the present design of "Custombuilt". It is also
noteworthy that "Custombuilt" sells at P35 less than "Chuck Taylor"; thus the casual
buyer is led to believe that he is buying the same product at a lower price. Not
surprisingly, the volume of sales of "Custombuilt" increased from 35% to 75% of
defendants' total sales after they incorporated in their product the design and
appearance of "Chuck Taylor".
It is thus clear that defendants are guilty of unfair competition by giving "Custombuilt"
the same general appearance as "Chuck Taylor". It is equally clear that defendants
in so doing are guilty of bad faith. There remains for the Court to consider the
damages that defendants should be liable for to plaintiffs. Plaintiffs claim
compensatory damages equivalent to 30% of the gross sales of "Custombuilt" and
attorney's fees in the amount of P25,000.00. By defendants' own evidence, the gross
sales of "Custombuilt" from 1962, the year defendants adopted the present design of
their product, to 1965 total P16,474,103.76. If the Court should grant plaintiffs' prayer
for compensatory damages equivalent to 30% of defendants' gross sales, the
compensatory damages would amount to P4,942,231.13. Considering the amount of
gross sales of "Custombuilt", an award to plaintiffs for 30% of defendants' annual
gross sales would seriously ripple, if not bankrupt, defendant companies. The Court
is aware that defendants' investment is substantial and that defendants support a
substantial number of employees and laborers. This being so, the Court is of the
opinion that plaintiffs are entitled to only one (1) per cent of annual gross sales of
"Custombuilt" shoes of current design. As for attorney s fees, the Court is of the
opinion that, P10,000.00 is reasonable. (Pages 217-228, Record on Appeal.)
Defendants-appellants have assigned the following alleged errors:
I
THE COURT A QUO ERRED IN ASSUMING JURISDICTION OVER THE
COMPLAINT OF PLAINTIFFS-APPELLEES.
II
THE COURT A QUO ERRED IN ARRIVING AT THE CONCLUSION THAT THE
DEFENDANTS ARE GUILTY OF UNFAIR COMPETITION WHEN DEFENDANT
JACINTO RUBBER & PLASTICS CO., INC., MANUFACTURED AND SOLD
RUBBER-SOLED CANVASS SHOES UNDER ITS REGISTERED TRADE MARK
"CUSTOMBUILT".
III
THE COURT A QUO ERRED IN ADJUDICATING IN FAVOR OF THE PLAINTIFF
THE SUM OF P160,000.00 AS COMPENSATORY DAMAGES AND P10,000.00 AS
ATTORNEY'S FEES. (Pp. A & B, Brief for Defendants-Appellants.)
We have carefully gone over the records and reviewed the evidence to satisfy Ourselves of the
similarity of the shoes manufactured and sold by plaintiffs with those sold by defendants, and We
find the conclusions of the trial court to be correct in all respects. In fact, in their brief, defendants do
not contest at all the findings of the trial court insofar as material Identity between the two kinds of
shoes in question is concerned. We have Ourselves examined the exhibits in detail, particularly, the
comparative pictures and other representations if the shoes in question, and We do not hesitate in
holding that he plaintiffs complaint of unfair competition is amply justified.
From said examination, We find the shoes manufactured by defendants to contain, as found by the
trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and
manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for heir
respective brands, of course. We fully agree with the trial court that "the respective designs, shapes,
the colors of the ankle patches, the bands, the toe patch and the soles of the two products are
exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish
"Custombuilt" from "Chuck Taylor". These elements are more than sufficient to serve as basis for a
charge of unfair competition. Even if not all the details just mentioned were Identical, with the
general appearances alone of the two products, any ordinary, or even perhaps even a not too
perceptive and discriminating customer could be deceived, and, therefore, Custombuilt could easily
be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the
imitator must be held liable. In R. F. & J. Alexander & Co. Ltd. et al. vs. Ang et al., 97 Phil. 157, at p.
160, this Court held:
By "purchasers" and "public" likely to be deceived by the appearance of the goods,
the statute means the "ordinary purchaser". And although this Court apparently
shifted its position a bit in Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, by referring to
simulations likely to mislead "the ordinarily intelligent buyer", it turned to the general
accepted doctrine in E. Spinner & Co. vs. Neuss Hesslein, 54 Phil. 224, where it
spoke of "the casual purchasers" "who knows the goods only by name."
It stands to reason that when the law speaks of purchasers' it generally refers to
ordinary or average purchasers.
... in cases of unfair competition, while the requisite degree of
resemblance or similarity between the names, brands, or other indicia
is not capable of exact definition, it may be stated generally that the
similarity must be such, but need only be such, as is likely to mislead
purchasers of ordinary caution and prudence; or in other words, the
ordinary buyer, into the belief that the goods or wares are those, or
that the name or business is that, of another producer or tradesman.
It is not necessary in either case that the resemblance be sufficient to
deceive experts, dealers, or other persons specially familiar with the
trademark or goods involved. Nor is it material that a critical
inspection and comparison would disclose differences, or that
persons seeing the trademarks or articles side by side would not be
deceived (52 Am. Jur. pp. 600-601). (Brief for Plaintiffs as Appellees,
pp. 28-29, p. 71, Record.)
Indeed, the very text of the law on unfair competition in this country is clear enough. It is found in
Chapter VI of Republic Act 166 reading thus:
SEC. 29. Unfair competition, rights and remedies. - 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 mark or trade name 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. Such a person
shall have the remedies provided in section twenty-three, Chapter V hereof.
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 of 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, and shall be subject to an action therefor.
In particular, and without in any way limiting the scope of unfair competition, the
following shall be deemed guilty of unfair competition:
(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
influence purchasers to believe that the goods offered are those of a manufacturer or
dealer other than the actual manufacturer or dealer, or who otherwise clothes the
goods with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any vendor
engaged in selling such goods with a like purpose;
(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of
another who has Identified such services in the mind of the public; or
(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to discredit
the goods, business or services of another.
It is the theory of defendants-appellants, however, that plaintiffs-appellees have failed to establish a
case of unfair competition because "inasmuch as the former (Converse Chuck Taylor) was not sold
in the local markets from 1949 to 1967, no competition, fair or unfair, could have been offered to it by
the latter product (Custombuilt Challenger) during the said period." While the argument, it may be
conceded, makes sense as a proposition in practical logic, as indeed, it served as a legal defense in
jurisprudence in the past, the modern view, as contended by plaintiffs "represents a tendency to
mold, and even to expand; legal remedies in this field to conform to ethical practices." (Brief of
Plaintiffs as Appellees, pp. 16-17.) As a matter of fact, in Ang vs. Toribio, 74 Phil. 129, this Court
aptly pointed out:
... As trade has developed and commercial changes have come about, the law of
unfair competition has expanded to keep pace with the times and the elements of
strict competition in itself has ceased to be the determining factor. The owner of a
trademark or trade-name has property right in which he is entitled to protection, since
there is damage to him from confusion of reputation or goodwill in the mind of the
public as well as from confusion of goods. The modern trend is to give emphasis to
the unfairness of the acts and to classify and treat the issue as fraud.
Additionally, We quote with approval counsel's contention thus:
In no uncertain terms, the statute on unfair competition extends protection to the
goodwill of a manufacturer or dealer. It attaches no fetish to the word "competition".
In plain language it declares that a "person who has Identified in the public the goods
he manufactures or deals in, his business or services from those of others, whether
or not a 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." It denominates
as "unfair competition" "any acts" calculated to result in the passing off of other
goods "for those of the one having established such goodwill." Singularly absent is a
requirement that the goodwill sought to be protected in an action for unfair
competition must have been established in an actual competitive situation. Nor does
the law require that the deception or other means contrary to good faith or any acts
calculated to pass off other goods for those of one who has established a goodwill
must have been committed in an actual competitive situation.
To read such conditions, as defendants-appellants seek to do, in the plain
prescription of the law is to re-construct it. Indeed, good-will established in other than
a competitive milieu is no less a property right that deserves protection from unjust
appropriation or injury. This, to us, is precisely the clear sense of the law when it
declares without equivocation that 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, 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."
Plaintiffs-appellees have a established goodwill. This goodwill, the trial court found,
defendants-appellants have pirated in clear bad faith to their unjust enrichment. It is
strange that defendants-appellants now say that they should be spared from the
penalty of the law, because they were not really in competition with plaintiffsappellees. (Pp. 21-22, Id.)
In a desperate attempt to escape liability, in their first assigned error, defendants-appellants assail
the jurisdiction of the trial court, contending that inasmuch as Converse Rubber Corporation is a
non-resident corporation, it has no legal right to sue in the courts of the Philippines, citing MarshallWells Co. vs. Elser & C•., 46 Phil. 70 and Commissioner of Internal Revenue vs. United States
Lines Co., G. R. No. L-16850, May 30, 1962 (5 SCRA 175) and, furthermore, that plaintiff
Edwardson Manufacturing Corporation, although "a domestic corporation, is nothing but a licensee
of Converse Rubber Corporation in the local manufacturing, advertisement, sale and distribution of
the rubber-soled footwear", hence, it is equally without such personality. (p. 18, Brief of DefendantsAppellants).
We are not impressed. The easy and, We hold to be correct, refutation of defendants' position is
stated adequately and understandably in plaintiffs' brief as appellees as follows:
The disability under Section 69 of the Corporation Law of an unlicensed foreign
corporation refers to transacting business in the Philippines and maintaining a "suit
for the recovery of any debt, claim, or demand whatever" arising from its transacting
business in the Philippines. In Marshall-Wells, this Court precisely rejected a reading
of Section 69 of the Corporation Law as "would give it a literal meaning", i.e., "No
foreign corporation shall be permitted by itself or assignee any suit for the recovery of
any deed, claim, or demand unless it shall have the license prescribed by Section 68
of the Law." "The effect of the statute," declared this Court, "preventing foreign
corporations from doing business and from bringing actions in the local courts,
except on compliance with elaborate requirements, must not be unduly extended or
improperly applied (at page 75). In Commissioner of Internal Revenue v. United
States Lines Company, this Court did not hold that an unlicensed foreign corporation
may not sue in the Philippines. The Court simply held that a foreign shipping
company, represented by a local agent, is doing business in the Philippines so as to
subject it to the "operation of our revenue and tax."
Western Equipment and Supply Co. v. Reyes, 51 Phil. 115, made clear that the
disability of a foreign corporation from suing in the Philippines is limited to suits "to
enforce any legal or contract rights arising from, or growing out, of any business
which it has transacted in thePhilippine Islands." ... On the other hand, where the
purpose of a suit is "to protect its reputation, its corporate name, its goodwill,
whenever that reputation, corporate name or goodwill have, through the natural
development of its trade, established themselves," an unlicensed foreign corporation
may sue in the Philippines (at page 128). So interpreted by the Supreme Court, it is
clear that Section 69 of the Corporation Law does not disqualify plaintiff-appellee
Converse Rubber, which does not have a branch office in any part of the Philippines
and is not "doing business" in the Philippines (Record on Appeal, pp. 190-191), from
filing and prosecuting this action for unfair competition.
The futility of the error assigned by defendants-appellants becomes more evident in
light of the explicit provision of Section 21 (a) of Republic Act No. 166, as amended,
that a foreign corporation, whether or not licensed to transact business in the
Philippines may bring an action for unfair competition provided the country of which it
"is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar
privilege to juristic persons in the Philippines." The Convention of Paris for the
Protection of Industrial Property, to which the Philippines adheres, provides, on a
reciprocal basis that citizens of a union member may file an action for unfair
competition and infringement of trademarks, patents, etc. (610. G. 8010) in and of
the union members. The United States of America, of which Converse Rubber is a
citizen, is also a signatory to this Convention. Section 1126 (b) and (h) of Public Law
489 of the United States of America allows corporations organized under the laws of
the Philippines to file an action for unfair competition in the United States of America,
whether or not it is licensed to do business in the United States. (Annex "H" of Partial
Stipulation of Facts, Record on Appeal, p. 192).
As regards the other plaintiff-appellee, Edwardson Manufacturing Corporation, it is
indisputable that it has a direct interest in the success of this action: as exclusive
licensee of Converse Rubber in the manufacture and sale of "Chuck Taylor" shoes in
the Philippines, naturally it would be directly affected by the continued manufacture
and sale by defendants-appellants of shoes that are confusingly Identical in
appearance and design with "Chuck Taylor." (Brief of Plaintiffs as Appellees, pp. 1114.)
As can be seen, what is actually the only controversial matter in this case is that which refers to the
assessment ot damages by the trial court, which both plaintiffs and defendants consider erroneous,
defendants maintaining, of course, that it is excessive, even baseless, while, on the other hand,
plaintiffs posit that it is far short from what the law and the relevant circumstances require.
Under Section 29 of the Republic Act 166, aforequoted, it will be observed that the first paragraph
thereof refers to the property rights in goodwill of a "person who has Identified in the mind of the
public goods he manufactures or deals in, his business or offices from those of others, whether or
not a mark or trade name is employed", while the second paragraph speaks of "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 ... for those of the one having established such goodwill." This second
paragraph, which may be read together with the first paragraph, makes the deceiver or imitator
"guilty of unfair competition and shall be subjected to an action therefore", meaning what the first
paragraph refers to as the "remedies provided in Section twenty-three, Chapter V" of the Act. It is
implicit in the decision of the trial court and the briefs of the parties that everyone here concerned
has acted on the basis of the assumptions just stated.
Now, Section 23 reads:
Actions, and damages and injunction for infringement. - Any person entitled to the
exclusive use of a registered mark or trade name may recover damages in a civil
action from any person who infringes his rights, and the measure of the damages
suffered shall be either the reasonable profit which the complaining party would have
made, had the defendant not infringed his said rights, or the profit which the
defendant actually made out of the infringement, or in the event such measure of
damages cannot be readily ascertained with reasonable certainty, then the court may
award as damages a reasonable percentage based upon the amount of gross sales
of the defendant of the value of the services in connection with which the mark or
trade name was used in the infringement of the rights of the complaining party. In
cases where actual intent to mislead the public or to defraud the complaining party
shall be shown, in the discretion of the court, the damages may be doubled.
The complaining party, upon proper showing, may also be granted injunction.
In the light of the foregoing provision, We find difficulty in seeing the basis of the trial court for
reducing the 30%, claimed by plaintiffs, of the gross earnings of defendants from the sale of
Custombuilt from 1962 to merely 1% as the measure of compensatory damages to which plaintiffs
are entitled for that period. Perhaps, as His Honor pessimistically argued, defendants would suffer
crippling of their business. But it is quite clear from the circumstances surrounding their act of
deliberately passing off the rubber shoes produced by them for those over which plaintiffs had priorly
established goodwill, that defendants had tremendously increased their volume of business and
profits in the imitated shoes and have precisely incurred, strictly speaking, the liability of the
damages to be paid by them be doubled, per the last sentence of Section 23.
We are of the considered opinion that the trial court was overly liberal to the defendants-appellants.
The P160,000.00 awarded by His Honor as compensatory damages for the years 1962 to 1965 are
utterly inadequate. Even the 5% of the gross sales of "Custombuilt" shoes from 1966 until its
injunction is fully obeyed are short of what the law contemplates in cases of this nature. We hold that
considering that the gross sales of defendants-appellants increased to P16,474,103.76, (as admitted
in defendants-appellants' own brief, p. 2), only 75% of which, plaintiffs-appellants generously assert
corresponded to Custombuilt sales, it would be but fair and just to award plaintiffs-appellants 15% of
such 75% as compensatory damages from 1962 up to the finality of this decision. In other words,
75% of P16,474,103.76 would be P12,355,577.82 and 15% of this last amount would be
P1,853,336.67, which should be awarded to plaintiffs-appellants for the whole period already stated,
without any interest, without prejudice to plaintiffs-appellants seeking by motion in the trial court in
this same case any further damage should defendants-appellants continue to disobey the injunction
herein affirmed after the finality of this decision.
We feel that this award is reasonable. It is not farfetched to assume that the net profit of the imitator
which, after all is what the law contemplates as basis for damages if it were only actually
ascertainable, in the manufacture of rubber shoes should not be less than 20 to 25% of the gross
sales. Regrettably, neither of the parties presented positive evidence in this respect, and the Court is
left to use as basis its own projection in the light of usual business practices. We could, to be sure,
return this case to the lower court for further evidence on this point, but, inasmuch as this litigation
started way back about fourteen years ago and it would take more years before any final disposition
is made hereof should take the course, We are convinced that the above straight computation,
without any penalty of interest, is in accordance with the spirit of the law governing this case.
In re G. R. No. L-30505
The subject matter of this appeal is the order of the trial court, incident to its main decision We have
just reviewed above, dismissing "for lack 6f jurisdiction the contempt charge filed by plaintiffs against
defendant Jacinto Rubber & Plastics Co. Inc., Ace Rubber & Plastics Corporation; Philippine &
Management Corporation and their respective corporate officers.
Importantly, it is necessary to immediately clear up the minds of appellees in regard to some aspects
of the argument on double jeopardy discussed by their distinguished counsel in his preliminary
argument in his brief (pp. 9-13). It is contended therein that inasmuch as the denial orders of August
23, 1967, December 29, 1967 and January 24, 1968 have the character of acquittals, contempt
proceedings being criminal in nature, this appeal subjects appellees to double jeopardy. Such
contention misses, however, the important consideration that the said denial orders, were, as
explained by His Honor himself in his last two orders, based on the assumption that he had lost
jurisdiction over the incident by virtue of the earlier perfection of the appeals of both parties from the
decision on the merits.
It is thus the effect of this assumption, revealed later by the trial judge, on the first order of August
23, 1967 that needs clarificatory disquisition, considering that the said first order was exclusively
based on "the interests of justice" and "lack of merit" and made no reference at all to jurisdiction. If
indeed the trial court had lost jurisdiction, it would be clear that said order could have no legal
standing, and the argument of double jeopardy would have no basis.
But after mature deliberation, and in the light of Cia General de Tabacos de Filipinas vs. Alhambra
Cigar & Cigarette Manufacturing Co., 33 Phil. 503, cited by appellant's counsel in his brief, We are
convinced that the trial court in the case at bar had jurisdiction to entertain and decide the motion for
contempt in question. Indeed, the enforcement of either final or preliminary-made-final injunctions in
decisions of trial courts are immediately executory. The reason for this rule lies in the nature itself of
the remedy. If a preliminary injunction, especially one issued after a hearing is enforceable
immediately to protect the rights of the one asking for it, independently of the pendency of the main
action, there is no reason why when that preliminary injunction is made final after further and fuller
hearing the merits of the plaintiff's cause of action, its enforceability should lesser, force. The same
must be true with stronger basis in the case of a permanent injunction issued as part ot the
judgment. The aim is to stop the act complained of immediately because the court has found it
necessary to serve the interests of justice involved in the litigation already resolve by it after hearing
and reception of the evidence of both parties.
As a matter ot fact, it is quite obvious that an action for unfair competition with prayer for an
injunction partakes of the nature of an action for injunction within the contemplation of Section 4 of
Rule 39, and this cited provision states explicitly that "unless otherwise ordered by the court, a
judgment in an action for injunction - shall not be stayed after its rendition and before an appeal is
taken or during the pendency of an appeal." In the above-mentioned case of Cia. General de
Tabacos, the Court held:
The applicant contends here: First, that the injunction is indefinite and uncertain to
such an extent that a person of ordinary intelligence would be unable to comply with
it and still protect his acknowledged rights; second, that the injunction is void for the
reason that the judgment of the court on which it 's based is not responsive to the
pleadings or to the evidence in the case and has nothing in the record to support it;
third, that the court erred in assuming jurisdiction and fining defendant after an
appeal had been taken from the judgment of the court and the perpetual injunction
issued thereon. There are other objections that need no particular discussion.
Discussing these questions generally it may be admitted, as we stated in our
decision in the main case (G. R No. 10251, ante p. 485) that, while the complaint set
forth an action on a trade-name and for unfair competition, accepting the plaintiff's
interpretation of it, the trial court based its judgment on the violation of a trade-mark,
although the complaint contained no allegation with respect to a trade-mark and no
issue was joined on that subject by the pleadings and no evidence was introduced on
the trial with respect thereto. There Aas however, some evidence in the case with
respect to the plaintiff's ownership of the trade-name "Isabela," for the violation of
which the plaintiff was suing, and there was some evidence which might support an
action of unfair competition, if such an action could be sustained under the statute.
Therefore, although the judgment of the trial court was based on the violation of a
trade-mark, there was some evidence to sustain the judgment if it had been founded
on a violation of the trade-name or on unfair competition. The judgment, as we have
already found in the main case, was erroneous and was reversed for that reason; but
having some evidence to sustain it, it was not void and the injunction issued in that
action was one which the court had power to issue. Although the judgment was
clearly erroneous and without basis in law, it was, nevertheless a judgment of a court
of competent jurisdiction which had authority to render that particular judgment and
to issue a permanent injunction thereon.
xxx xxx xxx
... The question is not was the judgment correct on the law and the facts, but was it a
valid judgment? If so, and if the injunction issued thereon was definite and certain
and was within the subject matter of the judgment, the defendant was bound to obey
it, however erroneous it may have been. (Pp. 505-506, 506, 33 Phil.)
It is interesting to note that while the trial court was of the opinion that it had lost jurisdiction over the
motion for contempt, upon insistence of the plaintiffs, in its order of January 24, 1968, it made the
following findings of fact:
It is not controverted on December 14, 1966, the Philippine Marketing and
Management sold to Virginia Ventures 12 pairs of "Custombuilt" rubber shoes
bearing an Identical design and general appearance as that prohibited in the
injunction. It is likewise not controverted that subsequent to December 14, 1966 the
sale of the said rubber shoes was advertised by Philippine Marketing and
Management Corporation in several metropolitan newspapers even during the
pendency of the contempt proceedings.
The only issue of fact is whether or not in selling and advertising the sale of the
prescribed shoes the Philippine Marketing and Management Corporation conspired
with the defendants, particularly defendant Jacinto Rubber, or acted as its agent,
employee or in any other capacity with knowledge of the issuance of the said
permanent injunction. On this point, the evidence of the plaintiffs shows that
Hermogenes Jacinto, Arturo Jacinto, Fernando Jacinto and Milagros J. Jose
constitute the majority of the board of directors of the Philippine Marketing and
Management Corporation; that Hermogenes Jacinto is the president, Arturo Jacinto
is the vice-president, and Fernando Jacinto and Milagros J. Jose are directors, of
defendant Jacinto Rubber; that Milagros J. Jose is the treasurer of the Philippine
Marketing and Management Corporation; and that Ramon V. Tupas, corporate
secretary of the Philippine Marketing and Management Corporation, actively assisted
by Atty. Juan T. David, counsel of record of the defendants, in defending the
defendants in this case. It also appears from the different advertisements published
in the metropolitan papers that Philippine Marketing and Management Corporation is
the exclusive distributor of the questioned "Custombuilt" rubber shoes. Moreover,
during the trial of this case on the merits the defendants admitted that the Philippine
Marketing and Management Corporation is a sister corporation of defendant Jacinto
Rubber, both corporations having Identical stockholders, and Hermogenes Jacinto
and Fernando Jacinto are stockholders and incorporators of the Philippine Marketing
and Management Corporation.
On the other hand, the defendants, particularly defendant Jacinto Rubber, presented
no evidence to disprove its intra-corporate relationship with the Philippine Marketing
and Management Corporation. Instead it presented, over the objection of the
plaintiffs, the affidavit of its executive vice-president, Geronimo Jacinto, who affirmed
that defendant Jacinto Rubber had no knowledge of, or participation in, the acts
complained of in the motion to declare them in contempt of Court and that it has not
in any way violated any order of this Court. On its part, the Philippine Marketing and
Management Corporation presented as a witness its general manager, Aniceto Tan,
who testified that the Philippine Marketing and Management Corporation is not an
agent or sister corporation of defendant Jacinto Rubber; that he came to know of the
pendency of this case and the issuance of the permanent injunction only on
December 19, 1966 when served with a copy of plaintiffs' motion; and that the
Philippine Marketing and Management Corporation buys the "Custombuilt Rubber"
shoes from defendant Jacinto Rubber which it resells to the general public. It is
noteworthy, however, that this particular witness made several admissions in the
course of his testimony which shed light on the question at issue. Thus, he admitted
that prior to the formal organization of the Philippine Marketing and Management
Corporation in January 1966 he was the sales manager of defendant Jacinto Rubber;
that after the organization of the said corporation, he was informed that defendant
Jacinto Rubber would discontinue its sales operations and instead give the exclusive
distribution of the shoes to the Philippine Marketing and Management Corporation;
and that he was then offered the position of sales manager of Philippine Marketing
and Management because of his extensive experience in the distribution of
"Custombuilt" rubber shoes. Also, he testified that the subscribed capital stock of the
Philippine Marketing and Management Corporation is only P100,000.00 out of which
P25,000.00 has been paid whereas its average monthly purchases of "Custombuilt"
rubber shoes is between P300,000.00 to P400,000.00 or between P4,000,000.00 to
P5,000,000.00 annually. Such huge purchases Philippine Marketing and
Management Corporation is able to make, in spite of its meager capital, because
defendant Jacinto Rubber allows it to buy on credit.
Considering the substantial Identity of the responsible corporate officers of the
defendant Jacinto Rubber and the Philippine Marketing and Management
Corporation, the huge volume of alleged purchases of "Custombuilt" shoes by the
Philippine Marketing and Management Corporation compared to its paid in capital,
and the cessation of the sales operations of defendant Jacinto Rubber after the
organization of the former, the Court is convinced beyond reasonable doubt that the
Philippine Marketing and Management Corporation is the selling arm or branch of
defendant Jacinto Rubber and that both corporations are controlled by substantially
the same persons, the Jacinto family. The contention of the Philippine Marketing and
Management Corporation that it sold the 12 pairs of "Custombuilt" shoes on
December 14, 1966 without knowledge of the issuance of the injunction is belied by
its conduct of continuing the sale and the advertisement of said shoes even during
the pendency of the contempt proceedings. This conduct clearly reveals the
wilfulness and contumacy with which it had disregarded the injunction. Besides, it is
inherently improbable that defendant Jacinto Rubber and Atty. Ramon B. Tupas did
not inform the Philippine Marketing and Management Corporation of the issuance of
the injunction, a fact which undoubtedly has a material adverse effect on its
business.
Upon the foregoing, the Court is convinced that defendants and Philippine Marketing
and Management Corporation are guilty of contempt of court in disregarding the
permanent injunction issued by this Court in its decision on the merits of the main
case. However, for the reasons stated in the Order of December 29, 1967, the Court
maintains that it has lost jurisdiction over the case. (Pp. 115-120, Record on Appeal.)
Stated differently, since the trial court had jurisdiction to take cognizance of the motion, its findings of
facts should as a rule bind the parties, and, in this connection, appellees do not seriously challenge
said findings. And since We are holding that the trial court had jurisdiction, the above findings may
be determinative of the factual issues among the parties herein. We are thus faced with the following
situations:
The first order of dismissal of August 23, 1967, albeit issued with jurisdiction, was incomplete
because it contained no statements of facts and law on which it was based in violation of the
pertinent constitutional precept. It could not stand as it was.
The second of December 29, 1967 was still incomplete, with the added flaw that his Honor declared
himself therein as having lost jurisdiction.
On other hand, while the third order of January 24, 1968 filled the ommissions of the first two orders,
it, however, the reiterated the erroneous ruling of the second order regarding lost of jurisdiction of
the court over the incident.
Combining the three orders, it can be seen that the result is that the trial court found from the
evidence that its injunction had been violated, but it erroneously considered itself devoid of authority
to impose the appropriate penalty, for want of jurisdiction. Upon these premises, We hold that the
factual findings of the trial court in its third order may well stand as basis tor the imposition of the
proper penalty.
To be sure, appellees are almost in the right track in contending that the first denial order of the trial
court found them not guilty. What they have overlooked however is that such a finding cannot be
equated with an acquittal in a criminal case that bars a subsequent jeopardy. True it is that
generally, contempt proceedings are characterized as criminal in nature, but the more accurate
juridical concept is that contempt proceedings may actually be either civil or criminal, even if the
distinction between one and the other may be so thin as to be almost imperceptible. But it does exist
in law. It is criminal when the purpose is to vindicate the authority of the court and protect its
outraged dignity. It is civil when there is failure to do something ordered by a court to be done for the
benefit of a party. (3 Moran, Rules of Court, pp. 343-344, 1970 ed; see also Perkins vs. Director of
Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81 Phil. 741.) And with this distinction in mind,
the fact that the injunction in the instant case is manifestly for the benefit of plaintiffs makes of the
contempt herein involved civil, not criminal. Accordingly, the conclusion is inevitable that appellees
have been virtually found by the trial court guilty of civil contempt, not criminal contempt, hence the
rule on double jeopardy may not be invoked.
WHEREFORE, judgment is hereby rendered - in G. R. No. L-27425 - affirming the decision of the
trial court with the modification of the amount of the damages awarded to plaintiffs in the manner
hereinabove indicated; and in G.R. No. L-30505 - the three orders of dismissal of the trial court of
the contempt charges against appellees are all hereby reversed, and on the basis of the factual
findings made by said court in its last order of January 24, 1968, appellees are hereby declared in
contempt of court and the records of the contempt proceedings (G. R. No. L-30505) are ordered
returned to the trial court for further proceedings in line with the above opinion, namely for the
imposition of the proper penalty, its decision being incomplete in that respect. Costs against
appellees in G. R. No. L-27425, no costs in G. R. No. L-30505. These decisions may be executed
separately.
Concepcion Jr., Guerrero and De Castro, JJ., concur.
Antonio, J., is on leave.
G.R. No. L-63796-97 May 2, 1984
LA CHEMISE LACOSTE, S. A., petitioner,
vs.
HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National
Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents.
G.R. No. L-65659 May 2l, 1984
GOBINDRAM HEMANDAS SUJANANI, petitioner,
vs.
HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON.
CESAR SAN DIEGO, in his capacity as Director of Patents, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.
Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.
GUTIERREZ, JR., J.:
It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation
among the manufacturing and trading centers of the world as a haven for intellectual pirates imitating
and illegally profiting from trademarks and tradenames which have established themselves in
international or foreign trade.
Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste,
S.A., a well known European manufacturer of clothings and sporting apparels sold in the
international market and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE
DEVICE" and a composite mark consisting of the word "LACOSTE" and a representation of a
crocodile/alligator. The petitioner asks us to set aside as null and void, the order of judge Oscar C.
Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region, granting the
motion to quash the search warrants previously issued by him and ordering the return of the seized
items.
The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing
under the laws of France and not doing business in the Philippines, It is undeniable from the records
that it is the actual owner of the abovementioned trademarks used on clothings and other goods
specifically sporting apparels sold in many parts of the world and which have been marketed in the
Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior
registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE &
CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other
garment products of the company. Two years later, it applied for the registration of the same
trademark under the Principal Register. The Patent Office eventually issued an order dated March 3,
1977 which states that:
xxx xxx xxx
... Considering that the mark was already registered in the Supplemental Register in
favor of herein applicant, the Office has no other recourse but to allow the
application, however, Reg. No. SR-2225 is now being contested in a Petition for
Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner
of the mark until after the registration is declared cancelled.
Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and
interest in the trademark "CHEMISE LACOSTE & DEVICE".
On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile
Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was
approved for publication while the latter was opposed by Games and Garments in Inter Partes Case
No. 1658. In 1982, the petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed
as Inter Partes Case No. 1689. Both cases have now been considered by this Court in Hemandas v.
Hon. Roberto Ongpin (G.R. No. 65659).
On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a lettercomplaint alleging therein the acts of unfair competition being committed by Hemandas and
requesting their assistance in his apprehension and prosecution. The NBI conducted an
investigation and subsequently filed with the respondent court two applications for the issuance of
search warrants which would authorize the search of the premises used and occupied by the
Lacoste Sports Center and Games and Garments both owned and operated by Hemandas.
The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of
the Revised Penal Code, "it appearing to the satisfaction of the judge after examining under oath
applicant and his witnesses that there are good and sufficient reasons to believe that Gobindram
Hemandas ... has in his control and possession in his premises the ... properties subject of the
offense," (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a result of
the search found and seized various goods and articles described in the warrants.
Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was
different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the
Patent Office, any criminal or civil action on the same subject matter and between the same parties
would be premature.
The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective
as it cited no valid ground for the quashal of the search warrants and that the grounds alleged in the
motion were absolutely without merit. The State Prosecutor likewise filed his opposition on the
grounds that the goods seized were instrument of a crime and necessary for the resolution of the
case on preliminary investigation and that the release of the said goods would be fatal to the case of
the People should prosecution follow in court.
The respondent court was, however, convinced that there was no probable cause to justify the
issuance of the search warrants. Thus, in its order dated March 22, 1983, the search warrants were
recalled and set aside and the NBI agents or officers in custody of the seized items were ordered to
return the same to Hemandas. (Rollo, p. 25)
The petitioner anchors the present petition on the following issues:
Did respondent judge act with grave abuse of discretion amounting to lack of
jurisdiction,
(i) in reversing the finding of probable cause which he himself had made in issuing
the search warrants, upon allegations which are matters of defense and as such can
be raised and resolved only upon trial on the merits; and
(ii) in finding that the issuance of the search warrants is premature in the face of the
fact that (a) Lacoste's registration of the subject trademarks is still pending with the
Patent Office with opposition from Hemandas; and (b) the subject trademarks had
been earlier registered by Hemandas in his name in the Supplemental Register of
the Philippine Patent Office?
Respondent, on the other hand, centers his arguments on the following issues:
I
THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.
II
THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.
Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign
corporation failed to allege essential facts bearing upon its capacity to sue before Philippine courts.
He states that not only is the petitioner not doing business in the Philippines but it also is not
licensed to do business in the Philippines. He also cites the case of Leviton Industries v.
Salvador (114 SCRA 420) to support his contention The Leviton case, however, involved a
complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides:
Sec. 21 — A. Any foreign corporation or juristic person to which a mark or tradename
has been registered or assigned under this Act may bring an action hereunder for
infringement, for unfair competition, or false designation of origin and false
description, whether or not it has been licensed to do business in the Philippines
under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise
known as the Corporation Law, at the time it brings the complaint; Provided, That the
country of which the said foreign corporation or juristic person is a citizen, or in which
it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or
juristic persons of the Philippines.
We held that it was not enough for Leviton, a foreign corporation organized and existing under the
laws of the State of New York, United States of America, to merely allege that it is a foreign
corporation. It averred in Paragraph 2 of its complaint that its action was being filed under the
provisions of Section 21-A of Republic Act No. 166, as amended. Compliance with the requirements
imposed by the abovecited provision was necessary because Section 21-A of Republic Act No. 166
having explicitly laid down certain conditions in a specific proviso, the same must be expressly
averred before a successful prosecution may ensue. It is therefore, necessary for the foreign
corporation to comply with these requirements or aver why it should be exempted from them, if such
was the case. The foreign corporation may have the right to sue before Philippine courts, but our
rules on pleadings require that the qualifying circumstances necessary for the assertion of such right
should first be affirmatively pleaded.
In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised
Penal Code. The Leviton case is not applicable.
Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that
the petitioner was doing business in the Philippines but was not licensed to do so. To support this
argument, he states that the applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman:
(72 Phil. 524) where Mentholatum Co. Inc., a foreign corporation and Philippine-American Drug Co.,
the former's exclusive distributing agent in the Philippines filed a complaint for infringement of
trademark and unfair competition against the Mangalimans.
The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at
bar. Philippine American Drug Co., Inc., was admittedly selling products of its principal Mentholatum
Co., Inc., in the latter's name or for the latter's account. Thus, this Court held that "whatever
transactions the Philippine-American Drug Co., Inc. had executed in view of the law, the
Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign doing business in
the Philippines without the license required by Section 68 of the Corporation Law, it may not
prosecute this action for violation of trademark and unfair competition."
In the present case, however, the petitioner is a foreign corporation not doing business in the
Philippines. The marketing of its products in the Philippines is done through an exclusive distributor,
Rustan Commercial Corporation The latter is an independent entity which buys and then markets not
only products of the petitioner but also many other products bearing equally well-known and
established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of
the petitioner.
The rules and regulations promulgated by the Board of Investments pursuant to its rule-making
power under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code,
support a finding that the petitioner is not doing business in the Philippines. Rule I, Sec. 1 (g) of said
rules and regulations defines "doing business" as one" which includes, inter alia:
(1) ... A foreign firm which does business through middlemen acting on their own
names, such as indentors, commercial brokers or commission merchants, shall not
be deemed doing business in the Philippines. But such indentors, commercial
brokers or commission merchants shall be the ones deemed to be doing business in
the Philippines.
(2) Appointing a representative or distributor who is domiciled in the Philippines,
unless said representative or distributor has an independent status, i.e., it transacts
business in its name and for its account, and not in the name or for the account of a
principal Thus, where a foreign firm is represented by a person or local company
which does not act in its name but in the name of the foreign firm the latter is doing
business in the Philippines.
xxx xxx xxx
Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not
doing business in the Philippines. Rustan is actually a middleman acting and transacting business in
its own name and or its own account and not in the name or for the account of the petitioner.
But even assuming the truth of the private respondent's allegation that the petitioner failed to allege
material facts in its petition relative to capacity to sue, the petitioner may still maintain the present
suit against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a
foreign corporation not doing business in the Philippines needs no license to sue before Philippine
courts for infringement of trademark and unfair competition. Thus, in Western Equipment and Supply
Co. v. Reyes (51 Phil. 115), this Court held that a foreign corporation which has never done any
business in the Philippines and which is unlicensed and unregistered to do business here, but is
widely and favorably known in the Philippines through the use therein of its products bearing its
corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the
residents and inhabitants thereof from organizing a corporation therein bearing the same name as
the foreign corporation, when it appears that they have personal knowledge of the existence of such
a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to
deal and trade in the same goods as those of the foreign corporation.
We further held:
xxx xxx xxx
... That company is not here seeking to enforce any legal or control rights arising
from, or growing out of, any business which it has transacted in the Philippine
Islands. The sole purpose of the action:
Is to protect its reputation, its corporate name, its goodwill, whenever that reputation,
corporate name or goodwill have, through the natural development of its trade,
established themselves.' And it contends that its rights to the use of its corporate and
trade name:
Is a property right, a right in rem, which it may assert and protect against all the
world, in any of the courts of the world-even in jurisdictions where it does not transact
business-just the same as it may protect its tangible property, real or personal,
against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and
TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names
and Unfair Competition and cases cited.' That point is sustained by the authorities,
and is well stated in Hanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed.,
513). in which the syllabus says:
Since it is the trade and not the mark that is to be protected, a trade-mark
acknowledges no territorial boundaries of municipalities or states or nations, but
extends to every market where the trader's goods have become known and Identified
by the use of the mark.
Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting.
Our jurisprudence is replete with cases illustrating instances when foreign corporations not doing
business in the Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v.
Ysmael and Co., Inc. (102 Phil. 1), we recognized a right of foreign corporation to sue on isolated
transactions. In General Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right
of Puritan Sportswear Corp., a foreign corporation not licensed to do and not doing business in the
Philippines, to file a petition for cancellation of a trademark before the Patent Office.
More important is the nature of the case which led to this petition. What preceded this petition
for certiorari was a letter complaint filed before the NBI charging Hemandas with a criminal offense,
i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of
the preliminary investigation being conducted by the Special Prosecutor the information shall be in
the name of the People of the Philippines and no longer the petitioner which is only an aggrieved
party since a criminal offense is essentially an act against the State. It is the latter which is principally
the injured party although there is a private right violated. Petitioner's capacity to sue would become,
therefore, of not much significance in the main case. We cannot snow a possible violator of our
criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or
victim of a crime has no standing to sue.
In upholding the right of the petitioner to maintain the present suit before our courts for unfair
competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our
duties and the rights of foreign states under the Paris Convention for the Protection of Industrial
Property to which the Philippines and France are parties. We are simply interpreting and enforcing a
solemn international commitment of the Philippines embodied in a multilateral treaty to which we are
a party and which we entered into because it is in our national interest to do so.
The Paris Convention provides in part that:
ARTICLE 1
(1) The countries to which the present Convention applies constitute themselves into
a Union for the protection of industrial property.
(2) The protection of industrial property is concerned with patents, utility models,
industrial designs, trademarks service marks, trade names, and indications of source
or appellations of origin, and the repression of unfair competition.
xxx xxx xxx
ARTICLE 2
(2) Nationals of each of the countries of the Union shall as regards the protection of
industrial property, enjoy in all the other countries of the Union the advantages that
their respective laws now grant, or may hereafter grant, to nationals, without
prejudice to the rights specially provided by the present Convention. Consequently,
they shall have the same protection as the latter, and the same legal remedy against
any infringement of their rights, provided they observe the conditions and formalities
imposed upon nationals.
xxx xxx xxx
ARTICLE 6
(1) The countries of the Union undertake, either administratively if their legislation so
permits, or at the request of an interested party, to refuse or to cancel the registration
and to prohibit the use of a trademark which constitutes a reproduction, imitation or
translation, liable to create confusion, of a mark considered by the competent
authority of the country of registration or use to be well-known in that country as
being already the mark of a person entitled to the benefits of the present Convention
and used for Identical or similar goods. These provisions shall also apply when the
essential part of the mark constitutes a reproduction of any such well-known mark or
an imitation liable to create confusion therewith.
xxx xxx xxx
ARTICLE 8
A trade name shall be protected in all the countries of the Union without the
obligation of filing or registration, whether or not it forms part of a trademark.
xxx xxx xxx
ARTICLE 10bis
(1) The countries of the Union are bound to assure to persons entitled to the benefits
of the Union effective protection against unfair competition.
xxx xxx xxx
ARTICLE 10ter
(1) The countries of the Union undertake to assure to nationals of the other countries
of the Union appropriate legal remedies to repress effectively all the acts referred to
in Articles 9, 10 and l0bis.
(2) They undertake, further, to provide measures to permit syndicates and
associations which represent the industrialists, producers or traders concerned and
the existence of which is not contrary to the laws of their countries, to take action in
the Courts or before the administrative authorities, with a view to the repression of
the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in
which protection is claimed allows such action by the syndicates and associations of
that country.
xxx xxx xxx
ARTICLE 17
Every country party to this Convention undertakes to adopt, in accordance with its
constitution, the measures necessary to ensure the application of this Convention.
It is understood that at the time an instrument of ratification or accession is deposited
on behalf of a country; such country will be in a position under its domestic law to
give effect to the provisions of this Convention. (61 O.G. 8010)
xxx xxx xxx
In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals
had occasion to comment on the extraterritorial application of the Paris Convention It said that:
[11] The International Convention is essentially a compact between the various
member countries to accord in their own countries to citizens of the other contracting
parties trademark and other rights comparable to those accorded their own citizens
by their domestic law. The underlying principle is that foreign nationals should be
given the same treatment in each of the member countries as that country makes
available to its own citizens. In addition, the Convention sought to create uniformity in
certain respects by obligating each member nation 'to assure to nationals of
countries of the Union an effective protection against unfair competition.'
[12] The Convention is not premised upon the Idea that the trade-mark and related
laws of each member nation shall be given extra-territorial application, but on exactly
the converse principle that each nation's law shall have only territorial application.
Thus a foreign national of a member nation using his trademark in commerce in the
United States is accorded extensive protection here against infringement and other
types of unfair competition by virtue of United States membership in the Convention.
But that protection has its source in, and is subject to the limitations of, American
law, not the law of the foreign national's own country. ...
By the same token, the petitioner should be given the same treatment in the Philippines as we make
available to our own citizens. We are obligated to assure to nationals of "countries of the Union" an
effective protection against unfair competition in the same way that they are obligated to similarly
protect Filipino citizens and firms.
Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum
addressed to the Director of the Patents Office directing the latter:
xxx xxx xxx
... to reject all pending applications for Philippine registration of signature and other
world famous trademarks by applicants other than its original owners or users.
The conflicting claims over internationally known trademarks involve such name
brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci,
Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey
Beene, Lanvin and Ted Lapidus.
It is further directed that, in cases where warranted, Philippine registrants of such
trademarks should be asked to surrender their certificates of registration, if any, to
avoid suits for damages and other legal action by the trademarks' foreign or local
owners or original users.
The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and
amity with all nations. It is not, as wrongly alleged by the private respondent, a personal policy of
Minister Luis Villafuerte which expires once he leaves the Ministry of Trade. For a treaty or
convention is not a mere moral obligation to be enforced or not at the whims of an incumbent head
of a Ministry. It creates a legally binding obligation on the parties founded on the generally accepted
principle of international law of pacta sunt servanda which has been adopted as part of the law of
our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal
duty to obey both law and treaty. It must also be obeyed.
Hemandas further contends that the respondent court did not commit grave abuse of discretion in
issuing the questioned order of April 22, 1983.
A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals
the fact that they are not appropriate for quashing a warrant. They are matters of defense which
should be ventilated during the trial on the merits of the case. For instance, on the basis of the facts
before the Judge, we fail to understand how he could treat a bare allegation that the respondent's
trademark is different from the petitioner's trademark as a sufficient basis to grant the motion to
quash. We will treat the issue of prejudicial question later. Granting that respondent Hemandas was
only trying to show the absence of probable cause, we, nonetheless, hold the arguments to be
untenable.
As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in
no uncertain terms the determination of probable cause by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3).
Probable cause has traditionally meant such facts and circumstances antecedent to the issuance of
the warrant that are in themselves sufficient to induce a cautious man to rely upon them and act in
pursuance thereof (People v. Sy Juco, 64 Phil. 667).
This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20
SCRA 383) that probable cause "presupposes the introduction of competent proof that the party
against whom it is sought has performed particular acts, or committed specific omissions, violating a
given provision of our criminal laws."
The question of whether or not probable cause exists is one which must be decided in the light of the
conditions obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there
is no general formula or fixed rule for the determination of the existence of probable cause since, as
we have recognized in Luna v. Plaza (26 SCRA 310), the existence depends to a large degree upon
the finding or opinion of the judge conducting the examination. However, the findings of the judge
should not disregard the facts before him nor run counter to the clear dictates of reason. More so it is
plain that our country's ability to abide by international commitments is at stake.
The records show that the NBI agents at the hearing of the application for the warrants before
respondent court presented three witnesses under oath, sworn statements, and various exhibits in
the form of clothing apparels manufactured by Hemandas but carrying the trademark Lacoste. The
respondent court personally interrogated Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by
means of searching questions. After hearing the testimonies and examining the documentary
evidence, the respondent court was convinced that there were good and sufficient reasons for the
issuance of the warrant. And it then issued the warrant.
The respondent court, therefore, complied with the constitutional and statutory requirements for the
issuance of a valid search warrant. At that point in time, it was fully convinced that there existed
probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent
court executed a complete turnabout and declared that there was no probable cause to justify its
earlier issuance of the warrants.
True, the lower court should be given the opportunity to correct its errors, if there be any, but the
rectification must, as earlier stated be based on sound and valid grounds. In this case, there was no
compelling justification for the about face. The allegation that vital facts were deliberately
suppressed or concealed by the petitioner should have been assessed more carefully because the
object of the quashal was the return of items already seized and easily examined by the court. The
items were alleged to be fake and quite obviously would be needed as evidence in the criminal
prosecution. Moreover, an application for a search warrant is heard ex parte. It is neither a trial nor a
part of the trial. Action on these applications must be expedited for time is of the essence. Great
reliance has to be accorded by the judge to the testimonies under oath of the complainant and the
witnesses. The allegation of Hemandas that the applicant withheld information from the respondent
court was clearly no basis to order the return of the seized items.
Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of
registration of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such
registration is only in the Supplemental Register.
A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of
registration, of the registrant's exclusive right to use the same in connection with the goods,
business, or services specified in the certificate. Such a certificate of registration cannot be filed, with
effect, with the Bureau of Customs in order to exclude from the Philippines, foreign goods bearing
infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in
Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 513-515).
Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental
register in addition to the principal register but specifically directs that:
xxx xxx xxx
The certificates of registration for marks and trade names registered on the
supplemental register shall be conspicuously different from certificates issued for
marks and trade names on the principal register.
xxx xxx xxx
The reason is explained by a leading commentator on Philippine Commercial Laws:
The registration of a mark upon the supplemental register is not, as in the case of the
principal register, prima facie evidence of (1) the validity of registration; (2)
registrant's ownership of the mark; and (3) registrant's exclusive right to use the
mark. It is not subject to opposition, although it may be cancelled after its issuance.
Neither may it be the subject of interference proceedings. Registration on the
supplemental register is not constructive notice of registrant's claim of ownership. A
supplemental register is provided for the registration of marks which are not
registrable on the principal register because of some defects (conversely, defects
which make a mark unregistrable on the principal register, yet do not bar them from
the supplemental register.) (Agbayani, II Commercial Laws of the Philippines, 1978,
p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents,
Apr. 30, 1963);
Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or
has appropriated the trademark. By the very fact that the trademark cannot as yet be entered in the
Principal Register, all who deal with it should be on guard that there are certain defects, some
obstacles which the user must Still overcome before he can claim legal ownership of the mark or ask
the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive
for a party with nothing more than a registration in the Supplemental Register to posture before
courts of justice as if the registration is in the Principal Register.
The reliance of the private respondent on the last sentence of the Patent office action on application
Serial No. 30954 that "registrant is presumed to be the owner of the mark until after the registration
is declared cancelled" is, therefore, misplaced and grounded on shaky foundation, The supposed
presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of
Practice before the Philippine Patent Office in Trademark Cases but considering all the facts
ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is
devoid of factual basis. And even in cases where presumption and precept may factually be
reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa,
G.R. No. L10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his
competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La
Yebana Co. v. Chua Seco & Co., 14 Phil. 534).
By the same token, the argument that the application was premature in view of the pending case
before the Patent Office is likewise without legal basis.
The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the
nature of a prejudicial question which must first be definitely resolved.
Section 5 of Rule 111 of the Rules of Court provides that:
A petition for the suspension of the criminal action based upon the pendency of a
pre-judicial question in a civil case, may only be presented by any party before or
during the trial of the criminal action.
The case which suspends the criminal prosecution must be a civil case which is determinative of the
innocence or, subject to the availability of other defenses, the guilt of the accused. The pending case
before the Patent Office is an administrative proceeding and not a civil case. The decision of the
Patent Office cannot be finally determinative of the private respondent's innocence of the charges
against him.
In Flordelis v. Castillo (58 SCRA 301), we held that:
As clearly delineated in the aforecited provisions of the new Civil Code and the Rules
of Court, and as uniformly applied in numerous decisions of this Court, (Berbari v.
Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83 Phil. 427 (1949); People v.
Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil 482
(1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178;
Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In
Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial question was
held inapplicable because no criminal case but merely an administrative case and a
civil suit were involved. The Court, however, held that, in view of the peculiar
circumstances of that case, the respondents' suit for damages in the lower court was
premature as it was filed during the pendency of an administrative case against the
respondents before the POLCOM. 'The possibility cannot be overlooked,' said the
Court, 'that the POLCOM may hand down a decision adverse to the respondents, in
which case the damage suit will become unfounded and baseless for wanting in
cause of action.') the doctrine of pre-judicial question comes into play generally in a
situation where a civil action and a criminal action both penned and there exists in
the former an issue which must be preemptively resolved before the criminal action
may proceed, because howsoever the issue raised in the civil action is resolved
would be determinative juris et de jure of the guilt or innocence of the accused in the
criminal case.
In the present case, no civil action pends nor has any been instituted. What was pending was an
administrative case before the Patent Office.
Even assuming that there could be an administrative proceeding with exceptional or special
circumstances which render a criminal prosecution premature pending the promulgation of the
administrative decision, no such peculiar circumstances are present in this case.
Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and
affirmed by the Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram
Sadhwani (AC-G.R. No. SP-13356, June 17, 1983).
The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was
involved in the appellate court's decision. The Minister as the "implementing authority" under Article
6bis of the Paris Convention for the protection of Industrial Property instructed the Director of
Patents to reject applications for Philippine registration of signature and other world famous
trademarks by applicants other than its original owners or users. The brand "Lacoste" was
specifically cited together with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci,
Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey Beene, Lanvin,
and Ted Lapidus. The Director of Patents was likewise ordered to require Philippine registrants of
such trademarks to surrender their certificates of registration. Compliance by the Director of Patents
was challenged.
The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we
cite with approval sustained the power of the Minister of Trade to issue the implementing
memorandum and, after going over the evidence in the records, affirmed the decision of the Director
of Patents declaring La Chemise Lacoste &A. the owner of the disputed trademark and crocodile or
alligator device. The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza
stated:
In the case at bar, the Minister of Trade, as 'the competent authority of the country of
registration,' has found that among other well-known trademarks 'Lacoste' is the
subject of conflicting claims. For this reason, applications for its registration must be
rejected or refused, pursuant to the treaty obligation of the Philippines.
Apart from this finding, the annexes to the opposition, which La Chemise Lacoste
S.A. filed in the Patent Office, show that it is the owner of the trademark 'Lacoste'
and the device consisting of a representation of a crocodile or alligator by the prior
adoption and use of such mark and device on clothing, sports apparel and the like.
La Chemise Lacoste S.A, obtained registration of these mark and device and was in
fact issued renewal certificates by the French National Industry Property Office.
xxx xxx xxx
Indeed, due process is a rule of reason. In the case at bar the order of the Patent
Office is based not only on the undisputed fact of ownership of the trademark by the
appellee but on a prior determination by the Minister of Trade, as the competent
authority under the Paris Convention, that the trademark and device sought to be
registered by the appellant are well-known marks which the Philippines, as party to
the Convention, is bound to protect in favor of its owners. it would be to exalt form
over substance to say that under the circumstances, due process requires that a
hearing should be held before the application is acted upon.
The appellant cites section 9 of Republic Act No. 166, which requires notice and
hearing whenever an opposition to the registration of a trademark is made. This
provision does not apply, however, to situations covered by the Paris Convention,
where the appropriate authorities have determined that a well-known trademark is
already that of another person. In such cases, the countries signatories to the
Convention are obliged to refuse or to cancel the registration of the mark by any
other person or authority. In this case, it is not disputed that the trademark Lacoste is
such a well-known mark that a hearing, such as that provided in Republic Act No.
166, would be superfluous.
The issue of due process was raised and fully discussed in the appellate court's decision. The court
ruled that due process was not violated.
In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.
We have carefully gone over the records of all the cases filed in this Court and find more than
enough evidence to sustain a finding that the petitioner is the owner of the trademarks "LACOSTE",
"CHEMISE LACOSTE", the crocodile or alligator device, and the composite mark of LACOSTE and
the representation of the crocodile or alligator. Any pretensions of the private respondent that he is
the owner are absolutely without basis. Any further ventilation of the issue of ownership before the
Patent Office will be a superfluity and a dilatory tactic.
The issue of whether or not the trademark used by the private respondent is different from the
petitioner's trade mark is a matter of defense and will be better resolved in the criminal proceedings
before a court of justice instead of raising it as a preliminary matter in an administrative proceeding.
The purpose of the law protecting a trademark cannot be overemphasized. They are to point out
distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been
instrumental in bringing into market a superior article of merchandise, the fruit of his industry and
skill, and to prevent fraud and imposition (Etepha v. Director of Patents, 16 SCRA 495).
The legislature has enacted laws to regulate the use of trademarks and provide for the protection
thereof. Modern trade and commerce demands that depredations on legitimate trade marks of nonnationals including those who have not shown prior registration thereof should not be countenanced.
The law against such depredations is not only for the protection of the owner of the trademark but
also, and more importantly, for the protection of purchasers from confusion, mistake, or deception as
to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments
Corporation v. Director of Patents, 41 SCRA 50).
The law on trademarks and tradenames is based on the principle of business integrity and common
justice' This law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade
in every way and aims to foster, and not to hamper, competition, no one, especially a trader, is
justified in damaging or jeopardizing another's business by fraud, deceipt, trickery or unfair methods
of any sort. This necessarily precludes the trading by one dealer upon the good name and reputation
built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).
The records show that the goodwill and reputation of the petitioner's products bearing the trademark
LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the
Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that
he was the first registrant in the Supplemental Register of a trademark used in international
commerce and not belonging to him is to render nugatory the very essence of the law on trademarks
and tradenames.
We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon.
Roberto V Ongpin, et al. (G.R. No. 65659).
Actually, three other petitions involving the same trademark and device have been filed with this
Court.
In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for
the following relief:
IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions
of the respondent Court of January 3, 1983 and February 24, 1983 be nullified; and
that the Decision of the same respondent Court of June 30, 1983 be declared to be
the law on the matter; (b) that the Director of Patents be directed to issue the
corresponding registration certificate in the Principal Register; and (c) granting upon
the petitioner such other legal and equitable remedies as are justified by the
premises.
On December 5, 1983, we issued the following resolution:
Considering the allegations contained, issues raised and the arguments adduced in
the petition for review, the respondent's comment thereon, and petitioner's reply to
said comment, the Court Resolved to DENY the petition for lack of merit.
The Court further Resolved to CALL the attention of the Philippine Patent Office to
the pendency in this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A.
v. Hon. Oscar C. Fernandez and Gobindram Hemandas' which was given due course
on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled 'Gobindram
Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed
for lack of merit on September 12, 1983. Both petitions involve the same dispute over
the use of the trademark 'Chemise Lacoste'.
The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29)
prayed for the following:
I. On the petition for issuance of writ of preliminary injunction, an order be issued
after due hearing:
l. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao
Granados from further proceedings in the unfair competition charges pending with
the Ministry of Justice filed against petitioner;
2. Enjoining and restraining respondents Company and its attorneys-in-fact from
causing undue publication in newspapers of general circulation on their unwarranted
claim that petitioner's products are FAKE pending proceedings hereof; and
3. Enjoining and restraining respondents Company and its attorneys-in-fact from
sending further threatening letters to petitioner's customers unjustly stating that
petitioner's products they are dealing in are FAKE and threatening them with
confiscation and seizure thereof.
II. On the main petition, judgment be rendered:
l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping,
and restraining respondents from further committing the acts complained of;
2. Awarding and granting the issuance of the Writ of Mandamus, ordering and
compelling respondents National Bureau of Investigation, its aforenamed agents, and
State Prosecutor Estanislao Granados to immediately comply with the Order of the
Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila, dated
April 22, 1983, which directs the immediate return of the seized items under Search
Warrants Nos. 83-128 and 83-129;
3. Making permanent any writ of injunction that may have been previously issued by
this Honorable Court in the petition at bar: and
4. Awarding such other and further relief as may be just and equitable in the
premises.
As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a
motion for reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of
merit and declared the denial to be final.
Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.
In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of
the enforcement of the following memorandum of respondent Minister Roberto Ongpin:
MEMORANDUM:
FOR: THE DIRECTOR OF PATENTS
Philippine Patent Office
xxx xxx xxx
Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and
adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that 'such rulemaking and adjudicatory powers should be revitalized in order that the Minister of Trade and
Industry can ...apply more swift and effective solutions and remedies to old and new problems ...
such as the infringement of internationally-known tradenames and trademarks ...'and in view of the
decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus
RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983] which affirms the validity of the
MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our
obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL
PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to
implement measures necessary to effect compliance with our obligations under said convention in
general, and, more specifically, to honor our commitment under Section 6 bis thereof, as follows:
1. Whether the trademark under consideration is well-known in the Philippines or is a
mark already belonging to a person entitled to the benefits of the CONVENTION, this
should be established, pursuant to Philippine Patent Office procedures in inter partes
and ex parte cases, according to any of the following criteria or any combination
thereof:
(a) a declaration by the Minister of Trade and Industry that' the trademark being
considered is already well-known in the Philippines such that permission for its use
by other than its original owner will constitute a reproduction, imitation, translation or
other infringement;
(b) that the trademark is used in commerce internationally, supported by proof that
goods bearing the trademark are sold on an international scale, advertisements, the
establishment of factories, sales offices, distributorships, and the like, in different
countries, including volume or other measure of international trade and commerce;
(c) that the trademark is duly registered in the industrial property office(s) of another
country or countries, taking into consideration the dates of such registration;
(d) that the trademark has been long established and obtained goodwill and general
international consumer recognition as belonging to one owner or source;
(e) that the trademark actually belongs to a party claiming ownership and has the
right to registration under the provisions of the aforestated PARIS CONVENTION.
2. The word trademark, as used in this MEMORANDUM, shall include tradenames,
service marks, logos, signs, emblems, insignia or other similar devices used for
Identification and recognition by consumers.
3. The Philippine Patent Office shall refuse all applications for, or cancel the
registration of, trademarks which constitute a reproduction, translation or imitation of
a trademark owned by a person, natural or corporate, who is a citizen of a country
signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL
PROPERTY.
4. The Philippine Patent Office shall give due course to the Opposition in cases
already or hereafter filed against the registration of trademarks entitled to protection
of Section 6 bis of said PARIS CONVENTION as outlined above, by remanding
applications filed by one not entitled to such protection for final disallowance by the
Examination Division.
5. All pending applications for Philippine registration of signature and other world
famous trademarks filed by applicants other than their original owners or users shall
be rejected forthwith. Where such applicants have already obtained registration
contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they
shall be directed to surrender their Certificates of Registration to the Philippine
Patent Office for immediate cancellation proceedings.
6. Consistent with the foregoing, you are hereby directed to expedite the hearing and
to decide without delay the following cases pending before your Office:
1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for
the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram
Hemandas, assignee of Hemandas and Company;
2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co.
against the registration of the trademark Lacoste sought by La Chemise Lacoste,
S.A.;
3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A.
against the registration of trademark Crocodile Device and Skiva sought by one
Wilson Chua.
Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be
patently without merit and accordingly deny it due course.
In complying with the order to decide without delay the cases specified in the memorandum, the
Director of Patents shall limit himself to the ascertainment of facts in issues not resolved by this
decision and apply the law as expounded by this Court to those facts.
One final point. It is essential that we stress our concern at the seeming inability of law enforcement
officials to stem the tide of fake and counterfeit consumer items flooding the Philippine market or
exported abroad from our country. The greater victim is not so much the manufacturer whose
product is being faked but the Filipino consuming public and in the case of exportations, our image
abroad. No less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to
strengthen the powers of the Minister of Trade and Industry for the protection of consumers, stated
that, among other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the
infringement of internationally known tradenames and trademarks, and the unfair trade practices of
business firms has reached such proportions as to constitute economic sabotage. We buy a kitchen
appliance, a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky,
and items of clothing like jeans, T-shirts, neck, ties, etc. — the list is quite length — and pay good
money relying on the brand name as guarantee of its quality and genuine nature only to explode in
bitter frustration and genuine nature on helpless anger because the purchased item turns out to be a
shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges all over the
country are well advised to remember that court processes should not be used as instruments to,
unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it
seeks to protect the Filipino consuming public and frustrate executive and administrative
implementation of solemn commitments pursuant to international conventions and treaties.
WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22,
1983 of the respondent regional trial court is REVERSED and SET ASIDE. Our Temporary
Restraining Order dated April 29, 1983 is ma(i.e. PERMANENT. The petition in G.R. NO. 65659 is
DENIED due course for lack of merit. Our Temporary Restraining Order dated December 5, 1983 is
LIFTED and SET ASIDE, effective immediately.
SO ORDERED.
G.R. No. 75067 February 26, 1988
PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner
vs.
THE INTERMEDIATE APPELLATE COURT and MIL-ORO MANUFACTURING
CORPORATION, respondents.
GUTIERREZ, JR., J.:
This is a petition for review by way of certiorari of the Court of Appeals' decision which reversed the order of the Regional Trial Court and
dismissed the civil case filed by the petitioner on the grounds of litis pendentia and lack of legal capacity to sue.
On July 25, 1985, the petitioner, a foreign corporation duly organized and existing under the laws of
the Federal Republic of Germany and the manufacturer and producer of "PUMA PRODUCTS," filed
a complaint for infringement of patent or trademark with a prayer for the issuance of a writ of
preliminary injunction against the private respondent before the Regional Trial Court of Makati.
Prior to the filing of the said civil suit, three cases were pending before the Philippine Patent Office,
namely:
Inter Partes Case No. 1259 entitled 'PUMA SPORTSCHUHFABRIKEN v. MIL-ORO
MANUFACTURING CORPORATION, respondent-applicant which is an opposition to
the registration of petitioner's trademark 'PUMA and DEVICE' in the PRINCIPAL
REGISTER;
Inter Partes Case No. 1675 similarly entitled, 'PUMA SPORTSCHUHFABRIKEN
RUDOLF DASSLER, K.G., petitioner, versus MIL-ORO MANUFACTURING
CORPORATION, respondent-registrant,' which is a case for the cancellation of the
trademark registration of the petitioner; and
Inter Partes Case No. 1945 also between the same parties this time the petitioner
praying for the cancellation of private respondent's Certificate of Registration No.
26875 (pp. 40-41, 255, Rollo) (pp. 51 -52, Rollo)
On July 31, 1985, the trial court issued a temporary restraining order, restraining the private
respondent and the Director of Patents from using the trademark "PUMA' or any reproduction,
counterfeit copy or colorable imitation thereof, and to withdraw from the market all products bearing
the same trademark.
On August 9, 1985, the private respondent filed a motion to dismiss on the grounds that the
petitioners' complaint states no cause of action, petitioner has no legal personality to sue, and litis
pendentia.
On August 19, 1985, the trial court denied the motion to dismiss and at the same time granted the
petitioner's application for a writ of injunction. The private respondents appealed to the Court of
Appeals.
On June 23, 1986, the Court of Appeals reversed the order of the trial court and ordered the
respondent judge to dismiss the civil case filed by the petitioner.
In reversing the order of the trial court, the Court of Appeals ruled that the requisites of lis
pendens as ground for the motion to dismiss have been met. It said:
Obviously, the parties are Identical. They are the same protagonists. As to the
second requisite, which is Identity of rights and reliefs prayed for, both sides maintain
that they are the rightful owners of the trademark "PUMA" for socks and belts such
that both parties seek the cancellation of the trademark of the other (see prayer in
private respondent's complaint, pp, 54-55, Rollo, Annex "A" to the Petition).
Inevitably, in either the lower court or in the Patent Office, there is a need to resolve
the issue as to who is the rightful owner of the TRADEMARK 'PUMA' for socks and
belts.After all,the right to register a trademark must be based on ownership thereof
(Operators Inc. v. Director of Patents, L-17910, Oct. 29,1965,15 SCRA 147).
Ownership of the trademark is an essential requisite to be proved by the applicant
either in a cancellation case or in a suit for infringement of trademark. The relief
prayed for by the parties in Inter Partes Cases Nos. 1259, 1675 and 1945 and Civil
Case No. 11189 before respondent court seek for the cancellation of usurper's
trademark, and the right of the legal owner to have exclusive use of said trademark.
From the totality of the obtaining circumstances, the rights of the respective parties
are dependent upon the resolution of a single issue, that is, the rightful ownership of
the trademark in question. The second requisite needed to justify a motion to dismiss
based on lis pendens is present.
As to the third requisite, the decisions and orders of administrative agencies
rendered pursuant to their quasi-judicial authority have upon their finality the
character of res judicata (Brilliantes v. Castro, 99 Phil. 497). The rule which forbids
the re-opening of a matter once judicially determined by competent authority applies
as well to judicial acts of public executive and administrative officers and boards
acting within their jurisdiction as to the judgments of Courts having general judicial
powers (Brilliantes vs. Castro, supra). It may be recalled that the resolution and
determination of the issue on ownership are both within the jurisdiction of the Director
of Patents and the Regional Trial Court (Sec 25, RA 166). It would thus be confusing
for two (2) different forums to hear the same case and resolve a main and
determinative issue with both forums risking the possibility of arriving at different
conclusions. In the construction of laws and statutes regarding jurisdiction, one must
interpret them in a complementary manner for it is presumed that the legislature does
not intend any absurdity in the laws it makes (Statutory Construction, Martin, p. 133).
Ms is precisely the reason why both decisions of the Director of Patents and
Regional Trial Court are appealable to the Intermediate Appellate Court (Sec. 9, BP
129), as both are co-equal in rank regarding the cases that may fall within their
jurisdiction.
The record reveals that on March 31, 1986, the Philippine Patent Office rendered a
decision in Inter Partes Cases Nos. 1259 and 1675 whereby it concluded that
petitioner is the prior and actual adaptor of the trademark 'PUMA and DEVICE used
on sports socks and belts, and that MIL-ORO CORPORATION is the rightful owner
thereof. ... (pp. 6-7, CA — decision, pp. 51-52, Rollo)
With regard to the petitioner's legal capacity to sue, the Court of Appeals likewise held that it had no
such capacity because it failed to allege reciprocity in its complaint:
As to private respondent's having no legal personality to sue, the record discloses
that private respondent was suing under Sec. 21-A of Republic Act No. 166, as
amended (p. 50, Annex "A", Petition). This is the exception to the general rule that a
foreign corporation doing business in the Philippines must secure a license to do
business before said foreign corporation could maintain a court or administrative suit
(Sec. 133, Corporation Code, in relation to Sec. 21-A, RA 638, as amended).
However, there are some conditions which must be met before that exception could
be made to apply, namely: (a) the trademark of the suing corporation must be
registered in the Philippines, or that it be the assignee thereof: and (b) that there
exists a reciprocal treatment to Philippine Corporations either by law or convention
by the country of origin of the foreign corporation (Sec. 21-A Trademark Law).
Petitioner recognizes that private respondent is the holder of several certificates of
registration, otherwise, the former would not have instituted cancellation proceedings
in the Patent's Office. Petitioner actually zeroes on the second requisite provided by
Section 21-A of the Trademark Law which is the private respondent's failure to allege
reciprocity in the complaint. ...
Citing the case of Leviton Industries v. Salvador (114 SCRA 420), it further ruled:
Failure to allege reciprocity, it being an essential fact under the trademark law
regarding its capacity to sue before the Philippine courts, is fatal to the foreign
corporations' cause. The Concurring Opinion of Chief Justice Aquino on the same
case is more emphatic when he said:
Respondent Leviton Manufacturing Co. Inc., alleged in par. 2 of its
complaint for unfair competition that its action 'is being filed under the
provisions of Section 21-A of Republic Act No. 166, as amended.'
Respondent is bound by the allegation in its complaint. It cannot sue
under Section 21-A because it has not complied with the
requirements hereof that (1) its trademark Leviton has been
registered with the Patent Office and (2) that it should show that the
State of New York grants to Philippine Corporations the privilege to
bring an action for unfair competition in that state. Respondent
'Leviton has to comply with those requirements before it can be
allowed to maintain an action for unfair competition. (p. 9, CA —
decision). (p. 55, Rollo).
The Court of Appeals further ruled that in issuing the writ of preliminary injunction, the trial court
committed grave abuse of discretion because it deprived the private respondent of its day in court as
the latter was not given the chance to present its counter-evidence.
In this petition for review, the petitioner contends that the Court of appeals erred in holding that: (1) it
had no legal capacity to sue; (2) the doctrine of lis pendens is applicable as a ground for dismissing
the case and (3) the writ of injunction was improperly issued.
Petitioner maintains that it has substantially complied with the requirements of Section 21-A of
Republic Act R.A. No. 166, as amended. According to the petitioner, its complaint specifically
alleged that it is not doing business in the Philippines and is suing under the said Repulbic Act; that
Section 21-A thereof provides that "the country of which the said corporation or juristic person is a
citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate
or juristic persons of the Philippines" but does not mandatorily require that such reciprocity between
the Federal Republic of Germany and the Philippines be pleaded; that such reciprocity arrangement
is embodied in and supplied by the Union Convention for the Protection of Industrial Property Paris
Convention) to which both the Philippines and Federal Republic of Germany are signatories and that
since the Paris 'Convention is a treaty which, pursuant to our Constitution, forms part of the law of
the land, our courts are bound to take judicial notice of such treaty, and, consequently, this fact need
not be averred in the complaint.
We agree.
In the leading case of La Chemise Lacoste, S.A .v. Fernandez, (129 SCRA 373), we ruled:
But even assuming the truth of the private respondents allegation that the petitioner
failed to allege material facto in its petition relative to capacity to sue, the petitioner
may still maintain the present suit against respondent Hernandes. As early as 1927,
this Court was, and it still is, of the view that a foreign corporation not doing business
in the Philippines needs no license to sue before Philippine courts for infringement of
trademark and unfair competition. Thus, in Western Equipment and Supply Co. v.
Reyes (51 Phil. 11 5), this Court held that a foreign corporation which has never
done any business in the Philippines and which is unlicensed and unregistered to do
business here, but is widely and favorably known in the Philippines through the use
therein of its products bearing its corporate and tradename, has a legal right to
maintain an action in the Philippines to restrain the residents and inhabitants thereof
from organizing a corporation therein bearing the same name as the foreign
corporation, when it appears that they have personal knowledge of the existence of
such a foreign corporation, and it is apparent that the purpose of the proposed
domestic corporation is to deal and trade in the same goods as those of the foreign
corporation.
Quoting the Paris Convention and the case of Vanity Fair Mills, Inc. v. T. Eaton, Co. (234 F. 2d 633),
this Court further said:
By the same token, the petitioner should be given the same treatment in the
Philippines as we make available to our own citizens. We are obligated to assure to
nationals of 'countries of the Union' an effective protection against unfair competition
in the same way that they are obligated to similarly protect Filipino citizens and firms.
Pursuant to this obligation, the Ministry of Trade on November 20,1980 issued a
memorandum addressed to the Director of the Patents Office directing the latter -xxx xxx xxx
... [T]o reject all pending applications for Philippine registration of signature and other
world famous trademarks by applicants other than its original owners or users.
The conflicting claims over internationally known trademarks involve such name
brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci,
Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey
Beene, Lanvin and Ted Lapidus.
It is further directed that, in cases where warranted, Philippine registrants of such
trademarks should be asked to surrender their certificates of registration, if any, to
avoid suits for damages and other legal action by the trademarks' foreign or local
owners or original users.
The memorandum is a clear manifestation of our avowed adherence to a policy of
cooperation and amity with an nations. It is not, as wrongly alleged by the private
respondent, a personal policy of Minister Luis Villafuerte which expires once he
leaves the Ministry of trade. For a treaty or convention is not a mere moral obligation
to be enforced or not at the whims of an incumbent head of a Ministry. It creates a
legally binding obligation on the parties founded on the generally accepted principle
of international law of pacta sunt servanda which has been adopted as part of the
law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director
of Patents of his legal duty to obey both law and treaty. It must also be obeyed. (at
pp. 389-390, La Chemise Lacoste, S.A. v. Fernandez, supra).
In the case of of Cerverse Rubber Corporation V. Universal Rubber Products, Inc. (174 SCRA 165),
we likewise re-aafirmed our adherence to the Paris Convention:
The ruling in the aforecited case is in consonance with the Convention of Converse
Rubber Corporation v. Universal Rubber Products, Inc. (I 47 SCRA 165), we likewise
re-affirmed our adherence to the Paris Convention: the Union of Paris for the
Protection of Industrial Property to which the Philippines became a party on
September 27, 1965. Article 8 thereof provides that 'a trade name [corporation name]
shall be protected in all the countries of the Union without the obligation of filing or
registration, whether or not it forms part of the trademark.'
The object of the Convention is to accord a national of a member nation extensive
protection 'against infringement and other types of unfair competition [Vanity Fair
Mills, Inc. v. T. Eaton Co., 234 F. 2d 633]." (at p. 165)
The mandate of the aforementioned Convention finds implementation in Section 37
of RA No. 166, otherwise known as the trademark Law:
Rights of Foreign Registrants. — Persons who are nationals of, domiciled in, or have
a bona fide or effective business or commercial establishment in any foreign country,
which is a party to an international convention or treaty relating to marks or
tradenames on the represssion of unfair competition to which the Philippines may be
party, shall be entitled to the benefits and subject to the provisions of this Act ...
Tradenames of persons described in the first paragraph of this section shall be
protected without the obligation of filing or registration whether or not they form part
of marks.
We, therefore, hold that the petitioner had the legal capacity to file the action below.
Anent the issue of lis pendens as a ground for a motion to dismiss, the petitioner submits that the
relief prayed for in its civil action is different from the relief sought in the Inter Partes cases. More
important, however, is the fact that for lis pendens to be a valid ground for the dismissal of a case,
the other case pending between the same parties and having the same cause must be a court
action. As we have held in Solancho v. Ramos (19 SCRA 848):
As noted above, the defendants contend that the pendency of an administrative
between themselves and the plaintiff before the Bureau of Lands is a sufficient
ground to dismiss the action. On the other hand, the plaintiff, believing that this
ground as interposed by the defendants is a sufficient ground for the dismissal of his
complaint, filed a motion to withdraw his free patent application No. 16649.
This is not what is contemplated under the law because under section 1(d), Rule 16
(formerly Rule 8) of the Rules of Court, one of the grounds for the dismissal of an
action is that "there is another action pending between the same parties for the same
cause." Note that the Rule uses the phrase another action. This phrase should be
construed in line with Section 1 of Rule 2, which defines the word action, thus-Action means an ordinary suit in a court of justice by which one party
prosecutes another for the enforcement or protection of alright, or the
prevention or redress of a wrong. Every other remedy is a special
proceeding.
It is,therefore,very clear that the Bureau of Land is not covered under the
aforementioned provisions of the Rules of Court. (at p. 851)
Thus, the Court of Appeals likewise erred in holding that the requisites of lis pendens were present
so as to justify the dismissal of the case below.
As regards the propriety of the issuance of the writ of preliminary injunuction, the records show that
herein private respondent was given the opportunity to present its counter-evidence against the
issuance thereof but it intentionally refused to do so to be consistent with its theory that the civil case
should be dismissed in the first place.
Considering the fact that "PUMA" is an internationally known brand name, it is pertinent to reiterate
the directive to lower courts, which equally applies to administrative agencies, found in La Chemise
Lacoste, S.A. v. Fernandez, supra):
One final point. It is essential that we stress our concern at the seeming inability of
law enforcement officials to stem the tide of fake and counterfeit consumer items
flooding the Philippine market or exported abroad from our country. The greater
victim is not so much the manufacturer whose product is being faked but the Filipino
consuming public and in the case of exportations, our image abroad. No less than
the President, in issuing Executive Order No. 913 dated October 7, 1983 to
strengthen the powers of the Minister of Trade and Industry for the protection of
consumers, stated that, among other acts, the dumping of substandard, imitated,
hazardous, and cheap goods, the infringement of internationally known tradenames
and trademarks, and the unfair trade Practices of business firms have reached such
proportions as to constitute economic sabotage. We buy a kitchen appliance, a
household tool, perfume, face powder, other toilet articles, watches, brandy or
whisky, and items of clothing like jeans, T-shirts, neckties, etc. — the list is quite
lengthy — pay good money relying on the brand name as guarantee of its quality and
genuine nature only to explode in bitter frustration and helpless anger because the
purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit,
of the quality product. Judges all over the country are well advised to remember that
court processes should not be used as instruments to, unwittingly or otherwise, aid
counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect
the Filipino consuming public and frustrate executive and administrative
implementation of solemn commitments pursuant to international conventions and
treaties. (at p. 403)
WHEREFORE, the appealed decision of the Court of Appeals dated June 23, 1986 is REVERSED
and SET ASIDE and the order of the Regional Trial Court of Makati is hereby Reinstated.
SO ORDERED.
Protection of Undisclosed Information
G.R. No. 172835
December 13, 2007
AIR PHILIPPINES CORPORATION, Petitioner,
vs.
PENNSWELL, INC. Respondent.
DECISION
CHICO-NAZARIO, J.:
Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the
Rules of Court, the nullification of the 16 February 2006 Decision1 and the 25 May 2006
Resolution2 of the Court of Appeals in CA-G.R. SP No. 86329, which affirmed the Order3 dated 30
June 2004 of the Regional Trial Court (RTC), Makati City, Branch 64, in Civil Case No. 00-561.
Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air
transportation services. On the other hand, respondent Pennswell, Inc. was organized to engage in
the business of manufacturing and selling industrial chemicals, solvents, and special lubricants.
On various dates, respondent delivered and sold to petitioner sundry goods in trade, covered by
Sales Invoices No. 8846,4 9105,5 8962,6 and 8963,7 which correspond to Purchase Orders No. 6433,
6684, 6634 and 6633, respectively. Under the contracts, petitioner’s total outstanding obligation
amounted to ₱449,864.98 with interest at 14% per annum until the amount would be fully paid. For
failure of the petitioner to comply with its obligation under said contracts, respondent filed a
Complaint8 for a Sum of Money on 28 April 2000 with the RTC.
In its Answer,9 petitioner contended that its refusal to pay was not without valid and justifiable
reasons. In particular, petitioner alleged that it was defrauded in the amount of ₱592,000.00 by
respondent for its previous sale of four items, covered by Purchase Order No. 6626. Said items were
misrepresented by respondent as belonging to a new line, but were in truth and in fact, identical with
products petitioner had previously purchased from respondent. Petitioner asserted that it was
deceived by respondent which merely altered the names and labels of such goods. Petitioner
specifically identified the items in question, as follows:
Label/Description
Item No.
Amount
P.O.
Date
1. a. Anti-Friction Fluid
b. Excellent Rust Corrosion
(fake)
MPL-800
MPL-008
153,941.40
155,496.00
5714
5888
05/20/99
06/20/99
2. a. Contact Grease
b. Connector Grease (fake)
COG #2
CG
115,236.00
230,519.52
5540
6327
04/26/99
08/05/99
3. a. Trixohtropic Grease
b. Di-Electric Strength
Protective Coating (fake)
EPC
EPC#2
81,876.96
81,876.96
4582
5446
01/29/99
04/21/99
4. a. Dry Lubricant
b. Anti-Seize Compound
(fake)
ASC-EP
ASC-EP
2000
87,346.52
124,108.10
5712
4763 &
5890
05/20/99
02/16/99 &
06/24/99
According to petitioner, respondent’s products, namely Excellent Rust Corrosion, Connector Grease,
Electric Strength Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction
Fluid, Contact Grease, Thixohtropic Grease, and Dry Lubricant, respectively. Petitioner asseverated
that had respondent been forthright about the identical character of the products, it would not have
purchased the items complained of. Moreover, petitioner alleged that when the purported fraud was
discovered, a conference was held between petitioner and respondent on 13 January 2000, whereby
the parties agreed that respondent would return to petitioner the amount it previously paid. However,
petitioner was surprised when it received a letter from the respondent, demanding payment of the
amount of ₱449,864.94, which later became the subject of respondent’s Complaint for Collection of
a Sum of Money against petitioner.
During the pendency of the trial, petitioner filed a Motion to Compel10 respondent to give a detailed
list of the ingredients and chemical components of the following products, to wit: (a) Contact Grease
and Connector Grease; (b) Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c)
Dry Lubricant and Anti-Seize Compound.11 It appears that petitioner had earlier requested the
Philippine Institute of Pure and Applied Chemistry (PIPAC) for the latter to conduct a comparison of
respondent’s goods.
On 15 March 2004, the RTC rendered an Order granting the petitioner’s motion. It disposed, thus:
The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner] Air Philippines
Corporation[,] a detailed list of the ingredients or chemical components of the following chemical
products:
a. Contact Grease to be compared with Connector Grease;
b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating; and
c. Dry Lubricant to be compared with Anti-Seize Compound[.]
[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order to submit to
[petitioner] Air Philippines Corporation the chemical components of all the above-mentioned
products for chemical comparison/analysis.12
Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled
to disclose the chemical components sought because the matter is confidential. It argued that what
petitioner endeavored to inquire upon constituted a trade secret which respondent cannot be forced
to divulge. Respondent maintained that its products are specialized lubricants, and if their
components were revealed, its business competitors may easily imitate and market the same types
of products, in violation of its proprietary rights and to its serious damage and prejudice.
The RTC gave credence to respondent’s reasoning, and reversed itself. It issued an Order dated 30
June 2004, finding that the chemical components are respondent’s trade secrets and are privileged
in character. A priori, it rationalized:
The Supreme Court held in the case of Chavez vs. Presidential Commission on Good Government,
299 SCRA 744, p. 764, that "the drafters of the Constitution also unequivocally affirmed that aside
from national security matters and intelligence information, trade or industrial secrets (pursuant to
the Intellectual Property Code and other related laws) as well as banking transactions (pursuant to
the Secrecy of Bank Deposit Act) are also exempted from compulsory disclosure."
Trade secrets may not be the subject of compulsory disclosure. By reason of [their] confidential and
privileged character, ingredients or chemical components of the products ordered by this Court to be
disclosed constitute trade secrets lest [herein respondent] would eventually be exposed to
unwarranted business competition with others who may imitate and market the same kinds of
products in violation of [respondent’s] proprietary rights. Being privileged, the detailed list of
ingredients or chemical components may not be the subject of mode of discovery under Rule 27,
Section 1 of the Rules of Court, which expressly makes privileged information an exception from its
coverage.13
Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition for Certiorari
under Rule 65 of the Rules of Court with the Court of Appeals, which denied the Petition and
affirmed the Order dated 30 June 2004 of the RTC.
The Court of Appeals ruled that to compel respondent to reveal in detail the list of ingredients of its
lubricants is to disregard respondent’s rights over its trade secrets. It was categorical in declaring
that the chemical formulation of respondent’s products and their ingredients are embraced within the
meaning of "trade secrets." In disallowing the disclosure, the Court of Appeals expounded, thus:
The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989]) held that trade
secrets and confidential, commercial and financial information are exempt from public scrutiny. This
is reiterated in Chavez v. Presidential Commission on Good Government (299 SCRA 744 [1998])
where the Supreme Court enumerated the kinds of information and transactions that are recognized
as restrictions on or privileges against compulsory disclosure. There, the Supreme Court explicitly
stated that:
"The drafters of the Constitution also unequivocally affirmed that, aside from national security
matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property
Code and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank
Deposits Act) re also exempt from compulsory disclosure."
It is thus clear from the foregoing that a party cannot be compelled to produce, release or disclose
documents, papers, or any object which are considered trade secrets.
In the instant case, petitioner [Air Philippines Corporation] would have [respondent] Pennswell
produce a detailed list of ingredients or composition of the latter’s lubricant products so that a
chemical comparison and analysis thereof can be obtained. On this note, We believe and so hold
that the ingredients or composition of [respondent] Pennswell’s lubricants are trade secrets which it
cannot be compelled to disclose.
[Respondent] Pennswell has a proprietary or economic right over the ingredients or components of
its lubricant products. The formulation thereof is not known to the general public and is peculiar only
to [respondent] Pennswell. The legitimate and economic interests of business enterprises in
protecting their manufacturing and business secrets are well-recognized in our system.
[Respondent] Pennswell has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information against the public. Otherwise, such
information can be illegally and unfairly utilized by business competitors who, through their access to
[respondent] Pennswell’s business secrets, may use the same for their own private gain and to the
irreparable prejudice of the latter.
xxxx
In the case before Us, the alleged trade secrets have a factual basis, i.e., it comprises of the
ingredients and formulation of [respondent] Pennswell’s lubricant products which are unknown to the
public and peculiar only to Pennswell.
All told, We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part
of public respondent Judge in finding that the detailed list of ingredients or composition of the subject
lubricant products which petitioner [Air Philippines Corporation] seeks to be disclosed are trade
secrets of [respondent] Pennswell; hence, privileged against compulsory disclosure.14
Petitioner’s Motion for Reconsideration was denied.
Unyielding, petitioner brought the instant Petition before us, on the sole issue of:
WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH PREVAILING LAWS
AND JURISPRUDENCE WHEN IT UPHELD THE RULING OF THE TRIAL COURT THAT THE
CHEMICAL COMPONENTS OR INGREDIENTS OF RESPONDENT’S PRODUCTS ARE TRADE
SECRETS OR INDUSTRIAL SECRETS THAT ARE NOT SUBJECT TO COMPULSORY
DISCLOSURE.15
Petitioner seeks to convince this Court that it has a right to obtain the chemical composition and
ingredients of respondent’s products to conduct a comparative analysis of its products. Petitioner
assails the conclusion reached by the Court of Appeals that the matters are trade secrets which are
protected by law and beyond public scrutiny. Relying on Section 1, Rule 27 of the Rules of Court,
petitioner argues that the use of modes of discovery operates with desirable flexibility under the
discretionary control of the trial court. Furthermore, petitioner posits that its request is not done in
bad faith or in any manner as to annoy, embarrass, or oppress respondent.
A trade secret is defined as a plan or process, tool, mechanism or compound known only to its
owner and those of his employees to whom it is necessary to confide it.16 The definition also extends
to a secret formula or process not patented, but known only to certain individuals using it in
compounding some article of trade having a commercial value.17 A trade secret may consist of any
formula, pattern, device, or compilation of information that: (1) is used in one's business; and (2)
gives the employer an opportunity to obtain an advantage over competitors who do not possess the
information.18 Generally, a trade secret is a process or device intended for continuous use in the
operation of the business, for example, a machine or formula, but can be a price list or catalogue or
specialized customer list.19 It is indubitable that trade secrets constitute proprietary rights. The
inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which
may be treated as property, and ordinarily an injunction will be granted to prevent the disclosure of
the trade secret by one who obtained the information "in confidence" or through a "confidential
relationship."20 American jurisprudence has utilized the following factors21 to determine if an
information is a trade secret, to wit:
(1) the extent to which the information is known outside of the employer's business;
(2) the extent to which the information is known by employees and others involved in the
business;
(3) the extent of measures taken by the employer to guard the secrecy of the information;
(4) the value of the information to the employer and to competitors;
(5) the amount of effort or money expended by the company in developing the information;
and
(6) the extent to which the information could be easily or readily obtained through an
independent source.22
In Cocoland Development Corporation v. National Labor Relations Commission,23 the issue was the
legality of an employee’s termination on the ground of unauthorized disclosure of trade secrets. The
Court laid down the rule that any determination by management as to the confidential nature of
technologies, processes, formulae or other so-called trade secrets must have a substantial factual
basis which can pass judicial scrutiny. The Court rejected the employer’s naked contention that its
own determination as to what constitutes a trade secret should be binding and conclusive upon the
NLRC. As a caveat, the Court said that to rule otherwise would be to permit an employer to label
almost anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss
an employee on the pretext that the latter somehow disclosed a trade secret, even if in fact there be
none at all to speak of.24 Hence, in Cocoland, the parameters in the determination of trade secrets
were set to be such substantial factual basis that can withstand judicial scrutiny.
The chemical composition, formulation, and ingredients of respondent’s special lubricants are trade
secrets within the contemplation of the law. Respondent was established to engage in the business
of general manufacturing and selling of, and to deal in, distribute, sell or otherwise dispose of goods,
wares, merchandise, products, including but not limited to industrial chemicals, solvents, lubricants,
acids, alkalies, salts, paints, oils, varnishes, colors, pigments and similar preparations, among
others. It is unmistakable to our minds that the manufacture and production of respondent’s products
proceed from a formulation of a secret list of ingredients. In the creation of its lubricants, respondent
expended efforts, skills, research, and resources. What it had achieved by virtue of its investments
may not be wrested from respondent on the mere pretext that it is necessary for petitioner’s defense
against a collection for a sum of money. By and large, the value of the information to respondent is
crystal clear. The ingredients constitute the very fabric of respondent’s production and business. No
doubt, the information is also valuable to respondent’s competitors. To compel its disclosure is to
cripple respondent’s business, and to place it at an undue disadvantage. If the chemical composition
of respondent’s lubricants are opened to public scrutiny, it will stand to lose the backbone on which
its business is founded. This would result in nothing less than the probable demise of respondent’s
business. Respondent’s proprietary interest over the ingredients which it had developed and
expended money and effort on is incontrovertible. Our conclusion is that the detailed ingredients
sought to be revealed have a commercial value to respondent. Not only do we acknowledge the fact
that the information grants it a competitive advantage; we also find that there is clearly a glaring
intent on the part of respondent to keep the information confidential and not available to the prying
public.
We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect
documents or things upon a showing of good cause before the court in which an action is pending.
Its entire provision reads:
SECTION 1. Motion for production or inspection order. – Upon motion of any party showing good
cause therefore, the court in which an action is pending may (a) order any party to produce and
permit the inspection and copying or photographing, by or on behalf of the moving party, of any
designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not
privileged, which constitute or contain evidence material to any matter involved in the action and
which are in his possession, custody or control; or (b) order any party to permit entry upon
designated land or other property in his possession or control for the purpose of inspecting,
measuring, surveying, or photographing the property or any designated relevant object or operation
thereon. The order shall specify the time, place and manner of making the inspection and taking
copies and photographs, and may prescribe such terms and conditions as are just.
A more than cursory glance at the above text would show that the production or inspection of
documents or things as a mode of discovery sanctioned by the Rules of Court may be availed of by
any party upon a showing of good cause therefor before the court in which an action is pending. The
court may order any party: a) to produce and permit the inspection and copying or photographing of
any designated documents, papers, books, accounts, letters, photographs, objects or tangible
things, which are not privileged;25 which constitute or contain evidence material to any matter
involved in the action; and which are in his possession, custody or control; or b) to permit entry upon
designated land or other property in his possession or control for the purpose of inspecting,
measuring, surveying, or photographing the property or any designated relevant object or operation
thereon.
Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters,
photographs, objects or tangible things that may be produced and inspected should not be
privileged.26 The documents must not be privileged against disclosure.27 On the ground of public
policy, the rules providing for production and inspection of books and papers do not authorize the
production or inspection of privileged matter; that is, books and papers which, because of their
confidential and privileged character, could not be received in evidence.28 Such a condition is in
addition to the requisite that the items be specifically described, and must constitute or contain
evidence material to any matter involved in the action and which are in the party’s possession,
custody or control.
Section 2429 of Rule 130 draws the types of disqualification by reason of privileged communication,
to wit: (a) communication between husband and wife; (b) communication between attorney and
client; (c) communication between physician and patient; (d) communication between priest and
penitent; and (e) public officers and public interest. There are, however, other privileged matters that
are not mentioned by Rule 130. Among them are the following: (a) editors may not be compelled to
disclose the source of published news; (b) voters may not be compelled to disclose for whom they
voted; (c) trade secrets; (d) information contained in tax census returns; and (d) bank deposits. 30
We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals which upheld the
finding of the RTC that there is substantial basis for respondent to seek protection of the law for its
proprietary rights over the detailed chemical composition of its products.
