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EN BANC [G.R. No. 118295. May 2, 1997.] WIGBERTO E. TAÑADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and as taxpayers; NICANOR P. PERLAS and HORACIO R. MORALES, both as taxpayers: CIVIL LIBERTIES UNION, NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in representation of various taxpayers and as non-governmental organizations, petitioners, YV. EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEÑA, SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective capacities as members of the Philippine Senate who concurred in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his capacity as Executive Secretary, respondents. Abelardo T . Domondon for petitioners. Copyright 1994-2014

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The Solicitor General for respondents. SYLLABUS 1. REMEDIAL LAW; ACTIONS; ESTOPPEL, SUBJECT TO WAIVER. — The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively, waived it by not pursuing it in any of their pleadings; in any event, this issue, even if ruled in respondents' favor, will not cause the petition's dismissal as there are petitioners other than the two senators, who are not vulnerable to the defense of estoppel. 2. ID.; ID.; PARTIES; LOCUS STANDI; SUBJECT TO WAIVER. — During its deliberations on the case, the Court noted that the respondents did not question the locus standi of petitioners. Hence, they are also deemed to have waived the benefit of such issue. They probably realized that grave constitutional issues, expenditures of public funds and serious international commitments of the nation are involved here, and that transcendental public interest requires that the substantive issues be met head on and decided on the merits, rather than skirted or deflected by procedural matters. 3. ID.; ID.; PETITION SEEKING TO NULLIFY ACT OF SENATE ON GROUND THAT IT CONTRAVENES THE CONSTITUTION, A JUSTICIABLE QUESTION. — In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. "The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the supremacy of the Constitution is upheld." Once a "controversy as to the application or interpretation of a constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide." 4. ID.; SUPREME COURT; JUDICIAL POWER; SCOPE. — The jurisdiction of this Court to adjudicate the matters raised in the petition is clearly set out in the 1987 Constitution, as follows: "Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality, of the government." The foregoing text emphasizes the Copyright 1994-2014

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judicial department's duty and power to strike down grave abuse of discretion on the part of any branch or instrumentality, of government including Congress. It is an innovation in our political law. As explained by former Chief Justice Roberto Concepcion, "the judiciary is the final arbiter on the question of whether or not a branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so capriciously, as to constitute an abuse of discretion amounting to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of this nature." As this Court has repeatedly and firmly emphasized in many cases, it will not shirk, digress from or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or department of the government. 5. ID.; SPECIAL CIVIL ACTIONS; CERTIORARI, PROHIBITION AND MANDAMUS; APPROPRIATE REMEDIES TO REVIEW ACTS OF LEGISLATIVE AND EXECUTIVE OFFICIALS. — Certiorari, prohibition and mandamus are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials. 6. POLITICAL LAW; CONSTITUTION; DECLARATION OF PRINCIPLES AND STATE POLICIES; AIDS OR GUIDES IN THE EXERCISE OF JUDICIAL AND LEGISLATIVE POWERS. — By its very title, Article II of the Constitution is a "declaration of principles and state policies." The counterpart of this article in the 1935 Constitution is called the "basic political creed of the nation" by Dean Vicente Sinco. These principles in Article II are not intended to be self-executing principles ready for enforcement through the courts. They are used by the judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato, the principles and state policies enumerated in Article II and some sections of Article XII are not "self-executing provisions, the disregard of which can give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional rights but guidelines for legislation." 7. ID.; ID.; THOUGH IT MANDATES A BIAS IN FAVOR OF FILIPINO GOODS, SERVICES, LABOR AND ENTERPRISES, IT RECOGNIZES THE NEED FOR BUSINESS EXCHANGE WITH THE REST OF THE WORLD. — While the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices that are Copyright 1994-2014

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unfair. In other words, the Constitution did not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Philippine economy. While the Constitution does not encourage the unlimited entry of foreign goods, services and investments into the country, it does not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair. 8. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; JOINING THE WORLD TRADE ORGANIZATION, NOT A GRAVE ABUSE OF DISCRETION. — The basic principles underlying the WTO Agreement recognize the need of developing countries like the Philippines to "share in the growth in international trade commensurate with the needs of their economic development." GATT has provided built-in protection from unfair foreign competition and trade practices including anti-dumping measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by unfair foreign competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion simply because we disagree with it or simply because we believe only in other economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages and disadvantages of trade liberalization as an economic policy. It will only, perform its constitutional duty of determining whether the Senate committed grave abuse of discretion. 9. POLITICAL LAW; CONSTITUTION; DECLARATION OF PRINCIPLES AND STATE POLICIES; POLICY OF "SELF-RELIANT AND INDEPENDENT NATIONAL ECONOMY" DOES NOT RULE OUT ENTRY OF FOREIGN INVESTMENTS, GOODS AND SERVICES. — The constitutional policy of a "self-reliant and independent national economy" does not necessarily rule out the entry, of foreign investments, goods and services. It contemplates neither "economic seclusion" nor "mendicancy in the international community." 10. POLITICAL LAW; INTERNATIONAL LAW; WORLD TRADE LAW ORGANIZATION/GENERAL AGREEMENT ON TARIFFS AND TRADE; RELIANCE ON "MOST FAVORED NATIONS", CONSTITUTIONAL. — The Copyright 1994-2014

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WTO reliance on "most favored nation", "national treatment", and "trade without discrimination" cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity, that apply to all WTO members. Aside from envisioning a trade policy based on "equality and reciprocal", the fundamental law encourages industries that are "competitive in both domestic and foreign markets," thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that can compete with the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises have shown capability and tenacity to compete internationally. And given a free trade environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire. 11. REMEDIAL LAW; ACTIONS; QUESTIONS INVOLVING "JUDGMENT CALLS", NOT SUBJECT TO JUDICIAL REVIEW. — Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality? Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will — as promised by its promoters — expand the country's exports and generate more employment? Will it bring more prosperity, employment, purchasing power and quality products at the most reasonable rates to the Filipino public? The responses to these questions involve "judgment calls" by our policy makers, for which they are answerable to our people during appropriate electoral exercises. Such questions and the answers thereto are not subject to judicial pronouncements based on grave abuse of discretion. 12. POLITICAL LAW; SOVEREIGNTY; SUBJECT TO RESTRICTIONS AND LIMITATIONS VOLUNTARILY AGREED TO BY THE STATE; CASE AT BAR. — While sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. In its Declaration of Principles and State Policies, the Constitution "adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations." By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws. One of the oldest and most fundamental rules in international law is pacta sunt servanda — international agreements must be performed in good faith. "A treaty engagement is not a mere moral obligation but creates a legally binding obligation on the parties . . . A state which has contracted Copyright 1994-2014

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valid international obligations is bound to make in its legislations such modifications as may be necessary to ensure the fulfillment of the obligations undertaken." 13. ID.; ID.; ID.; ID. — When the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign rights under the "concept of sovereignty as auto-limitation." Under Article 2 of the UN Charter, "(a)ll members shall give the United Nations every assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to any state against which the United Nations is taking preventive or enforcement action." Apart from the UN Treaty, the Philippines has entered into many other international pacts — both bilateral and multilateral — that involve limitations on Philippine sovereignty the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its citizens. The same reciprocity characterizes the Philippine commitments under WTO-GATT. The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating the Constitution, based on the rationale that the Philippines "adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of . . . cooperation and amity with all nations." 14. ID.; ID.; ID.; WORLD TRADE ORGANIZATION; PARAGRAPH 1, ARTICLE 34 OF THE GENERAL PROVISIONS AND BASIC PRINCIPLES OF THE AGREEMENT ON TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS (TRIPS); DOES NOT INTRUDE ON THE POWER OF THE SUPREME COURT TO PROMULGATE RULES ON PLEADING, PRACTICE AND PROCEDURES. — Petitioners aver that paragraph 1, Article 34 (Process Patents: Burden of Proof) of the General Provisions and Basic Principles of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) intrudes on the power of the Supreme Court to promulgate rules concerning pleading, practice and procedures. A WTO Member is required to provide a rule of disputable (note the words "in the absence of proof to the contrary") presumption that a product shown to be identical to one produced with the use of a patented process shall be deemed to have been obtained by the (illegal) use of the said patented process, (1) where such product obtained by the patented product is new, or (2) where there is "substantial likelihood" that the identical product was made with the use of the said patented process but the owner of the patent could not determine the exact process used in obtaining such identical product. Hence, the "burden of proof" contemplated by Copyright 1994-2014

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Article 34 should actually be understood as the duty of the alleged patent infringer to overthrow such presumption. Such burden, properly understood, actually refers to the "burden of evidence" (burden of going forward) placed on the producer of the identical (or fake) product to show that his product was produced without the use of the patented process. The foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless of the presumption provided under paragraph 1 of Article 34, such owner still has to introduce evidence of the existence of the alleged identical product, the fact that it is "identical" to the genuine one produced by the patented process and the fact of "newness" of the genuine product was made by the patented process. Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption applies only if (1) the product obtained by the patented process is NEW or (2) there is a substantial likelihood that the identical product was made by the process and the process owner has not been able through reasonable effort to determine the process used. Where either of these two provisos does not obtain, members shall be free to determine the appropriate method of implementing the provisions of TRIPS within their own internal systems and processes. By and large, the arguments adduced in connection with our disposition of the third issue — derogation of a legislative power — will apply to this fourth issue also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if any actually exists. Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due process and the concept of adversarial dispute settlement inherent in our judicial system. So too, since the Philippine is a signatory to most international conventions on patents, trademarks and copyrights, the adjustments in legislation and rules of procedure will not be substantial. 15. ID.; ID.; ID.; ID.; MINISTERIAL DECLARATION AND DECISIONS AND THE UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES, NOT SUBJECT TO CONCURRENCE BY THE SENATE. — "A final act, sometimes called protocol de cloture, is an instrument which records the winding up of the proceedings of a diplomatic conference and usually includes a reproduction of the texts of treaties, conventions, recommendations and other acts agreed upon and signed by the plenipotentiaries attending the conference." It is not the treaty itself. It is rather a summary of the proceedings of a protracted conference which may have taken place over several years. The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required from its signatories, namely, concurrence of the Senate in the WTO Agreement. The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They were approved by the ministers by virtue of Article XXV: 1 of GATT which provides that representatives of the members can meet "to give effect to those provision of this Copyright 1994-2014

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Agreement which invoke joint action, and generally with a view to facilitating the operation and furthering the objectives of this Agreement." The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to the Philippines. It applies only to those 27 Members which "have indicated in their respective schedules of commitments on standstill, elimination of monopoly, expansion of operation of existing financial service suppliers, temporary entry of personnel, free transfer and processing of information, and national treatment with respect to access to payment, clearing systems and refinancing available in the normal course of business." 16. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; RESORT THERETO ON GROUND OF GRAVE ABUSE OF DISCRETION AVAILABLE ONLY WHERE THERE IS NO PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW. — Procedurally. a writ of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of Court when it is amply shown that petitioners have no other plain, speedy and adequate remedy in the ordinary course of law. 17. ID.; ID.; ID.; GRAVE ABUSE OF DISCRETION, CONSTRUED. — By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty, enjoined or to act at all in contemplation of law. Failure on the part of the petitioner to show grave abuse of discretion will result in the dismissal of the petition. 18. ID.; ID.; ID.; CONCURRENCE BY THE SENATE IN THE WORLD TRADE ORGANIZATION, NOT A GRAVE ABUSE OF DISCRETION. — In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of two sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a constitutional body independent and coordinate, and thus its actions are presumed regular and done in good faith. Unless convincing proof and persuasive arguments are presented to overthrow such presumptions, this Court will resolve every doubt in its favor. Using the foregoing well-accepted definition of grave abuse of discretion and the presumption of regularity in the Senate's processes, this Court cannot find any cogent reason to impute grave abuse of discretion to the Senate's exercise of its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the Constitution. That the Senate, after deliberation and Copyright 1994-2014

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voting, voluntarily and overwhelmingly gave its consent to the WTO Agreement thereby making it "a part of the law of the land" is a legitimate exercise of its sovereign duty and power. We find no "patent and gross" arbitrariness or despotism "by reason of passion or personal hostility" in such exercise. It is not impossible to surmise that this Court, or at least some of its members, may even agree with petitioners that it is more advantageous to the national interest to strike down Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision. To do so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably, what the Senate did was a valid exercise of its authority. As to whether such exercise was wise, beneficial or viable is outside the realm of judicial inquiry and review. That is a matter between the elected policy makers and the people. As to whether the nation should join the worldwide march toward trade liberalization and economic globalization is a matter that our people should determine in electing their policy makers. After all, the WTO Agreement allows withdrawal of membership, should this be the political desire of a member.

DECISION

PANGANIBAN, J : p

The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the vast majority of countries, has revolutionized international business and economic relations amongst states. It has irreversibly propelled the world towards trade liberalization and economic globalization. Liberalization, globalization, deregulation and privatization, the third-millennium buzz words, are ushering in a new borderless world of business by sweeping away as mere historical relics the heretofore traditional modes of promoting and protecting national economies like tariffs, export subsidies, import quotas, quantitative restrictions, tax exemptions and currency controls. Finding market niches and becoming the best in specific industries in a market-driven and export-oriented global scenario are replacing age-old "beggar-thy-neighbor" policies that unilaterally protect weak and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-known management guru, "Increased participation in the world economy has become the key to domestic economic growth and prosperity." prll

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Brief Historical Background To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the establishment of three multilateral institutions — inspired by that grand political body, the United Nations — were discussed at Dumbarton Oaks and Bretton Woods. The first was the World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and later developing countries; the second, the International Monetary Fund (IMF) which was to deal with currency problems; and the third, the International Trade Organization (ITO), which was to foster order and predictability in world trade and to minimize unilateral protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of reasons, including its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained was only GATT — the General Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the economies of treaty adherents with no institutionalized body administering the agreements or dependable system of dispute settlement. After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the Tokyo Round and the Uruguay Round, the world finally gave birth to that administering body — the World Trade Organization — with the signing of the "Final Act" in Marrakesh, Morocco and the ratification of the WTO Agreement by its members. 1(1) 1a(2) 1b (3)1c Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as articulated by President Fidel V. Ramos in two letters to the Senate (infra), of improving "Philippine access to foreign markets, especially its major trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products." The President also saw in the WTO the opening of "new opportunities for the services sector . . ., (the reduction of) costs and uncertainty associated with exporting . . ., and (the attraction of) more investments into the country." Although the Chief Executive did not expressly mention it in his letter, the Philippines — and this is of special interest to the legal profession — will benefit from the WTO system of dispute settlement by judicial adjudication through the independent WTO settlement bodies called (1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally, weak and underdeveloped countries were at a disadvantage. Copyright 1994-2014

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The Petition in Brief Arguing mainly (1) that the WTO requires the Philippines "to place nationals and products of member-countries on the same footing as Filipinos and local products" and (2) that the WTO "intrudes, limits and/or impairs" the constitutional powers of both Congress and the Supreme Court, the instant petition before this Court assails the WTO Agreement for violating the mandate of the 1987 Constitution to "develop a self-reliant and independent national economy effectively controlled by Filipinos . . . (to) give preference to qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic materials and locally produced goods." Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization and economic globalization? Does it proscribe Philippine integration into a global economy that is liberalized, deregulated and privatized? These are the main questions raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and (2) for the prohibition of its implementation and enforcement through the release and utilization of public funds, the assignment of public officials and employees, as well as the use of government properties and resources by respondent-heads of various executive offices concerned therewith. This concurrence is embodied in Senate Resolution No. 97, dated December 14, 1994. The Facts On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the Department of Trade and Industry (Secretary Navarro, for brevity), representing the Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay Round of Multilateral Negotiations (Final Act, for brevity). By signing the Final Act, the Philippines, agreed:

2(4)

Secretary Navarro on behalf of the Republic of

"(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities, with a view to seeking approval of the Agreement in accordance with their procedures; and

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(b)

to adopt the Ministerial Declarations and Decisions."

On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the President of the Philippines, 3(5) stating among others that "the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution." cdta

On August 13, 1994, the members of the Philippine Senate received another letter from the President of the Philippines 4(6) likewise dated August 11, 1994, which stated among others that "the Uruguay Round Final Act, the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution." On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption of P.S. 1083, a resolution entitled "Concurring in the Ratification of the Agreement Establishing the World Trade Organization." 5(7) On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which "Resolved, as it is hereby resolved, that the Senate concur, as it hereby concurs, in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization." 6(8) The text of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-volume Uruguay Round of Multilateral Trade Negotiations and includes various agreements and associated legal instruments (identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade Agreements, for brevity) as follows: "ANNEX I Annex 1A: Multilateral Agreement on Trade in Goods General Agreement on Tariffs and Trade 1994 Agreement on Agriculture Agreement on the Application of Sanitary and Phytosanitary Measures Agreement on Textiles and Clothing Agreement on Technical Barriers to Trade Agreement on Trade-Related Investment Measures Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 Agreement on Implementation of Article VII of the General Copyright 1994-2014

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on Tariffs and Trade 1994 Agreement on Pre-Shipment Inspection Agreement on Rules of Origin Agreement on Imports Licensing Procedures Agreement on Subsidies and Coordinating Measures Agreement on Safeguards Annex 1B: General Agreement on Trade in Services and Annexes Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights ANNEX 2 Understanding on Rules and Procedures Governing the Settlement of Disputes ANNEX 3 Trade Policy Review Mechanism"

On December 16, 1994, the President of the Philippines signed Instrument of Ratification, declaring:

7(9)

the

"NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after having seen and considered the aforementioned Agreement Establishing the World Trade Organization and the agreements and associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do hereby ratify and confirm the same and every Article and Clause thereof."

To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the Agreement Proper and "the associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof." On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement (and its integral annexes aforementioned) but also (1) the Ministerial Declarations and Decisions and (2) the Understanding on Commitments in Financial Services. In his Memorandum dated May 13, 1996, 8(10) the Solicitor General describes these two latter documents as follows: "The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide range of matters, such as measures in favor of least Copyright 1994-2014

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developed countries, notification procedures, relationship of WTO with the International Monetary Fund (IMF), and agreements on technical barriers to trade and on dispute settlement. The Understanding on Commitments in Financial Services dwell on, among other things, standstill or limitations and qualifications of commitments to existing non-conforming measures, market access, national treatment, and definitions of non-resident supplier of financial services, commercial presence and new financial service." cdti

On December 29, 1994, the present petition was filed. After careful deliberation on respondents' comment and petitioners' reply thereto, the Court resolved on December 12, 1995, to give due course to the petition, and the parties thereafter filed their respective memoranda. The Court also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as "Bautista Paper," 9(11) for brevity, (1) providing a historical background of and (2) summarizing the said agreements. During the Oral Argument held on August 27, 1996, the Court directed: "(a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2) the transcript of proceedings/hearings in the Senate; and (b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior to the Philippine adherence to the WTO Agreement, which derogate from Philippine sovereignty and (2) copies of the multi-volume WTO Agreement and other documents mentioned in the Final Act, as soon as possible."

After receipt of the foregoing documents, the Court said it would consider the case submitted for resolution. In a Compliance dated September 16, 1996, the Solicitor General submitted a printed copy of the 36-volume Uruguay Round of Multilateral Trade Negotiations, and in another Compliance dated October 24, 1996, he listed the various "bilateral or multilateral treaties or international instruments involving derogation of Philippine sovereignty." Petitioners, on the other hand, submitted their Compliance dated January 28, 1997, on January 30, 1997. The Issues In their Memorandum dated March 11, 1996, petitioners summarized the issues Copyright 1994-2014

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as follows: "A.

Whether the petition presents a political question or is otherwise not justiciable.

B.

Whether the petitioner members of the Senate who participated in the deliberations and voting leading to the concurrence are estopped from impugning the validity of the Agreement Establishing the World Trade Organization or of the validity or of the concurrence.

C.

Whether the provisions of the Agreement Establishing the World Trade Organization contravene the provisions of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution.

D.

Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is 'vested in the Congress of the Philippines';

E.

Whether provisions of the Agreement Establishing the World Trade Organization interfere with the exercise of judicial power.

F.

Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction when they voted for concurrence in the ratification of the constitutionally-infirm Agreement Establishing the World Trade Organization.

G.

Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction when they concurred only in the ratification of the Agreement Establishing the World Trade Organization, and not with the Presidential submission which included the Final Act, Ministerial Declaration and Decisions, and the Understanding on Commitments in Financial Services."

On the other hand, the Solicitor General as counsel for respondents "synthesized the several issues raised by petitioners into the following": 10(12) "1. Whether or not the provisions of the 'Agreement Establishing the World Trade Organization and the Agreements and Associated Legal Instruments included in Annexes one (1), two (2) and three (3) of that agreement' cited by petitioners directly contravene or undermine the letter, spirit and intent of Section 19, Article II and Sections 10 and 12, Article XII of the 1987 Constitution. Copyright 1994-2014

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2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of legislative power by Congress. 3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this Honorable Court in promulgating the rules of evidence. 4. Whether or not the concurrence of the Senate 'in the ratification by the President of the Philippines of the Agreement establishing the World Trade Organization' implied rejection of the treaty embodied in the Final Act."

By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General has effectively ignored three, namely: (1) whether the petition presents a political question or is otherwise not justiciable; (2) whether petitioner-members of the Senate (Wigberto E. Tañada and Anna Dominique Coseteng) are estopped from joining this suit; and (3) whether the respondent-members of the Senate acted in grave abuse of discretion when they voted for concurrence in the ratification of the WTO Agreement. The foregoing notwithstanding, this Court resolved to deal with these three issues thus: cdt

(1) The "political question" issue — being very fundamental and vital, and being a matter that probes into the very jurisdiction of this Court to hear and decide this case — was deliberated upon by the Court and will thus be ruled upon as the first issue; (2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively waived it by not pursuing it in any of their pleadings; in any event, this issue, even if ruled in respondents' favor, will not cause the petition's dismissal as there are petitioners other than the two senators, who are not vulnerable to the defense of estoppel; and (3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up as an integral part of the disposition of the four issues raised by the Solicitor General. During its deliberations on the case, the Court noted that the respondents did not question the locus standi of petitioners. Hence, they are also deemed to have waived the benefit of such issue. They probably realized that grave constitutional issues, expenditures of public funds and serious international commitments of the nation are involved here, and that transcendental public interest requires that the substantive issues be met head on and decided on the merits, rather than skirted or Copyright 1994-2014

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deflected by procedural matters. 11(13) To recapitulate, the issues that will be ruled upon shortly are: (1)

DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES THE PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION?

(2)

DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?

(3)

DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS?

(4)

DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE?

(5)

WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES?

The First Issue: Does the Court Have Jurisdiction Over the Controversy? In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. "The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the supremacy of the Constitution is upheld." 12(14) Once a "controversy as to the application or interpretation of a constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide." 13(15) Copyright 1994-2014

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The jurisdiction of this Court to adjudicate the matters petition is clearly set out in the 1987 Constitution, 15(17) as follows:

14(16)

raised in the

"Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government."

The foregoing text emphasizes the judicial department's duty and power to strike down grave abuse of discretion on the part of any branch or instrumentality of government including Congress. It is an innovation in our political law. 16(18) As explained by former Chief Justice Roberto Concepcion, 17(19) "the judiciary is the final arbiter on the question of whether or not a branch of government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of this nature." As this Court has repeatedly and firmly emphasized in many cases, 18(20) it will not shirk, digress from or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or department of the government. LibLex

As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate remedy in the ordinary course of law, we have no hesitation at all in holding that this petition should be given due course and the vital questions raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate remedies to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials. On this, we have no equivocation. We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the wisdom of the decision of the President and the Senate in enlisting the country into the WTO, or pass upon the merits of trade liberalization as a policy espoused by said international body. Neither will it rule on the propriety of the government's economic policy of reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other import/trade barriers. Rather, it will only exercise its constitutional duty "to determine whether or not there had been a grave abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in Copyright 1994-2014

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ratifying the WTO Agreement and its three annexes. Second Issue: The WTO Agreement and Economic Nationalism This is the lis mota, the main issue, raised by the petition. Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution mandating "economic nationalism" are violated by the so-called "parity provisions" and "national treatment" clauses scattered in various parts not only of the WTO Agreement and its annexes but also in the Ministerial Decisions and Declarations and in the Understanding on Commitments in Financial Services. Specifically, the "flagship" constitutional provisions referred to are Sec. 19, Article II, and Secs. 10 and 12, Article XII, of the Constitution, which are worded as follows: "Article II DECLARATION OF PRINCIPLES AND STATE POLICIES xxx

xxx

xxx

Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. xxx

xxx

xxx

Article XII NATIONAL ECONOMY AND PATRIMONY xxx

xxx

xxx

Sec. 10 . . . The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. xxx

xxx

xxx

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help make them competitive."

Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions quoted in their memorandum: 19(21) "a) In the area of investment measures related to trade in goods (TRIMS, for brevity): "Article 2 National Treatment and Quantitative Restrictions. 1.

Without prejudice to other rights and obligations under GATT 1994. No Member shall apply any TRIM that is inconsistent with the provisions of Article III or Article XI of GATT 1994.

2.

An Illustrative list of TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in paragraph I of Article XI of GATT 1994 is contained in the Annex to this Agreement." (Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round, Legal Instruments, p. 22121, emphasis supplied). The Annex referred to reads as follows: "ANNEX Illustrative List

1.

TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of Article III of GATT 1994 include those which are mandatory or enforceable under domestic law or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which require: (a)

the purchase or use by an enterprise of products of domestic origin or from any domestic source, whether specified in terms of particular products, in terms of volume or value of products, or in terms of proportion of volume or value of its local production; or

(b)

that an enterprise's purchases or use of imported products be limited to an amount related to the volume or value of local products that it exports. LLjur

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of quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994 include those which are mandatory or enforceable under domestic laws or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which restrict: (a)

the importation by an enterprise of products used in or related to the local production that it exports;

(b)

the importation by an enterprise of products used in or related to its local production by restricting its access to foreign exchange inflows attributable to the enterprise; or

(c)

the exportation or sale for export specified in terms of particular products, in terms of volume or value of products, or in terms of a preparation of volume or value of its local production." (Annex to the Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay Round Legal Documents, p. 22125, emphasis supplied).

The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows: The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product." (Article III, GATT 1947, as amended by the Protocol Modifying Part II, and Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to paragraph 1 (a) of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments p. 177, emphasis supplied). "b) In the area of trade-related aspects of intellectual property rights (TRIPS, for brevity): Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property . . . (par. 1, Article 3, Agreement on Trade-Related Aspect of Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments, p. 25432 (emphasis Copyright 1994-2014

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supplied) "(c) In the area of the General Agreement on Trade in Services: National Treatment 1.

In the sectors inscribed in its schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than it accords to its own like services and service suppliers.

2.

A Member may meet the requirement of paragraph I by according to services and service suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers.

3.

Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of completion in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member. (Article XVII, General Agreement on Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p. 22610 emphasis supplied)."

It is petitioners' position that the foregoing "national treatment" and "parity provisions" of the WTO Agreement "place nationals and products of member countries on the same footing as Filipinos and local products," in contravention of the "Filipino First" policy of the Constitution. They allegedly render meaningless the phrase "effectively controlled by Filipinos." The constitutional conflict becomes more manifest when viewed in the context of the clear duty imposed on the Philippines as a WTO member to ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed agreements. 20(22) Petitioners further argue that these provisions contravene constitutional limitations on the role exports play in national development and negate the preferential treatment accorded to Filipino labor, domestic materials and locally produced goods. On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not self-executing and merely set out general policies; (2) that these nationalistic portions of the Constitution invoked by petitioners should not be read in isolation but should be related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do not conflict with the Constitution; and (4) that the WTO Agreement contains Copyright 1994-2014

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sufficient provisions to protect developing countries like the Philippines from the harshness of sudden trade liberalization. LLphil

We shall now discuss and rule on these arguments. Declaration of Principles Not Self-Executing By its very title, Article II of the Constitution is a "declaration of principles and state policies." The counterpart of this article in the 1935 Constitution 21(23) is called the "basic political creed of the nation" by Dean Vicente Sinco. 22(24) These principles in Article II are not intended to be self-executing principles ready for enforcement through the courts. 23(25) They are used by the judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato, 24(26) the principles and state policies enumerated in Article II and some sections of Article XII are not "self-executing provisions, the disregard of which can give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional rights but guidelines for legislation." In the same light, we held in Basco vs. Pagcor 25(27) that broad constitutional principles need legislative enactments to implement them, thus: "On petitioners' allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to state also that these are merely statements of principles and policies. As such, they are basically not self-executing, meaning a law should be passed by Congress to clearly define and effectuate such principles. 'In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for enforcement through the courts. They were rather directives addressed to the executive and to the legislature. If the executive and the legislature failed to heed the directives of the article, the available remedy was not judicial but political. The electorate could express their displeasure with the failure of the executive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2)."

The reasons for denying a cause of action to an alleged infringement of broad constitutional principles are sourced from basic considerations of due process and the lack of judicial authority to wade "into the uncharted ocean of social and economic policy making." Mr. Justice Florentino P. Feliciano in his concurring opinion in Copyright 1994-2014

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Oposa vs. Factoran, Jr., 26(28) explained these reasons as follows: "My suggestion is simply that petitioners must, before the trial court, show a more specific legal right — a right cast in language of a significantly lower order of generality than Article II (15) of the Constitution — that is or may be violated by the actions, or failures to act, imputed to the public respondent by petitioners so that the trial court can validly render judgment granting all or part of the relief prayed for. To my mind, the court should be understood as simply saying that such a more specific legal right or rights may well exist in our corpus of law, considering the general policy principles found in the Constitution and the existence of the Philippine Environment Code, and that the trial court should have given petitioners an effective opportunity so to demonstrate, instead of aborting the proceedings on a motion to dismiss. It seems to me important that the legal right which is an essential component of a cause of action be a specific, operable legal right, rather than a constitutional or statutory policy, for at least two (2) reasons. One is that unless the legal right claimed to have been violated or disregarded is given specification in operational terms, defendants may well be unable to defend themselves intelligently and effectively; in other words, there are due process dimensions to this matter. The second is a broader-gauge consideration — where a specific violation of law or applicable regulation is not alleged or proved, petitioners can be expected to fall back on the expanded conception of judicial power in the second paragraph of Section 1 of Article VIII of the Constitution which reads: 'Section 1.

...

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.' (Emphases supplied) When substantive standards as general as 'the right to a balanced and healthy ecology' and 'the right to health' are combined with remedial standards as broad ranging as 'a grave abuse of discretion amounting to lack or excess of jurisdiction,' the result will be, it is respectfully submitted, to propel courts into the uncharted ocean of social and economic policy making. At least in respect of the vast area of environmental protection and management, our courts have no claim to special technical competence and experience and professional Copyright 1994-2014

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qualification. Where no specific, operable norms and standards are shown to exist, then the policy making departments — the legislative and executive departments — must be given a real and effective opportunity to fashion and promulgate those norms and standards, and to implement them before the courts should intervene." cdasia

Economic Nationalism Should Be Read with Other Constitutional Mandates to Attain Balanced Development of Economy On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles relating to the national economy and patrimony, should be read and understood in relation to the other sections in said article, especially Secs. 1 and 13 thereof which read: "Section 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged. The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices. In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. . . xxx

xxx

xxx

Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity."

As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic development, as follows: 1.

A more equitable distribution of opportunities, income and wealth;

2.

A sustained increase in the amount of goods and services provided by the nation for the benefit of the people; and

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3.

An expanding productivity as the key to raising the quality of life for all especially the underprivileged.

With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by expressing preference in favor of qualified Filipinos "in the grant of rights, privileges and concessions covering the national economy and patrimony" 27(29) and in the use of "Filipino labor, domestic materials and locally-produced goods"; (2) by mandating the State to "adopt measures that help make them competitive; 28(30) and (3) by requiring the State to "develop a self-reliant and independent national economy effectively controlled by Filipinos." 29(31) In similar language, the Constitution takes into account the realities of the outside world as it requires the pursuit of "a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity"; 30(32) and speaks of industries "which are competitive in both domestic and foreign markets" as well as of the protection of "Filipino enterprises against unfair foreign competition and trade practices." It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al., 31(33) this Court held that "Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete in itself and which needs no further guidelines or implementing laws or rules for its enforcement. From its very words the provision does not require any legislation to put it in operation. It is per se judicially enforceable." However, as the constitutional provision itself states, it is enforceable only in regard to "the grants of rights, privileges and concessions covering national economy and patrimony" and not to every aspect of trade and commerce. It refers to exceptions rather than the rule. The issue here is not whether this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a rule, there are enough balancing provisions in the Constitution to allow the Senate to ratify the Philippine concurrence in the WTO Agreement. And we hold that there are. All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices that are unfair. 32(34) In other words, the Constitution did not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the development of the Philippine economy. While the Constitution does not encourage the unlimited entry of foreign goods, services and investments into the country, it does Copyright 1994-2014

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not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair. WTO Recognizes Need to Protect Weak Economies Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect weak and developing economies, which comprise the vast majority of its members. Unlike in the UN where major states have permanent seats and veto powers in the Security Council, in the WTO, decisions are made on the basis of sovereign equality, with each member's vote equal in weight to that of any other. There is no WTO equivalent of the UN Security Council. aisadc

"WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial Conference and the General Council shall be taken by the majority of the votes cast, except in cases of interpretation of the Agreement or waiver of the obligation of a member which would require three fourths vote. Amendments would require two thirds vote in general. Amendments to MFN provisions and the Amendments provision will require assent of all members. Any member may withdraw from the Agreement upon the expiration of six months from the date of notice of withdrawals." 33(35)

Hence, poor countries can protect their common interests more effectively through the WTO than through one-on-one negotiations with developed countries. Within the WTO, developing countries can form powerful blocs to push their economic agenda more decisively than outside the Organization. This is not merely a matter of practical alliances but a negotiating strategy rooted in law. Thus, the basic principles underlying the WTO Agreement recognize the need of developing countries like the Philippines to "share in the growth in international trade commensurate with the needs of their economic development." These basic principles are found in the preamble 34(36) of the WTO Agreement as follows: "The Parties to this Agreement, Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of Copyright 1994-2014

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economic development, Recognizing further that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development, Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations, Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on Tariffs and Trade, the results of past trade liberalization efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations, Determined to preserve the basic principles and to further the objectives underlying this multilateral trading system, . . ." (emphasis supplied.)

Specific WTO Provisos Protect Developing Countries So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic principles, the WTO Agreement grants developing countries a more lenient treatment, giving their domestic industries some protection from the rush of foreign competition. Thus, with respect to tariffs in general, preferential treatment is given to developing countries in terms of the amount of tariff reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an average tariff reduction rate of 36% for developed countries to be effected within a period of six (6) years while developing countries — including the Philippines — are required to effect an average tariff reduction of only 24% within ten (10) years. In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to agricultural products by 20% over six (6) years, as compared to only 13% for developing countries to be effected within ten (10) years. In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their budgetary outlays for export subsidy by 36% and export volumes receiving export subsidy by 21% within a period of six (6) years. For developing countries, however, the reduction rate is only two-thirds of that prescribed for developed countries and a longer period of ten (10) years within which to effect such reduction. Copyright 1994-2014

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Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including anti-dumping measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by unfair foreign competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion, simply because we disagree with it or simply because we believe only in other economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages and disadvantages of trade liberalization as an economic policy. It will only perform its constitutional duty of determining whether the Senate committed grave abuse of discretion. cdtai

Constitution Does Not Rule Out Foreign Competition Furthermore, the constitutional policy of a "self-reliant and independent national economy" 35(37) does not necessarily rule out the entry of foreign investments, goods and services. It contemplates neither "economic seclusion" nor "mendicancy in the international community." As explained by Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional policy: "Economic self reliance is a primary objective of a developing country that is keenly aware of overdependence on external assistance for even its most basic needs. It does not mean autarky or economic seclusion; rather, it means avoiding mendicancy in the international community. Independence refers to the freedom from undue foreign control of the national economy, especially in such strategic industries as in the development of natural resources and public utilities." 36(38)

The WTO reliance on "most favored nation," "national treatment," and "trade without discrimination" cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Aside from envisioning a trade policy based on "equality and reciprocity," 37(39) the fundamental law encourages industries that are "competitive in both domestic and foreign markets," thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that can Copyright 1994-2014

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compete with the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises have shown capability and tenacity to compete internationally. And given a free trade environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire. Constitution Favors Consumers, Not Industries or Enterprises The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it contain any specific pronouncement that Filipino companies should be pampered with a total proscription of foreign competition. On the other hand, respondents claim that WTO/GATT aims to make available to the Filipino consumer the best goods and services obtainable anywhere in the world at the most reasonable prices. Consequently, the question boils down to whether WTO/GATT will favor the general welfare of the public at large. Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality? Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will — as promised by its promoters — expand the country's exports and generate more employment? Will it bring more prosperity, employment, purchasing power and quality products at the most reasonable rates to the Filipino public? The responses to these questions involve "judgment calls" by our policy makers, for which they are answerable to our people during appropriate electoral exercises. Such questions and the answers thereto are not subject to judicial pronouncements based on grave abuse of discretion. Constitution Designed to Meet Future Events and Contingencies No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified in 1987. That does not mean however that the Charter is necessarily flawed in the sense that its framers might not have anticipated the advent of a borderless world of business. By the same token, the United Nations was not yet in existence when the 1935 Constitution became effective. Did that necessarily mean that the then Constitution might not have contemplated a diminution of the absoluteness of sovereignty when the Philippines signed the UN Charter, thereby effectively surrendering part of its control over its foreign relations to the decisions of Copyright 1994-2014

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various UN organs like the Security Council? It is not difficult to answer this question. Constitutions are designed to meet not only the vagaries of contemporary events. They should be interpreted to cover even future and unknown circumstances. It is to the credit of its drafters that a Constitution can withstand the assaults of bigots and infidels but at the same time bend with the refreshing winds of change necessitated by unfolding events. As one eminent political law writer and respected jurist 38(40) explains: "The Constitution must be quintessential rather than superficial, the root and not the blossom, the base and framework only of the edifice that is yet to rise. It is but the core of the dream that must take shape, not in a twinkling by mandate of our delegates, but slowly 'in the crucible of Filipino minds and hearts,' where it will in time develop its sinews and gradually gather its strength and finally achieve its substance. In fine, the Constitution cannot, like the goddess Athena, rise full-grown from the brow of the Constitutional Convention, nor can it conjure by mere fiat an instant Utopia. It must grow with the society it seeks to re-structure and march apace with the progress of the race, drawing from the vicissitudes of history the dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing, living law attuned to the heartbeat of the nation." cdtech

Third Issue: The WTO Agreement and Legislative Power The WTO Agreement provides that "(e)ach Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements." 39(41) Petitioners maintain that this undertaking "unduly limits, restricts and impairs Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in the Congress of the Philippines. It is an assault on the sovereign powers of the Philippines because this means that Congress could not pass legislation that will be good for our national interest and general welfare if such legislation will not conform with the WTO Agreement, which not only relates to the trade in goods . . . but also to the flow of investments and money . . . as well as to a whole slew of agreements on socio-cultural matters . . ." 40(42) More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in the Congress. 41(43) And while the Constitution allows Congress to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts, such authority is subject to "specified limits and . . . such limitations and restrictions" as Congress may provide, Copyright 1994-2014

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42(44)

as in fact it did under Sec. 401 of the Tariff and Customs Code. Sovereignty Limited by International Law and Treaties

This Court notes and appreciates the ferocity and passion by which petitioners stressed their arguments on this issue. However, while sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. Unquestionably, the Constitution did not envision a hermit-type isolation of the country from the rest of the world. In its Declaration of Principles and State Policies, the Constitution "adopts the generally accepted principles of international law as part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations." 43(45) By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws. 44(46) One of the oldest and most fundamental rules in international law is pacta sunt servanda — international agreements must be performed in good faith. "A treaty engagement is not a mere moral obligation but creates a legally binding obligation on the parties . . . A state which has contracted valid international obligations is bound to make in its legislations such modifications as may be necessary to ensure the fulfillment of the obligations undertaken." 45(47) By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. After all, states, like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements between States concerning such widely diverse matters as, for example, the lease of naval bases, the sale or cession of territory, the termination of war, the regulation of conduct of hostilities, the formation of alliances, the regulation of commercial relations, the settling of claims, the laying down of rules governing conduct in peace and the establishment of international organizations. 46(48) The sovereignty of a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by the very nature of membership in the family of nations and (2) limitations imposed by treaty stipulations. As aptly put by John F. Kennedy, "Today, no nation can build its destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here." 47(49)

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UN Charter and Other Treaties Limit Sovereignty Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign rights under the "concept of sovereignty as auto-limitation." 47-A(50) Under Article 2 of the UN Charter, "(a)ll members shall give the United Nations every assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to any state against which the United Nations is taking preventive or enforcement action." Such assistance includes payment of its corresponding share not merely in administrative expenses but also in expenditures for the peace-keeping operations of the organization. In its advisory opinion of July 20, 1961, the International Court of Justice held that money used by the United Nations Emergency Force in the Middle East and in the Congo were "expenses of the United Nations" under Article 17, paragraph 2, of the UN Charter. Hence, all its members must bear their corresponding share in such expenses. In this sense, the Philippine Congress is restricted in its power to appropriate. It is compelled to appropriate funds whether it agrees with such peace-keeping expenses or not. So too, under Article 105 of the said Charter, the UN and its representatives enjoy diplomatic privileges and immunities, thereby limiting again the exercise of sovereignty of members within their own territory. Another example: although "sovereign equality" and "domestic jurisdiction" of all members are set forth as underlying principles in the UN Charter, such provisos are however subject to enforcement measures decided by the Security Council for the maintenance of international peace and security under Chapter VII of the Charter. A final example: under Article 103, "(i)n the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligation under the present charter shall prevail," thus unquestionably denying the Philippines — as a member — the sovereign power to make a choice as to which of conflicting obligations, if any, to honor. cda

Apart from the UN Treaty, the Philippines has entered into many other international pacts — both bilateral and multilateral — that involve limitations on Philippine sovereignty. These are enumerated by the Solicitor General in his Compliance dated October 24, 1996, as follows: "(a)

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Bilateral convention with the United States regarding taxes on income, where the Philippines agreed, among others, to exempt from tax, income received in the Philippines by, among others, the Federal Reserve Bank of the United States, the Export/Import Bank of the United States, the Overseas Private Investment Corporation of the United States. Likewise, CD Technologies Asia, Inc.

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in said convention, wages, salaries and similar remunerations paid by the United States to its citizens for labor and personal services performed by them as employees or officials of the United States are exempt from income tax by the Philippines. (b)

Bilateral agreement with Belgium, providing, among others, for the avoidance of double taxation with respect to taxes on income.

(c)

Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation.

(d)

Bilateral convention with the French Republic for the avoidance of double taxation.

(e)

Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all customs duties, inspection fees and other duties or taxes aircrafts of South Korea and the regular equipment, spare parts and supplies arriving with said aircrafts.

(f)

Bilateral air service agreement with Japan, where the Philippines agreed to exempt from customs duties, excise taxes, inspection fees and other similar duties, taxes or charges fuel, lubricating oils, spare parts, regular equipment, stores on board Japanese aircrafts while on Philippine soil.

(g)

Bilateral air service agreement with Belgium where the Philippines granted Belgian air carriers the same privileges as those granted to Japanese and Korean air carriers under separate air service agreements.

(h)

Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines exempted Israeli nationals from the requirement of obtaining transit or visitor visas for a sojourn in the Philippines not exceeding 59 days.

(i)

Bilateral agreement with France exempting French nationals from the requirement of obtaining transit and visitor visa for a sojourn not exceeding 59 days.

(j)

Multilateral Convention on Special Missions, where the Philippines agreed that premises of Special Missions in the Philippines are inviolable and its agents can not enter said premises without consent of the Head of Mission concerned. Special Missions are also exempted from customs duties, taxes and related charges.

(k)

Multilateral Convention on the Law of Treaties. In this convention, the

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Philippines agreed to be governed by the Vienna Convention on the Law of Treaties. (l)

Declaration of the President of the Philippines accepting compulsory jurisdiction of the International Court of Justice. The International Court of Justice has jurisdiction in all legal disputes concerning the interpretation of a treaty, any question of international law, the existence of any fact which, if established, would constitute a breach of international obligation."

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its citizens. The same reciprocity characterizes the Philippine commitments under WTO-GATT. "International treaties, whether relating to nuclear disarmament, human rights, the environment, the law of the sea, or trade, constrain domestic political sovereignty through the assumption of external obligations. But unless anarchy in international relations is preferred as an alternative, in most cases we accept that the benefits of the reciprocal obligations involved outweigh the costs associated with any loss of political sovereignty. (T)rade treaties that structure relations by reference to durable, well-defined substantive norms and objective dispute resolution procedures reduce the risks of larger countries exploiting raw economic power to bully smaller countries, by subjecting power relations to some form of legal ordering. In addition, smaller countries typically stand to gain disproportionately from trade liberalization. This is due to the simple fact that liberalization will provide access to a larger set of potential new trading relationship than in case of the larger country gaining enhanced success to the smaller country's market." 48(51)

The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating the Constitution, based on the rationale that the Philippines "adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of . . . cooperation and amity with all nations." casia

Fourth Issue: The WTO Agreement and Judicial Power Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of the Agreement on Trade-Related Aspects of Intellectual Property Copyright 1994-2014

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Rights (TRIPS) 49(52) intrudes on the power of the Supreme Court to promulgate rules concerning pleading, practice and procedures. 50(53) To understand the scope and meaning of Article 34, TRIPS, fruitful to restate its full text as follows:

51(54)

it will be

"Article 34 Process Patents: Burden of Proof 1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred to in paragraph 1 (b) of Article 28, if the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from the patented process. Therefore, Members shall provide, in at least one of the following circumstances, that any identical product when produced without the consent of the patent owner shall, in the absence of proof to the contrary, be deemed to have been obtained by the patented process: (a)

if the product obtained by the patented process is new;

(b)

if there is a substantial likelihood that the identical product was made by the process and the owner of the patent has been unable through reasonable efforts to determine the process actually used.

2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be on the alleged infringer only if the condition referred to in subparagraph (a) is fulfilled or only if the condition referred to in subparagraph (b) is fulfilled. 3. In the adduction of proof to the contrary, the legitimate interests of defendants in protecting their manufacturing and business secrets shall be taken into account."

From the above, a WTO Member is required to provide a rule of disputable (note the words "in the absence of proof to the contrary") presumption that a product shown to be identical to one produced with the use of a patented process shall be deemed to have been obtained by the (illegal) use of the said patented process, (1) where such product obtained by the patented product is new, or (2) where there is "substantial likelihood" that the identical product was made with the use of the said patented process but the owner of the patent could not determine the exact process used in obtaining such identical product. Hence, the "burden of proof" contemplated Copyright 1994-2014

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by Article 34 should actually be understood as the duty of the alleged patent infringer to overthrow such presumption. Such burden, properly understood, actually refers to the "burden of evidence" (burden of going forward) placed on the producer of the identical (or fake) product to show that his product was produced without the use of the patented process. The foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless of the presumption provided under paragraph 1 of Article 34, such owner still has to introduce evidence of the existence of the alleged identical product, the fact that it is "identical" to the genuine one produced by the patented process and the fact of "newness" of the genuine product or the fact of "substantial likelihood" that the identical product was made by the patented process. The foregoing should really present no problem in changing the rules of evidence as the present law on the subject, Republic Act No. 165, as amended, otherwise known as the Patent Law, provides a similar presumption in cases of infringement of patented design or utility model, thus: "SEC. 60. Infringement. — Infringement of a design patent or of a patent for utility model shall consist in unauthorized copying of the patented design or utility model for the purpose of trade or industry in the article or product and in the making, using or selling of the article or product copying the patented design or utility model. Identity or substantial identity with the patented design or utility model shall constitute evidence of copying." (emphasis supplied)

Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption applies only if (1) the product obtained by the patented process is NEW or (2) there is a substantial likelihood that the identical product was made by the process and the process owner has not been able through reasonable effort to determine the process used. Where either of these two provisos does not obtain, members shall be free to determine the appropriate method of implementing the provisions of TRIPS within their own internal systems and processes. By and large, the arguments adduced in connection with our disposition of the third issue — derogation of legislative power — will apply to this fourth issue also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if any actually exists. Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due process and the concept of adversarial dispute settlement inherent in our judicial system. Copyright 1994-2014

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So too, since the Philippine is a signatory to most international conventions on patents, trademarks and copyrights, the adjustment in legislation and rules of procedure will not be substantial. 52(55) Fifth Issue: Concurrence Only in the WTO Agreement and Not in Other Documents Contained in the Final Act Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes — but not in the other documents referred to in the Final Act, namely the Ministerial Declaration and Decisions and the Understanding on Commitments in Financial Services — is defective and insufficient and thus constitutes abuse of discretion. They submit that such concurrence in the WTO Agreement alone is flawed because it is in effect a rejection of the Final Act, which in turn was the document signed by Secretary Navarro, in representation of the Republic upon authority of the President. They contend that the second letter of the President to the Senate 53(56) which enumerated what constitutes the Final Act should have been the subject of concurrence of the Senate. cdt

"A final act, sometimes called protocol de clôture, is an instrument which records the winding up of the proceedings of a diplomatic conference and usually includes a reproduction of the texts of treaties, conventions, recommendations and other acts agreed upon and signed by the plenipotentiaries attending the conference." 54(57) It is not the treaty itself. It is rather a summary of the proceedings of a protracted conference which may have taken place over several years. The text of the "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" is contained in just one page 55(58) in Vol. I of the 36-volume Uruguay Round of Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as representative of the Republic of the Philippines undertook: "(a)

to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities with a view to seeking approval of the Agreement in accordance with their procedures; and

(b)

to adopt the Ministerial Declarations and Decisions."

The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required from its signatories, namely, concurrence of the Senate in the WTO Agreement. The Ministerial Declarations and Decisions were deemed adopted without need Copyright 1994-2014

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for ratification. They were approved by the ministers by virtue of Article XXV: 1 of GATT which provides that representatives of the members can meet "to give effect to those provisions of this Agreement which invoke joint action, and generally with a view to facilitating the operation and furthering the objectives of this Agreement." 56(59)

The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to the Philippines. It applies only to those 27 Members which "have indicated in their respective schedules of commitments on standstill, elimination of monopoly, expansion of operation of existing financial service suppliers, temporary entry of personnel, free transfer and processing of information, and national treatment with respect to access to payment, clearing systems and refinancing available in the normal course of business." 57(60) On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed included as its integral parts, 58(61) as follows: "Article II Scope of the WTO 1. The WTO shall provide the common institutional framework for the conduct of trade relations among its Members in matters to the agreements and associated legal instruments included in the Annexes to this Agreement. 2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3 (hereinafter referred to as "Multilateral Agreements") are integral parts of this Agreement, binding on all Members. 3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to as "Plurilateral Trade Agreements") are also part of this Agreement for those Members that have accepted them, and are binding on those Members. The Plurilateral Trade Agreements do not create either obligation or rights for Members that have not accepted them. 4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter referred to as "GATT 1994") is legally distinct from the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act adopted at the conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment, as subsequently rectified, amended or modified (hereinafter referred to as "GATT 1947"). Copyright 1994-2014

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It should be added that the Senate was well-aware of what it was concurring in as shown by the members' deliberation on August 25, 1994. After reading the letter of President Ramos dated August 11, 1994, 59(62) the senators of the Republic minutely dissected what the Senate was concurring in, as follows: 60(63) "THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first day hearing of this Committee yesterday. Was the observation made by Senator Tañada that what was submitted to the Senate was not the agreement on establishing the World Trade Organization by the final act of the Uruguay Round which is not the same as the agreement establishing the World Trade Organization? And on that basis, Senator Tolentino raised a point of order which, however, he agreed to withdraw upon understanding that his suggestion for an alternative solution at that time was acceptable. That suggestion was to treat the proceedings of the Committee as being in the nature of briefings for Senators until the question of the submission could be clarified. And so, Secretary Romulo, in effect, is the President submitting a new. . . is he making a new submission which improves on the clarity of the first submission? MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no misunderstanding, it was his intention to clarify all matters by giving this letter. THE CHAIRMAN: Thank you. Can this Committee hear from Senator Tañada and later on Senator Tolentino since they were the ones that raised this question yesterday? Senator Tañada, please. SEN. TAÑADA: Thank you, Mr. Chairman. Based on what Secretary Romulo has read, it would now clearly appear that what is being submitted to the Senate for ratification is not the Final Act of the Uruguay Round, but rather the Agreement on the World Trade Organization as well as the Ministerial Declarations and Decisions, and the Understanding and Commitments in Financial Services. I am now satisfied with the wording of the new submission of President Ramos. Copyright 1994-2014

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SEN. TAÑADA. . . . of President Ramos, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Tañada. Can we hear from Senator Tolentino? And after him Senator Neptali Gonzales and Senator Lina. SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us but I saw the draft of his earlier, and I think it now complies with the provisions of the Constitution, and with the Final Act itself . The Constitution does not require us to ratify the Final Act. It requires us to ratify the Agreement which is now being submitted. The Final Act itself specifies what is going to be submitted to with the governments of the participants. prcd

In paragraph 2 of the Final Act, we read and I quote: 'By signing the present Final Act, the representatives agree: (a) to submit as appropriate the WTO Agreement for the consideration of the respective competent authorities with a view of seeking approval of the Agreement in accordance with their procedures.' In other words, it is not the Final Act that was agreed to be submitted to the governments for ratification or acceptance as whatever their constitutional procedures may provide but it is the World Trade Organization Agreement. And if that is the one that is being submitted now, I think it satisfies both the Constitution and the Final Act itself . Thank you, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales. SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And they had been adequately reflected in the journal of yesterday's session and I don't see any need for repeating the same. Now, I would consider the new submission as an act ex abudante cautela. THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment on this? SEN. LINA, Mr. President, I agree with the observation just made by Senator Gonzales out of the abundance of question. Then the new submission is, I believe, stating the obvious and therefore I have no further comment to make." Copyright 1994-2014

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Epilogue In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are invoking this Court's constitutionally imposed duty "to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in giving its concurrence therein via Senate Resolution No. 97. Procedurally, a writ of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of Court when it is amply shown that petitioners have no other plain, speedy and adequate remedy in the ordinary course of law. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. 61(64) Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. 62(65) Failure on the part of the petitioner to show grave abuse of discretion will result in the dismissal of the petition. 63(66) In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of two sovereign houses of Congress and is thus entitled to great respect in its actions. It is itself a constitutional body independent and coordinate, and thus its actions are presumed regular and done in good faith. Unless convincing proof and persuasive arguments are presented to overthrow such presumptions, this Court will resolve every doubt in its favor. Using the foregoing well-accepted definition of grave abuse of discretion and the presumption of regularity in the Senate's processes, this Court cannot find any cogent reason to impute grave abuse of discretion to the Senate's exercise of its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the Constitution. 64(67) It is true, as alleged by petitioners, that broad constitutional principles require the State to develop an independent national economy effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials and locally produced goods. But it is equally true that such principles — while serving as judicial and legislative guides — are not in themselves sources of causes of action. Moreover, there are other equally fundamental constitutional principles relied upon by the Senate which mandate the pursuit of a "trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and Copyright 1994-2014

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reciprocity" and the promotion of industries "which are competitive in both domestic and foreign markets," thereby justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and judicial powers is balanced by the adoption of the generally accepted principles of international law as part of the law of the land and the adherence of the Constitution to the policy of cooperation and amity with all nations. cdasia

That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent to the WTO Agreement thereby making it "a part of the law of the land" is a legitimate exercise of its sovereign duty and power. We find no "patent and gross" arbitrariness or despotism "by reason of passion or personal hostility" in such exercise. It is not impossible to surmise that this Court, or at least some of its members, may even agree with petitioners that it is more advantageous to the national interest to strike down Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision. To do so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably, what the Senate did was a valid exercise of its authority. As to whether such exercise was wise, beneficial or viable is outside the realm of judicial inquiry and review. That is a matter between the elected policy makers and the people. As to whether the nation should join the worldwide march toward trade liberalization and economic globalization is a matter that our people should determine in electing their policy makers. After all, the WTO Agreement allows withdrawal of membership, should this be the political desire of a member. The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance 65(68) where "the East will become the dominant region of the world economically, politically and culturally in the next century." He refers to the "free market" espoused by WTO as the "catalyst" in this coming Asian ascendancy. There are at present about 31 countries including China, Russia and Saudi Arabia negotiating for membership in the WTO. Notwithstanding objections against possible limitations on national sovereignty, the WTO remains as the only viable structure for multilateral trading and the veritable forum for the development of international trade law. The alternative to WTO is isolation, stagnation, if not economic self-destruction. Duly enriched with original membership, keenly aware of the advantages and disadvantages of globalization with its on-line experience, and endowed with a vision of the future, the Philippines now straddles the crossroads of an international strategy for economic prosperity and stability in the new millennium. Let the people, through their duly authorized elected officers, make their free choice.

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WHEREFORE, the petition is DISMISSED for lack of merit.

cda

SO ORDERED. Narvasa, C .J ., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Kapunan, Mendoza, Francisco, Hermosisima, Jr., and Torres, Jr., JJ., concur. Padilla and Vitug, JJ., concur in the result. )RRWQRWHV 1.

In Annex "A" of her Memorandum, dated August 8, 1996, received by this Court on August 12, 1996, Philippine Ambassador to the United Nations, World Trade Organization and other international organizations Lilia R. Bautista (hereafter referred to as "Bautista Paper") submitted a "46-year Chronology" of GATT as follows: "1947 The birth of GATT . On 30 October 1947, the General Agreement on Tariffs and Trade (GATT) was signed by 23 nations at the Palais des Nations in Geneva. The Agreement contained tariff concessions agreed to in the first multilateral trade negotiations and a set of rules designed to prevent these concessions from being frustrated by restrictive trade measures. The 23 founding contracting parties were members of the Preparatory Committee established by the United Nations Economic and Social Council in 1946 to draft the charter of the International Trade Organization (ITO). The ITO was envisaged as the final leg of a triad of post-War economic agencies (the other two were the International Monetary Fund and the International Bank for Reconstruction — later the World Bank). In parallel with this task, the Committee members decided to negotiate tariff concessions among themselves. From April to October 1947, the participants completed some 123 negotiations and established 20 schedules containing the tariff reductions and bindings which became an integral part of GATT. These schedules resulting from the first Round covered some 45,000 tariff concessions and about $10 billion in trade. GATT was conceived as an interim measure that put into effect the commercial-policy provisions of the ITO. In November, delegations from 56 countries met in Havana, Cuba, to consider the ITO draft as a whole. After long and difficult negotiations, some 53 countries signed the Final Act authenticating the text of the Havana Charter in March 1948. There was no commitment, however, from governments to ratification and, in the end, the ITO was stillborn, leaving GATT as the only international instrument governing the conduct of world trade. 1948 Entry into force. On 1 January 1948, GATT entered into force. The 23 founding members were: Australia, Belgium, Brazil, Burma, Canada, Ceylon,

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1a.

Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United Kingdom and the United States. The first Session of the Contracting Parties was held from February to March in Havana, Cuba. The secretariat of the Interim Commission for the ITO, which served as the ad hoc secretariat of GATT, moved from Lake, Placid, New York, to Geneva. The Contracting Parties held their second session in Geneva from August to September. 1949 Second Round at Annecy. During the second Round of trade negotiations, held from April to August at Annecy, France, the contracting parties exchanged some 5,000 tariff concessions. At their third Session, they also dealt with the accession of ten more countries. 1950 Third Round at Torquay. From September 1950 to April 1951, the contracting parties exchanged some 8,700 tariff concessions in the English town, yielding tariff reduction of about 25 per cent in relation to the 1948 level. Four more countries acceded to GATT. During the fifth Session of the Contracting Parties, the United States indicated that the ITO Charter would not be re-submitted to the US Congress; this, in effect, meant that ITO would not come into operation. 1956 Fourth Round at Geneva. The fourth Round was completed in May and produced some $2.5 billion worth of tariff reductions. At the beginning of the year, the GATT commercial policy course for officials of developing countries was inaugurated. 1958 The Haberler Report. GATT published Trends in International Trade in October. Known as the "Haberler Report" in honour of Professor Gottfried Haberler, the chairman of the panel of eminent economists, it provided initial guidelines for the work of GATT. The Contracting Parties at their 13th Sessions, attended by Ministers, subsequently established three committees in GATT: Committee I to convene a further tariff negotiating conference; Committee II to review the agricultural policies of member governments and Committee III to tackle the problems facing developing countries in their trade. The establishment of the European Economic Community during the previous year also demanded large-scale tariff negotiations under Article XXIV:6 of the General Agreement. 1960 The Dillon Round. The fifth Round opened in September and was divided into two phases: the first was concerned with negotiations with EEC member states for the creation of a single schedule of concessions for the Community based on its Common External Tariff; and the second was a further general round of tariff negotiations. Named in honour of US Under-Secretary of State Douglas Dillon who proposed the negotiations, the Round was concluded in July 1962 and resulted in about 4,400 tariff concessions covering $4.9 billion of trade. 1961 The Short-Term Arrangement covering cotton textiles was agreed as an

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1b.

exception to the GATT rules. The arrangement permitted the negotiation of quota restrictions affecting the exports of cotton-producing countries. In 1962 the "Short Term" Arrangement became the "Long term" Arrangement, lasting until 1974 when the Multifibre Arrangement entered into force. 1964 The Kennedy Round. Meeting at Ministerial level, a Trade Negotiations Committee formally opened the Kennedy Round in May. In June 1967, the Round's Final Act was signed by some 50 participating countries which together accounted for 75 per cent of world trade. For the first time, negotiations departed from the product-by-product approach used in the previous Rounds to an across-the-board or linear method of cutting tariffs for industrial goods. The working hypothesis of a 50 per cent target cut in tariff levels was achieved in many areas. Concessions covered an estimated total value of trade of about $40 billion. Separate agreements were reached on grains, chemical products and a Code on Anti-Dumping. 1965 A New Chapter. The early 1960s marked the accession to the General Agreement of many newly-independent developing countries. In February, the Contracting Parties, meeting in a special session, adopted the text of Part IV on Trade and Development. The additional chapter to the GATT required developed countries to accord high priority to the reduction of trade barriers to products of developing countries. A Committee on Trade and Development was established to oversee the functioning of the new GATT provisions. In the preceding year, GATT had established the International Trade Center (ITC) to help developing countries in trade promotion and identification of potential markets. Since 1968, the ITC had been jointly operated by GATT and the UN Conference on Trade and Development (UNCTAD). 1973 The Tokyo Round. The seventh Round was launched by Ministers in September at the Japanese capital. Some 99 countries participated in negotiating a comprehensive body of agreements covering both tariff and non-tariff matters. At the end of the Round in November 1979, participants exchanged tariff reductions and bindings which covered more than $300 billion of trade. As a result of these cuts, the weighted average tariff on manufactured goods in the world's nine major industrial markets declined from 7.0 to 4.7 per cent. Agreements were reached in the following areas; subsidies and countervailing measures, technical barriers to trade, import licensing procedures, government procurement, customs valuation, a revised anti-dumping code, trade in bovine meat, trade in dairy products and trade in civil aircraft. The first concrete result of the Round was the reduction of import duties and other trade barriers by industrial countries on tropical products exported by developing countries. 1974 On 1 January 1974, the Arrangement Regarding International Trade in Textiles, otherwise known as the Multifibre Arrangement (MFA), entered into force. It superseded the arrangements that had been governing trade in cotton

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1c.

2.

textiles since 1961. The MFA seeks to promote the expansion and progressive liberalization of trade in textile products while at the same time avoiding disruptive effects in individual markets and lines of production. The MFA was extended in 1978, 1982, 1986, 1991 and 1992. MFA members account for most of the world exports of textiles and clothing which in 1986 amounted to US$128 billion. 1982 Ministerial Meeting. Meeting for the first time in nearly ten years, the GATT Ministers in November at Geneva reaffirmed the validity of GATT rules for the conduct of international trade and committed themselves to combating protectionist pressures. They also established a wide-ranging work programme, for the GATT which was to lay down the groundwork for a new Round. 1986. The Uruguay Round. The GATT Trade Ministers meeting at Punta del Este, Uruguay, launched the eighth Round of trade negotiations on 20 September. The Punta del Este Declaration, while representing a single political undertaking, was divided into two sections. The first covered negotiations on trade in goods and the second initiated negotiation on trade in services. In the area of trade in goods, the Ministers committed themselves to a "standstill" on new trade measures inconsistent with their GATT obligations and to a "rollback" programme aimed at phasing out existing inconsistent measures. Envisaged to last four years, negotiations started in early February 1987 in the following areas: tariffs, non-tariff measures, tropical products, natural resource-based products, textiles and clothing, agriculture, subsidies, safeguards, trade-related aspects of intellectual property rights including trade in counterfeit goods, and trade-related investment measures. The work of other groups included a review of GATT articles, the GATT dispute-settlement procedure, the Tokyo Round agreements, as well as the functioning of the GATT system as a whole. 1994 "GATT 1994" is the updated version of GATT 1947 and takes into account the substantive and institutional changes negotiated in the Uruguay Round. GATT 1994 is an integral part of the World Trade Organization established on 1 January 1995. It is agreed that there be a one year transition period during which certain GATT 1947 bodies and commitments would co-exist with those of the World Trade Organization." The Final Act was signed by representatives of 125 entities, namely Algeria, Angola, Antigua and Barbuda, Argentine Republic, Australia, Republic of Austria, State of Bahrain, People's Republic of Bangladesh, Barbados, The Kingdom of Belgium, Belize, Republic of Benin, Bolivia, Botswana, Brazil, Brunei Darussalam, Burkina Faso, Burundi, Cameroon, Canada, Central African Republic, Chad, Chile, People's Republic of China, Colombia, Congo, Costa Rica, Republic of Cote d' Ivoire, Cuba, Cyprus, Czech Republic, Kingdom of Denmark, Commonwealth of Dominica, Dominican Republic, Arab Republic of Egypt, El Salvador, European Communities, Republic of Fiji, Finland, French Republic, Gabonese Republic, Gambia, Federal Republic of Germany, Ghana, Hellenic Republic, Grenada, Guatemala, Republic of Guinea-Bissau, Republic of Guyana, Haiti, Honduras, Hong Kong, Hungary, Iceland,

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India, Indonesia, Ireland, State of Israel, Italian Republic, Jamaica, Japan, Kenya, Korea, State of Kuwait, Kingdom of Lesotho, Principality of Liechtenstein, Grand Duchy of Luxembourg, Macau, Republic of Madagascar, Republic of Malawi, Malaysia, Republic of Maldives, Republic of Mali, Republic of Malta, Islamic Republic of Mauritania, Republic of Mauritius, United Mexican States, Kingdom of Morocco, Republic of Mozambique, Union of Myanmar, Republic of Namibia, Kingdom of the Netherlands, New Zealand, Nicaragua, Republic of Niger, Federal Republic of Nigeria, Kingdom of Norway, Islamic Republic of Pakistan, Paraguay, Peru, Philippines, Poland, Portuguese Republic, State of Qatar, Romania, Rwandese Republic, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Sierra Leone, Singapore, Slovak Republic, South Africa, Kingdom of Spain, Democratic Socialist Republic of Sri Lanka, Republic of Surinam, Kingdom of Swaziland, Kingdom of Sweden, Swiss Confederation, United Republic of Tanzania, Kingdom of Thailand, Togolese Republic, Republic of Trinidad and Tobago, Tunisia, Turkey, Uganda, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America, Eastern Republic of Uruguay, Venezuela, Republic of Zaire, Republic of Zambia, Republic of Zimbabwe; see pp. 6-25, Vol. 1, Uruguay Round of Multilateral Trade Negotiations. 3. 11 August 1994 The Honorable Members Senate Through Senate President Edgardo Angara Manila Ladies and Gentlemen: I have the honor to forward herewith an authenticated copy of the Uruguay Round Final Act signed by Department of Trade and Industry Secretary Rizalino S. Navarro for the Philippines on 15 April 1994 in Marrakesh, Morocco. The Uruguay Round Final Act aims to liberalize and expand world trade and strengthen the interrelationship between trade and economic policies affecting growth and development. The Final Act will improve Philippine access to foreign markets, especially its major trading partners through the reduction of tariffs on its exports particularly agricultural and industrial products. These concessions may be availed of by the Philippines, only if it is a member of the World Trade Organization. By GATT estimates, the Philippines can acquire additional export revenues from $2.2 to $2.7 Billion annually under Uruguay Round. This will be on top of the normal increase in exports that the Philippines may experience. The Final Act will also open up new opportunities for the services sector in such areas as the movement of personnel, (e.g. professional services and construction Copyright 1994-2014

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services), cross-border supply (e.g. computer-related services), consumption abroad (e.g. tourism, convention services, etc.) and commercial presence. The clarified and improved rules and disciplines on anti-dumping and countervailing measures will also benefit Philippine exporters by reducing the costs and uncertainty associated with exporting while at the same time providing a means for domestic industries to safeguard themselves against unfair imports. Likewise, the provision of adequate protection for intellectual property rights is expected to attract more investments into the country and to make it less vulnerable to unilateral actions by its trading partners (e.g Sec. 301 of the United States' Omnibus Trade Law). In view of the foregoing, the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution. A draft of a proposed Resolution giving its concurrence to the aforesaid Agreement is enclosed. Very truly yours, (SGD.) FIDEL V. RAMOS 4. 11 August 1994 The Honorable Members Senate Through Senate President Edgardo Angara Manila Ladies and Gentlemen: I have the honor to forward herewith an authenticated copy of the Uruguay Round Final Act signed by Department of Trade and Industry Secretary Rizalino S. Navarro for the Philippines on 13 April 1994 in Marrakech (sic), Morocco. Members of the trade negotiations committee, which included the Philippines, agreed that the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services embody the results of their negotiations and form an integral part of the Uruguay Round Final Act. By signing the Uruguay Round Final Act, the Philippines, through Secretary Navarro, agreed: (a) To submit the Agreement Establishing the World Trade Organization to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution; and (b) To adopt the Ministerial Declarations and Decisions. Copyright 1994-2014

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The Uruguay Round Final Act aims to liberalize and expand world trade and strengthen the interrelationship between trade and economic policies affecting growth and development. The Final Act will improve Philippine access to foreign markets, especially its major trading partners through the reduction of tariffs on its exports particularly agricultural and industrial products. These concessions may be availed of by the Philippines, only if it is a member of the World Trade Organization. By GATT estimates, the Philippines can acquire additional export revenues from $2.2 to $2.7 Billion annually under Uruguay Round. This will be on top of the normal increase in the exports that the Philippines may experience. The Final Act will also open up new opportunities for the services sector in such areas as the movement of personnel, (e.g. professional services and construction services), cross-border supply (e.g. computer-related services), consumption abroad (e.g. tourism, convention services, etc.) and commercial presence. The clarified and improved rules and disciplines on anti-dumping and countervailing measures will also benefit Philippine exporters by reducing the costs and uncertainty associated with exporting while at the same time providing a means for domestic industries to safeguard themselves against unfair imports. Likewise, the provision of adequate protection for intellectual property rights is expected to attract more investments into the country and to make it a less vulnerable to unilateral actions by its trading partners (e.g., Sec. 301 of the United States Omnibus Trade Law). In view of the foregoing, the Uruguay Round Final Act, the Agreement Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services, as embodied in the Uruguay Round Final Act and forming an integral part thereof are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution. A draft of a proposed Resolution giving its concurrence to the aforesaid Agreement is enclosed. Very truly yours, (SGD.) FIDEL V. RAMOS 5. December 9, 1994 HON. EDGARDO J. ANGARA Senate President Senate, Manila Dear Senate President Angara: Copyright 1994-2014

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Pursuant to the provisions of Sec. 26 (2) Article VI of the Constitution, I hereby certify to the necessity of the immediate adoption of P.S. 1083, entitled: "CONCURRING IN THE RATIFICATION OF THE AGREEMENT ESTABLISHING THE WORLD TRADE ORGANIZATION" to meet a public emergency consisting of the need for immediate membership in the WTO in order to assure the benefits of the Philippine economy arising from such membership. Very truly yours, (SGD.) FIDEL V. RAMOS 6.

7.

8. 9.

10. 11.

Attached as Annex A, Petition; Rollo, p. 52, P.S. 1083 is the forerunner of assailed Senate Resolution No. 97. It was prepared by the Committee of the Whole on the General Agreement on Tariffs and Trade chaired by Sen. Blas F. Ople and co-chaired by Sen. Gloria Macapagal-Arroyo; see Annex C, Compliance of petitioners dated January 28, 1997. The Philippines is thus considered an original or founding member of WTO, which as of July 26, 1996 had 123 members as follows: Antigua and Barbuda, Argentina, Australia, Austria, Bahrain, Bangladesh, Barbados, Belgium, Belize, Benin, Bolivia, Botswana, Brazil, Brunei Darussalam, Burkina Faso, Burundi, Cameroon, Canada, Central African Republic, Chile, Colombia, Costa Rica, Cote d' Ivoire, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, European Community, Fiji, Finland, France, Gabon, Germany, Ghana, Greece, Grenada, Guatemala, Guinea, Guinea Bissau, Guyana, Haiti, Honduras, Hongkong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kenya, Korea, Kuwait, Lesotho, Liechtenstein, Luxembourg, Macau, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Mauritania, Mauritius, Mexico, Morocco, Mozambique, Myanmar, Namibia, Netherlands — for the Kingdom in Europe and for the Netherlands Antilles, New Zealand, Nicaragua, Nigeria, Norway, Pakistan, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Qatar, Romania, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent & the Grenadines, Senegal, Sierra Leone, Singapore, Slovak Republic, Slovenia, Solomon Islands, South Africa, Spain, Sri Lanka, Surinam, Swaziland, Sweden, Switzerland, Tanzania, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Uganda, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela, Zambia, and Zimbabwe. See Annex A, Bautista Paper, infra. Page 6; Rollo, p. 261. In compliance, Ambassador Bautista submitted to the Court on August 12, 1996, a Memorandum (the "Bautista Paper") consisting of 56 pages excluding annexes. This is the same document mentioned in footnote no. 1. Memorandum for Respondents, p. 13; Rollo, p. 268. CF Kilosbayan, Incorporated vs. Morato, 246 SCRA 540, July 17, 1995 for a

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12. 13. 14. 15. 16.

17. 18. 19 20. 21. 22. 23.

24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34 35. 36. 37. 38.

discussion on locus standi. See also the Concurring Opinion of Mr. Justice Vicente V. Mendoza in Tatad vs. Garcia, Jr., 243 SCRA 473, April 6, 1995, as well as Kilusang Mayo Uno Labor Center vs. Garcia, Jr., 239 SCRA 386, 414, December 23, 1994. Aquino, Jr. vs. Ponce Enrile, 59 SCRA 183, 196, September 17, 1974, cited in Bondoc vs. Pineda, 201 SCRA 792, 795, September 26, 1991. Guingona, Jr. vs. Gonzales, 219 SCRA 326, 337, March 1, 1993. See Tañada and Macapagal vs. Cuenco, et al., 103 Phil. 1051 for a discussion on the scope of "political question." Section 1, Article VIII, (par. 2). In a privilege speech on May 17, 1993, entitled "Supreme Court — Potential Tyrant?" Senator Arturo Tolentino concedes that this new provision gives the Supreme Court a duty "to intrude into the jurisdiction of the Congress or the President." I Record of the Constitutional Commission 436. Cf. Daza vs. Singson, 180 SCRA 496, December 21, 1989. Memorandum for Petitioners, pp. 14-16; Rollo, pp. 204-206. Par. 4, Article XVI, WTO Agreement, Uruguay Round of Multilateral Trade Negotiations, Vol. 1, p. 146. Also entitled "Declaration of Principles." The nomenclature in the 1973 Charter is identical with that in the 1987's. Philippine Political Law, 1962 Ed., p. 116. Bernas, The Constitution of the Philippines: A Commentary, Vol. II, 1988 Ed., p. 2. In the very recent case of Manila Prince Hotel vs. GSIS, G.R. No. 122156, February 3, 1997, p. 8, it was held that "A provision which lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not self-executing." 246 SCRA 540, 564, July 17, 1995. See also Tolentino vs. Secretary of Finance, G.R. No. 115455 and consolidated cases, August 25, 1995. 197 SCRA 52, 68, May 14, 1991. 224 SCRA 792, 817, July 30, 1993. Sec. 10, Article XII. Sec. 12, Article XII. Sec. 19, Art. II. Sec. 13, Art. XII. G.R. No. 122156, February 3, 1997, pp. 13-14. Sec. 1, Art. XII. Bautista Paper, p. 19. Preamble, WTO Agreement p. 137, Vol. 1, Uruguay Round of Multilateral Trade Negotiations. Emphasis supplied. Sec. 19, Article II, Constitution. III Records of the Constitutional Commission 252. Sec. 13, Article XII Constitution. Justice Isagani A. Cruz, Philippine Political Law, 1995 Ed., p. 13, quoting his own article entitled, "A Quintessential Constitution" earlier published in the San Beda Law

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Journal, April 1972; emphasis supplied. 39. Par. 4, Article XVI (Miscellaneous Provisions), WTO Agreement, p. 146, Vol. 1, Uruguay Round of Multilateral Trade Negotiations. 40. Memorandum for the Petitioners, p. 29; Rollo, p. 219. 41. Sec. 24, Article VI, Constitution. 42. Subsection (2), Sec. 28, Article VI, Constitution. 43. Sec. 2, Article II, Constitution. 44. Cruz, Philippine Political Law, 1995 Ed., p. 55. 45. Salonga and Yap, op cit 305. 46. Salonga, op. cit., p. 287. 47. Quoted in Paras and Paras, Jr., International Law and World Politics, 1994 Ed., p. 178. 47-A. Reagan vs. Commissioner of Internal Revenue, 30 SCRA 968, 973, December 27, 1969. 48. Trebilcock and Howse. The Regulation of International Trade, p. 14, London, 1995, cited on p. 55-56, Bautista Paper. 49. Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445. 50. Item 5, Sec. 5, Article VIII, Constitution. 51. Uruguay Round of Multilateral Trade Negotiations, Vol. 31, p. 25445. 52. Bautista Paper, p. 13. 53. See footnote 3 of the text of this letter. 54. Salonga and Yap, op cit., pp. 289-290. 55. The full text, without the signatures, of the Final Act is as follows: "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations 1. Having met in order to conclude the Uruguay Round of Multilateral Trade Negotiations, representatives of the governments and of the European Communities, members of the Trade Negotiations Committee, agree that the Agreement Establishing the World Trade Organization (referred to in the Final Act as the "WTO Agreement"), the Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial Services, as annexed hereto, embody the results of their negotiations and form an integral part of this Final Act. 2. By signing to the present Final Act, the representatives agree. "(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities with a view to seeking approval of the Agreement in accordance with their procedures; and (b) to adopt the Ministerial Declarations and Decisions." 3. The representatives agree on the desirability of acceptance of the WTO Agreement by all participants in the Uruguay Round of Multilateral Trade Negotiations (hereinafter referred to as "participants") with a view to its entry into force by 1 January 1995, or as early as possible thereafter. Not later than late 1994, Ministers will meet, in accordance with the final paragraph of the Punta del Este Copyright 1994-2014

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56. 57. 58. 59. 60. 61. 62.

63. 64. 65.

Ministerial Declarations, to decide on the international implementation of the results, including the timing of their entry into force. 4. The representatives agree that the WTO Agreement shall be open for acceptance as a whole, by signature or otherwise, by all participants pursuant to Article XIV thereof. The acceptance and entry into force of a Plurilateral Trade Agreement included in Annex 4 of the WTO Agreement shall be governed by the provisions of that Plurilateral Trade Agreement. 5. Before accepting the WTO Agreement, participants which are not contracting parties to the General Agreement on Tariffs and Trade must first have concluded negotiations for their accession to the General Agreement and become contracting parties thereto. For participants which are not contracting parties to the general Agreement as of the date of the Final Act, the Schedules are not definitive and shall be subsequently completed for the purpose of their accession to the General Agreement and acceptance of the WTO Agreement. 6. This Final Act and the texts annexed hereto shall be deposited with the Director-General to the CONTRACTING PARTIES to the General Agreement on Tariffs and Trade who shall promptly furnish to each participant a certified copy thereof. DONE at Marrakesh this fifteenth day of April one thousand nine hundred and ninety-four, in a single copy, in the English, French and Spanish languages, each text being authentic." Bautista Paper, p. 16. Bautista Paper, p. 16. Uruguay Round of Multilateral Trade Negotiations, Vol. I, pp. 137-138. See footnote 3 for complete text. Taken from pp. 63-85, "Respondent" Memorandum. Zarate vs. Olegario, G.R. No. 90655, October 7, 1996. San Sebastian College vs. Court of Appeals, 197 SCRA 138, 144, May 15, 1991; Commissioner of Internal Revenue vs. Court of Tax Appeals, 195 SCRA 444, 458 March 20, 1991; Simon vs. Civil Service Commission, 215 SCRA 410, November 5, 1992; Bustamante vs. Commissioner on Audit, 216 SCRA 134, 136, November 27, 1992. Paredes vs. Civil Service Commission, 192 SCRA 84, 94, December 4, 1990. "Sec. 21. No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the Members of the Senate." Reader's Digest, December 1996 issue, p. 28.

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SECOND DIVISION [G.R. No. 96161. February 21, 1992.] PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC., petitioners, YV COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION and STANDARD PHILIPS CORPORATION, respondents. Emeterio V. Soliven & Associates for petitioners. Narciso A. Manantan for private respondent. SYLLABUS 1. COMMERCIAL LAW; CORPORATION CODE; SECTION 18 THEREOF APPLICABLE ONLY WHEN CORPORATE NAMES ARE IDENTICAL. — Section 18 of the Corporation Code is applicable only when the corporate names in question are identical. In the instant case, there is no confusing similarity between Petitioners' and Private Respondent's corporate names as those of the Petitioners contain at least two words different from that of the Respondent. 2. ID.; CORPORATION; RIGHT TO USE ITS CORPORATE AND TRADE NAME, A PROPERTY RIGHT. — As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927), the Court declared that a corporation's right to use its corporate and trade name is a property right, a right in rem, which it may assert and protect against the world in the same manner as it may protect its tangible property, real or personal, against trespass or conversion. It is regarded, to a certain extent, as a property right and one which cannot be impaired or defeated by subsequent appropriation by another corporation in the same field (Red Line Transportation Co. vs. Rural Transit co., September 6, 1934, 60 Phil. 549). 3. ID.; ID.; IMPORTANCE OF CORPORATE NAME. — A name is peculiarly important as necessary to the very existence of a corporation. Its name is one of its attributes, an element of its existence, and essential to its identity (6 Fletcher Copyright 1994-2014

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[Perm Ed], pp. 3-4). The general rule as to corporations is that each corporation must have a name by which it is to sue and be sued and do all legal acts. The name of a corporation in this respect designates the corporation in the same manner as the name of an individual designates the person (Cincinnati Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10 NH 123); and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted. 4. ID.; ID.; CORPORATE NAME DISTINGUISHED FROM INDIVIDUAL'S NAME. — A corporation acquires its name by choice and need not select a name identical with or similar to one already appropriated by a senior corporation while an individual's name is thrust upon him (See Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A corporation can no more use a corporate name in violation of the rights of others that an individual can use his name legally acquired so as to mislead the public and injure another (Armington vs. Palmer, 21 RI 109, 42 A 308). 5. ID.; ID.; ID.; STATUTORY PROHIBITION PROVIDED IN SEC. 18 OF CORPORATION CODE; REQUISITES. — Our own Corporation Code, in its Section 18, expressly provides that: "No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing law. Where a change in the corporate name is approved, the commission shall issue an amended certificate of incorporation under the amended name." (Emphasis supplied) The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely: (1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2) the proposed name is either: (a) identical or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing law. 6. ID.; ID.; ID.; RIGHT TO EXCLUSIVE USE OF CORPORATE NAME DETERMINED BY PRIORITY OF ADOPTION; APPLIED IN CASE AT BAR. — The right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption (1 Thompson, p.80 citing Munn v. Americana Co., 82 N., Eq. 63 88 Atl. 30; San Francisco Oyster House v. Mihich, 75 Wash. 274, 134 Pac. 921). In this regard, there is no doubt with respect to Petitioners' prior adoption of the name "PHILIPS" as part of its corporate name. Petitioners Philips Electrical and Philips Industrial were incorporated on 29 August 1956 and 25 Copyright 1994-2014

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May 1956, respectively, while Respondent Standard Philips was issued a Certificate of Registration on 19 April 1982, twenty-six (26) years later (Rollo, p.16). Petitioner PEBV has also used the trademark "PHILIPS" on electrical lamps of all types and their accessories since 30 September 1922, as evidenced by Certificate of Registration No. 1651. 7. ID.; ID.; ID.; TEST IN DETERMINING EXISTENCE OF CONFUSING SIMILARITY; PROOF OF ACTUAL CONFUSION NOT NECESSARY. — In determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary care and discrimination. In so doing, the Court must look to the record as well as the names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). It is settled, however, that proof of actual confusion need not be shown. It suffices that confusion is probably or likely to occur (6 Fletcher [Perm Ed], pp. 107-108, enumerating a long line of cases). 8. ID.; ID.; ID.; INTENT OF SUBSEQUENT APPROPRIATOR OF NAME. — Petitioners pointed out that "[p]rivate respondent's choice of 'PHILIPS' as part of its corporate name [STANDARD PHILIPS CORPORATION] . . . tends to show said respondent's intention to ride on the popularity and established goodwill of said petitioner's business throughout the world." The subsequent appropriator of the name or one confusingly similar thereto usually seeks an unfair advantage, a free ride on another's goodwill (American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488). 9. ID.; ID.; ID.; RULE ON PROPOSED NAME. — True, under the Guidelines in the Approval of Corporate and Partnership Names formulated by the SEC, the proposed name "should not be similar to one already used by another corporation or partnership. If the proposed name contains a word already used as part of the firm name or style of a registered company, the proposed name must contain two other words different from the company already registered." It is then pointed out that Petitioners Philips Electrical and Philips Industrial have two words different from that of Private Respondent's name. 10. ID.; ID.; ID.; CORPORATION HAS EXCLUSIVE RIGHT TO THE USE OF ITS NAME WHICH MAY BE PROTECTED BY INJUNCTION; BASIS FOR SUCH PRINCIPLE. — A corporation has an exclusive right to the use of its name, which may be protected by injunction upon a principle similar to that upon which persons are protected in the use of trademarks and tradenames (18 C.J.S. 574). Such principle proceeds upon the theory that it is a fraud on the corporation which has Copyright 1994-2014

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acquired a right to that name and perhaps carried on its business thereunder, that another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name (6 Fletcher [Perm Ed.], pp. 39-40, citing Borden Ice Cream Co. v. Borden's Condensed Milk Co., 210 F 510).

DECISION

MELENCIO-HERRERA, J : p

Petitioners challenge the Decision of the Court of Appeals, dated 31 July 1990, in CA-GR Sp. No. 20067, upholding the Order of the Securities and Exchange Commission, dated 2 January 1990, in SEC-AC No. 202, dismissing petitioners' prayer for the cancellation or removal of the word "PHILIPS" for private respondent's corporate name. Petitioner Philips Export B.V. (PEBV), a foreign corporation organized under the laws of the Netherlands, although not engaged in business here, is the registered owner of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM under Certificate of Registration Nos. R-1641 and R-1674, respectively issued by the Philippine Patent Office (presently known as the Bureau of Patents, Trademarks and Technology Transfer). Petitioners Philips Electrical Lamps, Inc. (Philips Electrical, for brevity) and Philips Industrial Development, Inc. (Philips Industrial, for short), authorized users of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM, were incorporated on 29 August 1956 and 25 may 1956, respectively. All petitioner corporations belong to the PHILIPS Group of Companies. Respondent Standard Philips Corporation (Standard Philips), on the other hand, was issued a Certificate of Registration by respondent Commission on 19 May 1982. On 24 September 1984, Petitioners filed a letter complaint with the Securities & Exchange Commission (SEC) asking for the cancellation of the word "PHILIPS" from Private Respondent's corporate name in view of the prior registration with the Bureau of Patents of the trademark "PHILIPS" and the logo "PHILIPS SHIELD EMBLEM" in the name of Petitioner PEBV, and the previous registration of Petitioners Philips Electrical and Philips Industrial with the SEC. Copyright 1994-2014

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As a result of Private Respondent's refusal to amend its Articles of Incorporation, Petitioners filed with the SEC, on 6 February 1985, a Petition (SEC Case No. 2743), praying for the issuance of a Writ of Preliminary Injunction, alleging, among others, that Private Respondent's use of the word PHILIPS amounts to an infringement and clear violation of Petitioner's exclusive right to use the same considering that both parties engage in the same business. In its Answer, dated 7 March 1985, Private Respondent countered that Petitioner PEBV has no legal capacity to sue; that its use of its corporate name is not at all similar to Petitioners' trademark PHILIPS when considered in its entirety; and that its products consisting of chain rollers, belts, bearings and cutting saw are grossly different from Petitioners' electrical products. After conducting hearings with respect to the prayer for Injunction, the SEC Hearing Officer, on 27 September 1985, ruled against the issuance of such Writ. On 30 January 1987, the same Hearing Officer dismissed the Petition for lack of merit. In so ruling, the latter declared that inasmuch as the SEC found no sufficient ground for the granting of injunctive relief on the basis of the testimonial and documentary evidence presented, it cannot order the removal or cancellation of the word "PHILIPS" from Private Respondent's corporate name on the basis of the same evidence adopted in toto during trial on the merits. Besides, Section 18 of the Corporation Code (infra) is applicable only when the corporate names in question are identical. Here, there is no confusing similarity between Petitioners' and Private Respondent's corporate names as those of the Petitioners contain at least two words different from that of the Respondent. Petitioners' Motion for Reconsideration was likewise denied on 17 June 1987. LibLex

On appeal, the SEC en banc affirmed the dismissal declaring that the corporate names of Petitioners and Private Respondent hardly breed confusion inasmuch as each contains at least two different words and, therefore, rules out any possibility of confusing one for the other. On 30 January 1990, Petitioners sought an extension of time to file a Petition for Review on Certiorari before this Court, which Petition was later referred to the Court of Appeals in a Resolution dated 12 February 1990. In deciding to dismiss the petition on 31 July 1990, the Court of Appeals 1(1) swept aside Petitioners' claim that following the ruling in Converse Rubber Corporation v. Universal Converse Rubber Products, Inc., et al, (G.R. No. L-27906, Copyright 1994-2014

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January 8, 1987, 147 SCRA 154), the word PHILIPS cannot be used as part of Private Respondent's corporate name as the same constitutes a dominant part of Petitioners' corporate names. In so holding, the Appellate Court observed that the Converse case is not four-square with the present case inasmuch as the contending parties in Converse are engaged in a similar business, that is, the manufacture of rubber shoes. Upholding the SEC, the Appellate Court concluded that "private respondent's products consisting of chain rollers, belts, bearings and cutting saw are unrelated and non-competing with petitioners' products i.e. electrical lamps such that consumers would not in any probability mistake one as the source or origin of the product of the other." The Appellate Court denied Petitioners' Motion for Reconsideration on 20 November 1990, hence, this Petition which was given due course on 22 April 1991, after which the parties were required to submit their memoranda, the latest of which was received on 2 July 1991. In December 1991, the SEC was also required to elevate its records for the perusal of this Court, the same not having been apparently before respondent Court of Appeals. We find basis for petitioners' plea. As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927), the Court declared that a corporation's right to use its corporate and trade name is a property right, a right in rem, which it may assert and protect against the world in the same manner as it may protect its tangible property, real or personal, against trespass or conversion. It is regarded, to a certain extent, as a property right and one which cannot be impaired or defeated by subsequent appropriation by another corporation in the same field (Red Line Transportation Co. vs. Rural Transit Co., September 6, 1934, 60 Phil 549). A name is peculiarly important as necessary to the very existence of a corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co, 40 W Va 530, 23 SE 792). Its name is one of its attributes, an element of its existence, and essential to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations is that each corporation must have name by which it is to sue and be sued and do all legal acts. The name of a corporation in this respect designates the corporation in the same manner as the name of an individual designates the person (Cincinnati Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10 NH 123); and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted (Federal Copyright 1994-2014

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Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165, 26 A 36). Cdpr

A corporation acquires its name by choice and need not select a name identical with or similar to one already appropriated by a senior corporation while an individual's name is thrust upon him (See Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A corporation can no more use a corporate name in violation of the rights of others than an individual can use his name legally acquired so as to mislead the public and injure another (Armington vs. Palmer, 21 RI 109, 42 A 308). Our own Corporation Code, in its Section 18, expressly provides that: "No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing law. Where a change in the corporate name is approved, the commission shall issue an amended certificate of incorporation under the amended name." (Emphasis supplied).

The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely: (1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2)

the proposed name is either: (a)

identical or

(b)

deceptively or confusingly similar

to that of any existing corporation or to any other name already protected by law; or (c)

patently deceptive, confusing or contrary to existing law.

The right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption (1 Thomson, p.80 citing Munn v. Americana Co., 82 N., Eq. 63, 88 Atl. 30; San Francisco Oyster House v. Mihich, 75 Wash, 274, 134 Pac. 921). In this regard, there is no doubt with respect to Petitioners' prior adoption of the name "PHILIPS" as part of its corporate name. Copyright 1994-2014

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Petitioners Philips Electrical and Philips Industrial were incorporated on 29 August 1956 and 25 May 1956, respectively, while Respondent Standard Philips was issued a Certificate of Registration on 19 April 1982, twenty-six (26) years later (Rollo, p.16). Petitioner PEBV has also used the trademark "PHILIPS" on electrical lamps of all types and their accessories since 30 September 1922, as evidenced by Certificate of Registration No. 1651. The second requisite no less exists in this case. In determining the existence of confusing similarity in corporate names, the test is whether the similarity is such as to mislead a person using ordinary care and discrimination. In so doing, the Court must look to the record as well as the names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). While the corporate names of Petitioners and Private Respondent are not identical, a reading of Petitioner's corporate names, to wit: PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC., inevitably leads one to conclude that "PHILIPS" is, indeed, the dominant word in that all the companies affiliated or associated with the principal corporation, PEBV, are known in the Philippines and abroad as the PHILIPS Group of Companies. cdll

Respondents maintain, however, that Petitioners did not present an iota of proof of actual confusion or deception of the public much less a single purchaser or their product who has been deceived or confused or showed any likelihood of confusion. It is settled, however, that proof of actual confusion need not be shown. It suffices that confusion is probably or likely to occur (6 Fletcher [Perm Ed], pp. 107-108, enumerating a long line of cases). It may be that Private Respondent's products also consist of chain rollers, belts, bearing and the like while petitioners deal principally with electrical products. It is significant to note, however, that even the Director of Patents had denied Private Respondent's application for registration of the trademarks "Standard Philips & Device" for chains, rollers, belts, bearings and cutting saw. That office held that PEBV "had shipped to its subsidiaries in the Philippines equipment, machines and their parts which fall under international class where chains, rollers, belts, bearings and cutting saw, the goods in connection with which Respondent is seeking to register "STANDARD PHILIPS . . . also belong" (Inter Partes Case No. 2010, June 17, 1988, SEC Rollo). Furthermore, the records show that among Private Respondent's primary purposes in its Articles of Incorporation (Annex D, Petition; p. 37, Rollo) are the Copyright 1994-2014

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following: "To buy, sell, barter, trade, manufacture, import, export or otherwise acquire, dispose of, and deal in and deal with any kind of goods, wares, and merchandise such as but not limited to plastics, carbon products, office stationery and supplies, hardware parts, electrical wiring devices, electrical component parts and/or complement of industrial, agricultural or commercial machineries, constructive supplies, electrical supplies and other merchandise which are or may become articles of commerce except food, drugs, and cosmetics and to carry on such business as manufacturer, distributor, dealer, indentor, factor, manufacturer's representative capacity for domestic or foreign companies." (emphasis ours).

For its part, Philips Electrical also includes, among its primary purposes, the following: "To develop, manufacture and deal in electrical products, including electronic, mechanical and other similar products . . . ." (p. 30, Record of SEC Case No. 2743)

Given Private Respondent's aforesaid underlined primary purpose, nothing could prevent it from dealing in the same line of business of electrical devices, products or supplies which fall under its primary purposes. Besides, there is showing that Private Respondent not only manufactured and sold ballasts for fluorescent lamps with their corporate name printed thereon but also advertised the same as, among others, Standard Philips (TSN, before the SEC, pp. 14, 17, 25, 26, 37-42, June 14, 1985; pp. 16-19, July 25, 1985). As aptly pointed out by Petitioners, "[p]rivate respondent's choice of 'PHILIPS' as part of its corporate name [STANDARD PHILIPS CORPORATION] . . . tends to show said respondent's intention to ride on the popularity and established goodwill of said petitioner's business throughout the world" (Rollo, p. 137). The subsequent appropriator of the name or one confusingly similar thereto usually seeks an unfair advantage, a free ride on another's goodwill (American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488). prLL

In allowing Private Respondent the continued use of its corporate name, the SEC maintains that the corporate names of Petitioners PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC. contain at least two words different from that of the corporate name of respondent STANDARD PHILIPS CORPORATION, which words will readily identify Private Respondent from Petitioners and vice-versa. Copyright 1994-2014

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True, under the Guidelines in the Approval of Corporate and Partnership Names formulated by the SEC, the proposed name "should not be similar to one already used by another corporation or partnership. If the proposed name contains a word already used as part of the firm name or style of a registered company, the proposed name must contain two other words different from the company already registered" (Emphasis ours). It is then pointed out that Petitioners Philips Electrical and Philips Industrial have two words different from that of Private Respondent's name. What is lost sight of, however, is that PHILIPS is a trademark or trade name which was registered as far back as 1922. Petitioners, therefore, have the exclusive right to its use which must be free from any infringement by similarity. A corporation has an exclusive right to the use of its name, which may be protected by injunction upon a principle similar to that upon which persons are protected in the use of trademarks and tradenames (18 C.J.S. 574). Such principle proceeds upon the theory that it is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business thereunder, that another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name (6 Fletcher [Perm Ed], pp. 39-40, citing Borden Ice Cream Co. v. Borden's Condensed Milk Co., 210 F 510). Notably, too, Private Respondents' name actually contains only a single word, that is, "STANDARD", different from that of Petitioners inasmuch as the inclusion of the term "Corporation" or "Corp." merely serves the purpose of distinguishing the corporation from partnerships and other business organizations. The fact that there are other companies engaged in other lines of business using the word "PHILIPS" as part of their corporate names is no defense and does not warrant the use by Private Respondent of such word which constitutes an essential feature of Petitioners' corporate name previously adopted and registered and having acquired the status of a well-known mark in the Philippines and internationally, as well (Bureau of Patents Decision No. 88-35 [TM], June 17, 1988, SEC Records). In support of its application for the registration of its Articles of Incorporation with the SEC, Private Respondent had submitted an undertaking "manifesting its willingness to change its corporate name in the event another person, firm or entity has acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it." Private Respondent must now be held to its undertaking. cdll

"As a general rule, parties organizing a corporation must choose a name Copyright 1994-2014

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at their peril; and the use of a name similar to one adopted by another corporation, whether a business or a nonbusiness or nonprofit organization if misleading and likely to injure it in the exercise of its corporate functions, regardless of intent, may be prevented by the corporation having the prior right, by a suit for injunction against the new corporation to prevent the use of the name (American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc. 89 App DC 269, 191 F 2d 488, 27 ALR 2d 948)."

WHEREFORE, the Decision of the Court of Appeals dated 31 July 1990, and its Resolution dated 20 November 1990, are SET ASIDE and a new one entered ENJOINING private respondent from using "PHILIPS" as a feature of its corporate name, and ORDERING the Securities and Exchange Commission to amend private respondent's Articles of Incorporation by deleting the word PHILIPS from the corporate name of private respondent. No costs. SO ORDERED. Paras, Padilla, Regalado and Nocon, JJ., concur. )RRWQRWHV 1.

Second Division, composed of Justice Jose A. R. Melo, Chairman, Justice Antonio M. Martinez, Ponente, and Justice Nicolas P. Lapeña, Jr., Member.

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THIRD DIVISION [G.R. No. 101897. March 5, 1993.] LYCEUM OF THE PHILIPPINES, INC., petitioner, YV COURT OF APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM, INC., respondents. Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for petitioner. Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices for respondents. Froilan Siobal for Western Pangasinan Lyceum. SYLLABUS 1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY EXISTING CORPORATION, PROHIBITED; CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM". — The Articles of Incorporation of a corporation must, among other things, set out the name of the corporation. Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate names are concerned: "Section 18. Corporate name. — No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name." The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly Copyright 1994-2014

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similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations. We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. 2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. — It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that word, although originally a generic, has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. The doctrine of secondary meaning originated in the field of trademark law. Its application has, however, been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. In Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of secondary meaning was elaborated in the following terms: " . . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public which has to do with schools). The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive appropriation with reference to an article in the market, because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that, in that trade and to that group of the purchasing public, the word or phrase has come to mean that the article was his Copyright 1994-2014

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produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. . . . No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If there was any of this kind, the same tend to prove only that the appellant had been using the disputed word for a long period of time. . . . In other words, while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time, this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. Consequently, the allegations of the appellant in its first two assigned errors must necessarily fail." We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but not registered with the SEC because they have not adopted the corporate form of organization. 3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE WHETHER THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER CORPORATE ENTITY'S NAME. — petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other.

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DECISION

FELICIANO, J : p

Petitioner is an educational institution duly registered with the Securities and Exchange Commission ("SEC"). When it first registered with the SEC on 21 September 1950, it used the corporate name Lyceum of the Philippines, Inc. and has used that name ever since. On 24 February 1984, petitioner instituted proceedings before the SEC to compel the private respondents, which are also educational institutions, to delete the word "Lyceum" from their corporate names and permanently to enjoin them from using "Lyceum" as part of their respective names. prLL

Some of the private respondents actively participated in the proceedings before the SEC. These are the following, the dates of their original SEC registration being set out below opposite their respective names: Western Pangasinan Lyceum — 27 October 1950 Lyceum of Cabagan — 31 October 1962 Lyceum of Lallo, Inc. — 26 March 1972 Lyceum of Aparri — 28 March 1972 Lyceum of Tuao, Inc. — 28 March 1972 Lyceum of Camalaniugan — 28 March 1972

The following private respondents were declared in default for failure to file an answer despite service of summons: Buhi Lyceum; Central Lyceum of Catanduanes; Lyceum of Eastern Mindanao, Inc.; and Copyright 1994-2014

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Lyceum of Southern Philippines

Petitioner's original complaint before the SEC had included three (3) other entities: 1.

The Lyceum of Malacanay;

2.

The Lyceum of Marbel; and

3.

The Lyceum of Araullo

The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the Lyceum of Marbel, for failure to serve summons upon these two (2) entities. The case against the Liceum of Araullo was dismissed when that school motu proprio change its corporate name to "Pamantasan ng Araullo." The background of the case at bar needs some recounting. Petitioner had sometime before commenced in the SEC a proceeding (SEC-Case No. 1241) against the Lyceum of Baguio, Inc. to require it to change its corporate name and to adopt another name not "similar [to] or identical" with that of petitioner. In an Order dated 20 April 1977, Associate Commissioner Julio Sulit held that the corporate name of petitioner and that of the Lyceum of Baguio, Inc. were substantially identical because of the presence of a "dominant" word, i.e., "Lyceum," the name of the geographical location of the campus being the only word which distinguished one from the other corporate name. The SEC also noted that petitioner had registered as a corporation ahead of the Lyceum of Baguio, Inc. in point of time, 1 (1)and ordered the latter to change its name to another name "not similar or identical [with]" the names of previously registered entities. cdrep

The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme Court in a case docketed as G.R. No. L-46595. In a Minute Resolution dated 14 September 1977, the Court denied the Petition for Review for lack of merit. Entry of judgment in that case was made on 21 October 1977. 2(2) Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then wrote all the educational institutions it could find using the word "Lyceum" as part of their corporate name, and advised them to discontinue such use of "Lyceum." When, with the passage of time, it became clear that this recourse had failed, petitioner instituted before the SEC SEC-Case No. 2579 to enforce what petitioner claims as its proprietary right to the word "Lyceum." The SEC hearing officer rendered a decision sustaining petitioner's claim to an exclusive right to use the word "Lyceum." The hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc. case Copyright 1994-2014

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(SEC-Case No. 1241) and held that the word "Lyceum" was capable of appropriation and that petitioner had acquired an enforceable exclusive right to the use of that word. On appeal, however, by private respondents to the SEC En Banc, the decision of the hearing officer was reversed and set aside. The SEC En Banc did not consider the word "Lyceum" to have become so identified with petitioner as to render use thereof by other institutions as productive of confusion about the identity of the schools concerned in the mind of the general public. Unlike its hearing officer, the SEC En Banc held that the attaching of geographical names to the word "Lyceum" served sufficiently to distinguish the schools from one another, especially in view of the fact that the campuses of petitioner and those of the private respondents were physically quite remote from each other. 3(3) Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28 June 1991, however, the Court of Appeals affirmed the questioned Orders of the SEC En Banc. 4(4) Petitioner filed a motion for reconsideration, without success. Before this Court, petitioner asserts that the Court of Appeals committed the following errors: 1. The Court of Appeals erred in holding that the Resolution of the Supreme Court in G.R. No. L-46595 did not constitute stare decisis as to apply to this case and in not holding that said Resolution bound subsequent determinations on the right to exclusive use of the word Lyceum. 2. The Court of Appeals erred in holding that respondent Western Pangasinan Lyceum, Inc. was incorporated earlier than petitioner. 3. The Court of Appeals erred in holding that the word Lyceum has not acquired a secondary meaning in favor of petitioner. 4. The Court of Appeals erred in holding that Lyceum as a generic word cannot be appropriated by the petitioner to the exclusion of others. 5(5)

We will consider all the foregoing ascribed errors, though not necessarily seriatim. We begin by noting that the Resolution of the Court in G.R. No. L-46595 does not, of course, constitute res adjudicata in respect of the case at bar, since there is no identity of parties. Neither is stare decisis pertinent, if only because the SEC En Banc itself has re-examined Associate Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute Resolution of the Court in G.R. No. L-46595 was not a reasoned adoption of the Sulit ruling. Copyright 1994-2014

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The Articles of Incorporation of a corporation must, among other things, set out the name of the corporation. 6(6) Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate names are concerned: "SECTION 18. Corporate name. — No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name." (Emphasis supplied)

The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the reduction of difficulties of administration and supervision over corporations. 7(7) We do not consider that the corporate names of private respondent institutions are "identical with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. LLphil

Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus, Pericles and Lycurgus frequented by the youth for exercise and by the philosopher Aristotle and his followers for teaching." 8(8) In time, the word "Lyceum" became associated with schools and other institutions providing public lectures and concerts and public discussions. Thus today, the word "Lyceum" generally refers to a school or an institution of learning. While the Latin word "lyceum" has been incorporated into the English language, the word is also found in Spanish (liceo) and in French (lycee). As the Court of Appeals noted in its Decision, Roman Catholic schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Copyright 1994-2014

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Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo de Albay." 9(9) "Lyceum" is in fact as generic in character as the word "university." In the name of the petitioner, "Lyceum" appears to be a substitute for "university;" in other places, however, "Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college. It may be (though this is a question of fact which we need not resolve) that the use of the word "Lyceum" may not yet be as widespread as the use of "university," but it is clear that a not inconsiderable number of educational institutions have adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo" denotes a school or institution of learning, it is not unnatural to use this word to designate an entity which is organized and operating as an educational institution. It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that that word, although originally a generic, has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. The doctrine of secondary meaning originated in the field of trademark law. Its application has, however, been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. 10 (10)In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11(11) the doctrine of secondary meaning was elaborated in the following terms: " . . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." 12(12)

The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public which has to do with schools). The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive appropriation with reference to an article in the market, because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article Copyright 1994-2014

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that, in that trade and to that group of the purchasing public, the word or phrase has come to mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. Consequently, the same doctrine or principle cannot be made to apply where the evidence did not prove that the business (of the plaintiff) has continued for so long a time that it has become of consequence and acquired a good will of considerable value such that its articles and produce have acquired a well-known reputation, and confusion will result by the use of the disputed name (by the defendant) (Ang Si Heng vs. Wellington Department Store, Inc., 92 Phil. 448). llcd

With the foregoing as a yardstick, [we] believe the appellant failed to satisfy the aforementioned requisites. No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If there was any of this kind, the same tend to prove only that the appellant had been using the disputed word for a long period of time. Nevertheless, its (appellant) exclusive use of the word (Lyceum) was never established or proven as in fact the evidence tend to convey that the cross-claimant was already using the word 'Lyceum' seventeen (17) years prior to the date the appellant started using the same word in its corporate name. Furthermore, educational institutions of the Roman Catholic Church had been using the same or similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate), 'Liceo de Masbate,' 'Liceo de Albay' long before appellant started using the word 'Lyceum'. The appellant also failed to prove that the word 'Lyceum' has become so identified with its educational institution that confusion will surely arise in the minds of the public if the same word were to be used by other educational institutions. In other words, while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time, this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. Consequently, the allegations of the appellant in its first two assigned errors must necessarily fail." 13(13) (Emphasis partly in the original and partly supplied)

We agree with the Court of Appeals. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word Copyright 1994-2014

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"Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. It may be noted also that at least one of the private respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen (17) years before the petitioner registered its own corporate name with the SEC and began using the word "Lyceum." It follows that if any institution had acquired an exclusive right to the word "Lyceum," that institution would have been the Western Pangasinan Lyceum, Inc. rather than the petitioner institution. cdphil

In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc. failed to reconstruct its records before the SEC in accordance with the provisions of R.A. No. 62, which records had been destroyed during World War II, Western Pangasinan Lyceum should be deemed to have lost all rights it may have acquired by virtue of its past registration. It might be noted that the Western Pangasinan Lyceum, Inc. registered with the SEC soon after petitioner had filed its own registration on 21 September 1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed to have lost its rights under its original 1933 registration, appears to us to be quite secondary in importance; we refer to this earlier registration simply to underscore the fact that petitioner's use of the word "Lyceum" was neither the first use of that term in the Philippines nor an exclusive use thereof. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but not registered with the SEC because they have not adopted the corporate form of organization. We conclude and so hold that petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other. WHEREFORE, the petitioner having failed to show any reversible error on the part of the public respondent Court of Appeals, the Petition for Review is DENIED for lack of merit, and the Decision of the Court of Appeals dated 28 June 1991 is hereby AFFIRMED. No pronouncement as to costs. LexLib

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SO ORDERED. Bidin, Davide, Jr., Romero and Melo, JJ ., concur. Gutierrez, Jr., J ., on terminal leave. )RRWQRWHV 1. 2. 3. 4. 5. 6. 7.

8. 9.

10.

11. 12. 13.

Rollo, pp. 54-61. Id., pp. 62-63. Records, pp. 6-8, 10-16. Rollo, pp. 42-51. Petition for Review, p. 8; Rollo, p. 16. Section 14, Corporation Code. Red Line Transportation Co. v. Rural Transit Co., 60 Phil. 549 (1934). See also Universal Mills Corp. v. Universal Textile Mills, Inc., 78 SCRA 62 (1977); and Philippine First Insurance Co., Inc. v. Hartigan, 34 SCRA 252 (1970). Webster's Geographical Dictionary, p. 643 (1949). Decision, Court of Appeals, Rollo, p. 46. In the preceding century, "Liceo" was also used to designate an association devoted to the promotion of the arts and literature; as in the "Liceo Artistico Literario de Manila." (see L.M. Guerrero, "The First Filipino: A Biography of Jose Rizal" 73 [1969]). 6 Fletcher, Cyclopedia of Corporations, Section 2423 (Permanent ed., 1968); Burnside Veneer Co. v. New Burnside Veneer Co. 247 S.W. 2d. 524 (1952); Economy Food Products Co. v. Economy Grocery Stores Corp., 183 N.E. 49 1932). 65 SCRA 575 (1975). 65 SCRA at 576. Rollo, pp. 46-47.

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EN BANC [G.R. No. L-14761. January 28, 1961.] ARCE SONS AND COMPANY, SHWLWLRQHU, YV SELECTA BISCUIT COMPANY, INC, ET AL.,UHVSRQGHQWV.

[G.R. No. 17981. January 28, 1961.] ARCE SONS AND COMPANY, SODLQWLIIDSSHOOHH, YV. SELECTA BISCUIT COMPANY, INC.,GHIHQGDQWDSSHOODQW. 0DQXHO2&KDQand5DPRQ6(UHQHWDfor plaintiff-appellee. (9ROWDLUH*DUFLDfor defendant-appellant. SYLLABUS 1. TRADEMARKS AND TRADE NAMES; SECONDARY MEANING OF BUSINESS NAME. — Although the word "SELECTA" may be an ordinary or common word in the sense that it may be used or employed by any one in promoting his business or enterprise, once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge or authenticity, it may acquire a secondary meaning as to be exclusively associated with its products and business. In this sense, its use by another may lead to confusion in trade and cause damage to its business. 2. ID.; ID.; WHEN ITS USE BECOMES ENTITLED TO PROTECTION. — Petitioner used the word "SELECTA" as a trade-mark and as such the law gives it protection and guarantees its use to the exclusion of all others. It is in this sense that the law postulates that "The ownership or possession of a trade-mark, . . . shall be recognized and protected in the same manner and to the same extent, as are other property rights known to the law," thereby giving to any person entitled to the exclusive use of such trade-mark the right to recover damages in a civil action from any person who may have sold goods of similar kind bearing such trade-mark Copyright 1994-2014

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(Sections 2-A and 23, Republic Act No. 166, as amended.) 3. ID.; ID.; ID.; WHEN REASON FOR USE OR SAME NAME BY ANOTHER NOT TENABLE. — The suggestion that the name "SELECTA" was chosen merely as a translation from a Chinese word "Ching Suan" meaning "mapili" in the dialect is betrayed by the very manner of its selection, for if the only purpose is to make an English translation of that word and not to compete with the business of petitioner, why choose the word "SELECTA", a Spanish word, and not "SELECTED", the English equivalent thereof, as was done by the other well-known enterprises ?

DECISION

BAUTISTA ANGELO, - : p

On August 31, 1955, Selecta Biscuit Company, Inc., hereinafter referred to as respondent, filed with the Philippine Patent Office a petition for the registration of the word "SELECTA" as trade-mark to be used on its bakery products alleging that it is in actual use thereof for not less than two months before said date and that "no other person, partnership, corporation, or association . . . has the right to use said trade-mark in the Philippines, either in the identical form or in any such near resemblance thereto, as might be calculated to deceive." Its petition was referred to an examiner for study who found that the trade-mark sought to be registered resembles the word "SELECTA" used by Arce Sons and Company, hereinafter referred to as petitioner, in its milk and ice cream products so that its very use by respondent will cause confusion as to the origin of their respective goods. Consequently, he recommended that the application be refused. However, upon reconsideration, the Patent Office ordered the publication of the application - for purposes of opposition. In due time, petitioner filed its opposition thereto on several grounds, among which are: (1) that the mark "SELECTA" had been continuously used by petitioner in the manufacture and sale of its products, including cakes, bakery products, milk and ice cream, from the time of its organization and even prior thereto by its predecessor-in-interest, Ramon Arce; (2) that the mark "SELECTA" has already become identified with the name of petitioner and its business; (3) that petitioner had warned respondent not to use said mark because it was already being used by the Copyright 1994-2014

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former, but that the latter ignored said warning; (4) that respondent is using the word "SELECTA" as a trade-mark in bakery products in unfair competition with the products of petitioner thus resulting in confusion in trade; (5) that the mark to which the application of respondent refers has striking resemblance, both in appearance and meaning, to petitioner's mark as to be mistaken therefore by the public and cause respondent's goods to be sold as petitioner's; and (6) that actually a complaint has been filed by petitioner against respondent for unfair competition in the Court of First Instance of Manila asking for damages and for the issuance of a writ of injunction against respondent enjoining the latter from continuing with the use of said mark. On September 28, 1958, the Court of First Instance of Manila rendered decision in the unfair competition case perpetually enjoining respondent from using the name "SELECTA" as a trade-mark on the goods manufactured and/or sold by it and ordering it to pay petitioner by way of damages all the profits it may have realized by the use of said name, plus the sum of P5,000.00 as attorney's fees and costs of suit. From this decision, respondent brought the matter on appeal to the Court of Appeals wherein the case was docketed as CA-G. R. No. 24017-R. Inasmuch as the issues of facts in the case for unfair competition are substantially identical with those raised before the Patent Office, the parties, at the hearing thereof, agreed to submit the evidence they have introduced before the Court of First Instance of Manila to said office, and on the strength thereof, the Director of Patents, on December 7, 1958, rendered decision dismissing petitioner's opposition and stating that the registration of the trademark "SELECTA" in favor of applicant Selecta Biscuit Company, Inc., will not cause confusion or mistake nor will deceive the purchasers as to cause damage to petitioner. Hence, petitioner interposed the present petition for review. On September 7, 1960, this Court issued a resolution of the following tenor: "In G.R. No. L-14761 (Arce Sons and Company vs. Selecta Biscuit Company, Inc., et al.), considering that the issues raised and evidence presented in this appeal are the same as those involved and presented in Civil Case No. 32907, entitled Arce Sons and Company vs. Selecta Biscuit Company, Inc. of the Court of First Instance of Manila, presently pending appeal in the Court of Appeals, docketed as CA-G.R. No. 24017-R, the Court resolved to require the parties, or their counsel, to inform this Court why the appeal pending before the Court of Appeals should not be forwarded to this Court in order that the two cases may be considered and jointly decided, to avoid any conflicting decision, pursuant to the provisions of sections 17, paragraph 5, of the Judiciary Act of Copyright 1994-2014

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1948 (Republic Act No. 296)."

And having both petitioner and respondent manifested in writing that they do not register any objection that the case they submitted on appeal to the Court of Appeals be certified to this Court so that it may be consolidated with the present case, the two cases are now before us for consolidated decision. The case for petitioner is narrated in the decision of the court DTXR as follows: "In 1933, Ramon Arce, predecessor in interest of the plaintiff, started a milk business in Novaliches, Rizal, using the name 'SELECTA' as a trade name as well as a trade-mark. He began selling and distributing his products to different residences, restaurants and offices, in bottles on the caps of which were inscribed the words 'SELECTA FRESH MILK'. As his business prospered, he thought of expanding and, in fact, he expanded his business by establishing a store at Nos. 711-713 Lepanto Street. While there, he began to cater, in addition to milk, ice cream, sandwiches and other food products. As his catering and ice cream business prospered in a big way, he placed a big signboard in his establishment with the name 'SELECTA' inscribed thereon. The signboard was placed right in front of the said store. For the sake of efficiency, the Novaliches place was made the pasteurizing plant and its products were distributed through the Lepanto store. Special containers made of tin cans with the word 'SELECTA' written on their covers and 'embossed or blown' on the bottles themselves were used. Similarly, exclusive bottles for milk products were ordered from Getz Brothers with the word 'SELECTA' blown on them. The sandwiches which were sold and distributed were wrapped in carton boxes with covers bearing the name 'SELECTA'. To the ordinary cars being used for the delivery of his products to serve outside orders were added to a fleet of five (5) delivery trucks with the word 'SELECTA' prominently painted on them. Sales were made directly at the Lepanto store or by means of deliveries to specified addresses, restaurants and offices inside Manila and its suburbs and sometimes to customers in the provinces. As time passed, new products were produced for sale, such as cheese (cottage cheese) with special containers especially ordered from the Philippine Education Company with the name 'Selecta' written on their covers. "The war that broke out on December 8, 1941, did not stop Ramon Arce from continuing with his business. After a brief interruption of about a month, that is, during the end of January, 1942, and early February, 1942, he resumed his business using the same trade-name and trade-mark, but this time, on a larger scale. He entered the restaurant business. Dairy products, ice cream, milk, sandwiches continued to be sold and distributed by him. However, Ramon Arce was again forced to discontinue the business on October, 1944, because time Copyright 1994-2014

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was beginning to be precarious. American planes started to bomb Manila and one of his sons Eulalio Arce, who was/is managing the business, was seized and jailed by the Japanese. Liberation came and immediately thereafter, Ramon Arce once more resumed his business, even more actively, by adding another store located at the corner of Lepanto and Azcarraga Streets. Continuing to use the name 'Selecta', he added bakery products to his line of business. With a firewood type of oven, about one-half the size of the courtroom, he made his own bread, cookies, pastries and assorted bakery products. Incidentally, Arce's bakery was transferred to Balintawak, Quezon City — another expansion of his business — where the bakery products are now being baked thru the use of firewood, electric and gas oven. These bakery products, like his other products, are being sold at the store itself and/or delivered to people ordering them in Manila and its suburbs, and even Baguio. Like the other products, special carton boxes in different sizes, according to the sizes of the bakery products, with the name 'Selecta' on top of the covers are provided for these bakery products. For the cakes, special boxes and labels reading 'Selecta Cakes for all occasions' are made. For the milk products, special bottle caps and bottles with the colored words 'Quality Always Selecta Fresh Milk, One Pint' inscribed and blown on the sides of the bottles — an innovation from the old bottles and caps used formerly. Similar, special boxes with the name 'Selecta' are provided for fried chicken sold to customers. "Business being already well established, Ramon Arce decided to retire, so that his children can go on with the business. For this purpose, he transferred and leased to them all his rights, interests and participations in the business, including the use of the name 'Selecta' sometime in the year 1950, at a monthly rental of P10,000.00, later reduced to P6,500.00. He further wrote the Bureau of Commerce a letter dated February 10, 1950, requesting cancellation of the business name 'Selecta Restaurant' to give way to the registration of the name 'Selecta' and asked that the same be registered in the name of Arce Sons & Company, a co-partnership entered into by and among his children on February 10, 1950. Said co-partnership was organized, so its articles of co-partnership state, 'to conduct a first class restaurant business; to engage in the manufacture and sale of ice cream, milk, cakes and other dairy and bakery products; and to carry on such other legitimate business as may produce profit'; Arce Sons & Company has thus continued the lucrative business of their predecessor in interest. It is now, and has always been, engaged in the restaurant business, the sale of milk, and the production and sale of cakes, dairy products and bakery products. Arce Sons & Company are now making bakery products like bread rolls, pan de navarro, pan de sal, and other new types of cookies and biscuits of the round, hard and other types, providing therefor special boxes with the name 'Selecta'. Copyright 1994-2014

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"Pursuing the policy of expansion adopted by their predecessor, Arce Sons & Company established another store — the now famous 'Selecta Dewey Boulevard', with seven (7) delivery trucks with the name 'Selecta' conspicuously painted on them, to serve, deliver and cater to customers in and outside of Manila."