That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction
affords to trade secrets is evident in our laws. The Interim Rules of Procedure on Government
Rehabilitation, effective 15 December 2000, which applies to: (1) petitions for rehabilitation filed by
corporations, partnerships, and associations pursuant to Presidential Decree No. 902-A,31 as
amended; and (2) cases for rehabilitation transferred from the Securities and Exchange Commission
to the RTCs pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation
Code, expressly provides that the court may issue an order to protect trade secrets or other
confidential research, development, or commercial information belonging to the debtor.32 Moreover,
the Securities Regulation Code is explicit that the Securities and Exchange Commission is not
required or authorized to require the revelation of trade secrets or processes in any application,
report or document filed with the Commission.33 This confidentiality is made paramount as a
limitation to the right of any member of the general public, upon request, to have access to all
information filed with the Commission.34
Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets under the
following articles:
Art. 291. Revealing secrets with abuse of office. — The penalty of arresto mayor and a fine not
exceeding 500 pesos shall be imposed upon any manager, employee or servant who, in such
capacity, shall learn the secrets of his principal or master and shall reveal such secrets.
Art. 292. Revelation of industrial secrets. — The penalty of prision correccional in its minimum and
medium periods and a fine not exceeding 500 pesos shall be imposed upon the person in charge,
employee or workman of any manufacturing or industrial establishment who, to the prejudice of the
owner thereof, shall reveal the secrets of the industry of
the latter.
Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997,
has a restrictive provision on trade secrets, penalizing the revelation thereof by internal revenue
officers or employees, to wit:
SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who causes or
procures an officer or employee of the Bureau of Internal Revenue to divulge any confidential
information regarding the business, income or inheritance of any taxpayer, knowledge of which was
acquired by him in the discharge of his official duties, and which it is unlawful for him to reveal, and
any person who publishes or prints in any manner whatever, not provided by law, any income, profit,
loss or expenditure appearing in any income tax return, shall be punished by a fine of not more than
two thousand pesos (₱2,000), or suffer imprisonment of not less than six (6) months nor more than
five (5) years, or both.
Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of
1990, enacted to implement the policy of the state to regulate, restrict or prohibit the importation,
manufacture, processing, sale, distribution, use and disposal of chemical substances and mixtures
that present unreasonable risk and/or injury to health or the environment, also contains a
provision that limits the right of the public to have access to records, reports or information
concerning chemical substances and mixtures including safety data submitted and data on
emission or discharge into the environment, if the matter is confidential such that it would
divulge trade secrets, production or sales figures; or methods, production or processes
unique to such manufacturer, processor or distributor; or would otherwise tend to affect
adversely the competitive position of such manufacturer, processor or distributor.35
Clearly, in accordance with our statutory laws, this Court has declared that intellectual and industrial
property rights cases are not simple property cases.36 Without limiting such industrial property rights
to trademarks and trade names, this Court has ruled that all agreements concerning intellectual
property are intimately connected with economic development.37 The protection of industrial property
encourages investments in new ideas and inventions and stimulates creative efforts for the
satisfaction of human needs. It speeds up transfer of technology and industrialization, and thereby
bring about social and economic progress.38 Verily, the protection of industrial secrets is inextricably
linked to the advancement of our economy and fosters healthy competition in trade.
Jurisprudence has consistently acknowledged the private character of trade secrets. There is a
privilege not to disclose one’s trade secrets.39 Foremost, this Court has declared that trade secrets
and banking transactions are among the recognized restrictions to the right of the people to
information as embodied in the Constitution.40 We said that the drafters of the Constitution also
unequivocally affirmed that, aside from national security matters and intelligence information, trade
or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as
banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from
compulsory disclosure.41
1âw phi 1
Significantly, our cases on labor are replete with examples of a protectionist stance towards the
trade secrets of employers. For instance, this Court upheld the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying employees of any competitor
company, on the rationalization that the company has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other confidential programs and information from
competitors.42 Notably, it was in a labor-related case that this Court made a stark ruling on the proper
determination of trade secrets.
In the case at bar, petitioner cannot rely on Section 7743 of Republic Act 7394, or the Consumer Act
of the Philippines, in order to compel respondent to reveal the chemical components of its products.
While it is true that all consumer products domestically sold, whether manufactured locally or
imported, shall indicate their general make or active ingredients in their respective labels of
packaging, the law does not apply to respondent. Respondent’s specialized lubricants -- namely,
Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating,
Dry Lubricant and Anti-Seize Compound -- are not consumer products. "Consumer products," as it is
defined in Article 4(q),44 refers to goods, services and credits, debts or obligations which are primarily
for personal, family, household or agricultural purposes, which shall include, but not be limited to,
food, drugs, cosmetics, and devices. This is not the nature of respondent’s products. Its products are
not intended for personal, family, household or agricultural purposes. Rather, they are for industrial
use, specifically for the use of aircraft propellers and engines.
Petitioner’s argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs, requires
the disclosure of the active ingredients of a drug is also on faulty ground.45 Respondent’s products
are outside the scope of the cited law. They do not come within the purview of a drug46 which, as
defined therein, refers to any chemical compound or biological substance, other than food, that is
intended for use in the treatment, prevention or diagnosis of disease in man or animals. Again, such
are not the characteristics of respondent’s products.
What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical
formulation of respondent’s products is not known to the general public and is unique only to it. Both
courts uniformly ruled that these ingredients are not within the knowledge of the public. Since such
factual findings are generally not reviewable by this Court, it is not duty-bound to analyze and weigh
all over again the evidence already considered in the proceedings below.47 We need not delve into
the factual bases of such findings as questions of fact are beyond the pale of Rule 45 of the Rules of
Court. Factual findings of the trial court when affirmed by the Court of Appeals, are binding and
conclusive on the Supreme Court.48
We do not find merit or applicability in petitioner’s invocation of Section 1249 of the Toxic Substances
and Hazardous and Nuclear Wastes Control Act of 1990, which grants the public access to records,
reports or information concerning chemical substances and mixtures, including safety data
submitted, and data on emission or discharge into the environment. To reiterate, Section 1250 of
said Act deems as confidential matters, which may not be made public, those that would divulge
trade secrets, including production or sales figures or methods; production or processes unique to
such manufacturer, processor or distributor, or would otherwise tend to affect adversely the
competitive position of such manufacturer, processor or distributor. It is true that under the same Act,
the Department of Environment and Natural Resources may release information; however, the clear
import of the law is that said authority is limited by the right to confidentiality of the manufacturer,
processor or distributor, which information may be released only to a medical research or scientific
institution where the information is needed for the purpose of medical diagnosis or treatment of a
person exposed to the chemical substance or mixture. The right to confidentiality is recognized by
said Act as primordial. Petitioner has not made the slightest attempt to show that these
circumstances are availing in the case at bar.
Indeed, the privilege is not absolute; the trial court may compel disclosure where it is indispensable
for doing justice.51 We do not, however, find reason to except respondent’s trade secrets from the
application of the rule on privilege. The revelation of respondent’s trade secrets serves no better
purpose to the disposition of the main case pending with the RTC, which is on the collection of a
sum of money. As can be gleaned from the facts, petitioner received respondent’s goods in trade in
the normal course of business. To be sure, there are defenses under the laws of contracts and sales
available to petitioner. On the other hand, the greater interest of justice ought to favor respondent as
the holder of trade secrets. If we were to weigh the conflicting interests between the parties, we rule
in favor of the greater interest of respondent. Trade secrets should receive greater protection from
discovery, because they derive economic value from being generally unknown and not readily
ascertainable by the public.52 To the mind of this Court, petitioner was not able to show a compelling
reason for us to lift the veil of confidentiality which shields respondent’s trade secrets.
WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the Resolution
dated 25 May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No costs.
SO ORDERED.
Director and Deputies Director General
[G.R. NO. 179127 : December 24, 2008]
IN-N-OUT BURGER, INC., Petitioner, v. SEHWANI,
INCORPORATED AND/OR BENITA'S FRITES,
INC., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court, seeking to reverse the Decision1 dated 18 July 2006
rendered by the Court of Appeals in CA-G.R. SP No. 92785, which
reversed the Decision2 dated 23 December 2005 of the Director
General of the Intellectual Property Office (IPO) in Appeal No. 1005-01. The Court of Appeals, in its assailed Decision, decreed that
the IPO Director of Legal Affairs and the IPO Director General do not
have jurisdiction over cases involving unfair competition.
Petitioner IN-N-OUT BURGER, INC., a business entity incorporated
under the laws of California, United States (US) of America, which is
a signatory to the Convention of Paris on Protection of Industrial
Property and the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in
the restaurant business, but it has never engaged in business in the
Philippines.3
Respondents Sehwani, Incorporated and Benita Frites, Inc. are
corporations organized in the Philippines.4
On 2 June 1997, petitioner filed trademark and service mark
applications with the Bureau of Trademarks (BOT) of the IPO for
"IN-N-OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner later
found out, through the Official Action Papers issued by the IPO on
31 May 2000, that respondent Sehwani, Incorporated had already
obtained Trademark Registration for the mark "IN N OUT (the inside
of the letter "O" formed like a star)."5 By virtue of a licensing
agreement, Benita Frites, Inc. was able to use the registered mark
of respondent Sehwani, Incorporated.
Petitioner eventually filed on 4 June 2001 before the Bureau of
Legal Affairs (BLA) of the IPO an administrative complaint against
respondents for unfair competition and cancellation of trademark
registration. Petitioner averred in its complaint that it is the owner
of the trade name IN-N-OUT and the following trademarks: (1) "INN-OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT
Burger Logo." These trademarks are registered with the Trademark
Office of the US and in various parts of the world, are internationally
well-known, and have become distinctive of its business and goods
through its long and exclusive commercial use.6 Petitioner pointed
out that its internationally well-known trademarks and the mark of
the respondents are all registered for the restaurant business and
are clearly identical and confusingly similar. Petitioner claimed that
respondents are making it appear that their goods and services are
those of the petitioner, thus, misleading ordinary and unsuspecting
consumers that they are purchasing petitioner's products.7
Following the filing of its complaint, petitioner sent on 18 October
2000 a demand letter directing respondent Sehwani, Incorporated
to cease and desist from claiming ownership of the mark "IN-NOUT" and to voluntarily cancel its trademark registration. In a
letter-reply dated 23 October 2000, respondents refused to accede
to petitioner' demand, but expressed willingness to surrender the
registration of respondent Sehwani, Incorporated of the "IN N OUT"
trademark for a fair and reasonable consideration.8
Petitioner was able to register the mark "Double Double" on 4 July
2002, based on their application filed on 2 June 1997.9 It alleged
that respondents also used this mark, as well as the menu color
scheme. Petitioners also averred that respondent Benita's receipts
bore the phrase, "representing IN-N-OUT Burger."10 It should be
noted that that although respondent Sehwahi, Incorporated
registered a mark which appeared as "IN N OUT (the inside of the
letter "O" formed like a star)," respondents used the mark "IN-NOUT."11
To counter petitioner's complaint, respondents filed before the BLAIPO an Answer with Counterclaim. Respondents asserted therein
that they had been using the mark "IN N OUT" in the Philippines
since 15 October 1982. On 15 November 1991, respondent
Sehwani, Incorporated filed with the then Bureau of Patents,
Trademarks and Technology Transfer (BPTTT) an application for the
registration of the mark "IN N OUT (the inside of the letter "O"
formed like a star)." Upon approval of its application, a certificate of
registration of the said mark was issued in the name of respondent
Sehwani, Incorporated on 17 December 1993. On 30 August 2000,
respondents Sehwani, Incorporated and Benita Frites, Inc. entered
into a Licensing Agreement, wherein the former entitled the latter to
use its registered mark, "IN N OUT." Respondents asserted that
respondent Sehwani, Incorporated, being the registered owner of
the mark "IN N OUT," should be accorded the presumption of a valid
registration of its mark with the exclusive right to use the same.
Respondents argued that none of the grounds provided under the
Intellectual Property Code for the cancellation of a certificate of
registration are present in this case. Additionally, respondents
maintained that petitioner had no legal capacity to sue as it had
never operated in the Philippines.12
Subsequently, the IPO Director of Legal Affairs, Estrellita BeltranAbelardo, rendered a Decision dated 22 December 2003,13 in favor
of petitioner. According to said Decision, petitioner had the legal
capacity to sue in the Philippines, since its country of origin or
domicile was a member of and a signatory to the Convention of
Paris on Protection of Industrial Property. And although petitioner
had never done business in the Philippines, it was widely known in
this country through the use herein of products bearing its
corporate and trade name. Petitioner's marks are internationally
well-known, given the world-wide registration of the mark "IN-N-
OUT," and its numerous advertisements in various publications and
in the Internet. Moreover, the IPO had already declared in a
previous inter partes case that "In-N-Out Burger and Arrow Design"
was an internationally well-known mark. Given these circumstances,
the IPO Director for Legal Affairs pronounced in her Decision that
petitioner had the right to use its tradename and mark "IN-N-OUT"
in the Philippines to the exclusion of others, including the
respondents. However, respondents used the mark "IN N OUT" in
good faith and were not guilty of unfair competition, since
respondent Sehwani, Incorporated did not evince any intent to ride
upon petitioner's goodwill by copying the mark "IN-N-OUT Burger"
exactly. The inside of the letter "O" in the mark used by
respondents formed a star. In addition, the simple act of respondent
Sehwani, Incorporated of inquiring into the existence of a pending
application for registration of the "IN-N-OUT" mark was not deemed
fraudulent. The dispositive part of the Decision of the IPO Director
for Legal Affairs reads:
With the foregoing disquisition, Certificate of Registration No. 56666
dated 17 December 1993 for the mark "IN-N-OUT" (the inside of
the letter "O" formed like a star) issued in favor of Sehwani,
Incorporated is hereby CANCELLED. Consequently, respondents
Sehwani, Inc. and Benita's Frites are hereby ordered to permanently
cease and desist from using the mark "IN-N-OUT" and "IN-N-OUT
BURGER LOGO" on its goods and in its business. With regards the
mark "Double-Double," considering that as earlier discussed, the
mark has been approved by this Office for publication and that as
shown by evidence, Complainant is the owner of the said mark,
Respondents are so hereby ordered to permanently cease and
desist from using the mark Double-Double. NO COSTS.14
Both parties filed their respective Motions for Reconsideration of the
aforementioned Decision. Respondents' Motion for
Reconsideration15 and petitioner's Motion for Partial
Reconsideration16 were denied by the IPO Director for Legal Affairs
in Resolution No. 2004-1817 dated 28 October 2004 and Resolution
No. 2005-05 dated 25 April 2005,18 respectively.
Subsequent events would give rise to two cases before this Court,
G.R. No. 171053 and G.R. No. 179127, the case at bar.
G.R. No. 171053
On 29 October 2004, respondents received a copy of Resolution No.
2004-18 dated 28 October 2004 denying their Motion for
Reconsideration. Thus, on 18 November 2004, respondents filed an
Appeal Memorandum with IPO Director General Emma Francisco
(Director General Francisco). However, in an Order dated 7
December 2004, the appeal was dismissed by the IPO Director
General for being filed beyond the 15-day reglementary period to
appeal.
Respondents appealed to the Court of Appeals via a Petition for
Review under Rule 43 of the Rules of Court, filed on 20 December
2004 and docketed as CA-G.R. SP No. 88004, challenging the
dismissal of their appeal by the IPO Director General, which
effectively affirmed the Decision dated 22 December 2003 of the
IPO Director for Legal Affairs ordering the cancellation of the
registration of the disputed trademark in the name of respondent
Sehwani, Incorporated and enjoining respondents from using the
same. In particular, respondents based their Petition on the
following grounds:
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN
DISMISSING APPEAL NO. 14-2004-00004 ON A MERE
TECHNICALITY
THE BUREAU OF LEGAL AFFAIR'S (SIC) DECISION AND
RESOLUTION (1) CANCELLING RESPONDENT'S CERTIFICATE OF
REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING
PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING
THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY
TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE.
Respondents thus prayed:
WHEREFORE, petitioners respectfully pray that this Honorable Court
give due course to this petition, and thereafter order the Office of
the Director General of the Intellectual Property Office to reinstate
and give due course to [respondent]'s Appeal No. 14-2004-00004.
Other reliefs, just and equitable under the premises, are likewise
prayed for.
On 21 October 2005, the Court of Appeals rendered a Decision
denying respondents' Petition in CA-G.R SP No. 88004 and affirming
the Order dated 7 December 2004 of the IPO Director General. The
appellate court confirmed that respondents' appeal before the IPO
Director General was filed out of time and that it was only proper to
cancel the registration of the disputed trademark in the name of
respondent Sehwani, Incorporated and to permanently enjoin
respondents from using the same. Effectively, the 22 December
2003 Decision of IPO Director of Legal Affairs was likewise affirmed.
On 10 November 2005, respondents moved for the reconsideration
of the said Decision. On 16 January 2006, the Court of Appeals
denied their motion for reconsideration.
Dismayed with the outcome of their petition before the Court of
Appeals, respondents raised the matter to the Supreme Court in a
Petition for Review under Rule 45 of the Rules of Court, filed on 30
January 2006, bearing the title Sehwani, Incorporated v. In-N-Out
Burger and docketed as G.R. No. 171053.19
This Court promulgated a Decision in G.R. No. 171053 on 15
October 2007,20 finding that herein respondents failed to file their
Appeal Memorandum before the IPO Director General within the
period prescribed by law and, consequently, they lost their right to
appeal. The Court further affirmed the Decision dated 22 December
2003 of the IPO Director of Legal Affairs holding that herein
petitioner had the legal capacity to sue for the protection of its
trademarks, even though it was not doing business in the
Philippines, and ordering the cancellation of the registration
obtained by herein respondent Sehwani, Incorporated of the
internationally well-known marks of petitioner, and directing
respondents to stop using the said marks. Respondents filed a
Motion for Reconsideration of the Decision of this Court in G.R. No.
171053, but it was denied with finality in a Resolution dated 21
January 2008.
G.R. No. 179127
Upon the denial of its Partial Motion for Reconsideration of the
Decision dated 22 December 2003 of the IPO Director for Legal
Affairs, petitioner was able to file a timely appeal before the IPO
Director General on 27 May 2005.
During the pendency of petitioner's appeal before the IPO Director
General, the Court of Appeals already rendered on 21 October 2005
its Decision dismissing respondents' Petition in CA-G.R. SP No.
88004.
In a Decision dated 23 December 2005, IPO Director General Adrian
Cristobal, Jr. found petitioner's appeal meritorious and modified the
Decision dated 22 December 2003 of the IPO Director of Legal
Affairs. The IPO Director General declared that respondents were
guilty of unfair competition. Despite respondents' claims that they
had been using the mark since 1982, they only started constructing
their restaurant sometime in 2000, after petitioner had already
demanded that they desist from claiming ownership of the mark
"IN-N-OUT." Moreover, the sole distinction of the mark registered in
the name of respondent Sehwani, Incorporated, from those of the
petitioner was the star inside the letter "O," a minor difference
which still deceived purchasers. Respondents were not even actually
using the star in their mark because it was allegedly difficult to
print. The IPO Director General expressed his disbelief over the
respondents' reasoning for the non-use of the star symbol. The IPO
Director General also considered respondents' use of petitioner's
registered mark "Double-Double" as a sign of bad faith and an
intent to mislead the public. Thus, the IPO Director General ruled
that petitioner was entitled to an award for the actual damages it
suffered by reason of respondents' acts of unfair competition,
exemplary damages, and attorney's fees.21 The fallo of the Decision
reads:
WHEREFORE, premises considered, the [herein respondents] are
held guilty of unfair competition. Accordingly, Decision No. 2003-02
dated 22 December 2003 is hereby MODIFIED as follows:
[Herein Respondents] are hereby ordered to jointly and severally
pay [herein petitioner]:
1. Damages in the amount of TWO HUNDRED TWELVE
THOUSAND FIVE HUNDRED SEVENTY FOUR AND
28/100(P212,574.28);
2. Exemplary damages in the amount of FIVE HUNDRED
THOUSAND PESOS (P500,000.00);
3. Attorney's fees and expenses of litigation in the amount of FIVE
HUNDRED THOUSAND PESOS (P500,000.00).
All products of [herein respondents] including the labels, signs,
prints, packages, wrappers, receptacles and materials used by them
in committing unfair competition should be without compensation of
any sort be seized and disposed of outside the channels of
commerce.
Let a copy of this Decision be furnished the Director of Bureau of
Legal Affairs for appropriate action, and the records be returned to
her for proper disposition. Further, let a copy of this Decision be
furnished the Documentation, Information and Technology Transfer
Bureau for their information and records purposes.22
Aggrieved, respondents were thus constrained to file on 11 January
2006 before the Court of Appeals another Petition for Review under
Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785.
Respondents based their second Petition before the appellate court
on the following grounds:
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN
HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN
ORDERING THEM TO PAY DAMAGES AND ATTORNEY'S FEES TO
RESPONDENTS
THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN
AFFIRMING THE BUREAU OF LEGAL AFFAIR'S DECISION (1)
CANCELLING PETITIONER'S CERTIFICATE OF REGISTRATION FOR
THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO
PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT
MARK ON ITS GOODS AND BUSINESS
Respondents assailed before the appellate court the foregoing 23
December 2005 Decision of the IPO Director General, alleging that
their use of the disputed mark was not tainted with fraudulent
intent; hence, they should not be held liable for damages. They
argued that petitioner had never entered into any transaction
involving its goods and services in the Philippines and, therefore,
could not claim that its goods and services had already been
identified in the mind of the public. Respondents added that the
disputed mark was not well-known. Finally, they maintained that
petitioner's complaint was already barred by laches.23
At the end of their Petition in CA-G.R. SP No. 92785, respondents
presented the following prayer:
WHEREFORE, [respondents herein] respectfully pray that this
Honorable Court:
(a) upon the filing of this petition, issue a temporary restraining
order enjoining the IPO and [petitioner], their agents, successors
and assigns, from executing, enforcing and implementing the IPO
Director General's Decision dated 23 December 2005, which
modified the Decision No. 2003-02 dated 22 December 2003 of the
BLA, until further orders from this Honorable Court.
(b) after notice and hearing, enjoin the IPO and [petitioner], their
agents, successors and assigns, from executing, enforcing and
implementing the Decision dated 23 December 2005 of the Director
General of the IPO in IPV No. 10-2001-00004 and to maintain the
status quo ante pending the resolution of the merits of this petition;
and
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(c) after giving due course to this petition:
(i) reverse and set aside the Decision dated 23 December 2005 of
the Director General of the IPO in IPV No. 10-2001-00004 finding
the [respondents] guilty of unfair competition and awarding
damages and attorney's fees to the respondent
(ii) in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22
December 2003 and Resolution No. 2005-05 of the BLA dated 25
April 2005, insofar as it finds [respondents] not guilty of unfair
competition and hence not liable to the [petitioner] for damages and
attorney's fees;
(iii) reverse Decision No. 2003-02 of the BLA dated 22 December
2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005,
insofar as it upheld [petitioner]'s legal capacity to sue; that
[petitioner]'s trademarks are well-known; and that respondent has
the exclusive right to use the same; and
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(iv) make the injunction permanent.
[Respondents] also pray for other reliefs, as may deemed just or
equitable.24
On 18 July 2006, the Court of Appeals promulgated a Decision25 in
CA-G.R. SP No. 92785 reversing the Decision dated 23 December
2005 of the IPO Director General.
The Court of Appeals, in its Decision, initially addressed petitioner's
assertion that respondents had committed forum shopping by the
institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It
ruled that respondents were not guilty of forum shopping,
distinguishing between the respondents' two Petitions. The subject
of Respondents' Petition in CA-G.R SP No. 88004 was the 7
December 2004 Decision of the IPO Director General dismissing
respondents' appeal of the 22 December 2003 Decision of the IPO
Director of Legal Affairs. Respondents questioned therein the
cancellation of the trademark registration of respondent Sehwani,
Incorporated and the order permanently enjoining respondents from
using the disputed trademark. Respondents' Petition in CA-G.R. SP
No. 92785 sought the review of the 23 December 2005 Decision of
the IPO Director General partially modifying the 22 December 2003
Decision of the IPO Director of Legal Affairs. Respondents raised
different issues in their second petition before the appellate court,
mainly concerning the finding of the IPO Director General that
respondents were guilty of unfair competition and the awarding of
actual and exemplary damages, as well as attorney's fees, to
petitioner.
The Court of Appeals then proceeded to resolve CA-G.R. SP No.
92785 on jurisdictional grounds not raised by the parties. The
appellate court declared that Section 163 of the Intellectual
Property Code specifically confers upon the regular courts, and not
the BLA-IPO, sole jurisdiction to hear and decide cases involving
provisions of the Intellectual Property Code, particularly trademarks.
Consequently, the IPO Director General had no jurisdiction to rule in
its Decision dated 23 December 2005 on supposed violations of
these provisions of the Intellectual Property Code.
In the end, the Court of Appeals decreed:
WHEREFORE, the Petition is GRANTED. The Decision dated 23
December 2005 rendered by the Director General of the Intellectual
Property Office of the Philippines in Appeal No. 10-05-01
is REVERSED and SET ASIDE. Insofar as they pertain to acts
governed by Article 168 of R.A. 8293 and other sections
enumerated in Section 163 of the same Code, respondent's claims
in its Complaint docketed as IPV No. 10-2001-00004 are
hereby DISMISSED.26
The Court of Appeals, in a Resolution dated 31 July 2007,27 denied
petitioner's Motion for Reconsideration of its aforementioned
Decision.
Hence, the present Petition, where petitioner raises the following
issues:
I
WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE
QUESTIONED DECISION DATED 18 JULY 2006
AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO
HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR
INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;
II
WHETHER OR NOT THE INSTANT PETITION IS FORMALLY
DEFECTIVE; AND
III
WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE
QUESTIONED DECISION DATED 18 JULY 2006
AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT
SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A
PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND
(B) FORUM SHOPPING PROPER.28
As previously narrated herein, on 15 October 2007, during the
pendency of the present Petition, this Court already promulgated its
Decision29 in G.R. No. 171053 on 15 October 2007, which affirmed
the IPO Director General's dismissal of respondents' appeal for
being filed beyond the reglementary period, and left the 22
December 2003 Decision of the IPO Director for Legal Affairs,
canceling the trademark registration of respondent Sehwani,
Incorporated and enjoining respondents from using the disputed
marks.
Before discussing the merits of this case, this Court must first rule
on the procedural flaws that each party has attributed to the other.
Formal Defects of the Petition
Respondents contend that the Verification/Certification executed by
Atty. Edmund Jason Barranda of Villaraza and Angangco, which
petitioner attached to the present Petition, is defective and should
result in the dismissal of the said Petition.
Respondents point out that the Secretary's Certificate executed by
Arnold M. Wensinger on 20 August 2007, stating that petitioner had
authorized the lawyers of Villaraza and Angangco to represent it in
the present Petition and to sign the Verification and Certification
against Forum Shopping, among other acts, was not properly
notarized. The jurat of the aforementioned Secretary's Certificate
reads:
Subscribed and sworn to me this 20th day of August 2007 in Irving
California.
Rachel A. Blake (Sgd.)
Notary Public30
Respondents aver that the said Secretary's Certificate cannot
properly authorize Atty. Barranda to sign the
Verification/Certification on behalf of petitioner because the notary
public Rachel A. Blake failed to state that: (1) petitioner's Corporate
Secretary, Mr. Wensinger, was known to her; (2) he was the same
person who acknowledged the instrument; and (3) he
acknowledged the same to be his free act and deed, as required
under Section 2 of Act No. 2103 and Landingin v. Republic of the
Philippines.31
Respondents likewise impugn the validity of the notarial certificate
of Atty. Aldrich Fitz B. Uy, on Atty. Baranda's
Verification/Certification attached to the instant Petition, noting the
absence of (1) the serial number of the commission of the notary
public; (2) the office address of the notary public; (3) the roll of
attorneys' number and the IBP membership number; and (4) a
statement that the Verification/Certification was notarized within the
notary public's territorial jurisdiction, as required under the 2004
Rules on Notarial Practice.32
Section 2 of Act No. 2103 and Landingin v. Republic of the
Philippines are not applicable to the present case. The requirements
enumerated therein refer to documents which require an
acknowledgement, and not a mere jurat.
A jurat is that part of an affidavit in which the notary certifies that
before him/her, the document was subscribed and sworn to by the
executor. Ordinarily, the language of the jurat should avow that the
document was subscribed and sworn to before the notary public. In
contrast, an acknowledgment is the act of one who has executed a
deed in going before some competent officer or court and declaring
it to be his act or deed. It involves an extra step undertaken
whereby the signor actually declares to the notary that the executor
of a document has attested to the notary that the same is his/her
own free act and deed.33 A Secretary's Certificate, as that executed
by petitioner in favor of the lawyers of the Angangco and Villaraza
law office, only requires a jurat.34
Even assuming that the Secretary's Certificate was flawed, Atty.
Barranda may still sign the Verification attached to the Petition at
bar. A pleading is verified by an affidavit that the affiant has read
the pleading and that the allegations therein are true and correct of
his personal knowledge or based on authentic records.35 The party
itself need not sign the verification. A party's representative, lawyer
or any other person who personally knows the truth of the facts
alleged in the pleading may sign the verification.36 Atty. Barranda,
as petitioner's counsel, was in the position to verify the truth and
correctness of the allegations of the present Petition. Hence, the
Verification signed by Atty. Barranda substantially complies with the
formal requirements for such.
Moreover, the Court deems it proper not to focus on the supposed
technical infirmities of Atty. Baranda's Verification. It must be borne
in mind that the purpose of requiring a verification is to secure an
assurance that the allegations of the petition has been made in
good faith; or are true and correct, not merely speculative. This
requirement is simply a condition affecting the form of pleadings,
and non-compliance therewith does not necessarily render it fatally
defective. Indeed, verification is only a formal, not a jurisdictional
requirement. In the interest of substantial justice, strict observance
of procedural rules may be dispensed with for compelling
reasons.37 The vital issues raised in the instant Petition on the
jurisdiction of the IPO Director for Legal Affairs and the IPO Director
General over trademark cases justify the liberal application of the
rules, so that the Court may give the said Petition due course and
resolve the same on the merits.
This Court agrees, nevertheless, that the notaries public, Rachel A.
Blake and Aldrich Fitz B. Uy, were less than careful with their jurats
or notarial certificates. Parties and their counsel should take care
not to abuse the Court's zeal to resolve cases on their merits.
Notaries public in the Philippines are reminded to exert utmost care
and effort in complying with the 2004 Rules on Notarial Practice.
Parties and their counsel are further charged with the responsibility
of ensuring that documents notarized abroad be in their proper form
before presenting said documents before Philippine courts.
Forum Shopping
Petitioner next avers that respondents are guilty of forum shopping
in filing the Petition in CA-G.R. SP No. 92785, following their earlier
filing of the Petition in CA-G.R SP No. 88004. Petitioner also asserts
that respondents were guilty of submitting to the Court of Appeals a
patently false Certification of Non-forum Shopping in CA-G.R. SP
No. 92785, when they failed to mention therein the pendency of CAG.R SP No. 88004.
Forum shopping is the institution of two or more actions or
proceedings grounded on the same cause on the supposition that
one or the other court would make a favorable disposition. It is an
act of malpractice and is prohibited and condemned as trifling with
courts and abusing their processes. In determining whether or not
there is forum shopping, what is important is the vexation caused
the courts and parties-litigants by a party who asks different courts
and/or administrative bodies to rule on the same or related causes
and/or grant the same or substantially the same reliefs and in the
process creates the possibility of conflicting decisions being
rendered by the different bodies upon the same issues.38
Forum shopping is present when, in two or more cases pending,
there is identity of (1) parties (2) rights or causes of action and
reliefs prayed for, and (3) the identity of the two preceding
particulars is such that any judgment rendered in the other action,
will, regardless of which party is successful, amount to res
judicata in the action under consideration.39
After a cursory look into the two Petitions in CA-G.R. SP No. 88004
and CA-G.R. SP No. 92785, it would at first seem that respondents
are guilty of forum shopping.
There is no question that both Petitions involved identical parties,
and raised at least one similar ground for which they sought the
same relief. Among the grounds stated by the respondents for their
Petition in CA-G.R SP No. 88004 was that "[T]he Bureau of Legal
Affair's (sic) Decision and Resolution (1) canceling [herein
respondent Sehwani, Incorporated]'s certificate of registration for
the mark 'IN-N-OUT' and (2) ordering [herein respondents] to
permanently cease and desist from using the subject mark on its
goods and business are contrary to law and/or is (sic) not supported
by evidence."40 The same ground was again invoked by respondents
in their Petition in CA-G.R. SP No. 92785, rephrased as follows:
"The IPO Director General committed grave error in affirming the
Bureau of Legal Affair's (sic) Decision (1) canceling [herein
respondent Sehwani, Incorporated]'s certificate of registration for
the mark "IN-N-OUT," and (2) ordering [herein respondents] to
permanently cease and desist from using the subject mark on its
goods and business."41 Both Petitions, in effect, seek the reversal of
the 22 December 2003 Decision of the IPO Director of Legal Affairs.
Undoubtedly, a judgment in either one of these Petitions affirming
or reversing the said Decision of the IPO Director of Legal Affairs
based on the merits thereof would bar the Court of Appeals from
making a contrary ruling in the other Petition, under the principle
of res judicata.
Upon a closer scrutiny of the two Petitions, however, the Court
takes notice of one issue which respondents did not raise in CA-G.R.
SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e.,
whether respondents are liable for unfair competition. Hence,
respondents seek additional reliefs in CA-G.R. SP No. 92785,
seeking the reversal of the finding of the IPO Director General that
they are guilty of unfair competition, and the nullification of the
award of damages in favor of petitioner resulting from said finding.
Undoubtedly, respondents could not have raised the issue of unfair
competition in CA-G.R. SP No. 88004 because at the time they filed
their Petition therein on 28 December 2004, the IPO Director
General had not yet rendered its Decision dated 23 December 2005
wherein it ruled that respondents were guilty thereof and awarded
damages to petitioner.
In arguing in their Petition in CA-G.R. SP No. 92785 that they are
not liable for unfair competition, it is only predictable, although not
necessarily legally tenable, for respondents to reassert their right to
register, own, and use the disputed mark. Respondents again raise
the issue of who has the better right to the disputed mark, because
their defense from the award of damages for unfair competition
depends on the resolution of said issue in their favor. While this
reasoning may be legally unsound, this Court cannot readily
presume bad faith on the part of respondents in filing their Petition
in CA-G.R. SP No. 92785; or hold that respondents breached the
rule on forum shopping by the mere filing of the second petition
before the Court of Appeals.
True, respondents should have referred to CA-G.R. SP No. 88004 in
the Certification of Non-Forum Shopping, which they attached to
their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual
background of this case and the importance of resolving the
jurisdictional and substantive issues raised herein, justify the
relaxation of another procedural rule. Although the submission of a
certificate against forum shopping is deemed obligatory, it is not
jurisdictional.42 Hence, in this case in which such a certification was
in fact submitted, only it was defective, the Court may still refuse to
dismiss and, instead, give due course to the Petition in light of
attendant exceptional circumstances.
The parties and their counsel, however, are once again warned
against taking procedural rules lightly. It will do them well to
remember that the Courts have taken a stricter stance against the
disregard of procedural rules, especially in connection with the
submission of the certificate against forum shopping, and it will not
hesitate to dismiss a Petition for non-compliance therewith in the
absence of justifiable circumstances.
The Jurisdiction of the IPO
The Court now proceeds to resolve an important issue which arose
from the Court of Appeals Decision dated 18 July 2006 in CA-G.R.
SP No. 92785. In the afore-stated Decision, the Court of Appeals
adjudged that the IPO Director for Legal Affairs and the IPO Director
General had no jurisdiction over the administrative proceedings
below to rule on issue of unfair competition, because Section 163 of
the Intellectual Property Code confers jurisdiction over particular
provisions in the law on trademarks on regular courts exclusively.
According to the said provision:
Section 163. Jurisdiction of Court.–All actions under Sections 150,
155, 164, and 166 to 169 shall be brought before the proper courts
with appropriate jurisdiction under existing laws.
The provisions referred to in Section 163 are: Section 150 on
License Contracts; Section 155 on Remedies on Infringement;
Section 164 on Notice of Filing Suit Given to the Director; Section
166 on Goods Bearing Infringing Marks or Trade Names; Section
167 on Collective Marks; Section 168 on Unfair Competition, Rights,
Regulation and Remedies; and Section 169 on False Designations of
Origin, False Description or Representation.
The Court disagrees with the Court of Appeals.
Section 10 of the Intellectual Property Code specifically identifies
the functions of the Bureau of Legal Affairs, thus:
Section 10. The Bureau of Legal Affairs.–The Bureau of Legal Affairs
shall have the following functions:
10.1 Hear and decide opposition to the application for registration
of marks; cancellation of trademarks; subject to the provisions
of Section 64, cancellation of patents and utility models, and
industrial designs; and petitions for compulsory licensing of patents;
10.2 (a) Exercise original jurisdiction in administrative
complaints for violations of laws involving intellectual
property rights; Provided, That its jurisdiction is limited to
complaints where the total damages claimed are not less
than Two hundred thousand pesos
(P200,000): Provided, futher, That availment of the
provisional remedies may be granted in accordance with the
Rules of Court. The Director of Legal Affairs shall have the power
to hold and punish for contempt all those who disregard orders or
writs issued in the course of the proceedings.
(b) After formal investigation, the Director for Legal Affairs may
impose one (1) or more of the following administrative penalties:
(i) The issuance of a cease and desist order which shall specify the
acts that the respondent shall cease and desist from and shall
require him to submit a compliance report within a reasonable time
which shall be fixed in the order;
(ii) The acceptance of a voluntary assurance of compliance or
discontinuance as may be imposed. Such voluntary assurance may
include one or more of the following:
(1) An assurance to comply with the provisions of the intellectual
property law violated;
(2) An assurance to refrain from engaging in unlawful and unfair
acts and practices subject of the formal investigation
(3) An assurance to recall, replace, repair, or refund the money
value of defective goods distributed in commerce; and
cralawl ibra ry
(4) An assurance to reimburse the complainant the expenses and
costs incurred in prosecuting the case in the Bureau of Legal Affairs.
The Director of Legal Affairs may also require the respondent to
submit periodic compliance reports and file a bond to guarantee
compliance of his undertaking.
(iii) The condemnation or seizure of products which are subject of
the offense. The goods seized hereunder shall be disposed of in
such manner as may be deemed appropriate by the Director of
Legal Affairs, such as by sale, donation to distressed local
governments or to charitable or relief institutions, exportation,
recycling into other goods, or any combination thereof, under such
guidelines as he may provide;
(iv) The forfeiture of paraphernalia and all real and personal
properties which have been used in the commission of the offense;
(v) The imposition of administrative fines in such amount as
deemed reasonable by the Director of Legal Affairs, which shall in
no case be less than Five thousand pesos (P5,000) nor more than
One hundred fifty thousand pesos (P150,000). In addition, an
additional fine of not more than One thousand pesos (P1,000) shall
be imposed for each day of continuing violation;
(vi) The cancellation of any permit, license, authority, or
registration which may have been granted by the Office, or
the suspension of the validity thereof for such period of time as the
Director of Legal Affairs may deem reasonable which shall not
exceed one (1) year;
(vii) The withholding of any permit, license, authority, or
registration which is being secured by the respondent from the
Office;
(viii) The assessment of damages;
(ix) Censure; and
crala wlibra ry
(x) Other analogous penalties or sanctions.
10.3 The Director General may by Regulations establish the
procedure to govern the implementation of this
Section.43 (Emphasis provided.)
Unquestionably, petitioner's complaint, which seeks the cancellation
of the disputed mark in the name of respondent Sehwani,
Incorporated, and damages for violation of petitioner's intellectual
property rights, falls within the jurisdiction of the IPO Director of
Legal Affairs.
The Intellectual Property Code also expressly recognizes the
appellate jurisdiction of the IPO Director General over the decisions
of the IPO Director of Legal Affairs, to wit:
Section 7. The Director General and Deputies Director General.
7.1 Fuctions.–The Director General shall exercise the following
powers and functions:
xxx
b) Exercise exclusive appellate jurisdiction over all decisions
rendered by the Director of Legal Affairs, the Director of Patents,
the Director of Trademarks, and the Director of Documentation,
Information and Technology Transfer Bureau. The decisions of the
Director General in the exercise of his appellate jurisdiction in
respect of the decisions of the Director of Patents, and the Director
of Trademarks shall be appealable to the Court of Appeals in
accordance with the Rules of Court; and those in respect of the
decisions of the Director of Documentation, Information and
Technology Transfer Bureau shall be appealable to the Secretary of
Trade and Industry;
The Court of Appeals erroneously reasoned that Section 10(a) of the
Intellectual Property Code, conferring upon the BLA-IPO jurisdiction
over administrative complaints for violations of intellectual property
rights, is a general provision, over which the specific provision of
Section 163 of the same Code, found under Part III thereof
particularly governing trademarks, service marks, and tradenames,
must prevail. Proceeding therefrom, the Court of Appeals incorrectly
concluded that all actions involving trademarks, including charges of
unfair competition, are under the exclusive jurisdiction of civil
courts.
Such interpretation is not supported by the provisions of the
Intellectual Property Code. While Section 163 thereof vests in civil
courts jurisdiction over cases of unfair competition, nothing in the
said section states that the regular courts have sole jurisdiction over
unfair competition cases, to the exclusion of administrative bodies.
On the contrary, Sections 160 and 170, which are also found under
Part III of the Intellectual Property Code, recognize the concurrent
jurisdiction of civil courts and the IPO over unfair competition cases.
These two provisions read:
Section 160. Right of Foreign Corporation to Sue in Trademark or
Service Mark Enforcement Action.–Any foreign national or juridical
person who meets the requirements of Section 3 of this Act and
does not engage in business in the Philippines may bring a civil
or administrative action hereunder for opposition, cancellation,
infringement, unfair competition, or false designation of origin and
false description, whether or not it is licensed to do business in the
Philippines under existing laws.
xxx
Section 170. Penalties.–Independent of the civil
and administrative sanctions imposed by law, a criminal penalty
of imprisonment from two (2) years to five (5) years and a fine
ranging from Fifty thousand pesos (P50,000) to Two hundred
thousand pesos (P200,000), shall be imposed on any person who is
found guilty of committing any of the acts mentioned in Section
155, Section168, and Subsection169.1.
Based on the foregoing discussion, the IPO Director of Legal Affairs
had jurisdiction to decide the petitioner's administrative case
against respondents and the IPO Director General had exclusive
jurisdiction over the appeal of the judgment of the IPO Director of
Legal Affairs.
Unfair Competition
The Court will no longer touch on the issue of the validity or
propriety of the 22 December 2003 Decision of the IPO Director of
Legal Affairs which: (1) directed the cancellation of the certificate of
registration of respondent Sehwani, Incorporated for the mark "INN-OUT" and (2) ordered respondents to permanently cease and
desist from using the disputed mark on its goods and business.
Such an issue has already been settled by this Court in its final and
executory Decision dated 15 October 2007 in G.R. No.
171053, Sehwani, Incorporated v. In-N-Out Burger,44 ultimately
affirming the foregoing judgment of the IPO Director of Legal
Affairs. That petitioner has the superior right to own and use the
"IN-N-OUT" trademarks vis - à-vis respondents is a finding which
this Court may no longer disturb under the doctrine of
conclusiveness of judgment. In conclusiveness of judgment, any
right, fact, or matter in issue directly adjudicated or necessarily
involved in the determination of an action before a competent court
in which judgment is rendered on the merits is conclusively settled
by the judgment therein and cannot again be litigated between the
parties and their privies whether or not the claims, demands,
purposes, or subject matters of the two actions are the same.45
Thus, the only remaining issue for this Court to resolve is whether
the IPO Director General correctly found respondents guilty of unfair
competition for which he awarded damages to petitioner.
The essential elements of an action for unfair competition are (1)
confusing similarity in the general appearance of the goods and (2)
intent to deceive the public and defraud a competitor. The confusing
similarity may or may not result from similarity in the marks, but
may result from other external factors in the packaging or
presentation of the goods. The intent to deceive and defraud may
be inferred from the similarity of the appearance of the goods as
offered for sale to the public. Actual fraudulent intent need not be
shown.46
In his Decision dated 23 December 2005, the IPO Director General
ably explains the basis for his finding of the existence of unfair
competition in this case, viz:
The evidence on record shows that the [herein respondents] were
not using their registered trademark but that of the [petitioner].
[Respondent] SEHWANI, INC. was issued a Certificate of
Registration for IN N OUT (with the Inside of the Letter "O" Formed
like a Star) for restaurant business in 1993. The restaurant opened
only in 2000 but under the name IN-N-OUT BURGER. Apparently,
the [respondents] started constructing the restaurant only after the
[petitioner] demanded that the latter desist from claiming
ownership of the mark IN-N-OUT and voluntarily cancel their
trademark registration. Moreover, [respondents] are also using
[petitioner's] registered mark Double-Double for use on hamburger
products. In fact, the burger wrappers and the French fries
receptacles the [respondents] are using do not bear the mark
registered by the [respondent], but the [petitioner's] IN-N-OUT
Burger's name and trademark IN-N-OUT with Arrow design.
There is no evidence that the [respondents] were authorized by the
[petitioner] to use the latter's marks in the business.
[Respondents'] explanation that they are not using their own
registered trademark due to the difficulty in printing the "star" does
not justify the unauthorized use of the [petitioner's] trademark
instead.
Further, [respondents] are giving their products the general
appearance that would likely influence purchasers to believe that
these products are those of the [petitioner]. The intention to
deceive may be inferred from the similarity of the goods as packed
and offered for sale, and, thus, action will lie to restrain such unfair
competition. x x x.
xxx
[Respondents'] use of IN-N-OUT BURGER in busineses signages
reveals fraudulent intent to deceive purchasers. Exhibit "GG," which
shows the business establishment of [respondents] illustrates the
imitation of [petitioner's] corporate name IN-N-OUT and signage INN-OUT BURGER. Even the Director noticed it and held:
"We also note that In-N-Out Burger is likewise, [petitioner's]
corporate name. It has used the "IN-N-OUT" Burger name in its
restaurant business in Baldwin Park, California in the United States
of America since 1948. Thus it has the exclusive right to use the
tradenems "In-N-Out" Burger in the Philippines and the
respondents' are unlawfully using and appropriating the same."
The Office cannot give credence to the [respondent's] claim of good
faith and that they have openly and continuously used the subject
mark since 1982 and is (sic) in the process of expanding its
business. They contend that assuming that there is value in the
foreign registrations presented as evidence by the [petitioner], the
purported exclusive right to the use of the subject mark based on
such foreign registrations is not essential to a right of action for
unfair competition. [Respondents] also claim that actual or probable
deception and confusion on the part of customers by reason of
respondents' practices must always appear, and in the present case,
the BLA has found none. This Office finds the arguments untenable.
In contrast, the [respondents] have the burden of evidence to prove
that they do not have fraudulent intent in using the mark IN-N-OUT.
To prove their good faith, [respondents] could have easily offered
evidence of use of their registered trademark, which they claimed to
be using as early as 1982, but did not.
[Respondents] also failed to explain why they are using the marks
of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-NOUT Burger and Arrow Design. Even in their listing of menus,
[respondents] used [Appellants'] marks of DOUBLE DOUBLE and INN-OUT Burger and Arrow Design. In addition, in the wrappers and
receptacles being used by the [respondents] which also contained
the marks of the [petitioner], there is no notice in such wrappers
and receptacles that the hamburger and French fries are products of
the [respondents]. Furthermore, the receipts issued by the
[respondents] even indicate "representing IN-N-OUT." These acts
cannot be considered acts in good faith.47
Administrative proceedings are governed by the "substantial
evidence rule." A finding of guilt in an administrative case would
have to be sustained for as long as it is supported by substantial
evidence that the respondent has committed acts stated in the
complaint or formal charge. As defined, substantial evidence is such
relevant evidence as a reasonable mind may accept as adequate to
support a conclusion.48 As recounted by the IPO Director General in
his decision, there is more than enough substantial evidence to
support his finding that respondents are guilty of unfair competition.
With such finding, the award of damages in favor of petitioner is but
proper. This is in accordance with Section 168.4 of the Intellectual
Property Code, which provides that the remedies under Sections
156, 157 and 161 for infringement shall apply mutatis mutandis to
unfair competition. The remedies provided under Section 156
include the right to damages, to be computed in the following
manner:
Section 156. Actions, and Damages and Injunction for
Infringement.–156.1 The owner of a registered mark may recover
damages from any person who infringes his rights, and the measure
of the damages suffered shall be either the reasonable profit which
the complaining party would have made, had the defendant not
infringed his rights, or the profit which the defendant actually made
out of the infringement, or in the event such measure of damages
cannot be readily ascertained with reasonable certainty, then the
court may award as damages a reasonable percentage based upon
the amount of gross sales of the defendant or the value of the
services in connection with which the mark or trade name was used
in the infringement of the rights of the complaining party.
In the present case, the Court deems it just and fair that the IPO
Director General computed the damages due to petitioner by
applying the reasonable percentage of 30% to the respondents'
gross sales, and then doubling the amount thereof on account of
respondents' actual intent to mislead the public or defraud the
petitioner,49 thus, arriving at the amount of actual damages
of P212,574.28.
Taking into account the deliberate intent of respondents to engage
in unfair competition, it is only proper that petitioner be awarded
exemplary damages. Article 2229 of the Civil Code provides that
such damages may be imposed by way of example or correction for
the public good, such as the enhancement of the protection
accorded to intellectual property and the prevention of similar acts
of unfair competition. However, exemplary damages are not meant
to enrich one party or to impoverish another, but to serve as a
deterrent against or as a negative incentive to curb socially
deleterious action.50 While there is no hard and fast rule in
determining the fair amount of exemplary damages, the award of
exemplary damages should be commensurate with the actual loss
or injury suffered.51 Thus, exemplary damages of P500,000.00
should be reduced to P250,000.00 which more closely approximates
the actual damages awarded.
In accordance with Article 2208(1) of the Civil Code, attorney's fees
may likewise be awarded to petitioner since exemplary damages are
awarded to it. Petitioner was compelled to protect its rights over the
disputed mark. The amount of P500,000.00 is more than
reasonable, given the fact that the case has dragged on for more
than seven years, despite the respondent's failure to present
countervailing evidence. Considering moreover the reputation of
petitioner's counsel, the actual attorney's fees paid by petitioner
would far exceed the amount that was awarded to it.52
IN VIEW OF THE FOREGOING, the instant Petition is GRANTED.
The assailed Decision of the Court of Appeals in CA-G.R. SP No.
92785, promulgated on 18 July 2006, is REVERSED. The Decision
of the IPO Director General, dated 23 December 2005, is
hereby REINSTATED IN PART, with the modification that the
amount of exemplary damages awarded be reduced
to P250,000.00.
SO ORDERED.
NATURE OF PROCEEDINGS
SECOND DIVISION
G.R. No. 186967, January 18, 2017
DIVINA PALAO, Petitioner, v. FLORENTINO III INTERNATIONAL,
INC., Respondent.
DECISION
LEONEN, J.:
This resolves a Petition for Review on Certiorari1 filed by petitioner Divina Palao (Palao)
praying that the assailed January 8, 2009 Decision2 and the March 2, 2009
Resolution3 of the Court of Appeals in CA-G.R. SP No. 105595 be reversed and set
aside.
In its assailed Decision, the Court of Appeals reversed and set aside the September 22,
2008 Order4 of Intellectual Property Office Director General Adrian S. Cristobal, Jr. and
reinstated respondent Florentino III International, Inc.'s (Florentino) appeal from
Decision No. 2007-31,5 dated March 5, 2007, of the Bureau of Legal Affairs of the
Intellectual Property Office.
Decision No. 2007-31 denied Florentino's Petition for Cancellation of Letters Patent No.
UM-7789, which the Intellectual Property Office had issued in favor of Palao.6
Letters Patent No. UM-7789 pertained to "A Ceramic Tile Installation on Non-Concrete
Substrate Base Surfaces Adapted to Form Part of Furniture, Architectural Components
and the Like."7
In its Petition for Cancellation, Florentino claimed that the utility model covered by
Letters Patent No. UM-7789 was not original, new, or patentable, as it had been
publicly known or used in the Philippines and had even been the subject of several
publications.8 It added that it, as well as many others, had been using the utility model
well before Palao's application for a patent.9
In its Decision No. 2007-31,10 the Bureau of Legal Affairs of the Intellectual Property
Office denied Florentino's Petition for Cancellation. It noted that the testimony and
pictures, which Florentino offered in evidence, failed to establish that the utility model
subject of Letters Patent No. UM- 7789 was publicly known or used before Palao's
application for a patent.11
In its Resolution No. 2008-1412 dated July 14, 2008, the Bureau of Legal Affairs of the
Intellectual Property Office denied Florentino's Motion for Reconsideration.
On July 30, 2008, Florentino appealed to the Office of the Director General of the
Intellectual Property Office.13 This appeal's Verification and Certification of Non-Forum
Shopping was signed by Atty. John Labsky P. Maximo (Atty. Maximo) of the firm Balgos
and Perez.14 However, Florentino failed to attach to its appeal a secretary's certificate
or board resolution authorizing Balgos and Perez to sign the Verification and
Certification of Non-Forum Shopping.15 Thus, on August 14, 2008, the Office of the
Director General issued the Order requiring Florentino to submit proof that Atty.
Maximo or Balgos and Perez was authorized to sign the Verification and Certification of
Non-Forum Shopping.16
On August 19, 2008, Florentino filed a Compliance.17 It submitted a copy of the
Certificate executed on August 15, 2008 by Florentino's Corporate Secretary, Melanie
Marie A. C. Zosa-Tan, supposedly showing its counsel's authority to sign.18 This
Certificate stated:
[A]t a meeting of the Board of Directors of the said corporation on 14 August 2008,
during which a majority of the Directors were present, the following resolution was
unanimously adopted:
'RESOLVED, as it is hereby resolved, that BALGOS & PEREZ, or any of its associates,
be, as they are hereby, authorized to sign for and on behalf of the corporation, the
Verification and Certification on Non-Forum Shopping and/or all other documents
relevant to the Appeal filed by the Corporation with the Office of the Director General of
the Intellectual Property Office entitled "Philippine Chambers of Stonecraft Industries,
Inc. and Florentino III International, Inc. vs. Divina Palao".'
IN WITNESS WHEREOF, I have hereunto set my hand on these presents, this 15 August
2008 in Cebu City, Cebu.19
In his Order dated September 22, 2008, Intellectual Property Office Director General
Adrian S. Cristobal, Jr. (Director General Cristobal) dismissed Florentino's appeal.20 He
noted that the Secretary's Certificate pertained to an August 14, 2008 Resolution issued
by Florentino's Board of Directors, and reasoned that the same Certificate failed to
establish the authority of Florentino's counsel to sign the Verification and Certification of
Non-Forum Shopping as of the date of the filing of Florentino's appeal (i.e., on July 30,
2008).21
Florentino then filed before the Court of Appeals a Petition for Review under Rule 43 of
the 1997 Rules of Civil Procedure. In its assailed January 8, 2009 Decision,22 the Court
of Appeals faulted Director General Cristobal for an overly strict application of
procedural rules. Thus, it reversed Director General Cristobal's September 22, 2008
Order and reinstated Florentino's appeal.23
In its assailed March 2, 2009 Resolution,24 the Court of Appeals denied Palao's Motion
for Reconsideration.
Hence, this Petition was filed.
For resolution is the sole issue of whether the Court of Appeals erred in reversing the
September 22, 2008 Order of Intellectual Property Office Director General Adrian S.
Cristobal, Jr., and in reinstating respondent Florentino III International, Inc.'s appeal.
We deny the Petition and sustain the ruling of the Court of Appeals.
The need for a certification of non-forum shopping to be attached to respondent's
appeal before the Office of the Director General of the Intellectual Property Office is
established.
Section 3 of the Intellectual Property Office's Uniform Rules on Appeal25 specifies the
form through which appeals may be taken to the Director General:
cralawred
Section 3. Appeal Memorandum. - The appeal shall be perfected by filing an appeal
memorandum in three (3) legible copies with proof of service to the Bureau Director
and the adverse party, if any, and upon payment of the applicable fee, Reference Code
127 or 128, provided in the IPO Fee Structure.
Section 4(e) specifies the need for a certification of non-forum shopping. Section 4
reads in full:
Section 4. Contents of the Appeal Memorandum. - The appeal memorandum shall:
a) State the full name or names, capacity and address or addresses of the appellant or
appellants;
b) Indicate the material dates showing that it was filed on time;
c) Set forth concisely a statement of the matters involved, the issues raised, the specification
of errors of fact or law, or both, allegedly committed by the Bureau Director and the
reasons or arguments relied upon for the allowance of the appeal;
d) Be accompanied by legible copies of the decision or final order of the Bureau Director
and of the material portions of the record as would support the allegations of the appeal;
and
e) Contain a certification of non-forum-shopping. (Emphasis supplied)
These requirements notwithstanding, the Intellectual Property Office's own Regulations
on Inter Partes Proceedings (which governs petitions for cancellations of a mark,
patent, utility model, industrial design, opposition to registration of a mark and
compulsory licensing, and which were in effect when respondent filed its appeal) specify
that the Intellectual Property Office "shall not be bound by the strict technical rules of
procedure and evidence."26
Rule 2, Section 6 of these Regulations provides:
Section 6 Rules of Procedure to be Followed in the Conduct of Hearing of Inter Partes
Cases
In the conduct of hearing of inter partes cases, the rules of procedure herein contained
shall be primarily applied. The Rules of Court, unless inconsistent with these rules, may
be applied in suppletory character, provided, however, that the Director or Hearing
Officer shall not be bound by the strict technical rules of procedure and
evidence therein contained but may adopt, in the absence of any applicable rule herein,
such mode of proceedings which is consistent with the requirements of fair play and
conducive to the just, speedy and inexpensive disposition of cases, and which will give
the Bureau the greatest possibility to focus on the technical grounds or issues before it.
(Emphasis supplied)
This rule is in keeping with the general principle that administrative bodies are not
strictly bound by technical rules of procedure:
[A]dministrative bodies are not bound by the technical niceties of law and procedure
and the rules obtaining in courts of law. Administrative tribunals exercising quasijudicial powers are unfettered by the rigidity of certain procedural requirements,
subject to the observance of fundamental and essential requirements of due process in
justiciable cases presented before them. In administrative proceedings, technical rules
of procedure and evidence are not strictly applied and administrative due process
cannot be fully equated with due process in its strict judicial sense.27
In conformity with this liberality, Section 5(b) of the Intellectual Property Office's
Uniform Rules on Appeal expressly enables appellants, who failed to comply with
Section 4's formal requirements, to subsequently complete their compliance:
Section 5. Action on the Appeal Memorandum - The Director General shall:
a) Order the adverse party if any, to file comment to the appeal memorandum within thirty
(30) days from notice and/or order the Bureau Director to file comment and/or transmit
the records within thirty (30) days from notice; or
b) Order the appellant/appellants to complete the formal requirements mentioned in Section
4 hereof;
c) Dismiss the appeal for being patently without merit, Provided, that the dismissal shall be
outright if the appeal is not filed within the prescribed period or for failure of the appellant
to pay the required fee within the period of appeal. (Emphasis supplied)
Given these premises, it was an error for the Director General of the Intellectual
Property Office to have been so rigid in applying a procedural rule and dismissing
respondent's appeal.
Petitioner-in her pleadings before this Court—and Director General Cristobal—in his
September 2, 2008 Order—cite Decisions of this Court (namely: Philippine Public School
Teachers Association v. Heirs of Iligan28 and Philippine Airlines, Inc. v. Flight Attendants
& Stewards Association of the Philippines29) to emphasize the need for precise
compliance with the rule on appending a certification of non-forum shopping.
Philippine Public School Teachers Association states:
Under Section 3 of the same Rule, failure to comply shall be sufficient ground for the
dismissal of the petition. The rule on certification against forum shopping is intended to
prevent the actual filing of multiple petitions/complaints involving identical causes of
action, subject matter and issues in other tribunals or agencies as a form of forum
shopping. This is rooted in the principle that a party-litigant should not be allowed to
pursue simultaneous remedies in different forums, as this practice is detrimental to
orderly judicial procedure. Although not jurisdictional, the requirement of a certification
of non-forum shopping is mandatory. The rule requires that a certification against
forum shopping should be appended to or incorporated in the initiatory pleading filed
before the court. The rule also requires that the party, not counsel, must certify under
oath that he has not commenced any other action involving the same issue in the court
or any other tribunal or agency.
The requirement that the certification of non-forum shopping should be executed and
signed by the plaintiff or principal means that counsel cannot sign said certification
unless clothed with special authority to do so. The reason for this is that the plaintiff or
principal knows better than anyone else whether a petition has previously been filed
involving the same case or substantially the same issues. Hence, a certification signed
by counsel alone is defective and constitutes a valid cause for dismissal of the petition.
In the case of natural persons, the Rule requires the parties themselves to sign the
certificate of non-forum shopping. However, in the case of the corporations, the
physical act of signing may be performed, on behalf of the corporate entity, only by
specifically authorized individuals for the simple reason that corporations, as artificial
persons, cannot personally do the task themselves. It cannot be gainsaid that
obedience to the requirements of procedural rules is needed if we are to expect fair
results therefrom. Utter disregard of the rules cannot justly be rationalized by harking
on the policy of liberal construction.30
Philippine Airlines, for its part, states that:
The required certification of non-forum shopping must be valid at the time of filing of
the petition. An invalid certificate cannot be remedied by the subsequent submission of
a Secretary's Certificate that vests authority only after the petition had been filed.31
As pointed out by the Court of Appeals,32 however, the strict posturing of these
Decisions are not entirely suitable for this case. Both Philippine Public School Teachers
Association and Philippine Airlines involved petitions filed before the Court of Appeals,
that is, petitions in judicial proceedings. What is involved here is a quasi-judicial
proceeding that is "unfettered by the strict application of the technical rules of
procedure imposed in judicial proceedings."33
In any case, even in judicial proceedings, this Court has rebuked an overly strict
application of the rules pertaining to certifications of non-forum shopping.
In Pacquing v. Coca-Cola Philippines, Inc.:34
[T]he rules on forum shopping, which were designed to promote and facilitate the
orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective. Strict compliance
with the provision regarding the certificate of non-forum shopping underscores its
mandatory nature in that the certification cannot be altogether dispensed with or its
requirements completely disregarded. It does not, however, prohibit substantial
compliance therewith under justifiable circumstances, considering especially that
although it is obligatory, it is not jurisdictional.35
Thus, in Pacquing, this Court held that while, as a rule, "the certificate of non-forum
shopping must be signed by all the plaintiffs in a case and the signature of only one of
them is insufficient,"36 still, "when all the petitioners share a common interest and
invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the rules."37
Likewise, in Peak Ventures Corp. v. Heirs of Villareal,38 we did not consider as fatally
defective the fact that a petition for review on certiorari's verification and certification of
non-forum shopping was dated November 6, 2008, while the petition itself was dated
November 10, 2008.39 We state:
With respect to the requirement of a certification of non-forum shopping, "[t]he fact
that the [Rules] require strict compliance merely underscores its mandatory nature that
it cannot be dispensed with or its requirements altogether disregarded, but it does not
thereby interdict substantial compliance with its provisions under justifiable
circumstances."40
Even petitioner's own cited case, Philippine Public School Teachers Association v. Heirs
of Iligan,41 repudiates her position. The case involved a petition for review filed before
the Court of Appeals by the Philippine Public School Teachers Association.42 The
verification and certification of non-forum shopping of the petition was signed by a
certain Ramon G. Asuncion, Jr. without an accompanying board resolution or
secretary's certificate attesting to his authority to sign. The petition for review was
dismissed by the Court of Appeals "for being 'defective in substance,' there being no
proof that Asuncion had been duly authorized by [the Philippine Public School Teachers
Association] to execute and file a certification of non forum shopping in its behalf."43
This Court acknowledged that, in the strict sense, the Court of Appeals was correct:
"The ruling of the [Court of Appeals] that [the Philippine Public School Teachers
Association] was negligent when it failed to append in its petition a board resolution
authorizing petitioner Asuncion to sign the certification of non-forum shopping in its
behalf is correct."44
However, this Court did not end at that. It went on to state that "a strict application of
[the rule] is not called for":45
We have reviewed the records, however, and find that a strict application of Rule 42, in
relation to Section 5, Rule 7 of the Revised Rules of Court is not called for. As we held
in Huntington Steel Products, Inc. v. National Labor Relations Commission, while the
requirement of strict compliance underscores the mandatory nature of the rule, it does
not necessarily interdict substantial compliance with its provisions under justifiable
circumstances. The rule should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective which is the goal of all rules of
procedure, that is, to achieve justice as expeditiously as possible. A liberal application
of the rule may be justified where special circumstances or compelling reasons are
present.
Admittedly, the authorization of petitioner PPSTA's corporate secretary was submitted
to the appellate court only after petitioners received the comment of respondents.
However, in view of the peculiar circumstances of the present case and in the interest
of substantial justice, and considering further that petitioners submitted such
authorization before the [Court of Appeals] resolved to dismiss the petition on the
technical ground, we hold that, the procedural defect may be set aside pro hac vice.
Technical rules of procedure should be rules enjoined to facilitate the orderly
administration of justice. The liberality in the application of rules of procedure may not
be invoked if it will result in the wanton disregard of the rules or cause needless delay
in the administration of justice. Indeed, it cannot be gainsaid that obedience to the
requirements of procedural rule is needed if we are to expect fair results
therefrom.46 (Emphasis supplied)
The "peculiar circumstances"47 in Philippine Public School Teachers
Association pertained to a finding that the signatory of the verification and certification
of non-forum shopping, Ramon G. Asuncion, Jr., was "the former Acting General
Manager"48 of the Philippine Public School Teachers Association and was, thus,
previously "authorized to sign a verification and certification of non-forum
shopping"49 on behalf of the Association. By the time the Association actually filed its
petition before the Court of Appeals, however, his authority as the Acting General
Manager had ceased, and the Association's Board of Directors needed to give him
specific authority to sign a certification of non-forum shopping:
We agree with respondents' contention that when they filed their complaint in the MTC,
they impleaded petitioner Asuncion as party-defendant in his capacity as the Acting
General Manager of petitioner PPSTA. As such officer, he was authorized to sign a
verification and certification of non-forum shopping. However, he was no longer the
Acting General Manager when petitioners filed their petition in the CA, where he was in
fact referred to as "the former Acting General Manager." Thus, at the time the petition
was filed before the CA, petitioner Asuncion's authority to sign the verification and
certification of non-forum shopping for and in behalf of petitioner PPSTA ceased to
exist. There was a need for the board of directors of petitioner PPSTA to authorize him
to sign the requisite certification of non-forum shopping, and to append the same to
their petition as Annex thereof.50
We find this case to be attended by analogous circumstances. As pointed out by the
Court of Appeals, respondent's counsel, Balgos and Perez, has been representing
respondent (and signing documents for it) "since the [original] Petition for Cancellation
of Letter Patent No. UM-7789 was filed."51 Thus, its act of signing for respondent, on
appeal before the Director General of the Intellectual Property Office, was not an
aberration. It was a mere continuation of what it had previously done.
It is reasonable, therefore—consistent with the precept of liberally applying procedural
rules in administrative proceedings, and with the room allowed by jurisprudence for
substantial compliance with respect to the rule on certifications of non-forum
shopping—to construe the error committed by respondent as a venial lapse that should
not be fatal to its cause. We see here no "wanton disregard of the rules or [the risk of]
caus[ing] needless delay in the administration of justice."52 On the contrary, construing
it as such will enable a full ventilation of the parties' competing claims. As
with Philippine Public School Teachers Association, we consider it permissible to set
aside, pro hac vice, the procedural defect.53 Thus, we sustain the ruling of the Court of
Appeals.
WHEREFORE, the Petition is DENIED. The assailed January 8, 2009 Decision and the
March 2, 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 105595
are AFFIRMED.
SO ORDERED.
Concept and Purposes
of Patent System
- Manzano vs. Court of Appeal, GR No. 113388;Pearl and Dean Phil, Inc. vs. Shoemart, Inc.,
GR No. 148222
G.R. No. 113388 September 5, 1997
ANGELITA MANZANO, petitioner,
vs.
COURT OF APPEALS, and MELECIA MADOLARIA, as Assignor to NEW UNITED FOUNDRY
MANUFACTURING CORPORATION, respondents.
BELLOSILLO, J.:
The primary purpose of the patent system is not the reward of the individual but the advancement of
the arts and sciences. The function of a patent is to add to the sum of useful knowledge and one of
the purposes of the patent system is to encourage dissemination of information concerning
discoveries and inventions. This is a matter which is properly within the competence of the Patent
Office the official action of which has the presumption of correctness and may not be interfered with
in the absence of new evidence carrying thorough conviction that the Office has erred. Since the
Patent Office is an expert body preeminently qualified to determine questions of patentability, its
findings must be accepted if they are consistent with the evidence, with doubts as to patentability
resolved in favor of the Patent Office.1
Petitioner Angelita Manzano filed with the Philippine Patent Office on 19 February 1982 an action for
the cancellation of Letters Patent No. UM-4609 for a gas burner registered in the name of
respondent Melecia Madolaria who subsequently assigned the letters patent to New United Foundry
and Manufacturing Corporation (UNITED FOUNDRY, for brevity). Petitioner alleged that (a) the
utility model covered by the letters patent, in this case, an LPG gas burner, was not inventive, new or
useful; (b) the specification of the letters patent did not comply with the requirements of Sec. 14, RA
No. 165, as amended; (c) respondent Melecia Madolaria was not the original, true and actual
inventor nor did she derive her rights from the original, true and actual inventor of the utility model
covered by the letters patent; and, (d) the letters patent was secured by means of fraud or
misrepresentation. In support of her petition for cancellation petitioner further alleged that (a) the
utility model covered by the letters patent of respondent had been known or used by others in the
Philippines for more than one (1) year before she filed her application for letters patent on 9
December 1979; (b) the products which were produced in accordance with the utility model covered
by the letters patent had been in public use or on sale in the Philippines for more than one (1) year
before the application for patent therefor was filed.
Petitioner presented the following documents which she correspondingly marked as exhibits: (a)
affidavit of petitioner alleging the existence of prior art, marked Exh. "A;" (b) a brochure distributed by
Manila Gas Corporation disclosing a pictorial representation of Ransome Burner made by Ransome
Torch and Burner Company, USA, marked Exh. "D;" and, (c) a brochure distributed by Esso Gasul
or Esso Standard Eastern, Inc., of the Philippines showing a picture of another similar burner with
top elevation view and another perspective view of the same burner, marked Exh. "E."
Testifying for herself petitioner narrated that her husband Ong Bun Tua worked as a helper in the
UNITED FOUNDRY where respondent Melecia Madolaria used to be affiliated with from 1965 to
1970; that Ong helped in the casting of an LPG burner which was the same utility model of a burner
for which Letters Patent No. UM-4609 was issued, and that after her husband's separation from the
shop she organized Besco Metal Manufacturing (BESCO METAL, for brevity) for the casting of LPG
burners one of which had the configuration, form and component parts similar to those being
manufactured by UNITED FOUNDRY. Petitioner presented in evidence an alleged model of an LPG
burner marked Exh. "K" and covered by the Letters Patent of respondent, and testified that it was
given to her in January 1982 by one of her customers who allegedly acquired it from UNITED
FOUNDRY. Petitioner also presented in evidence her own model of an LPG burner called
"Ransome" burner marked Exh. "L," which was allegedly manufactured in 1974 or 1975 and sold by
her in the course of her business operation in the name of BESCO METAL. Petitioner claimed that
this "Ransome" burner (Exh. "L") had the same configuration and mechanism as that of the model
which was patented in favor of private respondent Melecia Madolaria. Also presented by petitioner
was a burner cup of an imported "Ransome" burner marked Exh "M" which was allegedly existing
even before the patent application of private respondent.
Petitioner presented two (2) other witnesses, namely, her husband Ong Bun Tua and Fidel
Francisco. Ong testified that he worked as a helper in the UNITED FOUNDRY from 1965 to 1970
where he helped in the casting of LPG burners with the same form, configuration and mechanism as
that of the model covered by the Letters Patent issued to private respondent. Francisco testified that
he had been employed with the Manila Gas Corporation from 1930 to 1941 and from 1952 up to
1969 where he retired as supervisor and that Manila Gas Corporation imported "Ransome" burners
way back in 1965 which were advertised through brochures to promote their sale.
Private respondent, on the other hand, presented only one witness, Rolando Madolaria, who
testified, among others, that he was the General Supervisor of the UNITED FOUNDRY in the
foundry, machine and buffing section; that in his early years with the company, UNITED FOUNDRY
was engaged in the manufacture of different kinds of gas stoves as well as burners based on
sketches and specifications furnished by customers; that the company manufactured early models of
single-piece types of burners where the mouth and throat were not detachable; that in the latter part
of 1978 respondent Melecia Madolaria confided in him that complaints were being brought to her
attention concerning the early models being manufactured; that he was then instructed by private
respondent to cast several experimental models based on revised sketches and specifications; that
private respondent again made some innovations; that after a few months, private respondent
discovered the solution to all the defects of the earlier models and, based on her latest sketches and
specifications, he was able to cast several models incorporating the additions to the innovations
introduced in the models. Various tests were conducted on the latest model in the presence and
under the supervision of Melecia Madolaria and they obtained perfect results. Rolando Madolaria
testified that private respondent decided to file her application for utility model patent in December
1979.
On 7 July 1986 the Director of Patents Cesar C. Sandiego issued Decision No. 86-56 denying the
petition for cancellation and holding that the evidence of petitioner was not able to establish
convincingly that the patented utility model of private respondent was anticipated. Not one of the
various pictorial representations of business clearly and convincingly showed that the devices
presented by petitioner was identical or substantially identical with the utility model of the
respondent. The decision also stated that even assuming that the brochures depicted clearly each
and every element of the patented gas burner device so that the prior art and patented device
became identical although in truth they were not, they could not serve as anticipatory bars for the
reason that they were undated. The dates when they were distributed to the public were not
indicated and, therefore, were useless prior art references. The records and evidence also do not
support the petitioner's contention that Letters Patent No. UM-4609 was obtained by means of fraud
and/or misrepresentation. No evidence whatsoever was presented by petitioner to show that the
then applicant Melecia Madolaria withheld with intent to deceive material facts which, if disclosed,
would have resulted in the refusal by the Philippine Patent Office to issue the Letters Patent under
inquiry.
Petitioner elevated the decision of the Director of Patents to the Court of Appeals which on 15
October 1993 affirmed the decision of the Director of Patents. Hence, this petition for review
on certiorari alleging that the Court of Appeals erred (a) in relying on imaginary differences which in
actuality did not exist between the model of private respondent covered by Letters Patent No. UM4609 and the previously known model of Esso Standard Eastern, Inc., and Manila Gas Corporation,
making such imaginary differences grounded entirely on speculation, surmises and conjectures; (b)
in rendering judgment based on misapprehension of facts; (c) in relying mainly on the testimony of
private respondent's sole witness Rolando Madolaria; and, (d) in not cancelling Letters Patent No.
UM-4609 in the name of private respondent.
Petitioner submits that the differences cited by the Court of Appeals between the utility model of
private respondent and the models of Manila Gas Corporation and Esso Standard Eastern, Inc., are
more imaginary than real. She alleges that based on Exhs. "E," "E-1," "F" and "F-1" or the brochures
of Manila Gas Corporation and Esso Standard Eastern, Inc., presented by petitioner, the cup-shaped
burner mouth and threaded hole on the side are shown to be similar to the utility model of private
respondent. The exhibits also show a detachable burner mouth having a plurality of upwardly
existing undulations adopted to act as gas passage when the cover is attached to the top of said
cup-shaped mouth all of which are the same as those in the patented model. Petitioner also denies
as substantial difference the short cylindrical tube of the burner mouth appearing in the brochures of
the burners being sold by Manila Gas Corporation and the long cylindered tube of private
respondent's model of the gas burner.
Petitioner argues that the actual demonstration made during the hearing disclosed the similarities in
form, operation and mechanism and parts between the utility model of private respondent and those
depicted in the brochures. The findings of the Patent Office and the Court of Appeals that the
brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., are undated cannot
overcome the fact of their circulation before private respondent filed her application for utility model
patent. Petitioner thus asks this Court to take judicial notice of the fact that Esso Standard Eastern,
Inc., disappeared before 1979 and reappeared only during the Martial Law years as Petrophil
Corporation. Petitioner also emphasizes that the brochures indicated the telephone number of
Manila Gas Corporation as 5-79-81 which is a five (5) numbered telephone number existing before
1975 because telephones in Metro Manila started to have six (6) numbers only after that year.
Petitioner further contends that the utility model of private respondent is absolutely similar to the
LPG burner being sold by petitioner in 1975 and 1976, and also to the "Ransome" burner depicted in
the old brochures of Manila Gas Corporation and Esso Standard Eastern, Inc., fabricated by
Ransome Torch and Burner Company of Oakland, California, USA, especially when considered
through actual physical examination, assembly and disassembly of the models of petitioner and
private respondent. Petitioner faults the Court of Appeals for disregarding the testimonies of Ong
Bun Tua and Fidel Francisco for their failure to produce documents on the alleged importation by
Manila Gas Corporation of "Ransome" burners in 1965 which had the same configuration, form and
mechanism as that of the private respondent's patented model.
Finally, it is argued that the testimony of private respondent's lone witness Rolando Madolaria should
not have been given weight by the Patent Office and the Court of Appeals because it contained
mere after-thoughts and pretensions.
We cannot sustain petitioner. Section 7 of RA No. 165, as amended, which is the law on patents,
expressly provides —
Sec. 7. Inventians patentable. Any invention of a new and useful machine, manufactured
product or substance, process or an improvement of any of the foregoing, shall be
patentable.
Further, Sec. 55 of the same law provides —
Sec. 55. Design patents and patents for utility models. — (a) Any new, original and
ornamental design for an article of manufacture and (b) any new model of implements or
tools or of any industrial product or of part of the same, which does not possess the quality of
invention, but which is of practical utility by reason of its form, configuration, construction or
composition, may be protected by the author thereof, the former by a patent for a design and
the latter by a patent for a utility model, in the same manner and subject to the same
provisions and requirements as relate to patents for inventions insofar as they are applicable
except as otherwise herein provided.
The element of novelty is an essential requisite of the patentability of an invention or discovery. If a
device or process has been known or used by others prior to its invention or discovery by the
applicant, an application for a patent therefor should be denied; and if the application has been
granted, the court, in a judicial proceeding in which the validity of the patent is drawn in question, will
hold it void and ineffective.2 It has been repeatedly held that an invention must possess the essential
elements of novelty, originality and precedence, and for the patentee to be entitled to the protection
the invention must be new to the world.3
In issuing Letters Patent No. UM-4609 to Melecia Madolaria for an "LPG Burner" on 22 July 1981,
the Philippine Patent Office found her invention novel and patentable. The issuance of such patent
creates a presumption which yields only to clear and cogent evidence that the patentee was the
original and first inventor. The burden of proving want of novelty is on him who avers it and the
burden is a heavy one which is met only by clear and satisfactory proof which overcomes every
reasonable doubt.4 Hence, a utility model shall not be considered "new" if before the application for a
patent it has been publicly known or publicly used in this country or has been described in a printed
publication or publications circulated within the country, or if it is substantially similar to any other
utility model so known, used or described within the country.5
As found by the Director of Patents, the standard of evidence sufficient to overcome the presumption
of legality of the issuance of UM-4609 to respondent Madolaria was not legally met by petitioner in
her action for the cancellation of the patent. Thus the Director of Patents explained his reasons for
the denial of the petition to cancel private respondent's patent —
Scrutiny of Exhs. "D" and "E" readily reveals that the utility model (LPG Burner) is not
anticipated. Not one of the various pictorial representations of burners clearly and
convincingly show that the device presented therein is identical or substantially identical in
construction with the aforesaid utility model. It is relevant and material to state that in
determining whether novelty or newness is negatived by any prior art, only one item of the
prior art may be used at a time. For anticipation to occur, the prior art must show that each
element is found either expressly or described or under principles of inherency in a single
prior art reference or that the claimed invention was probably known in a single prior art
device or practice. (Kalman v. Kimberly Clark, 218 USPQ 781, 789)
Even assuming gratia arguendi that the aforesaid brochures do depict clearly on all fours
each and every element of the patented gas burner device so that the prior art and the said
patented device become identical, although in truth they are not, they cannot serve as
anticipatory bars for the reason that they are undated. The dates when they were distributed
to the public were not indicated and, therefore, they are useless prior art references.
xxx xxx xxx
Furthermore, and more significantly, the model marked Exh. "K" does not show whether or
not it was manufactured and/or cast before the application for the issuance of patent for the
LPG burner was filed by Melecia Madolaria.
With respect to Exh. "L," petitioner claimed it to be her own model of LPG burner allegedly
manufactured sometime in 1974 or 1975 and sold by her in the course of her business
operation in the name of Besco Metal Manufacturing, which burner was denominated as
"Ransome" burner
xxx xxx xxx
But a careful examination of Exh. "L" would show that it does not bear the word "Ransome"
which is the burner referred to as the product being sold by the Petitioner. This is not the way
to prove that Exh. "L" anticipates Letters Patent No. UM-4609 through Exhs. "C" and "D."
Another factor working against the Petitioner's claims is that an examination of Exh. "L"
would disclose that there is no indication of the time or date it was manufactured. This Office,
thus has no way of determining whether Exh. "L" was really manufactured before the filing of
the aforesaid application which matured into Letters Patent No. UM-4609, subject matter of
the cancellation proceeding.
At this juncture, it is worthwhile to point out that petitioner also presented Exh. "M" which is
the alleged burner cup of an imported "Ransome" burner. Again, this Office finds the same
as unreliable evidence to show anticipation. It observed that there is no date indicated
therein as to when it was manufactured and/or imported before the filing of the application for
issuance of patent of the subject utility model. What is more, some component parts of Exh.
"M" are missing, as only the cup was presented so that the same could not be compared to
the utility model (subject matter of this case) which consists of several other detachable parts
in combination to form the complete LPG burner.
xxx xxx xxx
It must likewise be pointed out that Ong Bun Tua testified on the brochures allegedly of
Manila Gas and of Esso Gasul marked Exhs. "E" and "F" and on the alleged fact that Manila
Gas Corporation was importing from the United States "Ransome" burners. But the same
could not be given credence since he himself admitted during cross-examination that he has
never been connected with Manila Gas Corporation. He could not even present any
importation papers relating to the alleged imported ransome burners. Neither did his wife.6
The above findings and conclusions of the Director of Patent were reiterated and affirmed by the
Court of Appeals.7
The validity of the patent issued by the Philippine Patent Office in favor of private respondent and
the question over the inventiveness, novelty and usefulness of the improved model of the LPG
burner are matters which are better determined by the Patent Office. The technical staff of the
Philippine Patent Office composed of experts in their field has by the issuance of the patent in
question accepted private respondent's model of gas burner as a discovery. There is a presumption
that the Office has correctly determined the patentability of the model8 and such action must not be
interfered with in the absence of competent evidence to the contrary.
The rule is settled that the findings of fact of the Director of Patents, especially when affirmed by the
Court of Appeals, are conclusive on this Court when supported by substantial evidence. Petitioner
has failed to show compelling grounds for a reversal of the findings and conclusions of the Patent
Office and the Court of Appeals.
The alleged failure of the Director of Patents and the Court of Appeals to accord evidentiary weight
to the testimonies of the witnesses of petitioner showing anticipation is not a justification to grant the
petition. Pursuant to the requirement of clear and convincing evidence to overthrow the presumption
of validity of a patent, it has been held that oral testimony to show anticipation is open to suspicion
and if uncorroborated by cogent evidence, as what occurred in this case, it may be held insufficient.9
Finally, petitioner would want this Court to review all over again the evidence she presented before
the Patent Office. She argues that contrary to the decision of the Patent Office and the Court of
Appeals, the evidence she presented clearly proves that the patented model of private respondent is
no longer new and, therefore, fraud attended the acquisition of patent by private respondent.
It has been held that the question on priority of invention is one of fact. Novelty and utility are
likewise questions of fact. The validity of patent is decided on the basis of factual inquiries. Whether
evidence presented comes within the scope of prior art is a factual issue to be resolved by the
Patent Office.10 There is question of fact when the doubt or difference arises as to the truth or
falsehood of alleged facts or when the query necessarily invites calibration of the whole evidence
considering mainly the credibility of witnesses, existence and relevance of specific surrounding
circumstances, their relation to each other and to the whole and the probabilities of the situation.11
Time and again we have held that it is not the function of the Supreme Court to analyze or weigh all
over again the evidence and credibility of witnesses presented before the lower tribunal or office.
The Supreme Court is not a trier of facts. Its jurisdiction is limited to reviewing and revising errors of
law imputed to the lower court, its findings of fact being conclusive and not reviewable by this Court.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals affirming that of the
Philippine Patent Office is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 148222
August 15, 2003
PEARL & DEAN (PHIL.), INCORPORATED, Petitioner,
vs.
SHOEMART, INCORPORATED, and NORTH EDSA MARKETING,
INCORPORATED, Respondents.
DECISION
CORONA, J.:
In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl &
Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision1 of the Court of Appeals reversing the
October 31, 1996 decision2 of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI)
liable for infringement of trademark and copyright, and unfair competition.
FACTUAL ANTECEDENTS
The May 22, 2001 decision of the Court of Appeals3 contained a summary of this dispute:
"Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of
advertising display units simply referred to as light boxes. These units utilize specially printed
posters sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was
able to secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated
display units. The advertising light boxes were marketed under the trademark "Poster Ads". The
application for registration of the trademark was filed with the Bureau of Patents, Trademarks and
Technology Transfer on June 20, 1983, but was approved only on September 12, 1988, per
Registration No. 41165. From 1981 to about 1988, Pearl and Dean employed the services of Metro
Industrial Services to manufacture its advertising displays.
Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the
lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under
construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl
and Dean agreed. On September 11, 1985, Pearl and Dean’s General Manager, Rodolfo Vergara,
submitted for signature the contracts covering SM Cubao and SM Makati to SMI’s Advertising
Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati,
however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other
contract and reminding him that their agreement for installation of light boxes was not only for its SM
Makati branch, but also for SM Cubao. SMI did not bother to reply.
Instead, in a letter dated January 14, 1986, SMI’s house counsel informed Pearl and Dean that it
was rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply
dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis.
In the same letter, he pushed for the signing of the contract for SM Cubao.
Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to
fabricate its display units, offered to construct light boxes for Shoemart’s chain of stores. SMI
approved the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for
SMI. After its contract with Metro Industrial was terminated, SMI engaged the services of EYD
Rainbow Advertising Corporation to make the light boxes. Some 300 units were fabricated in 1991.
These were delivered on a staggered basis and installed at SM Megamall and SM City.
Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were
installed at SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean
found out that aside from the two (2) reported SM branches, light boxes similar to those it
manufactures were also installed in two (2) other SM stores. It further discovered that defendantappellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing
Services, was set up primarily to sell advertising space in lighted display units located in SMI’s
different branches. Pearl and Dean noted that NEMI is a sister company of SMI.
In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and
NEMI enjoining them to cease using the subject light boxes and to remove the same from SMI’s
establishments. It also demanded the discontinued use of the trademark "Poster Ads," and the
payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos
(P20,000,000.00).
Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light
boxes and NEMI took down its advertisements for "Poster Ads" from the lighted display units in
SMI’s stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed
this instant case for infringement of trademark and copyright, unfair competition and damages.
In denying the charges hurled against it, SMI maintained that it independently developed its poster
panels using commonly known techniques and available technology, without notice of or reference
to Pearl and Dean’s copyright. SMI noted that the registration of the mark "Poster Ads" was only for
stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word
"Poster Ads" is a generic term which cannot be appropriated as a trademark, and, as such,
registration of such mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs
prayed for in its complaint since its advertising display units contained no copyright notice, in
violation of Section 27 of P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it
and that the suit was purely intended to malign SMI’s good name. On this basis, SMI, aside from
praying for the dismissal of the case, also counterclaimed for moral, actual and exemplary damages
and for the cancellation of Pearl and Dean’s Certification of Copyright Registration No. PD-R-2558
dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September 12,
1988.
NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor
having engaged in the business of advertising. It repleaded SMI’s averments, admissions and
denials and prayed for similar reliefs and counterclaims as SMI."
The RTC of Makati City decided in favor of P & D:
Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of
copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of
RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and
Sections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed:
(1) to pay plaintiff the following damages:
(a) actual damages - ₱16,600,000.00,
representing profits
derived by defendants
as a result of infringement of plaintiff’s copyright
from 1991 to 1992
(b) moral damages - ₱1,000.000.00
(c) exemplary damages - ₱1,000,000.00
(d) attorney’s fees - ₱1,000,000.00
plus
(e) costs of suit;
(2) to deliver, under oath, for impounding in the National Library, all light boxes of SMI which
were fabricated by Metro Industrial Services and EYD Rainbow Advertising Corporation;
(3) to deliver, under oath, to the National Library, all filler-posters using the trademark
"Poster Ads", for destruction; and
(4) to permanently refrain from infringing the copyright on plaintiff’s light boxes and its
trademark "Poster Ads".
Defendants’ counterclaims are hereby ordered dismissed for lack of merit.
SO ORDERED.4
On appeal, however, the Court of Appeals reversed the trial court:
Since the light boxes cannot, by any stretch of the imagination, be considered as either prints,
pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a
copyrightable class "O" work, we have to agree with SMI when it posited that what was copyrighted
were the technical drawings only, and not the light boxes themselves, thus:
42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like
plaintiff-appellant’s will not extend to the actual object. It has so been held under jurisprudence, of
which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained
a copyright protection for a book entitled "Selden’s Condensed Ledger or Bookkeeping Simplified"
which purported to explain a new system of bookkeeping. Included as part of the book were blank
forms and illustrations consisting of ruled lines and headings, specially designed for use in
connection with the system explained in the work. These forms showed the entire operation of a day
or a week or a month on a single page, or on two pages following each other. The defendant Baker
then produced forms which were similar to the forms illustrated in Selden’s copyrighted books. The
Court held that exclusivity to the actual forms is not extended by a copyright. The reason was that "to
grant a monopoly in the underlying art when no examination of its novelty has ever been made
would be a surprise and a fraud upon the public; that is the province of letters patent, not of
copyright." And that is precisely the point. No doubt aware that its alleged original design would
never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a
fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely
employs a recordal system without the benefit of an in-depth examination of novelty.
The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43
F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished
drawing entitled "Bridge Approach – the drawing showed a novel bridge approach to unsnarl traffic
congestion". The defendant constructed a bridge approach which was alleged to be an infringement
of the new design illustrated in plaintiff’s drawings. In this case it was held that protection of the
drawing does not extend to the unauthorized duplication of the object drawn because copyright
extends only to the description or expression of the object and not to the object itself. It does not
prevent one from using the drawings to construct the object portrayed in the drawing.
In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v.
Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without
being authorized, uses a copyrighted architectural plan to construct a structure. This is because the
copyright does not extend to the structures themselves.
In fine, we cannot find SMI liable for infringing Pearl and Dean’s copyright over the technical
drawings of the latter’s advertising display units.
xxx xxx xxx
The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that
the protective mantle of the Trademark Law extends only to the goods used by the first user as
specified in the certificate of registration, following the clear mandate conveyed by Section 20 of
Republic Act 166, as amended, otherwise known as the Trademark Law, which reads:
SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a
mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant’s
ownership of the mark or trade-name, and of the registrant’s exclusive right to use the same in
connection with the goods, business or services specified in the certificate, subject to any conditions
and limitations stated therein." (underscoring supplied)
The records show that on June 20, 1983, Pearl and Dean applied for the registration of the
trademark "Poster Ads" with the Bureau of Patents, Trademarks, and Technology Transfer. Said
trademark was recorded in the Principal Register on September 12, 1988 under Registration No.
41165 covering the following products: stationeries such as letterheads, envelopes and calling cards
and newsletters.
With this as factual backdrop, we see no legal basis to the finding of liability on the part of the
defendants-appellants for their use of the words "Poster Ads", in the advertising display units in suit.
Jurisprudence has interpreted Section 20 of the Trademark Law as "an implicit permission to a
manufacturer to venture into the production of goods and allow that producer to appropriate the
brand name of the senior registrant on goods other than those stated in the certificate of
registration." The Supreme Court further emphasized the restrictive meaning of Section 20 when it
stated, through Justice Conrado V. Sanchez, that:
Really, if the certificate of registration were to be deemed as including goods not specified therein,
then a situation may arise whereby an applicant may be tempted to register a trademark on any and
all goods which his mind may conceive even if he had never intended to use the trademark for the
said goods. We believe that such omnibus registration is not contemplated by our Trademark Law.
While we do not discount the striking similarity between Pearl and Dean’s registered trademark and
defendants-appellants’ "Poster Ads" design, as well as the parallel use by which said words were
used in the parties’ respective advertising copies, we cannot find defendants-appellants liable for
infringement of trademark. "Poster Ads" was registered by Pearl and Dean for specific use in its
stationeries, in contrast to defendants-appellants who used the same words in their advertising
display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond
us. But, having already done so, it must stand by the consequence of the registration which it had
caused.
xxx xxx xxx
We are constrained to adopt the view of defendants-appellants that the words "Poster Ads" are a
simple contraction of the generic term poster advertising. In the absence of any convincing proof that
"Poster Ads" has acquired a secondary meaning in this jurisdiction, we find that Pearl and Dean’s
exclusive right to the use of "Poster Ads" is limited to what is written in its certificate of registration,
namely, stationeries.
Defendants-appellants cannot thus be held liable for infringement of the trademark "Poster Ads".