The case for respondent, on the other hand, is expressed as follows: "Defendant was organized and registered as a corporation under the name and style of Selecta Biscuit Company, Inc. on March 2, 1955 (Exhibit 2; Exhibit 2-A; t.s.n., p. 3, April 17, 1958) but which started operation as a biscuit factory on June 20, 1955 (t.s.n., p. 3, id). The name 'Selecta' was chosen by the organizers of defendant who are Chinese citizens as a translation of the Chinese word "Ching Suan' which means 'mapili' in Tagalog, and 'Selected' in English (t.s.n. p. 4, id.). Thereupon, the Articles of Incorporation of Selecta Biscuit Company, Inc. were registered with the Securities and Exchange Commission (t.s.n., p. 5, id), and at the same time registered as a business name with the Bureau of Commerce which issued certificate of registration No. 55594 (Exhibit 3; Exhibit 3-A). The same name Selecta Biscuit Company, Inc., was also subsequently registered with the Bureau of Internal Revenue which issued Registration Certificate No. 35764 (Exhibit 4, t.s.n., p. 6 Id.). Inquiries were also made with the Patent Office of the Philippines in connection with the registration of the name 'Selecta'; after an official of the Patent referred to index cards information was furnished to the effect that defendant could register the name 'Selecta' with the Bureau of Patents (t.s.n., p. 7 id.). Accordingly, the corresponding petition for registration of trade-mark was filed (Exh. 5, 5-A, Exhibit 5-B). Defendant actually operated its business factory on June 20, 1955, while the petition for registration of trade-mark 'Selecta' was filed with the Philippine Patent Office only on September 1, 1955, for the reason that the Patent Office informed the defendant that the name should first be used before registration (t.s.n., p. 8, id.). The factory of defendant is located at Tuason Avenue, Northern Hills, Malabon, Rizal, showing plainly on its wall facing the streets the name 'SELECTA BISCUIT COMPANY, INC.' (Exh. 6, 6-A, 6-B, t.s.n., p. 9, id.). It is significant to note that Eulalio Arce, Managing Partner of the plaintiff resided and resides near the defendant's factory, only around 150 meters away; in fact, Eulalio Arce used to pass in front of the factory of defendant while still under construction and up to the present time (t.s.n., pp. 9, 10, id.). Neither Eulalio Arce nor any other person in representation of the plaintiff complained to the defendant about the use of the name 'Selecta Biscuit' until the filing of the present complaint. "There are other factories using 'Selecta' as trade-mark for biscuits (t.s.n., Copyright 1994-2014

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p. 12; Exh. 7, 7-A, 7-B; Exhibits 8, 8-A, 8-B; Exhibits 9, 9-A; 9-B); defendant in fact uses different kinds of trademarks (Exhibits 10, 10-A, to 10-W, t.s.n., p. 17). "The biscuits, cookies, and crackers manufactured and sold by defendant are wrapped in cellophane pouches and placed inside tin can (Exh. 11; t.s.n. p. 19); the products of defendant are sold through the length and breadth of the Philippines through agents with more than 600 stores as customers buying on credit (t.s.n., pp. 19, 20, Exh. 12; t.s.n., p. 10, June 20, 1958). Defendant employs more than one hundred (100) laborers and employees presently although it started with around seventy (70) employees and laborers (t.s.n., p. 24); its present capitalization fully paid for is Two Hundred Thirty Four Thousand Pesos (P234,000.00) additional capitalizations were duly authorized by the Securities and Exchange Commission (Exhs. 13, 13-A); there was no complaint whatsoever from plaintiff until plaintiff saw defendant's business growing bigger and bigger and flourishing (t.s.n., p. 21) when plaintiff filed its complaint. "Defendant advertises its products through radio broadcasts and spot announcements (Exhs. 14, 14-A to 14-L; inclusive; Exhs. 15, 15-A, 15-B, 15-C; Exhs. 16, 16-A, 16-B to 16-E, inclusive; Exhs. 17, 17-A to 117-L, inclusive); the broadcasts scripts announced therein through the radio clearly show among others, that Selecta Biscuits are manufactured by Selecta Company, Inc. at Tuason Avenue, Northern Hills, Malabon, Rizal, with Telephone No. 2-13-27 (Exhs. 23-A, 23-B, 23-C, 23-D, 23-E, 23-F). "Besides the signboard, Selecta Biscuit Company, Inc.' on the building itself, defendant has installed signboards along the highways to indicate the location of the factory of defendant (Exhs. 18, 18-A); delivery trucks of defendant are plainly carrying signboards Selecta Biscuit Company, Inc., Tuason Avenue, Northern Hills, Malabon, Rizal, Telephone No. 2-13-27 (Exhs. 19, 19-A, 19-B, 19-C, 19-D, 19-E, 19-F). Defendant is using modern machineries in its biscuits factory (Exhs. 20, 20-A, 20-B, 20-C, 20-D, 20-E). The defendant sells its products throughout the Philippines, including Luzon, Visayas, and Mindanao; its customers count, among others, 600 stores buying on credit; its stores buying on cash number around 50 (t.s.n., p. 10). Sales in Manila and suburbs are minimal (Exh. 12). Defendant is a wholesaler and not a retailer of biscuits, cookies, and crackers. This is the nature of the operation of the business of the defendant."

At the outset one cannot but note that in the two cases appealed before us which involves the same parties and the same issues of fact and law, the court DTXR and the Director of Patents have rendered contradictory decisions. While the former is Copyright 1994-2014

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of the opinion that the word "SELECTA" has been used by petitioner, or its predecessor-in-interest, as a trade-mark in the sale and distribution of its dairy and bakery products as early as 1933 to the extent that it has acquired a proprietary connotation so that to allow respondent to use it now as a trade-mark in its business would be a usurpation of petitioner's goodwill and an infringement of its property right, the Director of Patents entertained a contrary opinion. He believes that the word as used by petitioner functions only to point to the SODFHRIEXVLQHVVRUORFDWLRQRILWV UHVWDXUDQW while the same word as used by respondent points to the RULJLQ of the products it manufactures and sells and he predicates the distinction upon the fact that while the goods of petitioner are only served within its restaurant or sold only on special orders in the City of Manila, respondent's goods are ready- made and are for sale throughout the length and breadth of the country. He is of the opinion that the use of said trade-mark by respondent has not resulted in confusion in trade contrary to the finding of the court D TXR Which of these opinions is correct is the issue now for determination. It appears that Ramon Arce, predecessor-in-interest of petitioner, started his milk business as early as 1933. He sold his milk products in bottles covered by caps on which the words "SELECTA FRESH MILK" were inscribed. Expanding his business, he established a store at Lepanto Street, City of Manila, where he sold, in addition to his milk products, ice cream, sandwiches and other food products, placing right in of his establishment a signboard with the name "SELECTA" inscribed thereon. Special containers made of tin cans with the word "SELECTA" written on their covers were used for his products. Bottles with the same word embossed on their sides were used for his milk products. The sandwiches he sold and distributed were wrapped in carton boxes with covers bearing the same name. He used several cars and trucks for delivery purposes on the sides of which were written the same word. As new products were produced for sale, the same were placed in containers with the same name written on their covers. After the war, he added to his business such items as cakes, bread, cookies, pastries and assorted bakery products. Then his business was acquired by petitioner, a co-partnership organized by his sons, the purposes of which are "to conduct a first class restaurant business; to engage in the manufacture and sale of ice cream, milk, cakes and other dairy and bakery products; and to carry on such other legitimate business as may produce profit." The foregoing unmistakably show that petitioner, through its predecessor-in-interest, had made use of the location of the restaurant where it manufactures and sells its products, but as a trade-mark to indicate the goods it offers for sale to the public. No other conclusion can be drawn. This is the very meaning or Copyright 1994-2014

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essence in which a trade-mark is used. This is not only in accordance with its general acceptance but with our law on the matter. "'Trade-mark' or "trade-name', distinction being highly technical, is sign, device, or mark by which articles produced are dealt in by particular person or organization are distinguished or distinguishable from those produced or dealt in by others." (Church of God vs. Tomlinson Church of God, 247 SW 2d. 63, 64) "A 'trade-mark' is a distinctive mark of authenticity through which the merchandise of a particular producer or manufacturer may be distinguished from that of others, and its sole function is to designate distinctively the origin of the products to which it is attached." (Reynolds & Reynolds Co. vs. Norick, et al., 114 F 2d, 278) "The term 'trade-mark' includes any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguished them from those manufactured, sold or dealt in by others". (Section 38, Republic Act No. 166)

Verily, the word "SELECTA" has been chosen by petitioner and has been inscribed on all its products to serve not only as a sign or symbol that may indicate that they are manufactured and sold by it but as a mark of authenticity that may distinguish them from the products manufactured and sold by other merchants or businessmen. The Director of Patents, therefore, erred in holding that petitioner made use of that word merely as a WUDGHQDPH and not as WUDGHPDUN within the meaning of the law. 1(1) The word "SELECTA", it is true, may be an RUGLQDU\ or FRPPRQZRUG in the sense that it may be used or employed by any one in promoting his business or enterprise, but once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge of authenticity, it may acquire a secondary meaning as to be exclusively associated with its products and business. 2(2) In this sense, its use by another may lead to confusion in trade and cause damage to its business. And this is the situation of petitioner when it used the word "SELECTA" as a trade-mark. In this sense, the law gives it protection and guarantees its use to the exclusion of all others (G. & C. Merrian Co. vs. Saalfield, 198 F. 369, 373). And it is also in this sense that the law postulates that "The ownership or possession of a trade-mark, . . . shall be recognized and protected in the same manner and to the same extent, as are other property rights known to the law," thereby giving to any person entitled to the exclusive use of such trade-mark the right to recover damages in a civil action from any person who may have sold goods of similar kind Copyright 1994-2014

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bearing such trade-mark (Sections 2-A and 23, Republic Act No. 166, as amended). The term "SELECTA" may be placed at par with the words "Ang Tibay" which this Court has considered not merely as a GHVFULSWLYHWHUP within the meaning of the Trade-mark Law but as a IDQFLIXO or FRLQHGSKUDVH or a trade-mark. In that case, this Court found that respondent has consistently used the term "Ang Tibay", both as a trade-mark and a trade-name, in the manufacture and sale of slippers, shoes, and indoor baseballs for twenty-two years before petitioner registered it as a trade-name for pants and shirts so that it has performed during that period the function of a trade-mark to point distinctively, or by its own meaning or by association, to the origin or ownership of the wares to which it applies. And in holding that respondent was entitled to protection in the use of that trade-mark, this Court made the following comment: "The function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. 'Ang Tibay,' as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before the petitioner adopted it as a trade-mark in her own business. 'Ang Tibay' shoes and slippers are, by association, known throughout the Philippines as products of the 'Ang Tibay' factory owned and operated by the respondent. Even if 'Ang Tibay, therefore, were not capable of exclusive appropriation as a trade-mark, the application of the doctrine of secondary meaning could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and business, it has acquired a proprietary connotation. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product." (Ang vs. Teodoro, VXSUD.)

The UDWLRQDOH in the Ang Tibay case applies on all fours to the case of petitioner. But respondent claims that it adopted the trade-mark "SELECTA" in good faith and not precisely to engage in unfair competition with petitioner. It tried to establish that respondent was organized as a corporation under the name of Selecta Biscuit Company, Inc. on March 2, 1955 and started operations as a biscuit factory on June 20, 1955; that the name "SELECTA" was chosen by the organizers of respondent who are Chinese citizens as a translation of the Chinese word "Ching Suan" which means Copyright 1994-2014

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"mapili" in Tagalog, and "Selected" in English; that, thereupon, it registered its articles of incorporation with the Securities and Exchange Commission and the name "SELECTA" as a business name with the Bureau of Commerce which issued to it Certificate of Registration No. 55594; and that it also registered the same trade-name with the Bureau of Internal Revenue and took steps to obtain a patent from the Patent Office by filing with it an application for the registration of said trade-name. The suggestion that the name "SELECTA" was chosen by the organizers of respondent merely as a translation from a Chinese word "Ching Suan" meaning "mapili" in the dialect is betrayed by the very manner of its selection, for if the only purpose is to make an English translation of that word and not to compete with the business of petitioner, why choose the word "SELECTA", a Spanish word, and not "Selected", the English equivalent thereof, as was done by other well- known enterprises? In the words of petitioner's counsel, "Why with all the words in the English dictionary and all the words in the Spanish dictionary and all the phrases that could be coined, should defendant- appellant (respondent) chose 'SELECTA' if its purpose was not and is not to fool the people and to damage plaintiff-appellee?". In this respect, we find appropriate the following comment of the trial court: "Eventually, like the plaintiff, one is tempted to ask as to why with the richness in words of the English language and with the affluence of the Spanish vocabulary or, for that matter, of our own dialects, should the defendant choose the controverted word 'Selecta', which has already acquired a secondary meaning by virtue of plaintiff's prior and continued use of the same as a trademark or tradename for its products? The explanation given by Sy Hap, manager of the defendant, that the word 'Selecta' was chosen for its bakery products by the organizers of said company from the Chinese Word 'Ching Suan' meaning 'mapili', which in English means 'Selected', and that they chose 'selecta', being the English translation, is, to say the least, very weak and untenable. Sy Hap himself admitted that he had known Eulalio Arce, the person managing plaintiff's business since 1954; that since he begun to reside at 10th Avenue, Grace Park, he had known the Selecta Restaurant on Azcarraga street; that at the time he established the defendant company, he knew that the word 'Selecta' was being employed in connection with the business of Eulalio Arce; that he had seen signboards of 'Selecta on Azcarraga Street and Dewey Boulevard and that he even had occasion to eat in one of the restaurants of the plaintiff. All of these circumstances tend to conspire in inducing one to doubt defendant's motive for using the same word 'Selecta' for its bakery products. To allow the defendant here to use the word 'Selecta' in spite of the fact that this word has already been adopted and exploited by Ramon Arce and by his family thru the organization of Arce Sons and Company, for the maintenance of its Copyright 1994-2014

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goodwill, for which said plaintiff and its predecessor have spent time, effort, and fortune, is to permit business pirates and buccaneers to appropriate for themselves and to their profit and advantage the trade names and trade marks of well established merchants with all their attendant goodwill and commercial benefit. Certainly, this cannot be allowed, and it becomes the duty of the court to protect the legitimate owners of said trade-names and trade- marks, for under the law, the same constitute one kind of property right entitled to the necessary legal protection."

Other points raised by respondent to show that the trial court erred in holding that the adoption by it of the word "SELECTA" is tantamount to unfair competition are: (1) that its products are biscuits, crackers. and cookies, wrapped in cellophane packages, placed in tin containers, and that its products may last a year without spoilage, while the ice cream, milk, cakes and other bakery products which petitioner manufactures last only for two or three days; (2) that the sale and distribution of petitioner's products are on retail basis, limited to the City of Manila and suburbs, and its place of business is localized at Azcarraga, corner Lepanto Street and at Dewey Boulevard, Manila, while that of respondent is on a wholesale basis, extending throughout the length and breadth of the Philippines; (3) that petitioner's signboard on its place of business reads, "SELECTA" and on its delivery trucks "Selecta, Quality Always, Restaurant and Caterer, Azcarraga, Dewey Boulevard, Balintawak and Telephone number" in contrast with respondent's signboard on its factory which reads "Selecta Biscuit Company, Inc., and on its delivery trucks "Selecta Biscuit Company, Inc., Tuason Avenue, Malabon, Rizal, Telephone No. 2-13-27; (4) that the business name of petitioner is different from the business name of respondent; (5) that petitioner has only a capital investment of P25,000.00 whereas respondent has a fully paid-up stock in the amount of P234,000.00 out of the P500,000.00 authorized capital, and (6) that the use of the name "SELECTA" by respondent cannot lead to confusion in the business operation of the parties. We have read carefully the reasons advanced in support of the points raised by counsel in an effort to make inroads into the findings of the court D TXR on unfair competition, but we believe them to be insubstantial and untenable. They appear to be well answered and refuted by counsel for petitioner in his brief, which refutation we do not need to repeat here. Suffice it to state that we agree with the authorities and reasons advanced therein which incidentally constitute the best support of the decision of the court DTXR With regard to the claim that petitioner failed to present sufficient evidence on the contract of lease of the business from its predecessor-in-interest, we find that Copyright 1994-2014

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under the circumstances secondary evidence is admissible. In view of the foregoing, we hold that the Director of Patents committed an error in dismissing the opposition of petitioner and in holding that the registration of the trade-mark "SELECTA" in favor of respondent will not cause damage to petitioner, and, consequently, we hereby reverse his decision. Consistently with this finding, we hereby affirm the decision of the court DTXR rendered in G.R. No. L-17981. No costs. 3DUDV &- %HQJ]RQ /DEUDGRU 5H\HV -%/ %DUUHUD *XWLHUUH] 'DYLG 3DUHGHV and 'L]RQ-- concur. 3DGLOODDQG&RQFHSFLRQ-- took no part.

)RRWQRWHV 1.

2.

"A trade-mark is generally described as a sign, device or mark by which the articles produced or dealt in by a particular person or organization are distinguished or distinguishable from those produced or dealt in by others, and must be affixed to the goods or articles; while a WUDGHQDPH is descriptive of the manufacturer or dealer himself as much as his own name is, and frequently includes the name of the place where the business is located; it involves the individuality of the maker or dealer for the protection in trade, and to avoid confusion in business, and to secure the advantages of a good reputation; it is more popularly applied to the good will of a business, and need not be affixed to the goods sold. In other words, it is not regarded as a trade-mark in the strict technical sense. 52 Am. Jur, p. 507, et seq.; 63 C.J., p. 322, et seq." (Katz Drug Co vs. Katz, 217 2d, 286, 289) "This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. & C. Merriam Co. vs. Saalfield, 198 F. 369, 373.)" (Ang vs. Teodoro, 74 Phil., 50, 53).

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SECOND DIVISION [G.R. No. 169504. March 3, 2010.] COFFEE PARTNERS, INC., petitioner, YV. SAN FRANCISCO COFFEE & ROASTERY, INC., respondent.

DECISION

CARPIO, J : p

The Case This is a petition for review 1(1) of the 15 June 2005 Decision 2(2) and the 1 September 2005 Resolution 3(3) of the Court of Appeals in CA-G.R. SP No. 80396. In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 Decision 4(4) of the Office of the Director General-Intellectual Property Office and reinstated the 14 August 2002 Decision 5(5) of the Bureau of Legal Affairs-Intellectual Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioner's motion for reconsideration and respondent's motion for partial reconsideration. The Facts Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and maintaining coffee shops in the country. It registered with the Securities and Exchange Commission (SEC) in January 2001. It has a franchise agreement 6(6) with Coffee Partners Ltd. (CPL), a business entity organized and existing under the laws of British Virgin Islands, for a non-exclusive right to operate coffee shops in the Philippines using trademarks designed by CPL such as "SAN FRANCISCO COFFEE." Respondent is a local corporation engaged in the wholesale and retail sale of Copyright 1994-2014

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coffee. It registered with the SEC in May 1995. It registered the business name "SAN FRANCISCO COFFEE & ROASTERY, INC." with the Department of Trade and Industry (DTI) in June 1995. Respondent had since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willy's, and other coffee companies. In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting, and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee carts in malls and other commercial establishments in Metro Manila. In June 2001, respondent discovered that petitioner was about to open a coffee shop under the name "SAN FRANCISCO COFFEE" in Libis, Quezon City. According to respondent, petitioner's shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the business of selling coffee. Respondent sent a letter to petitioner demanding that the latter stop using the name "SAN FRANCISCO COFFEE." Respondent also filed a complaint with the Bureau of Legal Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair competition with claims for damages. DAHSaT

In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the Intellectual Property Office (IPO) applications for registration of the mark "SAN FRANCISCO COFFEE & DEVICE" for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark could not be confused with respondent's trade name because of the notable distinctions in their appearances. Petitioner argued respondent stopped operating under the trade name "SAN FRANCISCO COFFEE" when it formed a joint venture with Boyd Coffee USA. Petitioner contended respondent did not cite any specific acts that would lead one to believe petitioner had, through fraudulent means, passed off its mark as that of respondent, or that it had diverted business away from respondent. Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon City opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall, Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed in January 2001 with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said he became involved in the business when one Arthur Gindang invited him to invest in a coffee shop and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop "SAN FRANCISCO COFFEE" has branches in Malaysia and Singapore. He added that he formed CPL in 1997 along with two other colleagues, Shirley Miller Copyright 1994-2014

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John and Leah Warren, who were former managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar venture and adopted the name "SAN FRANCISCO COFFEE" from the famous city in California where he and his former colleagues once lived and where special coffee roasts came from. The Ruling of the Bureau of Legal Affairs-Intellectual Property Office In its 14 August 2002 Decision, the BLA-IPO held that petitioner's trademark infringed on respondent's trade name. It ruled that the right to the exclusive use of a trade name with freedom from infringement by similarity is determined from priority of adoption. Since respondent registered its business name with the DTI in 1995 and petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in other countries, then respondent must be protected from infringement of its trade name. The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial evidence indicated respondent continuously used its trade name in connection with the purpose for which it was organized. It found that although respondent was no longer involved in blending, roasting, and distribution of coffee because of the creation of BCCPI, it continued making plans and doing research on the retailing of coffee and the setting up of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse must be permanent, intentional, and voluntary. The BLA-IPO held that petitioner's use of the trademark "SAN FRANCISCO COFFEE" will likely cause confusion because of the exact similarity in sound, spelling, pronunciation, and commercial impression of the words "SAN FRANCISCO" which is the dominant portion of respondent's trade name and petitioner's trademark. It held that no significant difference resulted even with a diamond-shaped figure with a cup in the center in petitioner's trademark because greater weight is given to words — the medium consumers use in ordering coffee products. DIcTEC

On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that petitioner adopted the trademark "SAN FRANCISCO COFFEE" because of the authority granted to it by its franchisor. The BLA-IPO held there was no evidence of intent to defraud on the part of petitioner. The BLA-IPO also dismissed respondent's claim of actual damages because its claims of profit loss were based on mere assumptions as respondent had not even started the operation of its coffee carts. The BLA-IPO likewise dismissed respondent's Copyright 1994-2014

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claim of moral damages, but granted its claim of attorney's fees. Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while respondent questioned the denial of actual damages. The BLA-IPO denied the parties' partial motion for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property Office (ODG-IPO). The Ruling of the Office of the Director GeneralIntellectual Property Office In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioner's use of the trademark "SAN FRANCISCO COFFEE" did not infringe on respondent's trade name. The ODG-IPO found that respondent had stopped using its trade name after it entered into a joint venture with Boyd Coffee USA in 1998 while petitioner continuously used the trademark since June 2001 when it opened its first coffee shop in Libis, Quezon City. It ruled that between a subsequent user of a trade name in good faith and a prior user who had stopped using such trade name, it would be inequitable to rule in favor of the latter. The Ruling of the Court of Appeals In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the ODG-IPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002 decision of the BLA-IPO finding infringement. The appellate court denied respondent's claim for actual damages and retained the award of attorney's fees. In its 1 September 2005 Resolution, the Court of Appeals denied petitioner's motion for reconsideration and respondent's motion for partial reconsideration. The Issue The sole issue is whether petitioner's use of the trademark "SAN FRANCISCO COFFEE" constitutes infringement of respondent's trade name "SAN FRANCISCO COFFEE & ROASTERY, INC.," even if the trade name is not registered with the Intellectual Property Office (IPO). The Court's Ruling The petition has no merit. Petitioner contends that when a trade name is not registered, a suit for Copyright 1994-2014

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infringement is not available. Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondent's registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when petitioner opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek the renewal of its business name registration. Petitioner stresses respondent's failure to continue the use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims no confusion is likely to occur between its trademark and respondent's trade name because of a wide divergence in the channels of trade, petitioner serving ready-made coffee while respondent is in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun "San Francisco" and the generic word "coffee" are not capable of exclusive appropriation. cACTaI

Respondent maintains the law protects trade names from infringement even if they are not registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293) 7(7) dispensed with registration of a trade name with the IPO as a requirement for the filing of an action for infringement. All that is required is that the trade name is previously used in trade or commerce in the Philippines. Respondent insists it never abandoned the use of its trade name as evidenced by its letter to petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the infringement case. Respondent alleges petitioner's trademark is confusingly similar to respondent's trade name. Respondent stresses ordinarily prudent consumers are likely to be misled about the source, affiliation, or sponsorship of petitioner's coffee. As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that respondent continued to make plans and do research on the retailing of coffee and the establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of Appeals, which further found that while respondent stopped using its trade name in its business of selling coffee, it continued to import and sell coffee machines, one of the services for which the use of the business name has been registered. The binding effect of the factual findings of the Court of Appeals on this Court applies with greater force when both the quasi-judicial body or tribunal like the BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also settled that absent any circumstance requiring the overturning of the factual conclusions made by the quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court necessarily upholds such findings of fact. 8(8) Coming now to the main issue, in Prosource International, Inc. v Horphag Copyright 1994-2014

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Research Management SA, 9(9) this Court laid down what constitutes infringement of an unregistered trade name, thus: (1)

The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered;

(2)

The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer;

(3)

The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services;

(4)

The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and

(5)

It is without the consent of the trademark or trade name owner or the assignee thereof. 10(10) (Emphasis supplied)

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines. 11(11) SCETHa

Section 22 of Republic Act No. 166, 12(12) as amended, required registration of a trade name as a condition for the institution of an infringement suit, to wit: Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy, or colorable imitation of any registered mark or trade name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy, or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any Copyright 1994-2014

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or all of the remedies herein provided. (Emphasis supplied)

However, RA 8293, which took effect on 1 January 1998, has dispensed with the registration requirement. Section 165.2 of RA 8293 categorically states that trade names shall be protected, even prior to or without registration with the IPO, against any unlawful act including any subsequent use of the trade name by a third party, whether as a trade name or a trademark likely to mislead the public. Thus: SEC. 165.2 (a) Notwithstanding any laws or regulations providing for any obligation to register trade names, such names shall be protected, even prior to or without registration, against any unlawful act committed by third parties. (b) In particular, any subsequent use of a trade name by a third party, whether as a trade name or a mark or collective mark, or any such use of a similar trade name or mark, likely to mislead the public, shall be deemed unlawful. (Emphasis supplied)

It is the likelihood of confusion that is the gravamen of infringement. But there is no absolute standard for likelihood of confusion. Only the particular, and sometimes peculiar, circumstances of each case can determine its existence. Thus, in infringement cases, precedents must be evaluated in the light of each particular case. 13(13)

In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the dominancy test and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement. If the competing trademark contains the main, essential, and dominant features of another, and confusion or deception is likely to result, infringement occurs. Exact duplication or imitation is not required. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to deceive consumers. 14(14) THIAaD

In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. 15(15) The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both marks in order that the observer may draw his conclusion whether one is confusingly similar to the other. 16(16) Copyright 1994-2014

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Applying either the dominancy test or the holistic test, petitioner's "SAN FRANCISCO COFFEE" trademark is a clear infringement of respondent's "SAN FRANCISCO COFFEE & ROASTERY, INC." trade name. The descriptive words "SAN FRANCISCO COFFEE" are precisely the dominant features of respondent's trade name. Petitioner and respondent are engaged in the same business of selling coffee, whether wholesale or retail. The likelihood of confusion is higher in cases where the business of one corporation is the same or substantially the same as that of another corporation. In this case, the consuming public will likely be confused as to the source of the coffee being sold at petitioner's coffee shops. Petitioner's argument that "San Francisco" is just a proper name referring to the famous city in California and that "coffee" is simply a generic term, is untenable. Respondent has acquired an exclusive right to the use of the trade name "SAN FRANCISCO COFFEE & ROASTERY, INC." since the registration of the business name with the DTI in 1995. Thus, respondent's use of its trade name from then on must be free from any infringement by similarity. Of course, this does not mean that respondent has exclusive use of the geographic word "San Francisco" or the generic word "coffee." Geographic or generic words are not, per se, subject to exclusive appropriation. It is only the combination of the words "SAN FRANCISCO COFFEE," which is respondent's trade name in its coffee business, that is protected against infringement on matters related to the coffee business to avoid confusing or deceiving the public. In Philips Export B.V. v. Court of Appeals, 17(17) this Court held that a corporation has an exclusive right to the use of its name. The right proceeds from the theory that it is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business thereunder, that another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name. 18(18) This Court is not just a court of law, but also of equity. We cannot allow petitioner to profit by the name and reputation so far built by respondent without running afoul of the basic demands of fair play. Not only the law but equity considerations hold petitioner liable for infringement of respondent's trade name. The Court of Appeals was correct in setting aside the 22 October 2003 Decision of the Office of the Director General-Intellectual Property Office and in reinstating the 14 August 2002 Decision of the Bureau of Legal Affairs-Intellectual Property Office. Copyright 1994-2014

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WHEREFORE, we DENY the petition for review. We AFFIRM the 15 June 2005 Decision and 1 September 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 80396. Costs against petitioner.

IaHAcT

SO ORDERED. Velasco, Jr., *(19) Del Castillo, Abad and Perez, JJ., concur. )RRWQRWHV 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. *

Under Rule 45 of the Rules of Court. Rollo, pp. 71-98. Penned by Associate Justice Arturo D. Brion, with Associate Justices Eugenio S. Labitoria and Eliezer R. Delos Santos, concurring. Id. at 100-101. Id. at 195-212. Id. at pp. 149-161. Id. at 128-140. Otherwise known as the Intellectual Property Code. Took effect on 1 January 1998. New City Builders, Inc. v. NLRC, 499 Phil. 207 (2005). G.R. No. 180073, 25 November 2009. Id. Philips Export B.V. v. Court of Appeals, G.R. No. 96161, 21 February 1992, 206 SCRA 457. Otherwise known as the Trademark Law. Took effect on 20 June 1947. Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, 27 June 2006, 493 SCRA 333. Id. Id. Prosource International, Inc. v. Horphag Research Management SA, supra note 9. Supra note 11. Id. Designated additional member per Raffle dated 15 February 2010.

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FIRST DIVISION [G.R. No. L-24075. January 31, 1974.] CRISANTA Y. GABRIEL, petitioner, YV DR. JOSE R. PEREZ and HONORABLE TIBURCIO EVALLE as Director of Patents, respondents. Paredes, Poblador, Cruz & Nazareno for petitioner. Jesus I . Santos for respondent Dr. Jose R. Perez. Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio G. Ibarra and Solicitor Alicia V . Sempio-Diy for respondent Director of Patents.

DECISION

MAKASIAR, J : p

Petition for review of the decision dated July 18, 1964 of the respondent Director of Patents denying the petition of herein petitioner Crisanta Y. Gabriel to cancel and revoke certificate of registration No. SR-389 covering the trademark "WONDER" used on beauty soap issued on May 11, 1961 to herein private respondent Dr. Jose R. Perez. On October 19, 1962, petitioner Crisanta Y. Gabriel filed with the Patent Office a petition for cancellation of the trademark "WONDER from the supplemental register alleging that the registrant was not entitled to register the said trademark at the time of his application for registration; that the trademark was not used and has not been actually used by registrant at the time he applied for its registration; that it was thru fraud and misrepresentation that the registration was procured by the registrant; and that it was she who has been actually using the said trademark since March, 1959, and as such is the rightful and recognized owner thereof and therefore entitled to its registration. In support of her petition, she further alleged the written contract between her and the registrant (respondent) wherein, according to her, the latter has recognized Copyright 1994-2014

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her right of use and ownership of said trademark; and that the labels submitted by the registrant are the very containers bearing the trademark "WONDER" which are owned by her and which she has been exclusively and continuously using in commerce (pp. 24-25, Vol. I, rec.) Respondent Dr. Jose R. Perez, in due time, duly filed his answer denying each and every ground for cancellation alleged in the said petition, and further averring that there is pending in the Court of First Instance of Bulacan a civil case (No. 2422) for unfair competition with injunction and damages filed by him against herein petitioner involving the manufacture of beauty soap and the use of the trademark "WONDER"; that a writ of preliminary injunction has been issued on September 7, 1961 by the said court against herein petitioner restraining her "from making, manufacturing and producing 'Wonder Bleaching Beauty Soap' with the same labels and chemical ingredients as those of the plaintiff, and from advertising, selling and distributing the same products"; and that no right of petitioner had been violated and therefore no cause of action exists in favor of petitioner (pp. 28-32, Vol. I, rec.) Issues having been joined, the case was heard and thereafter, respondent Director of Patents rendered his decision denying the petition to cancel the certificate of registration (pp. 139-150, Vol. I, rec.) Petitioner filed a motion for reconsideration on the ground that the decision is contrary to law and the evidence; but the same was denied on January 15, 1965 by respondent Director of Patents for lack of merit (p. 158, Vol. I, rec.) Hence, this petition for review filed on January 28, 1965 by herein petitioner (pp. 1-5, Vol. IV, rec.). Respondents were required to answer the same, and respondent Director Tiburcio Evalle filed his answer on August 6, 1965 (pp. 29-32, Vol. IV, rec.), Private respondent Dr. Jose R. Perez did not file an answer. Thereafter, both parties were required to file their respective briefs and petitioner filed one on September 28, 1965 (p. 38, Vol. IV, rec.) while respondent Director Evalle filed his brief on February 23, 1966 (p. 53, Vol. IV, rec.). Again, private respondent Perez did not file a brief as his counsel's motion for an extension of time within which to file one was denied by this Court for being late (pp. 41-42, Vol. IV, rec.). Consequently, the case was submitted for decision on May 22, 1966. On May 22, 1973, counsel for private respondent filed a motion for the early resolution of the case alleging among others that "respondent Dr. Jose R. Perez had died already and still Crisanta Y. Gabriel, the petitioner in this case, has been continuously harassing the rights of the late Dr. Jose R. Perez as far as the ownership Copyright 1994-2014

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and use of the trademark are concerned." (Pp. 59-61, Vol. IV, rec.) [No motion has been filed for substitution of the heirs in lieu of the deceased private respondent.] By way of factual background, herein private respondent Dr. Jose R. Perez filed with the Patents Office on February 23, 1961 an application for registration of the trademark "WONDER" in the Supplemental Register. After due and proper proceedings, the said petition was approved and the trademark "WONDER" was registered, as prayed for, in the Supplemental Register. Thereafter, Certificate of Registration No. SR-389 was issued to and in the name of herein private respondent Dr. Jose R. Perez. Said trademark "WONDER" is used by said private respondent on bleaching beauty soap (Medicated and Special) which under the Official Classification of Merchandise (Rule 82) of the Board of Patents falls under Class 51. Private respondent Dr. Perez, in his petition for registration, claimed March 10, 1953 as the date of first use of said trademark and August 1, 1953 as the date of first use of said trademark in commerce in the Philippines (see pp. 1-7, Vol. I, rec.) Petitioner Crisanta Y. Gabriel on the other hand, earlier filed on October 3, 1960 with the Patent Office a petition to register the same trademark "WONDER" and claimed March 7, 1959 as the date of first use of said trademark in commerce. Said petition was dismissed on November 18, 1960 by the Patents Office (thru its examiner) on the ground that said petitioner was not the owner of the trademark sought to be registered, informing at the same time petitioner that "as shown on the labels submitted, it appears that Dr. Jose R. Perez is the owner of the present mark . . ." Subsequently, on March 23, 1961, the said application was considered abandoned under Rules 97 and 98 of the Revised Rules of Practice in Trademark Cases for failure of petitioner to comply with Rule 93 of the same Revised Rules (see p. 8, Vol. I, rec.; pp. 79-86, Vol. III, rec.). Later, said application was revived, but further consideration thereof was suspended by the Patents Office until final determination of the present case considering that the matter of ownership of the trademark "WONDER" is in dispute (see p. 9, Vol. IV, rec.) The main facts of this case as substantially supported by the evidence on record, are related by respondent Director of Patents in the decision now under review, thus: ". . . Way back in 1953, the Respondent who claims to be a medical researcher and manufacturer. was experimenting on the creation of a beauty soap. Having discovered a workable formula he applied from the Bureau of Health for the issuance of a Certificate of Label Approval and on June 6, 1958 he was issued such certificate. It covers a beauty soap for bleaching, which Copyright 1994-2014

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whitens or sometimes softens the skin. (t.s.n., p. 48, Aug. 27, 1968). This certificate (Exh. '5') particularly describes and mentions 'Dr. Perez' Wonder Beauty Soap. He continued experimenting until he was able to discover an improved soap formula which he claims that aside from bleaching or whitening the skin it also allegedly removes pimples, freckles, dandruff, scabies, itching, head lice(s), rashes, falling of hair, and shallow wrinkles (t.s.n. p. 49, Aug. 27, 1963). For such product he obtained another certificate of label approval from the Bureau of Health on August 10, 1959 (Exh. '6'). This document also particularly describes 'Dr. Perez Wonder Beauty Soap (Improved Formula).' "In January, 1959 he made an agreement with a certain company named 'Manserco' for the distribution of his soap. It was then being managed by Mariano S. Yangga who happens to be the brother of the Petitioner Crisanta Y. Gabriel (t.s.n., pp. 3-4, Aug. 27, 1963). This was corroborated by Mr. August Cesar Espiritu who testified in favor of the Respondent. Mr. Espiritu claims to be the organizer and one of the incorporators of 'Manserco,' although really no document of its corporate existence was introduced as evidence in this case (t.s.n., pp. 55-57, Sept. 23, 1963). However, this fact had never been disputed by the Petitioner. "Because the corporation was allegedly going bankrupt and the members were deserting, the Respondent terminated the agreement in July, 1959, and thereafter he asked the Petitioner to become the distributor of his products (t.s.n., pp. 4-5, Aug. 27, 1963) and on September 1, 1959, a contract of 'Exclusive Distributorship' was executed between the Petitioner and the Respondent. (Exh. '7'; 'F-1' to 'F-2'.) The agreement is hereunder reproduced, to wit: "EXCLUSIVE DISTRIBUTORSHIP AGREEMENT "KNOW ALL MEN BY THESE PRESENT: "THIS AGREEMENT made and executed by and between DR. JOSE R. PEREZ, Filipino, of legal age, a resident of Sta. Maria, Bulacan. now and hereinafter called the Party of the First Part, "AND "CRISANTA Y. GABRIEL, likewise Filipino, of legal age, a resident of 1558 Camarines St., Manila, now and hereinafter called the Party of the Second Part, "WITNESSETH Copyright 1994-2014

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"1. That the Party of the First Part hereby agrees and binds himself to make the Party of the Second Part the sole and exclusive distributor of his product called and popularly known as 'Dr. Perez' Wonder Medicated Beauty Soap' for the whole Philippines for a period of five (5) years from date of perfection of this agreement, renewable for another five (5) years at the mutual agreement of both parties; "2. That the Party of the First Part hereby agrees to sell to the Party of the Second Part the abovementioned merchandise at the rate of sixty (P.60) centavos a piece which shall have a minimum weight of eighty (80) grams; PROVIDED however that said price may be subject to change in cases of deflation and inflation of the peso; "3. That the Party of the First Part hereby binds himself to make delivery of the merchandise under contract at 1558 Camarines St. Manila, the cost of the same being for the account of the former; "4. That the Party of the First Part hereby agrees to extend to the Party of the Second Part a credit line of TWO THOUSAND (P2,000.00) PESOS with accounts due and payable on the 5th and 20th of each month with a maximum of sixty days from date of receipt of the merchandise by the Party of the Second Part; "5. That the Party of the First Part guarantees the production of the full quantity of Dr. Perez Wonder Medicated Beauty Soap that the Party of the Second Part could sell and distribute; with the latter giving the former a written notice of the same; "6. That the Party of the Second Part has the exclusive right of ownership of the packages and that said party is responsible for the costs as well as the design and the manner of packing the same; "7. That the Party of the First Part hereby binds himself not to give or sell to any person or entity the same product or any similar product or products of the same name during the term and duration of this contract; "8. That this contract is binding upon the administrator, heirs and assigns of both parties during the term and duration of this agreement; "9.

That this contract will take effect upon the signing thereof.

"IN WITNESS WHEREOF, the parties and their witnesses have Copyright 1994-2014

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hereunder set their hands at Manila this 1st day of September, 1959." (See pp. 11-13, Vol. IV, rec.) "At this juncture, mention should be made of the Petitioner's commercial background, as it appears in the record. Her documentary exhibits show that she was registered as a bona fide Filipino retailer as of April 8, 1958 (Exh. 'C'); that she was doing business under the name 'Gabriel Grocery and Cold Store' as of March 20, 1958 (Exh. 'A'); and that on September 24, 1959 she obtained another certificate of registration for the firm name 'Wonder Commercial Co., Inc.,' she being the Manager thereof (Exh. 'B')." (Pp. 10-13, Vol. IV, rec.)

Respondent Director of Patents set forth the evidence of the petitioner as follows: "From the evidence presented by her, she endeavors to prove that even before the execution of the agreement (Exh 'F-1') or particularly on March 11, 1959 she hired the services of Eriberto Flores (t.s.n., pp. 43-52, May 23, 1963) who allegedly designed the packages for which she paid him the sum of P50.00 (Exh. 'FF'). Thereafter she allegedly started the sales promotion of the Respondent's product by extensive advertisement through some magazines (Exhs. 'G'; 'G-1'; and 'H'), the radio (Exhs. 'I'-'18'), and the cinema by means of projector 'slides' (Exhs. 'M' and 'N') in various neighborhood theatres in the Philippines (Exhs. 'O' to '-48'). She also allegedly caused the printing of thousands of boxes and literature accompanying the soap with printing companies (Exhs. 'P', 'Q', 'R', 'S'. 'T', 'U', 'V', 'W', and 'X' to 'X-8'). She also presented a few sales invoices, the earliest of which was issued on November 4, 1959 by the Wonder Commercial Co., Inc., showing sales of the 'Wonder Soap.' (Exh. 'Y'). Another booklet of sales invoices under the firm name 'C.Y. Gabriel' showing sales of the same soap, the earliest of which was August 13, 1960, was also presented (Exhs. 'Z' and 'AA'). All the while the packages (Exhs. 'D' and 'E') and literature (Exh. 'W') indicate that the soap is known as 'Dr. Perez Bleaching Beauty Soap' manufactured by Dr. Jose R. Perez Cosmetic Laboratory and that the exclusive distributor is 'Crisanta Y. Gabriel (C Y. Gabriel)', the herein Petitioner. "As further evidence of sale, the Petitioner presented as witness Pedro Alvero, a businessman from San Pablo City who, as alleged dealer in medicinal products, toiletries, etc., testified as having purchased from her 'Wonder' soap in 1959 up to 1961 (t.s.n., pp. 43-52, May 23. 1963)." (See pp. 13-14, Vol. IV, rec.)

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The determination that Dr, Perez is the rightful owner of the disputed trademark "WONDER" and the consequent denial by the respondent Director of Patents of the petition to cancel certificate of registration No. SR-389 covering said trademark issued to and in the name of Dr. Jose R. Perez, were based mainly on his finding that Dr. Perez had priority of adoption and use of the said trademark. And such finding of fact is conclusive on this Court. As stated by Justice Fernando in Lim Kiah vs. Kaynee Company (25 SCRA 485) and reiterated by him in the subsequent case of Sy Chng vs. Gaw Liu (44 SCRA 150-151): "It is well-settled that we are precluded from making an inquiry as the finding of facts of the Director of Patents in the absence of any showing that there was grave abuse of discretion is binding on us. As set forth by Justice Makalintal in Chung Te vs. Ng Kian Giab (18 SCRA 747): 'The rule is that findings of facts by the Director of Patents are conclusive on the Supreme Court provided that they are supported by substantial evidence.'" In the present case, the findings of fact of the respondent Director of Patents are substantially supported by evidence and no grave abuse of discretion was committed by said respondent. 1. At the time of the analysis of the soap product of private respondent Dr. Jose R. Perez, there was already a label or trademark known as "Dr. Perez' WONDER Beauty Soap" as shown and supported by Exhibit "5" which is a Certificate of Label Approval dated June 6, 1958 (p. 103, Vol. III, rec.) and Exhibit "6" another Certificate of Label Approval dated August 10, 1959 (p. 104, Vol. III, rec.) both issued by the Bureau of Health to Dr. Jose R. Perez as manager of the Dr. Jose R. Perez Cosmetic Laboratory. Both certificates identified the product covered as "Dr. Perez' Wonder Beauty Soap" and further indicated that said product emanated from the Dr. Jose R. Perez Cosmetic Laboratory. Furthermore, the certificates show that the Bureau of Health referred to and relied on the said label or trademark of the product as the basis for its certification that the same (product) "was found not adulterated nor misbranded." 2. It is not denied that private respondent Dr. Jose R. Perez was the originator, producer and manufacturer of the soap product identified as "DR. JOSE R. PEREZ WONDER BEAUTY SOAP." This fact, furthermore, is clearly shown in Exhibits "5" and "6" which, as already adverted to, point out that said product emanated from the Dr. Jose R. Perez Cosmetic Laboratory. The very boxes-containers used in packing the said product also exhibit this fact (Exhs. "DD", "EE", "LL", "HH" also marked as Exh. "7", "JJ" and "KK", pp. 94-96, 98-101, Vol. III, rec.). On the other hand, petitioner Crisanta Y. Gabriel appears to be a mere Copyright 1994-2014

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distributor of the product by contract with the manufacturer, respondent Dr. Jose R. Perez (Exhs. "7", "F-l" to "F-2", p. 13, Vol. III, rec.) and the same was only for a term. This fact is also clearly shown by the containers-boxes used in packing the product (Exhs. "E", "D" and "II" also marked as Exh. "8", pp. 10, 11 and 99, Vol. III, rec.) which indicate and describe Crisanta Y. Gabriel as the exclusive distributor of the product. Thus, as stated in the decision under review: "Therefore, it cannot be denied that the Respondent is the originator and manufacturer of the so-called 'Dr. Perez Wonder Beauty Soap,' a phrase clearly coined by, and associated with, the Respondent. As such, the connotation in itself is sufficient to clothe the product as an item or a commodity emanating from a particularly identified source who is none other than Dr. Jose R. Perez. The words serve as an indication of origin, and the product identified by the words can never be regarded as having emanated or originated from another individual, typical of which is the Petitioner, a mere distributor." (P. 15, Vol. IV, rec.). Under Sections 2 and 2-A of the Trademark Law, Republic Act No. 166, as amended, the right to register trademark is based on ownership and a mere distributor of a product bearing a trademark, even if permitted to use said trademark, has no right to and cannot register the said trademark (Marvex Commercial Co., Inc. vs. Petra Hawpia & Co., 18 SCRA 1178; Operators, Inc. vs. Director of Patents, et al., 15 SCRA 148). II 1. Petitioner urges that the agreement of exclusive distributorship executed by and between her and respondent vested in her the exclusive ownership of the trademark "WONDER". But a scrutiny of the provisions of said contract does not yield any right in favor of petitioner other than that expressly granted to her — to be the sole and exclusive distributor of respondent Dr. Perez' product. The fact that paragraph 6 (Exh. "F-2") of the agreement provides that the petitioner "has the exclusive right of ownership of the packages and that said party is responsible for the costs as well as the design and manner of packing the same" did not necessarily grant her the right to the exclusive use of the trademark; because the agreement never mentioned transfer of ownership of the trademark. It merely empowers the petitioner as exclusive distributor to own the package and to create a design at her pleasure, but not the right to appropriate unto herself the sole ownership of the trademark so as to entitle her to registration in the Patent Office. In fact, the agreement does not even grant her the right to register the mark, as correctly stated in Copyright 1994-2014

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the appealed decision, which further held that: "The statute provides that 'the owner of a trademark used in commerce may register his trademark . . .' By statutory definition a trademark is 'any word, name, symbol or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured by others.' (Emphasis added). There is nothing in the statute which remotely suggests that one who merely sells a manufacturer's goods bearing the manufacturer's mark acquires any rights in the mark; nor is there anything in the statute which suggests that such a person may register a mark which his supplier has adopted and used to identify his goods. Ex parte E. Leitz, Inc., (Comr Pats) 105 USPQ 480." (pp. 16-17. Vol. IV, rec.).

2. The exclusive distributor does not acquire any proprietary interest in the principal's trademark. "In the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor, who employs the trademark of the manufacturer does not acquire proprietary interest in the mark which will extinguish the rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate before application for registration is filed." (87 CJS 258-259, citing cases.)

III It has been repeatedly said that the objects of a trademark are "to point out distinctly the origin or ownership of the goods 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. 52 Am. Jur., p. 50, citing cases." (Etepha vs. Director of Patents, et al., 16 SCRA 495). Necessarily, therefore, a trademark can only be used in connection with the sale of the identical article that has been sold under the trademark or tradename to the extent necessary to establish them as such (Note 1 L.R.A. [N.S.] 704; A.I.M. Percolating Corporation vs. Ferrodine Chemical Corporation, et al., 124 S.E. 446). In this instant case, the trademark "WONDER" has long been identified and associated with the product manufactured and produced by the Dr. Jose R. Perez Cosmetic Laboratory. It would thus appear that the decision under review is but in consonance with the sound purposes or objects of a trademark. Indeed, a contrary ruling would have resulted in the cancellation of the trademark in question and in granting the pending application of herein petitioner to register the same trademark in Copyright 1994-2014

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her favor to be used on her bleaching soap, which is of the same class as that of respondent (bleaching and beauty soap) [see pp. 222, 265-276, Vol. I, rec.; also Exh. "9", p. 105, Vol. III, rec.]. And the effect on the public as well as on respondent Dr. Jose R. Perez would have been disastrous. Such a situation would sanction a false implication that the product to be sold by her (petitioner) is still that manufactured by respondent. IV Petitioner would also anchor her claim of exclusive ownership of the trademark in question on the fact that she defrayed substantial expenses in the promotion of respondent's soap as covered by the trademark "WONDER" and the printing of the packages which she further claimed to have been designed thru her efforts as she was the one who hired the services of an artist who created the design of the said packages and trademark. Such claim was disposed correctly by respondent Director of Patents, thus: "Petitioner's act in defraying substantial expenses in the promotion of the Respondent's goods and the printing of the packages are the necessary or essential consequences of Paragraph 6 of the agreement because, anyway, those activities are normal in the field of sale and distribution, as it would redound to her own benefit as distributor, and those acts are incumbent upon her to do. While it may be argued that sale by the Petitioner may be regarded as trademark use by her. nevertheless it should also be regarded that such sale is a consequence of the 'Exclusive Distributorship Agreement' and it inured to the benefit of the Respondent because it was his trademark that was being used. But this does not result in the Respondent's surrender in her favor of the right to register the trademark in her own name. What would happen if the first five years' period terminates and the Respondent decides not to continue with the agreement under Paragraph 1 thereof? What trademark would be use if he himself assumes the distribution thereof or if he contracts with another entity or person for exclusive distributorship?" (P. 17, Vol. IV, rec.)

It is true that she has been dealing with the product "Wonder Soap" even before the execution of the Exclusive Distributorship Agreement on September 1, 1959, evidenced by her agreement with Grace Trading Co., Inc. dated June 23, 1959 for the printing of boxes-containers for the "Wonder Soap" and the literature accompanying the same (Exhs. "Q" and "W", pp. 58, 68, Vol. III, rec.), as well as by another contract dated July 22, 1959 with the Philippine Broadcasting Corporation for spot announcement of the product "Wonder Soap" showing her as the sponsor (Exh. "I-1" or "5-A", p. 18, Vol. III, rec.). But this was because Manserco, Inc., which handled Copyright 1994-2014

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first the distribution of the product "Wonder Soap" from January, 1959 to July, 1959, employed her (petitioner) to help precisely in the marketing and distribution of the said product, she being the sister of Mariano Yangga who was then the general manager of said Manserco, Inc., as testified to by Mr. Augusto Cesar Espiritu, who, as earlier adverted to, was the organizer and one of the incorporators of the Manserco, Inc. (pp. 480-481, Vol. III, rec.). V From the records, it further appears that pursuant to the Exclusive Distributorship Agreement between petitioner and respondent, the latter manufactured "WONDER" soap and delivered them to the former who in turn handled the distribution thereof. This continued for sometime until January, 1961, when the arrangement was stopped because as claimed and alleged by herein respondent, he discovered that petitioner began manufacturing her own soap and placed them in the boxes which contained his name and trademark, and for which reason respondent Dr. Perez filed an unfair competition case against her (petitioner) [see pp. 29-31, Vol. I, rec.; pp. 379-380, Vol. II, rec.] with the Court of First Instance of Bulacan, which issued a writ of preliminary injunction against her. These claims of respondent were never denied, much less refuted by petitioner in her rebuttal testimony. Earlier in her direct testimony, petitioner stated that her occupation was merchant and manufacturer of bleaching soap (p. 222, Vol. II, rec.) and on cross-examination she stated that she manufactured Marvel and Dahlia Bleaching Beauty Soap as well as C.Y. GABRIEL WONDER BEAUTY SOAP, although she claimed to have manufactured the same only from February, 1961 to September, 1961 (pp. 265-270, Vol. II, rec.). Her use of the mark "Wonder" on the soap manufactured by her is patently shown by Exhibit "9" consisting of a cake of soap with the inscription C.Y. GABRIEL WONDER SPECIAL and an accompanying literature wherein appear, among others, the following words: C.Y. Gabriel — WONDER MEDICATED Beauty Soap, Manufactured by: C.Y. GABRIEL COSMETIC LABORATORY (see Exh. "9", p. 105, Vol. III, rec.; pp. 440-441, Vol. II, rec.). VI OUR examination of the entire records of the present case likewise revealed petitioner's disregard of the rudiments of fair dealing. Mr. Justice Fernando, in behalf of the Court, stated in Lim Kiah vs. Kaynee Company, thus: ". . . The decision of the Director of Patents is not only sound in law but also commendable for its consonance with the appropriate ethical standard Copyright 1994-2014

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which by no means should be excluded from the business world as alien, if not a hostile, force. While in the fierce competitive jungle which at times constitutes the arena of commercial transactions, shrewdness and ingenuity are at a premium, the law is by no means called upon to yield invariably its nod of approval to schemes frowned upon by the concept of fairness. Here. petitioner engaged in manufacturing and selling the same kind of products would rely on a trademark, which Undeniably was previously registered abroad and which theretofore had been used and advertised extensively by one of the leading department stores in the Philippines." (26 SCRA 490.)

To our mind, the situation of herein petitioner is worse. WHEREFORE, THE DECISION SOUGHT TO BE REVIEWED IS HEREBY AFFIRMED AND THE PETITION IS HEREBY DISMISSED. WITH COSTS AGAINST PETITIONER. Makalintal, C .J ., Castro, Teehankee, Esguerra and Muñoz Palma, JJ ., concur.

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SECOND DIVISION [G.R. No. 91385. January 4, 1994.] HEIRS OF CRISANTA Y. GABRIEL-ALMORADIE, herein represented by the special administrator LORENZO B. ALMORADIE of the Intestate Estate of the Late Crisanta Y. Gabriel-Almoradie and LORENZO B. ALMORADIE, petitioners, YV COURT OF APPEALS and EMILIA M. SUMERA, herein sued in her capacity as special administratrix of the Testate Estate of the late DR. JOSE R. PEREZ, respondents.

SYLLABUS 1. REMEDIAL LAW; SUPREME COURT; REMANDING OF CASES TO THE LOWER COURTS FOR FURTHER RECEPTION OF EVIDENCE NOT NECESSARY WHEN IT IS IN THE POSITION TO RESOLVE THE DISPUTE BASED ON THE RECORDS. — In the interest of the public and for the expeditious administration of justice the issue on infringement shall be resolved by the court considering that this case has dragged on for years and has gone from one forum to another. It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation. No useful purpose will be served if the case or the determination of an issue in a case is remanded to the trial court only to have its decision raised again to the Court of Appeals and from there to the Supreme Court. We have laid down the rule that the remand of the case or of an issue to the lower court for further reception of evidence is not necessary where the Court is in position to resolve the dispute based on the records before it and particularly where the ends of justice would not be subserved by the remand thereof. Moreover, the Supreme Court is clothed with ample authority to review matters, even those not raised on appeal if it finds that their consideration is necessary in arriving at a just disposition of the case. 2. COMMERCIAL LAW; TRADEMARK LAW; INFRINGEMENT THEREOF; WHAT CONSTITUTES; RULE. — R.A. 166 describes what constitutes Copyright 1994-2014

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infringement: "Sec. 22. Infringement, what constitutes — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. The law also provides that any person whose trademark or trade name is infringed may recover damages in a civil action, and upon proper showing, may also be granted injunction. 3. ID.; ID.; ID.; ID.; ID.; CASE AT BAR AS A CASE OF. — Glaring is the fact that the only difference in the above figures is the "supposed origin" of the product ("Dr. Perez" as against "C.Y. Gabriel") which are not even as eye catching as the word "WONDER" itself. Apparently, Gabriel never used or adopted the trademark of Go Hay in her products, instead she has all along been using the trademark registered in the name of Perez. Petitioner's continued use of respondent's trademark on her product, instead of the assigned mark "WONDER GH" is a clear act of abandonment due to non-use, which is in fact a ground for cancellation of registration under Sec. 17 (b) of R.A. 166. What is worse is that there is obvious bad faith on the part of Gabriel in acquiring the mark "Wonder GH." Undoubtedly her intent in having the mark assigned to her is merely to give color to the use of the mark "WONDER" on her products. Particularly so since the Director of Patents in October 1960, denied the registration to Gabriel of the trademark "WONDER" because it was found that the mark was already in use and is owned by Dr. Jose Perez. And then again in 1978, petitioner failed to convince the Director of Patents and the Court of Appeals that she has a right over the same trademark. Petitioner's argument that the word "Wonder" could not be appropriated exclusively as a trademark by private respondent has no leg to stand on. The matter restricting the exclusive use of a trademark is only true over unrelated goods. The law requires that in the adoption of a mark there should not be any likelihood of confusion, mistake or deception to the consumer. Records show that the trademark Gabriel claims to own, through assignment from Go Hay, with certificate of registration no. 33957 in the Principal Register and registration no. SR-4217 in the Supplemental Register is principally for laundry soap in bars and cakes.On the other hand, the mark "WONDER" registered to the testate estate of Jose R. Perez was registered principally for beauty soap. This fact would not have been Copyright 1994-2014

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relevant if no confusion results thereby. In the case at bar, although the presentation of the marks as registered appears to be different, still confusion is bound to result, since the marks are used on related goods (bleaching beauty soap as against laundry soap). 4. ID.; ID.; CANCELLATION OF REGISTRATION; EFFECT. — There is likewise no merit in petitioner's assertion that Cancellation Order No. 143, dated November 16, 1984, rendered Civil Case No. C-8147 moot and academic. We reiterate the findings of the Court of Appeals in AC G.R. Sp. 06915, supra. The cancellation order was issued allegedly due to respondent's failure to file the affidavit of use as required by Sec. 12 of R.A. 166. It is not, however, clear whether such order has become final as respondent filed a motion to set aside the order, alleging that it was issued prematurely. Even assuming that the order has become final, still petitioner could not have acquired an exclusive right over the mark "WONDER" as a matter of course. The only effect of cancellation is that it would deprive the registrant protection from infringement. Sec. 22 of R.A. 166, states that only a registrant of a mark can file a case for infringement. On the other hand, Sec. 19 states that any right conferred upon the registrant under the provisions of R.A. 166 terminates only when judgment or order of cancellation has become final. The present complaint was filed sometime in December 1979, almost 5 years prior to the alleged cancellation order. Thus, until the time that the right is finally terminated, respondent still has a cause of action against petitioners. 5. ID.; ID.; PRINCIPLE OF "FIRST TO USE" AS A BASIS; APPLICATION IN THE CASE AT BAR. — what draws the axe against petitioners is the principle of " first to use" on which our Trademark Law is based. We have said and reiterated in the case of La Chemise Lacoste v. Fernandez, that: "The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin of 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." Sec. 2 of R.A. 166 states that as a condition precedent to registration the trademark, trade name or service marks should have been in actual use in commerce in the Philippines before the time of the filing of the application. A careful perusal of the record shows/that although Go Hay, assignor of Gabriel, first registered the trademark "Wonder GH" on October 17, 1958 while the registration of the trademark "WONDER" in the name of Dr. Perez was registered in the Supplemental Register on May 11, 1961 and then the Principal Register on January 3, 1978, the certificate of registration issued to Go Hay showed that the mark "Wonder GH" was first used on July 1, 1958, while that of the mark "WONDER" in favor of Dr. Perez was recorded to have been in use since March Copyright 1994-2014

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3, 1953,or five (5) years prior to Go Hay's use. Thus, all things being equal, it is then safe to conclude that Dr. Perez had a better right to the mark "WONDER." The registration of the mark "Wonder GH" should have been cancelled in the first place because its use in commerce was much later and its existence would likely cause confusion to the consumer being attached on the product of the same class as that of the mark "WONDER."