There being no finding of either copyright or trademark infringement on the part of SMI and NEMI,
the monetary award granted by the lower court to Pearl and Dean has no leg to stand on.
xxx xxx xxx
WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and
another is rendered DISMISSING the complaint and counterclaims in the above-entitled case for
lack of merit.5
Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following
errors for the Court’s consideration:
A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT
INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI;
B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO
INFRINGEMENT OF PEARL & DEAN’S TRADEMARK "POSTER ADS" WAS COMMITTED
BY RESPONDENTS SM AND NEMI;
C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF
THE TRIAL COURT, DESPITE THE LATTER’S FINDING, NOT DISPUTED BY THE
HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS
NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN.
D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS
SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY
DAMAGES, ATTORNEY’S FEES AND COSTS OF SUIT.6
ISSUES
In resolving this very interesting case, we are challenged once again to put into proper perspective
four main concerns of intellectual property law — patents, copyrights, trademarks and unfair
competition arising from infringement of any of the first three. We shall focus then on the following
issues:
(1) if the engineering or technical drawings of an advertising display unit (light box) are
granted copyright protection (copyright certificate of registration) by the National Library, is
the light box depicted in such engineering drawings ipso facto also protected by such
copyright?
(2) or should the light box be registered separately and protected by a patent issued by the
Bureau of Patents Trademarks and Technology Transfer (now Intellectual Property Office) —
in addition to the copyright of the engineering drawings?
(3) can the owner of a registered trademark legally prevent others from using such trademark
if it is a mere abbreviation of a term descriptive of his goods, services or business?
ON THE ISSUE OF COPYRIGHT INFRINGEMENT
Petitioner P & D’s complaint was that SMI infringed on its copyright over the light boxes when SMI
had the units manufactured by Metro and EYD Rainbow Advertising for its own account. Obviously,
petitioner’s position was premised on its belief that its copyright over the engineering drawings
extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was
no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings
alone and not to the light box itself. We agree with the appellate court.
First, petitioner’s application for a copyright certificate — as well as Copyright Certificate No. PDR2588 issued by the National Library on January 20, 1981 — clearly stated that it was for a class
"O" work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then
prevailing. Said Section 2 expressly enumerated the works subject to copyright:
SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to
any of the following works:
xxx
xxx
xxx
(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps;
xxx
xxx
xxx
Although petitioner’s copyright certificate was entitled "Advertising Display Units" (which depicted the
box-type electrical devices), its claim of copyright infringement cannot be sustained.
Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the
rights are limited to what the statute confers. It may be obtained and enjoyed only with respect to the
subjects and by the persons, and on terms and conditions specified in the statute.7 Accordingly, it can
cover only the works falling within the statutory enumeration or description.8
P & D secured its copyright under the classification class "O" work. This being so, petitioner’s
copyright protection extended only to the technical drawings and not to the light box itself because
the latter was not at all in the category of "prints, pictorial illustrations, advertising copies, labels, tags
and box wraps." Stated otherwise, even as we find that P & D indeed owned a valid copyright, the
same could have referred only to the technical drawings within the category of "pictorial illustrations."
It could not have possibly stretched out to include the underlying light box. The strict application9 of
the law’s enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is,
even if its copyright certificate was entitled "Advertising Display Units." What the law does not
include, it excludes, and for the good reason: the light box was not a literary or artistic piece which
could be copyrighted under the copyright law. And no less clearly, neither could the lack of statutory
authority to make the light box copyrightable be remedied by the simplistic act of entitling the
copyright certificate issued by the National Library as "Advertising Display Units."
In fine, if SMI and NEMI reprinted P & D’s technical drawings for sale to the public without license
from P & D, then no doubt they would have been guilty of copyright infringement. But this was not
the case. SMI’s and NEMI’s acts complained of by P & D were to have units similar or identical to
the light box illustrated in the technical drawings manufactured by Metro and EYD Rainbow
Advertising, for leasing out to different advertisers. Was this an infringement of petitioner’s copyright
over the technical drawings? We do not think so.
During the trial, the president of P & D himself admitted that the light box was neither a literary not
an artistic work but an "engineering or marketing invention."10 Obviously, there appeared to be some
confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and
trademarks. In the leading case of Kho vs. Court of Appeals,11 we ruled that these three legal rights
are completely distinct and separate from one another, and the protection afforded by one cannot be
used interchangeably to cover items or works that exclusively pertain to the others:
Trademark, copyright and patents are different intellectual property rights that cannot be
interchanged with one another. A trademark is any visible sign capable of distinguishing the
goods (trademark) or services (service mark) of an enterprise and shall include a stamped or
marked container of goods. In relation thereto, a trade name means the name or designation
identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary
and artistic works which are original intellectual creations in the literary and artistic domain protected
from the moment of their creation. Patentable inventions, on the other hand, refer to any technical
solution of a problem in any field of human activity which is new, involves an inventive step and is
industrially applicable.
ON THE ISSUE OF PATENT INFRINGEMENT
This brings us to the next point: if, despite its manufacture and commercial use of the light
boxes without license from petitioner, private respondents cannot be held legally liable for
infringement of P & D’s copyright over its technical drawings of the said light boxes, should they be
liable instead for infringement of patent? We do not think so either.
For some reason or another, petitioner never secured a patent for the light boxes. It therefore
acquired no patent rights which could have protected its invention, if in fact it really was. And
because it had no patent, petitioner could not legally prevent anyone from manufacturing or
commercially using the contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,12 we held
that "there can be no infringement of a patent until a patent has been issued, since whatever right
one has to the invention covered by the patent arises alone from the grant of patent. x x x (A)n
inventor has no common law right to a monopoly of his invention. He has the right to make use of
and vend his invention, but if he voluntarily discloses it, such as by offering it for sale, the world is
free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all
others. As a patentee, he has the exclusive right of making, selling or using the invention.13 On the
assumption that petitioner’s advertising units were patentable inventions, petitioner revealed them
fully to the public by submitting the engineering drawings thereof to the National Library.
To be able to effectively and legally preclude others from copying and profiting from the invention, a
patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is
to bring new designs and technologies into the public domain through disclosure.14 Ideas, once
disclosed to the public without the protection of a valid patent, are subject to appropriation without
significant restraint.15
On one side of the coin is the public which will benefit from new ideas; on the other are the inventors
who must be protected. As held in Bauer & Cie vs. O’Donnel,16 "The act secured to the inventor the
exclusive right to make use, and vend the thing patented, and consequently to prevent others from
exercising like privileges without the consent of the patentee. It was passed for the purpose of
encouraging useful invention and promoting new and useful inventions by the protection and
stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the
exclusive privileges granted the benefit of such inventions and improvements."
The law attempts to strike an ideal balance between the two interests:
"(The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and
disclosure of new useful and non-obvious advances in technology and design, in return for the
exclusive right to practice the invention for a number of years. The inventor may keep his invention
secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to
the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but
upon the expiration of that period, the knowledge of the invention inures to the people, who are thus
enabled to practice it and profit by its use."17
The patent law has a three-fold purpose: "first, patent law seeks to foster and reward invention;
second, it promotes disclosures of inventions to stimulate further innovation and to permit the public
to practice the invention once the patent expires; third, the stringent requirements for patent
protection seek to ensure that ideas in the public domain remain there for the free use of the
public."18
It is only after an exhaustive examination by the patent office that a patent is issued. Such an indepth investigation is required because "in rewarding a useful invention, the rights and welfare of the
community must be fairly dealt with and effectively guarded. To that end, the prerequisites to
obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise
are equally strictly enforced. To begin with, a genuine invention or discovery must be demonstrated
lest in the constant demand for new appliances, the heavy hand of tribute be laid on each slight
technological advance in art."19
There is no such scrutiny in the case of copyrights nor any notice published before its grant to the
effect that a person is claiming the creation of a work. The law confers the copyright from the
moment of creation20 and the copyright certificate is issued upon registration with the National Library
of a sworn ex-parte claim of creation.
Therefore, not having gone through the arduous examination for patents, the petitioner cannot
exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of
its copyright certificate over the technical drawings.
Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office
(IPO) to scrutinize the light box’s eligibility as a patentable invention. The irony here is that, had
petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through
the simplified procedure of copyright-registration with the National Library — without undergoing the
rigor of defending the patentability of its invention before the IPO and the public — the petitioner
would be protected for 50 years. This situation could not have been the intention of the law.
In the oft-cited case of Baker vs. Selden21 , the United States Supreme Court held that only the
expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the
copyright of a book which expounded on a new accounting system he had developed. The
publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced
forms similar to those illustrated in the plaintiff’s copyrighted book. The US Supreme Court ruled
that:
"There is no doubt that a work on the subject of book-keeping, though only explanatory of well
known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But
there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate.
The mere statement of the proposition is so evident that it requires hardly any argument to support it.
The same distinction may be predicated of every other art as well as that of bookkeeping. A treatise
on the composition and use of medicines, be they old or new; on the construction and use of
ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or
on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright;
but no one would contend that the copyright of the treatise would give the exclusive right to the art or
manufacture described therein. The copyright of the book, if not pirated from other works, would be
valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or
thing described or explained has nothing to do with the validity of the copyright. To give to the
author of the book an exclusive property in the art described therein, when no examination of
its novelty has ever been officially made, would be a surprise and a fraud upon the public.
That is the province of letters patent, not of copyright. The claim to an invention of discovery
of an art or manufacture must be subjected to the examination of the Patent Office before an
exclusive right therein can be obtained; and a patent from the government can only secure it.
The difference between the two things, letters patent and copyright, may be illustrated by reference
to the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of
great value in the healing art. If the discoverer writes and publishes a book on the subject (as
regular physicians generally do), he gains no exclusive right to the manufacture and sale of
the medicine; he gives that to the public. If he desires to acquire such exclusive right, he
must obtain a patent for the mixture as a new art, manufacture or composition of matter. He
may copyright his book, if he pleases; but that only secures to him the exclusive right of
printing and publishing his book. So of all other inventions or discoveries.
The copyright of a book on perspective, no matter how many drawings and illustrations it may
contain, gives no exclusive right to the modes of drawing described, though they may never have
been known or used before. By publishing the book without getting a patent for the art, the latter is
given to the public.
xxx
Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book
intended to convey instruction in the art, any person may practice and use the art itself which he has
described and illustrated therein. The use of the art is a totally different thing from a publication
of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive
right to make, sell and use account books prepared upon the plan set forth in such book. Whether
the art might or might not have been patented, is a question, which is not before us. It was not
patented, and is open and free to the use of the public. And, of course, in using the art, the ruled
lines and headings of accounts must necessarily be used as incident to it.
The plausibility of the claim put forward by the complainant in this case arises from a confusion of
ideas produced by the peculiar nature of the art described in the books, which have been made the
subject of copyright. In describing the art, the illustrations and diagrams employed happened to
correspond more closely than usual with the actual work performed by the operator who uses the
art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays
no foundation for an exclusive claim to the art itself. The object of the one is explanation; the
object of the other is use. The former may be secured by copyright. The latter can only be
secured, if it can be secured at all, by letters patent." (underscoring supplied)
ON THE ISSUE OF TRADEMARK INFRINGEMENT
This issue concerns the use by respondents of the mark "Poster Ads" which petitioner’s president
said was a contraction of "poster advertising." P & D was able to secure a trademark certificate for it,
but one where the goods specified were "stationeries such as letterheads, envelopes, calling cards
and newsletters."22 Petitioner admitted it did not commercially engage in or market these goods. On
the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising
spaces thereon, which, however, were not at all specified in the trademark certificate.
Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate
Appellate Court,23 where we, invoking Section 20 of the old Trademark Law, ruled that "the certificate
of registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to
use its own symbol only to those goods specified in the certificate, subject to any conditions and
limitations specified in the certificate x x x. One who has adopted and used a trademark on his
goods does not prevent the adoption and use of the same trademark by others for products which
are of a different description."24 Faberge, Inc. was correct and was in fact recently reiterated in Canon
Kabushiki Kaisha vs. Court of Appeals.25
Assuming arguendo that "Poster Ads" could validly qualify as a trademark, the failure of P & D to
secure a trademark registration for specific use on the light boxes meant that there could not have
been any trademark infringement since registration was an essential element thereof.
1âw phi 1
ON THE ISSUE OF UNFAIR COMPETITION
If at all, the cause of action should have been for unfair competition, a situation which was possible
even if P & D had no registration.26 However, while the petitioner’s complaint in the RTC also cited
unfair competition, the trial court did not find private respondents liable therefor. Petitioner
did not appeal this particular point; hence, it cannot now revive its claim of unfair competition.
But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair
competition.
By the nature of things, there can be no unfair competition under the law on copyrights although it is
applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation
as a trademark or tradename may, by long and exclusive use by a business (such that the name or
phrase becomes associated with the business or product in the mind of the purchasing public), be
entitled to protection against unfair competition.27 In this case, there was no evidence that P & D’s
use of "Poster Ads" was distinctive or well-known. As noted by the Court of Appeals, petitioner’s
expert witnesses himself had testified that " ‘Poster Ads’ was too generic a name. So it was difficult
to identify it with any company, honestly speaking."28 This crucial admission by its own expert witness
that "Poster Ads" could not be associated with P & D showed that, in the mind of the public, the
goods and services carrying the trademark "Poster Ads" could not be distinguished from the goods
and services of other entities.
This fact also prevented the application of the doctrine of secondary meaning. "Poster Ads" was
generic and incapable of being used as a trademark because it was used in the field of poster
advertising, the very business engaged in by petitioner. "Secondary meaning" means that a word or
phrase originally incapable of exclusive appropriation with reference to an article in the market
(because it is geographically or otherwise descriptive) might nevertheless have been used for so
long and so exclusively by one producer with reference to his article that, in the trade and to that
branch of the purchasing public, the word or phrase has come to mean that the article was his
property.29 The admission by petitioner’s own expert witness that he himself could not associate
"Poster Ads" with petitioner P & D because it was "too generic" definitely precluded the application of
this exception.
Having discussed the most important and critical issues, we see no need to belabor the rest.
All told, the Court finds no reversible error committed by the Court of Appeals when it reversed the
Regional Trial Court of Makati City.
WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated May
22, 2001 is AFFIRMED in toto.
SO ORDERED.
Patent Infringement
- Secs.71.1 and 76.1; Creser Precision System vs. CA, GR No. 118708; Pearl and Dean Phil, Inc. vs.
Shoemart, Inc., GR No. 148222; Del Rosario vs. CA, GR NO. 115106, Godines vs. CA, GR No. 97343;
Smithkline Beckman Corporation vs. CA, GR No. 12662
G.R. No. 118708 February 2, 1998
CRESER PRECISION SYSTEMS, INC., petitioner,
vs.
COURT OF APPEALS AND FLORO INTERNATIONAL CORP., respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the decision 1 of the Court of Appeals dated November 9,
1994 in C.A.-G.R. SP No. 34425 entitled "Floro International Corp. vs. Hon. Tirso D.C Cruz and
Creser Precision System, Inc.", the dispositive portion of which reads:
WHEREFORE, THE PETITION IS HEREBY GRANTED. THE COMPLAINT FOR
INJUNCTION AND DAMAGES, CIVIL CASE NO. 93-1856 BEFORE THE
RESPONDENT JUDGE IS HEREBY ORDERED DISMISSED AND HIS ORDERS
THEREIN OF DECEMBER 29, 1993 AND MAY 11, 1994 ARE ORDERED SET
ASIDE.
Private respondent is a domestic corporation engaged in the manufacture, production, distribution
and sale of military armaments, munitions, airmunitions and other similar materials. 2
On January 23, 1990, private respondent was granted by the Bureau of Patents, Trademarks and
Technology Transfer (BPTTT), a Letters Patent No. UM-69383 covering an aerial fuze which was
published in the September-October-1990, Vol. III, No. 5 issue of the Bureau of Patent's
Official Gazette.4
Sometime in November 1993, private respondent, through its president, Mr. Gregory Floro,
Jr., discovered that petitioner submitted samples of its patented aerial fuze to the Armed
Forces of the Philippines (AFP) for testing. He learned that petitioner was claiming the
aforesaid aerial fuze as its own and planning to bid and manufacture the same commercially
without license or authority from private respondent. To protect its right, private respondent
on December 3, 1993, sent a letter5 to petitioner advising it of its existing patent and its rights
thereunder, warning petitioner of a possible court action and/or application for injunction,
should it proceed with the scheduled testing by the military on December 7, 1993.
In response to private respondent's demand, petitioner filed on December 8, 1993 a
complaint6 for injunction and damages arising from the alleged infringement before the
Regional Trial Court of Quezon City, Branch 88. The complaint alleged, among others: that
petitioner is the first, true and actual inventor of an aerial fuze denominated as "Fuze, PDR 77
CB4" which it developed as early as December 1981 under the Self-Reliance Defense Posture
Program (SRDP) of the AFP; that sometime in 1986, petitioner began supplying the AFP with
the said aerial fuze; that private respondent's aerial fuze is identical in every respect to the
petitioner's fuze; and that the only difference between the two fuzes are miniscule and merely
cosmetic in nature. Petitioner prayed that a temporary restraining order and/or writ of
preliminary injunction be issued enjoining private respondent including any and all persons
acting on its behalf from manufacturing, marketing and/or profiting therefrom, and/or from
performing any other act in connection therewith or tending to prejudice and deprive it of any
rights, privileges and benefits to which it is duly entitled as the first, true and actual inventor
of the aerial fuze.
On December 10, 1993, the trial court issued a temporary restraining order. Thereafter,
hearings were held on the application of petitioner for the issuance of a writ of preliminary
injunction, with both parties presenting their evidence. After the hearings, the trial court
directed the parties to submit their respective memoranda in support of their positions.
On December 27, 1993, private respondent submitted its memorandum 7 alleging that
petitioner has no cause of action to file a complaint for infringement against it since it has no
patent for the aerial fuze which it claims to have invented; that petitioner's available remedy
is to file a petition for cancellation of patent before the Bureau of Patents; that private
respondent as the patent holder cannot be stripped of its property right over the
patented aerial fuze consisting of the exclusive right to manufacture, use and sell the same
and that it stands to suffer irreparable damage and injury if it is enjoined from the exercise of
its property rights over its patent.
On December 29, 1993, the trial court issued an Order 8 granting the issuance of a writ of
preliminary injunction against private respondent the dispositive portion of which reads:
WHEREFORE, plaintiffs application for the issuance of a writ of preliminary
injunction is granted and, upon posting of the corresponding bond by plaintiff
in the amount of PHP 200,000.00, let the writ of preliminary injunction be
issued by the branch Clerk of this Court enjoining the defendant and any and
all persons acting on its behalf or by and under its authority, from
manufacturing, marketing and/or selling aerial fuzes identical, to those of
plaintiff, and from profiting therefrom, and/or from performing any other act in
connection therewith until further orders from this Court.
Private respondent moved for reconsideration but this was denied by the trial court in its
Order9 of May 11, 1994, pertinent portions of which read:
For resolution before this Court is the Motion for Reconsideration filed by the
defendant and the plaintiff's Opposition thereto. The Court finds no sufficient
cause to reconsider its order dated December 29, 1993. During the hearing for
the issuance of the preliminary injunction, the plaintiff has amply proven its
entitlement to the relief prayed for. It is undisputed that the plaintiff has
developed its aerial fuze way back in 1981 while the defendant began
manufacturing the same only in 1987. Thus, it is only logical to conclude that it
was the plaintiff's aerial fuze that was copied or imitated which gives the
plaintiff the right to have the defendant enjoined "from manufacturing,
marketing and/or selling aerial fuzes identical to those of the plaintiff, and from
profiting therefrom and/or performing any other act in connection therewith
until further orders from this Court." With regards to the defendant's assertion
that an action for infringement may only be brought by "anyone possessing
right, title or interest to the patented invention," (Section 42, RA 165) qualified
by Sec. 10, RA 165 to include only "the first true and actual inventor, his heirs,
legal representatives or assignees, "this court finds the foregoing to be
untenable. Sec. 10 merely enumerates the persons who may have an invention
patented which does not necessarily limit to these persons the right to
institute an action for infringement. Defendant further contends that the order
in issue is disruptive of the status quo. On the contrary, the order issued by
the Court in effect maintained the status quo. The last actual, peaceable
uncontested status existing prior to this controversy was the plaintiff
manufacturing and selling its own aerial fuzes PDR 77 CB4 which was ordered
stopped through the defendant's letter. With the issuance of the order, the
operations of the plaintiff continue. Lastly, this court believes that the
defendant will not suffer irreparable injury by virtue of said order. The
defendant's claim is primarily hinged on its patent (Letters Patent No. UM-6983)
the validity of which is being questioned in this case.
WHEREFORE, premises considered, the Motion for Reconsideration is hereby
denied for lack of merit.
SO ORDERED.
Aggrieved, private respondent on June 27, 1994, filed a petition for certiorari, mandamus and
prohibition 10 before respondent Court of Appeals raising as grounds the following:
a. Petitioner has no cause of action for infringement against private
respondent, the latter not having any patent for the aerial fuze which it claims
to have invented and developed and allegedly infringed by private respondent;
b. the case being an action for cancellation or invalidation of private
respondent's Letters Patent over its own aerial fuze, the proper venue is the
Office of the Director of Patents;
c. The trial court acted in grave abuse of discretion and/or in excess of
jurisdiction in finding that petitioner has fully established its clear title or right
to preliminary injunction;
d. The trial court acted in grave abuse of discretion and/or in excess of
jurisdiction in granting the preliminary injunction, it being disruptive of the
status quo; and
e. The trial court acted in grave abuse of discretion and/or in excess of
jurisdiction in granting the preliminary injunction thereby depriving private
respondent of its property rights over the patented aerial fuze and cause it
irreparable damages.
On November 9, 1994, the respondent court rendered the now assailed decision reversing the
trial court's Order of December 29, 1993 and dismissing the complaint filed by petitioner.
The motion for reconsideration was also denied on January 17, 1995. 11 Hence, this present
petition.
It is petitioner's contention that it can file, under Section 42 of the Patent Law (R.A. 165), an
action for infringement not as a patentee but as an entity in possession of a right, title or
interest in and to the patented invention. It advances the theory that while the absence of a
patent may prevent one from lawfully suing another for infringement of said patent, such
absence does not bar the first true and actual inventor of the patented invention from suing
another who was granted a patent in a suit for declaratory or injunctive relief recognized
under American patent laws. This remedy, petitioner points out, may be likened to a civil
action for infringement under Section 42 of the Philippine Patent Law.
We find the above arguments untenable.
Section 42 of R.A. 165, otherwise known as the Patent Law, explicitly provides:
Sec. 42. Civil action for infringement. — Any patentee, or anyone possessing
any right, title or interest in and to the patented invention, whose rights have
been infringed, may bring a civil action before the proper Court of First
Instance (now Regional Trial court), to recover from the infringer damages
sustained by reason of the infringement and to secure an injunction for the
protection of his right. . . .
Under the aforequoted law, only the patentee or his successors-in-interest may file an action
for infringement. The phrase "anyone possessing any right, title or interest in and to the
patented invention" upon which petitioner maintains its present suit, refers only to the
patentee's successors-in-interest, assignees or grantees since actions for infringement of
patent may be brought in the name of the person or persons interested, whether as patentee,
assignees, or as grantees, of the exclusive right. 12 Moreover, there can be no infringement of
a patent until a patent has been issued, since whatever right one has to the invention covered
by the patent arises alone from the grant of patent. 13 In short, a person or entity who has not
been granted letters patent over an invention and has not acquired any light or title thereto
either as assignee or as licensee, has no cause of action for infringement because the right
to maintain an infringement suit depends on the existence of the patent. 14
Petitioner admits it has no patent over its aerial fuze. Therefore, it has no legal basis or cause
of action to institute the petition for injunction and damages arising from the alleged
infringement by private respondent. While petitioner claims to be the first inventor of
the aerial fuze, still it has no right of property over the same upon which it can maintain a suit
unless it obtains a patent therefor. Under American jurisprudence, an inventor has no
common-law right to a monopoly of his invention. He has the right to make, use and vend his
own invention, but if he voluntarily discloses it, such as by offering it for sale, the world is
free to copy and use it with impunity. A patent, however, gives the inventor the right to
exclude all others. As a patentee, he has the exclusive right of making, using or selling the
invention. 15
Further, the remedy of declaratory judgment or injunctive suit on patent invalidity relied upon
by petitioner cannot be likened to the civil action for infringement under Section 42 of the
Patent Law. The reason for this is that the said remedy is available only to the patent holder
or his successors-in-interest. Thus, anyone who has no patent over an invention but claims
to have a right or interest thereto can not file an action for declaratory judgment or injunctive
suit which is not recognized in this jurisdiction. Said person, however, is not left without any
remedy. He can, under Section 28 of the aforementioned law, file a petition for cancellation of
the patent within three (3) years from the publication of said patent with the Director of
Patents and raise as ground therefor that the person to whom the patent was issued is not
the true and actual inventor. Hence, petitioner's remedy is not to file an action for injunction
or infringement but to file a petition for cancellation of private respondent's patent. Petitioner
however failed to do so. As such, it can not now assail or impugn the validity of the private
respondent's letters patent by claiming that it is the true and actual inventor of the aerial fuze.
Thus, as correctly ruled by the respondent Court of Appeals in its assailed decision: "since
the petitioner (private respondent herein) is the patentee of the disputed invention embraced
by letters of patent UM No. 6938 issued to it on January 23, 1990 by the Bureau of Patents, it
has in its favor not only the presumption of validity of its patent, but that of a legal and
factual first and true inventor of the invention."
In the case of Aguas vs. De Leon, 16 we stated that:
The validity of the patent issued by the Philippine Patent Office in favor of the
private respondent and the question over the investments, novelty and
usefulness of the improved process therein specified and described are
matters which are better determined by the Philippines Patent Office. The
technical Staff of the Philippines Patent Office, composed of experts in their
field, have, by the issuance of the patent in question, accepted the thinness of
the private respondent's new tiles as a discovery. There is a presumption that
the Philippine Patent Office has correctly determined the patentability of the
improvement by the private respondent of the process in question.
In fine, in the absence of error or abuse of power or lack of jurisdiction or grave abuse of
discretion, we sustain the assailed decision of the respondent Court of Appeal.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. No pronouncement
as to costs.
SO ORDERED.
G.R. No. 115106 March 15, 1996
ROBERTO L. DEL ROSARIO, petitioner,
vs.
COURT OF APPEALS AND JANITO CORPORATION, respondents.
BELLOSILLO, J.:p
Roberto del Rosario petitions this Court to review the decision of the Court of Appeals 1 which set aside the order of the Regional Trial Court
of Makati granting a writ of preliminary injunction in his favor.
The antecedents: On 18 January 1993 petitioner filed a complaint for patent infringement against
private respondent Janito Corporation.2 Roberto L. del Rosario alleged that he was a patentee of an
audio equipment and improved audio equipment commonly known as the sing-along System
or karaoke under Letters Patent No. UM-5269 dated 2 June 1983 as well as Letters Patent No. UM6237 dated 14 November 1986 issued by the Director of Patents. The effectivity of both Letters
Patents was for five (5) years and was extended for another five (5) years starting 2 June 1988 and
14 November 1991, respectively. He described his sing-along system as a handy multi-purpose
compact machine which incorporates an amplifier speaker, one or two tape mechanisms, optional
tuner or radio and microphone mixer with features to enhance one's voice, such as the echo or
reverb to stimulate an opera hall or a studio sound, with the whole system enclosed in one cabinet
casing.
In the early part of 1990 petitioner learned that private respondent was manufacturing a sing-along
system bearing the trademark miyata or miyata karaoke substantially similar if not identical to the
sing-along system covered by the patents issued in his favor. Thus he sought from .the trial court the
issuance of a writ of preliminary injunction to enjoin private respondent, its officers and everybody
elsewhere acting on its behalf, from using, selling and advertising the miyata or miyata
karaoke brand, the injunction to be made permanent after trial, and praying for damages, attorney's
fees and costs of suit.
On 5 February 1993 the trial court temporarily restrained private respondent from manufacturing,
using and/or selling and advertising the miyata sing-along system or any sing-along system
substantially identical to the sing-along system patented by petitioner until further orders.
On 24 February 1993 the trial court issued a writ of preliminary injunction upon a bond on the basis
of its finding that petitioner was a holder of a utility model patent for a sing-along system and that
without his approval and consent private respondent was admittedly manufacturing and selling its
own sing-along system under the brand name miyata which was substantially similar to the patented
utility mode 3 of petitioner.
Private respondent assailed the order of 24 February 1993 directing the issuance of the writ by way
of a petition for certiorari with prayer for the issuance of a writ of preliminary injunction and a
temporary restraining order before respondent Court of Appeals.
On 15 November 1993 respondent appellate court granted the writ and set aside the questioned
order of the trial court. It expressed the view that there was no infringement of the patents of
petitioner by the fact alone that private respondent had manufactured the miyata karaoke or audio
system, and that the karaoke system was a universal product manufactured, advertised and
marketed in most countries of the world long before the patents were issued to petitioner. The
motion to reconsider the grant of the writ was denied;4 hence, the instant petition for review.
This petition alleges that: (a) it was improper for the Court of Appeals to consider questions of fact in
a certiorari proceeding; (b) the Court of Appeals erred in taking judicial notice of private respondent's
self-serving presentation of facts; (c) the Court of Appeals erred in disregarding the findings of fact of
the trial court; and, (d) there was no basis for the Court of Appeals to grant a writ of preliminary
injunction in favor of private respondent.5
Petitioner argues that in a certiorari proceeding questions of fact are not generally permitted the
inquiry being limited essentially to whether the tribunal has acted without or in excess of jurisdiction
or with grave abuse of discretion; that respondent court should not have disturbed but respected
instead the factual findings of the trial court; that the movant has a clear legal right to be protected
and that there is a violation of such right by private respondent. Thus, petitioner herein claims, he
has satisfied the legal requisites to justify the order of the trial court directing the issuance of the writ
of injunction. On the other hand, in the absence of a patent to justify the manufacture and sale by
private respondent of sing-along systems, it is not entitled to the injunctive relief granted by
respondent appellate court.
The crux of the controversy before us hinges on whether respondent Court of Appeals erred in
finding the trial court to have committed grave abuse of discretion in enjoining private respondent
from manufacturing, selling and advertising the miyata karaoke brand sing-along system for being
substantially similar if not identical to the audio equipment covered by letters patent issued to
petitioner.
Injunction is a preservative remedy for the protection of substantive rights or interests. It is not a
cause of action in itself but merely a provisional remedy, an adjunct to a main suit. The controlling
reason for the existence of the judicial power to issue the writ is that the court may thereby prevent a
threatened or continuous irremediable injury to some of the parties before their claims can be
thoroughly investigated and advisedly adjudicated. It is to be resorted to only when there is a
pressing necessity to avoid injurious consequences which cannot be remedied under any standard
of compensation. The application of the writ rests upon an alleged existence of an emergency or of a
special reason for such an order before the case can be regularly heard, and the essential
conditions for granting such temporary injunctive relief are that the complaint alleges facts which
appear to be sufficient to constitute a cause of action for injunction and that on the entire showing
from both sides, it appears, in view of all the circumstances, that the injunction is reasonably
necessary to protect the legal rights of plaintiff pending the litigation.6
A preliminary injunction may be granted at any time after the commencement of the action and
before judgment when it is established that the defendant is doing, threatens, or is about to do, or is
procuring or suffering to be done, some act probably in violation of the plaintiff's rights. Thus, there
are only two requisites to be satisfied if an injunction is to issue, namely, the existence of the right to
be protected, and that the facts against which the injunction is to be directed are violative of said
right.7
For the writ to issue the interest of petitioner in the controversy or the right he seeks to be protected
must be a present right, a legal right which must be shown to be clear and positive.
In this regard Sec. 55 of R.A. 165 as amended, known as The Patent Law, provides —
Sec. 55. Design patents and patents for utility models. — (a) Any new, original, and
ornamental design for an article of manufacture and (b) new model or implements or
tools or of any industrial product or of part of the same, which does not possess the
quality of invention but which is of practical utility by reason of its form, configuration,
construction or composition, may be protected by the author thereof, the former by a
patent for a design and the latter by a patent for a utility model, in the same manner
and subject to the same provisions and requirements as relate to patents for
inventions insofar as they are applicable, except as otherwise herein provide . . . .
Admittedly, petitioner is a holder of Letters Patent No. UM-5629 dated 2 June 1985 issued for a term
of five (5) years from the grant of a Utility Model herein described —
The construction of an audio equipment comprising a substantially cubical casing
having a window at its rear and upper corner fitted with a slightly inclined control
panel, said cubical (casing) having a vertical partition wall therein defining a rear
compartment and a front compartment, and said front compartment serving as a
speaker baffle; a transistorized amplifier circuit having an echo section and writhed in
at least the printed circuit boards placed inside said rear compartment of said casing
and attached to said vertical partition wall, said transistorized amplifier circuit capable
of being operated from outside, through various controls mounted on said control
panel of such casing; a loud speaker fitted inside said front compartment of said
casing and connected to the output of the main audio amplifier section of said
transistorized amplifier circuit and a tape player mounted on the top wall of said
casing and said tape player being connected in conventional manner to said
transistorized amplifier circuit.8
Again, on 14 November 1986 petitioner was granted Letters Patent No. UM-6237 for a term of five
(5) years from the grant of a Utility Model described as —
In an audio equipment consisting of a first cubical casing having an opening at its
rear and upper rear portion and a partition therein forming a rear compartment and a
front compartment serving as a loud speaker baffle, a control panel formed by
vertical and horizontal sections, a transistorized amplifier circuit wired in at least two
printed circuit boards attached at the back of said control panel, a first loud speaker
fitted inside said first compartment of such first casing and connected to the output of
said transistorized amplifier circuit; the improvement wherein said control panel being
removably fitted to said first cubical casing and further comprises a set of tape
recorder and tape player mounted on the vertical section of said control panel and
said recorder and player are likewise connected to said transistorized amplifier
circuit; a second cubical casing having an opening at its rear, said second cubical
casing having (being?) provided with a vertical partition therein defining a rear
compartment and a front compartment, said rear compartment being provided with a
door and enclosing therein a set of tape racks and said front compartment serving as
loud speaker baffle, said second cubical casing being adapted to said first cubical
casing so that said first and second casings are secured together in compact and
portable form; and a second loud speaker fitted inside said front compartment of said
casing and connected to the output of said amplifier circuit.9
The terms of both Letters Patents were extended for another five (5) years each, the first beginning
2 June 1988 and the second, 14 November 1991.
The Patent Law expressly acknowledges that any new model of implements or tools of any industrial
product even if not possessed of the quality of invention but which is of practical utility is entitled to a
patent for utility model. 10 Here, there is no dispute that the letters patent issued to petitioner are for
utility models of audio equipment.
In issuing, reissuing or withholding patents and extensions thereof, the Director of Patents
determines whether the patent is new and whether the machine or device is the proper subject of
patent. In passing on an application, the Director decides not only questions of law but also
questions of fact, i.e. whether there has been a prior public use or sale of the article sought to be
patented. 11 Where petitioner introduces the patent in evidence, if it is in due form, it affords a prima
facie presumption of its correctness and validity. The decision of the Director of Patents in granting
the patent is always presumed to be correct, and the burden then shifts to respondent to overcome
this presumption by competent evidence. 12
Under Sec. 55 of The Patent Law a utility model shall not be considered "new" if before the
application for a patent it has been publicly known or publicly used in this country or has been
described in a printed publication or publications circulated within the country, or if it is substantially
similar to any other utility model so known, used or described within the country. Respondent
corporation failed to present before the trial court competent evidence that the utility models covered
by the Letters Patents issued to petitioner were not new. This is evident from the testimony of Janito
Cua, President of respondent Janito Corporation, during the hearing on the issuance of the
injunction, to wit —
Q. Mr. Cua, you testified that there are (sic) so many other
companies which already have (sic) the sing-along system even
before the patent application of Mr. del Rosario and as a matter of
fact you mentioned Sanyo, Sony and Sharp, is that right?
A. Musicmate and Asahi.
Q. Now do you recall that your lawyer filed with this Honorable Court
an Urgent Motion to Lift Temporary Restraining Order of this
Honorable Court. I am sure you were the one who provided him with
the information about the many other companies selling the singalong system, is that right? These 18 which you enumerated here.
A. More than that because. . . .
Q. Now you will agree with me that in your statement Sharp you put
the date as 1985 agreed?
A. No.
Q. You mean your lawyer was wrong when he put the word Sharp
1985?
A. Maybe I informed him already.
xxx
xxx
xxx
Q. You mean your lawyer was wrong in alleging to this Court that
Sharp manufactured and sold (in) 1985 as found in the Urgent
Motion?
A. Since it is urgent it is more or less.
Q. The same also with Sanyo 1985 which you put, more or less?
A. Sanyo is wrong.
Q. It is not 1985?
A. Sanyo is 1979 I think.
Q. So this is also wrong. Panasonic 1986 is also wrong?
A. Panasonic I think.
Q. So you don't think this is also correct.
A. The date?
Q. So you don't think also that this allegation here that they
manufactured in 1986 is correct?
A. Wrong. Earlier.
Q. National by Precision Electronic 1986 this is also wrong?
A. I think earlier.
Q. So that means all your allegations here from 2 to 5 are wrong?
OK. By Philipps Philippines 1986, this is also correct or wrong?
A. More or less. We said more or less.
Q. Nakabutshi by Asahi Electronics that is also wrong?
A. No that is 1979.
Q. Electone by DICO 1989 is this correct or wrong?
A. Correct. More or less.
Q. Skylers 1985 is that correct or wrong?
A. It is more or less because it is urgent. We don't have time to exact
the date.
Q. Musicmate of G.A. Yupangco 1981 this is more or less? You are
not also sure?
A. 95% sure.
Q. Now you are sure 1981.
A. This one because. . . .
Q. Mr. Witness so you are now trying to tell this Honorable Court that
all your allegations here of the dates in this Urgent Motion except for
Musicmate which you are only 95% sure they are all wrong or they
are also more or less or not sure, is that right?
A. More or less.
Q. Now do you have any proof, any advertisement, anything in writing
that would show that all these instruments are in the market, do you
have it.
A. No I don't have it because. . . .
Q. No I am satisfied with your answer. Now Mr. Witness, you don't
also have a proof that Akai instrument that you said was also in the
market before 1982? You don't have any written proof, any
advertisement?
A. I have the product.
Q. But you have not brought the product in (sic) this Honorable Court,
right?
A. No. 13
As may be gleaned herein, the rights of petitioner as a patentee have been sufficiently established,
contrary to the findings and conclusions of respondent Court of Appeals. Consequently, under Sec.
37 of The Patent law, petitioner as a patentee shall have the exclusive right to make, use and sell
the patented machine, article or product for the purpose of industry or commerce, throughout the
territory of the Philippines for the term of the patent, and such making, using or selling by any person
without authorization of the patentee constitutes infringement of his patent.
Petitioner established before the trial court that respondent Janito Corporation was manufacturing a
similar sing-along system bearing the trademark miyata which infringed his patented models. He
also alleged that both his own patented audio equipment and respondent's sing-along system were
constructed in a casing with a control panel, the casing having a vertical partition wall defining the
rear compartment from the front compartment, with the front compartment consisting of a loud
speaker baffle, both containing a transistorized amplifier circuit capable of being operated from
outside through various controls mounted on the control panel, and that both had loud speakers
fitted inside the front compartment of the casing and connected to the output of the main audio
amplifier section both having a tape recorder and a tape player mounted on the control panel with
the tape recorder and tape player being both connected to the transistorized amplifier circuit. 14
Respondent Janito Corporation denied that there was any violation of petitioner's patent rights, and
cited the differences between its miyata equipment and petitioner's audio equipment. But, it must be
emphasized, respondent only confined its comparison to the first model, Utility Model No. 5269, and
completely disregarded Utility Model No. 6237 which improved on the first. As described by
respondent corporation, 15 these differences are —
First. Under Utility Model 5269, the unit is a substantially cubical casing with a
window at its rear and upper corner fitted with slightly inclined control panel, while
the miyata equipment is a substantially rectangular casing with panel vertically
positioned.
Second. Under Utility Model 5269, the cubical casing has a vertical partition wall
defining a rear compartment and a front compartment serving as a speaker baffle,
while the miyata equipment has no rear compartment and front compartment in its
rectangular casing; it has only a front compartment horizontally divided into 3
compartments like a 3-storey building, the 1st compartment being a kit, the 2nd also
the speaker, and the 3rd are kits.
Third. Under Utility Model No. 5269, a transistorized amplifier circuit with an echo
section wired in at least 2 printed circuit boards is placed inside the rear
compartment of the casing and attached to the vertical partition wall, the printed
circuit board having 1 amplifier and 1 echo, while in the miyata equipment the
amplifier is mainly IC (Integrated Circuit) — powered with 8 printed circuit boards
almost all of which are IC controlled, with 1 amplifier with power supply, 1 main tuner,
1 equalizer (3-band), 1 IC controlled volume control, 1 echo IC, 1 tape pream, 1
instrument and 1 wireless microphone.
Fourth. Under Utility Model 5269, 4 printed circuits are placed inside the
compartment of its casing attached to the vertical partition wall, while in the miyata,
the 7 printed circuit boards (PCB) are attached to the front panel and 1 attached to
the horizontal divider.
Fifth. Under Utility Model 5269, there are various controls mounted on the control
panel of the casing, while in miyata, the various controls are all separated from the
printed circuit boards and the various controls are all attached thereto.
Sixth. Under Utility Model 5269, a loud speaker fitted inside the front compartment of
the casing is connected to the output of the main audio amplifier section of the
transistorized amplifier circuit, while in miyata, there is no other way but to use 2 loud
speakers connected to the amplifier.
Seventh. Under Utility Model 5269, a tape player is mounted on the top wall of the
casing, while in miyata, 2 tape players are used mounted side by side at the front.
It is elementary that a patent may be infringed where the essential or substantial features of the
patented invention are taken or appropriated, or the device, machine or other subject matter alleged
to infringe is substantially identical with the patented invention. In order to infringe a patent, a
machine or device must perform the same function, or accomplish the same result by identical or
substantially identical means and the principle or mode of operation must be substantially the
same. 16
It may be noted that respondent corporation failed to present before the trial court a clear, competent
and reliable comparison between its own model and that of petitioner, and disregarded completely
petitioner's utility Model No. 6237 which improved on his first patented model. Notwithstanding the
differences cited by respondent corporation, it did not refute and disprove the allegations of
petitioner before the trial court that: (a) both are used by a singer to sing and amplify his voice; (b)
both are used to sing with a minus-one or multiplex tapes, or that both are used to play minus-one or
standard cassette tapes for singing or for listening to; (c) both are used to sing with a minus-one
tape and multiplex tape and to record the singing and the accompaniment; (d) both are used to sing
with live accompaniment and to record the same; (e) both are used to enhance the voice of the
singer using echo effect, treble, bass and other controls; (g) both are equipped with cassette tape
decks which are installed with one being used for playback and the other, for recording the singer
and the accompaniment, and both may also be used to record a speaker's voice or instrumental
playing, like the guitar and other instruments; (h) both are
encased in a box-like cabinets; and, (i) both can be used with one or more microphones. 17
Clearly, therefore, both petitioner's and respondent's models involve substantially the same modes
of operation and produce substantially the same if not identical results when used.
In view thereof, we find that petitioner had established before the trial court prima facie proof of
violation of his rights as patentee to justify the issuance of a writ of preliminary injunction in his favor
during the pendency of the main suit for damages resulting from the alleged infringement.
WHEREFORE, the Decision of the Court of Appeals dated 15 November 1993 is REVERSED and
SET ASIDE and the Order of the trial court dated 24 February 1993 granting petitioner the writ of
injunction is REINSTATED.
The trial court is directed to continue with the proceedings on the main action pending before it in
order to resolve with dispatch the issues therein presented.
SO ORDERED.
G.R. No. 97343 September 13, 1993
PASCUAL GODINES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, SPECIAL FOURTH DIVISION and SV-AGRO
ENTERPRISES, INC., respondents.
Jesus S. Anonat for petitioner.
Arturo M. Alinio for private respondent.
ROMERO, J.:
Through this petition for review in certiorari of a decision of the Court of Appeals affirming the
decision of the trial court, petitioner Pascual Godines seeks to reverse the adverse decision of the
Court a quo that he was liable for infringement of patent and unfair competition. The dispositive
portion of the assailed decision is hereby quoted to wit:
WHEREFORE, with the elimination of the award for attorney's fees, the judgment
appealed from is hereby AFFIRMED, with costs against appellant.1
The patent involved in this case is Letters Patent No. UM-2236 issued by the Philippine Patent
Office to one Magdalena S. Villaruz on July 15, 1976. It covers a utility model for a hand tractor or
power tiller, the main components of which are the following: "(1) a vacuumatic house float; (2) a
harrow with adjustable operating handle; (3) a pair of paddy wheels; (4) a protective water covering
for the engine main drive; (5) a transmission case; (6) an operating handle; (7) an engine foundation
on the top midportion of the vacuumatic housing float to which the main engine drive is detachedly
installed; (8) a frontal frame extension above the quarter — circularly shaped water covering hold
(sic) in place the transmission case; (9) a V-belt connection to the engine main drive with
transmission gear through the pulley, and (10) an idler pulley installed on the engine
foundation."2 The patented hand tractor works in the following manner: "the engine drives the
transmission gear thru the V-belt, a driven pulley and a transmission shaft. The engine drives the
transmission gear by tensioning of the V-belt which is controlled by the idler pulley. The V-belt drives
the pulley attached to the transmission gear which in turn drives the shaft where the paddy wheels
are attached. The operator handles the hand tractor through a handle which is inclined upwardly and
supported by a pair of substanding pipes and reinforced by a U-shaped G.I. pipe at the V-shaped
end."3
The above mentioned patent was acquired by SV-Agro Industries Enterprises, Inc., herein private
respondent, from Magdalena Villaruz, its chairman and president, by virtue of a Deed of Assignment
executed by the latter in its favor. On October 31, 1979, SV-Agro Industries caused the publication
of the patent in Bulletin Today, a newspaper of general circulation.
In accordance with the patent, private respondent manufactured and sold the patented power tillers
with the patent imprinted on them. In 1979, SV-Agro Industries suffered a decline of more than 50%
in sales in its Molave, Zamboanga del Sur branch. Upon investigation, it discovered that power tillers
similar to those patented by private respondent were being manufactured and sold by petitioner
herein. Consequently, private respondent notified Pascual Godines about the existing patent and
demanded that the latter stop selling and manufacturing similar power tillers. Upon petitioner's failure
to comply with the demand, SV-Agro Industries filed before the Regional Trial Court a complaint for
infringement of patent and unfair competition.
After trial, the court held Pascual Godines liable for infringement of patent and unfair competition.
The dispositive portion of the decision reads as follows:
WHEREFORE, premises considered, JUDGMENT is hereby rendered in favor of the
plaintiff SV-Agro Industries Enterprises, Inc., and against defendant Pascual
Godines:
1. Declaring the writ of preliminary injunction issued by this Court against defendant
as permanent;
2. Ordering defendant Pascual Godines to pay plaintiff the sum of Fifty Thousand
Pesos (P50,000.00) as damages to its business reputation and goodwill, plus the
further sum of Eighty Thousand Pesos (P80,000.00) for unrealized profits during the
period defendant was manufacturing and selling copied or imitation floating power
tiller;
3. Ordering the defendant to pay the plaintiff, the further sum of Eight Thousand
Pesos (P8,000.00) as reimbursement of attorney's fees and other expenses of
litigation; and to pay the costs of the suit.