DECISION

NOCON, J : p

Just for the record, the present case, involving the same parties and the same trademark has been twice before the Director of Patents, twice before the trial courts, four times before the Court of Appeals and twice before this Court. On review before us is the decision of the Court of Appeals in the case entitled "Emilia M. Sumera v. Crisanta Y. Gabriel, CA-G.R. CV No. 12866" 1(1) which reversed and set aside the order of the Regional Trial Court in Civil Case No. C-8147, 2(2) dismissing the complaint filed by private respondent, Emilia M. Sumera against Crisanta Y. Gabriel for Infringement of Trademarks and Damages with Prayer for Issuance of a Writ of Preliminary Injunction. Historical antecedents of the case at bar relate as far back as 1953 when the late Dr. Jose Perez discovered a beauty soap for bleaching, which whitens or sometimes softens the skin. A certificate of label approval was issued in his name by the Bureau of Health on June 6, 1958 for the said product with the label reading "Dr. Perez' Wonder Beauty Soap." Not surprisingly, he later on developed an improved formula for his soap after continued laboratory experimentation, for which he obtained another certificate of label approval from the Bureau of Health on August 10, 1959, also describing the product as "Dr. Perez Wonder Beauty Soap (Improved Formula)." 3(3) Needing a marketing firm for wider distribution of his soap, he entered into an agreement on January 1959 with a certain company named "Manserco," owned and managed by Mariano S. Yangga, for the distribution of his soap. This venture, however, did not last long, as the corporation allegedly went bankrupt. He then terminated his agreement with Manserco and forged an "Exclusive Copyright 1994-2014

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Distributorship Agreement" with Crisanta Y. Gabriel, who happened to be the sister of Mariano S. Yangga. What could have been a good business relation turned sour; instead a series of legal battles transpired thereafter between them in the Patent and Trademark Office, the trial court, the Court of Appeals and this Court. I. On October 3, 1960, Gabriel filed an application with the Patent Office to register the trademark "WONDER." Said application was denied on November 18, 1960 on the ground that Gabriel was not the owner of the trademark sought to be registered and that as shown in the labels submitted, it appeared that Dr. Jose R. Perez is the owner of the said mark. On the other hand, on May 11, 1961, Perez obtained in his name a certificate of registration No. SR-389 covering the same trademark "WONDER" for beauty soap.4(4) II. Thereafter, Perez filed a complaint for Unfair Competition with Injunction and Damages, dated August 8, 1961, docketed as Civil Case No. 2422, against Gabriel. In the said complaint, Perez alleged that Gabriel, without just cause and in violation of the terms of the distributorship agreement, stopped selling and distributing "WONDER" soap, and instead on October 3, 1960 Gabriel tried to register the trademark "WONDER" in her name. On September 7, 1961, a writ of preliminary injunction was issued against Gabriel, restraining her "from making, manufacturing, and producing 'Wonder Bleaching Beauty Soap' with the same labels and chemical ingredients as those of the plaintiff, and from advertising, selling and distributing the same products." 5(5) As to what happened to this civil suit, or whether the case was ever terminated remains unknown and is not on record. III. Meanwhile, on October 19, 1962, Gabriel, in Inter Partes Case No. 280, filed a Petition to Cancel Certificate of Registration No. SR-389 covering the trademark "WONDER" for beauty soap in the name of Dr. Perez. On July 15, 1964, a decision was rendered by Director of Patents Tiburcio S. Evalle denying said petition. Her motion for reconsideration thereof having been denied, Gabriel filed a petition for review before this Court, entitled "Crisanta Y. Gabriel v. Dr. Jose R. Perez and Hon. Tiburcio Evalle as Director of Patents," G.R. No. L-24075.6(6) The above case was decided in favor of Perez since the court found out that: ". . . the trademark 'WONDER' has long been identified and associated with the product manufactured and produced by the Dr. Jose R. Perez Cosmetic Laboratory. It would thus appear that the decision under review is but in Copyright 1994-2014

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consonance with the sound purposes or objects of a trademark. Indeed, a contrary ruling would have resulted in the cancellation of the trademark in question and in granting the pending application of herein petitioner to register the same trademark in her favor to be used on her bleaching soap, which is of the same class as that of respondent. And the effect on the public as well as on respondent Dr. Jose R. Perez would have been disastrous. Such a situation would sanction a false implication that the product to be sold by her (Gabriel) is still that manufactured by respondent." 7(7)

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On the claim of Gabriel that the exclusive ownership of the trademark "WONDER" is vested in her by virtue of her agreement with Perez, the court further said: "The fact that paragraph 6 (Exh. "F-2") of the (Distributorship) agreement provides that the petitioner 'has the exclusive right of ownership of the packages and that said party is responsible for the costs as well as the design and manner of packaging the same' did not necessarily grant her the right to the exclusive use of the trademark; because the agreement never mentioned transfer of ownership of the trademark. It merely empowers the petitioner as exclusive distributor to own the package and to create a design at her pleasure, but not the right to appropriate unto herself the sole ownership of the trademark so as to entitle her to registration in the Patent Office. . . . (emphasis added). "The exclusive distributor does not acquire any proprietary interest in the principal's trademark. "In the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary interest in the mark which will extinguish the rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate, before application for registration is filed. (87 CJS 258-259, citing cases.)" 8(8)

IV. The issue of ownership of the trademark "WONDER" having been settled as pronounced in the above decision, Emilia M. Sumera, in her capacity as special administratrix of the estate of Dr. Jose R. Perez, who died on October 9, 1971, filed on January 31, 1975, with the Philippine Patent Office an application for registration of the trademark "WONDER" for beauty soap in the Principal Register. The Copyright 1994-2014

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application was later amended to change the name of the applicant to "The Testate of the late Dr. Jose R. Perez, represented by Emilia Sumera as Special Administratrix." Gabriel opposed anew the application alleging among others that "1) she is the owner of the trademark 'WONDER' used for beauty soap and had been using it prior to the alleged date of first use of applicant (Sumera); 2) that the trademark 'WONDER' which she created and adopted is well known throughout the Philippines and even abroad, that the use thereof by the applicant (Sumera) would result in confusion in her business to her damage and prejudice."9(9) The Director of Patents dismissed the opposition on the ground of res judicata, the issues having been resolved in G.R. No. L-24075. The application was approved and Certificate of Registration No. 25610 in the Principal Register was issued for the trademark "WONDER" in the name of "The Testate Estate of Dr. Jose R. Perez." 10(10) The foregoing decision of the Director of Patents was appealed before the Court of Appeals and the appellate court in CA-G.R. SP-07446-R 11(11)said: "Appellant Gabriel's insistence that there is no identity of parties between G.R. No. L-24075 and the case at bar is untenable. The fact that Emilia Sumera was not a party in the first case is of no moment, inasmuch as her participation in the case at bar is merely as representative of the estate of the late Dr. Perez, being the Special Administratrix. It should be noted that the application for registration of the trademark filed by Emilia Sumera was amended and the name of the applicant was changed to the Testate Estate of the late Dr. Jose R. Perez, who is deemed the owner of the trademark. xxx

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"It should be noted that appellant Gabriel's petition for cancellation of the trademark in the supplemental register in the name of Dr. Perez was based on her claim of ownership of said trademark. The decision in said case, (G.R. No. L-24075) shows that both parties endeavored to prove their rights of ownership of the trademark "Wonder". In the case at bar, the same parties again assert their rights of ownership of the same trademark. It is clear, therefore, that between the two suits, there is identity of cause of action, i.e., the same parties' claim of ownership of the trademark "Wonder." What is different here only is the form of action. But the employment of two different forms of action does not enable one to escape the operation of the principle that one and the same cause of action shall not be twice litigated. (Yusingco v. Ong Hing Lian, G.R. No. L-26523, Dec. 24, 1971, 42 SCRA 589, 605)." 12(12) Copyright 1994-2014

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V. Despite the foregoing, Gabriel continued distributing and selling beauty soap products using the mark "Wonder." Thus, on December 18, 1979, Sumera filed an action against Gabriel for Infringement of Trademark with Damages and a Prayer for a Writ of Preliminary Injunction before the Regional Trial Court (Civil Case No. C-8147, case at bar under our review). The trial court granted a temporary restraining order and in the Order of February 28, 1980, Gabriel was enjoined from using the trademark "Wonder." 13(13) Subsequently, Gabriel filed a motion to quash the temporary restraining order invoking as a ground res judicata, alleging the pendency of Civil Case No. 2422, filed before the Court of First Instance of Bulacan, Branch III, involving the same parties and trademark. Perhaps unaware of the events prior to the filing of the present complaint, 14(14) or so we would like to think, the court, on March 17, 1980, ordered the lifting of the temporary restraining order issued on February 28, 1980. As a consequence, on March 28, 1980, Sumera filed a motion to reinstate the restraining order issued on February 28, 1980, while Gabriel filed a reply to the opposition on April 15, 1980 and on April 25, 1980, she filed her answer with counterclaim and a prayer for the issuance of a writ of preliminary injunction. In her answer, she again alleged that 1) the registrations of the trademark "WONDER" (SR-2138 and Reg. No. 25610) in the name of Dr. Perez were unlawfully, wrongfully, irregularly and fraudulently procured; 2) that the trademark "WONDER" has been registered with the Patents Office in the name of a certain Go Hay as early as 1959, which registration was assigned to her and as successor-in-interest, her right to the trademark dates back from 1959; 3) and that she created and developed the package bearing the trademark "WONDER" and is the true and lawful owner thereof. In an order dated September 15, 1980, the trial court issued a writ of preliminary injunction against Sumera and the estate of Dr. Jose R. Perez. 15(15)This prompted Sumera to elevate the matter to the Court of Appeals in a petition for certiorari questioning the court's order. Initially, the appellate court sustained the order of the trial court. Nevertheless, upon motion for reconsideration of Sumera, the appellate court on September 8, 1961 16(16)modified its earlier decision of February 24, 1981 and said: "While it is true that it is not Our role in this present posture of the case to decide who of the parties is entitled (to) the use of the trademark 'Wonder' for that has to be decided by respondent Court on the merits of the case before it, the fact remains that the Patent Office had issued in favor of petitioner a certificate of registration for the use of the trademark "Wonder" for the Copyright 1994-2014

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manufacture, sale, etc. of bleaching and beauty soap in the same way that the Patent Office had also issued a certificate of registration in favor of Go Hay, private respondents' assignor, for the use of the trademark 'Wonder' in the manufacture, sale, etc. of laundry soap in bars and cakes. Private respondents, however, claimed that they are entitled to the use of said trademark not only on laundry soaps in cakes and bars but to all goods falling under Classification No. 3 which includes 'bleaching preparations and other substances for laundry use; cleaning, polishing, scouring abrasive preparations; soap, perfumery, essential oils, cosmetics, hair lotions, dentifrices which, according to private respondents, includes bleaching and beauty soap and, therefore, under the patent which was issued on June 30, 1959 prior to one issued to Dr. Perez on May 11, 1961, private respondents were entitled to the exclusive use of said trademark and to restrain petitioner from the use of said trademark even on bleaching soap. (emphasis ours). "On the other hand, petitioner claimed that the right of the Estate of Dr. Perez to use the said trademark, especially as against private respondents, had been sustained by the Supreme Court in its decision in Gabriel vs. Perez, 55 SCRA 406. "While We maintain Our original position that We should not decide in the case before Us who is better entitled to the use of said trademark, We are bound to accord prima facie validity to the certificates of registration issued to both petitioner and private respondents until the certificates of registration issued by the Patent Office in favor of petitioner or to private respondents as assignee of Go Hay are annulled or set aside in a proper proceedings. Accordingly, We find it necessary to reconsider Our decision sustaining the order of respondent Court issuing a preliminary injunction against petitioner, for an injunction against petitioner preventing her to avail of the right to the use of the trademark "Wonder" under the certificate of registration issued by the Patent Office in favor of Dr. Perez which until now remained valid as it had not been set aside by competent authority, would be clearly iniquitous and unjust. In the same manner, private respondents should not be restrained from availing of their rights to the use of the trademark "Wonder." The end result would be, during the pendency of the case before the lower Court, both petitioner and private respondents should be permitted to manufacture and distribute articles which are covered by their respective trademarks. IN VIEW OF THE FOREGOING, Our decision of February 24, 1981 is hereby MODIFIED in the sense that the order of respondent Court of September 15, 1980 to the extent that it granted the issuance of a preliminary injunction restraining petitioner from using the trademark "Wonder" in the manufacture, advertisement, packing, marketing, distribution and sale of beauty soap is Copyright 1994-2014

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hereby SET ASIDE and the preliminary injunction issued pursuant to said order declared NULL and VOID. 17(17)

VI. While Civil Case No. C-8147 was still pending, Luis M. Duka, Jr., Assistant to the Director, Philippine Patent Office, in an order dated November 16, 1984, cancelled Certificate of Registration No. SR-2138 in the Supplemental Registrar and No. 25610 in the Principal Registrar, of the trademark "WONDER" both in the name of the "Testate Estate of Dr. Jose R. Perez," for failure to file the required Fifth Anniversary Affidavit of Use/Non Use. 18(18)Gabriel then, alleging the above cancellation, filed an "Omnibus Motion" on December 19, 1984, for the issuance of a restraining order, 19(19) which was granted by the trial court on January 4, 1985. 20(20) However, on June 5, 1985, upon motion for reconsideration of Sumera, the court lifted its order of January 4, 1985 and ordered the Sheriff to return to respondent the equipment, machineries and products seized. 21(21) Nevertheless, on July 17, 1985, the trial court, upon motion for reconsideration of Gabriel and despite the opposition of Sumera to said motion, lifted its Order of June 5, 1985, reinstated its Order of January 4, 1985, and ordered anew the seizing of respondent's equipment, machineries and products. 22(22) Hence, Sumera sought again the intervention of the Court of Appeals and filed a petition for review on certiorari. On July 25, 1986, the appellate court in AC-G.R. SP No. 0691523(23) granted the petition of Sumera and said: "The only issue this Court has to resolve is whether or not the respondent Judge acted with grave abuse of discretion amounting to want or absence of jurisdiction in issuing the questioned order dated January 4, 1985, ordering the confiscation of the equipments of the petitioners and the Order dated July 17, 1985, ordering the reinstatement of his Order of January 4, 1985, after it was recalled in his Order of June 5, 1985. "In fact, the issue raised in the instant case, appears to be the same as the issue raised in the above quoted decision of the Court of Appeals in CA-G.R. SP 07446-R, where the trademark already registered already registered in the name of Dr. Jose R. Perez was also cancelled for failure to file an affidavit of use within one year following the fifth anniversary of the date of issue of the certificate of registration, as required under Section 12 of Republic Act No. 166. The petition for registration of Emilia M. Sumera, in her capacity as special administratrix of the estate of Dr. Jose R. Perez, was also opposed by Crisanta Y. Gabriel. And in said case, the Court of Appeals decided against the Copyright 1994-2014

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opposition of Crisanta Gabriel of the registration of the application filed by Emilia Sumera, in representation of the testate estate of Dr. Jose R. Perez, for the registration of the trademark 'WONDER' for beauty soap, granted by the Director of Patents. The Court of Appeals, and as already above quoted, held that the question of ownership of the trademark 'WONDER' having been decided in G.R. No. L-24075, the employment of two different forms of action shall not be twice litigated. "Furthermore, the Former Third Division of the Appellate Court (in CA-G.R. No SP-1167-R 24(24) [sic]) in its decision dated February 4, 1981, as amended by its Resolution dated September 8, 1981, declared null and void the Order of the same respondent Judge ordering a preliminary injunction, restraining Sumera from using the trademark `WONDER' in the manufacture, advertisements, packaging, marketing, distribution and sale of beauty soap."

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"We find merit in the petition. Considering the previous decisions not only of the former Court of Appeals but of the Supreme Court, the questioned Order in effect pre-judged the very issues raised in the pleadings of the parties, without the benefit of a full blown trial or hearing as required by the Rules. The sole justification of the respondent Judge in issuing the Order of July 17, 1985 reinstating its Order of January 4, 1985 is the alleged cancellation of the trademark of petitioner by the Bureau of Patents on November 16, 1984. Such, however, is without legal basis, as the cancellation Order was not yet final, considering the filing of a motion to set aside the order of cancellation based on the ground that the period for filing of the affidavit of use had not yet expired. Until such time that the motion to set aside the order of cancellation is final, trademark of petitioners was prematurely deemed or non-existent. The only effect of said cancellation, assuming it to be valid, is that it would deprive the registrant of the protection afforded him by law, which is the protection from infringement of trademark, and it was erroneous and a grave abuse of discretion for the respondent Judge to assume that when the registration of petitioner was cancelled, private respondent became exclusive owner of the exclusion of plaintiff Sumera, of the trademark 'WONDER' and thus, plaintiff Sumera in pending case Civil Case No. C-8147 should, during the pendency of said case, be preliminary enjoined, as provided in the questioned order of July 17, 1985 in relation to the Order of January 4, 1985. "Private respondents (sic) claim that, '(p)etitioner's invocation of the decision in G.R. No. L-24075 (Crisanta Y. Gabriel v. Dr. Jose R. Perez, et al) wherein she alleged that the ownership of the trademark 'WONDER' for beauty Copyright 1994-2014

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soap in favor of petitioner was upheld,' as well as the decision of the then Court of Appeals in CA-G.R. No. SP No. 07446-R is now of no moment because after the promulgation of the decisions in said cases the circumstances between the parties (petitioner and private respondents herein) have changed materially with the private respondent Gabriel's acquisition of Go Hay's prior trademark "Wonder." Thus under existing jurisprudence, the said decisions could not be enforced or made applicable as this would produce inequity and injustice to private respondent Gabriel.' . . . is without merit, considering that she merely stepped into the shoes of Go Hay, and thus, could have no better right than Go Hay as against Emilia Sumera (in her capacity as Special Administratrix of the Estate of the late Dr. Jose R. Perez)." 26(26)

VII. Unfortunately, even before the foregoing decision was rendered, petitioner Gabriel on August 13, 1985, filed with the trial Court a Manifestation and Motion to Dismiss Plaintiff's Complaint for having been Rendered Moot and Academic. 27(27) In the said motion, petitioner reiterated that since Certificate No. SR-2138 and Certificate No. 25610 both of the registration of the trademark "WONDER" in the name of the Estate of Dr. Jose R. Perez, had been cancelled in Cancellation Order No. 143, dated November 16, 1984, respondent Sumera's cause of action had become non-existent, as she no longer had rights to protect and interest to pursue. Thus, finally, on December 24, 1985, the court without waiting for the resolution of the Court of Appeals in AC-G.R. SP No. 06915, resolved to dismiss the case. 28(28) Once more respondent Sumera pleaded before the Court of Appeals to review and set aside the order of the trial court dismissing Civil Case No. C-8147. The Court of Appeals granted the petition and in its considered opinion, said: "The court a quo in dismissing the complaint for 'Infringement of Trademark, Damages and with a prayer for Issuance of a Writ of Preliminary Injunction,' only considered the injunctive relief which was issued to protect the present right of the defendants confining as basis for dismissal the second paragraph of Section 23 of RA 166, as amended, providing that 'the complaining party upon proper showing may also be granted injunction,' but it failed to consider the main paragraph of Section 23, supra, providing that any person entitled to the exclusive use of a trademark 'may recover damages in a civil action from any person who infringes his rights . . . .' This section is clear. It allows a party to file 'actions; and damages and injunction for infringement.' 29(29)

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"The order is half-baked because the court a quo failed to make a definite ruling on the pivotal question of whether or not plaintiff is entitled to damages as a consequence of the infringement of the trademark which she claims to be the registered owner at the very least from the time the (trademark) was registered in her (predecessor's) name up to the time that it was cancelled on November 19, 1984. "Indeed, this Court already interdicted to the same presiding judge in Emilia M. Sumera, etc. vs. Hon. Alfredo M. Gorgonio etc., Et Al., AC-G.R. SP No. 06915, July 25, 1986, of the necessity of a 'full blown trial' or hearing of the issues raised in the pleadings as required by the Rules to avoid any conception of judgment without hearing of full examination. 30(30)

Petitioner now comes to us arguing that our decision in the case of Gabriel v. Perez, supra, has become functus officio on account of the prior registration of the trademark "WONDER" by Go Hay and its subsequent assignment to petitioner's predecessors; and that the Cancellation No. 143, dated November 16, 1984 involving private respondent's trademark rendered the Civil Case No. C-8147 moot and academic. We are not convinced. Suffice it to say that these issues herein raised have been squarely met in the decisions (CA-G.R. SP-07446-R; CA-G.R. No. SP-11670-R; AC-G.R. SP No. 06915 and CA-G.R. CV No. 12886) rendered by the appellate court, all of which we agree with. We find that the trial court erred in dismissing the complaint of private respondent, Sumera, without determining whether there was indeed infringement. Because, contrary to the presumption of the trial court, the complaint in Civil Case No. C-8147 is not merely for preliminary injunction, but for infringement of trademark and for damages. In the interest of the public and for the expeditious administration of justice the issue on infringement shall be resolved by the court considering that this case has dragged on for years and has gone from one forum to another. It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation. No useful purpose will be served if the case or the determination of an issue in a case is remanded to the trial court only to have its decision raised again to the Court of Appeals and from there to the Supreme Court. 31(31) We have laid down the rule that the remand of the case or of an issue to the lower court for further reception of evidence is not necessary where the Court is in Copyright 1994-2014

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position to resolve the dispute based on the records before it and particularly where the ends of justice would not be subserved by the remand thereof. 32(32)Moreover, the Supreme Court is clothed with ample authority to review matters, even those not raised on appeal if it finds that their consideration is necessary in arriving at a just disposition of the case. 33(33) R.A. 166 describes what constitutes infringement: "Sec. 22. Infringement, what constitutes — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

The law also provides that any person whose trademark or trade name is infringed may recover damages in a civil action, and upon proper showing, may also be granted injunction. 34(34) We cannot help but note Gabriel's propensity to infringe Dr. Perez' trademark, an act which she has been doing since 1960. Assuming arguendo that she was able to obtain a valid assignment of the trademark "Wonder GH" from Go Hay, still there is reason to believe that Gabriel, or her assigns, has been infringing respondent's trademark since 1960, when she violated the distributorship agreement and appropriated the mark as her own and went on, even when the trademark "Wonder GH" was allegedly assigned to her. The records at hand, show the two marks as registered in the Patents Office as follows:

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In the actual market, however, what is presented to the consumers are the following:

Glaring is the fact that the only difference in the above figures is the "supposed origin" of the product ("Dr. Perez" as against "C.Y. Gabriel") which are not even as eye catching as the word "WONDER" itself. Apparently, Gabriel never used or adopted the trademark of Go Hay in her products, instead she has all along been using the trademark registered in the name of Perez. Petitioner's continued use of respondent's trademark on her product, instead of the assigned mark "WONDER GH" is a clear act of abandonment due to non-use, which is in fact a ground for cancellation of registration under Sec. 17 (b) of R.A. 166. What is worse is that there is obvious bad faith on the part of Gabriel in acquiring the mark "Wonder GH." Undoubtedly her intent in having the mark assigned to her is merely to give color to the use of the mark "WONDER" on her products. Particularly so since the Director of Patents in October 1960, denied the Copyright 1994-2014

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registration to Gabriel of the trademark "WONDER" because it was found that the mark was already in use and is owned by Dr. Jose Perez. And then again in 1978, petitioner failed to convince the Director of Patents and the Court of Appeals that she has a right over the same trademark. Petitioner's argument that the word "Wonder" could not be appropriated exclusively as a trademark by private respondent has no leg to stand on. The matter restricting the exclusive use of a trademark is only true over unrelated goods. The law requires that in the adoption of a mark there should not be any likelihood of confusion, mistake or deception to the consumer. 35(35) Records show that the trademark Gabriel claims to own, through assignment from Go Hay, with certificate of registration No. 33957 in the Principal Register and registration No. SR-4217 in the Supplemental Register is principally for laundry soap in bars and cakes. 36(36)On the other hand, the mark "WONDER" registered to the testate estate of Jose R. Perez was registered principally for beauty soap. 37(37) This fact would not have been relevant if no confusion results thereby. In the case at bar, although the presentation of the marks as registered appears to be different, still confusion is bound to result, since the marks are used on related goods (bleaching beauty soap as against laundry soap). There is likewise no merit in petitioner's assertion that Cancellation Order No. 143, dated November 16, 1984, rendered Civil Case No. C-8147 moot and academic. We reiterate the findings of the Court of Appeals in AC G.R. Sp. 06915, supra. The cancellation order was issued allegedly due to respondent's failure to file the affidavit of use as required by Sec. 12 of R.A. 166. It is not, however, clear whether such order has become final as respondent filed a motion to set aside the order, alleging that it was issued prematurely. Even assuming that the order has become final, still petitioner could not have acquired an exclusive right over the mark "WONDER" as a matter of course. The only effect of cancellation is that it would deprive the registrant protection from infringement. Sec. 22 of R.A. 166, states that only a registrant of a mark can file a case for infringement. On the other hand, Sec. 19 states that any right conferred upon the registrant under the provisions of R.A. 166 terminates/only when judgment or order of cancellation has become final. The present complaint was filed sometime in December 1979, almost 5 years prior to the alleged cancellation order. Thus, until the time that the right is finally terminated, respondent still has a cause of action against petitioners. Ultimately, what draws the axe against petitioners is the principle of " first to use" on which our Trademark Law is based. We have said and reiterated in the case of Copyright 1994-2014

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La Chemise Lacoste v. Fernandez, that: "The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin of 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." 38(38) (emphasis ours)

Sec. 2 of R.A. 166 states that as a condition precedent to registration the trademark, trade name or service marks should have been in actual use in commerce in the Philippines before the time of the filing of the application. A careful perusal of the record shows/that although Go Hay, assignor of Gabriel, first registered the trademark "Wonder GH" on October 17, 1958 39(39) while the registration of the trademark "WONDER" in the name of Dr. Perez was registered in the Supplemental Register on May 11, 1961 and then the Principal Register on January 3, 1978, the certificate of registration issued to Go Hay showed that the mark "Wonder GH" was first used on July 1, 1958, 40(40) while that of the mark "WONDER" in favor of Dr. Perez was recorded to have been in use since March 3, 1953, 41(41) or five (5) years prior to Go Hay's use. Thus, all things being equal, it is then safe to conclude that Dr. Perez had a better right to the mark "WONDER." The registration of the mark "Wonder GH" should have been cancelled in the first place because its use in commerce was much later and its existence would likely cause confusion to the consumer being attached on the product of the same class as that of the mark "WONDER." Considering the foregoing, we find that petitioners have been infringing the trademark "WONDER" which rightfully belongs to respondent. However since the original complaint calls for a determination of damages as a result of the infringement, the trial court is ordered to receive evidence to ascertain the amount thereof. As an incident thereto, the trial court will also have to find out whether the cancellation order has become final and if it did, when it became final. On the other hand the registration of the trademark "Wonder G.H." assigned to C.Y. Gabriel should be and is hereby ordered cancelled since we found that: a) its procurement was tainted with bad faith; b) its continued existence would cause confusion to the consumers; and c) it is not being used by the assignees. 42(42) WHEREFORE, the petition is hereby DISMISSED for lack of merit. Petitioners, having been found to be infringing the mark "WONDER", are permanently enjoined from using the mark. This case is hereby REMANDED to the trial court only for the purpose of determining the amount of damages due to the respondent. Finally, Copyright 1994-2014

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the registration of the trademark "Wonder G.H." is hereby ORDERED cancelled. Let a certification of this case be issued to the Director of Patents for appropriate action. SO ORDERED. Narvasa, C.J., Padilla, Regalado and Puno, JJ., concur. )RRWQRWHV 1. 2.

3. 4. 5. 6. 7. 8. 9. 10. 11.

12. 13. 14. 15. 16.

17. 18. 19. 20. 21. 22. 23.

Artemon D. Luna, J., ponente, Manuel C. Herrera, J., and Eduardo R. Bengzon, J., concurring, promulgated on November 29, 1989. entitled "Emilia M. Sumera, in her capacity as Special Administratrix of the Estate of the late Dr. Jose R. Perez v. Crisanta Y. Gabriel, and her husband," December 24, 1985, Caloocan City, Branch XXXV. Gabriel V. Perez, G.R. No. L-24075, 55 SCRA 406. Original Records, pp. 11-12. Ibid, at p. 409. 55 SCRA 406. Ibid, at p. 417-418. Ibid, at p. 416-417. Inter Partes Case No. 968, decided on August 30, 1977, as discussed in CA G.R. SP-07446-R, pp. 2-3. Original Records, pp. 13-14. "Crisanta Y. Gabriel v. Emilia M. Sumera, the Director of Patents," Justice Nestor B. Alampay, ponente, Justices Luis B. Reyes and Jorge R. Coquia, concurring, June 21, 1979. Original Record, pp. 35-36; C.A. G.R. SP-07446-R Decision, pp. 5-6. Original Record, p. 47. refer to paragraph II, supra. Original Record, p. 193. Emilia Sumera, in her capacity as Special Administratrix of the Estate of the late Dr. Jose R. Perez v. Hon. Alfredo M. Gorgonio, Presiding Judge, Court of First Instance of Rizal, and Crisanta Y. Gabriel and her husband, CA-G.R. No. SP-11670-R; Justice Lino M. Patajo, ponente, Justices Emilio Gancayco and Milagros A. German, concurring, September 8, 1981. Original Records, pp. 263-264; C.A. G.R. No. S.P. 11670-R, dated September 8, 1991, pp. 3-4. as required in R.A. Original Records, pp. 286-287. Original Records, p. 292. Original Records, pp. 331-332. Original Records, p. 362. Justice Jorge S. Imperial, ponente; Justices Carolina Griño-Aquino, Jose Racella, Jr.

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24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36.

37. 38. 39. 40. 41. 42.

and Fidel Purisima, concurring; July 25, 1986. should be CA-G.R. No. SP-11670-R. Original Records, pp. 398-399. Original records, pp. 400-401. Original Records, pp. 365-367. Original Records, pp. 377-378. Decision, pp. 4-5, Rollo, pp. 146-147. Id, at 147. Board of Commissioners v. Judge Joselito de la Rosa and Judge Capulong, G.R. No. 95122-23. Escudero v. Dulay, 158 SCRA 69 (1988); Roman Catholic Archbishop of Manila v. Court of Appeals, 198 SCRA 300 (1991). Roman Catholic, ibid. Sec. 23, R.A. 166. Philippine Refining Co., Inc. v. Ng Sam, 115 SCRA 472. Original Records, pp. 339-342. In a sworn statement given by Go Hay to the Philippine Patent Office, accompanying his application for registration, he specifically alleged that the mark sought to be registered is impressed in laundry soap in bars and cakes. (p. 314, Original Record). Original Records, pp. 153-156. G.R. No. L-63796-97, 129 SCRA 373 (1984), citing the case of Etepha v. Dir. of Patents, 16 SCRA 495. Original Record, p. 148. Original Record, p. 150. Original Record, p. 12. Section 25, R.A. 166.

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FIRST DIVISION [G.R. No. L-28554. February 28, 1983.] UNNO COMMERCIAL ENTERPRISES, INCORPORATED, SHWLWLRQHU, YV GENERAL MILLING CORPORATION and TIBURCIO S. EVALLE, in his capacity as Director of Patents, UHVSRQGHQWV. 6DOHP 'LRQLVLR/DZ2IILFH for petitioner. 6LTXLRQ5H\QD,0RQWHFLOOR,%HOOR 2QJVLDNR for private respondent. SYLLABUS 1. MERCANTILE LAW; TRADEMARK; RIGHT TO REGISTER IT, BASED ON OWNERSHIP. — When the applicant is not the owner of the trademark being applied for, he has no right to apply for the registration of the same. Under the Trademark Law only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. A local importer, however, may make application for the registration of a foreign trademark, trade name or other mark of ownership. 2. ID.; ID.; OWNER; SCOPE UNDER THE TRADEMARK LAW. — The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other mark of ownership, unless such importer is actually the owner thereof in the country from which the goods are imported. Thus this Court, has on several occasions ruled that where the applicant's alleged ownership is not shown in any notarial document and the applicant appears to be merely an importer or distributor of the merchandise covered by said trademark, its application cannot be granted. 3. ID.; ID.; DEED OF ASSIGNMENT; PROOF OF OWNERSHIP. — The Director of Patents correctly found that ample evidence was presented that Centennial Mills, Inc. was the owner and prior user in the Philippines of the trademark "All Montana" through a local importer and broker. The Deed of Assignment itself Copyright 1994-2014

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constitutes sufficient proof of its ownership of the trademark "All Montana, "showing that Centennial Mills was a corporation duly organized and existing under and by virtue of the laws of the State of Oregon, U.S.A. with principal place and business at Portland, Oregon, U.S.A. and the absolute and registered owner of several trademarks for wheat flour, i.e. (Imperial, White Lily, Duck, General, Swan, White Horse, Vinta, El Paro, Baker's Joy, Choice, Red Bowl, All Montana and Dollar) all of which were assigned by it to respondent General Milling Corporation. 4. ID.; ID.; OWNERSHIP NOT ACQUIRED BY REGISTRATION ALONE. — Petitioner's contention that it is the owner of the mark "All Montana'' because of its certificate of registration issued by the Director of Patents, must fail, since ownership of a trademark is not acquired by the mere fact of registration alone. Registration merely creates a prima facie presumption of the validity of the registration, of the registrant's ownership of the trademark and of the exclusive right to the use thereof. Registration does not perfect a trademark right. As conceded itself by petitioner, evidence may be presented to overcome the presumption. Prior use by one will controvert a claim of legal appropriation by subsequent users. 5. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT BY THE DIRECTOR OF PATENTS; CONCLUSIVE IF SUPPORTED BY SUBSTANTIAL EVIDENCE. — It is well-settled that we are precluded from making further inquiry, since the findings of fact of the Director of Patents in the absence of any showing that there was grave abuse of discretion is binding on us and the findings of facts by the Director of Patents are deemed conclusive in the Supreme Court provided that they are supported by substantial evidence. Petitioner has failed to show that the findings of fact of the Director of Patents are not substantially supported by evidence nor that any grave abuse of discretion was committed. 6. MERCANTILE LAW; DIRECTOR OF PATENTS; AUTHORITY TO ORDER CANCELLATION OF A REGISTERED MARK OR TRADENAME IN AN INTER PARTES CASE. — Finally, the Court finds without merit petitioner's argument that the Director of Patents could not order the cancellation of its certificate of registration in an interference proceeding and that the question of whether or not a certificate of registration is to be cancelled should have been brought in cancellation proceedings. Under Rule 178 of the Rules of the Patent Office in Trademark Cases, the Director of Patents is expressly authorized to order the cancellation of a registered mark or trade name or name or other mark of ownership in an inter partes case, such as the interference proceeding at bar.

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DECISION

TEEHANKEE, - : p

The Court affirms respondent Director of Patent's decision declaring respondent General Milling Corporation as the prior user of the trademark "All Montana" on wheat flour in the Philippines and ordering the cancellation of the certificate of registration for the same trademark previously issued in favor of petitioner Unno Commercial Enterprises, Incorporated, it appearing that Unno Commercial Enterprises, Inc. merely acted as exclusive distributor of All Montana wheat flour in the Philippines. Only the owner of a trademark, trade name or service mark may apply for its registration and an importer, broker, indentor or distributor acquires no rights to the trademark of the goods he is dealing with in the absence of a valid transfer or assignment of the trade mark. On December 11, 1962, respondent General Milling Corporation filed an application for the registration of the trademark "All Montana" to be used in the sale of wheat flour. In view of the fact, that the same trademark was previously registered in favor of petitioner Unno Commercial Enterprises, Inc., the Chief Trademark Examiner of the Philippines Patent Office declared an interference proceeding 1(1) between respondent corporation's application (Serial No. 9732), as Junior/Party-Applicant, and petitioner company's registration (Registration No. 9589), as Senior Party-Applicant, docketed in the Philippines Patent Office as Inter Partes Case No. 313, to determine which party has previously adopted and used the trademark "All Montana". Respondent General Milling Corporation, in its application for registration, alleged that it started using the trademark "All Montana" on August 31, 1955 and subsequently was licensed to use the same by Centennial Mills, Inc. by virtue of a deed of assignment executed on September 20, 1962. On the other hand, petitioner Unno Commercial Enterprises, Inc. argued that the same trademark had been registered in its favor on March 8, 1962 asserting that it started using the trademark on June 30, 1956, as indentor or broker for S.H. Huang Bros. & Co., a local firm. LLpr

The Director of Patents, after hearing, ruled in favor of respondent General Milling Corporation and rendered its decision as follows: Copyright 1994-2014

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"However, there is testimony in the record (t.s.n., pp. 11-12, Jan. 17, 1967, testimony of Jose Uy) to the effect that, indispensable, "ALL MONTANA" wheat flour is a premium flour produced from premium wheat coming from the State of Montana, U.S.A. It is apparent that the trademark is primarily geographically descriptive of the goods. It is therefore a matter overlooked by the Trademark Examiner, and it is incumbent upon him to determine if the applicant should claim and is qualified to claim distinctiveness under Section 4(f) of the Trademark Statute. Otherwise, it is registrable on the Supplemental Register and should thus be registered therein. "WHEREFORE, the Junior Party-Applicant is adjudged prior user of the trademark ALL MONTANA, but because it is primarily geographically descriptive, the application is herein remanded to the Chief Trademark Examiner for proper proceeding before issuance of the certificate of registration. "The certificate of registration issued to the Senior Party is ordered cancelled. "IT IS SO ORDERED."

After its motion for reconsideration was denied, petitioner brought the instant petition seeking the reversal of the decision and praying that it be declared the owner and prior user of the trademark "All Montana" on wheat flour. Petitioner based its claim of ownership over the trademark in question by the fact that it acted as an indentor or broker for S. H. Huang Bros. & Co., a local importer of wheat flour, offering as evidence the various shipments, documents, invoices and other correspondence of Centennial Mills, Inc., shipping thousand of bags of wheat flour bearing the trademark "All Montana" to the Philippines. Petitioner argued that these documents, invoices and correspondence proved the fact that it has been using the trademark "All Montana" as early as 1955 in the concept of an owner and maintained that anyone, whether he is only an importer, broker or indentor can appropriate, use and own a particular mark of its own choice although he is not the manufacturer of the goods he deals with. Relying on the provisions of Section 2-A of the Trademarks Law 2(2) (Republic Act 166), petitioner insists that "the appropriation and ownership of a particular trademark is not merely confined to producers or manufacturers but likewise to anyone who lawfully deals in merchandise who renders any lawful service in commerce, like petitioner in the case at bar." 3(3) The right to register trademark is based on ownership. 4(4) When the applicant is not the owner of the trademark being applied for, he has no right to apply for the Copyright 1994-2014

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registration of the same. 5(5) Under the Trademark Law only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. 6(6)

The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other mark of ownership, unless such importer is actually the owner thereof in the country from which the goods are imported. A local importer, however, may make application for the registration of a foreign trademark, trade name or service mark if he is duly authorized by the actual owner of the name or other mark of ownership. 7(7) Thus, this Court, has on several occasions ruled that where the applicant's alleged ownership is not shown in any notarial document and the applicant appears to be merely an importer or distributor of the merchandise covered by said trademark, its application cannot be granted. 8(8) Moreover, the provision relied upon by petitioner (Sec. 2-A, Rep. Act No. 166) allows one "who lawfully produces or deals in merchandise . . . or who engages in any lawful business or who renders any lawful service in commerce, by actual use thereof . . . (to) appropriate to his exclusive use a trademark, or a service mark QRW VR DSSURSULDWHGE\DQRWKHU." In the case at bar, the evidence showed that the trademark "All Montana" was owned and registered in the name of Centennial Mills, Inc. which later transferred it to respondent General Milling Corporation by way of a deed of assignment. It is undisputed that way back in March, 1955, Centennial Mills, Inc. under the tradename Wenatchee Milling Co., exported flour to the Philippines, through its distributor, herein petitioner Unno Commercial Enterprises, Inc. which acted as indentor or broker for the firm S. H. Huang Bros. & Co. However, because of increased taxes and subsidies, Centennial Mills discontinued shipments of flour in the Philippines and eventually sold its brands for wheat flour, including "All Montana" brand to respondent General Milling Corporation in consideration of 1,000 shares of stock of respondent corporation with a par value of P100.00 per share or a total of P100,000.00. Respondent General Milling Corporation, since the start of the operation in 1961 of its flour mills located in Lapu-lapu City, Cebu has been manufacturing and selling "All Montana" flour in the Philippines. LLpr

As against petitioner's argument that respondent failed to establish convincingly the ownership of the trademark "All Montana" by its assignor Centennial Mills, Inc., the Director of Patents correctly found that ample evidence was presented that Centennial Mills, Inc. was the owner and prior user in the Copyright 1994-2014

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Philippines of the trademark "All Montana" through a local importer and broker. The Deed of Assignment itself constitutes sufficient proof of its ownership of the trademark "All Montana," showing that Centennial Mills was a corporation duly organized and existing under and by virtue of the laws of the State of Oregon, U.S.A. with principal place and business at Portland, Oregon, U.S.A. and the absolute and registered owner of several trademarks for wheat flour, i.e. (Imperial, White Lily, Duck, General, Swan, White Horse, Vinta, El Paro, Baker's Joy, Choice, Red Bowl, All Montana and Dollar) all of which were assigned by it to respondent General Milling Corporation. The deed of assignment was signed by its president, Dugald MacGregor, duly acknowledged before James Hunt, a notary public for the State of Oregon, accompanied by a certification issued by the Secretary of State of the State of Oregon stating that the said James Hunt is a duly qualified Notary Public with full power and authority to take acknowledgments of all oaths and that full faith and credit should be given to his official acts as notary public. The Director of Patents likewise correctly rejected petitioner's contention that in a 1954 conference in Manila the ownership and use by petitioner of the brand "All Montana" was agreed upon, on the contrary finding that "Details of that meeting were, however, explained by Mr. Dugald MacGregor, President of Centennial Mills, Inc., as the Junior Party's rebuttal witness. Mr. MacGregor confirmed holding such conference in a restaurant in Manila with representatives of the Senior Party, namely; Messrs. Jose Uy, Francisco Gonzales and S.H. Huang, although he could not remember the name of the restaurant. He further explained that his company owned the trademark; that it had been using the mark in the United States; and that ownership of the mark had never been conferred upon any other company, much less the Senior Party"; and "Inasmuch as it was not the owner of the trademark, the Senior Party could not be regarded as having used and adopted it, and had no right to apply for its registration. It acknowledged that it was a mere importer of flour, and a mere importer and distributor acquires no rights in the mark used on the imported goods by the foreign exporter in the absence of an assignment of any kind . . ., Trademarks used and adopted on goods manufactured or packed in a foreign country in behalf of a domestic importer, broker, or indentor and distributor are presumed to be owned by the manufacturer or packer, unless there is a written agreement clearly showing that ownership vests in the importer, broker, indentor or distributor." Thus, petitioner's contention that it is the owner of the mark "All Montana" because of its certificate of registration issued by the Director of Patents, must fail, since ownership of a trademark is not acquired by the mere fact of registration alone. 9(9) Registration merely creates a SULPD IDFLH presumption of the validity of the Copyright 1994-2014

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registration, of the registrant's ownership of the trademark and of the exclusive right to the use thereof. 10(10) Registration does not perfect a trademark right. 11(11) As conceded itself by petitioner, evidence may be presented to overcome the presumption. Prior use by one will controvert a claim of legal appropriation by subsequent users. In the case at bar, the Director of Patents found that "ample evidence was presented in the record that Centennial Mills, Inc. was the owner and prior user in the Philippines of the trademark 'All Montana' through a local importer and broker. Use of a trademark by a mere importer, indentor or exporter (the Senior Party herein) inures to the benefit of the foreign manufacturer whose goods are identified by the trademark. The Junior Party has hereby established a continuous chain of title and, consequently, prior adoption and use" and ruled that "based on the facts established, it is safe to conclude that the Junior Party has satisfactorily discharged the burden of proving priority of adoption and use and is entitled to registration." It is well-settled that we are precluded from making further inquiry, since the findings of fact of the Director of Patents in the absence of any showing that there was grave abuse of discretion is binding on us 12(12) and the findings of facts by the Director of Patents are deemed conclusive in the Supreme Court provided that they are supported by substantial evidence. 13(13) Petitioner has failed to show that the findings of fact of the Director of Patents are not substantially supported by evidence nor that any grave abuse of discretion was committed. LexLib

Finally, the Court finds without merit petitioner's argument that the Director of Patents could not order the cancellation of its certificate of registration in an interference proceeding and that the question of whether or not a certificate of registration is to be cancelled should have been brought in cancellation proceedings. Under Rule 178 of the Rules of the Patent Office in Trademark Cases, 14(14) the Director of Patents is expressly authorized to order the cancellation of a registered mark or trade name or name or other mark of ownership in an inter partes case, such as the interference proceeding at bar. 15(15) WHEREFORE, the appealed decision is hereby affirmed. No costs. 0HOHQFLR+HUUHUD, 3ODQD,9D]TXH],5HORYD and Gutierrez, Jr., JJ.,concur. )RRWQRWHV 1. 2.

Under Sec. 10-A, Republic Act No. 166. Sec. 2-A. Ownership of trademarks, trade names and service marks how acquired. Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use

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3. 4.

5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

15.

thereof in manufacture or trade, in business and in the service rendered, may appropriate to his exclusive use a trademark, or a service mark QRWVRDSSURSULDWHGE\ DQRWKHU to distinguish his merchandise, business or service from the merchandise, business or service of others . . .." (italics supplied.). P. 7, Petition; also p. 16, Petitioner's Brief. Lim Kiah vs. The Kaynee Co., et al., 25 SCRA 485; Marvex Commercial Co., Inc. vs. Petra Hawpia & Company, 18 SCRA 1178; Operators, Inc. vs. Director of Patents, 15 SCRA 147. Operators, Inc. vs. Director of Patents, VXSUD. R.A. No. 638 amending Sec. 2, R.A. No. 166; Gabriel vs. Perez, 55 SCRA 406. Rule 37, Rev. Rules of Practice before the Phil. Patent Office in Trademark Cases. Marvex Commercial Co., Inc. vs. Petra Hawpia & Co., supra; Operators, Inc. vs. Director of Patents, et al., supra. 1 Nims, Unfair Competition & Trademark, p. 626. Sec. 20, R.A No. 166. Sterling Products, International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214. Lim Kiah vs. Kaynee Co., supra; Sy Ching vs. Gaw Liu, 44 SCRA 143. Chung Te vs. Ng Kian Giab, 18 SCRA 747. The rule provides: "5HJLVWUDWLRQPD\EHUHIXVHGFDQFHOOHGRUUHVWULFWHGE\WKH 'LUHFWRU. — In LQWHUSDUWHV proceedings, the Director may refuse to register the opposed mark or trade name or name or other mark of ownership, PD\FDQFHORU UHVWULFWWKHUHJLVWUDWLRQRIDUHJLVWHUHGPDUN or trade name or name or other mark of ownership, or may refuse to register any or all of several interfering marks, of trade names or names or other marks of ownership or may register the mark or marks or trade name or trade names and other marks of ownership for the person or persons entitled thereto, as the right of the parties may be established in the proceedings." (Italics supplied) Under Rule 166 of the Rules of the Patent Office in Trademark Cases, inter partes includes: (a) interferences between a pending application or between pending application and a registration; (b) opposition proceedings; (c) cancellation proceedings.

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FIRST DIVISION [G.R. No. 184850. October 20, 2010.] E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, petitioners, YV. SHEN DAR ELECTRICITY AND MACHINERY CO., LTD., respondent.

DECISION

VELASCO, JR., J : p

The Case This Petition for Review on Certiorari under Rule 45 seeks to nullify and reverse the February 21, 2008 Decision 1(1) and the October 6, 2008 Resolution 2(2) rendered by the Court of Appeals (CA) in CA-G.R. SP No. 99356 entitled Shen Dar Electricity and Machinery Co., Ltd. v. E.Y. Industrial Sales, Inc. and Engracio Yap. HcTSDa

The assailed decision reversed the Decision dated May 25, 2007 3(3) issued by the Director General of the Intellectual Property Office (IPO) in Inter Partes Case No. 14-2004-00084. The IPO Director General upheld Certificate of Registration (COR) No. 4-1999-005393 issued by the IPO for the trademark "VESPA" in favor of petitioner E.Y. Industrial Sales, Inc. (EYIS), but ordered the cancellation of COR No. 4-1997-121492, also for the trademark "VESPA," issued in favor of respondent Shen Dar Electricity and Machinery Co., Ltd. (Shen Dar). The Decision of the IPO Director General, in effect, affirmed the Decision dated May 29, 2006 4(4) issued by the Director of the Bureau of Legal Affairs (BLA) of the IPO. The Facts EYIS is a domestic corporation engaged in the production, distribution and sale Copyright 1994-2014

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of air compressors and other industrial tools and equipment. Yap is the Chairman of the Board of Directors of EYIS. 6(6)

5(5)

Petitioner Engracio

Respondent Shen Dar is a Taiwan-based foreign corporation engaged in the manufacture of air compressors. 7(7) Both companies claimed to have the right to register the trademark "VESPA" for air compressors. From 1997 to 2004, EYIS imported air compressors from Shen Dar through sales contracts. In the Sales Contract dated April 20, 2002, 8(8) for example, Shen Dar would supply EYIS in one (1) year with 24 to 30 units of 40-ft. containers worth of air compressors identified in the Packing/Weight Lists simply as SD-23, SD-29, SD-31, SD-32, SD-39, SD-67 and SD-68. In the corresponding Bill of Ladings, the items were described merely as air compressors. 9(9) There is no documentary evidence to show that such air compressors were marked "VESPA." On June 9, 1997, Shen Dar filed Trademark Application Serial No. 4-1997-121492 with the IPO for the mark "VESPA, Chinese Characters and Device" for use on air compressors and welding machines. 10(10) On July 28, 1999, EYIS filed Trademark Application Serial No. 4-1999-005393, also for the mark "VESPA," for use on air compressors. 11(11) On January 18, 2004, the IPO issued COR No. 4-1999-005393 in favor of EYIS. 12(12) Thereafter, on February 8, 2007, Shen Dar was also issued COR No. 4-1997-121492. 13(13)

In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation of EYIS' COR with the BLA. 14(14) In the Petition, Shen Dar primarily argued that the issuance of the COR in favor of EYIS violated Section 123.1 paragraphs (d), (e) and (f) of Republic Act No. (RA) 8293, otherwise known as the Intellectual Property Code (IP Code), having first filed an application for the mark. Shen Dar further alleged that EYIS was a mere distributor of air compressors bearing the mark "VESPA" which it imported from Shen Dar. Shen Dar also argued that it had prior and exclusive right to the use and registration of the mark "VESPA" in the Philippines under the provisions of the Paris Convention. 15(15) In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true owners of the mark "VESPA" being the sole assembler and fabricator of air compressors since the early 1990s. They further alleged that the air compressors that Shen Dar allegedly supplied them bore the mark "SD" for Shen Dar and not Copyright 1994-2014

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"VESPA." Moreover, EYIS argued that Shen Dar, not being the owner of the mark, could not seek protection from the provisions of the Paris Convention or the IP Code. 16(16)

TDcAIH

Thereafter, the Director of the BLA issued its Decision dated May 29, 2006 in favor of EYIS and against Shen Dar, the dispositive portion of which reads: WHEREFORE, premises considered, the Petition for Cancellation is, as it is hereby, DENIED. Consequently, Certificate of Registration No. 4-1999-[005393] for the mark "VESPA" granted in the name of E.Y. Industrial Sales, Inc. on 9 January 2007 is hereby upheld. Let the filewrapper of VESPA subject matter of this case be forwarded to the Administrative, Financial and Human Resource Development Services Bureau for issuance and appropriate action in accordance with this DECISION and a copy thereof furnished to the Bureau of Trademarks for information and update of its records. SO ORDERED. 17(17)

Shen Dar appealed the decision of the BLA Director to the Director General of the IPO. In the appeal, Shen Dar raised the following issues: 1.

Whether the BLA Director erred in ruling that Shen Dar failed to present evidence;

2.

Whether the registration of EYIS' application was proper considering that Shen Dar was the first to file an application for the mark; and

3.

Whether the BLA Director correctly ruled that EYIS is the true owner of the mark. 18(18)

Later, the IPO Director General issued a Decision dated May 25, 2007 upholding the COR issued in favor of EYIS while cancelling the COR of Shen Dar, the dispositive portion of which reads: WHEREFORE, premises considered, the appeal is DENIED. Certificate of Registration No. 4-1999-005393 for the mark VESPA for air compressor issued in favor of Appellee is hereby upheld. Consequently, Certificate of Registration No. 4-1997-121492 for the mark VESPA, Chinese Characters & Device for goods air compressor and spot welding machine issued in favor of Copyright 1994-2014

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Appellant is hereby ordered cancelled. Let a copy of this Decision as well as the records of this case be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks, the Administrative, Financial and Human Resources Development Services Bureau, and the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. 19(19)

Shen Dar appealed the above decision of the IPO Director General to the CA where Shen Dar raised the following issues: IACDaS

1.

Whether Shen Dar is guilty of forum shopping;

2.

Whether the first-to-file rule applies to the instant case;

3.

Whether Shen Dar presented evidence of actual use;

4.

Whether EYIS is the true owner of the mark "VESPA";

5.

Whether the IPO Director General erred in cancelling Shen Dar's COR No. 4-1997-121492 without a petition for cancellation; and

6.

Whether Shen Dar sustained damages. 20(20)

In the assailed decision, the CA reversed the IPO Director General and ruled in favor of Shen Dar. The dispositive portion states: WHEREFORE, premises considered, the petition is GRANTED. Consequently, the assailed decision of the Director General of the Intellectual Property Office dated May 25, 2007 is hereby REVERSED and SET ASIDE. In lieu thereof, a new one is entered: a) ordering the cancellation of Certificate of Registration No. 4-1999-005393 issued on January 19, 2004 for the trademark VESPA in favor of E.Y. Industrial Sales, Inc.; b) ordering the restoration of the validity of Certificate of Registration No. 4-1997-121492 for the trademark VESPA in favor of Shen Dar Electricity and Machinery Co., Ltd. No pronouncement as to costs. SO ORDERED. 21(21)

In ruling for Shen Dar, the CA ruled that, despite the fact that Shen Dar did not formally offer its evidence before the BLA, such evidence was properly attached to Copyright 1994-2014

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the Petition for Cancellation. As such, Shen Dar's evidence may be properly considered. The CA also enunciated that the IPO failed to properly apply the provisions of Sec. 123.1 (d) of RA 8293, which prohibits the registration of a trademark in favor of a party when there is an earlier filed application for the same mark. The CA further ruled that Shen Dar should be considered to have prior use of the mark based on the statements made by the parties in their respective Declarations of Actual Use. The CA added that EYIS is a mere importer of the air compressors with the mark "VESPA" as may be gleaned from its receipts which indicated that EYIS is an importer, wholesaler and retailer, and therefore, cannot be considered an owner of the mark. 22(22) EYIS filed a motion for reconsideration of the assailed decision which the CA denied in the assailed resolution. Hence, the instant appeal. Issues EYIS and Yap raise the following issues in their petition: A.

Whether the Director General of the IPO correctly upheld the rights of Petitioners over the trademark VESPA.

B.

Whether the Director General of the IPO can, under the circumstances, order the cancellation of Respondent's certificate of registration for VESPA, which has been fraudulently obtained and erroneously issued. aCcADT

C.

Whether the Honorable Court of Appeals was justified in reversing the findings of fact of the IPO, which affirm the rights of Petitioner EYIS over the trademark VESPA and when such findings are supported by the evidence on record.

D.

Whether this Honorable Court may review questions of fact considering that the findings of the Court of Appeals and the IPO are in conflict and the conclusions of the appellee court are contradicted by the evidence on record. 23(23)

The Ruling of the Court The appeal is meritorious. First Issue: Copyright 1994-2014

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Whether this Court may review the questions of fact presented Petitioners raise the factual issue of who the true owner of the mark is. As a general rule, this Court is not a trier of facts. However, such rule is subject to exceptions. In New City Builders, Inc. v. National Labor Relations Commission, Court ruled that:

24(24)

the

We are very much aware that the rule to the effect that this Court is not a trier of facts admits of exceptions. As we have stated in Insular Life Assurance Company, Ltd. vs. CA: [i]t is a settled rule that in the exercise of the Supreme Court's power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. (Emphasis supplied.)

In the instant case, the records will show that the IPO and the CA made differing conclusions on the issue of ownership based on the evidence presented by the parties. Hence, this issue may be the subject of this Court's review. Second Issue: Whether evidence presented before the BLA must be formally offered Copyright 1994-2014

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Preliminarily, it must be noted that the BLA ruled that Shen Dar failed to adduce evidence in support of its allegations as required under Office Order No. 79, Series of 2005, Amendments to the Regulations on Inter Partes Proceedings, having failed to formally offer its evidence during the proceedings before it. The BLA ruled: CcAITa

At the outset, we note petitioner's failure to adduce any evidence in support of its allegations in the Petition for Cancellation. Petitioner did not file nor submit its marked evidence as required in this Bureau's Order No. 2006-157 dated 25 January 2006 in compliance with Office Order No. 79, Series of 2005, Amendments to the Regulations on Inter Partes Proceedings. 25(25) . . .

In reversing such finding, the CA cited Sec. 2.4 of BLA Memorandum Circular No. 03, Series of 2005, which states: Section 2.4. In all cases, failure to file the documentary evidences in accordance with Sections 7 and 8 of the rules on summary proceedings shall be construed as a waiver on the part of the parties. In such a case, the original petition, opposition, answer and the supporting documents therein shall constitute the entire evidence for the parties subject to applicable rules.

The CA concluded that Shen Dar needed not formally offer its evidence but merely needed to attach its evidence to its position paper with the proper markings, 26(26) which it did in this case. The IP Code provides under its Sec. 10.3 that the Director General of the IPO shall establish the procedure for the application for the registration of a trademark, as well as the opposition to it: Section 10. The Bureau of Legal Affairs. — The Bureau of Legal Affairs shall have the following functions: xxx

xxx

xxx

10.3. The Director General may by Regulations establish the procedure to govern the implementation of this Section.

Thus, the Director General issued Office Order No. 79, Series of 2005 amending the regulations on Inter Partes Proceedings, Sec. 12.1 of which provides: Section 12. Evidence for the Parties. — 12.1. The verified petition or opposition, reply if any, duly marked Copyright 1994-2014

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affidavits of the witnesses, and the documents submitted, shall constitute the entire evidence for the petitioner or opposer. The verified answer, rejoinder if any, and the duly marked affidavits and documents submitted shall constitute the evidence for the respondent. Affidavits, documents and other evidence not submitted and duly marked in accordance with the preceding sections shall not be admitted as evidence.

The preceding sections referred to in the above provision refer to Secs. 7.1, 8.1 and 9 which, in turn, provide: Section 7.

Filing of Petition or Opposition. —

7.1. The petition or opposition, together with the affidavits of witnesses and originals of the documents and other requirements, shall be filed with the Bureau, provided, that in case of public documents, certified copies shall be allowed in lieu of the originals. The Bureau shall check if the petition or opposition is in due form as provided in the Regulations particularly Rule 3, Section 3; Rule 4, Section 2; Rule 5, Section 3; Rule 6, Section 9; Rule 7, Sections 3 and 5; Rule 8, Sections 3 and 4. For petition for cancellation of layout design (topography) of integrated circuits, Rule 3, Section 3 applies as to the form and requirements. The affidavits, documents and other evidence shall be marked consecutively as "Exhibits" beginning with the letter "A". CIETDc

Section 8.