SO ORDERED.4
The decision was affirmed by the appellate court.
Thereafter, this petition was filed. Petitioner maintains the defenses which he raised before the trial
and appellate courts, to wit: that he was not engaged in the manufacture and sale of the power tillers
as he made them only upon the special order of his customers who gave their own specifications;
hence, he could not be liable for infringement of patent and unfair competition; and that those made
by him were different from those being manufactured and sold by private respondent.
We find no merit in his arguments. The question of whether petitioner was manufacturing and selling
power tillers is a question of fact better addressed to the lower courts. In dismissing the first
argument of petitioner herein, the Court of Appeals quoted the findings of the court, to wit:
It is the contention of defendant that he did not manufacture or make imitations or
copies of plaintiff's turtle power tiller as what he merely did was to fabricate his
floating power tiller upon specifications and designs of those who ordered them.
However, this contention appears untenable in the light of the following
circumstances: 1) he admits in his Answer that he has been manufacturing power
tillers or hand tractors, selling and distributing them long before plaintiff started
selling its turtle power tiller in Zamboanga del Sur and Misamis Occidental, meaning
that defendant is principally a manufacturer of power tillers, not upon specification
and design of buyers, but upon his own specification and design; 2) it would be
unbelievable that defendant would fabricate power tillers similar to the turtle power
tillers of plaintiff upon specifications of buyers without requiring a job order where the
specification and designs of those ordered are specified. No document was (sic) ever
been presented showing such job orders, and it is rather unusual for defendant to
manufacture something without the specification and designs, considering that he is
an engineer by profession and proprietor of the Ozamis Engineering shop. On the
other hand, it is also highly unusual for buyers to order the fabrication of a power tiller
or hand tractor and allow defendant to manufacture them merely based on their
verbal instructions. This is contrary to the usual business and manufacturing practice.
This is not only time consuming, but costly because it involves a trial and error
method, repeat jobs and material wastage. Defendant judicially admitted two (2) units
of the turtle power tiller sold by him to Policarpio Berondo.5
Of general acceptance is the rule imbedded in our jurisprudence that ". . . the jurisdiction of the
Supreme Court in cases brought to it from the Court of Appeals in a petition for certiorari under Rule
45 of the Rules of Court is limited to the review of errors of law, and that said appellate court's
findings of fact are conclusive upon this Court."6
The fact that petitioner herein manufactured and sold power tillers without patentee's authority has
been established by the courts despite petitioner's claims to the contrary.
The question now arises: Did petitioner's product infringe upon the patent of private respondent?
Tests have been established to determine infringement. These are (a) literal infringement; and (b)
the doctrine of equivalents.7 In using literal infringement as a test, ". . . resort must be had, in the first
instance, to the words of the claim. If accused matter clearly falls within the claim, infringement is
made out and that is the end of it."8 To determine whether the particular item falls within the literal
meaning of the patent claims, the court must juxtapose the claims of the patent and the accused
product within the overall context of the claims and specifications, to determine whether there is
exact identity of all material elements.9
The trial court made the following observation:
Samples of the defendant's floating power tiller have been produced and inspected
by the court and compared with that of the turtle power tiller of the plaintiff (see
Exhibits H to H-28). In appearance and form, both the floating power tillers of the
defendant and the turtle power tiller of the plaintiff are virtually the same. Defendant
admitted to the Court that two (2) of the power inspected on March 12, 1984, were
manufactured and sold by him (see TSN, March 12, 1984, p. 7). The three power
tillers were placed alongside with each other. At the center was the turtle power tiller
of plaintiff, and on both sides thereof were the floating power tillers of defendant
(Exhibits H to H-2). Witness Rodrigo took photographs of the same power tillers
(front, side, top and back views for purposes of comparison (see Exhibits H-4 to H28). Viewed from any perspective or angle, the power tiller of the defendant is
identical and similar to that of the turtle power tiller of plaintiff in form, configuration,
design and appearance. The parts or components thereof are virtually the same.
Both have the circularly-shaped vacuumatic housing float, a paddy in front, a
protective water covering, a transmission box housing the transmission gears, a
handle which is V-shaped and inclined upwardly, attached to the side of the
vacuumatic housing float and supported by the upstanding G.I. pipes and an engine
base at the top midportion of the vacuumatic housing float to which the engine drive
may be attached. In operation, the floating power tiller of the defendant operates also
in similar manner as the turtle power tiller of plaintiff. This was admitted by the
defendant himself in court that they are operating on the same principles. (TSN,
August 19, 1987, p. 13) 10
Moreover, it is also observed that petitioner also called his power tiller as a floating power tiller. The
patent issued by the Patent Office referred to a "farm implement but more particularly to a turtle hand
tractor having a vacuumatic housing float on which the engine drive is held in place, the operating
handle, the harrow housing with its operating handle and the paddy wheel protective covering." 11 It
appears from the foregoing observation of the trial court that these claims of the patent and the
features of the patented utility model were copied by petitioner. We are compelled to arrive at no
other conclusion but that there was infringement.
Petitioner's argument that his power tillers were different from private respondent's is that of a
drowning man clutching at straws.
Recognizing that the logical fallback position of one in the place of defendant is to aver that his
product is different from the patented one, courts have adopted the doctrine of equivalents which
recognizes that minor modifications in a patented invention are sufficient to put the item beyond the
scope of literal infringement. 12 Thus, according to this doctrine, "(a)n infringement also occurs when
a device appropriates a prior invention by incorporating its innovative concept and, albeit with some
modification and change, performs substantially the same function in substantially the same way to
achieve substantially the same result." 13 The reason for the doctrine of equivalents is that to permit
the imitation of a patented invention which does not copy any literal detail would be to convert the
protection of the patent grant into a hollow and useless thing. Such imitation would leave room for —
indeed encourage — the unscrupulous copyist to make unimportant and insubstantial changes and
substitutions in the patent which, though adding nothing, would be enough to take the copied matter
outside the claim, and hence outside the reach of the law. 14
In this case, the trial court observed:
Defendant's witness Eduardo Cañete, employed for 11 years as welder of the
Ozamis Engineering, and therefore actually involved in the making of the floating
power tillers of defendant tried to explain the difference between the floating power
tillers made by the defendant. But a careful examination between the two power
tillers will show that they will operate on the same fundamental principles. And,
according to establish jurisprudence, in infringement of patent, similarities or
differences are to be determined, not by the names of things, but in the light of what
elements do, and substantial, rather than technical, identity in the test. More
specifically, it is necessary and sufficient to constitute equivalency that the same
function can be performed in substantially the same way or manner, or by the same
or substantially the same, principle or mode of operation; but where these tests are
satisfied, mere differences of form or name are immaterial. . . . 15
It also stated:
To establish an infringement, it is not essential to show that the defendant adopted
the device or process in every particular; Proof of an adoption of the substance of the
thing will be sufficient. "In one sense," said Justice Brown, "it may be said that no
device can be adjudged an infringement that does not substantially correspond with
the patent. But another construction, which would limit these words to exact
mechanism described in the patent, would be so obviously unjust that no court could
be expected to adopt it. . . .
The law will protect a patentee against imitation of his patent by other forms and
proportions. If two devices do the same work in substantially the same way, and
accomplish substantially the same result, they are the same, even though they differ
in name, form, or shape. 16
We pronounce petitioner liable for infringement in accordance with Section 37 of Republic Act No.
165, as amended, providing, inter alia:
Sec. 37. Right of Patentees. — A patentee shall have the exclusive right to make,
use and sell the patented machine, article or product, and to use the patented
process for the purpose of industry or commerce, throughout the territory of the
Philippines for the terms of the patent; and such making, using, or selling by any
person without the authorization of the Patentee constitutes infringement of the
patent. (Emphasis ours)
As far as the issue regarding unfair competition is concerned, suffice it to say that Republic Act No.
166, as amended, provides, inter alia:
Sec. 29. Unfair competition, rights and remedies. — . . .
xxx xxx xxx
In particular, and without in any way limiting the scope of unfair competition, the
following shall be deemed guilty of unfair competition:
(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
influence purchasers that the goods offered are those of a manufacturer or dealer
other than the actual manufacturer or dealer, or who otherwise clothes the goods
with such appearance as shall deceive the public and defraud another of his
legitimate trade. . . .
xxx
xxx
xxx
Considering the foregoing, we find no reversible error in the decision of the Court of Appeals
affirming with modification the decision of the trial court.
WHEREFORE, premises considered, the decision of the Court of Appeals is hereby AFFIRMED and
this petition DENIED for lack of merit.
Bidin, Melo and Vitug, JJ., concur.
G. R. No. 126627
August 14, 2003
SMITH KLINE BECKMAN CORPORATION, Petitioner,
vs.
THE HONORABLE COURT OF APPEALS and TRYCO PHARMA CORPORATION, Respondents.
DECISION
CARPIO-MORALES, J.:
Smith Kline Beckman Corporation (petitioner), a corporation existing by virtue of the laws of the state
of Pennsylvania, United States of America (U.S.) and licensed to do business in the Philippines, filed
on October 8, 1976, as assignee, before the Philippine Patent Office (now Bureau of Patents,
Trademarks and Technology Transfer) an application for patent over an invention entitled "Methods
and Compositions for Producing Biphasic Parasiticide Activity Using Methyl 5 Propylthio-2Benzimidazole Carbamate." The application bore Serial No. 18989.
On September 24, 1981, Letters Patent No. 145611 for the aforesaid invention was issued to
petitioner for a term of seventeen (17) years.
The letters patent provides in its claims2 that the patented invention consisted of a new compound
named methyl 5 propylthio-2-benzimidazole carbamate and the methods or compositions utilizing
the compound as an active ingredient in fighting infections caused by gastrointestinal parasites and
lungworms in animals such as swine, sheep, cattle, goats, horses, and even pet animals.
Tryco Pharma Corporation (private respondent) is a domestic corporation that manufactures,
distributes and sells veterinary products including Impregon, a drug that has Albendazole for its
active ingredient and is claimed to be effective against gastro-intestinal roundworms, lungworms,
tapeworms and fluke infestation in carabaos, cattle and goats.
Petitioner sued private respondent for infringement of patent and unfair competition before the
Caloocan City Regional Trial Court (RTC).3 It claimed that its patent covers or includes the substance
Albendazole such that private respondent, by manufacturing, selling, using, and causing to be sold
and used the drug Impregon without its authorization, infringed Claims 2, 3, 4, 7, 8 and 9 of Letters
Patent No. 145614 as well as committed unfair competition under Article 189, paragraph 1 of the
Revised Penal Code and Section 29 of Republic Act No. 166 (The Trademark Law) for advertising
and selling as its own the drug Impregon although the same contained petitioner’s patented
Albendazole.5
On motion of petitioner, Branch 125 of the Caloocan RTC issued a temporary restraining order
against private respondent enjoining it from committing acts of patent infringement and unfair
competition.6 A writ of preliminary injunction was subsequently issued.7
Private respondent in its Answer8 averred that Letters Patent No. 14561 does not cover the
substance Albendazole for nowhere in it does that word appear; that even if the patent were to
include Albendazole, such substance is unpatentable; that the Bureau of Food and Drugs allowed it
to manufacture and market Impregon with Albendazole as its known ingredient; that there is no proof
that it passed off in any way its veterinary products as those of petitioner; that Letters Patent No.
14561 is null and void, the application for the issuance thereof having been filed beyond the one
year period from the filing of an application abroad for the same invention covered thereby, in
violation of Section 15 of Republic Act No. 165 (The Patent Law); and that petitioner is not the
registered patent holder.
Private respondent lodged a Counterclaim against petitioner for such amount of actual damages as
may be proven; ₱1,000,000.00 in moral damages; ₱300,000.00 in exemplary damages; and
₱150,000.00 in attorney’s fees.
Finding for private respondent, the trial court rendered a Decision dated July 23, 1991,9 the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing, plaintiff’s complaint should be, as it is hereby, DISMISSED.
The Writ of injunction issued in connection with the case is hereby ordered DISSOLVED.
The Letters Patent No. 14561 issued by the then Philippine Patents Office is hereby declared null
and void for being in violation of Sections 7, 9 and 15 of the Patents Law.
Pursuant to Sec. 46 of the Patents Law, the Director of Bureau of Patents is hereby directed
to cancel Letters Patent No. 14561 issued to the plaintiff and to publish such cancellation in the
Official Gazette.
Defendant Tryco Pharmaceutical Corporation is hereby awarded P330,000.00 actual damages and
P100,000.00 attorney’s fees as prayed for in its counterclaim but said amount awarded to defendant
is subject to the lien on correct payment of filing fees.
SO ORDERED. (Underscoring supplied)
On appeal, the Court of Appeals, by Decision of April 21, 1995,10 upheld the trial court’s finding that
private respondent was not liable for any infringement of the patent of petitioner in light of the latter’s
failure to show that Albendazole is the same as the compound subject of Letters Patent No. 14561.
Noting petitioner’s admission of the issuance by the U.S. of a patent for Albendazole in the name of
Smith Kline and French Laboratories which was petitioner’s former corporate name, the appellate
court considered the U.S. patent as implying that Albendazole is different from methyl 5 propylthio-2benzimidazole carbamate. It likewise found that private respondent was not guilty of deceiving the
public by misrepresenting that Impregon is its product.
The appellate court, however, declared that Letters Patent No. 14561 was not void as it sustained
petitioner’s explanation that Patent Application Serial No. 18989 which was filed on October 8, 1976
was a divisional application of Patent Application Serial No. 17280 filed on June 17, 1975 with the
Philippine Patent Office, well within one year from petitioner’s filing on June 19, 1974 of its Foreign
Application Priority Data No. 480,646 in the U.S. covering the same compound subject of Patent
Application Serial No. 17280.
Applying Section 17 of the Patent Law, the Court of Appeals thus ruled that Patent Application Serial
No. 18989 was deemed filed on June 17, 1995 or still within one year from the filing of a patent
application abroad in compliance with the one-year rule under Section 15 of the Patent Law. And it
rejected the submission that the compound in Letters Patent No. 14561 was not patentable, citing
the jurisprudentially established presumption that the Patent Office’s determination of patentability is
correct. Finally, it ruled that petitioner established itself to be the one and the same assignee of the
patent notwithstanding changes in its corporate name. Thus the appellate court disposed:
WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that the orders
for the nullification of Letters Patent No. 14561 and for its cancellation are deleted therefrom.
SO ORDERED.
Petitioner’s motion for reconsideration of the Court of Appeals’ decision having been denied11 the
present petition for review on certiorari12 was filed, assigning as errors the following:
I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT ALBENDAZOLE,
THE ACTIVE INGREDIENT IN TRYCO’S "IMPREGON" DRUG, IS INCLUDED IN
PETITIONER’S LETTERS PATENT NO. 14561, AND THAT CONSEQUENTLY TRYCO IS
ANSWERABLE FOR PATENT INFRINGEMENT.
II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING TO PRIVATE
RESPONDENT TRYCO PHARMA CORPORATION P330,000.00 ACTUAL DAMAGES AND
P100,000.00 ATTORNEY’S FEES.
Petitioner argues that under the doctrine of equivalents for determining patent infringement,
Albendazole, the active ingredient it alleges was appropriated by private respondent for its drug
Impregon, is substantially the same as methyl 5 propylthio-2-benzimidazole carbamate covered by
its patent since both of them are meant to combat worm or parasite infestation in animals. It cites the
"unrebutted" testimony of its witness Dr. Godofredo C. Orinion (Dr. Orinion) that the chemical
formula in Letters Patent No. 14561 refers to the compound Albendazole. Petitioner adds that the
two substances substantially do the same function in substantially the same way to achieve the
same results, thereby making them truly identical. Petitioner thus submits that the appellate court
should have gone beyond the literal wordings used in Letters Patent No. 14561, beyond merely
applying the literal infringement test, for in spite of the fact that the word Albendazole does not
appear in petitioner’s letters patent, it has ably shown by evidence its sameness with methyl 5
propylthio-2-benzimidazole carbamate.
Petitioner likewise points out that its application with the Philippine Patent Office on account of which
it was granted Letters Patent No. 14561 was merely a divisional application of a prior application in
the U. S. which granted a patent for Albendazole. Hence, petitioner concludes that both methyl 5
propylthio-2-benzimidazole carbamate and the U.S.-patented Albendazole are dependent on each
other and mutually contribute to produce a single result, thereby making Albendazole as much a part
of Letters Patent No. 14561 as the other substance is.
Petitioner concedes in its Sur-Rejoinder13 that although methyl 5 propylthio-2-benzimidazole
carbamate is not identical with Albendazole, the former is an improvement or improved version of
the latter thereby making both substances still substantially the same.
With respect to the award of actual damages in favor of private respondent in the amount of
₱330,000.00 representing lost profits, petitioner assails the same as highly speculative and
conjectural, hence, without basis. It assails too the award of ₱100,000.00 in attorney’s fees as not
falling under any of the instances enumerated by law where recovery of attorney’s fees is allowed.
In its Comment,14 private respondent contends that application of the doctrine of equivalents would
not alter the outcome of the case, Albendazole and methyl 5 propylthio-2-benzimidazole carbamate
being two different compounds with different chemical and physical properties. It stresses that the
existence of a separate U.S. patent for Albendazole indicates that the same and the compound in
Letters Patent No. 14561 are different from each other; and that since it was on account of a
divisional application that the patent for methyl 5 propylthio-2-benzimidazole carbamate was issued,
then, by definition of a divisional application, such a compound is just one of several independent
inventions alongside Albendazole under petitioner’s original patent application.
As has repeatedly been held, only questions of law may be raised in a petition for review on
certiorari before this Court. Unless the factual findings of the appellate court are mistaken, absurd,
speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings
culled by the court of origin,15 this Court does not review them.
From an examination of the evidence on record, this Court finds nothing infirm in the appellate
court’s conclusions with respect to the principal issue of whether private respondent committed
patent infringement to the prejudice of petitioner.
The burden of proof to substantiate a charge for patent infringement rests on the plaintiff.16 In the
case at bar, petitioner’s evidence consists primarily of its Letters Patent No. 14561, and the
testimony of Dr. Orinion, its general manager in the Philippines for its Animal Health Products
Division, by which it sought to show that its patent for the compound methyl 5 propylthio-2benzimidazole carbamate also covers the substance Albendazole.
From a reading of the 9 claims of Letters Patent No. 14561 in relation to the other portions thereof,
no mention is made of the compound Albendazole. All that the claims disclose are: the covered
invention, that is, the compound methyl 5 propylthio-2-benzimidazole carbamate; the compound’s
being anthelmintic but nontoxic for animals or its ability to destroy parasites without harming the host
animals; and the patented methods, compositions or preparations involving the compound to
maximize its efficacy against certain kinds of parasites infecting specified animals.
When the language of its claims is clear and distinct, the patentee is bound thereby and may not
claim anything beyond them.17 And so are the courts bound which may not add to or detract from the
claims matters not expressed or necessarily implied, nor may they enlarge the patent beyond the
scope of that which the inventor claimed and the patent office allowed, even if the patentee may
have been entitled to something more than the words it had chosen would include.18
It bears stressing that the mere absence of the word Albendazole in Letters Patent No. 14561 is not
determinative of Albendazole’s non-inclusion in the claims of the patent. While Albendazole is
admittedly a chemical compound that exists by a name different from that covered in petitioner’s
letters patent, the language of Letter Patent No. 14561 fails to yield anything at all regarding
Albendazole. And no extrinsic evidence had been adduced to prove that Albendazole inheres in
petitioner’s patent in spite of its omission therefrom or that the meaning of the claims of the patent
embraces the same.
While petitioner concedes that the mere literal wordings of its patent cannot establish private
respondent’s infringement, it urges this Court to apply the doctrine of equivalents.
The doctrine of equivalents provides that an infringement also takes place when a device
appropriates a prior invention by incorporating its innovative concept and, although with some
modification and change, performs substantially the same function in substantially the same way to
achieve substantially the same result.19 Yet again, a scrutiny of petitioner’s evidence fails to convince
this Court of the substantial sameness of petitioner’s patented compound and Albendazole. While
both compounds have the effect of neutralizing parasites in animals, identity of result does not
amount to infringement of patent unless Albendazole operates in substantially the same way or by
substantially the same means as the patented compound, even though it performs the same function
and achieves the same result.20 In other words, the principle or mode of operation must be the
same or substantially the same.21
The doctrine of equivalents thus requires satisfaction of the function-means-and-result test, the
patentee having the burden to show that all three components of such equivalency test are met.22
As stated early on, petitioner’s evidence fails to explain how Albendazole is in every essential detail
identical to methyl 5 propylthio-2-benzimidazole carbamate. Apart from the fact that Albendazole is
an anthelmintic agent like methyl 5 propylthio-2-benzimidazole carbamate, nothing more is asserted
and accordingly substantiated regarding the method or means by which Albendazole weeds out
parasites in animals, thus giving no information on whether that method is substantially the same as
the manner by which petitioner’s compound works. The testimony of Dr. Orinion lends no support to
petitioner’s cause, he not having been presented or qualified as an expert witness who has the
knowledge or expertise on the matter of chemical compounds.
As for the concept of divisional applications proffered by petitioner, it comes into play when two or
more inventions are claimed in a single application but are of such a nature that a single patent may
not be issued for them.23 The applicant thus is required "to divide," that is, to limit the claims to
whichever invention he may elect, whereas those inventions not elected may be made the subject of
separate applications which are called "divisional applications."24 What this only means is that
petitioner’s methyl 5 propylthio-2-benzimidazole carbamate is an invention distinct from the other
inventions claimed in the original application divided out, Albendazole being one of those other
inventions. Otherwise, methyl 5 propylthio-2-benzimidazole carbamate would not have been the
subject of a divisional application if a single patent could have been issued for it as well as
Albendazole.
1âwphi1
The foregoing discussions notwithstanding, this Court does not sustain the award of actual damages
and attorney’s fees in favor of private respondent. The claimed actual damages of ₱330,000.00
representing lost profits or revenues incurred by private respondent as a result of the issuance of the
injunction against it, computed at the rate of 30% of its alleged ₱100,000.00 monthly gross sales for
eleven months, were supported by the testimonies of private respondent’s President25 and Executive
Vice-President that the average monthly sale of Impregon was ₱100,000.00 and that sales
plummeted to zero after the issuance of the injunction.26 While indemnification for actual or
compensatory damages covers not only the loss suffered (damnum emergens) but also profits which
the obligee failed to obtain (lucrum cessans or ganacias frustradas), it is necessary to prove the
actual amount of damages with a reasonable degree of certainty based on competent proof and on
the best evidence obtainable by the injured party.27 The testimonies of private respondent’s officers
are not the competent proof or best evidence obtainable to establish its right to actual or
compensatory damages for such damages also require presentation of documentary evidence to
substantiate a claim therefor.28
In the same vein, this Court does not sustain the grant by the appellate court of attorney’s fees to
private respondent anchored on Article 2208 (2) of the Civil Code, private respondent having been
allegedly forced to litigate as a result of petitioner’s suit. Even if a claimant is compelled to litigate
with third persons or to incur expenses to protect its rights, still attorney’s fees may not be awarded
where no sufficient showing of bad faith could be reflected in a party’s persistence in a case other
than an erroneous conviction of the righteousness of his cause.29 There exists no evidence on record
indicating that petitioner was moved by malice in suing private respondent.
This Court, however, grants private respondent temperate or moderate damages in the amount of
₱20,000.00 which it finds reasonable under the circumstances, it having suffered some pecuniary
loss the amount of which cannot, from the nature of the case, be established with certainty.30
WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED with
MODIFICATION. The award of actual or compensatory damages and attorney’s fees to private
respondent, Tryco Pharma Corporation, is DELETED; instead, it is hereby awarded the amount
of P20,000.00 as temperate or moderate damages.
SO ORDERED.
Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Corona,
Nature of infringement
Case –
ABS Corporation vs. Gozon, GR. No. 195956;
G.R. No. 195956
March 11, 2015
ABS-CBN CORPORATION, Petitioner,
vs.
FELIPE GOZON, GILBERTO R. DUAVIT, JR., MARISSA L. FLORES, JESSICA A. SORO,
GRACE DELA PENA-REYES, JOHN OLIVER T. MANALASTAS, JOHN DOES AND JANE
DOES, Respondents.
DECISION
LEONEN, J.:
The main issue in this case is whether there is probable cause to charge respondents with
infringement under Republic Act No. 8293, otherwise known as the Intellectual Property Code. The
resolution of this issue requires clarification of the concept of "copyrightable material" in relation to
material that is rebroadcast live as a news story. We are also asked to rule on whether criminal
prosecution for infringement of copyrightable material, such as live rebroadcast, can be negated by
good faith.
ABS-CBN Corporation (ABS-CBN) filed the Petition for Review on Certiorari1 to assail the November
9, 2010 Decision2 and the March 3, 2011 Resolution3 of the Court of Appeals. The Court of Appeals
reinstated the Department of Justice Resolution dated August 1, 2005 that ordered the withdrawal of
the Information finding probable cause for respondents’ violation of Sections 1774 and 2115 of the
Intellectual Property Code.6 Respondents are officers and employees of GMA Network, Inc. (GMA7). They are: Felipe Gozon (Gozon), GMA-7 President; Gilberto R. Duavit, Jr. (Duavit, Jr.), Executive
Vice-President; Marissa L. Flores (Flores), Vice-President for New and Public Affairs; Jessica A.
Soho (Soho), Director for News; Grace Dela Peña-Reyes (Dela Peña-Reyes), Head of News and
Public Affairs; John Oliver Manalastas (Manalastas), Program Manager; and others.
The controversy arose from GMA-7’s news coverage on the homecoming of Filipino overseas
worker and hostage victim Angelo dela Cruz on July 22, 2004. As summarized by the Court of
Appeals:
Overseas Filipino worker Angelo dela Cruz was kidnapped by Iraqi militants and as a condition for
his release, a demand was made for the withdrawal of Filipino troops in Iraq. After negotiations, he
was released by his captors and was scheduled to return to the country in the afternoon of 22 July
2004. Occasioned by said homecoming and the public interest it generated, both . . . GMA Network,
Inc. . . . and [petitioner] made their respective broadcasts and coverage of the live event.7
ABS-CBN "conducted live audio-video coverage of and broadcasted the arrival of Angelo dela Cruz
at the Ninoy Aquino International Airport (NAIA) and the subsequent press conference."8 ABS-CBN
allowed Reuters Television Service (Reuters) to air the footages it had taken earlier under a special
embargo agreement.9
ABS-CBN alleged that under the special embargo agreement, any of the footages it took would be
for the "use of Reuter’s international subscribers only, and shall be considered and treated by
Reuters under ‘embargo’ against use by other subscribers in the Philippines. . . . [N]o other
Philippine subscriber of Reuters would be allowed to use ABS-CBN footage without the latter’s
consent."10
GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes, and Manalastas are
connected, "assigned and stationed news reporters and technical men at the NAIA for its live
broadcast and non-live news coverage of the arrival of dela Cruz."11 GMA-7 subscribes to both
Reuters and Cable News Network (CNN). It received a live video feed of the coverage of Angelo
dela Cruz’s arrival from Reuters.12
GMA-7 immediately carried the live news feed in its program "Flash Report," together with its live
broadcast.13 Allegedly, GMA-7 did not receive any notice or was not aware that Reuters was airing
footages of ABS-CBN.14 GMA-7’s news control room staff saw neither the "No Access Philippines"
notice nor a notice that the video feed was under embargo in favor of ABS-CBN.15
On August 13, 2004, ABS-CBN filed the Complaint for copyright infringement under Sections
17716 and 21117 of the Intellectual Property Code.18
On December 3, 2004, Assistant City Prosecutor Dindo Venturanza issued the Resolution19 finding
probable cause to indict Dela Peña-Reyes and Manalastas.20 Consequently, the Information21 for
violation of the Intellectual Property Code was filed on December 17, 2004. It reads:
That on or about the 22nd of July 2004, in Quezon City, Philippines, the above-named accused,
conspiring together, confederating with and mutually helping each other, being the Head of News
Operations and the Program Manager, respectively, for the News and Public Affairs Department of
GMA Network, Inc., did then and there, willfully, unlawfully and feloniously use and broadcast the
footage of the arrival of Angelo [d]ela Cruz at the Ninoy Aquino International Airport of which ABSCBN holds the exclusive ownership and copyright by then and there using, airing, and broadcasting
the said footage in its news program "FLASH REPORT" without first obtaining the consent or
authority of said copyright owner, to their damage and prejudice.
Contrary to law.22
On January 4, 2005, respondents filed the Petition for Review before the Department of Justice.23 In
the Resolution (Gonzalez Resolution) dated August 1, 2005, Department of Justice Secretary Raul
M. Gonzalez (Secretary Gonzalez) ruled in favor of respondents and held that good faith may be
raised as a defense in the case.24 The dispositive portion of the Resolution reads:
WHEREFORE, THE PETITION FOR REVIEW FILED BY GMA-7 in I.S. No. 04-10458 is considered
meritorious and is hereby GRANTED. This case is hereby Dismissed, the resolution of the City
Prosecutor of Quezon City is hereby reversed and the same is ordered to withdraw the information if
any and report action taken to this office within ten (10) days.25 (Emphasis in the original)
Both parties moved for reconsideration of the Gonzalez Resolution.26
Meanwhile, on January 19, 2005, the trial court granted the Motion to Suspend Proceedings filed
earlier by Dela Peña-Reyes and Manalastas.27 The trial court Order reads:
Perusing the motion, the court finds that a petition for review was filed with the Department of Justice
on January 5, 2005 as confirmed by the public prosecutor. Under Section 11 (c), Rule 116 of the
Rules of Criminal Procedure, once a petition for review is filed with the Department of Justice, a
suspension of the criminal proceedings may be allowed by the court.
Accordingly, to allow the Department of Justice the opportunity to act on said petition for review, let
the proceedings on this case be suspended for a period of sixty (60) days counted from January 5,
2005, the date the petition was filed with the Department of Justice. The arraignment of the accused
on February 1, 2005 is accordingly cancelled. Let the arraignment be rescheduled to March 8, 2005
at 8:30 a.m. The accused through counsel are notified in open court.
SO ORDERED.28
On June 29, 2010, Department of Justice Acting Secretary Alberto C. Agra (Secretary Agra) issued
the Resolution (Agra Resolution) that reversed the Gonzalez Resolution and found probable cause
to charge Dela Peña-Reyes and Manalastas for violation of the Intellectual Property
Code.29 Secretary Agra also found probable cause to indict Gozon, Duavit, Jr., Flores, and Soho for
the same violation.30 He ruled that:
[w]hile good faith may be a defense in copyright infringement, the same is a disputable presumption
that must be proven in a full-blown trial. Disputable presumptions may be contradicted and
overcome by other evidence. Thus, a full-blown trial is the proper venue where facts, issues and
laws are evaluated and considered. The very purpose of trial is to allow a party to present evidence
to overcome the disputable presumptions involved.31
The dispositive portion of the Agra Resolution provides:
WHEREFORE, premises considered:
(a) The Motion for Reconsideration filed by appellees ABS-CBN Broadcasting Corporation
(ABS-CBN) of our Resolution promulgated on August 1, 2005 (Resolution No. 364, Series of
2005) and the Petition for Review filed by complainant-appellant ABS-CBN in I.S. No. 0410458 on April10, 2006, are GRANTED and the City Prosecutor of Quezon City is hereby
ordered to file the necessary Information for violation of Section 177 and 211 of Republic Act
No. 8293 against GMA-7. Felipe L. Gozon, Gilberto R. Duavit, Jr., Marissa L.Flores, Jessica
A. Soho, Grace Dela Pena-Reyes, John Oliver T. Manalastas[.]
....
SO ORDERED.32 (Emphasis in the original)
Respondents assailed the Agra Resolution through the Petition for Certiorari with prayer for issuance
of a temporary restraining order and/or Writ of Preliminary Injunction on September 2, 2010 before
the Court of Appeals. In the Resolution dated September 13, 2010, the Court of Appeals granted the
temporary restraining order preventing the Department of Justice from enforcing the Agra
Resolution.33
On November 9, 2010, the Court of Appeals rendered the Decision granting the Petition and
reversing and setting aside the Agra Resolution.34 The Court of Appeals held that Secretary Agra
committed errors of jurisdiction in issuing the assailed Resolution. Resolving the issue of copyright
infringement, the Court of Appeals said:
Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. However, it is an admitted fact that
petitioner GMA had only aired a five (5) second footage of the disputed live video feed that it had
received from Reuters and CNN as a subscriber. Indeed, petitioners had no notice of the right of
ownership of private respondent over the same. Without notice of the "No Access Philippines"
restriction of the live video feed, petitioner cannot be faulted for airing a live video feed from Reuters
and CNN.
Verily, as aptly opined by Secretary Gonzalez in his earlier Resolution, the act of petitioners in airing
the five (5) second footage was undeniably attended by good faith and it thus serves to exculpate
them from criminal liability under the Code. While the Intellectual Property Code is a special law, and
thus generally categorized as malum prohibitum, it bears to stress that the provisions of the Code
itself do not ipso facto penalize a person or entity for copyright infringement by the mere fact that
one had used a copyrighted work or material.
Certainly so, in the exercise of one’s moral and economic or copyrights, the very provisions of Part
IV of the Intellectual Property Code provide for the scope and limitations on copyright protection
under Section 184 and in fact permit fair use of copyrighted work under Section 185. With the
aforesaid statutory limitations on one’s economic and copyrights and the allowable instances where
the other persons can legally use a copyrighted work, criminal culpability clearly attaches only when
the infringement had been knowingly and intentionally committed.35 (Emphasis supplied)
The dispositive portion of the Decision reads:
WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the assailed
Resolution dated 29 June 2010 REVERSED and SET ASIDE. Accordingly, the earlier Resolution
dated 1 August 2005, which ordered the withdrawal of the Information filed, if any, against the
petitioners for violation of Sections 177 and 211 of the Intellectual Property Code, is hereby
REINSTATED. No costs.
SO ORDERED.36 (Emphasis in the original)
ABS-CBN’s Motion for Reconsideration was denied.37 It then filed its Petition for Review before this
court assailing the Decision and Resolution of the Court of Appeals.38
The issues for this court’s consideration are:
First, whether Secretary Agra committed errors of jurisdiction in the Resolution dated June 29, 2010
and, therefore, whether a petition for certiorari was the proper remedy in assailing that Resolution;
Second, whether news footage is copyrightable under the law;
Third, whether there was fair use of the broadcast material;
Fourth, whether lack of knowledge that a material is copyrighted is a defense against copyright
infringement;
Fifth, whether good faith is a defense in a criminal prosecution for violation of the Intellectual
Property Code; and
Lastly, whether the Court of Appeals was correct in overturning Secretary Agra’s finding of probable
cause.
I
The trial court granted respondents’ Motion to Suspend Proceedings and deferred respondents Dela
Peña-Reyes and Manalastas’ arraignment for 60 days in view of the Petition for Review filed before
the Department of Justice.
Rule 116, Section 11 (c) of the Rules of Criminal Procedure allows
the suspension of the accused’s arraignment in certain circumstances only:
SEC. 11. Suspension of arraignment.–Upon motion by the proper party, the arraignment shall be
suspended in the following cases:
(a) The accused appears to be suffering from an unsound mental condition which effectively
renders him unable to fully understand the charge against him and to plead intelligently
thereto. In such case, the court shall order his mental examination and, if necessary, his
confinement for such purpose;
(b) There exists a prejudicial question; and
(c) A petition for review of the resolution of the prosecutor is pending at either the
Department of Justice, or the Office of the President; provided, that the period of suspension
shall not exceed sixty (60) days counted from the filing of the petition with the reviewing
office. (12a) (Emphasis supplied)
In Samson v. Daway,39 this court acknowledged the applicability of Rule 116, Section (c) in a criminal
prosecution for infringement under the Intellectual Property Code. However, this court emphasized
the limits of the order of deferment under the Rule:
While the pendency of a petition for review is a ground for suspension of the arraignment, the . . .
provision limits the deferment of the arraignment to a period of 60 days reckoned from the filing of
the petition with the reviewing office. It follows, therefore, that after the expiration of said period, the
trial court is bound to arraign the accused or to deny the motion to defer arraignment.40
We clarify that the suspension of the arraignment should always be within the limits allowed by law.
In Crespo v. Judge Mogul,41 this court outlined the effects of filing an information before the trial
court, which includes initiating a criminal action and giving this court "authority to hear and determine
the case":42
The preliminary investigation conducted by the fiscal for the purpose of determining whether a prima
facie case exists warranting the prosecution of the accused is terminated upon the filing of the
information in the proper court. In turn, as above stated, the filing of said information sets in motion
the criminal action against the accused in Court. Should the fiscal find it proper to conduct a
reinvestigation of the case, at such stage, the permission of the Court must be secured. After such
reinvestigation the finding and recommendations of the fiscal should be submitted to the Court for
appropriate action. While it is true that the fiscal has the quasi judicial discretion to determine
whether or not a criminal case should be filed in court or not, once the case had already been
brought to Court whatever disposition the fiscal may feel should be proper in the case thereafter
should be addressed for the consideration of the Court, the only qualification is that the action of the
Court must not impair the substantial rights of the accused or the right of the People to due process
of law.
Whether the accused had been arraigned or not and whether it was due to a reinvestigation by the
fiscal or a review by the Secretary of Justice whereby a motion to dismiss was submitted to the
Court, the Court in the exercise of its discretion may grant the motion or deny it and require that the
trial on the merits proceed for the proper determination of the case.
However, one may ask, if the trial court refuses to grant the motion to dismiss filed by the fiscal upon
the directive of the Secretary of Justice will there not be a vacuum in the prosecution? A state
prosecutor to handle the case cannot possibly be designated by the Secretary of Justice who does
not believe that there is a basis for prosecution nor can the fiscal be expected to handle the
prosecution of the case thereby defying the superior order of the Secretary of Justice. The answer is
simple. The role of the fiscal or prosecutor as We all know is to see that justice is done and not
necessarily to secure the conviction of the person accused before the Courts. Thus, in spite of his
opinion to the contrary, it is the duty of the fiscal to proceed with the presentation of evidence of the
prosecution to the Court to enable the Court to arrive at its own independent judgment as to whether
the accused should be convicted or acquitted. The fiscal should not shirk from the responsibility of
appearing for the People of the Philippines even under such circumstances much less should he
abandon the prosecution of the case leaving it to the hands of a private prosecutor for then the entire
proceedings will be null and void. The least that the fiscal should do is to continue to appear for the
prosecution although he may turn over the presentation of the evidence to the private prosecutor but
still under his direction and control.
The rule therefore in this jurisdiction is that once a complaint or information is filed in Court any
disposition of the case as to its dismissal or the conviction or acquittal of the accused rests in the
sound discretion of the Court. Although the fiscal retains the direction and control of the prosecution
of criminal cases even while the case is already in Court he cannot impose his opinion on the trial
court. The Court is the best and sole judge on what to do with the case before it. The determination
of the case is within its exclusive jurisdiction and competence. A motion to dismiss the case filed by
the fiscal should be addressed to the Court who has the option to grant or deny the same. It does
not matter if this is done before or after the arraignment of the accused or that the motion was filed
after a reinvestigation or upon instructions of the Secretary of Justice who reviewed the records of
the investigation.43 (Emphasis supplied, citations omitted)
The doctrine in Crespo was reiterated in Mayor Balindong v. Court of Appeals,44 where this court
reminded the Department of Justice Secretary to refrain from entertaining petitions for review when
the case is already pending with this court:
[I]n order to avoid a situation where the opinion of the Secretary of Justice who reviewed the action
of the fiscal may be disregarded by the trial court, the Secretary of Justice should, as far as
practicable, refrain from entertaining a petition for review or appeal from the action of the fiscal,
when the complaint or information has already been filed in the Court. The matter should be left
entirely for the determination of the Court.45
The trial court should have proceeded with respondents Dela Peña-Reyes and Manalastas’
arraignment after the 60-day period from the filing of the Petition for Review before the Department
of Justice on March 8, 2005. It was only on September 13, 2010 that the temporary restraining order
was issued by the Court of Appeals. The trial court erred when it did not act on the criminal case
during the interim period. It had full control and direction of the case. As Judge Mogul reasoned in
denying the motion to dismiss in Crespo, failure to proceed with the arraignment "disregards the
requirements of due process [and] erodes the Court’s independence and integrity."46
II
According to ABS-CBN, the Court of Appeals erred in finding that: a motion for reconsideration was
not necessary before a petition for certiorari could be filed; the Department of Justice Secretary
committed errors of jurisdiction since the Agra Resolution was issued within its authority and in
accordance with settled laws and jurisprudence; and respondents were not liable for copyright
infringement.
In its assailed Decision, the Court of Appeals found that respondents committed a procedural error
when they failed to file a motion for reconsideration before filing the Petition for Certiorari. However,
the Court of Appeals held that a motion for reconsideration was unnecessary since the Agra
Resolution was a patent nullity and it would have been useless under the circumstances: Given that
a reading of the assailed Resolution and the instant records readily reveals errors of jurisdiction on
the part of respondent Secretary, direct judicial recourse is warranted under the circumstances.
Aside from the fact that said Resolution is a patent nullity having been issued in grave abuse of
discretion amounting to lack or excess of jurisdiction, the filing of a motion for reconsideration is
evidently useless on account of the fact that the issues and arguments before this Court have
already been duly raised and accordingly delved into by respondent Secretary in his disposition of
the petition a quo.47 (Emphasis in the original)
In Elma v. Jacobi,48 this court ruled that a petition for certiorari under Rule 65 of the Rules of Court is
proper when assailing adverse resolutions of the Department of Justice stemming from the
determination of probable cause.49 However, grave abuse of discretion must be alleged.50
In Sanrio Company Limited v. Lim,51 this court stressed the prosecutor’s role in determining probable
cause. Judicial review will only lie when it is shown that the prosecutor acted with grave abuse of
discretion amounting to lack or excess of jurisdiction:
A prosecutor alone determines the sufficiency of evidence that will establish probable cause
justifying the filing of a criminal information against the respondent. By way of exception, however,
judicial review is allowed where respondent has clearly established that the prosecutor committed
grave abuse of discretion. Otherwise stated, such review is appropriate only when the prosecutor
has exercised his discretion in an arbitrary, capricious, whimsical or despotic manner by reason of
passion or personal hostility, patent and gross enough to amount to an evasion of a positive duty or
virtual refusal to perform a duty enjoined by law.52 (Citations omitted)
Grave abuse of discretion refers to:
such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The
abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility and must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.53
Resorting to certiorari requires that there be there be "no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law[,]"54 such as a motion for reconsideration. Generally, "a motion
for reconsideration is a condition sine qua non before a petition for certiorari may lie, its purpose
being to grant an opportunity for the [tribunal or officer] to correct any error attributed to it by a reexamination of the legal and factual circumstances of the case."55 However, exceptions to the rule
exist:
(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court; (c) where there is an
urgent necessity for the resolution of the question and any further delay would prejudice the interests
of the Government or of the petitioner or the subject matter of the action is perishable; (d) where,
under the circumstances, a motion for reconsideration would be useless; (e) where petitioner was
deprived of due process and there is extreme urgency for relief; (f) where, in a criminal case, relief
from an order of arrest is urgent and the granting of such relief by the trial Court is improbable; (g)
where the proceedings in the lower court are a nullity for lack of due process; (h) where the
proceedings was ex parte or in which the petitioner had no opportunity to object; and (i) where the
issue raised is one purely of law or where public interest is involved.56 (Emphasis in the original,
citations omitted)
As argued by respondents, "[a] second motion for reconsideration would have been useless and
futile since the D[epartment] [of] J[ustice] had already passed upon the same issues twice."57 Equally
pressing under the circumstances was the need to resolve the matter, as the Information’s filing
would lead to respondents’ imminent arrest.58
Moreover, Department of Justice Department Circular No. 70 dated July 3, 2000, or the 2000 NPS
Rules on Appeal, provides that no second motion for reconsideration of the Department of Justice
Secretary’s resolution shall be entertained:
SECTION 13. Motion for reconsideration. The aggrieved party may file a motion for reconsideration
within a non-extendible period of ten (10) days from receipt of the resolution on appeal, furnishing
the adverse party and the Prosecution Office concerned with copies thereof and submitting proof of
such service. No second or further motion for reconsideration shall be entertained.
The Agra Resolution was the result of respondents’ Motion for Reconsideration assailing the
Gonzalez Resolution. To file a motion for reconsideration of the Agra Resolution would be
superfluous. Respondents were, therefore, correct in filing the Petition for Certiorari of the Agra
Resolution before the Court of Appeals.
III
The Court of Appeals ruled that Secretary Agra committed errors of jurisdiction, which then required
the grant of the writ of certiorari:
So viewed, by ordering the filing of information without proof that probable cause exists to charge
petitioners with a crime, respondent Secretary clearly committed an error of jurisdiction thus
warranting the issuance of the writ of certiorari. Surely, probable cause cannot be had when the very
provisions of the statute exculpates criminal liability in cases classified as fair use of copyrighted
materials. The fact that they admittedly used the Reuters live video feed is not, as a matter of
course, tantamount to copyright infringement that would justify the filing of an information against the
petitioners.59
Error of jurisdiction must be distinguished from error of judgment:
A line must be drawn between errors of judgment and errors of jurisdiction. An error of judgment is
one which the court may commit in the exercise of its jurisdiction. An error of jurisdiction renders an
order or judgment void or voidable. Errors of jurisdiction are reviewable on certiorari; errors of
judgment, only by appeal.60
In People v. Hon. Sandiganbayan61:
An error of judgment is one which the court may commit in the exercise of its jurisdiction. An error of
jurisdictionis one where the act complained of was issued by the court without or in excess of
jurisdiction, or with grave abuse of discretion, which is tantamount to lack or in excess of jurisdiction
and which error is correctible only by the extraordinary writ of certiorari. Certiorari will not be issued
to cure errors of the trial court in its appreciation of the evidence of the parties, or its conclusions
anchored on the said findings and its conclusions of law.62 (Emphasis supplied)
This court has adopted a deferential attitude towards review of the executive’s finding of probable
cause.63 This is based "not only upon the respect for the investigatory and [prosecutorial] powers
granted by the Constitution to the executive department but upon practicality as well."64 Review of the
Department of Justice Secretary’s decision or resolution will be allowed only when grave abuse of
discretion is alleged:
The full discretionary authority to determine probable cause in a preliminary investigation to
ascertain sufficient ground for the filing of information rests with the executive branch. Hence, judicial
review of the resolution of the Secretary of Justice is limited to a determination whether there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction. Courts cannot
substitute the executive branch’s judgment.
....
It is only where the decision of the Justice Secretary is tainted with grave abuse of discretion
amounting to lack or excess of jurisdiction that the Court of Appeals may take cognizance of the
case in a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The Court of
Appeals decision may then be appealed to this Court by way of a petition for review on
certiorari.65 (Emphasis supplied, citations omitted)
In this case, it must be shown that Secretary Agra exceeded his authority when he reversed the
findings of Secretary Gonzalez. This court must determine whether there is probable cause to file an
information for copyright infringement under the Intellectual Property Code.
IV
Probable cause pertains to "such facts as are sufficient to engender a well-founded belief that a
crime has been committed and that respondent is probably guilty thereof."66 Preliminary investigation
is the inquiry or proceeding to determine whether there is probable cause.67
In Webb v. De Leon,68 this court ruled that determination of probable cause during preliminary
investigation does not require trial-like evaluation of evidence since existence of probable cause
does not equate to guilt:
It ought to be emphasized that in determining probable cause, the average man weighs facts and
circumstances without resorting to the calibrations of our technical rules of evidence of which his
knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men
have an abundance.
....
. . . A finding of probable cause merely binds over the suspect to stand trial. It is not a
pronouncement of guilt.69
In Reyes v. Pearlbank Securities, Inc.,70 finding probable cause is not equivalent to finding with moral
certainty that the accused committed the crime:
A finding of probable cause needs only to rest on evidence showing that more likely than not a crime
has been committed by the suspects. It need not be based on clear and convincing evidence of guilt,
not on evidence establishing guilt beyond reasonable doubt, and definitely not on evidence
establishing absolute certainty of guilt. In determining probable cause, the average man weighs facts
and circumstances without resorting to the calibrations of the rules of evidence of which he has no
technical knowledge. He relies on common sense.71
During preliminary investigation, a public prosecutor does not adjudicate on the parties’ rights,
obligations, or liabilities.72
In the recent case of Estrada v. Office of the Ombudsman, et al.,73 we reiterated Webb on the
determination of probable cause during preliminary investigation and traced the history of probable
cause as borrowed from American jurisprudence:
The purpose in determining probable cause is to make sure that the courts are not clogged with
weak cases that will only be dismissed, as well as to spare a person from the travails of a needless
prosecution.
....
. . . In the United States, from where we borrowed the concept of probable cause, the prevailing
definition of probable cause is this:
In dealing with probable cause, however, as the very name implies, we deal with probabilities. These
are not technical; they are the factual and practical considerations of everyday life on which
reasonable and prudent men, not legal technicians, act. The standard of proof is accordingly
correlative to what must be proved.
"The substance of all the definitions" of probable cause "is a reasonable ground for belief of guilt."
McCarthy v. De Armit, 99 Pa. St. 63, 69, quoted with approval in the Carroll opinion. 267 U. S. at
161. And this "means less than evidence which would justify condemnation" or conviction, as
Marshall, C. J., said for the Court more than a century ago in Locke v. United States, 7 Cranch 339,
348. Since Marshall’s time, at any rate, it has come to mean more than bare suspicion: Probable
cause exists where "the facts and circumstances within their [the officers’] knowledge and of which
they had reasonably trustworthy information [are] sufficient in themselves to warrant a man of
reasonable caution in the belief that" an offense has been or is being committed. Carroll v. United
States, 267 U. S. 132, 162.
These long-prevailing standards seek to safeguard citizens from rash and unreasonable
interferences with privacy and from unfounded charges of crime. They also seek to give fair leeway
for enforcing the law in the community’s protection. Because many situations which confront officers
in the course of executing their duties are more or less ambiguous, room must be allowed for some
mistakes on their part. But the mistakes must be those of reasonable men, acting on facts leading
sensibly to their conclusions of probability. The rule of probable cause is a practical, non technical
conception affording the best compromise that has been found for accommodating these often
opposing interests. Requiring more would unduly hamper law enforcement. To allow less would be
to leave law-abiding citizens at the mercy of the officers’ whim or caprice.
In the Philippines, there are four instances in the Revised Rules of Criminal Procedure where
probable cause is needed to be established:
(1) In Sections 1 and 3 of Rule 112: By the investigating officer, to determine whether there
is sufficient ground to engender a well-founded belief that a crime has been committed and
the respondent is probably guilty thereof, and should be held for trial. A preliminary
investigation is required before the filing of a complaint or information for an offense where
the penalty prescribed by law is at least four years, two months and one day without regard
to the fine;
(2) In Sections 6 and 9 of Rule 112: By the judge, to determine whether a warrant of arrest or
a commitment order, if the accused has already been arrested, shall be issued and that there
is a necessity of placing the respondent under immediate custody in order not to frustrate the
ends of justice;
(3) In Section 5(b) of Rule 113:By a peace officer or a private person making a warrantless
arrest when an offense has just been committed, and he has probable cause to believe
based on personal knowledge of facts or circumstances that the person to be arrested has
committed it; and
(4) In Section 4 of Rule 126: By the judge, to determine whether a search warrant shall be
issued, and only upon probable cause in connection with one specific offense to be
determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to be
searched and the things to be seized which may be anywhere in the Philippines.
In all these instances, the evidence necessary to establish probable cause is based only on the
likelihood, or probability, of guilt.74
Estrada also highlighted that a "[p]reliminary investigation is not part of the criminal action. It is
merely preparatory and may even be disposed of in certain situations."75
To determine whether there is probable cause that respondents committed copyright infringement, a
review of the elements of the crime, including the existing facts, is required.
V
ABS-CBN claims that news footage is subject to copyright and prohibited use of copyrighted material
is punishable under the Intellectual Property Code. It argues that the new footage is not a
"newsworthy event" but "merely an account of the arrival of Angelo dela Cruz in the Philippines —
the latter being the newsworthy event":76
To be clear, it is the event itself or the arrival of Angelo dela Cruz which is not copyrightable because
that is the newsworthy event. However, any footage created from the event itself, in this case the
arrival of Angelo dela Cruz, are intellectual creations which are copyrightable. Thus, the footage
created by ABS-CBN during the arrival of Angelo dela Cruz, which includes the statements of Dindo
Amparo, are copyrightable and protected by the laws on copyright.77
On the other hand, respondents argue that ABS-CBN’s news footage of Angelo dela Cruz’s arrival is
not copyrightable or subject to protection:
Certainly, the arrival of Angelo [d]ela Cruz, which aroused public attention and the consciousness of
the Filipino people with regard to their countrymen, OFWs working in foreign countries and how the
Philippine government responds to the issues concerning them, is "news". There is no ingenuity or
inventiveness added in the said news footage. The video footage of this "news" is not copyrightable
by any legal standard as facts of everyday life depicted in the news and items of press information is
part of the public domain.78 (Emphasis in the original)
The news footage is copyrightable.
The Intellectual Property Code is clear about the rights afforded to authors of various kinds of work.
Under the Code, "works are protected by the sole fact of their creation, irrespective of their mode or
form of expression, as well as of their content, quality and purpose."79 These include "[a]udiovisual
works and cinematographic works and works produced by a process analogous to cinematography
or any process for making audiovisual recordings."80
Contrary to the old copyright law,81 the Intellectual Property Code does not require registration of the
work to fully recover in an infringement suit. Nevertheless, both copyright laws provide that copyright
for a work is acquired by an intellectual creator from the moment of creation.82
It is true that under Section 175 of the Intellectual Property Code, "news of the day and other
miscellaneous facts having the character of mere items of press information" are considered
unprotected subject matter.83 However, the Code does not state that expression of the news of the
day, particularly when it underwent a creative process, is not entitled to protection.
An idea or event must be distinguished from the expression of that idea or event. An idea has been
likened to a ghost in that it "must be spoken to a little before it will explain itself."84 It is a concept that
has eluded exact legal definition.85 To get a better grasp of the idea/expression dichotomy, the
etymology of the term "idea" is traced:
The word "idea" is derived from a Greek term, meaning "a form, the look or appearance of a thing as
opposed to its reality, from idein, to see." In the Timaeus, Plato saw ideas as eternal paradigms,
independent objects to which the divine demiurge looks as patterns in forming the world. This was
later modified to the religious conception of ideas as the thoughts of God. "It is not a very long step
to extend the term ‘idea’ to cover patterns, blueprints, or plans in anyone's mind, not only in God’s."
The word entered the French and English vernacular in the 1600s and possessed two meanings.
The first was the Platonic meaning of a perfect exemplar or paradigm. The second, which probably
has its origin with Descartes, is of a mental concept or image or, more broadly, any object of the
mind when it is active. Objects of thought may exist independently. The sun exists (probably) before
and after you think of it. But it is also possible to think of things that have never existed, such as a
unicorn or Pegasus. John Locke defined ideas very comprehensively, to include: all objects of the
mind. Language was a way of translating the invisible, hidden ideas that make up a person’s
thoughts into the external, perceptible world of articulate sounds and visible written symbols that
others can understand.86 (Citations omitted) There is no one legal definition of "idea" in this
jurisdiction. The term "idea" is mentioned only once in the Intellectual Property Code.87 In Joaquin, Jr.
v. Drilon,88 a television format (i.e., a dating show format) is not copyrightable under Section 2 of
Presidential Decree No. 49;89 it is a mere concept:
P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to
concepts. The copyright does not extend to an idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work. Thus, the new INTELLECTUAL PROPERTY CODE OF THE
PHILIPPINES provides:
SEC. 175. Unprotected Subject Matter.—Notwithstanding the provisions of Sections 172 and 173,
no protection shall extend, under this law, to any idea, procedure, system, method or operation,
concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated
or embodied in a work; news of the day and other miscellaneous facts having the character of mere
items of press information; or any official text of a legislative, administrative or legal nature, as well
as any official translation thereof.
What then is the subject matter of petitioners’ copyright? This Court is of the opinion that petitioner
BJPI’s copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within
the class of works mentioned in P.D. 49, §2(M),to wit:
Cinematographic works and works produced by a process analogous to cinematography or any
process for making audio-visual recordings;
The copyright does not extend to the general concept or format of its dating game show.
Accordingly, by the very nature of the subject of petitioner BJPI’s copyright, the investigating
prosecutor should have the opportunity to compare the videotapes of the two shows.
Mere description by words of the general format of the two dating game shows is insufficient; the
presentation of the master videotape in evidence was indispensable to the determination of the
existence of probable cause. As aptly observed by respondent Secretary of Justice:
A television show includes more than mere words can describe because it involves a whole
spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found
by merely describing the general copyright/format of both dating game shows.90 (Emphasis supplied,
citations omitted)
Ideas can be either abstract or concrete.91 It is the concrete ideas that are generally referred to as
expression:
The words "abstract" and "concrete" arise in many cases dealing with the idea/expression
distinction. The Nichols court, for example, found that the defendant’s film did not infringe the
plaintiff’s play because it was "too generalized an abstraction from what plaintiff wrote . . . only a part
of her ideas." In Eichel v. Marcin, the court said that authors may exploit facts, experiences, field of
thought, and general ideas found in another’s work, "provided they do not substantially copy a
concrete form, in which the circumstances and ideas have been developed, arranged, and put into
shape." Judge Hand, in National Comics Publications, Inc. v. Fawcett Publications, Inc. said that "no
one infringes, unless he descends so far into what is concrete as to invade. . . ‘expression.’"
These cases seem to be distinguishing "abstract" ideas from "concrete" tangible embodiments of
these abstractions that may be termed expression. However, if the concrete form of a work means
more than the literal expression contained within it, it is difficult to determine what is meant by
"concrete." Webster's New Twentieth Century Dictionary of the English Language provides several
meanings for the word concrete. These include: "having a material, perceptible existence; of,
belonging to, or characterized by things or events that can be perceived by the senses; real; actual;"
and "referring to a particular; specific, not general or abstract."92
In Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,93 this court, citing the American case
of Baker v. Selden, distinguished copyright from patents and illustrated how an idea or concept is
different from the expression of that idea:
In the oft-cited case of Baker vs. Selden, the United States Supreme Court held that only the
expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the
copyright of a book which expounded on a new accounting system he had developed. The
publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced
forms similar to those illustrated in the plaintiff’s copyrighted book. The US Supreme Court ruled
that:
"There is no doubt that a work on the subject of book-keeping, though only explanatory of well
known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x But
there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate.
The mere statement of the proposition is so evident that it requires hardly any argument to support it.
The same distinction may be predicated of every other art as well as that of bookkeeping.
A treatise on the composition and use of medicines, be they old or new; on the construction and use
of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or
on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright;
but no one would contend that the copyright of the treatise would give the exclusive right to the art or
manufacture described therein. The copyright of the book, if not pirated from other works, would be
valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or
thing described or explained has nothing to do with the validity of the copyright. To give to the author
of the book an exclusive property in the art described therein, when no examination of its novelty has
ever been officially made, would be a surprise and a fraud upon the public. That is the province of
letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must
be subjected to the examination of the Patent Office before an exclusive right therein can be
obtained; and a patent from the government can only secure it.
The difference between the two things, letters patent and copyright, may be illustrated by reference
to the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of
great value in the healing art. If the discoverer writes and publishes a book on the subject (as regular
physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he
gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the
mixture as a new art, manufacture or composition of matter. He may copyright his book, if he
pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all
other inventions or discoveries.
The copyright of a book on perspective, no matter how many drawings and illustrations it may
contain, gives no exclusive right to the modes of drawing described, though they may never have
been known or used before. By publishing the book without getting a patent for the art, the latter is
given to the public.
....
Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book
intended to convey instruction in the art, any person may practice and use the art itself which he has
described and illustrated therein. The use of the art is a totally different thing from a publication of
the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to
make, sell and use account books prepared upon the plan set forth in such book. Whether the art
might or might not have been patented, is a question, which is not before us. It was not patented,
and is open and free to the use of the public. And, of course, in using the art, the ruled lines and
headings of accounts must necessarily be used as incident to it.
The plausibility of the claim put forward by the complainant in this case arises from a confusion of
ideas produced by the peculiar nature of the art described in the books, which have been made the
subject of copyright. In describing the art, the illustrations and diagrams employed happened to
correspond more closely than usual with the actual work performed by the operator who uses the
art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no
foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of
the other is use. The former may be secured by copyright. The latter can only be secured, if it can be
secured at all, by letters patent."94 (Emphasis supplied)
News or the event itself is not copyrightable. However, an event can be captured and presented in a
specific medium. As recognized by this court in Joaquin, television "involves a whole spectrum of
visuals and effects, video and audio."95 News coverage in television involves framing shots, using
images, graphics, and sound effects.96 It involves creative process and originality. Television news
footage is an expression of the news.
In the United States, a line of cases dwelt on the possibility of television newscasts to be
copyrighted.97 Most of these cases focused on private individuals’ sale or resale of tapes of news
broadcasts. Conflicting decisions were rendered by its courts. Noteworthy, however, is the District
Court’s pronouncement in Pacific & Southern Co. v. Duncan,98 which involves a News Monitoring
Service’s videotaping and sale of WXIA-TV’s news broadcasts:
It is axiomatic that copyright protection does not extend to news "events" or the facts or ideas which
are the subject of news reports. Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th Cir.
1981); Wainwright Securities, Inc. v. Wall Street Transcript Corp., 558 F.2d 91, 95 (2d Cir. 1977),
cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978). But it is equally well-settled that
copyright protection does extend to the reports themselves, as distinguished from the substance of
the information contained in the reports. Wainwright, 558 F.2d at 95; International News Service v.
Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918); see Chicago Record-Herald Co.
v. Tribune Assn., 275 F. 797 (7th Cir.1921); 1 Nimmer on Copyright § 2.11[B] (1983). Copyright
protects the manner of expression of news reports, "the particular form or collocation of words in
which the writer has communicated it." International News Service, 248 U.S. at 234, 39 S.Ct. at 70.
Such protection extends to electronic news reports as well as written reports. See17 U.S.C. § 102(a)
(5), (6), and (7); see also Iowa State University Research Foundations, Inc. v. American
Broadcasting Cos., 621 F.2d 57, 61 (2d Cir. 1980).99 (Emphasis supplied)
The idea/expression dichotomy has long been subject to debate in the field of copyright law.
Abolishing the dichotomy has been proposed, in that non-protectibility of ideas should be reexamined, if not stricken, from decisions and the law:
If the underlying purpose of the copyright law is the dual one expressed by Lord Mansfield, the only
excuse for the continuance of the idea-expression test as a judicial standard for determining
protectibility would be that it was or could be a truly useful method of determining the proper balance
between the creator’s right to profit from his work and the public's right that the "progress of the arts
not be retarded."
. . . [A]s used in the present-day context[,] the dichotomy has little or no relationship to the policy
which it should effectuate. Indeed, all too often the sweeping language of the courts regarding the
non-protectibility of ideas gives the impression that this is of itself a policy of the law, instead of
merely a clumsy and outdated tool to achieve a much more basic end.100
The idea/expression dichotomy is a complex matter if one is trying to determine whether a certain
material is a copy of another.101 This dichotomy would be more relevant in determining, for instance,
whether a stage play was an infringement of an author’s book involving the same characters and
setting. In this case, however, respondents admitted that the material under review — which is the
subject of the controversy — is an exact copy of the original. Respondents did not subject ABSCBN’s footage to any editing of their own. The news footage did not undergo any transformation
where there is a need to track elements of the original.
Having established the protectible nature of news footage, we now discuss the concomitant rights
accorded to authors. The authors of a work are granted several rights in relation to it, including
copyright or economic rights:
SECTION 177. Copyright or Economic Rights. — Subject to the provisions of Chapter VIII, copyright
or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following
acts:
177.1. Reproduction of the work or substantial portion of the work;
177.2. Dramatization, translation, adaptation, abridgment, arrangement or other
transformation of the work;
177.3. The first public distribution of the original and each copy of the work by sale or other
forms of transfer of ownership;
177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work
embodied in a sound recording, a computer program, a compilation of data and other
materials or a musical work in graphic form, irrespective of the ownership of the original or
the copy which is the subject of the rental; (n)
177.5. Public display of the original or a copy of the work;
177.6. Public performance of the work; and
177.7. Other communication to the public of the work.(Sec. 5, P. D. No. 49a) (Emphasis
supplied)
Under Section 211 of the Intellectual Property Code, broadcasting organizations are granted a more
specific set of rights called related or neighboring rights:
SECTION 211. Scope of Right. — Subject to the provisions of Section 212, broadcasting
organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following
acts:
211.1. The rebroadcasting of their broadcasts;
211.2. The recording in any manner, including the making of films or the use of video tape, of
their broadcasts for the purpose of communication to the public of television broadcasts of
the same; and
211.3. The use of such records for fresh transmissions or for fresh recording. (Sec. 52, P.D.
No. 49) (Emphasis supplied)
Section 212 of the Code provides:
CHAPTER XV
LIMITATIONS ON PROTECTION
Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:
212.1. The use by a natural person exclusively for his own personal purposes;
212.2. Using short excerpts for reporting current events;
212.3. Use solely for the purpose of teaching or for scientific research; and
212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D.
No. 49a)
The Code defines what broadcasting is and who broadcasting organizations include:
202.7. "Broadcasting" means the transmission by wireless means for the public reception of
sounds or of images or of representations thereof; such transmission by satellite is also
"broadcasting" where the means for decrypting are provided to the public by the
broadcasting organization or with its consent;
202.8. "Broadcasting organization" shall include a natural person or a juridical entity duly
authorized to engage in broadcasting[.]
Developments in technology, including the process of preserving once ephemeral works and
disseminating them, resulted in the need to provide a new kind of protection as distinguished from
copyright.102 The designation "neighboring rights" was abbreviated from the phrase "rights
neighboring to copyright."103 Neighboring or related rights are of equal importance with copyright as
established in the different conventions covering both kinds of rights.104
Several treaties deal with neighboring or related rights of copyright.105 The most prominent of these is
the "International Convention for the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations" (Rome Convention).106
The Rome Convention protects the rights of broadcasting organizations in relation to their
broadcasts. Article XIII of the Rome Convention enumerates the minimum rights accorded to
broadcasting organizations:
Article 13
Minimum Rights for Broadcasting Organizations
Broadcasting organisations shall enjoy the right to authorize or prohibit:
(a) the rebroadcasting of their broadcasts;
(b) the fixation of their broadcasts;
(c) the reproduction:
(i) of fixations, made without their consent, of their broadcasts;
(ii) of fixations, made in accordance with the provisions of Article 15, of their
broadcasts, if the reproduction is made for purposes different from those referred to
in those provisions;
(d) the communication to the public of their television broadcasts if such communication is
made in places accessible to the public against payment of an entrance fee; it shall be a
matter for the domestic law of the State where protection of this right is claimed to determine
the conditions under which it may be exercised.
With regard to the neighboring rights of a broadcasting organization in this jurisdiction, this court has
discussed the difference between broadcasting and rebroadcasting:
Section 202.7 of the IP Code defines broadcasting as "the transmission by wireless means for the
public reception of sounds or of images or of representations thereof; such transmission by satellite
is also ‘broadcasting’ where the means for decrypting are provided to the public by the broadcasting
organization or with its consent."
On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the
Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise
known as the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, is "the
simultaneous broadcasting by one broadcasting organization of the broadcast of another
broadcasting organization."
....
Under the Rome Convention, rebroadcasting is "the simultaneous broadcasting by one broadcasting
organization of the broadcast of another broadcasting organization." The Working Paper prepared by
the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting
organizations as "entities that take the financial and editorial responsibility for the selection and
arrangement of, and investment in, the transmitted content."107 (Emphasis in the original, citations
omitted)
Broadcasting organizations are entitled to several rights and to the protection of these rights under
the Intellectual Property Code. Respondents’ argument that the subject news footage is not
copyrightable is erroneous. The Court of Appeals, in its assailed Decision, correctly recognized the
existence of ABS-CBN’s copyright over the news footage:
Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement.108
News as expressed in a video footage is entitled to copyright protection. Broadcasting organizations
have not only copyright on but also neighboring rights over their broadcasts. Copyrightability of a
work is different from fair use of a work for purposes of news reporting.
VI
ABS-CBN assails the Court of Appeals’ ruling that the footage shown by GMA-7 falls under the
scope of Section 212.2 and 212.4 of the Intellectual Property Code:
The evidence on record, as well as the discussions above, show that the footage used
by[respondents] could hardlybe characterized as a short excerpt, as it was aired over one and a half
minutes.
Furthermore, the footage used does not fall under the contemplation of Section 212.2 of the
Intellectual Property Code. A plain reading of the provision would reveal that copyrighted material
referred to in Section 212 are short portions of an artist’s performance under Section 203, or a
producer’s sound recordings under Sections 208 and 209. Section 212 does not refer to actual use
of video footage of another as its own.
The Angelo dela Cruz footage does not fall under the rule on Section 212.4 of the Intellectual
Property Code on fair use of the broadcast.
....
In determining fair use, several factors are considered, including the nature of the copyrighted work,
and the amount and substantiality of the person used in relation to the copyrighted work as a whole.
In the business of television news reporting, the nature of the copyrighted work or the video
footages, are such that, footage created, must be a novelty to be a good report. Thus, when the . . .
Angelo dela Cruz footage was used by [respondents], the novelty of the footage was clearly
affected.
Moreover, given that a substantial portion of the Angelo dela Cruz footage was utilized by GMA-7 for
its own, its use can hardly be classified as fair use.
Hence, [respondents] could not be considered as having used the Angelo dela Cruz [footage]
following the provisions on fair use.
It is also worthy to note that the Honorable Court of Appeals seem to contradict itself when it relied
on the provisions of fair use in its assailed rulings considering that it found that the Angelo dela Cruz
footage is not copyrightable, given that the fair use presupposes an existing copyright. Thus, it is
apparent that the findings of the Honorable Court of Appeals are erroneous and based on wrong
assumptions.109 (Underscoring in the original)
On the other hand, respondents counter that GMA-7’s use of ABS-CBN’s news footage falls under
fair use as defined in the Intellectual Property Code. Respondents, citing the Court of Appeals
Decision, argue that a strong statutory defense negates any finding of probable cause under the
same statute.110 The Intellectual Property Code provides that fair use negates infringement.
Respondents point out that upon seeing ABS-CBN’s reporter Dindo Amparo on the footage, GMA-7
immediately shut off the broadcast. Only five (5) seconds passed before the footage was cut. They
argue that this shows that GMA-7 had no prior knowledge of ABS-CBN’s ownership of the footage or
was notified of it. They claim that the Angelo dela Cruz footage is considered a short excerpt of an
event’s "news" footage and is covered by fair use.111
Copyright protection is not absolute.112 The Intellectual Property Code provides the limitations on
copyright:
CHAPTER VIII
LIMITATIONS ON COPYRIGHT
Section 184. Limitations on Copyright. - 184.1. Notwithstanding the provisions of Chapter V, the
following acts shall not constitute infringement of copyright:
....
184.2. The provisions of this section shall be interpreted in such a way as to allow the work to be
used in a manner which does not conflict with the normal exploitation of the work and does not
unreasonably prejudice the right holder's legitimate interests.
....
CHAPTER XV
LIMITATIONS ON PROTECTION
Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:
....
212.2. Using short excerpts for reporting current events;
....
212.4. Fair use of the broadcast subject to the conditions under Section 185.(Sec. 44, P.D. No. 49a)
(Emphasis supplied)
The determination of what constitutes fair use depends on several factors. Section 185 of the
Intellectual Property Code states:
SECTION 185. Fair Use of a Copyrighted Work. —
185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching including
multiple copies for classroom use, scholarship, research, and similar purposes is not an infringement
of copyright. . . . In determining whether the use made of a work in any particular case is fair use, the
factors to be considered shall include:
a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work.
Respondents allege that the news footage was only five (5) seconds long, thus falling under
fair use. ABS-CBN belies this contention and argues that the footage aired for two (2)
minutes and 40 seconds.113 According to the Court of Appeals, the parties admitted that only
five (5) seconds of the news footage was broadcasted by GMA-7.114
This court defined fair use as "aprivilege to use the copyrighted material in a reasonable manner
without the consent of the copyright owner or as copying the theme or ideas rather than their
expression."115 Fair use is an exception to the copyright owner’s monopoly of the use of the work to
avoid stifling "the very creativity which that law is designed to foster."116
Determining fair use requires application of the four-factor test. Section 185 of the Intellectual
Property Code lists four (4) factors to determine if there was fair use of a copyrighted work:
a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and
d. The effect of the use upon the potential market for or value of the copyrighted work.
First, the purpose and character of the use of the copyrighted material must fall under those listed in
Section 185, thus: "criticism, comment, news reporting, teaching including multiple copies for
classroom use, scholarship, research, and similar purposes."117 The purpose and character
requirement is important in view of copyright’s goal to promote creativity and encourage creation of
works. Hence, commercial use of the copyrighted work can be weighed against fair use.
The "transformative test" is generally used in reviewing the purpose and character of the usage of
the copyrighted work.118 This court must look into whether the copy of the work adds "new
expression, meaning or message" to transform it into something else.119 "Meta-use" can also occur
without necessarily transforming the copyrighted work used.120
Second, the nature of the copyrighted work is significant in deciding whether its use was fair. If the
nature of the work is more factual than creative, then fair use will be weighed in favor of the user.
Third, the amount and substantiality of the portion used is important to determine whether usage
falls under fair use. An exact reproduction of a copyrighted work, compared to a small portion of it,
can result in the conclusion that its use is not fair. There may also be cases where, though the
entirety of the copyrighted work is used without consent, its purpose determines that the usage is
still fair.121 For example, a parody using a substantial amount of copyrighted work may be permissible
as fair use as opposed to a copy of a work produced purely for economic gain. Lastly, the effect of
the use on the copyrighted work’s market is also weighed for or against the user. If this court finds
that the use had or will have a negative impact on the copyrighted work’s market, then the use is
deemed unfair.
The structure and nature of broadcasting as a business requires assigned values for each second of
broadcast or airtime. In most cases, broadcasting organizations generate revenue through sale of
time or timeslots to advertisers, which, in turn, is based on market share:122 Once a news broadcast
has been transmitted, the broadcast becomes relatively worthless to the station. In the case of the
aerial broadcasters, advertising sales generate most of the profits derived from news reports.
Advertising rates are, in turn, governed by market share. Market share is determined by the number
of people watching a show at any particular time, relative to total viewers at that time. News is by
nature time-limited, and so re-broadcasts are generally of little worth because they draw few
viewers. Newscasts compete for market share by presenting their news in an appealing format that
will capture a loyal audience. Hence, the primary reason for copyrighting newscasts by broadcasters
would seem to be to prevent competing stations from rebroadcasting current news from the station
with the best coverage of a particular news item, thus misappropriating a portion of the market
share.
Of course, in the real world there are exceptions to this perfect economic view. However, there are
also many caveats with these exceptions. A common exception is that some stations rebroadcast
the news of others. The caveat is that generally, the two stations are not competing for market
share. CNN, for example, often makes news stories available to local broadcasters. First, the local
broadcaster is often not affiliated with a network (hence its need for more comprehensive
programming), confining any possible competition to a small geographical area. Second, the local
broadcaster is not in competition with CNN. Individuals who do not have cable TV (or a satellite dish
with decoder) cannot receive CNN; therefore there is no competition. . . . Third, CNN sells the right
of rebroadcast to the local stations. Ted Turner, owner of CNN, does not have First Amendment
freedom of access argument foremost on his mind. (Else he would give everyone free cable TV so
everyone could get CNN.) He is in the business for a profit. Giving away resources does not a profit
make.123 (Emphasis supplied)
The high value afforded to limited time periods is also seen in other media. In social media site
Instagram, users are allowed to post up to only 15 seconds of video.124 In short-video sharing website
Vine,125 users are allowed a shorter period of six (6) seconds per post. The mobile application 1
Second Everyday takes it further by capturing and stitching one (1) second of video footage taken
daily over a span of a certain period.126
Whether the alleged five-second footage may be considered fair use is a matter of defense. We
emphasize that the case involves determination of probable cause at the preliminary investigation
stage. Raising the defense of fair use does not automatically mean that no infringement was
committed. The investigating prosecutor has full discretion to evaluate the facts, allegations, and
evidence during preliminary investigation. Defenses raised during preliminary investigation are
subject to further proof and evaluation before the trial court. Given the insufficiency of available
evidence, determination of whether the Angelo dela Cruz footage is subject to fair use is better left to
the trial court where the proceedings are currently pending. GMA-7’s rebroadcast of ABS-CBN’s
news footage without the latter’s consent is not an issue. The mere act of rebroadcasting without
authority from the owner of the broadcast gives rise to the probability that a crime was committed
under the Intellectual Property Code.
VII
Respondents cannot invoke the defense of good faith to argue that no probable cause exists.
Respondents argue that copyright infringement is malum in se, in that "[c]opying alone is not what is
being prohibited, but its injurious effect which consists in the lifting from the copyright owners’ film or
materials, that were the result of the latter’s creativity, work and productions and without authority,
reproduced, sold and circulated for commercial use to the detriment of the latter."127
Infringement under the Intellectual Property Code is malum prohibitum. The Intellectual Property
Code is a special law. Copyright is a statutory creation:
Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right
granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory
grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with
respect to the subjects and by the persons, and on terms and conditions specified in the statute.128
The general rule is that acts punished under a special law are malum prohibitum.129 "An act which is
declared malum prohibitum, malice or criminal intent is completely immaterial."130
In contrast, crimes mala in seconcern inherently immoral acts:
Not every criminal act, however, involves moral turpitude. It is for this reason that "as to what crime
involves moral turpitude, is for the Supreme Court to determine". In resolving the foregoing question,
the Court is guided by one of the general rules that crimes mala in se involve moral turpitude, while
crimes mala prohibita do not, the rationale of which was set forth in "Zari v. Flores," to wit:
It (moral turpitude) implies something immoral in itself, regardless of the fact that it is punishable by
law or not. It must not be merely mala prohibita, but the act itself must be inherently immoral. The
doing of the act itself, and not its prohibition by statute fixes the moral turpitude. Moral turpitude does
not, however, include such acts as are not of themselves immoral but whose illegality lies in their
being positively prohibited. (Emphasis supplied)
[These] guidelines nonetheless proved short of providing a clear cut solution, for in International Rice
Research Institute v. NLRC, the Court admitted that it cannot always be ascertained whether moral
turpitude does or does not exist by merely classifying a crime as malum in se or as malum
prohibitum. There are crimes which are mala in se and yet but rarely involve moral turpitude and
there are crimes which involve moral turpitude and are mala prohibita only. In the final analysis,
whether or not a crime involves moral turpitude is ultimately a question of fact and frequently
depends on all the circumstances surrounding the violation of the statue.131 (Emphasis in the original)
"Implicit in the concept of mala in se is that of mens rea."132 Mens reais defined as "the nonphysical
element which, combined with the act of the accused, makes up the crime charged. Most frequently
it is the criminal intent, or the guilty mind[.]"133
Crimes mala in sepre suppose that the person who did the felonious act had criminal intent to do so,
while crimes mala prohibita do not require knowledge or criminal intent:
In the case of mala in se it is necessary, to constitute a punishable offense, for the person doing the
act to have knowledge of the nature of his act and to have a criminal intent; in the case of mala
prohibita, unless such words as "knowingly" and "willfully" are contained in the statute, neither
knowledge nor criminal intent is necessary. In other words, a person morally quite innocent and with
every intention of being a law abiding citizen becomes a criminal, and liable to criminal penaltes, if
he does an act prohibited by these statutes.134 (Emphasis supplied) Hence, "[i]ntent to commit the
crime and intent to perpetrate the act must be distinguished. A person may not have consciously
intended to commit a crime; but he did intend to commit an act, and that act is, by the very nature of
things, the crime itself[.]"135 When an act is prohibited by a special law, it is considered injurious to
public welfare, and the performance of the prohibited act is the crime itself.136
Volition, or intent to commit the act, is different from criminal intent. Volition or voluntariness refers to
knowledge of the act being done. On the other hand, criminal intent — which is different from motive,
or the moving power for the commission of the crime137 — refers to the state of mind beyond
voluntariness. It is this intent that is being punished by crimes mala in se.
Unlike other jurisdictions that require intent for a criminal prosecution of copyright infringement, the
Philippines does not statutorily support good faith as a defense. Other jurisdictions provide in their
intellectual property codes or relevant laws that mens rea, whether express or implied, is an element
of criminal copyright infringement.138
In Canada, criminal offenses are categorized under three (3) kinds: "the full mens rea offence,
meaning the accused’s actual or subjective state of mind has to be proved; strict liability offences
where no mens rea has to be proved but the accused can avoid liability if he can prove he took all
reasonable steps to avoid the particular event; [and] absolute liability offences where Parliament has
made it clear that guilt follows proof of the prescribed act only."139 Because of the use of the word
"knowingly" in Canada’s Copyright Act, it has been held that copyright infringement is a full mens rea
offense.140
In the United States, willful intent is required for criminal copyright infringement.141 Before the
passage of the No Electronic Theft Act, "civil copyright infringements were violations of criminal
copyright laws only if a defendant willfully infringed a copyright ‘for purposes of commercial
advantage or private financial gain.’"142 However, the No Electronic Theft Act now allows criminal
copyright infringement without the requirement of commercial gain. The infringing act may or may
not be for profit.143
There is a difference, however, between the required liability in civil copyright infringement and that
in criminal copyright infringement in the United States. Civil copyright infringement does not require
culpability and employs a strict liability regime144 where "lack of intention to infringe is not a defense
to an action for infringement."145
In the Philippines, the Intellectual Property Code, as amended, provides for the prosecution of
criminal actions for the following violations of intellectual property rights: Repetition of Infringement of
Patent (Section 84); Utility Model (Section 108); Industrial Design (Section 119); Trademark
Infringement (Section 155 in relation to Section 170); Unfair Competition (Section 168 in relation to
Section 170); False Designations of Origin, False Description or Representation (Section 169.1 in
relation to Section 170); infringement of copyright, moral rights, performers’ rights, producers’ rights,
and broadcasting rights (Section 177, 193, 203, 208 and 211 in relation to Section 217); and other
violations of intellectual property rights as may be defined by law.
The Intellectual Property Code requires strict liability for copyright infringement whether for a civil
action or a criminal prosecution; it does not require mens rea or culpa:146
SECTION 216. Remedies for Infringement. —
216.1. Any person infringing a right protected under this law shall be liable:
a. To an injunction restraining such infringement. The court may also order the
defendant to desist from an infringement, among others, to prevent the entry into the
channels of commerce of imported goods that involve an infringement, immediately
after customs clearance of such goods.
b. Pay to the copyright proprietor or his assigns or heirs such actual damages,
including legal costs and other expenses, as he may have incurred due to the
infringement as well as the profits the infringer may have made due to such
infringement, and in proving profits the plaintiff shall be required to prove sales only
and the defendant shall be required to prove every element of cost which he claims,
or, in lieu of actual damages and profits, such damages which to the court shall
appear to be just and shall not be regarded as penalty.
c. Deliver under oath, for impounding during the pendency of the action, upon such
terms and conditions as the court may prescribe, sales invoices and other
documents evidencing sales, all articles and their packaging alleged to infringe a
copyright and implements for making them.
d. Deliver under oath for destruction without any compensation all infringing copies or
devices, as well as all plates, molds, or other means for making such infringing
copies as the court may order.
e. Such other terms and conditions, including the payment of moral and exemplary
damages, which the court may deem proper, wise and equitable and the destruction
of infringing copies of the work even in the event of acquittal in a criminal case.
216.2. In an infringement action, the court shall also have the power to order the seizure and
impounding of any article which may serve as evidence in the court proceedings. (Sec. 28,
P.D. No. 49a)
SECTION 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of
Part IV of this Actor aiding or abetting such infringement shall be guilty of a crime punishable by:
a. Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty
thousand pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the
first offense.
b. Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging
from One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos
(₱500,000) for the second offense.
c. Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging
from Five hundred thousand pesos (₱500,000) to One million five hundred thousand
pesos (₱1,500,000) for the third and subsequent offenses.
d. In all cases, subsidiary imprisonment in cases of insolvency.
217.2. In determining the number of years of imprisonment and the amount of fine, the court
shall consider the value of the infringing materials that the defendant has produced or
manufactured and the damage that the copyright owner has suffered by reason of the
infringement.
217.3. Any person who at the time when copyright subsists in a work has in his possession
an article which he knows, or ought to know, to be an infringing copy of the work for the
purpose of: a. Selling, letting for hire, or by way of trade offering or exposing for sale, or hire,
the article;
b. Distributing the article for purpose of trade, or for any other purpose to an extent
that will prejudice the rights of the copyright owner in the work; or
c. Trade exhibit of the article in public, shall be guilty of an offense and shall be liable
on conviction to imprisonment and fine as above mentioned. (Sec. 29, P.D. No. 49a)
(Emphasis supplied)
The law is clear. Inasmuch as there is wisdom in prioritizing the flow and exchange of ideas as
opposed to rewarding the creator, it is the plain reading of the law in conjunction with the actions of
the legislature to which we defer. We have continuously "recognized the power of the legislature . . .
to forbid certain acts in a limited class of cases and to make their commission criminal without regard
to the intent of the doer. Such legislative enactments are based on the experience that repressive
measures which depend for their efficiency upon proof of the dealer’s knowledge or of his intent are
of little use and rarely accomplish their purposes."147
Respondents argue that live broadcast of news requires a different treatment in terms of good faith,
intent, and knowledge to commit infringement. To argue this point, they rely on the differences of the
media used in Habana et al. v. Robles, Columbia Pictures v. Court of Appeals, and this case:
Petitioner ABS-CBN argues that lack of notice that the Angelo dela Cruz was under embargo is not a
defense in copyright infringement and cites the case of Columbia Pictures vs. Court of Appeals and
Habana et al. vs. Robles(310 SCRA 511). However, these cases refer to film and literary work where
obviously there is "copying" from an existing material so that the copier knew that he is copying from
an existing material not owned by him. But, how could respondents know that what they are "copying
was not [theirs]" when they were not copying but merely receiving live video feed from Reuters and
CNN which they aired? What they knew and what they aired was the Reuters live video feed and the
CNN feed which GMA-7 is authorized to carry in its news broadcast, it being a subscriber of these
companies[.]
It is apt to stress that the subject of the alleged copyright infringement is not a film or literary work
but live broadcast of news footage. In a film or literary work, the infringer is confronted face to face
with the material he is allegedly copying and therefore knows, or is presumed to know, that what he
is copying is owned by another. Upon the other hand, in live broadcast, the alleged infringer is not
confronted with the fact that the material he airs or re-broadcasts is owned by another, and
therefore, he cannot be charged of knowledge of ownership of the material by another. This specially
obtains in the Angelo dela Cruz news footage which GMA-7 received from Reuters and CNN.
Reuters and CNN were beaming live videos from the coverage which GMA-7 received as a
subscriber and, in the exercise of its rights as a subscriber, GMA-7 picked up the live video and
simultaneously re-broadcast it. In simultaneously broadcasting the live video footage of Reuters,
GMA-7 did not copy the video footage of petitioner ABS-CBN[.]148 (Emphasis in the original)
Respondents’ arguments must fail.
Respondents are involved and experienced in the broadcasting business. They knew that there
would be consequences in carrying ABS-CBN’s footage in their broadcast. That is why GMA-7
allegedly cut the feed from Reuters upon seeing ABS-CBN’s ogo and reporter. To admit a different
treatment for broadcasts would mean abandonment of a broadcasting organization’s minimum
rights, including copyright on the broadcast material and the right against unauthorized rebroadcast
of copyrighted material. The nature of broadcast technology is precisely why related or neighboring
rights were created and developed. Carving out an exception for live broadcasts would go against
our commitments under relevant international treaties and agreements, which provide for the same
minimum rights.149
Contrary to respondents’ assertion, this court in Habana,150 reiterating the ruling in Columbia
Pictures,151 ruled that lack of knowledge of infringement is not a valid defense. Habana and Columbia
Pictures may have different factual scenarios from this case, but their rulings on copyright
infringement are analogous. In Habana, petitioners were the authors and copyright owners of
English textbooks and workbooks. The case was anchored on the protection of literary and artistic
creations such as books. In Columbia Pictures, video tapes of copyrighted films were the subject of
the copyright infringement suit.
In Habana, knowledge of the infringement is presumed when the infringer commits the prohibited
act:
The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its
gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a
private domain owned and occupied by the owner of the copyright, and, therefore, protected by law,
and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in
the doing by any person, without the consent of the owner of the copyright, of anything the sole right
to do which is conferred by statute on the owner of the copyright.
....
A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such
cases, did not know whether or not he was infringing any copyright; he at least knew that what he
was copying was not his, and he copied at his peril.
....
In cases of infringement, copying alone is not what is prohibited. The copying must produce an
"injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners’ book
materials that were the result of the latter’s research work and compilation and misrepresented them
as her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as
her source.152 (Emphasis supplied)
Habana and Columbia Pictures did not require knowledge of the infringement to constitute a
violation of the copyright. One does not need to know that he or she is copying a work without
consent to violate copyright law. Notice of fact of the embargo from Reuters or CNN is not material
to find probable cause that respondents committed infringement. Knowledge of infringement is only
material when the person is charged of aiding and abetting a copyright infringement under Section
217 of the Intellectual Property Code.153
We look at the purpose of copyright in relation to criminal prosecutions requiring willfulness: Most
importantly, in defining the contours of what it means to willfully infringe copyright for purposes of
criminal liability, the courts should remember the ultimate aim of copyright. Copyright is not primarily
about providing the strongest possible protection for copyright owners so that they have the highest
possible incentive to create more works. The control given to copyright owners is only a means to an
end: the promotion of knowledge and learning. Achieving that underlying goal of copyright law also
requires access to copyrighted works and it requires permitting certain kinds of uses of copyrighted
works without the permission of the copyright owner. While a particular defendant may appear to be
deserving of criminal sanctions, the standard for determining willfulness should be set with reference
to the larger goals of copyright embodied in the Constitution and the history of copyright in this
country.154
In addition, "[t]he essence of intellectual piracy should be essayed in conceptual terms in order to
underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a
trespass on a private domain owned and occupied by the owner of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a synonymous term in this
connection, consists in the doing by any person, without the consent of the owner of the copyright, of
anything the sole right to do which is conferred by statute on the owner of the copyright."155
Intellectual property rights, such as copyright and the neighboring right against rebroadcasting,
establish an artificial and limited monopoly to reward creativity. Without these legally enforceable
rights, creators will have extreme difficulty recovering their costs and capturing the surplus or profit
of their works as reflected in their markets. This, in turn, is based on the theory that the possibility of
gain due to creative work creates an incentive which may improve efficiency or simply enhance
consumer welfare or utility. More creativity redounds to the public good.
These, however, depend on the certainty of enforcement. Creativity, by its very nature, is vulnerable
to the free rider problem. It is easily replicated despite the costs to and efforts of the original creator.
The more useful the creation is in the market, the greater the propensity that it will be copied. The
most creative and inventive individuals are usually those who are unable to recover on their
creations.
Arguments against strict liability presuppose that the Philippines has a social, historical, and
economic climate similar to those of Western jurisdictions. As it stands, there is a current need to
strengthen intellectual property protection.
Thus, unless clearly provided in the law, offenses involving infringement of copyright protections
should be considered malum prohibitum. It is the act of infringement, not the intent, which causes
the damage. To require or assume the need to prove intent defeats the purpose of intellectual
property protection.
Nevertheless, proof beyond reasonable doubt is still the standard for criminal prosecutions under the
Intellectual Property Code.
VIII
Respondents argue that GMA-7’s officers and employees cannot be held liable for infringement
under the Intellectual Property Code since it does not expressly provide direct liability of the
corporate officers. They explain that "(i) a corporation may be charged and prosecuted for a crime
where the penalty is fine or both imprisonment and fine, and if found guilty, may be fined; or (ii) a
corporation may commit a crime but if the statute prescribes the penalty therefore to be suffered by
the corporate officers, directors or employees or other persons, the latter shall be responsible for the
offense."156
Section 217 of the Intellectual Property Code states that "any person" may be found guilty of
infringement. It also imposes the penalty of both imprisonment and fine:
Section 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions of
Part IV of this Act or aiding or abetting such infringement shall be guilty of a crime punishable by:
(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand
pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the first offense.
(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from
One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos (₱500,000)
for the second offense.
(c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from
five hundred thousand pesos (₱500,000) to One million five hundred thousand pesos
(₱1,500,000) for the third and subsequent offenses.
(d) In all cases, subsidiary imprisonment in cases of insolvency. (Emphasis supplied)
Corporations have separate and distinct personalities from their officers or directors.157 This
court has ruled that corporate officers and/or agents may be held individually liable for a
crime committed under the Intellectual Property Code:158
Petitioners, being corporate officers and/or directors, through whose act, default or omission the
corporation commits a crime, may themselves be individually held answerable for the crime. . . . The
existence of the corporate entity does not shield from prosecution the corporate agent who
knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners cannot hide
behind the cloak of the separate corporate personality of the corporation to escape criminal liability.
A corporate officer cannot protect himself behind a corporation where he is the actual, present and
efficient actor.159
However, the criminal liability of a corporation’s officers or employees stems from their active
participation in the commission of the wrongful act:
The principle applies whether or not the crime requires the consciousness of wrongdoing. It applies
to those corporate agents who themselves commit the crime and to those, who, by virtue of their
managerial positions or other similar relation to the corporation, could be deemed responsible for its
commission, if by virtue of their relationship to the corporation, they had the power to prevent the act.