Answer. —

8.1. Within three (3) working days from receipt of the petition or opposition, the Bureau shall issue an order for the respondent to file an answer together with the affidavits of witnesses and originals of documents, and at the same time shall notify all parties required to be notified in the IP Code and these Regulations, provided, that in case of public documents, certified true copies may be submitted in lieu of the originals. The affidavits and documents shall be marked consecutively as "Exhibits" beginning with the number "1". Section 9. Petition or Opposition and Answer must be verified. — Subject to Rules 7 and 8 of these regulations, the petition or opposition and the answer must be verified. Otherwise, the same shall not be considered as having been filed.

In other words, as long as the petition is verified and the pieces of evidence consisting of the affidavits of the witnesses and the original of other documentary evidence are attached to the petition and properly marked in accordance with Secs. 7.1 and 8.1 abovementioned, these shall be considered as the evidence of the petitioner. There is no requirement under the abovementioned rules that the evidence of the Copyright 1994-2014

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parties must be formally offered to the BLA. In any case, as a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the Regulations on Inter Partes Proceedings, the BLA is not bound by technical rules of procedure. The evidence attached to the petition may, therefore, be properly considered in the resolution of the case. Third Issue: Whether the IPO Director General can validly cancel Shen Dar's Certificate of Registration In his Decision, the IPO Director General stated that, despite the fact that the instant case was for the cancellation of the COR issued in favor of EYIS, the interests of justice dictate, and in view of its findings, that the COR of Shen Dar must be cancelled. The Director General explained: Accordingly, while the instant case involves a petition to cancel the registration of the Appellee's trademark VESPA, the interest of justice requires that Certificate of Registration No. 4-1997-121492 be cancelled. While the normal course of proceedings should have been the filing of a petition for cancellation of Certificate of Registration No. 4-1997-121492, that would involve critical facts and issues that have already been resolved in this case. To allow the Applicant to still maintain in the Trademark Registry Certificate of Registration No. 4-1997-121492 would nullify the exclusive rights of Appellee as the true and registered owner of the mark VESPA and defeat the purpose of the trademark registration system. 27(27)

Shen Dar challenges the propriety of such cancellation on the ground that there was no petition for cancellation as required under Sec. 151 of RA 8293. Office Order No. 79, Series of 2005, provides under its Sec. 5 that: Section 5. Rules of Procedure to be followed in the conduct of hearing of Inter Partes cases. — The rules of procedure herein contained primarily apply in the conduct of hearing of Inter Partes cases. The Rules of Court may be applied suppletorily. The Bureau shall not be bound by strict technical rules of procedure and evidence 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 contentious issues before it. (Emphasis supplied.) aETDIc

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The above rule reflects the oft-repeated legal principle that quasi-judicial and administrative bodies are not bound by technical rules of procedure. Such principle, however, is tempered by fundamental evidentiary rules, including due process. Thus, we ruled in Aya-ay, Sr. v. Arpaphil Shipping Corp.: 28(28) That administrative quasi-judicial bodies like the NLRC are not bound by technical rules of procedure in the adjudication of cases does not mean that the basic rules on proving allegations should be entirely dispensed with. A party alleging a critical fact must still support his allegation with substantial evidence. Any decision based on unsubstantiated allegation cannot stand as it will offend due process. . . . The liberality of procedure in administrative actions is subject to limitations imposed by basic requirements of due process. As this Court said in Ang Tibay v. CIR, the provision for flexibility in administrative procedure "does not go so far as to justify orders without a basis in evidence having rational probative value." More specifically, as held in Uichico v. NLRC: It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases. However, this procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules.

This was later reiterated in Lepanto Consolidated Mining Company v. Dumapis: 29(29) While it is true that administrative or quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases, this procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules. The evidence presented must at least have a modicum of admissibility for it to have probative value. Not only must there be some evidence to support a finding or conclusion, but the evidence must be substantial. Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Thus, even though technical rules of evidence are not strictly complied with before the LA and the NLRC, their decision must be based on evidence that must, at the very least, be substantial.

The fact that no petition for cancellation was filed against the COR issued to Shen Dar does not preclude the cancellation of Shen Dar's COR. It must be emphasized that, during the hearing for the cancellation of EYIS' COR before the BLA, Shen Dar tried to establish that it, not EYIS, was the true owner of the mark Copyright 1994-2014

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"VESPA" and, thus, entitled to have it registered. Shen Dar had more than sufficient opportunity to present its evidence and argue its case, and it did. It was given its day in court and its right to due process was respected. The IPO Director General's disregard of the procedure for the cancellation of a registered mark was a valid exercise of his discretion. Fourth Issue: Whether the factual findings of the IPO are binding on the CA Next, petitioners challenge the CA's reversal of the factual findings of the BLA that Shen Dar and not EYIS is the prior user and, therefore, true owner of the mark. In arguing its position, petitioners cite numerous rulings of this Court where it was enunciated that the factual findings of administrative bodies are given great weight if not conclusive upon the courts when supported by substantial evidence. We agree with petitioners that the general rule in this jurisdiction is that the factual findings of administrative bodies deserve utmost respect when supported by evidence. However, such general rule is subject to exceptions. In Fuentes v. Court of Appeals, 30(30) the Court established the rule of conclusiveness of factual findings of the CA as follows: Jurisprudence teaches us that "(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals . . . is limited to the review and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed conclusive. As such this Court is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below. This rule, however, is not without exceptions." The findings of fact of the Court of Appeals, which are as a general rule deemed conclusive, may admit of review by this Court: CETIDH

(1) when the factual findings of the Court of Appeals and the trial court are contradictory; (2) when the findings are grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible;

Copyright 1994-2014

(4)

when there is grave abuse of discretion in the appreciation of facts;

(5)

when the appellate court, in making its findings, goes beyond the

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issues of the case, and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; (8)

when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record. (Emphasis supplied.)

Thereafter, in Villaflor v. Court of Appeals, 31(31) this Court applied the above principle to factual findings of quasi-judicial bodies, to wit: Proceeding by analogy, the exceptions to the rule on conclusiveness of factual findings of the Court of Appeals, enumerated in Fuentes vs. Court of Appeals, can also be applied to those of quasi-judicial bodies . . . . (Emphasis supplied.)

Here, the CA identified certain material facts that were allegedly overlooked by the BLA and the IPO Director General which it opined, when correctly appreciated, would alter the result of the case. An examination of the IPO Decisions, however, would show that no such evidence was overlooked. First, as to the date of first use of the mark by the parties, the CA stated: To begin with, when respondents-appellees filed its application for registration of the VESPA trademark on July 28, 1999, they stated under oath, as found in their DECLARATION OF ACTUAL USE, that their first use of the mark was on December 22, 1998. On the other hand, [Shen Dar] in its application dated June 09, 1997 stated, likewise under oath in their DECLARATION OF ACTUAL USE, that its first use of the mark was in June 1996. This cannot be made any clearer. [Shen Dar] was not only the first to file an application for registration but likewise first to use said registrable mark. 32(32)

CAIaHS

Evidently, the CA anchors its finding that Shen Dar was the first to use the Copyright 1994-2014

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mark on the statements of the parties in their respective Declarations of Actual Use. Such conclusion is premature at best. While a Declaration of Actual Use is a notarized document, hence, a public document, it is not conclusive as to the fact of first use of a mark. The declaration must be accompanied by proof of actual use as of the date claimed. In a declaration of actual use, the applicant must, therefore, present evidence of such actual use. The BLA ruled on the same issue, as follows: More importantly, the private respondent's prior adoption and continuous use of the mark 'VESPA' on air compressors is bolstered by numerous documentary evidence consisting of sales invoices issued in the name of E.Y. Industrial and Bill of Lading (Exhibits '4' to '375'). Sales Invoice No. 12075 dated March 27, 1995 antedates petitioner's date of first use on January 1, 1997 indicated in its trademark application filed on June 9, 1997 as well as the date of first use in June of 1996 as indicated in the Declaration of Actual Use submitted on December 3, 2001 (Exhibit '385'). The use by respondent registrant in the concept of owner is shown by commercial documents, sales invoices unambiguously describing the goods as "VESPA" air compressors. Private respondents have sold the air compressors bearing the "VESPA" to various locations in the Philippines, as far as Mindanao and the Visayas since the early 1990's. We carefully inspected the evidence consisting of three hundred seventy-one (371) invoices and shipment documents which show that VESPA air compressors were sold not only in Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City, to name a few. There is no doubt that it is through private respondents' efforts that the mark "VESPA" used on air compressors has gained business goodwill and reputation in the Philippines for which it has validly acquired trademark rights. Respondent E.Y. Industrial's right has been preserved until the passage of RA 8293 which entitles it to register the same. 33(33)

Comparatively, the BLA's findings were founded upon the evidence presented by the parties. An example of such evidence is Invoice No. 12075 dated March 29, 1995 34(34) where EYIS sold four units of VESPA air compressors to Veteran Paint Trade Center. Shen Dar failed to rebut such evidence. The truth, as supported by the evidence on record, is that EYIS was first to use the mark. Moreover, the discrepancy in the date provided in the Declaration of Actual Use filed by EYIS and the proof submitted was appropriately considered by the BLA, ruling as follows: On the contrary, respondent EY Industrial was able to prove the use of Copyright 1994-2014

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the mark "VESPA" on the concept of an owner as early as 1991. Although Respondent E.Y. indicated in its trademark application that its first use was in December 22, 1998, it was able to prove by clear and positive evidence of use prior to such date. In Chuang Te v. Ng Kian-Guiab and Director of Patents, L-23791, 23 November 1966, the High Court clarified: Where an applicant for registration of a trademark states under oath the date of his earliest use, and later on he wishes to carry back his first date of use to an earlier date, he then takes on the greater burden of presenting "clear and convincing evidence" of adoption and use as of that earlier date. (B.R. Baker Co. vs. Lebrow Bros., 150 F. 2d 580.) 35(35)

The CA further found that EYIS is not a manufacturer of air compressors but merely imports and sells them as a wholesaler and retailer. The CA reasoned: Conversely, a careful perusal of appellees' own submitted receipts shows that it is not manufacturer but an importer, wholesaler and retailer. This fact is corroborated by the testimony of a former employee of appellees. Admittedly too, appellees are importing air compressors from [Shen Dar] from 1997 to 2004. These matters, lend credence to [Shen Dar's] claim that the letters SD followed by a number inscribed in the air compressor is only to describe its type, manufacturer business name and capacity. The VESPA mark is in the sticker which is attached to the air compressors. The ruling of the Supreme Court, in the case of UNNO Commercial Enterprises, Inc. vs. General Milling Corporation et al., is quite enlightening, thus We quote: "The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other mark of ownership, unless such importer is actually the owner thereof in the country from which the goods are imported. Thus, this Court, has on several occasions ruled that where the applicant's alleged ownership is not shown in any notarial document and the applicant appears to be merely an importer or distributor of the merchandise covered by said trademark, its application cannot be granted." 36(36) TaHIDS

This is a non sequitur. It does not follow. The fact that EYIS described itself in its sales invoice as an importer, wholesaler and retailer does not preclude its being a manufacturer. Sec. 237 of the National Internal Revenue Code states: Section 237. Issuance of Receipts or Sales or Commercial Invoices. — All persons subject to an internal revenue tax shall, for each sale and transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sale or commercial invoices, prepared at Copyright 1994-2014

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least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That where the receipt is issued to cover payment made as rentals, commissions, compensation or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client. The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period. The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section. (Emphasis supplied.)

Correlatively, in Revenue Memorandum No. 16-2003 dated May 20, 2003, the Bureau of Internal Revenue defined a Sales Invoice and identified its required information as follows: Sales Invoices (SI)/Cash Invoice (CI) — is written account of goods sold or services rendered and the prices charged therefor used in the ordinary course of business evidencing sale and transfer or agreement to sell or transfer of goods and services. It contains the same information found in the Official Receipt. Official Receipt (OR) — is a receipt issued for the payment of services rendered or goods sold. It contains the following information: a.

Business name and address;

b.

Taxpayer Identification Number;

c.

Name of printer (BIR Permit No.) with inclusive serial number of booklets and date of issuance of receipts.

There is no requirement that a sales invoice should accurately state the nature of all the businesses of the seller. There is no legal ground to state that EYIS' "declaration" in its sales invoices that it is an importer, wholesaler and retailer is restrictive and would preclude its being a manufacturer. From the above findings, there was no justifiable reason for the CA to disregard the factual findings of the IPO. The rulings of the IPO Director General and Copyright 1994-2014

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the BLA Director were supported by clear and convincing evidence. The facts cited by the CA and Shen Dar do not justify a different conclusion from that of the IPO. Hence, the findings of the BLA Director and the IPO Director General must be deemed as conclusive on the CA. TAScID

Fifth Issue: Whether EYIS is the true owner of the mark "VESPA" In any event, given the length of time already invested by the parties in the instant case, this Court must write finis to the instant controversy by determining, once and for all, the true owner of the mark "VESPA" based on the evidence presented. RA 8293 espouses the "first-to-file" rule as stated under Sec. 123.1 (d) which states: Section 123. Registrability. — 123.1. A mark cannot be registered if it: xxx

xxx

xxx

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date, in respect of:

(i)

The same goods or services, or

(ii) Closely related goods or services, or (iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion. (Emphasis supplied.) Under this provision, the registration of a mark is prevented with the filing of an earlier application for registration. This must not, however, be interpreted to mean that ownership should be based upon an earlier filing date. While RA 8293 removed the previous requirement of proof of actual use prior to the filing of an application for registration of a mark, proof of prior and continuous use is necessary to establish ownership of a mark. Such ownership constitutes sufficient evidence to oppose the registration of a mark. Sec. 134 of the IP Code provides that "any person who believes that he would be damaged by the registration of a mark . . ." may file an opposition to the application. The term "any person" encompasses the true owner of the mark — the prior and continuous user. Copyright 1994-2014

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Notably, the Court has ruled that the prior and continuous use of a mark may even overcome the presumptive ownership of the registrant and be held as the owner of the mark. As aptly stated by the Court in Shangri-la International Hotel Management, Ltd. v. Developers Group of Companies, Inc.: 37(37) Registration, without more, does not confer upon the registrant an absolute right to the registered mark. The certificate of registration is merely a prima facie proof that the registrant is the owner of the registered mark or trade name. Evidence of prior and continuous use of the mark or trade name by another can overcome the presumptive ownership of the registrant and may very well entitle the former to be declared owner in an appropriate case. xxx

xxx

xxx

Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade or commerce. As between actual use of a mark without registration, and registration of the mark without actual use thereof, the former prevails over the latter. For a rule widely accepted and firmly entrenched, because it has come down through the years, is that actual use in commerce or business is a pre-requisite to the acquisition of the right of ownership. ISDCHA

xxx

xxx

xxx

By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply for registration of the same. Registration merely creates a prima facie presumption of the validity of the registration, of the registrant's ownership of the trademark and of the exclusive right to the use thereof. Such presumption, just like the presumptive regularity in the performance of official functions, is rebuttable and must give way to evidence to the contrary.

Here, the incontrovertible truth, as established by the evidence submitted by the parties, is that EYIS is the prior user of the mark. The exhaustive discussion on the matter made by the BLA sufficiently addresses the issue: Based on the evidence, Respondent E.Y. Industrial is a legitimate corporation engaged in buying, importing, selling, industrial machineries and tools, manufacturing, among others since its incorporation in 1988. (Exhibit "1"). Indeed private respondents have submitted photographs (Exhibit "376", "377", "378", "379") showing an assembly line of its manufacturing or assembly Copyright 1994-2014

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process.

cETDIA

More importantly, the private respondent's prior adoption and continuous use of the mark "VESPA" on air compressors is bolstered by numerous documentary evidence consisting of sales invoices issued in the name of respondent EY Industrial and Bills of Lading. (Exhibits "4" to "375"). Sales Invoice No. 12075 dated March 27, 1995 antedates petitioner's date of first use in January 1, 1997 indicated in its trademark application filed in June 9, 1997 as well as the date of first use in June of 1996 as indicated in the Declaration of Actual Use submitted on December 3, 2001 (Exhibit "385"). The use by respondent-registrant in the concept of owner is shown by commercial documents, sales invoices unambiguously describing the goods as "VESPA" air compressors. Private respondents have sold the air compressors bearing the "VESPA" to various locations in the Philippines, as far as Mindanao and the Visayas since the early 1990's. We carefully inspected the evidence consisting of three hundred seventy one (371) invoices and shipment documents which show that "VESPA" air compressors were sold not only in Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City to name a few. There is no doubt that it is through private respondents' efforts that the mark "VESPA" used on air compressors has gained business goodwill and reputation in the Philippines for which it has validly acquired trademark rights. Respondent EY Industrial's right has been preserved until the passage of RA 8293 which entitles it to register the same. . . . 38(38)

On the other hand, Shen Dar failed to refute the evidence cited by the BLA in its decision. More importantly, Shen Dar failed to present sufficient evidence to prove its own prior use of the mark "VESPA." We cite with approval the ruling of the BLA: [Shen Dar] avers that it is the true and rightful owner of the trademark "VESPA" used on air compressors. The thrust of [Shen Dar's] argument is that respondent E.Y. Industrial Sales, Inc. is a mere distributor of the "VESPA" air compressors. We disagree. This conclusion is belied by the evidence. We have gone over each and every document attached as Annexes "A", "A 1-48" which consist of Bill of Lading and Packing Weight List. Not one of these documents referred to a "VESPA" air compressor. Instead, it simply describes the goods plainly as air compressors which is type "SD" and not "VESPA". More importantly, the earliest date reflected on the Bill of Lading was on May 5, 1997. (Annex — "A"-1). [Shen Dar] also attached as Annex "B" a purported Sales Contract with respondent EY Industrial Sales dated April 20, 2002. Surprisingly, nowhere in the document does it state that respondent EY Industrial agreed to sell "VESPA" air compressors. The document only mentions air compressors which if genuine Copyright 1994-2014

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merely bolsters respondent Engracio Yap's contention that [Shen Dar] approached them if it could sell the "Shen Dar" or "SD" air compressor. (Exhibit "386") In its position paper, [Shen Dar] merely mentions of Bill of Lading constituting respondent as consignee in 1993 but never submitted the same for consideration of this Bureau. The document is also not signed by [Shen Dar]. The agreement was not even drafted in the letterhead of either [Shen Dar] nor [sic] respondent — registrant. Our only conclusion is that [Shen Dar] was not able to prove to be the owner of the VESPA mark by appropriation. Neither was it able to prove actual commercial use in the Philippines of the mark VESPA prior to its filing of a trademark application in 9 June 1997. 39(39)

As such, EYIS must be considered as the prior and continuous user of the mark "VESPA" and its true owner. Hence, EYIS is entitled to the registration of the mark in its name. WHEREFORE, the petition is hereby GRANTED. The CA's February 21, 2008 Decision and October 6, 2008 Resolution in CA-G.R. SP No. 99356 are hereby REVERSED and SET ASIDE. The Decision dated May 25, 2007 issued by the IPO Director General in Inter Partes Case No. 14-2004-00084 and the Decision dated May 29, 2006 of the BLA Director of the IPO are hereby REINSTATED. HDATCc

No costs. SO ORDERED. Corona, C.J., Leonardo-de Castro, Del Castillo and Perez, JJ., concur. )RRWQRWHV 1.

2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Rollo, pp. 56-70. Penned by Associate Justice Enrico A. Lanzanas and concurred in by Associate Justices Remedios Salazar-Fernando (Chairperson) and Rosalinda Asuncion-Vicente. Id. at 71-78. Id. at 231-241. Id. at 218-229. Id. at 12. Id. at 58. Id. at 12. Id. at 88. Id. at 169-173. Id. at 57. Id. at 234.

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12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39.

Id. at 57. Id. Id. Id. at 58. Id. at 59-60. Id. at 60-61. Id. at 61. Id. at 56-57. Id. at 63. Id. at 69-70. Id. at 66-67. Id. at 18. G.R. No. 149281, June 15, 2005, 460 SCRA 220, 227. Rollo, p. 225. Id. at 68. Id. at 241. G.R. No. 155359, January 31, 2006, 481 SCRA 282, 296-297. G.R. No. 163210, August 13, 2008, 562 SCRA 103, 113-114. G.R. No. 109849, February 26, 1997, 268 SCRA 703, 708-709. G.R. No. 95694, October 9, 1997, 280 SCRA 297, 330-331. Rollo, pp. 66-67. Id. at 228. Id. at 173. Id. at 227. Id. at 67-68. G.R. No. 159938, March 31, 2006, 486 SCRA 405, 419-421. Rollo, p. 228. Id. at 226.

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FIRST DIVISION [G.R. No. 48226. December 14, 1942.] ANA L. ANG,SHWLWLRQHU, YV. TORIBIO TEODORO,UHVSRQGHQW. &LULOR/LPfor petitioner. 0DUFLDO3/LFKDXFR and 0DQXHO00HMLDfor respondent. SYLLABUS 1. TRADE-MARKS AND TRADE-NAMES; ACT NO. 666. — Respondent has continuously used "Ang Tibay," both as a trade-mark and as a trade- name, in the manufacture and sale of slippers, shoes, and indoor baseballs since 1910. He formally registered it as a trade-mark on September 29, 1915, and as a trade-name on January 3, 1933. Petitioner registered the same trade-mark "Ang Tibay" for pants and shirts on April 11, 1932, and established a factory for the manufacture of said articles in the year 1937. Held: That petitioner's registration of the trade-mark "Ang Tibay" should be cancelled, and that she should be perpetually enjoined from using said trade-mark on goods manufactured and sold by her. 2. ID; ID.; TERM "ANG TIBAY," NOT BEING GEOGRAPHIC OR DESCRIPTIVE, IS CAPABLE OF EXCLUSIVE APPROPRIATION AS A TRADE-MARK. — An inquiry into the etymology and meaning of the Tagalog words "Ang Tibay," made in the decision, shows that the phrase is never used adjectively to define or describe an object. It is, therefore, not a descriptive term within the meaning of the Trade-mark Law but rather a fanciful or coined phrase which may properly and legally be appropriated as a trade-mark or trade-name. Hence, it was originally capable of exclusive appropriation as a trade-mark by the respondent. 3. ID.; ID.; ID.; FUNCTION OF A TRADE-MARK; DOCTRINE OF "SECONDARY MEANING." — The function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. "Ang Tibay," as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before Copyright 1994-2014

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the petitioner adopted it as a trade-mark in her own business. "Ang Tibay" shoes and slippers are, by association, known throughout the Philippines as products of the "Ang Tibay" factory owned and operated by the respondent. Even if "Ang Tibay," therefore, were not capable of exclusive appropriation as a trade-mark, the application of the doctrine of secondary meaning could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. 4. ID.; ID.; ID.; ID.; TEST OF WHETHER NONCOMPETING GOODS ARE OR ARE NOT OF THE SAME CLASS. — In the present stage of development of the law on trade-marks, unfair competition, and unfair trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user. Although two noncompeting articles may be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would nevertheless be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trade- marks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods. Such construction of the law is induced by cogent reasons of equity and fair dealing discussed in the decision. 5. ID.; ID.; ID.; ID.; ID. — Tested by the foregoing rule, and in the light of other considerations set out in greater detail in the decision, Held: That pants and shirts are goods similar to shoes and slippers within the meaning of sections 3, 7, 11, 13, and 20 of the Trade-mark Law (Act No. 666).

DECISION

OZAETA,- : p

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Petitioner has appealed to this Court by certiorari to reverse the judgment of the Court of Appeals reversing that of the Court of First Instance of Manila and directing the Director of Commerce to cancel the registration of the trade-mark "Ang Tibay" in favor of said petitioner, and perpetually enjoining the latter from using said trade-mark on goods manufactured and sold by her. Respondent Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, has continuously used "Ang Tibay," both as a trade-mark and as a trade-name, in the manufacture and sale of slippers, shoes, and indoor baseballs since 1910. He formally registered it as a trade-mark on September 29, 1915, and as a trade-name on January 3, 1933. The growth of his business is a thrilling epic of Filipino industry and business capacity. Starting in an obscure shop in 1910 with a modest capital of P210 but with tireless industry and unlimited perseverance, Toribio Teodoro, then an unknown young man making slippers with his own hands but now a prominent business magnate and manufacturer with a large factory operated with modern machinery by a great number of employees, has steadily grown with his business to which he has dedicated the best years of his life and which he has expanded to such proportions that his gross sales from 1918 to 1938 aggregated P8,787,025.65. His sales in 1937 amounted to P1,299,343.10 and in 1938, P1,133,165.77. His expenses for advertisement from 1919 to 1938 aggregated P210,641.56. Petitioner (defendant below) registered the same trade-mark "Ang Tibay" for pants and shirts on April 11, 1932, and established a factory for the manufacture of said articles in the year 1937. In the following year (1938) her gross sales amounted to P422,682.09. Neither the decision of the trial court nor that of the Court of Appeals shows how much petitioner has spent for advertisement. But respondent in his brief says that petitioner "was unable to prove that she had spent a single centavo advertising 'Ang Tibay' shirts and pants prior to 1938. In that year she advertised the factory which she had just built and it was when this was brought to the attention of the appellee that he consulted his attorneys and eventually brought the present suit." The trial court (Judge Quirico Abeto presiding) absolved the defendant from the complaint, with costs against the plaintiff, on the grounds that the two trade-marks are dissimilar and are used on different and non-competing goods; that there had been no exclusive use of the trade-mark by the plaintiff; and that there had been no fraud in the use of the said trade-mark by the defendant because the goods on which it is used are essentially different from those of the plaintiff. The second division of the Court of Appeals, composed of Justices Bengson, Padilla, Lopez Vito, Tuason, and Alex Copyright 1994-2014

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Reyes, with Justice Padilla as ponente, reversed that judgment, holding that by uninterrupted and exclusive use since 1910 in the manufacture of slippers and shoes, respondent's trade-mark has acquired a secondary meaning; that the goods or articles on which the two trade-marks are used are similar or belong to the same class; and that the use by petitioner of said trade-mark constitutes a violation of sections 3 and 7 of Act No. 666. The defendant Director of Commerce did not appeal from the decision of the Court of Appeals. )LUVW. Counsel for the petitioner, in a well-written brief, makes a frontal sledge-hammer attack on the validity of respondent's trade- mark "Ang Tibay." He contends that the phrase "Ang Tibay" as employed by the respondent on the articles manufactured by him is a descriptive term because, "freely translated in English," it means "strong, durable lasting." He invokes section 2 of Act No. 666, which provides that words or devices which relate only to the name, quality, or description of the merchandise cannot be the subject of a trade-mark. He cites among others the case of Baxter vs. Zuazua (5 Phil., 160), which involved the trade-mark "Agua de Kananga" used on toilet water, and in which this Court held that the word "Kananga," which is the name of a well-known Philippine tree or its flower, could not be appropriated as a trade-mark any more than could the words "sugar," "tobacco," or "coffee." On the other hand, counsel for the respondent, in an equally well-prepared and exhaustive brief, contend that the words "Ang Tibay" are not descriptive but merely suggestive and may properly be regarded as fanciful or arbitrary in the legal sense. They cite several cases in which similar words have been sustained as valid trade-marks such as "Holeproof" for hosiery, 1(1) "Ideal" for tooth brushes, 2(2) and "Fashionknit" for neckties and sweaters. 3(3) We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine whether they are a descriptive term, i. e., whether they relate to the quality or description of the merchandise to which respondent has applied them as a trade-mark. The word "ang" is a definite article meaning "the" in English. It is also used as an adverb, a contraction of the word "anong" (what or how). For instance, instead of saying, "Anong ganda!" ("How beautiful!"), we ordinarily say, "Ang ganda!" 7LED\ is a root word from which are derived the verb PDJSDWLED\ (to strengthen); the nounsSDJNDPDWLED\ (strength, durability), NDWLED\DQ (proof, support, strength), NDWLED\WLED\DQ (superior strength); and the adjectives PDWLED\ (strong, durable, lasting), QDSDNDWLED\ (very strong), NDVLQWLED\ or PDJNDVLQWLED\ (as strong as, or of equal strength). The phrase "Ang Tibay" is an exclamation denoting admiration of strength or durability. For instance, one who tries hard but fails to break an object exclaims "Ang tibay!" ("How strong!") It may also be used in a sentence thus, "Ang Copyright 1994-2014

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tibay ng sapatos mo!" ("How durable your shoes are!") The phrase "ang tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" to mean "durable shoes," but "matibay na sapatos" or "sapatos na matibay." From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-Mark Law but rather a fanciful or coined phrase which may properly and legally be appropriated as a trade-mark or trade-name. In this connection we do not fail to note that when the petitioner herself took the trouble and expense of securing the registration of these same words as a trademark of her products she or her attorney as well as the Director of Commerce was undoubtedly convinced that said words (Ang Tibay) were not a descriptive term and hence could be legally used and validly registered as a trade-mark. It seems stultifying and puerile for her now to contend otherwise, suggestive of the story of sour grapes. Counsel for the petitioner says that the function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. That is correct, and we find that "Ang Tibay," as used by the respondent to designate his wares, had exactly performed that function for twenty- two years before the petitioner adopted it as a trade-mark in her own business. Ang Tibay shoes and slippers are, by association, known throughout the Philippines as products of the Ang Tibay factory owned and operated by the respondent Toribio Teodoro. 6HFRQG. In her second assignment of error petitioner contends that the Court of Appeals erred in holding that the words "Ang Tibay" had acquired a secondary meaning. In view of the conclusion we have reached upon the first assignment of error, it is unnecessary to apply here the doctrine of "secondary meaning" in trade-mark parlance. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. & C. Merriam Co. vs. Saalfield, 198 F., 369, 373.) We have said that the phrase "Ang Tibay," being neither geographic nor descriptive, was originally capable of exclusive appropriation as a trade-mark. But were it not so, the application of the doctrine of secondary meaning made by the Court of Appeals could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. (Landers, Frary, and Clark vs. Universal Cooler Corporation, 85 F. [2d], 46.) Copyright 1994-2014

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7KLUG. Petitioner's third assignment of error is, that the Court of Appeals erred in holding that pants and shirts are goods similar to shoes and slippers within the meaning of sections 3 and 7 of Act No. 666. She also contends under her fourth assignment of error (which we deem convenient to pass upon together with the third) that there can neither be infringement of trade-mark under section 3 nor unfair competition under section 7 through her use of the words "Ang Tibay" in connection with pants and shirts, because those articles do not belong to the same class of merchandise as shoes and slippers. The question raised by petitioner involve the scope and application of sections 3, 7, 11, 13, and 20 of the Trade-Mark Law (Act No. 666). Section 3 provides that "any person entitled to the exclusive use of a trade-mark to designate the origin or ownership of goods he has made or deals in, may recover damages in a civil action from any person who has sold goods of a similar kind, bearing such trade-mark . . . The complaining party . . . may have a preliminary injunction, . . . and such injunction upon final hearing, if the complainant's property in the trade-mark and the defendant's violation thereof shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for damages to be rendered in the same cause." Section 7 provides that any person who, in selling his goods, shall give them the general appearance of the goods of another either in the wrapping of the packages, or in 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 the complainant, shall be guilty of unfair competition, and shall be liable to an action for damages and to an injunction, as in the cases of trade-mark infringement under section 3. Section 11 requires the applicant for registration of a trade-mark to state, among others, "WKHJHQHUDOFODVVRIPHUFKDQGLVH to which the trade-mark claimed has been appropriated." Section 13 provides that no alleged trade-mark or trade-name shall be registered which is identical with a registered or known trade-mark owned by another and appropriate to the VDPH FODVV RI PHUFKDQGLVH, or which so nearly resembles another person's lawful trade-mark or trade-name as to be likely to cause confusion or mistake in the mind of the public, or to deceive purchasers. And section 20 authorizes the Director of Commerce to establish FODVVHV RI PHUFKDQGLVH for the purpose of the registration of trade-marks and to determine the particular description of articles included in each class; it also provides that "an application for registration of a trade-mark shall be registered only for one FODVV RI DUWLFOHV and only for the particular description of articles mentioned in said application." We have underlined the key words used in the statute: "goods of a similar kind," "general class of merchandise," "same class of merchandise," "classes of Copyright 1994-2014

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merchandise," and "class of articles," because it is upon their implications that the result of the case hinges. These phrases, which refer to the same thing, have the same meaning as the phrase "merchandise of the same descriptive properties" used in the statutes and jurisprudence of other jurisdictions. The burden of petitioner's argument is that under sections 11 and 20 the registration by respondent of the trade-mark "Ang Tibay" for shoes and slippers is no safe-guard against its being used by petitioner for pants and shirts because the latter do not belong to the same class of merchandise or articles as the former; that she cannot be held guilty of infringement of trade-mark under section 3 because respondent's mark is not a valid trade-mark, nor has it acquired a secondary meaning; that pants and shirts do not possess the same descriptive properties as shoes and slippers; that neither can she be held guilty of unfair competition under section 7 because the use by her of the trade-mark "Ang Tibay" upon pants and shirts is not likely to mislead the general public as to their origin or ownership; and that there is no showing that she is unfairly or fraudulently using the mark "Ang Tibay" against the respondent. If we were interpreting the statute for the first time and in the first decade of the twentieth century, when it was enacted, and were to construe it strictly and literally, we might uphold petitioner's contentions. But law and jurisprudence must keep abreast with the progress of mankind, and the courts must breathe life into the statutes if they are to serve their purpose. Our Trade-mark Law, enacted nearly forty years ago, has grown in its implications and practical application, like a constitution, in virtue of the life continually breathed into it. It is not of merely local application; it has its counterpart in other jurisdictions of the civilized world from whose jurisprudence it has also received vitalizing nourishment. We have to apply this law as it has grown and not as it was born. Its growth or development abreast with that of sister statutes and jurisprudence in other jurisdictions is reflected in the following observation of a well-known author: "This fundamental change in attitude first manifested itself in the year 1915-1917. Until about then, the courts had proceeded on the theory that the same trade-mark, used on unlike goods, could not cause confusion in trade and that, therefore, there could be no objection to the use and registration of a well-known mark by a third party for a different class of goods. Since 1916 however, a growing sentiment began to arise that in the selection of a famous mark by a third party, there was generally the hidden intention to 'have a free ride' on the trade-mark owner's reputation and good will." (Derenberg, Trade-Mark Protection & Unfair Trading, 1936 edition, p. 409.)

In the present state of development of the law on Trade-Marks, Unfair Copyright 1994-2014

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Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user. Although two noncompeting articles may be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trade-marks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods. Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that there can be unfair competition or unfair trading even if the goods are noncompeting, and that such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably results. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark. 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 element of strict competition in itself has ceased to be the determining factor. The owner of a trade-mark or trade-name has a 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 a fraud. A few of the numerous cases in which the foregoing doctrines have been laid down in one form or another will now be cited: (1) In Teodoro Kalaw Ng Khe vs. Lever Brothers Company (G. R. No. 46817), decided by this Court on April 18, 1941, Copyright 1994-2014

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the respondent company (plaintiff below) was granted injunctive relief against the use by the petitioner of the trade-mark "Lux" and "Lifebuoy" for hair pomade, they having been originally used by the respondent for soap; the Court held in effect that although said articles are noncompetitive, they are similar or belong to the same class. (2) In Lincoln Motor Co. vs. Lincoln Automobile Co. (44 F. [2d], 812), the manufacturer of the well-known Lincoln automobile was granted injunctive relief against the use of the word "Lincoln" by another company as part of its firm name. (3) The case of Aunt Jemima Mills Co. vs. Rigney & Co. (247 F., 407), involved the trade-mark "Aunt Jemima," originally used on flour, which the defendant attempted to use on syrup, and there the court held that the goods, though different, are so related as to fall within the mischief which equity should prevent. (4) In Tiffany & Co. vs. Tiffany Productions, Inc. (264 N. Y. S., 459; 23 Trade-mark Reporter, 183), the plaintiff, a jewelry concern, was granted injunctive relief against the defendant, a manufacturer of motion pictures, from using the name "Tiffany." Other famous cases cited on the margin, wherein the courts granted injunctive relief, involved the following trade-marks or trade-names. "Kodak," for cameras and photographic supplies, against its use for bicycles; 1(4) "Penslar," for medicines and toilet articles, against its use for cigars; 2(5) "Rolls- Royce," for automobiles, against its use for radio tubes; 3(6) "Vogue," as the name of a magazine, against its use for hats; 4(7) "Kotex," for sanitary napkins, against the use of "Rotex" for vaginal syringes; 5(8) "Sun-Maid," for raisins, against its use for flour; 6(9) "Yale," for locks and keys, against its use for electric flashlights; 1(10) and "Waterman," for fountain pens, against its use for razor blades. 2(11) Against this array of famous cases, the industry of counsel for the petitioner has enabled him to cite on this point only the following cases: (1) Mohawk Milk Products vs. General Distilleries Corporation (95 F. [2d], 334), wherein the court held that gin and canned milk and cream do not belong to the same class; (2) Fawcett Publications, Inc. vs. Popular Mechanics Co. (80 F. [2d], 194), wherein the court held that the words "Popular Mechanics" used as the title of a magazine and duly registered as a trade-mark were not infringed by defendant's use of the words "Modern Mechanics and Inventions" on a competitive magazine, because the word "mechanics" is merely a descriptive name; and (3) Oxford Book Co. vs. College Entrance Book Co. (98 F. [2d], 688), wherein the plaintiff unsuccessfully attempted to enjoin the defendant from using the word "Visualized" in connection with history books, the court holding that said word is merely descriptive. These cases cited and relied upon by petitioner are obviously of no decisive application to the case at bar. We think reasonable men may not disagree that shoes and shirts are not as unrelated as fountain pens and razor blades, for instance. The mere relation or Copyright 1994-2014

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association of the articles is not controlling. As may readily be noted from what we have heretofore said, the proprietary connotation that a trade-mark or trade-name has acquired is of more paramount consideration. The Court of Appeals found in this case that by uninterrupted and exclusive use since 1910 of respondent's registered trade-mark on slippers and shoes manufactured by him, it has come to indicate the origin and ownership of said goods. It is certainly not farfetched to surmise that the selection by petitioner of the same trade-mark for pants and shirts was motivated by a desire to get a free ride on the reputation and selling power it has acquired at the hands of the respondent. As observed in another case, 3(12) the field from which a person may select a trade-mark is practically unlimited, and hence there is no excuse for impinging upon or even closely approaching the mark of a business rival. In the unlimited field of choice, what could have been petitioner's purpose in selecting "Ang Tibay" if not for its fame? Lastly, in her fifth assignment of error petitioner seems to make a frantic effort to retain the use of the mark "Ang Tibay." Her counsel suggests that instead of enjoining her from using it, she may be required to state in her labels affixed to her products the inscription: "Not manufactured by Toribio Teodoro." We think such practice would be unethical and unworthy of a reputable businessman. To the suggestion of petitioner, respondent may say, not without justice though with a tinge of bitterness: "Why offer a perpetual apology or explanation as to the origin of your products in order to use my trade-mark instead of creating one of your own?" On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of another but builds one of his own. The judgment of the Court of Appeals is affirmed, with costs against the petitioner in the three instances. So ordered. <XOR&-0RUDQ3DUDV and %RFRER-- concur. )RRWQRWHV 1. 2. 3. 1. 2. 3. 4. 5. 6.

Holeproof Hosiery Co. vs. Wallach Bros. (167 F., 373). Hughes vs. Smith Co. (205 F., 302). Franklin Knitting Mills vs. Fashionit Sweater Mills (297 F., 247). Eastman Co. vs. Kodak Cycle Co. (15 R. P. C., 105). Peninsular Chemical Co. vs. Levinson (247 F., 658). Wall vs. Rolls-Royce of America (4 F. [2d], 333). Vogue Co. vs. Thompson-Hudson Co. (300 F., 509). Kotex Co. vs. McArthur (45 F. [2d], 256). Sun-Maid Raisin Growers of California vs. American Grocer Co. (40 F. [2d], 116).

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1. 2. 3.

Yale Electric Corporation vs. Robertson and The Yale & Towne Co. (21 F. [2d], 467); affirmed in 26 F. [2d], 972. L. E. Waterman Co. vs. Benjamin Gordon (8 F. Supp., 351: 24 Trade-mark Reporter, 347); affirmed in 72 F. [2d], 272. Kassman & Kessner, Inc., vs. Rosenberg Bros. Co. (10 F. [2d], 904).

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FIRST DIVISION [G.R. No. 100098. December 29, 1995.] EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, YV HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC., respondents. Julio C. Contreras for petitioner. Sycip, Salazar, Hernandez & Gatmaitan for private respondent. SYLLABUS 1. COMMERCIAL LAW; TRADEMARK LAW; INFRINGEMENT; DECISION ON EACH CASE MUST BE BASED ON ITS OWN MERIT. — In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v. Court of Appeals, 116 SCRA 336 (1982), we held: ". . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case." Likewise, it has been observed that: "In determining whether a particular name or mark is a "colorable imitation" of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product's purchasers; location of the business; the likelihood of deception or the mark or name's tendency to confuse; etc." TCIHSa

2. ID.; ID.; ID.; COLORABLE IMITATION, CONSTRUED. — The essential element of infringement is colorable imitation. This term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, Copyright 1994-2014

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or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." "Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article." 3. ID.; ID.; ID.; ID.; TEST IN THE DETERMINATION. — In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals, 224 SCRA 437 (1993), and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990), and its proponent cases. As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. 4. ID.; ID.; REQUISITES FOR THE ACQUISITION OF OWNERSHIP OVER TRADEMARK. — Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166). In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214 (1969), we declared: . . . "It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a preexisting right. Registration does not, however, perfect a trademark right." The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. Copyright 1994-2014

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5. ID.; ID.; DETERMINATION OF PRIOR USER OF TRADEMARK; FINDINGS OF FACTS BY THE DIRECTOR OF PATENTS, CONCLUSIVE UPON THE SUPREME COURT. — The determination as to who is the prior user of the trademark is a question of fact and it is this Court's working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 6. ID.; ID.; NATURE OF SUPPLEMENTAL REGISTER. — Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of marks which are not registrable on the principal register due to some defects. ScaCEH

DECISION

KAPUNAN, J : p

In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald Garment Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29 November 1990 in CA-G.R. SP No. 15266 declaring petitioner's trademark to be confusingly similar to that of private respondent and the resolution dated 17 May 1991 denying petitioner's motion for reconsideration. The record reveals the following antecedent facts: On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized under the laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for Cancellation of Registration No. SR 5054 (Supplemental Register) for the trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued on 27 October 1980 in the name of petitioner Emerald Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine laws. The petition was docketed as Inter Partes Case No. 1558. 1(1) Copyright 1994-2014

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Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris Convention for the Protection of Industrial Property, averred that petitioner's trademark "so closely resembled its own trademark, 'LEE' as previously registered and used in the Philippines, and not abandoned, as to be likely, when applied to or used in connection with petitioner's goods, to cause confusion, mistake and deception on the part of the purchasing public as to the origin of the goods." 2(2) In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and unmistakably different from that of private respondent and that its certificate of registration was legally and validly granted. 3(3) On 20 February 1984, petitioner caused the publication of its application for registration of the trademark "STYLISTIC MR. LEE" in the Principal Register." 4(4) On 27 July 1984, private respondent filed a notice of opposition to petitioner's application for registration also on grounds that petitioner's trademark was confusingly similar to its "LEE" trademark. 5(5) The case was docketed as Inter Partes Case No. 1860. On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985, issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common question of law was involved. 6(6) On 19 July 1988, the Director of Patents rendered a decision granting private respondent's petition for cancellation and opposition to registration. The Director of Patents found private respondent to be the prior registrant of the trademark "LEE" in the Philippines and that it had been using said mark in the Philippines. 7(7) Moreover, the Director of Patents, using the test of dominancy, declared that petitioner's trademark was confusingly similar to private respondent's mark because "it is the word 'Lee' which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. It is undeniably the dominant feature of the mark." 8(8) On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that the same would cause it great and irreparable damage and injury. Private respondent submitted its opposition on 22 Copyright 1994-2014

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August 1988. 9(9) On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioner's motion to stay execution subject to the following terms and conditions: 1. That under this resolution, Respondent-Registrant is authorized only to dispose of its current stock using the mark "STYLISTIC MR. LEE"; 2. That Respondent-Registrant is strictly prohibited from further production, regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock; 3. That this relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals and, if the Respondent's appeal loses, all goods bearing the mark "STYLISTIC MR. LEE" shall be removed from the market, otherwise such goods shall be seized in accordance with the law. SO ORDERED. 10(10)

On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the Director of Patents dated 19 July 1988 in all respects. 11(11)

In said decision the Court of Appeals expounded, thus: xxx

xxx

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Whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; that duplication or imitation is not necessary, a similarity in the dominant features of the trademark would be sufficient. The word "LEE" is the most prominent and distinctive feature of the appellant's trademark and all of the appellee's "LEE" trademarks. It is the mark which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. While it is true that there are other words such as "STYLISTIC", printed in the appellant's label, such word is printed in such small letters over the word "LEE" that it is not conspicuous enough to draw the attention of ordinary buyers whereas the word "LEE" is printed across the label in big, bold letters and of the same color, style, type and Copyright 1994-2014

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size of lettering as that of the trademark of the appellee. The alleged difference is too insubstantial to be noticeable. Even granting arguendo that the word "STYLISTIC" is conspicuous enough to draw attention, the goods may easily be mistaken for just another variation or line of garments under the appellee's "LEE" trademarks in view of the fact that the appellee has registered trademarks which use other words in addition to the principal mark "LEE" such as "LEE RIDERS", "LEESURES" and "LEE LEENS". The likelihood of confusion is further made more probable by the fact that both parties are engaged in the same line of business. It is well to reiterate that the determinative factor in ascertaining whether or not the marks are confusingly similar to each other is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. xxx

xxx

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The appellee has sufficiently established its right to prior use and registration of the trademark "LEE" in the Philippines and is thus entitled to protection from any infringement upon the same. It is thus axiomatic that one who has identified a peculiar symbol or mark with his goods thereby acquires a property right in such symbol or mark, and if another infringes the trademark, he thereby invokes this property right. The merchandise or goods being sold by the parties are not that expensive as alleged to be by the appellant and are quite ordinary commodities purchased by the average person and at times, by the ignorant and the unlettered. Ordinary purchasers will not as a rule examine the small letterings printed on the label but will simply be guided by the presence of the striking mark "LEE". Whatever difference there may be will pale in insignificance in the face of an evident similarity in the dominant features and overall appearance of the labels of the parties. 12(12) xxx

xxx

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On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision of the Court of Appeals. Private respondent opposed said motion on 8 January 1991 on grounds that it involved an impermissible change of theory on appeal. Petitioner allegedly raised entirely new and unrelated arguments and defenses not previously raised in the proceedings below such as laches and a claim that private respondent appropriated the style and appearance of petitioner's trademark when it registered its "LEE" mark Copyright 1994-2014

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under Registration No. 44220. 13(13) On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's motion for reconsideration and ruled thus: xxx

xxx

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A defense not raised in the trial court cannot be raised on appeal for the first time. An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. The object of requiring the parties to present all questions and issues to the lower court before they can be presented to this Court is to have the lower court rule upon them, so that this Court on appeal may determine whether or not such ruling was erroneous. The purpose is also in furtherance of justice to require the party to first present the question he contends for in the lower court so that the other party may not be taken by surprise and may present evidence to properly meet the issues raised. Moreover, for a question to be raised on appeal, the same must also be within the issues raised by the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided based upon such theory presented in the court below, he will not be permitted to change his theory on appeal. To permit him to do so would be unfair to the adverse party. A question raised for the first time on appeal, there having opportunity to raise them in the court of origin constitutes a change of theory which is not permissible on appeal. In the instant case, appellant's main defense pleaded in its answer dated March 23, 1982 was that there was "no confusing similarity between the competing trademark involved. On appeal, the appellant raised a single issue, to wit:

The only issue involved in this case is whether or not respondent-registrant's trademark "STYLISTIC MR. LEE" is confusingly similar with the petitioner's trademarks "LEE or LEE RIDERS, LEE-LEENS and LEE-SURES." Appellant's main argument in this motion for reconsideration on the other hand is that the appellee is estopped by laches from asserting its right to its trademark. Appellant claims although belatedly that appellee went to court with "unclean hands" by changing the appearance of its trademark to make it identical to the appellant's trademark. Neither defenses were raised by the appellant in the proceedings before Copyright 1994-2014

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the Bureau of Patents. Appellant cannot raise them now for the first time on appeal, let alone on a mere motion for reconsideration of the decision of this Court dismissing the appellant's appeal. While there may be instances and situations justifying relaxation of this rule, the circumstance of the instant case, equity would be better served by applying the settled rule it appearing that appellant has not given any reason at all as to why the defenses raised in its motion for reconsideration was not invoked earlier. 14(14) xxx

xxx

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Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors: I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE OF A FOURTH "LEE" TRADEMARK IMITATING THAT OF THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN EIGHT MONTHS AFTER THE BUREAU OF PATENT'S DECISION DATED JULY 19, 1988. II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF ESTOPPEL BY LACHES MUST BE RAISED IN THE PROCEEDINGS BEFORE THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER. III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE RESPONDENT'S PRIOR REGISTRATION OF ITS TRADEMARK AND DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO PROVE COMMERCIAL USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION. 15(15) In addition, petitioner reiterates the issues it raised in the Court of Appeals: I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONER'S TRADEMARK STYLISTIC MR. LEE, IS CONFUSINGLY SIMILAR WITH THE PRIVATE RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEE-LEENS AND LEE-SURES. II. PETITIONER'S EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER AND ITS TRADEMARK IS DIFFERENT Copyright 1994-2014

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FROM THAT OF THE PRIVATE RESPONDENT. III. PETITIONER'S TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE RESPONDENT'S AND THE REGISTRATION OF ITS TRADEMARK IS PRIMA FACIE EVIDENCE OF GOOD FAITH. IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK CANNOT BE CONFUSED WITH PRIVATE RESPONDENT'S LEE TRADEMARK. 16(16) Petitioner contends that private respondent is estopped from instituting an action for infringement before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A of R.A. No. 166, otherwise known as the Law on Trade-marks, Trade-names and Unfair Competition: SEC. 9-A. Equitable principles to govern proceedings. — In opposition proceedings and in all other inter partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and acquiescence, where applicable, may be considered and applied.

Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE" since 1 May 1975, yet, it was only on 18 September 1981 that private respondent filed a petition for cancellation of petitioner's certificate of registration for the said trademark. Similarly, private respondent's notice of opposition to petitioner's application for registration in the principal register was belatedly filed on 27 July 1984. 17(17) Private respondent counters by maintaining that petitioner was barred from raising new issues on appeal, the only contention in the proceedings below being the presence or absence of confusing similarity between the two trademarks in question. 18(18) We reject petitioner's contention. Petitioner's trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that "marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette." 19(19) The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, 20(20) the date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to petitioner. Copyright 1994-2014

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It was only on the date of publication and issuance of the registration certificate that private respondent may be considered "officially" put on notice that petitioner has appropriated or is using said mark, which, after all, is the function and purpose of registration in the supplemental register. 21(21) The record is bereft of evidence that private respondent was aware of petitioner's trademark before the date of said publication and issuance. Hence, when private respondent instituted cancellation proceedings on 18 September 1981, less than a year had passed. Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of opposition to petitioner's application for registration in the principal register since said application was published only on 20 February 1984. 22(22) From the time of publication to the time of filing the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. 23(23) More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently contends that its trademark "STYLISTIC MR. LEE" is entirely different from and not confusingly similar to private respondent's "LEE" trademark. Private respondent maintains otherwise. It asserts that petitioner's trademark tends to mislead and confuse the public and thus constitutes an infringement of its own mark, since the dominant feature therein is the word "LEE." The pertinent provision of R.A. No. 166 (Trademark Law) states thus: SEC. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Practical application, however, of the aforesaid provision is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, Copyright 1994-2014

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no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v.Court of Appeals, 24(24) we held: . . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. It is unquestionably true that, as stated in Coburn vs.Puritan Mills, Inc.: "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case." xxx

xxx

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Likewise, it has been observed that: In determining whether a particular name or mark is a "colorable imitation" of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product's purchasers; location of the business; the likelihood of deception or the mark or name's tendency to confuse; etc. 25(25)

Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." 26(26) Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article. 27(27)

In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals 28(28) and other cases 29(29) and the Holistic Test developed in Del Monte Copyright 1994-2014

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Corporation v.Court of Appeals 30(30) and its proponent cases. 31(31) As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. xxx

xxx

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. . . If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC), 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . . .) 32(32) xxx

xxx

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On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. xxx

xxx

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In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. 33(33) xxx

xxx

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Applying the foregoing tenets to the present controversy and taking into account the factual circumstances of this case, we considered the trademarks involved as a whole and rule that petitioner's "STYLISTIC MR. LEE" is not confusingly similar to private respondent's "LEE" trademark. Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its label the word "LEE" is prominent, the trademark should be considered as a whole Copyright 1994-2014

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and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of the following variables that must be factored in. First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soy sauce or soap which are of minimal cost. Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, 34(34) we noted that: . . . Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. . . .

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted. Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved. The definition laid down in Dy Buncio v.Tan Tiao Bok 35(35) is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely Copyright 1994-2014

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to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase." There is no cause for the Court of Appeals' apprehension that petitioner's products might be mistaken as "another variation or line of garments under private respondent's 'LEE' trademark". 36(36) As one would readily observe, private respondent's variation follows a standard format "LEERIDERS," "LEESURES" and "LEELEENS." It is, therefore, improbable that the public would immediately and naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another variation under private respondent's "LEE" mark. As we have previously intimated the issue of confusing similarity between trademarks is resolved by considering the distinct characteristics of each case. In the present controversy, taking into account these unique factors, we conclude that the similarities in the trademarks in question are not sufficient as to likely cause deception and confusion tantamount to infringement Another way of resolving the conflict is to consider the marks involved from the point of view of what marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4(e): CHAPTER II-A. — The Principal Register (Inserted by Sec. 2, Rep. Act No. 638.) SEC. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx

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(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (Italics ours.) xxx Copyright 1994-2014

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"LEE" is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term. . . . It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, "Wellington" is a surname, and its first user has no cause of action against the junior user of "Wellington" as it is incapable of exclusive appropriation. 37(37)

In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) which explicitly provides that: CHAPTER II.

Registration of Marks and Trade-names.

SEC. 2. What are registrable. — Trade-marks, trade-names, and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships, or associations domiciled in any foreign country may be registered in accordance with the provisions of this act: Provided, That said trade-marks, trade-names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And Provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended.) (Italics ours.) SEC. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in lawful business, or who renders any lawful service in commerce, by actual use hereof in manufacture or trade, in business and in the service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or services from others. The ownership or possession of Copyright 1994-2014

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trade-mark, trade-name, service-mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights to the law. (As amended.) (Italics ours.)

The provisions of the 1965 Paris Convention for the Protection of Industrial Property 38(38) relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) 39(39) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals: 40(40) xxx

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Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx

xxx

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In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx

xxx

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Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEE RIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969 to Copyright 1994-2014

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1973. 41(41) However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 42(42) we declared: xxx

xxx

xxx.

A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx

xxx

xxx.

It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. (Italics ours.) xxx

xxx

xxx.

To augment its arguments that it was, not only the prior registrant, but also the prior user, private respondent invokes Sec. 20 of the Trademark Law, thus: SEC. 20. Certificate of registration prima facie evidence of validity. — A certificate of registration of a mark or tradename shall be a 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.

The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. Moreover, the aforequoted provision applies only to registrations in the principal register. 43(43) Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of Copyright 1994-2014

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marks which are not registrable on the principal register due to some defects. 44(44) The determination as to who is the prior user of the trademark is a question of fact and it is this Court's working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 45(45) In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark "LEE" which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its "LEE" mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines 46(46) based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. 47(47) Similarly, we give little weight to the numerous vouchers representing various advertising expenses in the Philippines for "LEE" products. 48(48) It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May 1981. 49(49) On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its "STYLISTIC MR. LEE" trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. 50(50) Our rulings in Pagasa Industrial Corp. v. Court of Appeals 51(51) and Converse Rubber Corp. v. Universal Rubber Products, Inc., 52(52) respectively, are instructive: The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value." The evidence for respondent must be clear, definite and free from inconsistencies. "Samples" are not for sale and therefore, the fact of Copyright 1994-2014

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exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by law. Respondent did not expect income from such "samples." There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. xxx

xxx

xxx.

The sales invoices provide the best proof that there were actual sales of petitioner's product in the country and that there was actual use for a protracted period of petitioner's trademark or part thereof through these sales.

For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for infringement must necessarily fail. WHEREFORE, premises considered, the questioned decision and resolution are hereby REVERSED and SET ASIDE. SO ORDERED. Bellosillo and Hermosisima, Jr., JJ., concur. Davide, Jr., J., I vote to deny the petition there being no showing of an exception to inclusiveness of findings of BPTTT and of CA. Padilla, J., I dissent. I vote to deny the petition; I agree with BPTTT and the CA that petitioner's trademark "STYLISTIC MR. LEE" is confusingly similar to private respondent's earlier registered trademarks "LEE" or "LEE RIDER, LEE-LEENS and LEE-SURES" such that the trademark "STYLISTIC MR. LEE" is an infringement of the earlier registered trademarks. )RRWQRWHV 1. 2. 3. 4. 5.. 6. 7. 8. 9.

Rollo, pp. 3, 27, 53. Id., at 27, 55. Id., at 27, 54. Id., at 3, 27. Id., at 54. Ibid. Id., at 39. Id., at 38. Id., at 4.

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10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

20. 21. 22. 23. 24. 25.

26. 27. 28. 29.

30. 31.

Id., at 42. Id., at 33. Id., at 31-33. Id., at 175. Id., at 23-25. Id., at 7, 14-15. Ibid. Id., at 12, 158. Id., at 193. The whole paragraph reads as follows: Chapter IV-A. — The supplemental register. SEC. 19-A. xxx xxx xxx. Marks and trade-names for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette. Whenever any person believes that he is or will be damaged by the registration of a mark or trade-name on this register, he may at any time apply to the director to cancel such registration. Upon receiving the application, the director shall give notice thereof to the registrant. If it is found after a hearing that the registrant was not entitled to register the mark at the time of his application for registration thereof, or that the mark was not used by the registrant or has been abandoned, the registration shall be cancelled by the director. Supra, see Note 1. Sec. 19-A, R.A. No. 166; La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984). Supra, see Note 4. Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p. 32, citing La Insular v.Jao Oge, 47 Phil. 75, (1924); La Insular v.Yu So, 45 Phil. 398 (1923). 116 SCRA 336 (1982). Jaime N. Salazar, Trademarks and Tradenames, 55 SCRA 422 (1974); See also Colorable Imitation of Trademarks, Tradenames, Labels, Packages, Wrappers, etc., 16 SCRA 502 (1966). Etepha v.Director of Patents, 16 SCRA 495 (1966). Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p. 41. 224 SCRA 437 (1993). Co Tiong v. Director of Patents, 95 Phil. 1 (1954); Lim Hoa v.Director of Patents; 100 Phil. 214 (1956); American Wire & Cable Co. v.Director of Patents, 31 SCRA 544 (1970); Phil. Nut Industry, Inc. v. Standard Brands, Inc., 65 SCRA 575 (1975); Converse Rubber Corp. v.Universal Rubber Products, Inc., 147 SCRA 154 (1987). 181 SCRA 410 (1990). Mead Johnson & Co. v. N.V.J. Van Dorp, Ltd., 7 SCRA 771 (1963); Bristol Myers Co. v. Director of Patents, 17 SCRA 128 (1966); Fruit of the Loom, Inc. v. CA, 133 SCRA 405 (1984).

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32. 33. 34. 35. 36. 37. 38.

39.

40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52.

Supra, see note 28. Fruit of the Loom, Inc. v. CA, supra, see note 31. Supra, see note 30. 42 Phil. 190 (1921). Supra, see note 12. Ruben Agpalo, Trademark Law and Practice in the Philippines, 1990, p. 18, citing Ang Si Heng v. Wellington Dept. Store, Inc., 92 Phil. 448 (1953). The Philippines became a signatory thereto on 27 September 1965. The Paris Convention is essentially a compact among 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 laws. 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 nation to assure to nationals of countries of the Union an effective protection against unfair competition. (Ruben Agpalo, Trademark Law And Practice in the Philippines, 1990, pp. 200-201.) SEC. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or assigned under this Act may bring an action hereinunder 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 complaint: Provided, That the country of which the said foreign 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. (As amended.) 224 SCRA 576 (1993). Rollo, p. 170; Exhibits A, B, C, & C-l. 27 SCRA 1214 (1969); Reiterated in Kabushi Kaisha Isetan v. Intermediate Appellate Court, 203 SCRA 583 (1991). La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984). Ibid. Unno Commercial Enterprises, Inc. v. General Milling Corp., 120 SCRA 804 (1983); Kabushi Kaisha Isetan v. Intermediate Appellate Court, 203 SCRA 583 (1991). Rollo, p. 177. Original Records, p. 52. Exhibits F-1 to F-59. Exhibit E. Exhibits 1-e to 1-o. 118 SCRA 526 (1982). 147 SCRA 154 (1987).