Moreover, all parties active in promoting a crime, whether agents or not, are principals. Whether
such officers or employees are benefited by their delictual acts is not a touchstone of their criminal
liability. Benefit is not an operative fact.160 (Emphasis supplied) An accused’s participation in criminal
acts involving violations of intellectual property rights is the subject of allegation and proof. The
showing that the accused did the acts or contributed in a meaningful way in the commission of the
infringements is certainly different from the argument of lack of intent or good faith. Active
participation requires a showing of overt physical acts or intention to commit such acts. Intent or
good faith, on the other hand, are inferences from acts proven to have been or not been committed.
We find that the Department of Justice committed grave abuse of discretion when it resolved to file
the Information against respondents despite lack of proof of their actual participation in the alleged
crime.
Ordering the inclusion of respondents Gozon, GMA-7 President; Duavit, Jr., Executive VicePresident; Flores, Vice-President for News and Public Affairs; and Soho, Director for News, as
respondents, Secretary Agra overturned the City Prosecutor’s finding that only respondents Dela
Peña-Reyes and Manalastas are responsible for the crime charged due to their duties.161 The Agra
Resolution reads:
Thus, from the very nature of the offense and the penalty involved, it is necessary that GMA-7’s
directors, officers, employees or other officers thereof responsible for the offense shall be charged
and penalized for violation of the Sections 177 and 211 of Republic Act No. 8293. In their complaint
for libel, respondents Felipe L Gozon, Gilberto R. Duavit, Jr., Marissa L. Flores, Jessica A.Soho,
Grace Dela Pena-Reyes, John Oliver T. Manalastas felt they were aggrieved because they were "in
charge of the management, operations and production of news and public affairs programs of the
network" (GMA-7). This is clearly an admission on respondents’ part. Of course, respondents may
argue they have no intention to infringe the copyright of ABS-CBN; that they acted in good faith; and
that they did not directly cause the airing of the subject footage, but again this is preliminary
investigation and what is required is simply probable cause. Besides, these contentions can best be
addressed in the course of trial.162 (Citation omitted)
In contrast, the Office of the City Prosecutor, in the Resolution dated December 3, 2004, found that
respondents Gozon, Duavit, Jr., Flores, and Soho did not have active participation in the commission
of the crime charged:
This Office, however, does not subscribe to the view that respondents Atty. Felipe Gozon, Gilberto
Duavit, Marissa Flores and Jessica Soho should be held liable for the said offense. Complainant
failed to present clear and convincing evidence that the said respondents conspired with Reyes and
Manalastas. No evidence was adduced to prove that these respondents had an active participation
in the actual commission of the copyright infringement or they exercised their moral ascendancy
over Reyes and Manalastas in airing the said footage. It must be stressed that, conspiracy must be
established by positive and conclusive evidence. It must be shown to exist as clearly and
convincingly as the commission of the offense itself.163 (Emphasis supplied, citations omitted)
The City Prosecutor found respondents Dela Peña-Reyes and Manalastas liable due to the nature of
their work and responsibilities. He found that:
[t]his Office however finds respondents Grace Dela Peña-Reyes and John Oliver T. Manalastas
liable for copyright infringement penalized under Republic Act No. 8293. It is undisputed that
complainant ABSCBN holds the exclusive ownership and copyright over the "Angelo [d]ela Cruz
news footage". Hence, any airing and re-broadcast of the said footage without any consent and
authority from ABS-CBN will be held as an infringement and violation of the intellectual property
rights of the latter. Respondents Grace Dela Peña-Reyes as the Head of the News Operation and
John Oliver T. Manalastas as the Program Manager cannot escape liability since the news control
room was under their direct control and supervision. Clearly, they must have been aware that the
said footage coming from Reuters or CNN has a "No Access Philippines" advisory or embargo thus
cannot be re-broadcast. We find no merit to the defense of ignorance interposed by the respondents.
It is simply contrary to human experience and logic that experienced employees of an established
broadcasting network would be remiss in their duty in ascertaining if the said footage has an
embargo.164 (Emphasis supplied)
We agree with the findings as to respondents Dela Peña-Reyes and Manalastas. Both respondents
committed acts that promoted infringement of ABS-CBN’s footage. We note that embargoes are
common occurrences in and between news agencies and/or broadcast organizations.165 Under its
Operations Guide, Reuters has two (2) types of embargoes: transmission embargo and publication
embargo.166 Under ABS-CBN’s service contract with Reuters, Reuters will embargo any content
contributed by ABS-CBN from other broadcast subscribers within the same geographical location:
4a. Contributed Content
You agree to supply us at our request with news and sports news stories broadcast on the Client
Service of up to three (3) minutes each for use in our Services on a non-exclusive basis and at a
cost of US$300.00 (Three Hundred United States Dollars) per story. In respect of such items we
agree to embargo them against use by other broadcast subscribers in the Territory and confirm we
will observe all other conditions of usage regarding Contributed Content, as specified in Section 2.5
of the Reuters Business Principles for Television Services. For the purposes of clarification, any
geographical restriction imposed by you on your use of Contributed Content will not prevent us or
our clients from including such Contributed Content in online transmission services including the
internet. We acknowledge Contributed Content is your copyright and we will not acquire any
intellectual property rights in the Contributed Content.167 (Emphasis supplied)
Respondents Dela Peña-Reyes and Manalastas merely denied receiving the advisory sent by
Reuters to its clients, including GMA-7. As in the records, the advisory reads:
ADVISORY - - +++LIVE COVER PLANS+++
PHILIPPINES: HOSTAGE RETURN
**ATTENTION ALL CLIENTS**
PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER
PLANNED FOR THURSDAY, JULY 22:
....
SOURCE: ABS-CBN
TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES.168
There is probable cause that respondents Dela Peña-Reyes and Manalastas directly committed
copyright infringement of ABS-CBN’s news footage to warrant piercing of the corporate veil. They
are responsible in airing the embargoed Angelo dela Cruz footage. They could have prevented the
act of infringement had they been diligent in their functions as Head of News Operations and
Program Manager.
Secretary Agra, however, committed grave abuse of discretion when he ordered the filing of the
Information against all respondents despite the erroneous piercing of the corporate veil.
Respondents Gozon, Duavit, Jr., Flores, and Soho cannot be held liable for the criminal liability of
the corporation.
Mere membership in the Board or being President per se does not mean knowledge, approval, and
participation in the act alleged as criminal. There must be a showing of active participation, not
simply a constructive one.
Under principles of criminal law, the principals of a crime are those "who take a direct part in the
execution of the act; [t]hose who directly force or induce others to commit it; [or] [t]hose who
cooperate in the commission of the offense by another act without which it would not have been
accomplished."169 There is conspiracy "when two or more persons come to an agreement concerning
the commission of a felony and decide to commit it":170
Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of
conspiracy must be proven beyond reasonable doubt. While conspiracy need not be established by
direct evidence, for it may be inferred from the conduct of the accused before, during and after the
commission of the crime, all taken together, however, the evidence must be strong enough to show
the community of criminal design. For conspiracy to exist, it is essential that there must be a
conscious design to commit an offense. Conspiracy is the product of intentionality on the part of the
cohorts.
1âwphi1
It is necessary that a conspirator should have performed some overt act as a direct or indirect
contribution to the execution of the crime committed. The overt act may consist of active participation
in the actual commission of the crime itself, or it may consist of moral assistance to his coconspirators by being present at the commission of the crime or by exerting moral ascendancy over
the other co-conspirators[.]171 (Emphasis supplied, citations omitted)
In sum, the trial court erred in failing to resume the proceedings after the designated period. The
Court of Appeals erred when it held that Secretary Agra committed errors of jurisdiction despite its
own pronouncement that ABS-CBN is the owner of the copyright on the news footage. News should
be differentiated from expression of the news, particularly when the issue involves rebroadcast of
news footage. The Court of Appeals also erroneously held that good faith, as. well as lack of
knowledge of infringement, is a defense against criminal prosecution for copyright and neighboring
rights infringement. In its current form, the Intellectual Property Code is malum prohibitum and
prescribes a strict liability for copyright infringement. Good faith, lack of knowledge of the copyright,
or lack of intent to infringe is not a defense against copyright infringement. Copyright, however, is
subject to the rules of fair. use and will be judged on a case-to-case basis. Finding probable cause
includes a determination of the defendant's active participation, particularly when the corporate veil
is pierced in cases involving a corporation's criminal liability.
WHEREFORE, the Petition is partially GRANTED. The Department of Justice Resolution dated June
29, 2010 ordering the filing of the Information is hereby REINSTATED as to respondents Grace Dela
Pena-Reyes and John Oliver T. Manalastas. Branch 93 of the Regional Trial Court of Quezon City is
directed to continue with the proceedings in Criminal Case No. Q-04-131533.
SO ORDERED.
MARVIC M.V.F. LEONEN
G.R. L-45101 November 28, 1986
ROSARIO C. MAGUAN (formerly ROSARIO C. TAN), petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SUSANA LUCHAN, respondents.
Ambrosio Padilla Law Offices for petitioner.
PARAS, J.:p
Submitted on December 9, 1977 for Our decision is this petition for review on certiorari of the
two Resolutions of the Court of Appeals, the first dated July 6, 1976, setting aside its
Decision of February 16, 1976 in CA-G.R. No. SP-04706, titled "SUSANA LUCHAN v. Hon.
HONRADO, et al." wherein it ruled for the dismissal of the petition for lack of merit and at the
same time nullifying the writ of preliminary injunction it had previously issued; and the
second, dated November 4, 1976, denying the motion for reconsideration of the first
resolution above-mentioned.
Petitioner is doing business under the firm name and style of SWAN MANUFACTURING"
while private respondent is likewise doing business under the firm name and style of
"SUSANA LUCHAN POWDER PUFF MANUFACTURING."
It is undisputed that petitioner is a patent holder of powder puff namely:
1. UM-423 (extended and/or renewed under Extension No. UM109 for a period of 5 years from October 6, 1971)
2. UM-450 (extended and/or renewed under Extension No. UM110
for a period of 5 years from January 26, 1972)
3. UM 1184, for a period of 5years fromApril 5, 1974.(Petition,
Rollo, pp. 6-7).
In a letter dated July 10, 1974 (Annex "D", Rollo, p. 86), petitioner informed private
respondent that the powder puffs the latter is manufacturing and selling to various
enterprises particularly those in the cosmetics industry, resemble Identical or substantially
Identical powder puffs of which the former is a patent holder under Registration Certification
Nos. Extension UM-109, Extension UM-110 and Utility Model No. 1184; petitioner explained
such production and sale constitute infringement of said patents and therefore its immediate
discontinuance is demanded, otherwise it will be compelled to take judicial action. (Rollo, pp.
7-8).
Private respondent replied stating that her products are different and countered that
petitioner's patents are void because the utility models applied for were not new and
patentable and the person to whom the patents were issued was not the true and actual
author nor were her rights derived from such author. (Taken from allegations in the Answer,
par. 4, Rollo, p. 93). And on July 25, 1974, private respondent assailed the validity of the
patents involved and filed with the Philippine Patent Office petitions for cancellation of (1)
Utility Model Letter Patent Extension No. UM-109 (Inter Partes Case No. 838, Susana Luchan
v. Rosario C. Tan), (2) Utility Model Letters Patent No. UM-1184 (Inter Partes Case No. 839,
Susana Luchan v. Rosario C. Tan), (3) Utility Model Letters Patent Extension No. UM-110
(Inter Partes Case No. 840, Susana Luchan v. Rosario C. Tan. (Taken from allegations in the
Answer, par. 10, Rollo, pp. 94-95).
In view thereof, petitioner, on August 24, 1974, filed a complaint for damages with injunction
and preliminary injunction against private respondent with the then Court of First Instance of
Rizal, Pasig Branch, docketed as Civil Case No. 19908, for infringing the aforesaid letters
patent, and prayed, among others, that a writ of preliminary injunction be immediately issued
(Complaint, Rollo, p. 90).
In her answer, private respondent alleged that the products she is manufacturing and offering
for sale are not Identical, or even only substantially Identical to the products covered by
petitioner's patents and, by way of affirmative defenses, further alleged that petitioner's
patents in question are void on the following grounds:
(1) at the time of filing of application for the patents involved, the
utility models applied for were not new and patentable under
Sec. 55 of R.A. 165, as amended by R.A. 864; and
(2) the person to whom the patents were issued was not the true
and actual author of the utility models applied for, and neither
did she derive her rights from any true and actual author of
these utility models.
for the following reasons:
(a) since years prior to the filing of applications for the patents
involved, powder puffs of the kind applied for were then already
existing and publicly being sold in the market; both in the
Philippines and abroad; and
(b) applicant's claims in her applications, of "construction" or
process of manufacturing the utility models applied for, with
respect to UM-423 and UM-450, were but a complicated and
impractical version of an old, simple one which has been well
known to the cosmetics industry since years previous to her
filing of applications, and which belonged to no one except to
the general public; and with respect to UM1184; her claim in her
application of a unitary powder puff, was but an limitation of a
product well known to the cosmetics industry since years
previous to her firing of application, and which belonged to no
one except to the general public; (Answer, Rollo, pp. 93-94).
On September 18, 1974, the trial court issued an Order (Annex "K", Rollo, p. 125) granting the
preliminary injunction prayed for by petitioner. Consequently, the corresponding writ was
subsequently issued (Annex "K-1", Rollo, p. 131) enjoining the herein private respondent
(then defendant) and all other persons employed by her, her agents, servants and employees
from directly or indirectly manufacturing, making or causing to be made, selling or causing to
be sold, or using or causing to be used in accordance with, or embodying the utility models
of the Philippine Patent Office Utility Model Letters Patent Nos. 423 (Extension No. UM-109),
No. 450 (Extension No. UM-110), and Utility Model No. 1184 or from infringement upon or
violating said letters patent in any way whatsoever (Annex " K-1 ", Rollo, p. 131).
Private respondent questioned the propriety of the trial court's issuance of the Writ of
Preliminary Injunction arguing that since there is still a pending cancellation proceedings
before the Philippine Patent Office concerning petitioner's patents, such cannot be the basis
for preliminary injunction (Motion for Reconsideration, Rollo, p. 132).
In an Order dated September 11, 1975, the trial court denied private respondent's motion for
reconsideration (Annex "N", Rollo, p. 142).
In challenging these Orders private respondent filed a petition for certiorari with the
respondent court on September 29, 1975 (Annex "D", Rollo, pp. 148-171) reiterating among
other things the invalidity of petitioner's patents and prayed that the trial court be restrained
from enforcing or continuing to enforce the following:
(1) Order dated September 18, 1974, granting the preliminary
injunction;
(2) Writ of preliminary injunction dated September 18, 1974; and
(3) Order dated September 11, 1974 denying petitioner's motion
petition for reconsideration.
On October 15, 1975, the Writ of Preliminary Injunction was issued by the respondent Court
of Appeals as follows:
NOW, THEREFORE, you, respondents, and/or any person/persons acting on
your stead, are hereby ENJOINED to RESTRAIN from enforcing or continuing
to enforce, the proceedings complained of in the petition to wit: 1) Order dated
September 18, 1974, granting the preliminary injunction; 2) Writ of Preliminary
Injunction dated September 18, 1974; and Order dated September 11, 1975,
denying petitioner's motion for reconsideration, all issued in connection with
Civil Case No. 19908, UNTIL FURTHER ORDERS FROM THIS COURT. (Annex
"P", Rollo, p. 1.73)
On February 16, 1976, respondent court promulgated a decision the dispositive portion of
which reads:
WHEREFORE, finding no merit in the herein petition, the same is hereby
dismissed and the preliminary injunction previously issued by this Court is
hereby set aside, with costs.
SO ORDERED. (CA Decision, Rollo, p. 189).
ln said decision respondent court stated that in disposing of the petition it tackled only the
issue of whether the court a quo acted with grave abuse of discretion in issuing the
challenged orders. It made clear the question of whether the patents have been infringed or
not was not determined considering the court a quo has yet to decide the case on the merits
(Ibid., p. 186).
Feeling aggrieved, private respondent moved to reconsider the afore-mentioned Decision
based on the following grounds:
I
THAT THIS HONORABLE COURT ERRED IN NOT
APPRECIATING THE EXISTENCE OF A FAIR QUESTION OF
INVALIDITY OF PRIVATE RESPONDENT'S PATENTS.
II
THAT THIS HONORABLE COURT ERRED IN NOT REJECTING
THE THEORY OF RESPONDENT JUDGE THAT HE HAS NO
JURISDICTION TO INVALIDATE THE PATENTS UPON GROUND
OF LACK OF NOVELTY OF THE PRODUCTS PATENTED. (Motion
for Reconsideration, Rollo, p. 190).
Reviewing on reconsideration, respondent court gave weight to private respondent's
allegation that the latter's products are not identical or even only substantially identical to the
products covered by petitioner's patents. Said court noticed that contrary to the lower courts
position that the court a quo had no jurisdiction to determine the question of invalidity of the
patents, Section 45 and 46 of the Patent Law allow the court to make a finding on the validity
or invalidity of patents and in the event there exists a fair question of its invalidity, the
situation calls for a denial of the writ of preliminary injunction pending the evaluation of the
evidence presented (Rollo, pp. 218-226). Thus, finding the lower court's position to have been
opposed to Patent Law, respondent court considered it a grave abuse of discretion when the
court a quo issued the writ being questioned without looking into the defenses alleged by
herein private respondent. Further, it considered the remedy of appeal, under the
circumstances, to be inadequate.
Thus, on July 6, 1976, respondent court made a complete turnabout from its original decision
and promulgated a Resolution, the dispositive portion of which reads:
WHEREFORE, our decision is hereby set aside. The writ of certiorari is ordered
issued. Accordingly, the challenged orders, Exhibit H and H-1 and the order
denying the motion for reconsideration (Annex "K", Petition), are hereby set
aside. The writ of preliminary injunction previously ordered by this Court and
ordered lifted by the Decision now being set aside is hereby reinstated and
made permanent. Without pronouncement as to costs.
SO ORDERED. (CA Resolution, Rollo, p. 226).
In a Resolution dated November 4, 1976, respondent court, not persuaded by the grounds
embodied in the motion for reconsideration filed by herein petitioner (Annex "V ", Rollo, p.
227), denied the same for lack of merit, thereby maintaining the same stand it took in its July
6, 1976 Resolution (Rollo, p. 281). Hence, this petition.
On December 3, 1976, without giving due course to the petition, this Court required
respondent to file her Comment (Rollo, p. 290) which was filed on December 16, 1976 (Rollo,
pp. 291-316). Thereafter, petitioner filed her Reply (Rollo, p. 323) and on May 30, 1977, the
petition was given due course (Rollo, p. 345). Petitioner filed her brief on July 14, 1977 (Rollo,
p. 351) while private respondent filed her brief on August 25, 1977 (Rollo, p. 359). Thereafter,
petitioner having failed to file reply brief, the Court resolved to declare the case submitted for
decision on December 9, 1977 (Rollo, p. 359).
The assignment of errors raised by the petitioner in this case (Rollo, pp. 15-16) may be
reduced to three main issues:
(1) Whether or not in an action for infringement the Court a
quo had jurisdiction to determine the invalidity of the patents at
issue which invalidity was still pending consideration in the
patent office.
(2) Whether or not the Court a quo committed grave abuse of
discretion in the issuance of a writ of preliminary injunction.
(3) Whether or not certiorari is the proper remedy.
The first issue has been laid to rest in a number of cases where the Court ruled that "When a
patent is sought to be enforced, the questions of invention, novelty or prior use, and each of
them, are open to judicial examination." (Vargas v. F.M. Yaptico & Co. 40 Phil. 199 [1919];
Vargas v. Chua, 57 Phil. 790-791 [1933]; Frank and Gohn v. Kosuyana 59 Phil. 207 [1933]).
Under the present Patent Law, there is even less reason to doubt that the trial court has
jurisdiction to declare the patents in question invalid. A patentee shall have the exclusive
right to make, use and sell the patented article or product and the making, using, or selling by
any person without the authorization of the patentee constitutes infringement of the patent
(Sec. 37, R.A. 165). Any patentee whose rights have been infringed upon may bring an action
before the proper CFI now (RTC) and to secure an injunction for the protection of his rights
(Sec. 42, R.A. 165). Defenses in an action for infringement are provided for in Section 45 of
the same law which in fact were availed of by private respondent in this case. Then, as
correctly stated by respondent Court of Appeals, this conclusion is reinforced by Sec. 46 of
the same law which provides that if the Court shall find the patent or any claim thereof
invalid, the Director shall on certification of the final judgment ... issue an order cancelling
the patent or the claims found invalid and shall publish a notice thereof in the Official
Gazette." Upon such certification, it is ministerial on the part of the patent office to execute
the judgment. (Rollo, pp. 221-222).
II.
The burden of proof to substantiate a charge of infringement is with the plaintiff. But where
the plaintiff introduces the patent in evidence, and the same is in due form, there is created
a prima facie presumption of its correctness and validity. The decision of the Commissioner
(now Director) of Patent in granting the patent is presumed to be correct. The burden of going
forward with the evidence (burden of evidence) then shifts to the defendant to overcome by
competent evidence this legal presumption.
The question then in the instant case is whether or not the evidence introduced by private
respondent herein is sufficient to overcome said presumption.
After a careful review of the evidence consisting of 64 exhibits and oral testimonies of five
witnesses presented by private respondents before the Court of First Instance before the
Order of preliminary injunction was issued as well as those presented by the petitioner,
respondent Court of Appeals was satisfied that there is a prima facie showing of a fair
question of invalidity of petitioner's patents on the ground of lack of novelty. As pointed out
by said appellate court said evidence appeared not to have been considered at all by the
court a quo for alleged lack of jurisdiction, on the mistaken notion that such question in
within the exclusive jurisdiction of the patent office.
It has been repeatedly held that an invention must possess the essential elements of novelty ,
originality and precedence and for the patentee to be entitled to protection, the invention
must be new to the world. Accordingly, a single instance of public use of the invention by a
patentee for more than two years (now for more than one year only under Sec. 9 of the Patent
Law) before the date of his application for his patent, will be fatal to, the validity of the patent
when issued. (Frank, et al. v. Kosuyama Vargas v. F.M. Yaptico & Co. and Vargas v. Chua, et
al., supra).
The law provides:
SEC. 9. Invention not considered new or patentable. — An invention shall not
be considered new or capable of being patented if it was known or used by
others in the Philippines before the invention thereof by the inventor named in
an application for patent for the invention; or if it was patented or described in
any printed publication in the Philippines or any foreign country more than one
year before the application for a patent therefor; or if it had been in public use
or on sale in the Philippines for more than one year before the application for a
patent therefor; or if it is the subject matter of a validity issued patent in the
Philippines granted on an application filed before the filing of the application
for patent therefor.
Thus, more specifically, under American Law from which our Patent Law was derived (Vargas
v. F.M. Yaptico & Co. supra) it is generally held that in patent cases a preliminary injunction
will not issue for patent infringement unless the validity of the patent is clear and beyond
question. The issuance of letters patent, standing alone, is not sufficient to support such
drastic relief (8 Deller's Walker on Patents p. 406). In cases of infringement of patent no
preliminary injunction will be granted unless the patent is valid and infringed beyond
question and the record conclusively proves the defense is sham. (Ibid., p. 402)
In the same manner, under our jurisprudence, as a general rule because of the injurious
consequences a writ of injunction may bring, the right to the relief demanded must be clear
and unmistakable. (Sangki v. Comelec, 21 SCRA 1392; December 26, 1967) and the
dissolution of the writ is proper where applicant has doubtful title to the disputed property.
(Ramos v. C.A., 95 SCRA 359).
III.
It will be noted that the validity of petitioner's patents is in question for want of novelty.
Private respondent contends that powder puffs Identical in appearance with that covered by
petitioner's patents existed and were publicly known and used as early as 1963 long before
petitioner was issued the patents in question. (List of Exhibits, Rollo, pp. 194-199). As
correctly observed by respondent Court of Appeals, "since sufficient proofs have been
introduced in evidence showing a fair question of the invalidity of the patents issued for such
models, it is but right that the evidence be looked into, evaluated and determined on the
merits so that the matter of whether the patents issued were in fact valid or not may be
resolved." (Rollo, pp. 286-287).
All these notwithstanding, the trial court nonetheless issued the writ of preliminary injunction
which under the circumstances should be denied.
For failure to determine first the validity of the patents before aforesaid issuance of the writ,
the trial court failed to satisfy the two requisites necessary if an injunction is to issue,
namely: the existence of the right to be protected and the violation of said right. (Buayan
Cattle Co., Inc. v. Quintillan, 128 SCRA 276).
Under the above established principles, it appears obvious that the trial court committed a
grave abuse of discretion which makes certiorari the appropriate remedy.
As found by respondent Court of Appeals, the injunctive order of the trial court is of so
general a tenor that petitioner may be totally barred from the sale of any kind of powder puff.
Under the circumstances, respondent appellate court is of the view that ordinary appeal is
obviously inadequate. (Rollo, p. 288). A parallel was drawn from a decision of the Supreme
Court in the case of Sanchez v. Hon. Court of Appeals, 69 SCRA 328 [1976] where the First
Division of the Supreme Court ruled that "The prerogative writ of certiorari may be applied for
by proper petition notwithstanding the existence of the regular remedy of an appeal in due
cause when among other reasons, the broader interests of justice so require or an ordinary
appeal is not an adequate remedy."
Private respondent maintains the position that the resolutions sought to be appealed from
had long become final and executory for failure of Hon. Reynaldo P. Honrado, the trial court
judge, to appeal by certiorari from the resolutions of respondent Court of Appeals. (Rollo, pp.
291-292).
Such contention is untenable.
There is no dispute that petitioner has seasonably petitioned. On the other hand, it is
elementary that the trial judge is a mere nominal party as clearly provided in Section 5, Rule
65 of the Revised Rules of Court where it shall be the duty of such person or persons
interested in sustaining the proceedings in court, "to appear and defend, both in his or their
own behalf and in behalf of the court or judge affected by the proceedings."
Relative thereto "the judge whose order is under attack is merely a nominal party; wherefore,
a judge in his official capacity should not be made to appear as a party seeking reversal of a
decision that is unfavorable to the action taken by him." (Hon. Alcasid v. Samson, 102 Phil.
735-736; Tarona v. Sayo, 67 SCRA 508, 524; Lim Se v. Argel, 70 SCRA 378).
As to petitioner's claim of prescription, private respondent's contention that such refers to
the filing of petitions for cancellation in the Patent Office under Sec. 28 of the Patent Law and
not to a defense against an action for infringement under Sec. 45 thereof which may be raised
anytime, is evident under aforesaid law.
PREMISES CONSIDERED, the assailed resolutions of the Court of Appeals are hereby
AFFIRMED.
SO ORDERED
G.R. No. 134217 May 11, 2000
KENNETH ROY SAVAGE/K ANGELIN EXPORT TRADING, owned and managed by GEMMA
DEMORAL-SAVAGE, petitioners,
vs.
JUDGE APRONIANO B. TAYPIN, Presiding Judge, RTC-BR. 12, Cebu City, CEBU PROVINCIAL
PROSECUTOR'S OFFICE, NATIONAL BUREAU OF INVESTIGATION, Region VII, Cebu City,
JUANITA NG MENDOZA, MENDCO DEVELOPMENT CORPORATION, ALFREDO SABJON and
DANTE SOSMEÑA, respondents.
BELLOSILLO, J.:
Petitioners KENNETH ROY SAVAGE and K ANGELIN EXPORT TRADING, owned and managed
by GEMMA DEMORAL-SAVAGE, seek to nullify the search warrant issued by respondent Judge
Aproniano B. Taypin of the Regional Trial Court, Br. 12 Cebu City, which resulted in the seizure of
certain pieces of wrought iron furniture from the factory of petitioners located in Biasong, Talisay,
Cebu. Their motion to quash the search warrant was denied by respondent Judge as well as their
motion to reconsider the denial. Hence, this petition for certiorari.
The antecedent facts: Acting on a complaint lodged by private respondent Eric Ng Mendoza,
president and general manager of Mendco Development Corporation (MENDCO), 1 Supervising
Agent Jose Ermie Monsanto of the National Bureau of Investigation (NBI) filed an application for
search warrant with the Regional Trial Court of Cebu City. 2 The application sought the authorization
to search the premises of K Angelin Export International located in Biasong, Talisay, Cebu, and to
seize the pieces of wrought iron furniture found therein which were allegedly the object of unfair
competition involving design patents, punishable under Art. 189 of the Revised Penal Code as
amended. The assailed Search Warrant No. 637-10-1697-12 was issued by respondent Judge on 16
October 1997 and executed in the afternoon of the following day by NBI agents. 3 Seized from the
factory were several pieces of furniture, indicated in the Inventory Sheet attached to the Return of
Search Warrant, and all items seized have remained in NBI custody up to the present. 4
On 30 October 1997 petitioners moved to quash the search warrant alleging that: (a) the crime they
were accused of did not exist; (b) the issuance of the warrant was not based on probable cause; (c)
the judge failed to ask the witnesses searching questions; and, (d) the warrant did not particularly
describe the things to be seized. 5
On 10 November 1997 petitioners filed a Supplemental Motion to Quash where they additionally
alleged that the assailed warrant was applied for without a certification against forum shopping. 6 On
30 January 1998 respondent Judge denied the Motion to Quash and the Supplemental Motion to
Quash. 7 On 2 March 1998 petitioners moved to reconsider the denial of their motion to quash and
alleged substantially the same grounds found in their original Motion to Quash but adding thereto
two (2) new grounds, namely: (a) respondent court has no jurisdiction over the subject-matter; and,
(b) respondent court failed to "substantiate" the order sought to be reconsidered. 8 The denial of their
last motion 9 prompted petitioners to come to this Court.
The principal issues that must be addressed in this petition are: (a) questions involving jurisdiction
over the offense; (b) the need for a certification of non-forum shopping; and, (c) the existence of the
crime.
Petitioners claim that respondent trial court had no jurisdiction over the offense since it was not
designated as a special court for Intellectual Property Rights (IPR), citing in support thereof Supreme
Court Administrative Order No. 113-95 designating certain branches of the Regional Trial Courts,
Metropolitan Trial Courts and Municipal Trial Courts in Cities as Special Courts for IPR. The courts
enumerated therein are mandated to try and decide violations of IPR including Art. 189 of the
Revised Penal Code committed within their respective territorial jurisdictions. The sala of Judge
Benigno G. Gaviola of the RTC-Br. 9, Cebu City, was designated Special Court for IPR for the 7th
Judicial Region. 10 Subsequently Supreme Court Administrative Order No. 104-96 was issued
providing that jurisdiction over all violations of IPR was thereafter confined to the Regional Trial
Courts. 11
The authority to issue search warrants was not among those mentioned in the administrative orders.
But the Court has consistently ruled that a search warrant is merely a process issued by the court in
the exercise of its ancillary jurisdiction and not a criminal action which it may entertain pursuant to its
original jurisdiction. 12 The authority to issue search warrants is inherent in all courts and may be
effected outside their territorial jurisdiction. 1 In the instant case, the premises searched located in
Biasong, Talisay, Cebu, are well within the territorial jurisdiction of the respondent court. 14
Petitioners apparently misconstrued the import of the designation of Special Courts for IPR.
Administrative Order No. 113-95 merely specified which court could "try and decide" cases involving
violations of IPR. It did not, and could not, vest exclusive jurisdiction with regard to all matters
(including the issuance of search warrants and other judicial processes) in any one court.
Jurisdiction is conferred upon courts by substantive law; in this case, BP Blg.129, and not by a
procedural rule, much less by an administrative order. 15 The power to issue search warrants for
violations of IPR has not been exclusively vested in the courts enumerated in Supreme Court
Administrative Order No.113-95.
Petitioners next allege that the application for a search warrant should have been dismissed outright
since it was not accompanied by a certification of non-forum shopping, citing as authority
therefor Washington Distillers, Inc. v. Court of Appeals. 16 In that case, we sustained the quashal of
the search warrant because the applicant had been guilty of forum shopping as private respondent
sought a search warrant from the Manila Regional Trial Court only after he was denied by the courts
of Pampanga. The instant case differs significantly, for here there is no allegation of forum-shopping,
only failure to acquire a certification against forum-shopping. The Rules of Court as amended
requires such certification only from initiatory pleadings, omitting any mention of "applications." 17 In
contrast, Supreme Court Circular 04-94, the old rule on the matter, required such certification even
from "applications." Our ruling in Washington Distillers required no such certification from
applications for search warrants. Hence, the absence of such certification will not result in the
dismissal of an application for search warrant.
The last question to be resolved is whether unfair competition involving design patents punishable
under Art. 189 of the Revised Penal Code exists in this case. Prosecutor Ivan Herrero seems to
agree as he filed the corresponding Information against petitioners on 17 March 1998. 18 However,
since the IPR Code took effect on 1 January 1998 any discussion contrary to the view herein
expressed would be pointless. The repealing clause of the Code provides —
All Acts and parts of Acts inconsistent herewith, more particularly, Republic Act No.
165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of
the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree
No. 285, as amended, are hereby repealed (emphasis ours). 19
The issue involving the existence of "unfair competition" as a felony involving design patents,
referred to in Art. 189 of the Revised Penal Code, has been rendered moot and academic by the
repeal of the article.
The search warrant cannot even be issued by virtue of a possible violation of the IPR Code. The
assailed acts specifically alleged were the manufacture and fabrication of wrought iron furniture
similar to that patented by MENDCO, without securing any license or patent for the same, for the
purpose of deceiving or defrauding Mendco and the buying public. 20 The Code defines "unfair
competition" thus —
168.2. 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
shall commit any acts calculated to produce said result, shall be guilty of unfair
competition, and shall be subject to an action therefor.
168.3. In particular, and without in any way limiting the scope of protection against
unfair competition, the following shall be deemed guilty of unfair competition:
(a) Any person who is selling his goods and gives them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance which would be likely to influence
purchasers to believe that the goods offered are those of a manufacturer or dealer,
other than the actual manufacturer or dealer, or who otherwise clothes the goods
with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any vendor
engaged in selling such goods with a like purpose;
(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of
another who has identified such services in the mind of the public; or
(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to discredit
goods, businesses or services of another. 21
There is evidently no mention of any crime of "unfair competition" involving design patents in the
controlling provisions on Unfair Competition. It is therefore unclear whether the crime exists at all, for
the enactment of RA 8293 did not result in the reenactment of Art. 189 of the Revised Penal Code.
In the face of this ambiguity, we must strictly construe the statute against the State and liberally in
favor of the accused, 22 for penal statutes cannot be enlarged or extended by intendment, implication
or any equitable consideration. 2 Respondents invoke jurisprudence to support their contention that
"unfair competition" exists in this case. 24 However, we are prevented from applying these principles,
along with the new provisions on Unfair Competition found in the IPR Code, to the alleged acts of
the petitioners, for such acts constitute patent infringement as defined by the same Code —
Sec. 76. Civil Action for Infringement. — 76.1. The making, using, offering for sale,
selling, or importing a patented product or a product obtained directly or indirectly
from a patented process, or the use of a patented process without authorization of
the patentee constitutes patent infringement. 25
Although this case traces its origins to the year 1997 or before the enactment of the IPR Code, we
are constrained to invoke the provisions of the Code. Article 22 of the Revised Penal Code provides
that penal laws shall be applied retrospectively, if such application would be beneficial to the
accused. 26 Since the IPR Code effectively obliterates the possibility of any criminal liability attaching
to the acts alleged, then that Code must be applied here.
In the issuance of search warrants, the Rules of Court requires a finding of probable cause in
connection with one specific offense to be determined personally by the judge after examination of
the complainant and the witnesses he may produce, and particularly describing the place to be
searched and the things to be seized. 27 Hence, since there is no crime to speak of, the search
warrant does not even begin to fulfill these stringent requirements and is therefore defective on its
face. The nullity of the warrant renders moot and academic the other issues raised in petitioners'
Motion to Quash and Motion for Reconsideration. Since the assailed search warrant is null and void,
all property seized by virtue thereof should be returned to petitioners in accordance with established
jurisprudence. 28
In petitioners' Reply with Additional Information they allege that the trial court denied their motion to
transfer their case to a Special Court for IPR. We have gone through the records and we fail to find
any trace of such motion or even a copy of the order denying it. All that appears in the records is a
copy of an order granting a similar motion filed by a certain Minnie Dayon with regard to Search
Warrant No. 639-10-1697-12. 29 This attachment being immaterial we shall give it no further attention.
WHEREFORE, the Order of the Regional Trial Court, Br. 12, Cebu City, dated 30 January 1998,
denying the Motion to Quash Search Warrant No. 637-10-1697-12 dated 30 October 1997 and the
Supplemental Motion to Quash dated 10 November 1997 filed by petitioners, as well as the Order
dated 8 April 1998 denying petitioners' Motion for Reconsideration dated 2 March 1998, is SET
ASIDE. Search Warrant No. 637-10-1697-12 issued on 16 October 1997 is ANNULLED and SET
ASIDE, and respondents are ordered to return to petitioners the property seized by virtue of the
illegal search warrant.
SO ORDERED.
compulsory licensing
- Price Et. Al. vs. United Laboratories - GR No. 82542
G.R. No. 82542 September 29, 1988
BARRY JOHN PRICE, JOHN WATSON CLITHERON and JOHN BRADSHAW, Assignors to
ALLEN & HANBURYS, LTD., petitioners,
vs.
UNITED LABORATORIES, respondent.
Castillo, Laman, Tan & Pantaleon Law Offices for petitioners.
Teodoro B. Pison for respondent.
GRIÑO-AQUINO, J.:
The petitioners are the owners-assignees of Philippine Patent No. 13540 which was granted to them on
June 26,1980 for a pharmaceutical compound known as "aminoalkyl furan derivatives." On October 1,
1982, respondent United Laboratories, Inc. (or UNILAB) filed in the Philippine Patent Office a petition Inter
Partes Case No. 1683, "United Laboratories, Inc. versus Barry John Price, John Watson CLITHERON and
John Bradshaw, assignors to Allen & Hanburys Ltd.') for the issuance of a compulsory license to use the
patented compound in its own brands of medicines and pharmaceuticals and to sell, distribute, or otherwise
dispose of such medicines or pharmaceutical preparations in the country. The petition further alleged that
the patent relates to medicine and that petitioner, which has had long experience in the business of
manufacturing and selling pharmaceutical products, possesses the capability to use the subject compound
in the manufacture of a useful product or of making dosage formulations containing the said compound.
After the hearing, the Philippine Patent Office rendered a decision on June 2, 1986, granting
UNILAB a compulsory license subject to ten (1 0) terms and conditions No. 3 of which provides as
follows:
3. By virtue of this license, petitioner shall pay the respondent a royalty on all license
products containing the patented substance made and sold by the Petitioner in the
amount equivalent to TWO AND ONE HALF (2.5) PER CENT OF THE NET SALES
in Philippine currency. The terms 'net sales' means the gross billed for the product
pertaining to Letters Patent No. 13540 lessa) Transportation charges or allowances, if any, included in such
amount;
b) Trade, quantity or cash discounts and broker's or agent's or
distributor's commissions, if any, allowed or paid;
c) Credits or allowances, if any, given or made on account with
reflection or return of the product previously delivered; and
d) Any tax, excise or government charge included in such amount, or
measured by the production, sale, transportation, use or delivery of
the products.
In case Petitioner's product containing the patented substance shall contain one or
more active ingredients as admixed product, the royalty to be paid shall be
determined in accordance with the following formula:
Net Sales on Value of
Admixed Product Patented Substance
Royalty = _______________ x 0.025 x ___________________
(Value of Pa Value of
tended Substance) Active Ingredients
4. The royalties shall be computed after the end of each calendar quarter for all
goods containing the patented substance herein involved, made and sold during the
preceding quarter and to be paid by the Petitioner at its place of business on or
before the thirtieth day of the month following the end of each calendar quarter.
Payments should be made to Respondent's authorized representative in the
Philippines; (pp. 35-36, Rollo.)
The patentees appealed the decision to the Court of Appeals (CA-G.R. No. SP-09308) which
dismissed the appeal on December 4, 1 987. They have come to his Court praying for a review of
the Appellate Court's decision on the grounds that it erred:
1. in upholding the Director's unilateral determination of the terms and conditions of
the compulsory license, without affording the parties an opportunity to negotiate the
terms and conditions freely and by themselves;
2. in finding that the respondent possess the legally required capability to make use
of the petitioner's patented compound in the manufacture of a useful product;
3. in affirming the Director's award of the entire patent to the respondent, when only
one claim of the patent was controverted and
4. in considering evidence that UNILABs capability to use the compound was
acquired after, not before, filing its petition for compulsory licensing.
The first assignment of error has no merit. The terms and conditions of the compulsory license were
fixed by the Director of Patents after a hearing and careful consideration of the evidence of the
parties and in default of an agreement between them as to the terms of the license. This he is
authorized to do under Section 36 of Republic Act No. 165 which provides:
Sec. 36. GRANT OF LICENSE.—If the Director finds that a case for the grant of
license under Section 34, hereof made out, he may order the grant of an appropriate
license and in default of agreement among the parties as to the terms and conditions
of the license he shall fix the terms and conditions of the license in the order.
The order of the Director granting a license under this Chapter, when final, shall
operate as a deed granting a- license executed by the patentee and the other patties
in interest.
and under Section 35 of P.D. 1263, amending portions of Republic Act No.165 which reads:
Sec. 35. GRANT OF LICENSE.—(1)If the Director finds that a case for the grant of a
license under Sec. 34 hereof has been made out, he shall within one hundred eighty
(180) days from the date the petition was filed, order the grant of an appropriate
license. The order shall state the terms and conditions of the license which he
himself must fix in default of an agreement on the matter manifested or submitted by
the parties during the hearing.
The Court of Appeals found that the 2.5% royalty fixed by the Director of Patents 'is just and
reasonable.' We quote its observations hereunder:
Respondent-appellant contends further that the 2.5% royalty rate is unfair to
respondent-appellant as to amount to an undue deprivation of its property right. We
do not hold this view. The royalty rate of 2.5% provided for by the Director of Patents
is reasonable. Paragraph 3, Section 35-B, Republic Act No. 165, as amended by
Presidential Decree No. 1263, provides:
(3) A compulsory license shall only be granted subject to the payment
of adequate royalties commensurate with the extent to which the
invention is worked. However, royalty payments shall not exceed five
per cent (5%) of the net wholesale price (as defined in Section 33-A)
of the products manufactured under the license. If the product,
substance, or process subject of the compulsory license is involved in
an industrial project approved by the Board of Investments, the
royalty payable to the patentee or patentees shall not exceed three
per cent (3%) of the net wholesale price (as defined in Section 34-A)
of the patented commodity and/or commodity manufactured under
the patented process; the same rule of royalty shall be paid whenever
two or more patents are involved, which royalty shall be distributed to
the patentees in rates proportional to the extent of commercial use by
the licensee giving preferential values to the holder of the oldest
subsisting product patent.
Thus, said provision grants to the Director of Patents the use of his sound discretion
in fixing the percentage for the royalty rate and We find that the Director of Patents
committed no abuse of this discretion. Also, there is always a presumption of
regularity in the performance of one's official duties.
Moreover, what UNILAB has with the compulsory license is the bare right to use the
patented chemical compound in the manufacture of a special product, without any
technical assistance from herein respondent-appellant. Besides, the special product
to be manufactured by UNILAB will only be used, distributed, and disposed locally.
Therefore, the royalty rate of 2.5% is just and reasonable. (pp. 10-11, CA Decision,
pp. 44-45, Rollo)
Furthermore, as pointed out in the respondent's comment on the petition, Identical terms and
conditions had been prescribed for the grant of compulsory license in a good number of patent
cases (United Laboratories, Inc. vs. Boehringer Ingelhelm, GMBH, IPC 929, July 27, 1981; United
Laboratories, Inc. vs. Bristol-Myers Company, IPC 1179, Aug. 20, 1981; United Laboratories, Inc. vs.
E.R. Squibb & Sons, Inc., IPC 1349, Sept. 30, 1981; United Laboratories, Inc. vs. Helmut Weber, et
al., IPC 949, Dec. 13,1982; Oceanic Pharmacal Inc. vs. Gruppo Lepetit S.A. IPC 1549, Dec. 21,
1982; United Laboratories. Inc. vs. Boehringer Ingelheim, IPC 1185, June 8, 1983; United
Laboratories, Inc. vs. Pfizer Corp., IPC 1184, June 10,, 1983; Doctors Pharmaceuticals, Inc. vs.
Maggi, et al., July 11, 1983; Drugmaker's Laboratories v. Herningen et al., IPC 1679, September
22,1983; Superior Pharmacraft Inc. vs. Maggi, et al., IPC 1759, January 10, 1984; United
Laboratories, Inc. vs. Van Gelder et al., IPC 1627, June 29, 1984; Drugmaker's Laboratories, Inc. vs.
Janssen Pharmaceutical N.V. IPC 1555, August 27,1984; United Laboratories Inc. vs. Graham John
Durant et al., IPC 1731, August 14, 1987; United Laboratories, Inc. vs. Albert Anthony Carr, IPC
1906, August 31, 1987).
The Director's finding that UNILAB has the capability to use the patented compound in the
manufacture of an anti-ulcer pharmaceutical preparation is a factual finding which is supported by
substantial evidence, hence, the Court of Appeals did not commit a reversible error in affirming it
(Philippine Nut Industry, Inc. vs. Standard Brands, Inc., 65 SCRA 575; Sy Ching vs. Gaw Liu 44
SCRA 143; De Gala Sison vs. Manalo, 8 SCRA 595; Goduco vs. Court of Appeals, 14 SCRA 282;
Ramos vs. Pepsi-Cola Bottling Company of the P.I., 19 SCRA 289. Of indubitable relevance to this
point is the evidence that UNILAB has been engaged in the business of manufacturing drugs and
pharmaceutical products for the past thirty (30) years, that it is the leading drug manufacturer in the
country, that it has the necessary equipment and technological expertise for the development of
solid dosage forms or for tablet, capsule, and liquid preparations, and that it maintains standards and
procedures to ensure the quality of its products. Even if it were true, as alleged by the patentee
(although it is denied by UNILAB), that its capability to use the patented compound was only
acquired after the petition for compulsory licensing had been filed, the important thing is that such
capability was proven to exist during the hearing of the petition.
The patented invention in this case relates to medicine and is necessary for public health as it can
be used as component in the manufacture of anti-ulcer medicine. The Director of Patents did not err
in granting a compulsory license over the entire patented invention for there is no law requiring that
the license be limited to a specific embodiment of the invention, or, to a particular claim. The
invention in this case relates to new aminoalkyl derivatives which have histamine H2 blocking activity,
having the general formula (I) and physiologically acceptable salts, Noxides and dehydrates thereof.
The compound ranitidine hydrochloride named in Claim 45 is also covered by General Claim I and
several other sub-generic claims. Therefore, a license for Claim 45 alone would not be fully
comprehensive. In any event, since the petitioner will be paid royalties on the sales of any products
the licensee may manufacture using any or all of the patented compounds, the petitioner cannot
complain of a deprivation of property rights without just compensation.
WHEREFORE, the petition for review is denied for lack of merit.