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EN BANC [G.R. No. 103543. July 5, 1993.] ASIA BREWERY, INC. petitioner, YV THE HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents. Abad Santos & Associates and Sycip, Salazar, Hernandez and Gatmaitan for petitioner. Roco, Bunag, Kapunan Law Office for private respondent. SYLLABUS 1. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF COURT OF APPEALS CONCLUSIVE AND BINDING ON SUPREME COURT; EXCEPTIONS; CASE AT BAR. — As a general rule, the findings of the Court of Appeals upon factual questions are conclusive and ought not to be disturbed by us. However, there are exceptions to this general rule, and they are: (1) When the conclusion is grounded entirely on speculation, surmises and conjectures; (2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3) Where there is grave abuse of discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee; (6) When the findings of said court are contrary to those of the trial court; (7) When the findings are without citation of specific evidence on which they are based; (8) When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (9) When the findings of facts of the Court of Appeals are premised on the absence of evidence and are contradicted on record. (Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156 SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs. Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139 SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [citing Tolentino vs. De Jesus, 56 SCRA 167; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102 Copyright 1994-2014

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SCRA 817; and Moran, Jr. vs. Ca, 133 SCRA 88].) Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.) Where findings of the Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. (Cruz vs. CA, 129 SCRA 222, 227.) The present case is one of the exceptions because there is no concurrence between the trial court and the Court of Appeals on the lone factual issue of whether ABI, by manufacturing and selling its BEER PALE PILSEN in amber colored steinie bottles of 320 ml. capacity with a white painted rectangular label has committed trademark infringement and unfair competition against SMC. 2. COMMERCIAL LAW; TRADEMARK LAW (REPUBLIC ACT NO. 166); INFRINGEMENT; DEFINED; NATURE THEREOF. — Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil. 100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes infringement: Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. This definition implies that only registered trade marks, trade names and service marks are protected against infringement or unauthorized use by another or others. The use of someone else's registered trademark, trade name or service mark is unauthorized, hence, actionable, if it is done "without the consent of the registrant." 3. ID.; ID.; HOW QUESTION OF INFRINGEMENT OF TRADEMARK DETERMINED; QUESTION AT ISSUE IN CASES OF INFRINGEMENT. — Infringement is determined by the "test of dominancy" rather than by differences or variations in the details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus: "It has been consistently held that the question of infringement of a trademark is to be determined by the test of Copyright 1994-2014

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dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; not it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle While Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . .)" In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272, 275), the test was similarity or "resemblance between the two (trademarks) such as would be likely to cause the one mark to be mistaken for the other. . . . [But] this is not such similitude as amounts to identity." In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA 575, the court was more specific: the test is "similarity in the dominant features of the trademarks." 4. ID.; ID.; ID.; ID.; CASE AT BAR. — The dominant feature of SMC's trademark is the name of the product: SAN MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the beginning and end of the letters "S" and "M" on an amber background across the upper portion of the rectangular design. On the other hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with the word "Beer" written in large amber letters, larger than any of the letters found in the SMC label. The trial court perceptively observed that the word "BEER" does not appear in SMC's trademark, just as the words "SAM MIGUEL" do not appear in ABI's trademark. Hence, there is absolutely no similarity in the dominant features of both trademarks. Neither in sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar to SAN MIGUEL PALE PILSEN. No one who purchases BEER PALE PILSEN can possibly be deceived that it is SAN MIGUEL PALE PILSEN. No evidence whatsoever was presented by SMC proving otherwise. 5. ID.; ID.; GENERIC OR DESCRIPTIVE AND PRIMARILY GEOGRAPHICALLY DESCRIPTIVE WORDS NON-REGISTRABLE AND NOT APPROPRIABLE; REASON THEREFOR; CASE AT BAR. — The fact that the words pale pilsen are part of ABI's trademark does not constitute an infringement of SMC's trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are generic words descriptive of the color ("pale"), of a type of beer ("pilsen"), which is a light bohemian beer with a strong hops flavor that originated in the City of Pilsen in Czechoslovakia and became famous in the Middle Ages. (Webster's Third New International Copyright 1994-2014

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Dictionary of the English Language, Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam Co.,) 1976, page 1716.) "Pilsen" is a "primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166, as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable and not appropriable by any beer manufacturer. The Trademark Law provides: "Sec. 4 . . . The owner of trade-mark, trade-name or service-mark used to distinguished his goods, business or services from the goods, business or services of others shall have the right to register the same [on the principal register], unless it: . . . "(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname." The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part of its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as "evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be appropriated by any single manufacturer of these food products, for no other reason than that he was the first to use them in his registered trademark. In Masso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer in shoes cannot register "Leather Shoes" as his trademark because that would be merely descriptive and it would be unjust to deprive other dealers in leather shoes of the right to use the same words with reference to their merchandise. No one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]). 6. ID.; ID.; UNFAIR COMPETITION; DEFINED. — Unfair competition is the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or services, for those of another who has already established goodwill for his similar goods, business or services, or any acts calculated to produce the same result. (Sec. 29, Republic Act No. 166, as amended.) 7. ID.; ID.; ID.; TEST TO DETERMINE EXISTENCE THEREOF. — The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of the customers by reason of defendant's practices must always appear." (Shell Co. of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.) . . . In Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 196-197, where two Copyright 1994-2014

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competing tea products were both labelled as Formosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of conventional color, both with labels containing designs drawn in green ink and Chinese characters written in red ink, one label showing a double-decked jar in the center, the other, a flower pot, this court found that the resemblances between the designs were not sufficient to mislead the ordinary intelligent buyer, hence, there was no unfair competition. The Court held: ". . . In order that there may be deception of the buying public in the sense necessary to constitute unfair competition, it is necessary to suppose a public accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or possibility of the deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent as between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinarily intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase." 8. ID.; ID.; PROTECTION AGAINST IMITATION PROPERLY LIMITED TO NONFUNCTIONAL FEATURES; CASE AT BAR. — The petitioner's contention that bottle size, shape and color may not be the exclusive property of any one beer manufacturer is well taken. SMC's being the first to use the steinie bottle does not give SMC a vested right to use it to the exclusion of everyone else. Being of functional or common use, and not the exclusive invention of any one, it is available to all who might need to use it within the industry. Nobody can acquire any exclusive right to market articles supplying simple human needs in containers or wrappers of the general form, size and character commonly and immediately used in marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 194-195.) . . . ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat bulging neck to differentiate it from SMC's bottle. The amber color is a functional feature of the beer bottle. As pointed out by ABI, all bottled beer produced in the Philippines is contained and sold in amber-colored bottles because amber is the most effective color in preventing transmission of light and provides the maximum protection to beer. As was ruled in California Crushed Fruit Corporation vs. Taylor B. and Candy Co., 38 F2d 885, a merchant cannot be enjoined from using a type or color of bottle where the same has the useful purpose of protecting the contents from the deleterious effects of light rays. Moreover, no one may have a monopoly of any color. Not only beer, but most medicines, whether in liquid or tablet form, are sold in amber-colored bottles. That the ABI bottle has a 320 ml. capacity is not due to a Copyright 1994-2014

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desire to imitate SMC's bottle but because that bottle capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December 1979, of the Department of Trade, Metric System Board. With regard to the white label of both beer bottles, ABI explained that it used the color white for its label because white presents the strongest contrast to the amber color of ABI's bottle; it is also the most economical to use on labels, and the easiest to "bake" in the furnace. No one can have a monopoly of the color amber for bottles, nor of white for labels, nor of the rectangular shape which is the usual configuration of labels. Needless to say, the shape of the bottle and of the label is unimportant. What is all important is the name of the product written on the label of the bottle for that is how one beer may be distinguished from the others. 9. ID.; ID.; TRADEMARK ALLEGEDLY INFRINGED CONSIDERED AS A WHOLE AND NOT AS DISSECTED; DOCTRINE ENUNCIATED IN DEL MONTE CORPORATION vs. COURT OF APPEALS AND SUNSHINE SAUCE MANUFACTURING INDUSTRIES, 181 SCRA 410, 419, NOT APPLICABLE TO CASE AT BAR. — Our decision in this case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, that: ". . . to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it." That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases of infringement and unfair competition, the courts should "take into consideration several factors which would affect is conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased." (181 SCRA 410, 418-419). The Del Monte case involved catsup, a common household item which is bought off the store shelves by housewives and house help who, if they are illiterate and cannot identify the product by name or brand, would very likely identify it by mere recollection of its appearance. Since the competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del Monte bottles for its catsup (despite the warning embossed on the bottles: "Del Monte Corporation. Not to be refilled.") but also used labels which were "a colorable imitation" of Del Monte's label, we held that there was infringement of Del Monte's trademark and unfair competition by Sunshine. Our ruling in Del Monte would not apply to beer which is not usually picked up from a store shelf but ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant. CRUZ, J., dissenting: Copyright 1994-2014

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1. COMMERCIAL LAW; TRADEMARK LAW (REPUBLIC ACT NO. 166); INFRINGEMENT; TOUCHSTONE IN DETERMINATION OF EXISTENCE THEREOF; TO DETERMINE WHETHER TRADEMARK HAS BEEN INFRINGED, THE MARK IS CONSIDERED AS A WHOLE AND NOT AS DISSECTED. — The question is not whether the two articles are distinguishable by their labels when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone. It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. The court therefore should be guided by its first impression, for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark.

DECISION

GRIÑO-AQUINO, J : p

On September 15, 1988, San Miguel Corporation (SMC) filed a complaint against Asia Brewery Inc. (ABI) for infringement of trademark and unfair competition on account of the latter's BEER PALE PILSEN or BEER NA BEER product which has been competing with SMC's SAN MIGUEL PALE PILSEN for a share of the local beer market. (San Miguel Corporation vs. Asia Brewery Inc., Civ. Case No. 56390, RTC Branch 166, Pasig, Metro Manila.) On August 27, 1990, a decision was rendered by the trial Court, presided over by Judge Jesus O. Bersamira, dismissing SMC's complaint because ABI "has not Copyright 1994-2014

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committed trademark infringement or unfair competition against" SMC (p. 189, Rollo). prcd

SMC appealed to the Court of Appeals (C.A.-G.R. CV No. 28104). On September 30, 1991, the Court of Appeals (Sixth Division composed of Justice Jose C. Campos, Jr., chairman and ponente, and Justices Venancio D. Aldecoa Jr. and Filemon H. Mendoza, as members) reversed the trial court. The dispositive part of the decision reads as follows: "In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows: "(1) The defendant Asia Brewery Inc. its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer is the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant. "(2) The defendant Asia Brewery Inc. is hereby ordered to render an accounting and pay the San Miguel Corporation double any and all the payments derived by defendant from operations of its business and sale of goods bearing the mark 'Beer Pale Pilsen' estimated at approximately Five Million Pesos (P5,000,000.00); to recall all its products bearing the mark 'Beer Pale Pilsen' from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction. "(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P5,000,000.00) by way of exemplary damages. "(4) The defendant is further ordered to pay the plaintiff attorney's fees Copyright 1994-2014

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in the amount of P250,000.00 plus costs of this suit." (p. 90, Rollo.)

Upon a motion for reconsideration filed by ABI, the above dispositive part of the decision, was modified by the separate opinions of the Special Sixth Division 1(1) so that it should read thus: In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows: (1) The defendant Asia Brewery Inc., its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer is the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant. (2) The defendant Asia Brewery Inc. is hereby ordered 2(2) to recall all its products bearing the mark Beer Pale Pilsen from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction. (3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P500,000.00) by way of exemplary damages. (4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs of this suit.

In due time, ABI appealed to this Court by a petition for certiorari under Rule 45 of the Rules of Court. The lone issue in this appeal is whether ABI infringes SMC's trademark: San Miguel Pale Pilsen with Rectangular Hops and Malt Design, and thereby commits unfair competition against the latter. It is a factual issue (Phil. Nut Industry Inc. v. Standard Brands Inc., 65 SCRA 575) and as a general rule, the Copyright 1994-2014

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findings of the Court of Appeals upon factual questions are conclusive and ought not to be disturbed by us. However, there are exceptions to this general rule, and they are: (1) When the conclusion is grounded entirely on speculation, surmises and conjectures; (2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3)

Where there is grave abuse of discretion;

(4)

When the judgment is based on a misapprehension of facts;

(5) When the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee; (6)

When the findings of said court are contrary to those of the trial

court; (7) When the findings are without citation of specific evidence on which they are based; (8) When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (9) When the findings of facts of the Court of Appeals are premised on the absence of evidence and are contradicted on record. (Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156 SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs. Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139 SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [citing Tolentino vs. De Jesus, 56 SCRA 167; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102 SCRA 817; and Moran, Jr. vs. CA, 133 SCRA 88].)

Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.) Where findings of the Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. (Cruz vs. CA, 129 SCRA 222, 227.) The present case is one of the exceptions because there is no concurrence Copyright 1994-2014

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between the trial court and the Court of Appeals on the lone factual issue of whether ABI, by manufacturing and selling its BEER PALE PILSEN in amber colored steinie bottles of 320 ml. capacity with a white painted rectangular label has committed trademark infringement and unfair competition against SMC. Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil. 100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes infringement: Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied.)

This definition implies that only registered trade marks, trade names and service marks are protected against infringement or unauthorized use by another or others. The use of someone else's registered trademark, trade name or service mark is unauthorized, hence, actionable, if it is done "without the consent of the registrant." (Ibid.) The registered trademark of SMC for its pale pilsen beer is: "San Miguel Pale Pilsen With Rectangular Hops and Malt Design. (Philippine Bureau of Patents, Trademarks and Technology Transfer Trademark Certificate of Registration No. 36103, dated 23 Oct. 1986." (p. 174, Rollo.)

As described by the trial court in its decision (Page 177, Rollo): ". . . a rectangular design [is] bordered by what appears to be minute grains arranged in rows of three in which there appear in each corner hop designs. At the top is a phrase written in small print 'Reg. Phil. Pat. Off.' and at the bottom 'Net Contents: 320 Ml.' The dominant feature is the phrase 'San Miguel' written horizontally at the upper portion. Below are the words 'Pale Pilsen' written diagonally across the middle of the rectangular design. In Copyright 1994-2014

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between is a coat of arms and the phrase 'Expertly Brewed.' The 'S' in 'San' and the 'M' of 'Miguel,' 'P' of 'Pale' and 'Pilsen' are written in Gothic letters with fine strokes of serifs, the kind that first appeared in the 1780s in England and used for printing German as distinguished from Roman and Italic. Below 'Pale Pilsen' is the statement 'And Bottled by' (first line, 'San Miguel Brewery' (second line), and 'Philippines' (third line)." (p. 177, Rollo; Italics supplied.)

On the other hand, ABI's trademark, as described by the trial court, consists of: ". . . a rectangular design bordered by what appear to be buds of flowers with leaves. The dominant feature is 'Beer' written across the upper portion of the rectangular design. The phrase 'Pale Pilsen' appears immediately below in smaller block letters. To the left is a hop design and to the right, written in small prints, is the phrase 'Net Contents 320 ml.' immediately below 'Pale Pilsen' is the statement written in three lines 'Especially brewed and bottled by' (first line), 'Asia Brewery Incorporated' (second line), and 'Philippines' (third line)." (p. 177, Rollo; Italics supplied.)

Does ABI's BEER PALE PILSEN label or "design" infringe upon SMC's SAN MIGUEL PALE PILSEN WITH RECTANGULAR MALT AND HOPS DESIGN? The answer is "No." Infringement is determined by the "test of dominancy" rather than by differences or variations in the details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus: "It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . .)" (Emphasis supplied.)

In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272, 275), the test was similarity or "resemblance between the two (trademarks) such as would be likely to cause the one mark to be mistaken for the other . . . [But] this is not such similitude as Copyright 1994-2014

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amounts to identity." In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA 575, the court was more specific: the test is "similarity in the dominant features of the trademarks." What are the dominant features of the competing trademarks before us? There is hardly any dispute that the dominant feature of SMC's trademark is the name of the product: SAN MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the beginning and end of the letters "S" and "M" on an amber background across the upper portion of the rectangular design. On the other hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with the word "Beer" written in large amber letters, larger than any of the letters found in the SMC label. The trial court perceptively observed that the word "BEER" does not appear in SMC's trademark, just as the words "SAN MIGUEL" do not appear in ABI's trademark. Hence, there is absolutely no similarity in the dominant features of both trademarks. Neither in sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar to SAN MIGUEL PALE PILSEN. No one who purchases BEER PALE PILSEN can possibly be deceived that it is SAN MIGUEL PALE PILSEN. No evidence whatsoever was presented by SMC proving otherwise. Besides the dissimilarity in their names, the following other dissimilarities in the trade dress or appearance of the competing products abound: (1) The SAN MIGUEL PALE PILSEN bottle has a slender tapered neck. The BEER PALE PILSEN bottle has a fat, bulging neck. (2) The words "pale pilsen" on SMC's label are printed in bold and laced letters along a diagonal band, whereas the words "pale pilsen" on ABI's bottle are half the size and printed in slender block letters on a straight horizontal band. (See Exhibit "8-a".) (3) The names of the manufacturers are prominently printed on their respective bottles. SAN MIGUEL PALE PILSEN is "Bottled by the San Miguel Brewery, Copyright 1994-2014

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Philippines," whereas BEER PALE PILSEN is "Especially brewed and bottled by Asia Brewery Incorporated, Philippines." (4) On the back of ABI's bottle is printed in big, bold letters, under a row of flower buds and leaves, its copyrighted slogan: "BEER NA BEER!"

Whereas SMC's bottle carries no slogan. (5) The back of the SAN MIGUEL PALE PILSEN bottle carries the SMC logo, whereas the BEER PALE PILSEN bottle has no logo. (6) The SAN MIGUEL PALE PILSEN bottle cap is stamped with a coat of arms and the words "San Miguel Brewery Philippines" encircling the same. The BEER PALE PILSEN bottle cap is stamped with the name "BEER" in the center, surrounded by the words "Asia Brewery Incorporated Philippines." (7) Finally, there is a substantial price difference between BEER PALE PILSEN (currently at P4.25 per bottle) and SAN MIGUEL PALE PILSEN (currently at P7.00 per bottle). One who pays only P4.25 for a bottle of beer cannot expect to receive San Miguel Pale Pilsen from the storekeeper or bartender. The fact that the words pale pilsen are part of ABI's trademark does not constitute an infringement of SMC's trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are generic words descriptive of the color ("pale"), of a type of beer ("pilsen"), which is a light bohemian beer with a strong hops flavor that originated in the City of Pilsen in Czechoslovakia and became famous in the Middle Ages. (Webster's Third New International Dictionary of the English Language, Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam Co., c) 1976, page 1716.) "Pilsen" is a "primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166, as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable and not appropriable by any beer manufacturer. The Trademark Law provides: "Sec. 4. . . . The owner of trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same [on the principal register], unless it:

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xxx

xxx

xxx

"(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname." (Emphasis supplied.)

The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part of its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as "evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be appropriated by any single manufacturer of these food products, for no other reason than that he was the first to use them in his registered trademark. In Masso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer in shoes cannot register "Leather Shoes" as his trademark because that would be merely descriptive and it would be unjust to deprive other dealers in leather shoes of the right to use the same words with reference to their merchandise. No one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]): "A word or a combination of words which is merely descriptive of an article of trade, or of its composition, characteristics, or qualities, cannot be appropriated and protected as a trademark to the exclusion of its use by others . . . inasmuch as all persons have an equal right to produce and vend similar articles, they also have the right to describe them properly and to use any appropriate language or words for that purpose, and no person can appropriate to himself exclusively any word or expression, properly descriptive of the article, its qualities, ingredients or characteristics, and thus limit other persons in the use of language appropriate to the description of their manufactures, the right to the use of such language being common to all. This rule excluding descriptive terms has also been held to apply to trade-names. As to whether words employed fall within this prohibition, it is said that the true test is not whether they are exhaustively descriptive of the article designated, but whether in themselves, and as they are commonly used by those who understand their meaning, they are reasonably indicative and descriptive of the thing intended. If they are thus descriptive, and not arbitrary, they cannot be appropriated from general use and become the exclusive property of anyone. (52 Am. Jur. 542-543.) ". . . Others may use the same or similar descriptive word in connection Copyright 1994-2014

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with their own wares, provided they take proper steps to prevent the public being deceived. (Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E. [2d] 598.) ". . . A descriptive word may be admittedly distinctive, especially if the user is the first creator of the article. It will, however, be denied protection, not because it lacks distinctiveness, but rather because others are equally entitled to its use. (2 Callman, Unfair Competition and Trademarks, pp. 869-870.)" (Emphasis supplied.)

The circumstance that the manufacturer of BEER PALE PILSEN, Asia Brewery Incorporated, has printed its name all over the bottle of its beer product: on the label, on the back of the bottle, as well as on the bottle cap, disproves SMC's charge that ABI dishonestly and fraudulently intends to palm off its BEER PALE PILSEN as SMC's product. In view of the visible differences between the two products, the Court believes it is quite unlikely that a customer of average intelligence would mistake a bottle of BEER PALE PILSEN for SAN MIGUEL PALE PILSEN. The fact that BEER PALE PILSEN like SAN MIGUEL PALE PILSEN is bottled in amber-colored steinie bottles of 320 ml. capacity and is also advertised in print, broadcast, and television media, does not necessarily constitute unfair competition. Unfair competition is the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or services, for those of another who has already established goodwill for his similar goods, business or services, or any acts calculated to produce the same result. (Sec. 29, Republic Act No. 166, as amended.) The law further enumerates the more common ways of committing unfair competition, thus: "Sec. 29.

...

"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 Copyright 1994-2014

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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."

In this case, the question to be determined is whether ABI is using a name or mark for its beer that has previously come to designate SMC's beer, or whether ABI is passing off its BEER PALE PILSEN as SMC's SAN MIGUEL PALE PILSEN. ". . . The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of the customers by reason of defendant's practices must always appear." (Shell Co. of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.)

The use by ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN bottle, is not unlawful. As pointed out by ABI's counsel, SMC did not invent but merely borrowed the steinie bottle from abroad and it claims neither patent nor trademark protection for that bottle shape and design. (See rollo, page 55.) The Cerveza Especial and the Efes Pale Pilsen use the "steinie" bottle. (See Exhibits 57-D, 57-E.) The trial court found no infringement of SMC's bottle — "The court agrees with defendant that there is no infringement of plaintiff's bottle, firstly, because according to plaintiff's witness Deogracias Villadolid, it is a standard type of bottle called steinie, and to witness Jose Antonio Garcia, it is not a San Miguel Corporation design but a design originally developed in the United States by the Glass Container Manufacturer's Institute and therefore lacks exclusivity. Secondly, the shape was never registered as a trademark. Exhibit 'C' is not a registration of a beer bottle design required under Rep. Act 165 but the registration of the name and other marks of ownership stamped on containers as required by Rep. Act 623. Thirdly, the neck of defendant's bottle is much larger and has a distinct bulge in its uppermost part." (p. 186, Rollo.)

The petitioner's contention that bottle size, shape and color may not be the Copyright 1994-2014

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exclusive property of any one beer manufacturer is well taken. SMC's being the first to use the steinie bottle does not give SMC a vested right to use it to the exclusion of everyone else. Being of functional or common use, and not the exclusive invention of any one, it is available to all who might need to use it within the industry. Nobody can acquire any exclusive right to market articles supplying simple human needs in containers or wrappers of the general form, size and character commonly and immediately used in marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 194-195.) ". . . protection against imitation should be properly confined to nonfunctional features. Even if purely functional elements are slavishly copied, the resemblance will not support an action for unfair competition, and the first user cannot claim secondary meaning protection. Nor can the first user predicate his claim to protection on the argument that his business was established in reliance on any such unpatented nonfunctional feature, even 'at large expenditure of money.' (Callman Unfair Competition, Trademarks and Monopolies, Sec. 19.33 [4th Ed.].)" (Petition for Review, p. 28.)

ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat bulging neck to differentiate it from SMC's bottle. The amber color is a functional feature of the beer bottle. As pointed out by ABI, all bottled beer produced in the Philippines is contained and sold in amber-colored bottles because amber is the most effective color in preventing transmission of light and provides the maximum protection to beer. As was ruled in California Crushed Fruit Corporation vs. Taylor B. and Candy Co., 38 F2d 885, a merchant cannot be enjoined from using a type or color of bottle where the same has the useful purpose of protecting the contents from the deleterious effects of light rays. Moreover, no one may have a monopoly of any color. Not only beer, but most medicines, whether in liquid or tablet form, are sold in amber-colored bottles. That the ABI bottle has a 320 ml. capacity is not due to a desire to imitate SMC's bottle but because that bottle capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December 1979, of the Department of Trade, Metric System Board. With regard to the white label of both beer bottles, ABI explained that it used the color white for its label because white presents the strongest contrast to the amber color of ABI's bottle; it is also the most economical to use on labels, and the easiest to "bake" in the furnace (p. 16, TSN of September 20, 1988). No one can have a monopoly of the color amber for bottles, nor of white for labels, nor of the rectangular shape which is the usual configuration of labels. Needless to say, the shape of the Copyright 1994-2014

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bottle and of the label is unimportant. What is all important is the name of the product written on the label of the bottle for that is how one beer may be distinguished from the others. prLL

In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where two competing tea products were both labelled as Formosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of conventional color, both with labels containing designs drawn in green ink and Chinese characters written in red ink, one label showing a double-decked jar in the center, the other, a flower pot, this court found that the resemblances between the designs were not sufficient to mislead the ordinary intelligent buyer, hence, there was no unfair competition. The Court held: ". . . In order that there may be deception of the buying public in the sense necessary to constitute unfair competition, it is necessary to suppose a public accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or possibility of the deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent as between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinarily intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase."

The main thrust of SMC's complaint is not infringement of its trademark, but unfair competition arising from the allegedly "confusing similarity" in the general appearance or trade dress of ABI's BEER PALE PILSEN beside SMC's SAN MIGUEL PALE PILSEN (p. 209, Rollo). SMC claims that the "trade dress" of BEER PALE PILSEN is "confusingly similar" to its SAN MIGUEL PALE PILSEN because both are bottled in 320 ml. steinie type, amber-colored bottles with white rectangular labels. However, when as in this case, the names of the competing products are clearly different and their respective sources are prominently printed on the label and on other parts of the bottle, mere similarity in the shape and size of the container and label, does not constitute unfair competition. The steinie bottle is a standard bottle for beer and is universally used. SMC did not invent it nor patent it. The fact that SMC's bottle is registered under R.A. No. 623 (as amended by RA 5700, An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Copyright 1994-2014

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Similar Containers) simply prohibits manufacturers of other foodstuffs from the unauthorized use of SMC's bottles by refilling these with their products. It was not uncommon then for products such as patis (fish sauce) and toyo (soy sauce) to be sold in recycled SAN MIGUEL PALE PILSEN bottles. Registration of SMC's beer bottles did not give SMC a patent on the steinie or on bottles of similar size, shape or color. Most containers are standardized because they are usually made by the same manufacturer. Milk, whether in powdered or liquid form, is sold in uniform tin cans. The same can be said of the standard ketchup or vinegar bottle with its familiar elongated neck. Many other grocery items such as coffee, mayonnaise, pickles and peanut butter are sold in standard glass jars. The manufacturers of these foodstuffs have equal right to use these standard tins, bottles and jars for their products. Only their respective labels distinguish them from each other. Just as no milk producer may sue the others for unfair competition because they sell their milk in the same size and shape of milk can which he uses, neither may SMC claim unfair competition arising from the fact that ABI's BEER PALE PILSEN is sold, like SMC's SAN MIGUEL PALE PILSEN in amber steinie bottles. prcd

The record does not bear out SMC's apprehension that BEER PALE PILSEN is being passed off as SAN MIGUEL PALE PILSEN. This is unlikely to happen for consumers or buyers of beer generally order their beer by brand. As pointed out by ABI's counsel, in supermarkets and tiendas, beer is ordered by brand, and the customer surrenders his empty replacement bottles or pays a deposit to guarantee the return of the empties. If his empties are SAN MIGUEL PALE PILSEN, he will get SAN MIGUEL PALE PILSEN as replacement. In sari-sari stores, beer is also ordered from the tindera by brand. The same is true in restaurants, pubs and beer gardens — beer is ordered from the waiters by brand. (Op. cit. page 50.) Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer market for the past hundred years, those who have been drinking no other beer but SAN MIGUEL PALE PILSEN these many years certainly know their beer too well to be deceived by a newcomer in the market. If they gravitate to ABI's cheaper beer, it will not be because they are confused or deceived, but because they find the competing product to their taste. Our decision in this case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, 3(3) that: ". . . to determine whether a trademark has been infringed, we must Copyright 1994-2014

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consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it."

That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases of infringement and unfair competition, the courts should "take into consideration several factors which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased" (181 SCRA 410, 418-419). The Del Monte case involved catsup, a common household item which is bought off the store shelves by housewives and house help who, if they are illiterate and cannot identify the product by name or brand, would very likely identify it by mere recollection of its appearance. Since the competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del Monte bottles for its catsup (despite the warning embossed on the bottles: "Del Monte Corporation. Not to be refilled.") but also used labels which were "a colorable imitation" of Del Monte's label, we held that there was infringement of Del Monte's trademark and unfair competition by Sunshine. Our ruling in Del Monte would not apply to beer which is not usually picked up from a store shelf but ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant. Moreover, SMC's brand or trademark: "SAN MIGUEL PALE PILSEN" is not infringed by ABI's mark: "BEER NA BEER" or "BEER PALE PILSEN." ABI makes its own bottle with a bulging neck to differentiate it from SMC's bottle, and prints ABI's name in three (3) places on said bottle (front, back and bottle cap) to prove that it has no intention to pass off its "BEER" as "SAN MIGUEL." There is no confusing similarity between the competing beers for the name of one is "SAN MIGUEL" while the competitor is plain "BEER" and the points of dissimilarity between the two outnumber their points of similarity. Petition ABI has neither infringed SMC's trademark nor committed unfair competition with the latter's SAN MIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes with the latter in the open market, the competition is neither unfair nor fraudulent. Hence, we must deny SMC's prayer to suppress it. WHEREFORE, finding the petition for review meritorious, the same is hereby granted. The decision and resolution of the Court of Appeals in CA-G.R. CV No. Copyright 1994-2014

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28104 are hereby set aside and that of the trial court is REINSTATED and AFFIRMED. Costs against the private respondent. SO ORDERED. Narvasa, C .J ., Bidin, Regalado, Romero, Nocon, Bellosillo and Melo, JJ., concur. Feliciano, J., no part. One party represented by my former firm. Padilla, J., no part, in view of substantial interest in SMC.

Separate Opinions CRUZ, J ., dissenting: The present ponencia stresses the specific similarities and differences of the two products to support the conclusion that there is no infringement of trade marks or unfair competition. That test was rejected in my own ponencia in Del Monte Corporation vs. Court of Appeals, 181 SCRA 410, concurred in by Justices Narvasa, Gancayco, Griño-Aquino and Medialdea, where we declared: While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their labels when set side by side but whether the general confusion made by the Copyright 1994-2014

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article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone. It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. The court therefore should be guided by its first impression, for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts.

For the above reasons, and the other arguments stated in Del Monte, I dissent. Davide, Jr., dissents. )RRWQRWHV 1.

2.

Composed of Justice Jose C. Campos, Jr. as chairman, and Justices Ricardo Francisco, fully concurring, Ricardo Pronove, partly concurring, Filemon H. Mendoza and Oscar Herrera, both dissenting. Justice Aldecoa, who had written a separate dissenting opinion, retired before a resolution on the motion for reconsideration was promulgated. He was substituted by Justice Oscar M. Herrera. This portion of Justice Campos' original decision ordering ABI to render an accounting to SMC and pay estimated damages of P5,000,000.00 did not carry

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enough votes to become a decision as only Justice Ricardo Francisco concurred fully with him. Justice Ricardo Pronove, although concurring partially with Justice Campos' decision, excepted from the portion ordering an accounting and payment of P5 million damages. Cited in Justice R. Francisco's concurring opinion, p. 107, Rollo.

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EN BANC [G.R. No. L-6235. March 28, 1955.] ONG AI GUI alias TAN AI GUI, applicant-petitioner, YV. the Director of the Philippines Patent Office, respondent, E. I. DU PONT DE NEMOURS AND COMPANY, intervenor. Jose P. Laurel for petitioner. Solicitor General Juan R. Liwag and Solicitor Pacifico P. de Castro for respondent. J. A. Wolfson for intervenor. SYLLABUS 1. TRADE-NAMES; DESCRIPTIVE OR GENERIC TERM CAN NOT BE APPROPRIATED BY SINGLE INDIVIDUAL. — Although a combination of words may be registered as a trade-name, it is no justification for not applying the principle that the use of a descriptive or generic term in a trade-name is always subject to the limitation that the registrant can not acquire the exclusive right to the descriptive or generic term or word. 2. ID.; PROCEDURE FOR REGISTRATION. — There are two steps in the proceedings for the approval of an application for registration; the first is that conducted in the office of the Director and taking place prior to publication, and the second, that conducted after publication, in which the public is given the opportunity to contest the application. In the first, the application is referred to an examiner, who, after study and investigation makes a report and recommendation to the Director who, upon finding that applicant is entitled to registration, orders publication of the application. (Sec. 7, Rep. Act No. 166.) If he finds that applicant is not entitled to registration, he may then and there dismiss the application. In the second, opportunity is offered the public or any interested party to come in and object to the petition (Sec. 8, Id.), giving proofs and reasons for the objection, applicant being given the opportunity also to submit proofs or arguments in support of the application. (Sec. 9, Id.) It is the decision of the Director, given after this hearing, or opportunity to every Copyright 1994-2014

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interested party to be heard, that finally terminates the proceedings and in which the registration is finally approved or disapproved. Thereafter, notice of the issuance of the certificate of registration is published. (Sec. 10, Id.)

DECISION

LABRADOR, J : p

On November 8, 1948, Ong Ai Gui alias Tan Ai Gui filed an application (No. 803) with the Director of Patents for the registration of the following trade-name: "20th Century Nylon Shirts Factory." It is stated in connection with the application that the trade-name was used for the first time by the applicant on September 12, 1941 for his business described as follows: "General merchandise dealing principally in textiles, haberdasheries; also operating as manufacturer of shirts, pants and other men's and women's wears." Upon the filing of the application, the same was referred by the Director to an examiner. The latter in a report dated August 18, 1950 held that the words "shirts factory" are not registrable; so the applicant made a disclaimer of said words (shirts factory) inserting a statement to that effect in his original application. On August 13, 1951 the Director ordered the publication of the trade-name in the Official Gazette. Publication was made but before the expiration of the period for filing opposition, Atty. J. A. Wolfson, on behalf of E. I. Du Pont de Nemours and Company, presented on February 27, 1952, an opposition on the ground that the word "nylon" was a name coined by E. I. Du Pont de Nemours and Company as the generic name of a synthetic fabric material, invented, patented, manufactured and sold by it and that this word is a generic term; that the use of the name "nylon" is descriptive or deceptively misdescriptive of the goods, business of manufactures of the applicant; that the use of the name would produce confusion in trade and would deceive the public; and that "nylon" is not distinctive of applicant's goods; business and manufactures and applicant does not claim that it has so become. This opposition, however, was dismissed by the Director on the ground that at the time it was submitted Atty. J. A. Wolfson did not have, nor did he submit, authority to file it (opposition) in the corporate name, and that the subsequent authorization from the corporation to that effect did not cure the general defect in the opposition. But while he dismissed the opposition, the Director ruled that the application must be Copyright 1994-2014

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disapproved unless the word "nylon" is also disclaimed. The grounds for the disapproval of the application were as follows: "Nylon" is merely descriptive of the business of shirt-making if the shirts are made of nylon. It is deceptively misdescriptive of said business, if the shirts are not made of nylon. In either case, its registration in the Principal Register as a trade-name, or as a part of a trade-name, is expressly forbidden by subsection (e) of Section 4 of Republic Act No. 166, as amended by Section 2 of Republic Act No. 638. xxx

xxx

xxx

"But even if the trade-name here in question were applied for under the said subsection (f), "Nylon" would still have to be disclaimed. Used in connection with shirt-making, "Nylon" can never become distinctive, can never acquire secondary, meaning, because it is a generic term, like cotton, silk, linen, or ramie. Just as no length of use and no amount of advertising will make "cotton," "silk," "linen," or "ramie," distinctive of shirts or of the business of making them, so no length of use and no amount of advertising will make "nylon" distinctive of shirts or of the business of manufacturing them."

Against the above decision applicant has filed an appeal to this Court. During the pendency of this appeal, E. I. Du Pont de Nemours and Co. filed a petition to intervene, which petition was granted. It has also, through counsel, filed a brief answering the arguments of the applicant-appellant and supporting the decision appealed from. There are two main questions raised in the appeal, one legal and the other procedural. The legal question is put up by the claim of the applicant-appellant that while he admits that the term "nylon" is by itself alone descriptive and generic, what he desires to register is not the said word alone but the whole combination of "20th Century Nylon Shirts Factory." It is to be noted in answer to this contention that the Director of Patents has not completely denied the registration of the whole trade-name. He has made a conditional denial only, permitting the registration of the name but with the disclaimer of the terms "shirt factory" and "nylon." The import of the decision is that the trade-name may be registered, but applicant-appellant may not be entitled to the exclusive use of the terms "shirts factory" and "nylon" as against any other who may subsequently use the said terms, for the latter are merely descriptive or general terms, juris publici, incapable of appropriation by any single individual to the exclusion of others. This is supported by reason and authority. "A word or a combination of words which is merely descriptive of an Copyright 1994-2014

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article of trade, or of its composition, characteristics, or qualities, cannot be appropriated and protected as a trademark to the exclusion of its use by others. The reason for this is that inasmuch as all persons have an equal right to produce and vend similar articles, they also have the right to describe them properly and to use any appropriate language or words for that purpose, and no person can appropriate to himself exclusively any word or expression, properly descriptive of the article, its qualities, ingredients, or characteristics, and thus limit other persons in the use of language appropriate to the description of their manufactures, the right to the use of such language being common to all. This rule excluding descriptive terms has also been held to apply to trade-names. As to whether words employed fall within this prohibition, it is said that the true test is not whether they are exhaustively descriptive of the article designated, but whether in themselves, and as they are commonly used by those who understand their meaning, they are reasonably indicative and descriptive of the thing intended. If they are thus descriptive, and not arbitrary, they cannot be appropriated from general use and become the exclusive property of anyone." (52 Am. Jur. 542-543.) ". . . If the trade-name consists of a descriptive word, no monopoly of the right to use the same can be acquired. This is but a corollary of the proposition that a descriptive word cannot be the subject of a trade mark. G. & C. Merriam Co. vs. Saalfield (C. C. A.) 198 E. 369. Others may use the same or similar descriptive word in connection with their own wares, provided they take proper steps to prevent the public being deceived." . . . . (Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E. (2d) 598.) ". . . The so-called descriptive terms, which may be used to describe the product adequately, can not be monopolized by a single user and are available to all. It is only natural that the trade will prefer those marks which bear some reference to the article itself. Therefore, even those descriptive marks which are distinctive by themselves can be appropriated by others with impunity. A descriptive word may be admittedly distinctive, especially if the user is the first creator of the article. It will, however, be denied protection, not because it lacks distinctiveness, but rather because others are equally entitled to its use." . . . . (2 Callman. Unfair Competition and Trade Marks, pp. 869-870.)

The claim that a combination of word may be registered as a trade-name is no justification for not applying the rules or principles hereinabove mentioned. The use of a generic term in a trade-name is always conditional, i. e., subject to the limitation that the registrant does not acquire the exclusive right to the descriptive or generic term or word. ". . . A combination of marks or words may constitute a valid trademark Copyright 1994-2014

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or (in the case of words) a tradename even though some of the constituent portions thereof would not be subject, separately, to exclusive appropriation as such. Thus, although a word may be descriptive and not subject to exclusive use as a trademark, it may properly become the subject of a trademark by combination with another word or term which is nondescriptive, although no exclusive right to the descriptive word or term is created" . . . (52 Am. Jur. 553.)

The citation of appellant himself supports the decision thus: ". . . although perhaps not entitled to protection against infringement by the use of the descriptive matter by another." (Frost vs. Rindskopt, 42 Fed. 408.) It must also be noted that no claim is made in the application that the trade-name sought to be registered has acquired what is known as a secondary meaning within the provisions of paragraph (f) of section 4 of Republic Act No. 166. All that the applicant declares in his statement accompanying his application is that the said trade-name has been continuously used by it in business in the Philippines for about seven years, without allegation or proof that the trade-name has become distinctive of the applicant's business or services. Furthermore, the use of the term "nylon" in the tradename is both "descriptive" and "deceptively and misdescriptive" of the applicant-appellant's business, for apparently he does not use nylon in the manufacture of the shirts, pants and wears that he produces and sells. How can a secondary meaning be acquired if appellant's products are not made of nylon? Certainly no exclusive right can be acquired by deception or fraud. The procedural question arises from the fact that after the Director had ordered publication and notwithstanding dismissal of an opposition, the Director nevertheless conditionally denied the application after its publication and failed to give applicant opportunity for a hearing, as specifically required by section 7 of Republic Act No. 166. It is argued that after approval of the findings of the commissioner to whom the application is referred and giving of the order of publication, it becomes the ministerial duty of the Director to issue the corresponding certificate of registration and that his power is confined to this issuance alone. The answer to this argument is the fact that the law allows oppositions to be filed after publication, thus: "Sec. 8. Opposition. — Any person who believes that he would be damaged by the registration of a mark or trade-name may, upon payment of the required fee and within thirty days after the publication under the first paragraph of section seven hereof, file with the Director an opposition to the application. Such opposition shall be in writing and verified by the oppositor, or by any Copyright 1994-2014

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person on his behalf who knows the facts, and shall specify the grounds on which it is based and include a statement of the facts relied upon. Copies of certificates of registration of marks or trade-names registered in other countries or other supporting documents mentioned in the opposition shall be filed therewith, together with the translation thereof into English, if not in the English language. For good cause shown and upon payment of the required surcharge, the time for filing an opposition may be extended for an additional thirty days by the Director, who shall notify the applicant of such extension." (Republic Act No. 166.)

Of what use is the period given to oppositors to register their oppositions if such oppositions are not to be given consideration at all, because the Director has only the ministerial duty after publication to issue the certificate of registration? It will be noted that there are two steps in the proceedings for the approval of an application for registration; the first is that conducted in the Office of the Director and taking place prior to publication, and the second, that conducted after publication, in which the public is given the opportunity to contest the application. In the first, the application is referred to an examiner, who, after study and investigation makes a report and recommendation to the Director who, upon finding that applicant is entitled to registration, orders publication of the application. (Sec. 7, Rep. Act No. 166.) If he finds that applicant is not entitled to registration, he may then and there dismiss the application. In the second, opportunity is offered the public or any interested party to come in and object to the petition (Sec. 8, Id.), giving proofs and reasons for the objection, applicant being given opportunity also to submit proofs or arguments in support of the application. (Sec, 9, Id.) It is the decision of the Director, given after this hearing, or opportunity to every interested party to be heard, that finally terminates the proceedings and in which the registration is finally approved or disapproved. Thereafter, notice of the issuance of the certificate of registration is published. (Sec. 10, Id.) It is evident that the decision of the Director after the first step, ordering publication, can not have any finality. Of what use is the second step in the proceedings, if the Director is bound by his first decision, giving course to the publication? His first decision is merely provisional, in the sense that the application appears to be meritorious and is entitled to be given course leading to the more formal and important second step of hearing and trial, where the public and interested parties are allowed to take part. The argument that the Director failed to comply with paragraph 2 of section 7, Republic Act No. 166 cannot be raised in the case at bar, because the Director did not Copyright 1994-2014

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find that the applicant is not entitled to registration. He actually found that he is entitled to registration and that is why an order for the publication of the application was issued. How can the Director comply with the provisions of said paragraph 2 if he did not disapprove the applicant's petition for registration? We, therefore, find that the errors assigned in the appeal have not been committed by respondent Director of Patents. His decision is hereby affirmed, with costs against the applicant-appellant. Paras, C. J., Pablo, Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Concepcion and Reyes, J. B. L., JJ., concur.

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EN BANC [G.R. No. L-8072. October 31, 1956.] LIM HOA, petitioner, YV. DIRECTOR OF PATENTS, respondent. Perfecta E. de Vera for petitioner. Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo F. Torres and Solicitor Meliton G. Soliman for respondent. SYLLABUS 1. TRADEMARK; INFRINGEMENT OF, HOW DETERMINED — It has been consistently held that the question of infringement of a trademark is so to be determined by the test of dominancy. Similarity in size, form, and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. (Co Tiong Sa vs. Director of Patents, L-5372, May 24, 1954. 2. ID.; ID.; MARKS WHICH WOULD LIKELY CAUSE CONFUSION OR EVEN DECEPTION; CASE AT BAR. — The two roosters appearing on the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of different sexes, belong to the same family of the chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys an food seasoning product for the kitchen, the brand of "Manok" or "Marca Manok" would most likely be upper most in her mind and would influence her in selecting the product, regardless of whether the brand pictures a hen or a rooster or two rooster. To her, they are all manok. Therein lies the confusion, even deception.

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DECISION

MONTEMAYOR, J : p

On April 26, 1949, the petitioner, Lim Hoa, filed with the Patent Office an application for the registration of a trademark, consisting of a representation of two midget roosters in an attitude of combat with the word "Bantam" printed above them, he claiming that he had used said trademark on a food seasoning product since April 25 of that year. The application was published in the Official Gazette in its issue of February, 1953, released for circulation on April 18, of the same year. On April 30, 1953, the Agricom Development Co., Inc., a domestic corporation, opposed the application on several grounds, among others, that the trademark sought to be registered was confusingly similar to its register mark, consisting of a pictorial representation of a hen with the words "Hen Brand" and "Marca Manok", which mark or brand was also used on a food seasoning product, before the use of the trademark by the applicant. It is a fact that the family of C. Javier Advincula, since the year 1946, had adopted and used as a trademark of said food seasoning product manufactured by it, the pictorial representation of a hen. In 1947, the members of the Advincula family organized the Agricom Development Co., Inc., the oppositor in this case, and said corporation took over the manufacture of the same food product of the Advincula family, including the use of the brand of the pictorial representation of a hen but adding to it the word "Hen". In the year 1948, an addition was made to the brand with the words "Ve-Tsin, Hen Brand" and "Marca Manok," and since then, on its food seasoning product at different times, labels were used, in different colors but bearing the representation of a hen and the words just mentioned. So that the application to register applicant's brand, consisting of two roosters is an attitude of combat, with the word "Bantam" printed above them, came along after the use and registration of the mark or brand of the oppositor corporation and its predecessor, the Advincula family. After considering the application and the opposition thereto, and after comparing the two brands, the Director of Patents issued his order dated June 26, 1954, wherein he found and held that to allow the registration of the applicant's trademark would likely cause confusion or mistake or deceive purchasers, and he refused registration of said trademark, under Rule 178 of the Revised Rules of Copyright 1994-2014

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Practice in Trademark Cases, 1953. The petitioner is now appealing said order. After a careful examination of the facts above mentioned, and after comparing the two brands, we do not hesitate to say and to hold that there is such similarity between the two brands as to cause confusion in the mind of the public that buys the food seasoning product on the strength and on the indication of the trademark or brand identifying or distinguishing the same. In the case of Go Tiong Sa vs. Director of Patents, (95 Phil., 1), we had occasion to say the following: ". . . It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form, and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. (C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F. 489, 495, citing Eagle White Lead Co. v. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F 2d 588, 590, citing Procter and Gamble Co. vs. J. L. Prescot Co., 49 F 2d 959, 18 CCPA, Patents, 1433; Pepsodent Co. vs. Comfort Manufacturing Co., 83 F 2d 906; 23 CCPA, Patents, 124)"

The danger of confusion in trademarks and brands which are similar may not be so great in the case of commodities or articles of relatively great value, such as, radio and television sets, air conditioning units, machinery, etc., for the prospective buyer, generally the head of the family or a businessman, before making the purchase, reads the pamphlets and all literature available, describing the article he is planning to buy, and perhaps even makes comparisons with similar articles in the market. He is not likely to be deceived by similarity in the trademarks because he makes a more or less thorough study of the same and may even consult his friends about the relative merit and performance of the article or machinery, as compared to others also for sale. But in the sale of a food seasoning product, a kitchen article of everyday consumption, the circumstances are far different. Said product is generally purchased by cooks and household help, sometimes illiterate who are guided by pictorial representations and the sound of the word descriptive of said representation. The two roosters appearing in the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of different sexes, belong to the same family of chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys a food seasoning product for the kitchen the brand of Copyright 1994-2014

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"Manok" or "Marca Manok" would most likely be upper most in her mind and would influence her in selecting the product, regardless of whether the brand pictures a hen or a rooster or two roosters. To her, they are all manok. Therein lies the confusion, even deception. We do not see why applicant could not have stretched his imagination even a little and extended his choice to other members of the animal kingdom, as a brand to differentiate his product from similar products in the market. In a similar case decided by this Tribunal wherein, although one brand consisting of the representation of a rooster was already being used by one party, another party wanted to register a similar brand, consisting of two roosters on a similar product, namely, candy, this Court said: "Counsel for defendant insists that there is no real resemblance between a picture of one rooster and a picture of two roosters; that no person could or would be deceived by the use by the defendant of a trade-mark wholly distinct from that of the plaintiff; that the fact that the defendant used two roosters as its trademark clearly discloses its innocence of any intent to deceive, since a comparison of the trade-mark of the plaintiff with that of the defendant makes apparent at once that was not intended to be an imitation of the other. "We ask, however, why, with all the birds in the air, and all the fishes in the sea, and all the animals on the face of the earth to chose from, the defendant company selected two roosters as its trade- mark, although its directors, and managers must have been well aware of the long-continued use of a rooster by the plaintiff in connection with the sale and advertisement of his goods? "There is nothing in the picture of one or more roosters which in itself is descriptive of the goods sold by the plaintiff or by the defendant corporation, or suggestive of the quality of these goods. A cat, or dog, a carabao, a shark, or an eagle stamped upon the container in which candies are sold would serve as well as a rooster for purposes of identification as the product of defendant's factory. Why did defendant select two roosters as its trade-mark? We can not doubt that it was because the plaintiff's candies had acquired a certain reputation under the trade-mark of a rooster, and the defendant corporation hoped to profit unjustly by that reputation. Defendant knew that the use of a single rooster would be prohibited as a technical infringement of plaintiff's trade-mark, but it hoped that it could avoid that danger by the use of two roosters; and at the same time get such advantage as it must have believed it could secure from the use of a design on the containers of its goods, not absolutely identical with that used by the plaintiff, but so similar in the dominant idea as to confuse or mislead the purchasers. . . ." (Clarke vs. Manila Candy Co., 100 Phil. 36) Copyright 1994-2014

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In view of the foregoing, the order appealed from is hereby affirmed, with costs. We do not deem it necessary to discuss and rule upon the other questions raised in the appeal. Paras, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., and Felix, JJ., concur.

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EN BANC [G.R. No. L-19297. December 22, 1966.] MARVEX COMMERCIAL CO. INC., petitioner, YV PETRA HAWPIA & CO., and THE DIRECTOR OF PATENTS, respondents. Sta. Ana & Lasam for petitioner. A.S. Donato for respondent Petra Hawpia & Co. Solicitor General for respondent Director of Patents. SYLLABUS 1. TRADEMARKS AND TRADENAMES; BASIS OF RIGHT TO REGISTER; CASE AT BAR. — Under Sections 2 and 2-A of the Trade Mark Law, as amended, the right to register trademarks, tradenames and service marks by any person, corporation, partnership or association domiciled in the Philippines or in any foreign country, is based on ownership, and the burden is upon the applicant to prove such ownership (Operators, Inc. vs. Director of Patents, et al., G. R. No. L-17901, Oct. 29, 1965). 2. ID.; TRADEMARK; TRADENAMES; EVIDENCE OF OWNERSHIP NOT SUFFICIENT. — Where it appears that Exh. "5" the letter of assignment of all rights, interest and goodwill in the trademark "LIONPAS" was sent by a representative of the manufacturer thereof, and there appears no proof that as such representative, the former has been authorized by the latter to sell the trade mark in question and that letter of assignment has been signed only by someone whose position in the company's "Sundries Dept." is not described; and whose signature is not legible and that said letter of assignment is contradicted by Exh. "6", a joint sworn statement of the President of Osaka Boeki Kaisha, Ltd. and Asunaro Pharmaceuticals Industry Co., in the sense that Exh. "5" shows that "Osaka Boeki Kaisha Ltd. is a representative of Asunaro Pharmaceuticals Industry Co.." while Exh. "6" asserts that the former is not a representative of the latter but the owner of the trademark "LIONPAS"; and that said Exhs. 5 and 6 do not bear the acknowledgment contemplated by the Trademark Law, it cannot, therefore, be accorded the weight of Copyright 1994-2014

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an assignment of ownership thereof. Furthermore, the certification sheet which states that the signatures of the Presidents of the two Companies, "have been duly written by themselves is unmarked, unpaged, unsigned, undated and unsealed and," there is no evidence to show that it is the correct translation of the Japanese characters of another unmarked, and unpaged sheet. All these are insufficient to prove that the applicant is the owner of the trademark in question. 3. ID.; ID.; IMPORTER OR DISTRIBUTOR; RIGHT TO REGISTER UNDER ITS NAME. — Not being the owner of the trademark "LIONPAS" but being merely an importer and/or distributor of the said penetrative plaster, the applicant is not entitled under the law to register it in its name (Operators, Inc. vs. Director of Patents, supra). 4. ID.; DECISIONS OF DIRECTOR OF PATENTS REVIEWABLE BY SUPREME COURT. — Although the Director of Patents is the official vested by law with the power to administer the registration of trademarks and tradenames, his opinion on the matter of similarity or dissimilarity of trademarks and tradenames is not conclusive upon the Supreme Court, which may pass upon such determination. 5. ID.; SIMILARITY IN SOUNDS FATAL TO REGISTRATION; CASE AT BAR. — It is our considered view that the trade mark "SALONPAS" and "LIONPAS" are confusingly similar in sound. Both these words have the same suffix, "PAS", which is used to denote a plaster that adheres to the body with curative power; Two letters of "SALONPAS" are missing in "LIONPAS"; the first letter a and the letter s. Be that as it may, when the two words are pronounced, the sound effects are confusingly similar. And where goods are advertised over the radio, similarity in sound is of special significance (Co Tiong Sa vs. Director of Patents, 95 Phil., 1, citing Nims, The Law of Unfair Competition and Trademarks, 4th ed., Vol. 2, pp. 678-679). "The importance of this rule is emphasized by the increase of radio advertising in which we are deprived of the help of our eyes and must depend entirely on the ear" (Operators, Inc. vs. Director of Patents, supra). In the case at bar, "SALONPAS" and "LIONPAS", when spoken, sound very much alike. Similarity of sound is sufficient ground for this Court to rule that the two marks are confusingly similar when applied to merchandise of the same descriptive properties (See Celanese Corporation of America vs. E. I. Du Pont, 154 F. 2d. 146, 148). The registration of "LIONPAS" cannot therefore be given due course.

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DECISION

CASTRO, J : p

Petra Hawpia & Co., a partnership duly organized under the laws of the Philippines and doing business at 543 M. de Santos (Botica Divisoria), Manila (hereinafter referred to as the applicant), on October 14, 1958 filed a petition for the registration of the trademark "LIONPAS" used on medicated plaster, with the Philippine Patent Office, asserting its continuous use in the Philippines since June 9, 1958. 1(1) The Marvex Commercial Co., Inc., a corporation also duly organized under the laws of the Philippines (hereinafter referred to as the oppositor), on July 24, 1959 filed an opposition thereto, alleging that the registration of such trademark would violate its right to and interest in the trademark "SALONPAS" used on another medicated plaster, which is registered in its name under Certificate of Registration 5486, issued by the Director of Patents on September 29, 1956, and that both trademarks when used on medicated plaster would mislead the public as they are confusingly similar. After due hearing, the Director of Patents in his decision of August 18, 1961 dismissed the opposition and gave due course to the petition, stating in part that "confusion, mistake, or deception among the purchasers will not likely and reasonably occur" when both trademarks are applied to medicated plaster. The oppositor moved to have the decision reconsidered. This motion was denied in a resolution of November 27, 1961. The oppositor then interposed the present appeal. The issues stated by the Director of Patents in his decision are the same ones now tendered by the oppositor for resolution, namely, (1) Is the applicant the owner of the trademark "LIONPAS"?; (2) Should the application be rejected on the ground that the applicant made false representations in placing the phrase "Reg. Phil. Pat. Off." below the trademark "LIONPAS" on its cartons?; and (3) Is the trademark "LIONPAS" confusingly similar to the trade mark "SALONPAS"? We do not consider the second issue of any importance; we will thus proceed to resolve the first and third issues. Is the applicant the owner of the trademark "LIONPAS?" Copyright 1994-2014

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Under sections 2 and 2-A of the Trade Mark Law, as amended, the right to register trademarks, tradenames and service marks by any person, corporation, partnership or association domiciled in the Philippines or in any foreign country, is based on ownership, and the burden is upon the applicant to prove such ownership (Operators, Inc. vs. The Director of Patents, et al., L-17901, Oct. 29, 1965). The Director of Patents found, on the strength of exhibits 5 and 6 for the applicant, that the latter has "satisfactorily shown" its ownership of the trademark sought to be registered. Exhibit 5 is a letter dated June 20, 1958, sent by "OSAKA BOEKI KAISHA, LTD." to the applicant which tends to show that the former, for a $1 consideration, has assigned, ceded, and conveyed all its "rights, interests and goodwill in the tradename LIONPAS Medicated Plaster . . ." in favor of the latter. Exhibit 6 is a joint "SWORN STATEMENT" which appears to have been executed by the presidents of "OSAKA BOEKI KAISHA, LTD." and "ASUNARO PHARMACEUTICAL INDUSTRY CO"., and tends to confirm the contents of exhibit 5. A careful scrutiny of exh. 5 will reveal, however, that the sender of the letter, "OSAKA BOEKI KAISHA, LTD.", and which appears to be the seller, is merely a representative of the manufacturer "ASUNARO PHARMACEUTICAL INDUSTRY CO." There is no proof that as such representative, the former has been authorized by the latter to sell the trademark in question. Moreover, exh. 5 on its face appears to have been signed only by someone whose position in the company's "Sundries Dept." is not described; the signature is not legible. It is even contradicted by exh. 6. While exh. 5 shows that "OSAKA BOEKI KAISHA, LTD." is a representative of "ASUNARO PHARMACEUTICAL INDUSTRY CO."; exh. 6 asserts that the former is not a representative of the latter, but that it is the owner of the trademark "LIONPAS" (par. 2, exh. 6). At all events, neither averment can be accorded the weight of an assignment of ownership of the trademark in question under the Trade Mark Law. Exh. 5 is not acknowledged. Exh. 6 does not bear the acknowledgment contemplated by the aforesaid law particularly by the last paragraph of section 37 and paragraph 2 of section 31 of R. A. 166, as amended, which provide as follows: "The registration of a mark under the provisions of this section shall be independent of the registration in the country of origin and the duration, validity or transfer in the Philippines of such registration shall be governed by the provisions of this Act." (Sec. 37, last par.) (Emphasis ours)

"The assignment must be in writing, acknowledged before a notary public or other officer authorized to administer oaths or perform other notarial acts and certified Copyright 1994-2014

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under the hand and official seal of the notary or other officer." (Sec. 31, par. 2)In this case, although a sheet of paper is attached to exh. 6, on which is typewritten a certification that the signatures of the presidents of the two named companies (referring to the signatures in exh. 6) "have been duly written by themselves", this sheet is unmarked, unpaged, unsigned, undated and unsealed. We have thumbed the record in quest of any definitive evidence that it is a correct translation of the Japanese characters found on another unmarked and unpaged sheet, and have found none. It follows from the above disquisition that exhs. 5 and 6 are legally insufficient to prove that the applicant is the owner of the trademark in question. As a matter of fact, the other evidence on record conclusively belies the import of exh. 6. Thus exh. A states that the applicant is merely the "exclusive distributor" in the Philippines of the "LIONPAS" penetrative plaster; exh. A-1 describes the applicant as the "Philippine sole distributor" of "LIONPAS"; exh. B simply states that "LIONPAS" is manufactured exclusively for Petra Hawpia & Co. for distribution in the Philippines." Not being the owner of the trademark "LIONPAS" but being merely an importer and/or distributor of the said penetrative plaster, the applicant is not entitled under the law to register it in its name (Operators, Inc. vs. Director of Patents, supra). Upon the third issue, the applicant preliminarily asserts that there is no justification for this Court to disturb any finding made by the Director of Patents on appeal. This assertion is not tenable. Although the Director of Patents is the official vested by law with the power to administer the registration of trademarks and tradenames, his opinion on the matter of similarity or dissimilarity of trademarks and tradenames is not conclusive upon this Court which may pass upon such determination. The "SALONPAS" mark is not before this Court. Our meticulous examination of the entire record has failed to yield a sample of such mark. We have therefore proceeded to analyze the two marks, vis-a-vis each other, on the basis of what we can derive from the record for a comparative study. And our conclusion, in disagreement with that of the Director of Patents, is not based on a comparison of the appearance, form, style, shape, size or format of the trademarks, which we can not make because, as we have already observed, the "SALONPAS" mark is not before us, but on a comparison of the spelling, sound and pronunciation of the two words. It is our considered view that the trademarks "SALONPAS" and "LIONPAS" Copyright 1994-2014

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are confusingly similar in sound. Both these words have the same suffix, "PAS", which is used to denote a plaster that adheres to the body with curative powers. "PAS," being merely descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the subject of a trademark by combination with another word or phrase. Two letters of "SALONPAS" are missing in "LIONPAS": the first letter a and the letter s. Be that as it may, when the two words are pronounced, the sound effects are confusingly similar. And where goods are advertised over the radio, similarity in sound is of especial significance (Co Tiong Sa vs. Director of Patents, 95 Phil. I, citing Nims, The Law of Unfair Competition and Trademarks, 4th ed., Vol. 2, pp. 678-679). "The importance of this rule is emphasized by the increase of radio advertising in which we are deprived of the help of our eyes and must depend entirely on the ear" (Operators, Inc. vs. Director of Patents, supra). The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that "SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop"; "Jantzen" and "Jass-Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and Celborite"; "Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-Mark Law and Practice", pp. 419-421, cities, as coming within the purview of the idem sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-Up" and "Lemon-Up". In Co Tiong vs. Director of Patents, this Court unequivocally said that "Celdura" and "Cordura" are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark "Sapolin", as the sound of the two names is almost the same. In the case at bar, "SALONPAS" and "LIONPAS", when spoken, sound very much alike. Similarity of sound is sufficient ground for this Court to rule that the two marks are confusingly similar when applied to merchandise of the same descriptive properties (see Celanese Corporation of America vs. E. I. Du Pont, 154 F. 2d. 146, 148). The registration of "LIONPAS" cannot therefore be given due course. Copyright 1994-2014

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ACCORDINGLY, the decision of the respondent Director of Patents is set aside, and the petition below of the respondent Petra Hawpia & Co. is hereby dismissed, at the costs of the latter respondent. Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J. P., Zaldivar and Sanchez, JJ., concur. )RRWQRWHV 1.

Sec. 2 of the Trade Mark Law requires actual use in the Philippines of not less than two months before application may be filed.

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EN BANC [G.R. No. L-23023. August 31, 1968.] JOSE P. STA. ANA, petitioner, YV. FLORENTINO MALIWAT and TIBURCIO S. EVALLE, in his capacity as Director of Patents, respondents. Rodolfo A. Francisco for petitioner. Catalino S. Maravilla for respondent Florentino Maliwat. Solicitor General for respondent Tiburcio S. Evalle. SYLLABUS 1. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS; FINDINGS BY DIRECTOR OF PATENTS FINAL IF BASED ON FACTS STIPULATED IN THE COURSE OF TRIAL. — Admissions made by the parties in the pleadings, or in the course of trial or other proceedings do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistake (Rule 129, Sec. 2, Rules of Court). The findings of the Director that Maliwat was the prior adopter and user of the mark cannot be contradicted, since his findings were based on facts stipulated in the course of the trial in the interference proceedings. Since the stipulation of facts has not been shown to have been made through palpable mistake, it is vain for the petitioner to allege that the evidence for respondent Maliwat is false, fabricated, inconsistent, indefinite, contradictory, unclear, unconvincing and unsubstantial. 2. ID.; ID.; STENOGRAPHIC NOTES; STENOGRAPHERS PRESUMED TO HAVE PERFORMED THEIR DUTY REGULARLY. — Where there is no substantiation of the charge that the stipulation of facts of the transcript of stenographic notes taken on August 9, 1963 had been intercalated the presumption that the stenographer regularly performed her duty stands. The integrity of the record being intact, the petitioner is bound by it. We cannot overlook that even if his charges were true, it was plain and inexcusable negligence on his part not to discover earlier the defect he now complains of, if any, and in not taking steps to correct it in the Copyright 1994-2014

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Patent Office instead of here in the Supreme Court, which is both untimely and unhonorable. 3. COMMERCIAL LAW; TRADEMARKS AND PATENTS; REGISTRATION OF TRADEMARKS; APPLICANT FOR REGISTRATION OF TRADEMARK IS NOT BOUND BY DATE OF FIRST USE; CASE AT BAR. — An applicant for registration is not bound by the date of first use as stated by him in his application, but is entitled to carry back said stated date of first use to a prior date by proper evidence; but in order to show an earlier date of use, he is then under a heavy burden and his proof must be clear and convincing (Anchor Trading Co., Inc. vs. The Director of Patents, et al., L-8004, 30 May 1956). In the case at bar, the proof of date of first use (1953) earlier than that alleged in respondent Maliwat's application (1962), can be no less than clear and convincing because the fact was stipulated and no proof was needed. 4. ID.; ID.; EXTENT OF THE PROTECTION TO THE TRADEMARK OWNER. — Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field or is in any way connected with the activities of the infringer or when it forestalls the normal potential expansion of his business. 5. ID.; ID.; ID.; POSSESSION OF THE SAME DESCRIPTIVE PROPERTIES NOT REQUIRED; CASE AT BAR. — Sec. 4, Rep. Act No. 166 does not require that the articles of manufacture of the previous user and the late user of the mark should possess the same descriptive properties or should fall into the same categories as to bar the latter from registering his mark in the principal register (Chua Che vs. Phil. Patent Office, et al., L-18337, 30 Jan. 1965). Therefore, whether or not shirts and shoes have the same descriptive properties or whether or not it is the prevailing practice or the tendency of tailors and haberdashers to expand their business into shoe-making are not controlling. The meat of the matter is the likelihood of confusion, mistake or deception upon purchaser of the goods of the junior user of the mark and the goods manufactured by the previous user. Here, the resemblance or similarity of the mark "FLORMANN and the name FLORMEN and the likelihood of confusion, one to the other, is admitted; therefore, the prior adopter, respondent Maliwat, has the better right to the use of the mark. Copyright 1994-2014

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DECISION

REYES, J.B.L., J : p

Petition for review of the decision of the respondent Director of Patents in an interference proceeding 1(1) (Inter Partes Case No. 291) finding for the senior party applicant, Florentino Maliwat, the herein private respondent, and against the junior party applicant 2(2) , Jose P. Sta. Ana, the herein petitioner. On 21 June 1962, Florentino Maliwat filed with the Patent Office an application for registration of the trademark FLORMANN, which is used on shirts, pants, jackets and shoes for ladies, men, and children, claiming first use in commerce of the said mark on 15 January 1962. The claim of first use was subsequently amended to 6 July 1955. On 18 September 1962, Jose P. Sta. Ana filed an application for the registration of the trade-name FLORMEN SHOE MANUFACTURERS (SHOE 3(3) , which is used in the business of MANUFACTURERS disclaimed) manufacturing ladies' and children's shoes. His claim of first use in commerce of the said tradename is 8 April 1959. In view of the admittedly confusing similarity between the trade mark FLORMANN and the tradename FLORMEN, the Director of Patents decreed an interference. After trial, the respondent Director gave due course to Maliwat's application and denied that of Sta. Ana. The latter, not satisfied with the decision, appealed to this Court. The petitioner assigned the following errors: "I. The Director of Patents erred in not finding that respondent (senior party-applicant) failed to establish by clear and convincing evidence earlier date of use of his mark FLORMANN than that alleged in his application for registration, hence, respondent is not entitled to carry back the date of first use to a prior date. "II. The Director erred in holding that respondent is the prior adopter and user of his mark and in concluding that this is strengthened with Copyright 1994-2014

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documentary evidence that respondent has been using his mark since 1953 as tailor and haberdasher. "III. The Director of Patents erred in not finding false and fabricated respondent's testimonial and documentary evidence and Director should have applied the rule 'Falsus in uno, falsus in omnibus' and should have disregarded them. "IV. The Director of Patents erred in declaring that Maliwat has the prior right to the use of his trademark on shoes and such right may be carried back to the year 1953 when respondent started his tailoring and haberdashery business, and in holding that the manufacture of shoes is within the scope of natural expansion of the business of a tailor and haberdasher. "V. The Director of Patents erred in failing to apply the stricture that parties should confine use of their respective marks to their corresponding fields of business, and should have allowed the concurrent use of trade-name FLORMEN SHOE MANUFACTURERS and the trademark FLORMANN provided it is not used on shoes."

The findings of the Director that Maliwat was the prior adopter and user of the mark cannot be contradicted, since his findings were based on facts stipulated in the course of the trial in the interference proceedings. The recorded stipulation is as follows: "ATTY. FRANCISCO: Your honor please, with the mutual understanding of the counsel for the Junior Party and the counsel for the Senior Party in their desire to shorten the proceedings of this case, especially on matters that are admitted and not controverted by both parties, they have agreed and admitted that Mr. Jose P. Sta. Ana, the Junior Party Applicant in this case, is engaged solely in the manufacture of shoes under the firm name FLORMEN SHOE MANUFACTURERS since April 1959; that the name FLORMEN SHOE MANUFACTURERS is registered with the Bureau of Commerce on April 8, 1959, as shown by Exhibits 'A' and 'A-2'. That Mr. Florentino Maliwat has been engaged in the manufacture and sale of men's wear, shirts, polo shirts, and pants, since 1953, using FLORMANN as its trademark. That Mr. Florentino Maliwat began using the trademark FLORMANN on shoes on January 1962 and the firm name FLORMANN SHOES under which these shoes with the trademark FLORMANN were manufactured and sold was first used on January 1962, having also been registered with the Bureau of Commerce on January 1962 and with other departments of the government, like the Bureau of Labor, the Social Security System and the Workmen's Compensation in 1962. Copyright 1994-2014

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ATTY. MARAVILLA: On behalf of the Senior Party Applicant, represented by this humble representation, I respectfully concur and admit all those stipulations above-mentioned. HEARING OFFICER: The court reserves the resolution on those stipulations. We can proceed now with the redirect examination." (T.s.n., 9 August 1963, pp. 33-34).

And the Rules of Court provide: "SEC. 2. Judicial Admissions. — Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings do not require proof and can not be contradicted unless previously shown to have been made through palpable mistake." (Rule 129, Revised Rules of Court)

Since the aforequoted stipulation of facts has not been shown to have been made through palpable mistake, it is vain for the petitioner to allege that the evidence for respondent Maliwat is false, fabricated, inconsistent, indefinite, contradictory, unclear, unconvincing, and unsubstantial. The rule on judicial admissions was not found or provided for in the old Rules but can be culled from rulings laid down by this Court previous to its revision (Irlanda v. Pitargue, 22 Phil. 383; 5 Moran 57-59, 1963 Ed.). It was the law, then and now, being an application of the law on estoppel. To be true, petitioner Sta. Ana, through counsel, filed with this Court, on 24 December 1964, a motion entitled "MOTION TO ORDER STENOGRAPHER TO PRODUCE STENOGRAPHIC NOTES AND TO CORRECT TRANSCRIPT OF STENOGRAPHIC NOTES; TO ALLOW PETITIONER TO WITHDRAW FROM STIPULATION OF FACTS AND BE ALLOWED TO PRESENT ADDITIONAL EVIDENCE; AND TO SUSPEND PERIOD FOR FILING PETITIONER'S BRIEF." The reason given was that "counsel for Mr. Jose P. Sta. Ana does not recall making any stipulation or agreement of facts with the counsel of Mr. Florentino Maliwat on 9 August 1963". Opposition thereto was filed by Maliwat, asserting that the stenographer took down notes on those things which were stated and uttered by the parties; the movant should have moved for reconsideration in the Patent Office, instead of here in the Supreme Court, which is both untimely and unhonorable. Upon requirement by this Court, stenographer Cleofe Rosales commented on petitioner's motion that what she had taken down were actually uttered by counsel for Sta. Ana, no more, no less; that it was practically and highly impossible for her to Copyright 1994-2014

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have intercalated into the records the questioned stipulation of facts because of the length of counsel's manifestations and the different subject matters of his statements, aside from the concurrence of Maliwat's counsel and the reservation on the resolution made by the hearing officer; and that despite her length of service, since 1958, as stenographic reporter, there had been no complaint against her, except this one. Counsel for Sta. Ana replied to the foregoing comments, alleging, among others, that after his receipt of the decision, after 5 May 1964, he bought the transcript and requested the stenographer to verify the contents of pages 33 and 34 of her transcript but, despite several requests, and for a period of seven (7) months, for her to produce the stenographic notes, she has failed to produce said notes. On 2 April 1965, stenographer Rosales sent to the clerk of this Court the transcript of stenographic notes. This Court, on 2 February 1965, denied, for being late, the motion to present additional testimonial and documentary evidence, and, on 8 April 1965, deferred action on the objection to a portion of the transcript until after hearing. We find no substantiation of the charge that the stipulation of facts appearing on pages 33 to 34 of the transcript of stenographic notes taken on 9 August 1963 had been intercalated; hence, the presumption that the stenographer regularly performed her duty stands. The integrity of the record being intact, the petitioner is bound by it. We can not overlook that even if his charges were true, it was plain and inexcusable negligence on his part not to discover earlier the defect he now complains of, if any, and in not taking steps to correct it before the records were elevated to this Court. An applicant for registration is not bound by the date of first use as stated by him in his application, but is entitled to carry back said stated date of first use to a prior date by proper evidence; but in order to show an earlier date of use, he is then under a heavy burden, and his proof must be clear and convincing (Anchor Trading Co., Inc. vs. The Director of Patents, et. al., L-8004, 30 May 1956; Chung Te vs. Ng Kian Ciab, et al., L-23791, 23 November 1966). In the case at bar, the proof of date of first use (1953), earlier than that alleged in respondent Maliwat's application (1962), can be no less than clear and convincing because the fact was stipulated and no proof was needed. Petitioner would confine the respondent to the use of the mark FLORMANN to tailoring and haberdashery only, but not on shoes, on the ground that petitioner had used the name FLORMEN on shoes since 1959, while the respondent used his mark Copyright 1994-2014

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on shoes only in 1962; but the Director ruled: ". . . I believe that it is now the common practice among the local tailors and haberdashers to branch out into articles of manufacture which have, one way or another, some direct relationship with or appurtenance to garments or attire to complete one's wardrobe such as belts, shoes, handkerchiefs, and the like . . . It goes without saying that shoes on one hand and shirts, pants and jackets on the other, have the same descriptive properties for purposes of our Trademark Law."

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 52 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR., 77, 84; 52 Am. Jur. 576, 577). It is on this basis that the respondent Director of Patents adverted to the practice "among local tailors and haberdashers to branch out into articles of manufacture which have some direct relationship" . . ., "to garments or attire to complete one's wardrobe". Mere dissimilarity of goods should not preclude relief where the junior user's goods are not too different or remote from any that the owner would be likely to make or sell: and in the present case, wearing apparel is not so far removed from shoes as to preclude relief, any more than the pancake flour is from syrup or sugar cream (Aunt Jemima Mills Co. vs. Rigney & Co. LRA 1918C 1039), or baking powder from baking soda (Layton Pure Food Co. vs. Church & Co., 182 Fed. 35), or cosmetics and toilet goods from ladies' wearing apparel and costume jewelry (Lady Esther Ltd. vs. Lady Esther Corset Shoppe, 148 ALR 6). More specifically, manufacturers of men's clothing were declared entitled to protection against the use of their trademark in the sale of hats and caps [Rosenberg Bros. vs. Elliot, 7 Fed. (2d) 962] and of ladies shoes (Forsythe & Co. vs. Forsythe Shoe Corp., 254 NYS 584). In all these cases, the courts declared the owner of a trade mark from the first named goods entitled to exclude use of its trademark on the related class of goods above-referred to. It may be that previously the respondent drew a closer distinction among kinds of goods to which the use of similar marks could be applied; but it can not be said that the present ruling under appeal is so devoid of basis in law as to amount to grave abuse of discretion warranting reversal. Copyright 1994-2014

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Republic Act No. 166, as amended, provides: "SEC. 4 . . . The owner of a trade-mark, trade-name or service- mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: "xxx

xxx

xxx

"(d) Consists of or comprises a mark or trade-name which resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; "xxx

xxx

xxx

Note that the provision does not require that the articles of manufacture of the previous user and the late user of the mark should possess the same descriptive properties or should fall into the same categories as to bar the latter from registering his mark in the principal register (Chua Che vs. Phil. Patent Office, et al., L-18337, 30 Jan. 1965 4(4) , citing Application of Sylvan Sweets Co., 205 F. 2nd, 207). 5(5) Therefore, whether or not shirts and shoes have the same descriptive properties, or whether or not it is the prevailing practice or the tendency of tailors and haberdashers to expand their business into shoemaking, are not controlling. The meat of the matter is the likelihood of confusion, mistake or deception upon purchasers of the goods of the junior user of the mark and the goods manufactured by the previous user. Here, the resemblance or similarity of the mark FLORMANN and the name FLORMEN and the likelihood of confusion, one to the other, is admitted; therefore, the prior adopter, respondent Maliwat, has the better right to the use of the mark. FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs against the petitioner. Concepcion, C. J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. )RRWQRWHV 1.

"An interference is a proceeding instituted for the purpose of determining the question of priority of adoption and use of a trade- mark, trade-name, or service-mark between two or more parties claiming ownership of the same or substantially similar

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2.

3.

4. 5.

trade-mark, trade-name or service-mark." (Sec. 10-A, Republic Act No. 166 as amended) "The party whose application or registration involved in the interference has the latest filing date is the junior party . . ." (Rule 184, Rev. Rules of Practice in the Philippines Patent Office) "Any junior party in an interference proceeding, . . , shall be deemed to be in the position of plaintiff, and the other parties to such proceedings, to the position of defendants, with respect thereto . . ." (Rule 167, Ibid) "At any time, upon application of the registrant and payment of the required fee, the Director may permit any registration to be surrendered, cancelled, or for good cause shown to be amended, and he may permit any registered mark or tradename to be disclaimed in whole or in part: . . ." (Sec. 14, Republic Act No. 166, as amended) between toiletries and laundry soap. between candies and cigarettes.

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EN BANC [G.R. No. L-28744. April 29, 1971.] ACOJE MINING CO., INC., petitioner-applicant, DIRECTOR OF PATENTS, respondent.

YV

THE

Manuel M. Antonio & Roman G. Pacia for petitioner. Solicitor General Antonio P. Barredo, Assistant Solicitor General Frine' C. Zaballero, Solicitor Antonio M. Martinez and Attorney Amado L. Marquez for respondent.

DECISION

FERNANDO, J : p

The issue before us is simple and uncomplicated. May petitioner Acoje Mining Company register for the purpose of advertising its product, soy sauce, the trademark LOTUS, there being already in existence one such registered in favor of the Philippine Refining Company for its product, edible oil, it being further shown that the trademark applied for is in smaller type, colored differently, set on a background which is dissimilar as to yield a distinct appearance? The answer of the Director of Patents was in the negative. Hence this appeal which we sustain in the light of the controlling norm as set forth in the American Wire & Cable Co. case. 1(1) The facts as set forth in the appealed decision follow: "On September 14, 1965, Acoje Mining Co., Inc. a domestic corporation, filed an application for registration of the trademark LOTUS, used on Soy Sauce, Class 47. Use in commerce in the Philippines since June 1, 1965 is asserted. The Chief Trademark Examiner finally rejected the application by reason of confusing similarity with the trademark LOTUS registered in this Office under Certificate of Registration No. 12476 issued in favor of Philippine Refining Co., Inc., another domestic corporation. The cited mark is being used on edible oil, Class 47." 2(2) The matter was then elevated to respondent Director of Patents who, on January 31, 1968, upheld the view of the Chief Trademark Examiner and rejected the Copyright 1994-2014

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application of petitioner on the ground that while there is a difference between soy sauce and edible oil and there were dissimilarities in the trademarks due to type of letters used as well as in the size, color and design employed, still the close relationship of the products, soy sauce and edible oil, is such "that purchasers would be misled into believing that they have a common source." 3(3) This petition for its review was filed with this Court on March 6, 1968. After the submission of the briefs on behalf of petitioner and respondent, the case was deemed submitted. As set forth at the outset the decision of respondent Director of Patents is reversed. The decisive test as to whether an application for a trademark should be affirmatively acted upon or not is clearly set forth in the decision, already referred to, promulgated barely a year ago. In the language of Justice J.B.L. Reyes, who spoke for the Court in American Wire & Cable Co. v. Director of Patents: 4(4) "It is clear from the above-quoted provision that the determinative factor in a contest involving registration of trade mark is not whether the challenging mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. In short, to constitute an infringement of an existing trade-mark patent and warrant a denial of an application for registration, the law does not require that, the competing trademarks must be so identical as to produce actual error or mistake, it would be sufficient, for purposes of the law, that the similarity between the two labels is such that there is a possibility or likelihood of the purchaser of the older brand mistaking the newer brand for it." 5(5) Can it be said then that petitioner's application would be likely to cause confusion or mistake on the part of the buying public? The answer should be in the negative. It does not defy common sense to assert that a purchaser would be cognizant of the product he is buying. There is quite a difference between soy sauce and edible oil. If one is in the market for the former, he is not likely to purchase the latter just because of the trademark. LOTUS. Even on the rare occasions that a mistake does occur, it can easily be rectified, Moreover, there is no denying that the possibility of confusion is remote considering the difference in the type used, the coloring, the petitioner's trademark being in yellow and red while that of the Philippine Refining Company being in green and yellow, and the much smaller size of petitioner's trademark. When regard is had for the principle that the two trademarks in their entirety as they appear in their respective labels should be considered in relation to the goods advertised before registration could be denied, the conclusion is inescapable Copyright 1994-2014

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that respondent Director ought to have reached a different conclusion. Petitioner has successfully made out a case for registration. 6(6) WHEREFORE, the decision of respondent Director of Patents of January 31, 1968 is reversed and petitioner's application for registration of its trademark LOTUS granted. Without costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Villamor and Makasiar, JJ., concur. Barredo, J., did not take part. )RRWQRWHV 1. 2. 3. 4. 5. 6.

L-26557, Feb. 18, 1970, 31 SCRA ,544. Appendix to the Brief for the Petitioner, pp. I and II. Ibid, p. IV. L-26557, Feb. 18, 1970, 31 SCRA 544. Ibid, pp. 547-548. Cf. Bristol Myers Co. v. Director of Patents, L-21587, May 19, 1966, 17 SCRA 128.

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FIRST DIVISION [G.R. No. L-29971. August 31, 1982.] ESSO STANDARD EASTERN, INC., petitioner, YV THE HONORABLE COURT OF APPEALS **(1) and UNITED CIGARETTE CORPORATION, respondents. Gonzalo W. Gonzales and Associates for petitioner. The Solicitor General for respondents.

SYNOPSIS Petitioner filed a case against private respondent in the Court of First Instance of Manila for trademark infringement alleging that after the latter had acquired in November, 1963 the business, factory and patent rights of La Oriental Tobacco Corporation, it began to use the trademark ESSO on its cigarettes, the same trademark used by petitioner in its quality petroleum products which was likely to cause confusion or deception on the part of the purchasing public as to its origin or source, to the detriment of its own products. In its answer, private respondent admitted the use of the trademark ESSO on its own product of cigarettes but claimed that these were not identical to those produced and sold by the petitioner. The trial court found private respondent guilty of infringement of trademark. On appeal, the judgment was reversed and the complaint was dismissed. Hence, this petition. On certiorari, the Supreme Court affirmed the appellate court's decision ruling that the goods are obviously different from each other as to make it unlikely that purchasers would think that petitioner is the manufacturer of respondent's goods. The mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different kind. Judgment affirmed. Copyright 1994-2014

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SYLLABUS 1. COMMERCIAL LAW; PATENTS; INFRINGEMENT OF TRADEMARKS; MEANING OF. — The law defines infringement as the use without consent of the trademark owner of any "reproduction, counterfeit, copy or colorable imitation of any registered mark or trademark in connection with the sale, offering for sale, or advertising of any goods, business, or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, package, wrappers, receptacles, or advertisement intended to be used upon or in connection with such goods, business or services." Implicit in this definition is the concept that the goods must be so related that there is a likelihood either of confusion of goods or business (Sec. 22 Trademark Law; 2 Callman, Unfair Competition and Trademarks, p. 1324). 2. ID.; ID.; ID.; NOT A CASE OF. — In the situation before Us, the goods are obviously different from each other with absolutely no iota of similitude. They are so foreign to each other as to make it unlikely that the purchasers would think that petitioner is the manufacturer of respondent's goods. The mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different kind, (American Foundries vs. Robertson, 269 US 372, 381.)

DECISION

TEEHANKEE, J : p

The Court affirms on the basis of controlling doctrine the appealed decision of the Court of Appeals reversing that of the Court of First Instance of Manila and dismissing the complaint filed by herein petitioner against private respondent for trade infringement for using petitioner's trademark ESSO, since it clearly appears that the goods on which the trademark ESSO is used by respondent is non-competing and Copyright 1994-2014

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entirely unrelated to the products of petitioner so that there is no likelihood of confusion or deception on the part of the purchasing public as to the origin or source of the goods. cdasoa

Petitioner Esso Standard Eastern, Inc., 1(2) then a foreign corporation duly licensed to do business in the Philippines, is engaged in the sale of petroleum products which are identified with its trademark ESSO (which as successor of the defunct Standard Vacuum Oil Co. it registered as a business name with the Bureaus of Commerce and Internal Revenue in April and May, 1962). Private respondent in turn is a domestic corporation then engaged in the manufacture and sale of cigarettes, after it acquired in November, 1963 the business, factory and patent rights of its predecessor La Oriental Tobacco Corporation, one of the rights thus acquired having been the use of the trademark ESSO on its cigarettes, for which a permit had been duly granted by the Bureau of Internal Revenue. Barely had respondent as such successor started manufacturing cigarettes with the trademark ESSO, when petitioner commenced a case for trademark infringement in the Court of First Instance of Manila. The complaint alleged that the petitioner had been for many years engaged in the sale of petroleum products and its trademark ESSO had acquired a considerable goodwill to such an extent that the buying public had always taken the trademark ESSO as equivalent to high quality petroleum products. Petitioner asserted that the continued use by private respondent of the same trademark ESSO on its cigarettes was being carried out for the purpose of deceiving the public as to its quality and origin to the detriment and disadvantage of its own products. In its answer, respondent admitted that it used the trademark ESSO on its own product of cigarettes, which was not identical to those produced and sold by petitioner and therefore did not in any way infringe on or imitate petitioner's trademark. Respondent contended that in order that there may be trademark infringement, it is indispensable that the mark must be used by one person in connection or competition with goods of the same kind as the complainant's. The trial court, relying on the old cases of Ang vs. Teodoro 2(3) and Arce & Sons, Inc. vs. Selecta Biscuit Company, 3(4) referring to related products, decided in favor of petitioner and ruled that respondent was guilty of infringement of trademark. On appeal, respondent Court of Appeals found that there was no trademark infringement and dismissed the complaint. Reconsideration of the decision having been denied, petitioner appealed to this Court by way of certiorari to reverse the Copyright 1994-2014

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decision of the Court of Appeals and to reinstate the decision of the Court of First Instance of Manila. The Court finds no ground for granting the petition. The law defines infringement as the use without consent of the trademark owner of any "reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services." 4(5) Implicit in this definition is the concept that the goods must be so related that there is a likelihood either of confusion of goods or business. 5(6) But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. 6(7) It is unquestionably true that, as stated in Coburn vs. Puritan Mills, Inc.: 7(8) "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case." It is undisputed that the goods on which petitioner uses the trademark ESSO, petroleum products, and the product of respondent, cigarettes, are non-competing. But as to whether trademark infringement exists depends for the most part upon whether or not the goods are so related that the public may be, or is actually, deceived and misled that they came from the same maker or manufacturer. For non-competing goods may be those which, though they are not in actual competition, are so related to each other that it might reasonably be assumed that they originate from one manufacturer. Non-competing goods may also be those which, being entirely unrelated, could not reasonably be assumed to have a common source. In the former case of related goods, confusion of business could arise out of the use of similar marks; in the latter case of non-related goods, it could not. 8(9) The vast majority of courts today follow the modern theory or concept of "related goods" 9(10) which the Court has likewise adopted and uniformly recognized and applied. 10(11) Goods are related when they belong to the same class or have the same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture or quality. They may also be related because they serve the same purpose or are sold in grocery stores. 11(12) Thus, biscuits were held related to milk because they are both food products. Copyright 1994-2014

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12(13) Soap and perfume, lipstick and nail polish are similarly related because they are common household items nowadays. 13(14) The trademark "Ang Tibay" for shoes and

slippers was disallowed to be used for shirts and pants because they belong to the same general class of goods. 14(15) Soap and pomade, although non-competitive, were held to be similar or to belong to the same class, since both are toilet articles. 15(16) But no confusion or deception can possibly result or arise when the name "Wellington" which is the trademark for shirts, pants, drawers and other articles of wear for men, women and children is used as a name of a department store. 16(17) Thus, in Acoje Mining Co., Inc. vs. Director of Patents, 17(18) the Court, through now Chief Justice Fernando, reversed the patent director's decision on the question of "May petitioner Acoje Mining Company register for the purpose of advertising its product, soy sauce, the trademark LOTUS, there being already in existence one such registered in favor of the Philippine Refining Company for its product, edible oil, it being further shown that the trademark applied for is in smaller type, colored differently, set on a background which is dissimilar as to yield a distinct appearance?" and ordered the granting of petitioner's application for registration ruling that "there is quite a difference between soy sauce and edible oil. If one is in the market for the former, he is not likely to purchase the latter just because of the trademark "LOTUS" and "when regard is had for the principle that the two trademarks in their entirety as they appear in their respective labels should be considered in relation to the goods advertised before registration could be denied, the conclusion is inescapable that respondent Director ought to have reached a different conclusion." By the same token, in the recent case of Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 18(19) the Court upheld the patent director's registration of the same trademark CAMIA for herein respondent's product of ham notwithstanding is already being used by herein petitioner for a wide range of products: lard, butter, cooking oil, abrasive detergents, polishing materials and soap of all kinds. The Court, after noting that the same CAMIA trademark had been registered by two other companies, Everbright Development Company and F. E. Zuellig, Inc. for their respective products of thread and yarn (for the former) and textiles, embroideries and laces (for the latter) ruled that "while ham and some of the products of petitioner are classified under Class 47 (Foods and Ingredients of Food), this alone cannot serve as the decisive factor in the resolution of whether or not they are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics." The Court, therefore, concluded that "In fine, We hold that the businesses of the parties are noncompetitive and their products so unrelated that the use of identical trademarks is Copyright 1994-2014

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not likely to give rise to confusion, much less cause damage to petitioner." In the situation before us, the goods are obviously different from each other — with "absolutely no iota of similitude" 19(20) as stressed in respondent court's judgment. They are so foreign to each other as to make it unlikely that purchasers would think that petitioner is the manufacturer of respondent's goods. The mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different kind. 20(21) Petitioner uses the trademark ESSO and holds certificate of registration of the trademark for petroleum products, including aviation gasoline, grease, cigarette lighter fluid and other various products such as plastics, chemicals, synthetics, gasoline solvents, kerosene, automotive and industrial fuel, bunker fuel, lubricating oil, fertilizers, gas, alcohol, insecticides and the "ESSO Gasul" burner, while respondent's business is solely for the manufacture and sale of the unrelated product of cigarettes. The public knows too well that petitioner deals solely with petroleum products that there is no possibility that cigarettes with ESSO brand will be associated with whatever good name petitioner's ESSO trademark may have generated. Although petitioner's products are numerous, they are of the same class or line of merchandise which are noncompeting with respondent's product of cigarettes, which as pointed out in the appealed judgment is beyond petitioner's "zone of potential or natural and logical expansion." 21(22) When a trademark is used by a party for a product in which the other party does not deal, the use of the same trademark on the latter's product cannot be validly objected to. 22(23) Another factor that shows that the goods involved are non-competitive and non-related is the appellate court's finding that they flow through different channels of trade, thus: "The products of each party move along and are disposed through different channels of distribution. The (petitioner's) products are distributed principally through gasoline service and lubrication stations, automotive shops and hardware stores. On the other hand, the (respondent's) cigarettes are sold in sari-sari stores, grocery stores, and other small distributor outlets. (Respondent's) cigarettes are even peddled in the streets while (petitioner's) 'gasul' burners are not. Finally, there is a marked distinction between oil and tobacco, as well as between petroleum and cigarettes. Evidently, in kind and nature, the products of (respondent) and of (petitioner) are poles apart." 23(24) Respondent court correctly ruled that considering the general appearances of Copyright 1994-2014

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each mark as a whole, the possibility of any confusion is unlikely. A comparison of the labels of the samples of the goods submitted by the parties shows a great many differences on the trademarks used. As pointed out by respondent court in its appealed decision, "(A) witness for the plaintiff, Mr. Buhay, admitted that the color of the 'ESSO' used by the plaintiff for the oval design where the blue word ESSO contained is the distinct and unique kind of blue. In his answer to the trial court's question, Mr. Buhay informed the court that the plaintiff never used its trademarks on any product where the combination of colors is similar to the label of the Esso cigarettes," and "Another witness for the plaintiff, Mr. Tengco, testified that generally, the plaintiff's trademark comes all in either red, white, blue or any combination of the three colors. It is to be pointed out that not even a shade of these colors appears on the trademark of the appellant's cigarette. The only color that the appellant uses in its trademark is green." 24(25) Even the lower court, which ruled initially for petitioner, found that a "noticeable difference between the brand ESSO being used by the defendants and the trademark ESSO of the plaintiff is that the former has a rectangular background, while in that of the plaintiff the word ESSO is enclosed in an oval background." cdtai

In point of fact and time, the Court's dismissal of the petition at bar was presaged by its Resolution of May 21, 1979 dismissing by minute resolution the petition for review for lack of merit in the identical case of Shell Company of the Philippines, Ltd. vs. Court of Appeals, 25(26) wherein the Court thereby affirmed the patent office's registration of the trademark SHELL as used in the cigarettes manufactured by therein respondent Fortune Tobacco Corporation notwithstanding the therein petitioner Shell Company's opposition thereto as the prior registrant of the same trademark for its gasoline and other petroleum trademarks, on the strength of the controlling authority of Acoje Mining Co. vs. Director of Patents, supra, and the same rationale that "(I)n the Philippines, where buyers of appellee's (Fortune Corp.'s) cigarettes, which are low cost articles, can be more numerous compared to buyers of the higher priced petroleum and chemical products of appellant (Shell Co.) and where appellant (Shell) is known to be in the business of selling petroleum and petroleum-based chemical products, and no others, it is difficult to conceive of confusion in the minds of the buying public in the sense it can be thought that appellant (Shell) is the manufacturer of appellee's (Fortune's) cigarettes, or that appellee (Fortune) is the manufacturer or processor of appellant's (Shell's) petroleum and chemical products." 26(27) ACCORDINGLY, the petition is dismissed and the decision of respondent Copyright 1994-2014

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Court of Appeals is hereby affirmed. Melencio-Herrera Plana, Relova and Gutierrez, Jr., JJ., concur. Makasiar, J., is on official leave. Vasquez, J., took no part. )RRWQRWHV ** 1.

2. 3. 4. 5. 6. 7. 8. 9. 10.

11. 12. 13. 14. 15. 16. 17. 18.

First Division then composed of Villamor, Presiding Justice, ponente, Concepcion, Jr. and Mojica, JJ. On December 31, 1969, by virtue of an "Agreement of Exchange and Transfer," the businesses, properties and other assets in the Philippines of Esso Standard Eastern, Inc. were transferred to Esso Philippines, Inc. Its petition to be substituted by Esso Philippines, Inc. as party petitioner was denied in a resolution of this Court dated April 7, 1970, pursuant to the then Solicitor General's opposition "because of the possible legal consequences that may arise under the provisions of the Laurel-Langley Act and other related laws." 74 Phil. 50. 1 SCRA 253. Sec. 22, Trademark Law. 2 Callman, Unfair Competition and Trademarks, p. 1324. Ibid, p. 1123. 108 F. 2d 377, 378. 2 Callman, Unfair Competition and Trademarks, p. 1336. 2 McCarthy, Trademarks and Unfair Competition, p. 119. Vide: Arce vs. Selecta, 1 SCRA 253 (1961); Chua Che vs. Phil. Patents Office, 13 SCRA 67 (1965); Ang vs. Teodoro, 74 Phil. 50; Khe vs. Lever Bros. Co., 49 O.G. 3891 (1941); Ang Si Heng & Dee vs. Wellington Dept. Store, 92 Phil. 448; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480 (1971). 2 Callman, Unfair Competition & Trade Marks, p. 1257. Arce vs. Selecta, supra. Chua Che vs. Phils. Patent Office, supra. Ang vs. Teodoro, supra. Khe vs. Lever Bros. Co., supra. Ang Si Heng & Dee vs. Wellington Department Store, supra. 38 SCRA 480 (1971). G.R. No. L-26676, July 30, 1982 (2nd Division); see also Leviton Industries vs. Salvador, G.R. L-40163, June 19, 1982.

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19. 20. 21. 22. 23. 24. 25. 26.

Record, p. 128. American Foundries vs. Robertson, 269 US 372, 381. Record at page 138. George W. Luft Co., Inc. vs. Ngo Guan, 18 SCRA 944 (1966). Record at pages 135-136. Record at pages 137-138. G.R. No. L-49145, petition for review denied May 21, 1979 and judgment entered June 28, 1979. Idem, separate opinion of Court of Appeals Justice Corazon Juliano Agrava; Record at page 77.

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EN BANC [G.R. No. L-19906. April 30, 1969.] STERLING PRODUCTS INTERNATIONAL, INCORPORATED, plaintiff-appellant, YV FARBENFABRIKEN BAYER AKTIENGESELLSCHAFT and ALLIED MANUFACTURING AND TRADING CO., INC., defendants-appellants.

SYLLABUS 1. COMMERCIAL LAW; TRADEMARKS AND TRADENAMES; ACTUAL USE PREREQUISITE TO ACQUISITION OF RIGHT. — A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. 2. ID.; ID.; ADOPTION ALONE WOULD NOT GIVE EXCLUSIVE RIGHT; VALUE OF REGISTRATION. — Adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. 3. ID.; ID.; CERTIFICATE OF REGISTRATION SHOULD STATE PARTICULAR GOODS FOR WHICH IT IS REGISTERED AND DATE OF USE. — Section 11 of the Trademark Law requires that the certificate of registration state "the particular goods . . . for which it is registered." This is controlling. Under Section 11 aforesaid, likewise to be entered in the certificate of registration is "the date of the Copyright 1994-2014

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first use in commerce or business." SPI may not claim "first use" of the trademarks prior to the registration thereof on any product other than medicines. 4. ID.; ID.; DIRECTOR OF PATENT; EXAMINATION OF APPLICATION; PURPOSE. — Section 7 of the same Trademark Act directs that upon the filing of the application and the payment of the required fee, the "Director (of Patents) shall cause an examination of the application" — for registration of the trademark — "to be made, and, if on such examination it shall appear that the applicant is entitled to registration, the Director . . . shall cause the mark . . . to be published in the Official Gazette." This examination, it would seem to us, is necessary in order that the Director of Patents may be satisfied that the application conforms to the requirement of actual use in commerce of the trademark in Section 2 and 2-A of the Trademark Law; and that the statement in said application - as to the "first use" thereof and "the goods . . . in connection with which the mark . . . is used (Section 5) — is true. 5. ID.; ID.; REGISTRATION IN U.S. IS NOT REGISTRATION IN THE PHILIPPINES. — The United States is not the Philippines. Registration in the United States is not registration in the Philippines. At the time of the United States registration in 1927, we had our own Trademark Law, Act No. 666 aforesaid of the Philippine Commission, which provided for registration here of trademarks owned by persons domiciled in the United States. What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory. There is where his business is carried on; where the goodwill symbolized by the trademark has immediate value; where the infringer may profit by infringement. There is nothing new in what we now say. Plaintiff itself concedes that the principle of territoriality of the Trademark Law has been recognized in the Philippines, citing Ingenohl vs. Walter E. Olsen, 7 L.ed 762. As Callmann puts it, the law of trademarks "rests upon the doctrine of nationality or territoriality." Accordingly, the 1927 registration in the United States of the BAYER trademark would not of itself afford plaintiff protection for the use by defendants in the Philippines of the same trademark for the same or different products. 6. ID.; ID.; EFFECT OF FAILURE TO SEASONABLY OBJECT TO THE USE OF TRADEMARK. — Defendants ask us to delist plaintiff's BAYER trademarks for medicines from the Principal Register, claiming right thereto for said use. Said trademarks had been registered since 1939 by plaintiff's predecessor, The Bayer Co., Inc. Defendants' claim is stale; it suffers from the defect of non-use. While it is conceded that FBA's predecessors first introduced medical products with the BAYER trademarks in the Philippine market, it is equally true that, after World War I, Copyright 1994-2014

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no definite evidence there is that defendants or their predecessors traded in the Philippines in medicines with the BAYER trademarks thereafter. FBA did not seasonably voice its objection. Lack of protest thereto connoted acquiescence. And this, notwithstanding the fact that the 1923 and 1926 agreements were set aside in the anti-trust suits. Defendants did use the marks; but it was much later, i.e., in 1958 — and on chemicals and insecticides — not on medicines. FBA only bestirred itself and challenged plaintiffs' right to the trademarks on medicines when this suit was filed. Vigilantibus non dormientibus equitas subvenit. The net result is that, as the trial court aptly observed, plaintiff may hold on to its BAYER trademarks for medicines. And defendants may continue using the same trademarks for insecticides and other chemicals, not medicines.

DECISION

SANCHEZ, J : p

In this, a case for trademark infringement and unfair competition, each of the principal suitors, namely, plaintiff Sterling Products International, Inc., 1(1) and defendant Farbenfabriken Bayer Aktiengesellschaft, 2(2) seeks to exclude the other from use in the Philippines of the trademarks BAYER and BAYER CROSS IN CIRCLE. SPI asks this Court to strike down FBA's registration of BAYER CROSS IN CIRCLE covering industrial and agricultural products — insecticides and other chemicals, not medicines — from the supplemental register. FBA, for its part, prays for the cancellation from the principal register of SPI's certificates of registration of the trademarks aforesaid for medicines. Contending parties are doing business in the Philippines. SPI markets Bayer Aspirin, Aspirin for Children and Cafiaspirina. The BAYER and BAYER CROSS IN CIRCLE are being used by SPI in the Philippines only for said products — Bayer Aspirin, Cafiaspirina and Bayer Aspirin for Children. On the containers (bottles or printed cellophane strips, which, in turn, are placed in cardboard boxes) of Bayer Aspirin, Aspirin for Children and Cafiaspirina, SPI features the trademarks BAYER and BAYER CROSS IN CIRCLE. FBA thru Allied Manufacturing & Trading Co., Inc. 3(3) distributes "Folidol" and other industrial and agricultural chemicals. FBA's "FOLIDOL" (in steel or fiber drums or aluminum containers) displays a replica of SPI's trademark BAYER CROSS IN CIRCLE on the tin cap and label of the Copyright 1994-2014

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container. The conflict apparent, suit followed. The trial court declared itself "in favor of the solution that favors division of the market rather than monopoly." But to avoid confusion, it directed defendants "to add a distinctive word or words in their mark to indicate that their products come from Germany." The judgment below reads: "IN VIEW WHEREOF, both complaint and counterclaim are dismissed without costs; the Court sustains plaintiff's right to use the Bayer trademark for its medicines, and defendants' right to use it for chemicals, insecticides, and other products not medicines, but the Court orders, defendants to add a distinctive word or words in their mark to indicate that their products come from Germany." 4(4)

Both parties appealed: Plaintiff, insofar as the judgment "dismisses plaintiff's complaint and sustains defendants' right to use the BAYER trademark for their chemicals, insecticides, and other products not medicines"; 5(5) and defendants, "from the portions of the aforementioned decision particularly those which dismiss the counterclaim of the defendants for the cancellation of the registrations by the plaintiff of the trademarks Bayer and Bayer Cross and which allow the plaintiff to continue using the Bayer trademarks for medicines." 6(6) And now to the facts. The word BAYER was the surname of Friedrich Bayer, a German, who, on August 1, 1863, organized a drug company bearing his name — Friedr. Bayer et comp. — at Barmen, Germany. The company was at first engaged in the manufacture and sale of chemicals. At about the year 1888 it started to manufacture pharmaceutical preparations also. A change of name from Friedr. Bayer to Farbenfabriken vorm. Friedr. Bayer & Co. (FFB, for short) effective July 1, 1881 was following in 1912 by a change of principal place of Business from Elberfeld to Leverkusen, Germany. 7(7) Its products came to know outside Germany. With the discovery in 1899 of the Bayer Aspirin, the mark BAYER acquired prestige. The time was ripe to register the trademarks. The record, however, does not clearly show when the word BAYER was registered as a trademark in Germany. The BAYER CROSS IN CIRCLE trademark was registered in Germany on January 6, 1904 — No. 65777. 8(8) It was intended to be used on "medicines for human beings and animals, disinfectants, preservatives, tar dyestuffs and chemical preparations for dyes and for photographic purposes." 9(9) Copyright 1994-2014

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This registered trademark consists of the BAYER CROSS encircled by the company's name Farbenfabriken vorm. Friedr. Bayer & Co. Elberfeld. When the company was merged with other German companies in 1925 to form the I.G. Farbenindustrie, the name of the former company was deleted from the trademark and what remained was the present BAYER CROSS IN CIRCLE. A new registration was effected on June 17, 1929 in Germany and for which it was issued a certificate with serial no. 404341. The trademark BAYER CROSS IN CIRCLE was registered by FFB and its subsidiaries in other parts of the world, viz, in Norway, England, Denmark, and Argentina in 1904; in Japan and the United States in 1908; in Spain in 1911; in Peru in 1913. Sometime in 1895, FFB established a subsidiary in New York, United States. It was named Farbenfabriken of Elberfeld Co. Its purpose was to sell FFB's products in the United States and Canada. It was this subsidiary that registered the trademarks BAYER and BAYER CROSS IN CIRCLE in the United States between the years 1907-1908. Sometime in 1913, FFB organized another subsidiary — The Bayer Co., Inc. of New York. This new subsidiary was authorized by FFB to negotiate for and acquire the trademarks, goodwill, assets and property of Farbenfabriken of Elberfeld Co. By an agreement dated June 12, 1913 (Exh. 106) Bayer of New York purchased for the sum of US $750,000.00 Farbenfabriken of Elberfeld Co.'s "right for the sale in the United States and Canada of the drugs, chemicals, pharmaceuticals and any and all other products and articles manufactured and (or) controlled by Leverkusen" (FFB) and its "trademarks, goodwill and other assets and property." On April 6, 1917, 10(10) the United States declared war on Germany. Pursuant to the provisions of the Trading with the Enemy Act, the Alien Property Custodian classified The Bayer Co., Inc. of New York as an enemy-controlled corporation. Hence, the Alien Property Custodian seized its assets about the early part of 1918. Between December 1918 and January 1919, all the assets of the Bayer Co., Inc. of New York were sold by the Alien Property Custodian to Sterling Drug, Inc. for the sum of US $5,310,000.00. The Bayer Co., Inc. of New York then became a subsidiary of Sterling Drug, Inc. Winthrop Chemical Co., Inc. was later organized as a new subsidiary of Sterling Drug, Inc. "to manufacture and sell the physicians' drugs which had been acquired" by the purchase of the Bayer Co., Inc. Winthrop's operation was evidently hampered because "the Germans had kept manufacturing processes secret, so that the manufacture of physicians' drugs on a commercial scale became an almost Copyright 1994-2014

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insoluble problem." 11(11) Sterling Drug, Inc. secured registrations of the BAYER trademarks in different countries of the world. 12(12) It would appear that the trademark BAYER for medicines was known in the Philippines about the close of the 19th century. This appears on page 88 of the Revista Farmacéutica de Filipinas Año I, Numero 7, 3 de Julio de 1893. Before World War I, BAYER products entering the Philippines came from Germany. In 1922, a worldwide conflict of interests occurred between Farbenfabriken vorm. Friedrich Bayer & Co. and The Bayer Co., Inc. of New York, in reference to the trademarks BAYER and BAYER CROSS IN CIRCLE as they were applied to various products. Two agreements resolved this conflict, both executed on April 9, 1923 in London, England: one, between FFB and Winthrop Chemical Co., Inc. (Exh. 66), and the other between FFB and Bayer New York (Exh. WWW). Under the terms of the agreement with Winthrop Chemical Co., Inc., FFB stipulated, amongst others: (1) not to contest anymore Winthrop's right over the trademarks BAYER and BAYER CROSS IN CIRCLE; (2) to discontinue the use of said trademarks in the United States which was understood to include the Philippines under par. 16 of said agreement; and (3) to disclose all secrets of other processess relating to the manufacture of pharmaceuticals. Paragraph 26 of the FFB — Bayer New York agreement reads — "26. NEW YORK (The Bayer Company, Inc. of New York) agree that they will not sell or offer for sale any goods other than hereunder or those they may market for Winthrop as hereinbefore provided and other than Aspirin and compounds of Aspirin which New York shall continue to market for their own account in the United States of America, Puerto Rico, the Philippines and Hawaiian Islands and the Panama Zone." 13(13)

In 1925, Farbenfabriken vorm. Friedrich Bayer & Co. became I.G. Farbenindustrie, AG. This necessitated a new agreement incorporating Exh. 66 with modifications. Said new agreement was signed on November 15, 1926 between I.G. Farbenindustrie and Winthrop. On September 5, 1941, in the anti-trust suits against Sterling Drug, Inc., Winthrop Chemicals Co. and The Bayer Co., Inc. of New York, two consent decrees Copyright 1994-2014

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[Exh. 68 (No. 15-363) and Exh. 69 (No. 15- 364)] were promulgated by the U.S. District Court for Southern New York. Said consent decrees declared the April 9, 1923 cartel agreements violative of the U.S. anti-trust laws. One reason given is that the German company, FFB (later I.G. Farbenindustrie) — FBA's predecessor — was excluded from the U.S. pharmaceutical market. The sentence, however, contains a saving clause, thus — "The Bayer contract of 1923, the Bayer contract of 1926, and any and all amendments or supplements thereto are declared and adjudged to be unlawful under the Anti-Trust Laws of the United States, and the defendants Bayer and Sterling, and their respective successors and subsidiaries, or any of them, be and they are hereby enjoined and restrained from carrying out or enforcing any of the aforesaid contracts, or any supplements, amendments or modifications thereof, or from paying to I.G. Farben, its subsidiaries, successors or assigns, any royalties or share of profits pursuant to said contracts with respect to sales following the effective date of this decree. Provided, however, that nothing herein contained in this Sec. III shall: xxx

xxx

xxx

Affect in any way the rights or title of the defendants Bayer, its successors, subsidiaries or assigns, in or to the name 'Bayer' and the 'Bayer Cross' mark or registrations thereof, or. Affect or diminish any right, title or interest of said defendants, their successors, subsidiaries or assigns, in or to or under any heretofore acquired and presently existing patents, patent applications, patent licenses, trademarks, trade-names (such as the name 'Bayer' and the 'Bayer Cross' mark and registrations thereof), processes or formulae relating to the manufacturing, processing, use or sale of aspirin, aspirin compounds, pharmaceutical or other drug or chemical products, or impair any rights or remedies of said defendants, their successors, subsidiaries or assigns, provided by statute or convention, and by suits for damages, injunction or other remedy with respect to any such 14(14) patents, patent applications, patent licenses or trademarks . . . "

Meanwhile, in 1935, plaintiff Sterling Products International, Inc. (SPI), a Delaware corporation, a subsidiary of Sterling Drug, Inc. of New York, was issued a license to do business in the Philippines. 15(15) The trademarks BAYER and BAYER CROSS IN CIRCLE were then registered in the Philippines under the old Trademark Law (Act 666) by The Bayer Co., Inc.: the BAYER CROSS IN CIRCLE trademark on April 18, 1939 for which it was issued Certificate of Registration No. 13081; the Copyright 1994-2014

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BAYER trademark on April 22, 1939 for which it was issued Registration Certificate No. 13089. These trademark rights were assigned to SPI on December 30, 1942 and the assignment was recorded in the Philippines Patent Office on March 5, 1947. With the passage of Republic Act 166 repealing the old Trademark Law (Act 666), SPI was issued by the Philippines Patent Office on June 18, 1948 two new certificates of registration: No. 1260-S for BAYER CROSS IN CIRCLE; No. 1262-S for BAYER. The registration of these trademarks was only for "Medicines." Came World War II., I.G. Farbenindustrie, AG. was seized by the allied powers. In 1945, after World War II, I.G. Farbenindustrie, AG. was decartelized by the Allied High Commission. The unit known as Farbenfabriken Bayer was transferred in 1953 to Farbenfabriken Bayer Aktiengesellschaft (FBA), one of the defendants in this case, which was organized in 1951. Sometime in 1958, defendant Allied Manufacturing & Trading Co., Inc. (AMATCO) started selling FBA's products especially "Folidol," a chemical insecticide which bears the BAYER CROSS IN CIRCLE trademark. 16(16) On November 18, 1959, FBA applied for the registration of the BAYER CROSS IN CIRCLE trademark with the Philippines Patent Office for animal and plant destroying agents. The examiner's report dated December 17, 1959 stated that the subject mark appears to be similar to SPI's registered BAYER trademarks as covered by Certificates of Registration Nos. 1260-S and 1262-S. He concluded that "[r]egistration of applicant's mark is proscribed by Section 4-d of the Statute because it would cause confusion or mistake or [to] deceive purchasers." 17(17) This action of the Philippines Patent Office drew a reply from FBA. In its letter dated February 1, 1960 applicant FBA, thru counsel, said that it "offers no question or objection to the assertion of the Examiner that the registrant's mark and that of the applicant are similar to each other." It emphasized the fact that it was seeking registration in the Supplemental Register. Its concluding statement runs thus: "Being aware of the duties and obligations of a trademark user in the Philippines and the penalties provided for in the pertinent law on trademarks and being aware also that Supplemental Registration is not a prima facie evidence of ownership of mark but merely a recordation of the use as in fact the mark is actually being used by the applicant in the Philippines, it is respectfully urged that this [application] be given due course." 18(18)

On February 25, 1960, FBA was issued a certificate of registration in the Supplemental Register, SR-304. Copyright 1994-2014

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We now grapple with the problems raised in the separate appeals. 1. A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. This rule is spelled out in our Trademark Law, thus: "SECTION 2-A. Ownership of trade-marks, trade-names and service- marks: how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trade-mark, trade- name, service-mark, heretofore or hereafter appropriated, as in this Section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law." (As inserted by Section 1 of Republic Act 638)

It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." 19(19) Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. 20(20) Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however perfect a trademark right. The BAYER trademarks registered in the Philippines to which plaintiff SPI may lay claim, as correctly stated in the decision below, are those which cover medicines only. For, it was on said goods that the BAYER trademarks were actually used by it in the Philippines. Therefore, the certificates of registration for medicines issued by the Director of Patents upon which the protection is enjoyed are only for medicines. Nothing in those certificates recited would include chemicals or insecticides. But plaintiff insists that the statement of the applicant (The Bayer Co., Inc.) in Copyright 1994-2014

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its registrations of the BAYER marks states that "the merchandise for which the trademark is appropriated is d. — Chemicals, Medicines and Pharmaceutical Preparations." Plaintiff's position is that such statement determines the goods for which said marks had been registered. Validity does not attach to this proposition. First, the statement itself admits that "the particular description of the articles comprised in said class (d) on which the trademark is used is Medicines." 21(21) It is not used for chemicals. Then, Section 11 of the Trademark Law requires that the certificate of registration state "the particular goods . . . for which it is registered." This is controlling. Under Section 11 aforesaid, likewise to be entered in the certificate of registration is "the date of the first use in commerce or business. SPI may not claim "first use" of the trademarks prior to the registrations thereof on any product other than medicines. Besides, Section 7 of the same Trademark Act directs that upon the filing of the application and the payment of the required fee, the "Director [of Patents] shall cause an examination of the application" — for registration of the trademark — "to be made, and, if on such examination it shall appear that the applicant is entitled to registration, the Director . . . shall cause the mark . . . to be published in the Official Gazette." This examination, it would seem to us, is necessary in order that the Director of Patents may be satisfied that the application conforms to the requirement of actual use in commerce of the trademark in Section 2 and 2-A of the Trademark Law; and that the statement in said application — as to the "first use" thereof and "the goods . . . in connection with which the mark . . . is used" (Section 5) — is true. 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. Because of this and of the fact that the Bayer trademarks were never used in the Philippines by plaintiff except for medicines — Aspirin, Aspirin for Children and Cafiaspirina — we find ourselves unwilling to draw a hard and fast rule which would absolutely and under all circumstances give unqualified protection to plaintiff against the use of said trademarks by all others on goods other than medicines. 2. Neither will the 1927 registration in the United States of the BAYER trademark for insecticides serve plaintiff any. The United States is not the Philippines. Copyright 1994-2014

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Registration in the United States is not registration in the Philippines. At the time of the United States registration in 1927, we had our own Trademark Law, Act No. 666 aforesaid of the Philippine Commission, which provided for registration here of trademarks owned by persons domiciled in the United States. What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory. There is where his business is carried on; where the goodwill symbolized by the trademark has immediate value; where the infringer may profit by infringement. There is nothing new in what we now say. Plaintiff itself concedes 22(22) that the principle of territoriality of the Trademark Law has been recognized in the Philippines, citing Ingenohl vs. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of trademarks "rests upon the doctrine of nationality or territoriality." 23(23) Accordingly, the 1927 registration in the United States of the BAYER trademark would not of itself afford plaintiff protection for the use by defendants in the Philippines of the same trademark for the same or different products. 3. A question basic in the field of trademarks and unfair competition is the extent to which a registrant of a trademark covering one product may invoke the right to protection against the use by other(s) of the same trademark to identify merchandise different from those for which the trademark has been appropriated. Plaintiff's trenchant claim is that it should not be turned away because its case comes within the protection of the confusion of origin rule. Callmann notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other." In which case, "defendant's goods are then bought as the plaintiff's, and the poorer quality of the former reflects adversely on the plaintiff's reputation." The other is the confusion of business: "Here though the goods of the parties are different, the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist." 24(24) A judicial test giving the scope of the rule of confusion of origin is Ang vs. Teodoro (December 14, 1942), 74 Phil. 50. Briefly, the facts of the just cited case are as follows: Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, had continuously used "Ang Tibay" both as trademark and as tradename in Copyright 1994-2014

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the manufacture and sale of slippers, shoes and indoor baseballs since 1910. He formally registered it as a trademark on September 29, 1915 and as a tradename on January 3, 1933. Ana L. Ang registered the same trademark "Ang Tibay" for pants and shirts on April 11, 1932 and established a factory for the manufacture of said articles in 1937. Suit was lodged by Teodoro against Ang to cancel the latter's registration of the trademark "Ang Tibay" and to perpetually enjoin her from using the said trademark on goods manufactured and sold by her. The judgment of the trial court absolved defendant (Ana L. Ang) from the complaint with costs against the plaintiff. The Court of Appeals reversed. On appeal by certiorari, we affirmed the judgment of the Court of Appeals. We there said: "In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user. Although two noncompeting articles may be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trademarks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods. Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that there can be unfair competition or unfair trading even if the goods are noncompeting, and that such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably results. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trademark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark. As trade has developed and commercial changes have come about, the law of unfair Copyright 1994-2014

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competition has expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. The owner of a trade-mark or trade-name has a property rights 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 a fraud." 25(25)

The thoughts expressed in Ang Tibay command respect. Conduct of business should conform to ethical business standards. Unfairness is proscribed. The invocation of equity is bottomed upon the injunction that no one should "reap where he has not sown." 26(26) Nonetheless, "[i]t has been emphasized that each case presents a unique problem which must be answered by weighing the conflicting interests of the litigants." 27(27) With this in mind, we are convinced that the case before us is not to be analogized with Ang Tibay. The factual setting is different. His Honor, Judge Magno S. Gatmaitan (now Associate Justice of the Court of Appeals), the trial judge, so found. He reached a conclusion likewise different. And the reasons, so well stated by His Honor, are these: "1st). — It was not plaintiff's predecessor but defendant's namely Farbenfabriken or Bayer Germany that first introduced the medical products into the Philippine market and household with the Bayer mark half a century ago; this is what the Court gathers from the testimony of Frederick Umbreit and this is the implication even of Exh. 48, 49, 66 and WWW as already shown a few pages back; 28(28) 2nd). — There is thus reason plausible enough for defendant's plea that as Sterling was not the 'originator' of the Bayer mark, the rule in Ang vs. Teodoro, supra, is not applicable; and this is correct notwithstanding Exh. 106 and 63 and even giving unto these documents full force and virtue, because purchase of the assets of Elberfeld, defendants' previous affiliate in New York, by Bayer of New York, even if that were to be held to include purchase of the Bayer mark, did not make the purchaser Bayer of New York the originator of the mark; especially since Bayer of New York was only another subsidiary of Bayer Germany or Farbenfabriken which was the real originator; 3rd). — The Court is also impelled to believe that the evidence establishes that among the common people of the Philippines the 'Bayer' medicines come from Germany; this the Court deduces from the testimony of witness Florisa Pestaño who only reproduced the belief of her grandmother; the Copyright 1994-2014

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Court might as well say that plaintiff itself has not discouraged that belief because the drug and its literature that came from the plaintiff and its affiliate would show that it represented its medicines to have come from defendant 29(29) and were manufactured in Germany with that Bayer mark; thus Exh. 70 30(30) which is the price list of 1928 of Botica de Sta. Cruz on page 6 indicates that Winthrop Chemical Company of New York, — plaintiff's subsidiary — was a distributor of I.G. Farbenindustrie, A.G. Leverkusen, Germany; Exh. 80 31(31) which is a medical diary published by Winthrop for 1934 on page 148 manifested that the journal, 'Practical Therapeutics' was published by I.G. Farbenindustrie Aktiengesellschaft for Winthrop Chemical Company, Inc.; 'with particular reference to the pharmacological products, sera and vaccines originated and prepared in the laboratories of the I.G. Farbenindustrie, A.G.'; and Exh. 79 a, b, c, d and e which are prospectuses for the medicines, Mitigal, Afridol, Aspirina, Novalgina and Myo-Salvarsan 32(32) showed that these products were manufactured for Winthrop by I.G. Farbenindustrie; and then Exh. 81 the Revista Boie of 1928 would show that Winthrop represented itself as the distributor of the products of Bayer of Germany otherwise known as I.G. Farbenindustrie, 'según la alta calidad de la marca original'; 33(33) the Court being also impelled to add in this connection that it has to take judicial notice of a belief of long standing common among the people in the Philippines that German products are of very high quality and it is only natural for a distributor or a retailer to take advantage of that; and as it is not debated that 'Bayer' is a German surname, (see plaintiff's rebuttal Exh. QQQQ, see also p. 7 plaintiff's reply memorandum wherein it is said that this surname is a 'pretty common one among members of the German race') it is all so very easy to associate the Bayer trademark with products that come from Germany and to believe that they are of high quality; 4th). — The rationale of the doctrine in Ang vs. Teodoro, supra being that: 'The Courts have come to realize that there can be unfair competition or unfair trading even if the goods are non-competing, and that such unfair trading can cause injury or damage to the first user of a given trade mark, first, by prevention of the natural expansion of his business, and second, by having his business reputation confused with and put at the mercy of the second user.' 74 Phil. 55- 56; and the Court having found out that the 'first user' was Bayer Germany and it was this that had built up the Bayer mark and plaintiff apparently having itself encouraged that belief even after it had acquired the Bayer mark in America, thru forced sale, of defendant's subsidiary there in 1918, Exh. 79, 80, 81, to Copyright 1994-2014

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apply the Ang Tibay rule in the manner advocated by Sterling would, the Court fears, produce the reverse result and the consequence would be not equity but injustice." 34(34)

It would seem to us that the fact that plaintiff rode on the German reputation in the Bayer trademark has diluted the rationality of its exclusionary claim. Not that the free ride in the name of defendant's German predecessor was sporadic. It is continuing. Proof of this is the label on the box used by plaintiff (Exhibit U) in the distribution of Bayer Aspirin. This box bears prominently on the front part the legend "Genuine" in red color and two arrows: the first pointing to BAYER CROSS IN CIRCLE, and the second, to BAYER Aspirin. At the back thereof in big letters are the words "BAYER ASPIRIN," followed in small letters "Used since 1900" and down below the small words "Mfd. in the Phil. by Winthrop-Stearns, Inc. for STERLING PRODUCTS INTERNATIONAL, INCORPORATED." In plaintiff's prospectus (Exhibit 1) found in the box of Bayer Aspirin tablets, children's size, there is the significant statement: "GENUINE BAYER — Each Children's Size Bayer Aspirin tablet is stamped with the Bayer Cross, the trademark of the genuine Bayer product. This means that your child is getting the same gentle-to-the-system Bayer Aspirin that has been used for over 50 years by millions of normal people without ill effect." With the background of prior use in the Philippines of the word BAYER by FBA's German predecessor and the prior representations that plaintiff's medicines sold in the Philippines were manufactured in Germany, the facts just recited hammer on the mind of the public that the Aspirin, Cafiaspirina and Aspirin for Children being marketed for plaintiff in the Philippines come from the same source — the German source — and in use since 1900. That this view is far from far-fetched, is illustrated by the testimony of plaintiff's own witness, Dr. Antonio Vasquez, viz: "Q.

Have you ever heard of a pharmaceutical company of Bayer of Germany, or a company in Germany named Bayer?

A.

Yes, sir.

Q.

Since when have you heard of this pharmaceutical company in Germany with the name Bayer, since when have you heard of that?

A.

I have always taken the name Bayer as associated with Winthrop & Stearns.

Q.

But, you said a while ago . . .

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Witness. . . . Yes . . . xxx

xxx

xxx

Q.

. . . that you have heard of a pharmaceutical company with the name of Bayer in Germany?

A.

Yes, sir.

Q.

Do you know if this Winthrop & Stearns you mentioned has ever been connected with this Bayer Company of Germany?

A.

I have always understood that they were distributing drugs of Bayer & Company." 35(35)

4. The Ang Tibay doctrine, we believe, is not to be read as shunting aside the time-honored teaching that he who comes into equity must do so with clean hands. 36(36) Plaintiff cannot now say that the present worth of its BAYER trademarks it owes solely to its own efforts; it is not insulated from the charge that as it marketed its medicines it did so with an eye to the goodwill as to quality that defendants' predecessor had established. There is no whittling away of the identity of plaintiff's trademarks. Plaintiff is not the first user thereof in the Philippines. The trademarks do not necessarily link plaintiff with the public. Plaintiff must show injury; it has not. On the contrary, representations as to the place of manufacture of plaintiff's medicines were untrue, misleading. Plaintiff could still be tagged with the same deception "which (it) complains of in the defendant(s)." 37(37) Appropriate it is to recall here our observation in the Ang Tibay opinion, viz: "On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of another but builds one of his own." 38(38) Plaintiff, the owner in this country of the trademarks BAYER for medicines, has thus forfeited its right to protection from the use of the same trademarks by defendants for products different therefrom — insecticides and other chemicals. 5. But defendants ask us to delist plaintiff's BAYER trademarks for medicine from the Principal Register, claiming right thereto for said use. Said trademarks had been registered since 1939 by plaintiff's predecessor, The Bayer Co., Copyright 1994-2014

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Inc. Defendants' claim is stale; it suffers from the defect of non-use. 39(39) While it is conceded that FBA's predecessors first introduced medical products with the BAYER trademarks in the Philippine market, it is equally true that, after World War I, no definite evidence there is that defendants or their predecessors traded in the Philippines in medicines with the BAYER trademarks thereafter. FBA did not seasonably voice its objections. Lack of protest thereto connoted acquiescence. And this, notwithstanding the fact that the 1923 and 1926 agreements were set aside in the anti-trust suits. Defendants did use the marks, but it was much later, i.e., in 1958 — and on chemicals and insecticides — not on medicines. FBA only bestirred itself and challenged plaintiff's right to the trademarks on medicines when this suit was filed. Vigilantibus non dormientibus equitas subvenit. 40(40) The net result is that, as the trial court aptly observed, plaintiff may hold on to its BAYER trademarks for medicines. And defendants may continue using the same trademarks for insecticides and other chemicals, not medicines. 6. Defendants balk at the ruling below which directs them "to add a distinctive word or words in their mark to indicate that their products come from Germany." 41(41) We are left under no doubt as to the reasonableness of the formula thus fashioned. It avoids the mischief of confusion of origin — defendant FBA's product would not be mistaken for those of plaintiff. It reduces friction. We perceive of no prejudice to defendants. The order does not visit defendant FBA with reprobation or condemnation. Rather, said defendant would be enhancing the value of and would be sponsoring its own products. Anyway, a statement that its products come from Germany is but a statement of fact. FOR THE REASONS GIVEN, the judgment under review is hereby affirmed. No costs. SO ORDERED. Concepcion, C .J ., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ ., concur. Castro, J., is on official leave of absence.

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)RRWQRWHV 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

17. 18. 19.

20.

21.

Hereinafter referred to as SPI. Hereinafter referred to as FBA. Hereinafter referred to as AMATCO. Record on Appeal, p. 93. Record on Appeal p. 94. Record on Appeal, p. 95-96. The former places of Elberfeld and Barmen and other places together now form the town of Wuppertal. No longer valid in the Federal Republic of Germany as its protection expired on January 5, 1933. Exhs. 26 and 26-A. Encyclopedia of American History, ed. by Richard B. Morris (1953), p. 309. Exhibit 63-A, p. 99. See: Exhibits DDDD to YYYYYY-3. Emphasis supplied. Exhibit 69. Exhibit A-2. FBA's predecessors have been using elsewhere this mark for chemicals since 1910 (Exhibits 99 to 99-C) and plant destroying agents since 1924 (Exhibits 100 and 100-A). Exhibit II-1. Exhibit JJ-1. Esso, Inc. vs. Standard Oil Co., 98 F. 2d 1, 6, citing Hanover Star Milling Co. vs. Metcalf, 240 U.S. 403, 36 S. Ct. 357, 60 L. ed. 713; United Drug Co. vs. Theodore Rectanus Co., 248 U.S. 90, 39 S. Ct. 48, 63 L. ed. 141. See also: Oakford Company vs. Kroger Company, 157 F. Supp. 453, 458-460; Mason, Au & Magenheimer Confectionary Co. vs. Loose-Miles Biscuit Co., 1 F. Supp. 755, 756; Fry vs. Layne-Western Company, 282 F. 2d 97; 104, J.A. Dougherty's Sons, Inc. vs. Kasko Distillers Products Co., 35 F. Supp. 561, 564; Compañia Gral. de Tabacos vs. Alhambra Cigar & Cigarette Mfg. Co., 33 Phil. 485, where we held that in order that a name may be considered a tradename with exclusive rights which attach to the use thereof, it is necessary that it be used with the intent of appropriating it as a tradename. I Tolentino, Commentaries and Jurisprudence on the Commercial Law of the Philippines, 8th ed., p. 531, citing United Drug Co. vs. Theodore Rectanus Co., 248 U.S. 90, 63 L. ed. 141. Medicines (class d) in the 1939 registrations; medicines (class 6) in the 1949

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22. 23. 24. 25.

26. 27. 28.

registration. Brief for Plaintiff-Appellant, p. 88. 2 Callmann, Unfair Competition and Trademarks, 1945 ed., p. 1006. 2 Callmann, op. cit., pp. 1323-1324. Ang vs. Teodoro, supra, at pp. 54-55; emphasis supplies. See also: Sta. Ana vs. Maliwat (August 31, 1968), 24 SCRA 1018, 1025-1026. Cf.: The George W. Luft Co., Inc. vs. Ngo Guan (December 17, 1966), 18 SCRA 944, 946. 52 Am. Jur., p. 581. Id., p. 577; emphasis supplied. The lower court, in its decision (Rec. on Appeal, p. 65), said that there are indications that Bayer Germany's manufactures came to be known outside Germany even before the turn of the century, viz, according to Exh. 12, Catalogue of Exhibits at the Glasgow Exhibition, 1888; according to Exh. 47, thru drug literature in the Philippines in 1893. Dr. Agerico Sison, plaintiff's witness, testified: "Q. When you were still in college, still a student, you studied inventions — famous medicines such as acetyl salicylic acid, is that right? ... A.

Yes sir.

Q. And you remember that acetyl salicylic acid was invented by chemist in the employ of the Bayer Company of Germany? A. Q. century? A.

Yes, sir. And that this discovery was made about the end of the nineteenth

Yes, sir.

Q. And that you came to know afterwards when you were already practising medicine that one of the renowned manufacturers of pharmaceutical products is that Bayer Company of Germany? xxx A.

xxx

xxx

Yes, sir.

Q. And before World War II, in your practice of medicine you had come across pharmaceutical products manufactured by that Bayer Company of the Germany being used here in the Philippines? Copyright 1994-2014

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xxx

29. 30.

xxx

xxx

A. Yes, sir. (t.s.n., pp. 15-18, March 3, 1961)." (See; Brief of Defendants-Appellants, pp. 32-34). Defendant should read "defendant's predecessor." On pages 2 and 3 of price list of Botica de Sta. Cruz del Dr. Carlos Jaehrling (Exh. 70) printed by Benipayo & Photo Engraving, Manila, there are some photographs with the heading "Works of I.G. Farbenindustrie A.G., Germany, Pharmaceutical Department, 'Bayer- Meister Lucius,' Leverkusen and Hoechst A.M." At bottom of page 3, particularly, are the words: "The I.G. Farbenindustrie A.G., Germany, is the largest chemical manufacturing concern in the world combining the most reputable German manufacturers of chemicals, dyes and pharmaceutical products. The principal works in different parts of Germany are shown here." Page 5 thereof bears the heading "The BAYER COMPANY, INC. New York" followed by a specification of its "Aspirin Preparations" namely: ASPIRIN, BAYASPIRIN, CAFIASPIRIN and FENASPIRIN, and the corresponding prices thereof.

31.

32.

On page 6 is the heading "Winthrop Chemical Co., Inc., New York, H.A. Metz Laboratories, Inc., New York, Distributors of the I.G. Farbenindustrie, A.G., Leverkusen, Germany, in the Philippine Islands. On pages 7 and 8 of this diary, reference is made to the late Dr. Eliodoro Mercado, formerly of the San Lazaro Hospital. Particularly on page 8 thereof, we find the following statement: "In collaboration with the Bayer Company of Leverkusen, Germany — now part of the I.G. Farbenindustrie A.G. — he improved his original formula and experiments . . . in the successful treatment of a number of lepers . . ." On the opposite side a photographic picture of "The Works at Leverkusen" is shown (Exh. 80-a, 80-b, and 80-c). Exh. 79-a, A MITIGAL prospectus showing the photograph of a bottle and a package with the Bayer Cross. The words "Fabricado por: I.G. Farbenindustrie Aktiengesellschaft Leverkusen b. Koln para: Winthrop Chemical Company Inc., New York, N.Y." appear on the lower left part of the prospectus. Exh. 79-b, an AFRIDOL prospectus showing the photograph of a package with the Bayer Cross and the same words "Fabricado por: I.G. Farbenindustrie Aktiengesellschaft Leverkusen b. Koln para: Winthrop Chemical Company Inc., New York, N.Y." appearing also on the lower left part of the prospectus.

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Exh. 79-c, an ASPIRINA prospectus in which reference is made to the discovery of aspirin in 1899 by "la gigantesca fábrica de Elberfeld de la razón social Farbenfabriken vorm. Friedrich Bayer & Co." Exh. 79-d, a prospectus on NOVALGINA, which displays clearly the Bayer Cross beneath the word NOVALGINA; as manufacturer is indicated "I.G. FARBENINDUSTRIE AKTIENGESELLSCHAFT, Sección Farmacéutica Bayer-Meister Lucius." On top of this particular prospectus is a rubber stamp, "Dr. G. SCHWAB P.O.B. 1162, MANILA."

33.

34. 35. 36. 37. 38. 39. 40. 41.

Exh. 79-e, a prospectus on MYO-SALVARSAN, which mentions as manufacturer of this product "I.G. FARBENINDUSTRIE AKTIENGESELLSCHAFT, Pharmaceutical Dept. Bayer-Meinster Lucius." At the foot of page 38 of the Revista Boie, May 1928, Exh. 81- c, the following appears: "Winthrop Chemical Co. Inc., New York, Distributor of the 'BAYER' products in the Philippines. Manila Office: Dr. G. Schwab, P.O. Box 1162, Escolta 619." Record on Appeal, pp. 87-91; emphasis supplied. r., February 28, 1961, pp. 61-62; emphasis supplied. 7 C.J.S., p. 310, citing cases at footnote 53; 52 Am. Jur., p. 626, citing cases at footnote 18. 52 Am. Jur., p 631, citing cases at footnote 20. At p. 56. See: Section 9-A Trademark Law (R.A 166, as amended by R.A 638). . Buenaventura vs. David, 37 Phil, 435, 441. Record on Appeal, p. 93.

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FIRST DIVISION [G.R. No. 157216. November 20, 2003.] 246 CORPORATION, doing business under the name and style of ROLEX MUSIC LOUNGE, petitioner, YV. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge of Branch 90 of the Regional Trial Court of Quezon City, MONTES ROLEX S.A. and ROLEX CENTRE PHIL. LIMITED, respondents. Galo Orlando L. Deang for petitioner. Quasha Ancheta Peña & Nolasco for private respondents. SYNOPSIS Respondents Montres Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device, filed against petitioner 246 Corporation a case for trademark infringement and damages before the Regional Trial Court of Quezon City. Respondents alleged that sometime in July 1996, petitioner adopted and, since then, has been using without authority the mark "Rolex" in its business name "Rolex Music Lounge" as well as in its newspaper advertisements as — "Rolex Music Lounge, KTV, Disco & Party Club." In its answer raising special affirmative defenses, petitioner argued that respondents have no cause of action considering that its entertainment business is totally unrelated to the items catered by respondents, such as watches, clocks, bracelets and parts thereof. Petitioner filed a motion for preliminary hearing on its affirmative defenses with a motion to dismiss. The trial court denied the motion. Petitioner moved for reconsideration but was likewise denied. Petitioner filed a petition for certiorari with the Court of Appeals contending that the trial court gravely abused its discretion in denying his motion for preliminary hearing on his affirmative defenses. The Court of Appeals dismissed the petition. Reconsideration thereof was also denied. Hence, the present petition. Petitioner contended that the Court of Appeals violated his right to due process and committed grave abuse of discretion in arbitrarily and capriciously denying his motion for preliminary hearing. Copyright 1994-2014

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The Supreme Court denied the petition. According to the Court, a motion for preliminary hearing permitted under the Rules of Court is never mandatory, but rests largely on the sound discretion of the trial court. The use of the word "may" in Rule 16, Section 5 of the old Rules of Civil Procedure showed that such a hearing is not a matter of right demandable from the trial court; it is not mandatory, but discretionary. "May" is an auxiliary verb indicating liberty, opportunity, permission and possibility. Such interpretation is now specifically stated under the 1997 Rules of Civil Procedure. Rule 16, Section 6, thereof provides that a grant of a preliminary hearing rests on the sound discretion of the court. The Court of Appeals then did not err in finding that no abuse of discretion could be ascribed to the trial court's denial of petitioner's motion for preliminary hearing on its affirmative defenses with motion to dismiss. The Court, however, ruled that it cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which constitute the kernel issue at bar, clearly require determination of facts which need to be resolved at the trial court. The existence or absence of the said requisites should then be addressed in a full-blown hearing and not on a mere preliminary hearing, and respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same.

SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; MOTION TO DISMISS; PLEADING GROUNDS AS AFFIRMATIVE DEFENSES; PRELIMINARY HEARING RESTS ON THE SOUND DISCRETION OF THE TRIAL COURT. — We find that what was denied in the order dated October 27, 2000 was not only the motion for preliminary hearing but the motion to dismiss as well. A reading of the dispositive portion of said order shows that the trial court neither qualified its denial nor held in abeyance the ruling on petitioner's motion to dismiss. In issuing the assailed order, the trial court ruled on the merits of petitioner's Motion to Dismiss vis-a-vis respondents' Comment and Opposition which clearly traversed the affirmative defenses raised by petitioner. Moreover, it is presumed that all matters within an issue raised in a case were passed upon by the court. In the absence of evidence to the contrary, the presumption is that the court a quo discharged its task properly. In Municipality of Biñan Laguna v. Court of Appeals, decided under the old Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule 16, Section 5, is not mandatory even when the same is prayed for. It rests largely on the sound discretion of the trial court. The use of the word "may" in the provision Copyright 1994-2014

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shows that such a hearing is not a matter of right demandable from the trial court; it is not mandatory but discretionary. "May" is an auxiliary verb indicating liberty, opportunity, permission and possibility. Such interpretation is specifically stated under the 1997 Rules of Civil Procedure. Rule 16, Section 6, now provides that a grant of a preliminary hearing rests on the sound discretion of the court. In the case at bar, the Court of Appeals did not err in finding that no abuse of discretion could be ascribed to the trial court's denial of petitioner's motion for preliminary hearing on its affirmative defenses with motion to dismiss. The issue of whether or not a trademark infringement exists, is a question of fact that could best be determined by the trial court. IHaECA

2. ID.; ID.; ID.; ID.; THE EXISTENCE OR ABSENCE OF THE REQUISITES OF SECTION 123 OF THE INTELLECTUAL PROPERTY CODE (REPUBLIC ACT NO. 8293) SHOULD BE ADDRESSED IN A FULL BLOWN HEARING AND NOT ON A MERE PRELIMINARY HEARING. — Under the old Trademark Law where the goods for which the identical marks are used are unrelated, there can be no likelihood of confusion and there is therefore no infringement in the use by the junior user of the registered mark on the entirely different goods. This ruling, however, has been to some extent, modified by Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took effect on January 1, 1998. A junior user of a well-known mark on goods or services which are not similar to the goods or services, and are therefore unrelated, to those specified in the certificate of registration of the well-known mark is precluded from using the same on the entirely unrelated goods or services, subject however to the requisites provided by law. Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely unrelated to respondents' business involving watches, clocks, bracelets, etc. However, the Court cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f), which constitute the kernel issue at bar, clearly require determination facts of which need to be resolved at the trial court. The existence or absence of these requisites should be addressed in a full blown hearing and not on a mere preliminary hearing. The respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same. 3. ID.; ID.; ID.; ID.; ISSUE OF WHETHER THE COUNSEL OF RECORD OF RESPONDENTS WAS PROPERLY AUTHORIZED TO SIGN THE VERIFICATION AND CERTIFICATION AGAINST FORUM SHOPPING IN BEHALF OF RESPONDENTS SHOULD ALSO BE RESOLVED DURING THE TRIAL TOGETHER WITH THE SUBSTANTIVE ISSUE RAISED BY Copyright 1994-2014

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PETITIONER. — The same is true with respect to the issue of whether Atty. Alonzo Ancheta was properly authorized to sign the verification and certification against forum shopping in behalf of respondents. This could be properly resolved during the trial together with the substantive issues raised by petitioner. Considering that the trial court correctly denied petitioner's motion for preliminary hearing on its affirmative defenses with motion to dismiss, there exists no reason to compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it 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 or to act at all in contemplation of law. None of these was committed by the trial court; hence, the Court of Appeals correctly dismissed the petition.

DECISION

YNARES-SANTIAGO, J : p

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the November 28, 2002 Decision 1(1) of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner, as well as the Resolution 2(2) dated February 13, 2003 denying its motion for reconsideration. The undisputed facts show that on November 26, 1998, respondents Montres Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device, filed against petitioner 246 Corporation the instant suit for trademark infringement and damages with prayer for the issuance of a restraining order or writ of preliminary injunction 3(3) before the Regional Trial Court of Quezon City, Branch 90. Respondents alleged that sometime in July 1996, petitioner adopted and, since then, has been using without authority the mark "Rolex" in its business name "Rolex Music Lounge" as well as in its newspaper advertisements as — "Rolex Music Lounge, KTV, Disco & Party Club." Copyright 1994-2014

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In its answer raising special affirmative defenses, petitioner argued that respondents have no cause of action because no trademark infringement exist; that no confusion would arise from the use by petitioner of the mark "Rolex" considering that its entertainment business is totally unrelated to the items catered by respondents such as watches, clocks, bracelets and parts thereof. It also contended that the complaint was not properly verified and certified against forum shopping considering that Atty. Alonzo Ancheta, the counsel of record of respondents who signed the verification and certification, was not authorized to represent respondents. 4(4) On July 21, 2000, petitioner filed a motion for preliminary hearing on its affirmative defenses. 5(5) Subsequently, on motion of petitioner, the trial court issued a subpoena ad testificandum requiring Atty. Alonzo Ancheta to appear at the preliminary hearing. 6(6) Respondents, in the meantime, filed a Comment and Opposition 7(7) to the motion for preliminary hearing and a motion to quash the subpoena ad testificandum. In an Order dated October 27, 2000, the trial court quashed the subpoena ad testificandum and denied petitioner's motion for preliminary hearing on affirmative defenses with motion to dismiss. 8(8) With the denial of the motion for reconsideration on March 16, 2001, petitioner filed a petition for certiorari with the Court of Appeals contending that the trial court gravely abused its discretion in issuing the October 27, 2000 and March 16, 2001 orders. On November 28, 2002, the Court of Appeals dismissed the petition. The motion for reconsideration filed by petitioner was denied. Hence, the instant petition anchored on the following grounds: I IN ISSUING THE ASSAILED DECISIONS, THE HONORABLE COURT OF APPEALS PERFUNCTORILY BRUSHED ASIDE THE CONTROLLING PRECEDENTS LAID DOWN BY THIS HONORABLE COURT IN ESSO STANDARD EASTERN, INC. VS. COURT OF APPEALS AND UNITED CIGARETTE CORPORATION AND OTHER COMPANION CASES HOLDING THAT NO TRADEMARK INFRINGEMENT CAN POSSIBLY OCCUR WHERE THE CONTENDING PARTIES DEAL WITH GOODS AND SERVICES THAT ARE TOTALLY UNRELATED AND NON-COMPETING WITH EACH OTHER. Copyright 1994-2014

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II IN ARBITRARILY AND CAPRICIOUSLY RULING THAT THE ISSUES RAISED IN PETITIONER'S CERTIORARI PETITION ARE QUESTIONS OF FACT, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS BUT ALSO THE WELL-SETTLED RULE THAT THE ALLEGATIONS OF THE COMPLAINT IS HYPOTHETICALLY ADMITTED WHEN THE MOTION TO DISMISS IS GROUNDED UPON LACK OF CAUSE OF ACTION. MOREOVER, INDEPENDENT OF THE HYPOTHETICALLY ADMITTED FACTS EMBODIED IN THE COMPLAINT A QUO, THERE ARE SELF-EVIDENT FACTS AND IMPLIEDLY ADMITTED FACTS CONTAINED IN PRIVATE RESPONDENTS' PLEADINGS THAT WOULD CLEARLY AND UNMISTAKABLY SHOW PRIVATE RESPONDENTS' LACK OF CAUSE OF ACTION AGAINST HEREIN PETITIONER. III THE HONORABLE COURT OF APPEALS VIOLATED PETITIONER'S RIGHT TO SUBSTANTIVE DUE PROCESS WHEN IT ARBITRARILY AND CAPRICIOUSLY RULED THAT WHAT WAS SPECIFICALLY DENIED IN THE ASSAILED OCTOBER 20, 2000 ORDER IS PETITIONER'S MOTION FOR PRELIMINARY HEARING ON DEFENDANT'S AFFIRMATIVE DEFENSES AND NOT PETITIONER'S MOTION TO DISMISS PER SE CONSIDERING THAT: A.

THERE IS ABSOLUTELY NOTHING IN THE ORDER DATED OCTOBER 20, 2000 OF RESPONDENT JUDGE WHICH SUGGESTS THAT THE RESOLUTION OF PETITIONER'S MOTION TO DISMISS PER SE WAS HELD IN ABEYANCE BY THE RESPONDENT JUDGE. HENCE THE SAID ORDER DATED OCTOBER 20, 2000 ALSO CONSTITUTES A DENIAL ON THE MERITS OF PETITIONER'S MOTION TO DISMISS PER SE AND NOT MERELY OF PETITIONER'S MOTION FOR PRELIMINARY HEARING THEREON.

B.

PRIVATE RESPONDENTS' COMMENT AND OPPOSITION DATED 11 AUGUST 2000, WHICH WAS CITED AND SUSTAINED BY RESPONDENT JUDGE, CLEARLY TRAVERSED THE MERITS OF THE GROUNDS FOR PETITIONER'S MOTION TO DISMISS PER SE. HENCE, THE SAID 20 OCTOBER 2000 ORDER'S DENIAL OF PETITIONER'S MOTION IS NOT LIMITED TO THE MOTION FOR PRELIMINARY HEARING BUT ALSO CONSTITUTES A DENIAL

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OF PETITIONER'S MOTION TO DISMISS PER SE. IV IN ARBITRARILY AND CAPRICIOUSLY RULING THAT ATTY. ALONZO ANCHETA PROPERLY VERIFIED AND CERTIFIED PRIVATE RESPONDENTS' COMPLAINT A QUO, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONER'S SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO THE DOCTRINE OF SEPARATE CORPORATE PERSONALITY; CONSIDERING THAT THE RECORDS OF THIS CASE IS (sic) COMPLETELY BEREFT AND DEVOID OF ANY DULY EXECUTED SPECIAL POWER OF ATTORNEY, EMANATING FROM PRIVATE RESPONDENTS, WHICH EXPLICITLY AND SPECIFICALLY AUTHORIZES ATTY. ALONZO ANCHETA TO REPRESENT PRIVATE RESPONDENTS MONTRES ROLEX S.A. IN THE FILING OF THE COMPLAINT A QUO. BY REASON THEREOF, PRIVATE RESPONDENTS COULD NOT BE DEEMED TO HAVE VOLUNTARILY APPEARED BEFORE THE RESPONDENT JUDGE; CONSEQUENTLY, THE TRIAL COURT COULD NOT HAVE VALIDLY ACQUIRED JURISDICTION OVER THE PERSON OF PRIVATE RESPONDENTS. V IN ARBITRARILY AND CAPRICIOUSLY AFFIRMING RESPONDENT JUDGE'S QUASHAL OF THE SUBPOENA DATED 14 AUGUST 2000 DIRECTED AGAINST ATTY. ALONZO ANCHETA, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONER'S SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO SECTION 9, RULE 132 AND SECTION 7 RULE 133 OF THE 1989 REVISED RULES ON EVIDENCE, AND THE RULING OF THIS HONORABLE COURT IN THE CASE OF PEOPLE VS. RIVERA. 9(9)

Simply put, the issues are as follows — (1) whether the trial court denied not only petitioner's motion for preliminary hearing on its affirmative defenses but its motion to dismiss as well; (2) if the answer is in the affirmative, whether or not the trial court gravely abused its discretion in denying said motions; and (3) whether the trial court gravely abused its discretion in quashing the subpoena ad testificandum issued against Atty. Ancheta. Anent the first issue, we find that what was denied in the order dated October 27, 2000 was not only the motion for preliminary hearing but the motion to dismiss as well. A reading of the dispositive portion of said order shows that the trial court Copyright 1994-2014

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neither qualified its denial nor held in abeyance the ruling on petitioner's motion to dismiss thus — IN VIEW OF THE FOREGOING, the aforecited Motion To Quash Subpoena Ad Testificandum is granted; and the aforecited Motion For Preliminary Hearing On Defendant's Affirmative Defenses With Motion To dismiss The Instant Complaint Based On Said Affirmative Defenses is denied. 10(10) (Emphasis supplied)

In issuing the assailed order, the trial court ruled on the merits of petitioner's Motion to Dismiss vis-à-vis respondents' Comment and Opposition which clearly traversed the affirmative defenses raised by petitioner, to wit: After carefully going over the pleadings, this Court finds, on the first motion that the arguments raised in the said motion and the reply filed in connection thereto appear to be meritorious; and on the second motion, that the arguments raised in the comments and opposition and the rejoinder filed by the plaintiffs likewise appear to be meritorious. 11(11)

Moreover, it is presumed that all matters within an issue raised in a case were passed upon by the court. In the absence of evidence to the contrary, the presumption is that the court a quo discharged its task properly. 12(12) In Municipality of Biñan Laguna v. Court of Appeals, 13(13) decided under the old Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule 16, Section 5, is not mandatory even when the same is prayed for. It rests largely on the sound discretion of the trial court, thus — SEC. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this Rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may he had thereon as if a motion to dismiss had been filed. (Emphasis supplied)

The use of the word "may" in the aforequoted provision shows that such a hearing is not a matter of right demandable from the trial court; it is not mandatory but discretionary. "May" is an auxiliary verb indicating liberty, opportunity, permission and possibility. 14(14) Such interpretation is specifically stated under the 1997 Rules of Civil Procedure. Rule 16, Section 6, now provides that a grant of a preliminary hearing rests on the sound discretion of the court, to wit — SEC. 6. Copyright 1994-2014

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to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. (Emphasis supplied)

In the case at bar, the Court of Appeals did not err in finding that no abuse of discretion could be ascribed to the trial court's denial of petitioner's motion for preliminary hearing on its affirmative defenses with motion to dismiss. The issue of whether or not a trademark infringement exists, is a question of fact that could best be determined by the trial court. Under the old Trademark Law 15(15) where the goods for which the identical marks are used are unrelated, there can be no likelihood of confusion and there is therefore no infringement in the use by the junior user of the registered mark on the entirely different goods. 16(16) This ruling, however, has been to some extent, modified by Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took effect on January 1, 1998. The said section reads: Sec. 123.

Registrability. — 123.1. A mark cannot be registered if it: xxx

xxx

xxx

(f) Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well-known in accordance with the preceding paragraph, which is registered in the Philippines with respect to goods or services which are not similar to those with respect to which registration is applied for: Provided, That use of the mark in relation to those goods or services would indicate a connection between those goods or services, and the owner of the registered mark: Provided, further, That the interest of the owner of the registered mark are likely to be damaged by such use; (Emphasis supplied)

A junior user of a well-known mark on goods or services which are not similar to the goods or services, and are therefore unrelated, to those specified in the certificate of registration of the well-known mark is precluded from using the same on the entirely unrelated goods or services, subject to the following requisites, to wit: 1. The mark is well-known internationally and in the Philippines. Under Rule 102 of the Rules and Regulations on Trademarks; Service Marks, Trade Names and Marked or Stamped Containers, 17(17) in determining whether a mark is well known, the following criteria or any combination thereof may be taken into account: Copyright 1994-2014

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(a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; (b) the market share in the Philippines and in other countries, of the goods and/or services to which the mark applies; (c)

the degree of the inherent or acquired distinction of the

(d)

the quality-image or reputation acquired by the mark;

(e)

the extent to which the mark has been registered in the

(f) the world;

the exclusivity of the registration attained by the mark in

mark;

world;

(g)

the extent to which the mark has been used in the world;

(h)

the exclusivity of use attained by the mark in the world;

(i)

the commercial value attributed to the mark in the world;

(j)

the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and (l) the presence of absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. 2. The use of the well-known mark on the entirely unrelated goods or services would indicate a connection between such unrelated goods or services and those goods or services specified in the certificate of registration in the well known mark. This requirement refers to the likelihood of confusion of origin or business or some business connection or relationship between the registrant and the user of the mark. 3. Copyright 1994-2014

The interests of the owner of the well-known mark are likely to be

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damaged. For instance, if the registrant will be precluded from expanding its business to those unrelated good, or services, or if the interests of the registrant of the well-known mark will be damaged because of the inferior quality of the good or services of the user. 18(18)

Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely unrelated to respondents' business involving watches, clocks, bracelets, etc. However, the Court cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f), which constitute the kernel issue at bar, clearly require determination facts of which need to be resolved at the trial court. The existence or absence of these requisites should be addressed in a full blown hearing and not on a mere preliminary hearing. The respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same. The same is true with respect to the issue of whether Atty. Alonzo Ancheta was properly authorized to sign the verification and certification against forum shopping in behalf of respondents. This could be properly resolved during the trial together with the substantive issues raised by petitioner. Considering that the trial court correctly denied petitioner's motion for preliminary hearing on its affirmative defenses with motion to dismiss, there exists no reason to compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it 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 or to act at all in contemplation of law. None of these was committed by the trial court; hence, the Court of Appeals correctly dismissed the petition. WHEREFORE, in view of all the foregoing, the petition for review on certiorari filed by petitioner is DENIED. The November 28, 2002 Decision and the February 13, 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner are AFFIRMED. DAEaTS

SO ORDERED. Copyright 1994-2014

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Davide, Jr., C .J ., Panganiban, Carpio and Azcuna, JJ ., concur. )RRWQRWHV 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

17. 18.

Rollo, p. 51, penned by Associate Justice Romeo A. Brawner and concurred in by Associate Justices Bienvenido L. Reyes and Danilo B. Pine. Rollo, p. 61. Docketed as Civil Case No. Q-98-36172, Rollo, p. 62. Answer, Rollo, pp. 138–139; See also pp. 134–137. Rollo, p. 147. Petition, Rollo, p. 10. Rollo, p. 170. Rollo, p. 214. Petition, pp. 17–19. Op. cit., note 8. Id. Spouses Vicky Tan Toh v. Solid Bank Corporation, G.R. No. 154183, 7 August 2003. G.R. No. 94733, 17 February 1993, 219 SCRA 69. Municipality of Binan Laguna, supra, pp. 75–76. Republic Act No. 166. Esso Standard Eastern, Inc. v. Court of Appeals, 201 Phil. 803 (1982); Hickok, Manufacturing Co., Inc. v. Court of Appeals, 201 Phil. 853 (1982); Faberge, Inc. v. Intermediate Appellate Court, G.R. No. 71189, 4 November 1992, 215 SCRA 316. Amended by Office Order No. 17 dated 1 December 1998. Ruben E. Agpalo, The Law on Trademark Infringement and Unfair Competition, 2000 Edition, pp. 168–170.

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SECOND DIVISION [G.R. No. 185917. June 1, 2011.] FREDCO MANUFACTURING CORPORATION, petitioner, YV. PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), respondents.

DECISION

CARPIO, J : p

The Case Before the Court is a petition for review 1(1) assailing the 24 October 2008 Decision 2(2) and 8 January 2009 Resolution 3(3) of the Court of Appeals in CA-G.R. SP No. 103394. The Antecedent Facts On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and existing under the laws of the Philippines, filed a Petition for Cancellation of Registration No. 56561 before the Bureau of Legal Affairs of the Intellectual Property Office (IPO) against respondents President and Fellows of Harvard College (Harvard University), a corporation organized and existing under the laws of Massachusetts, United States of America. The case was docketed as Inter Partes Case No. 14-2005-00094. Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for the mark "Harvard Veritas Shield Symbol" for decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs under Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and Services. Fredco alleged that the mark "Harvard" for t-shirts, polo shirts, sandos, briefs, jackets and Copyright 1994-2014

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slacks was first used in the Philippines on 2 January 1982 by New York Garments Manufacturing & Export Co., Inc. (New York Garments), a domestic corporation and Fredco's predecessor-in-interest. On 24 January 1985, New York Garments filed for trademark registration of the mark "Harvard" for goods under Class 25. The application matured into a registration and a Certificate of Registration was issued on 12 December 1988, with a 20-year term subject to renewal at the end of the term. The registration was later assigned to Romeo Chuateco, a member of the family that owned New York Garments. CEASaT

Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9 November 1995 and had since then handled the manufacture, promotion and marketing of "Harvard" clothing articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard University, New York Garments had already registered the mark "Harvard" for goods under Class 25. Fredco alleged that the registration was cancelled on 30 July 1998 when New York Garments inadvertently failed to file an affidavit of use/non-use on the fifth anniversary of the registration but the right to the mark "Harvard" remained with its predecessor New York Garments and now with Fredco. Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark "Harvard" in numerous countries worldwide, including the Philippines. Among the countries where Harvard University has registered its name and mark "Harvard" are: 1.

Argentina

2.

Benelux 4(4)

3.

Brazil

4.

Canada

5.

Chile

6.

China P.R.

7.

Colombia

8.

Costa Rica

9.

Cyprus

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10.

Czech Republic

11.

Denmark

12.

Ecuador

13.

Egypt

14.

Finland

15.

France

16.

Great Britain

17.

Germany

18.

Greece

19.

Hong Kong

20.

India

21.

Indonesia

22.

Ireland

23.

Israel

24.

Italy

25.

Japan

26.

South Korea

27.

Malaysia

28.

Mexico

29.

New Zealand

30.

Norway

31.

Peru

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32.

Philippines

33.

Poland

34.

Portugal

35.

Russia

36.

South Africa

37.

Switzerland

38.

Singapore

39.

Slovak Republic

40.

Spain

41.

Sweden

42.

Taiwan

43.

Thailand

44.

Turkey

45.

United Arab Emirates

46.

Uruguay

47.

United States of America

48.

Venezuela

49.

Zimbabwe

50.

European Community 5(5)

TaCSAD

The name and mark "Harvard" was adopted in 1639 as the name of Harvard College 6(6) of Cambridge, Massachusetts, U.S.A. The name and mark "Harvard" was allegedly used in commerce as early as 1872. Harvard University is over 350 years old and is a highly regarded institution of higher learning in the United States and throughout the world. Harvard University promotes, uses, and advertises its name "Harvard" through Copyright 1994-2014

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various publications, services, and products in foreign countries, including the Philippines. Harvard University further alleged that the name and the mark have been rated as one of the most famous brands in the world, valued between US$750,000,000 and US$1,000,000,000. Harvard University alleged that in March 2002, it discovered, through its international trademark watch program, Fredco's website www.harvard-usa.com. The website advertises and promotes the brand name "Harvard Jeans USA" without Harvard University's consent. The website's main page shows an oblong logo bearing the mark "Harvard Jeans USA®," "Established 1936," and "Cambridge, Massachusetts." On 20 April 2004, Harvard University filed an administrative complaint against Fredco before the IPO for trademark infringement and/or unfair competition with damages. Harvard University alleged that its valid and existing certificates of trademark registration in the Philippines are: 1.

Trademark Registration No. 56561 issued on 25 November 1993 for "Harvard Veritas Shield Design" for goods and services in Classes 16, 18, 21, 25 and 28 (decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs) of the Nice International Classification of Goods and Services;

2.

Trademark Registration No. 57526 issued on 24 March 1994 for "Harvard Veritas Shield Symbol" for services in Class 41; Trademark Registration No. 56539 issued on 25 November 1998 for "Harvard" for services in Class 41; and

3.

Trademark Registration No. 66677 issued on 8 December 1998 for "Harvard Graphics" for goods in Class 9. Harvard University further alleged that it filed the requisite affidavits of use for the mark "Harvard Veritas Shield Symbol" with the IPO.

Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for "Harvard Medical International & Shield Design" for services in Classes 41 and 44. In 1989, Harvard University established the Harvard Trademark Licensing Program, operated by the Office for Technology and Trademark Licensing, to oversee and manage the worldwide licensing of the "Harvard" name and trademarks for various goods and services. Harvard University stated that it never authorized or licensed any person to use its name and mark "Harvard" in connection Copyright 1994-2014

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with any goods or services in the Philippines.

DcaSIH

In a Decision 7(7) dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal Affairs, IPO cancelled Harvard University's registration of the mark "Harvard" under Class 25, as follows: WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED. Consequently, Trademark Registration Number 56561 for the trademark "HARVARD VE RI TAS 'SHIELD' SYMBOL" issued on November 25, 1993 to PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY) should be CANCELLED only with respect to goods falling under Class 25. On the other hand, considering that the goods of Respondent-Registrant falling under Classes 16, 18, 21 and 28 are not confusingly similar with the Petitioner's goods, the Respondent-Registrant has acquired vested right over the same and therefore, should not be cancelled. Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for the trademark "HARVARD VE RI TAS 'SHIELD' SYMBOL", subject matter of this case together with a copy of this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action. SO ORDERED. 8(8)

Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision 9(9) dated 21 April 2008, the Office of the Director General, IPO reversed the decision of the Bureau of Legal Affairs, IPO. The Director General ruled that more than the use of the trademark in the Philippines, the applicant must be the owner of the mark sought to be registered. The Director General ruled that the right to register a trademark is based on ownership and when the applicant is not the owner, he has no right to register the mark. The Director General noted that the mark covered by Harvard University's Registration No. 56561 is not only the word "Harvard" but also the logo, emblem or symbol of Harvard University. The Director General ruled that Fredco failed to explain how its predecessor New York Garments came up with the mark "Harvard." In addition, there was no evidence that Fredco or New York Garments was licensed or authorized by Harvard University to use its name in commerce or for any other use. The dispositive portion of the decision of the Office of the Director General, IPO reads: WHEREFORE, premises considered, the instant appeal is GRANTED. Copyright 1994-2014

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The appealed decision is hereby REVERSED and SET ASIDE. Let a copy of this Decision as well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks and the Administrative, Financial and Human Resources Development Services Bureau, and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. aIcETS

SO ORDERED. 10(10)

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director General. The Decision of the Court of Appeals In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General of the IPO. The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter correctly set aside the cancellation by the Director of the Bureau of Legal Affairs of Harvard University's trademark registration under Class 25. The Court of Appeals ruled that Harvard University was able to substantiate that it appropriated and used the marks "Harvard" and "Harvard Veritas Shield Symbol" in Class 25 way ahead of Fredco and its predecessor New York Garments. The Court of Appeals also ruled that the records failed to disclose any explanation for Fredco's use of the name and mark "Harvard" and the words "USA," "Established 1936," and "Cambridge, Massachusetts" within an oblong device, "US Legend" and "Europe's No. 1 Brand." Citing Shangri-La International Hotel Management, Ltd. v Developers Group of Companies, Inc., 11(11) the Court of Appeals ruled: One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be coming to court with unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely take advantage of the goodwill established by the true owner. 12(12)

The dispositive portion of the decision of the Court of Appeals reads: WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated April 21, 2008 of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes Case No. 14-2005-00094 is hereby AFFIRMED. Copyright 1994-2014

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SO ORDERED. 13(13)

Fredco filed a motion for reconsideration. In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of merit. Hence, this petition before the Court.

CaAcSE

The Issue The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of the Office of the Director General of the IPO. The Ruling of this Court The petition has no merit. There is no dispute that the mark "Harvard" used by Fredco is the same as the mark "Harvard" in the "Harvard Veritas Shield Symbol" of Harvard University. It is also not disputed that Harvard University was named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge, Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark "Harvard" in commerce since 1872. It is also established that Harvard University has been using the marks "Harvard" and "Harvard Veritas Shield Symbol" for Class 25 goods in the United States since 1953. Further, there is no dispute that Harvard University has registered the name and mark "Harvard" in at least 50 countries. On the other hand, Fredco's predecessor-in-interest, New York Garments, started using the mark "Harvard" in the Philippines only in 1982. New York Garments filed an application with the Philippine Patent Office in 1985 to register the mark "Harvard," which application was approved in 1988. Fredco insists that the date of actual use in the Philippines should prevail on the issue of who has the better right to register the marks. Under Section 2 of Republic Act No. 166, 14(14) as amended (R.A. No. 166), before a trademark can be registered, it must have been actually used in commerce for not less than two months in the Philippines prior to the filing of an application for its registration. While Harvard University had actual prior use of its marks abroad for a long time, it did not have actual prior use in the Philippines of the mark "Harvard Veritas Shield Symbol" before its application for registration of the mark "Harvard" Copyright 1994-2014

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with the then Philippine Patents Office. However, Harvard University's registration of the name "Harvard" is based on home registration which is allowed under Section 37 of R.A. No. 166. 15(15) As pointed out by Harvard University in its Comment: Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that the applicant thereof must prove that the same has been actually in use in commerce or services for not less than two (2) months in the Philippines before the application for registration is filed, where the trademark sought to be registered has already been registered in a foreign country that is a member of the Paris Convention, the requirement of proof of use in the commerce in the Philippines for the said period is not necessary. An applicant for registration based on home certificate of registration need not even have used the mark or trade name in this country. 16(16)

Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard University's registration "is based on 'home registration' for the mark 'Harvard Veritas Shield' for Class 25." 17(17) HESIcT

In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293), "[m]arks registered under Republic Act No. 166 shall remain in force but shall be deemed to have been granted under this Act . . .," which does not require actual prior use of the mark in the Philippines. Since the mark "Harvard Veritas Shield Symbol" is now deemed granted under R.A. No. 8293, any alleged defect arising from the absence of actual prior use in the Philippines has been cured by Section 239.2. 19(19) In addition, Fredco's registration was already cancelled on 30 July 1998 when it failed to file the required affidavit of use/non-use for the fifth anniversary of the mark's registration. Hence, at the time of Fredco's filing of the Petition for Cancellation before the Bureau of Legal Affairs of the IPO, Fredco was no longer the registrant or presumptive owner of the mark "Harvard." 18(18)

There are two compelling reasons why Fredco's petition must fail. First, Fredco's registration of the mark "Harvard" and its identification of origin as "Cambridge, Massachusetts" falsely suggest that Fredco or its goods are connected with Harvard University, which uses the same mark "Harvard" and is also located in Cambridge, Massachusetts. This can easily be gleaned from the following oblong logo of Fredco that it attaches to its clothing line:

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Fredco's registration of the mark "Harvard" should not have been allowed because Section 4 (a) of R.A. No. 166 prohibits the registration of a mark "which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs . . . ." Section 4 (a) of R.A. No. 166 provides: Section 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-mark, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, a trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: (a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute; (b)

. . . (emphasis supplied)

Fredco's use of the mark "Harvard," coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a false connection with Harvard University. On this ground alone, Fredco's registration of the mark "Harvard" should have been disallowed. EcDATH

Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in 1936, or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of Appeals or to the IPO Copyright 1994-2014

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why it used the mark "Harvard" on its oblong logo with the words "Cambridge, Massachusetts," "Established in 1936," and "USA." Fredco now claims before this Court that it used these words "to evoke a 'lifestyle' or suggest a 'desirable aura' of petitioner's clothing lines." Fredco's belated justification merely confirms that it sought to connect or associate its products with Harvard University, riding on the prestige and popularity of Harvard University, and thus appropriating part of Harvard University's goodwill without the latter's consent. Section 4 (a) of R.A. No. 166 is identical to Section 2 (a) of the Lanham Act, the trademark law of the United States. These provisions are intended to protect the right of publicity of famous individuals and institutions from commercial exploitation of their goodwill by others. 21(21) What Fredco has done in using the mark "Harvard" and the words "Cambridge, Massachusetts," "USA" to evoke a "desirable aura" to its products is precisely to exploit commercially the goodwill of Harvard University without the latter's consent. This is a clear violation of Section 4 (a) of R.A. No. 166. Under Section 17 (c) 22(22) of R.A. No. 166, such violation is a ground for cancellation of Fredco's registration of the mark "Harvard" because the registration was obtained in violation of Section 4 of R.A. No. 166. 20(20)

acHTIC

Second, the Philippines and the United States of America are both signatories to the Paris Convention for the Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state: ARTICLE 6bis (i) 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 or a mark considered by the competent authority of the 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. 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. (Emphasis supplied) Copyright 1994-2014

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Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine nationals. 23(23)

Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows: Section 37. 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 any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. xxx

xxx

xxx

Trade-names 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 parts of marks. 24(24) DcSACE

xxx

xxx

xxx (Emphasis supplied)

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name forms part of a trademark, is protected "without the obligation of filing or registration." "Harvard" is the trade name of the world famous Harvard University, and it is also a trademark of Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its trade name "Harvard" even without registration of such trade name in the Philippines. This means that no educational entity in the Philippines can use the trade name "Harvard" without the consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark "Harvard," that its products or services are authorized, approved, or licensed by, or sourced from, Harvard University without the latter's consent. Article 6bis of the Paris Convention has been administratively implemented in Copyright 1994-2014

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the Philippines through two directives of the then Ministry (now Department) of Trade, which directives were upheld by this Court in several cases. 25(25) On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued a Memorandum directing the Director of Patents to reject, pursuant to the Paris Convention, all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners. 26(26) The Memorandum states: Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed 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, 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. You are also required to submit to the undersigned a progress report on the matter. For immediate compliance. 27(27)

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of Patents to implement measures necessary to comply with the Philippines' obligations under the Paris Convention, thus: EScaIT

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 Copyright 1994-2014

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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. xxx

xxx

xxx 28(28) (Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is that the trademark to be protected must he "well-known" in the country where protection is sought. 29(29) The Court declared that the power to determine whether a trademark is well-known lies in the competent authority of the country of registration or use. 30(30) The Court then stated that the competent authority would either be the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before the courts. 31(31) caEIDA

To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need not be registered or used in the Philippines. 32(32) All that is required is that the mark is well-known internationally and in the Copyright 1994-2014

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Philippines for identical or similar goods, whether or not the mark is registered or used in the Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.: 33(33) The fact that respondent's marks are neither registered nor used in the Philippines is of no moment. The scope of protection initially afforded by Article 6bis of the Paris Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a well-known mark should be protected in a country even if the mark is neither registered nor used in that country. Part I, Article 2(3) thereof provides: (3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for determining whether a mark is a well-known mark: (i) that the mark has been used in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, the Member State; (ii) that the mark is well known in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, any jurisdiction other than the Member State; or (iii) that the mark is well known by the public at large in the Member State. 34(34) (Italics in the original decision; boldface supplied)

Indeed, Section 123.1 (e) of R.A. No. 8293 now categorically states that "a mark which is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is registered here," cannot be registered by another in the Philippines. Section 123.1 (e) does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines. Moreover, Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, which implement R.A. No. 8293, provides: Rule 102. Criteria for determining whether a mark is well-known. In determining whether a mark is well-known, the following criteria or any combination thereof may be taken into account: CSTHca

(a) Copyright 1994-2014

the duration, extent and geographical area of any use of the mark,

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in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; (b) the market share, in the Philippines and in other countries, of the goods and/or services to which the mark applies; (c)

the degree of the inherent or acquired distinction of the mark;

(d)

the quality-image or reputation acquired by the mark;

(e)

the extent to which the mark has been registered in the world;

(f)

the exclusivity of registration attained by the mark in the world;

(g)

the extent to which the mark has been used in the world;

(h)

the exclusivity of use attained by the mark in the world;

(i)

the commercial value attributed to the mark in the world;

(j)

the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and (l) the presence or absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. (Emphasis supplied)

Since "any combination" of the foregoing criteria is sufficient to determine that a mark is well-known, it is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally well-known marks are the exceptions to this rule. In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found that: Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard University, a recognized and respected institution of higher learning located in Cambridge, Massachusetts, U.S.A. Initially referred to simply as "the new college," the institution was named Copyright 1994-2014

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"Harvard College" on 13 March 1639, after its first principal donor, a young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard bequeathed about four hundred books in his will to form the basis of the college library collection, along with half his personal wealth worth several hundred pounds. The earliest known official reference to Harvard as a "university" rather than "college" occurred in the new Massachusetts Constitution of 1780. IcTaAH

Records also show that the first use of the name HARVARD was in 1638 for educational services, policy courses of instructions and training at the university level. It has a Charter. Its first commercial use of the name or mark HARVARD for Class 25 was on 31 December 1953 covered by UPTON Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that the Appellate may have used the mark HARVARD in the Philippines ahead of the Appellant, it still cannot be denied that the Appellant's use thereof was decades, even centuries, ahead of the Appellee's. More importantly, the name HARVARD was the name of a person whose deeds were considered to be a cornerstone of the university. The Appellant's logos, emblems or symbols are owned by Harvard University. The name HARVARD and the logos, emblems or symbols are endemic and cannot be separated from the institution. 35(35)

Finally, in its assailed Decision, the Court of Appeals ruled: Records show that Harvard University is the oldest and one of the foremost educational institutions in the United States, it being established in 1636. It is located primarily in Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to the college his books and half of his estate. The mark "Harvard College" was first used in commerce in the United States in 1638 for educational services, specifically, providing courses of instruction and training at the university level (Class 41). Its application for registration with the United States Patent and Trademark Office was filed on September 20, 2000 and it was registered on October 16, 2001. The marks "Harvard" and "Harvard Veritas 'Shield' Symbol" were first used in commerce in the the United States on December 31, 1953 for athletic uniforms, boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant jackets, leather jackets, night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications for registration with the USPTO were filed on September 9, 1996, the mark "Harvard" was registered on December 9, 1997 and the mark "Harvard Veritas 'Shield' Symbol" was registered on September 30, 1997. 36(36) Copyright 1994-2014

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We also note that in a Decision 37(37) dated 18 December 2008 involving a separate case between Harvard University and Streetward International, Inc., 38(38) the Bureau of Legal Affairs of the IPO ruled that the mark "Harvard" is a "well-known mark." This Decision, which cites among others the numerous trademark registrations of Harvard University in various countries, has become final and executory. SCEDAI

There is no question then, and this Court so declares, that "Harvard" is a well-known name and mark not only in the United States but also internationally, including the Philippines. The mark "Harvard" is rated as one of the most famous marks in the world. It has been registered in at least 50 countries. It has been used and promoted extensively in numerous publications worldwide. It has established a considerable goodwill worldwide since the founding of Harvard University more than 350 years ago. It is easily recognizable as the trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A., internationally known as one of the leading educational institutions in the world. As such, even before Harvard University applied for registration of the mark "Harvard" in the Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention. Again, even without applying the Paris Convention, Harvard University can invoke Section 4 (a) of R.A. No. 166 which prohibits the registration of a mark "which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs . . . ." WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 103394. SO ORDERED. Nachura, Peralta, Abad and Mendoza, JJ., concur. )RRWQRWHV 1. 2. 3.

4. 5. 6. 7.

Under Rule 45 of the 1997 Rules of Civil Procedure. Rollo, pp. 103-116. Penned by Associate Justice Remedios A. Salazar-Fernando with Associate Justices Rosalinda Asuncion-Vicente and Ramon M. Bato, Jr., concurring. Id. at 118-119. Penned by Associate Justice Remedios A. Salazar-Fernando with Associate Justices Arcangelita M. Romilla-Lontok and Ramon M. Bato, Jr., concurring. Belgium, the Netherlands and Luxembourg. Exhibits "5" to "5-r." Rollo, pp. 288-306. Originally called "New College," founded in 1636. Rollo, p. 129. Id. at 135-156.

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8. 9. 10. 11. 12. 13. 14.

15. 16. 17. 18. 19. 20. 21. 22.

23. 24. 25.

26. 27. 28. 29. 30. 31. 32.

Id. at 156. Id. at 121-133. Penned by Director General Adrian S. Cristobal, Jr. Id. at 133. G.R. No. 159938, 31 March 2006, 486 SCRA 405. Rollo, p. 114. Id. at 115-116. An Act to Provide for the Registration and Protection of Trade-Marks, Trade-Names and Service-Marks, Defining Unfair Competition and False Markings and Providing Remedies Against the Same, and for Other Purposes. Decision of the Bureau of Legal Affairs, rollo, p. 154; Decision of the Director General, rollo, p. 122. Id. at 157. Id. at 122. Intellectual Property Code. Harvard University filed Affidavits of Use for the 5th and 10th Anniversaries of Registration No. 56561. Decision of the Director General, rollo, p. 132. Roger E. Schechter and John R. Thomas, INTELLECTUAL PROPERTY: THE LAW OF COPYRIGHTS, PATENTS AND TRADEMARKS (2003), p. 603. Id. at 263. Section 17 (c) of R.A. No. 166, as amended, provides: "Grounds for cancellation. — Any person, who believes that he is or will be damaged by the registration of a mark or trade-name, may, upon the payment of the prescribed fee, apply to cancel said registration upon any of the following grounds: (a) . . . xxx xxx xxx (c) That the registration was obtained fraudulently or contrary to the provisions of section four, Chapter II hereof; xxx xxx xxx." (Emphasis supplied) See La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., 214 Phil. 332 (1984). The original version of R.A. No. 166 already contains this provision. Mirpuri v. Court of Appeals, 376 Phil. 628 (1999); Puma Sportschuhfabriken Rudolf Dassler, K.G. v. IAC, 241 Phil. 1029 (1988); La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., supra note 23. Mirpuri v. Court of Appeals, id. Id. at 656-657. Id. at 658-659. Also cited in La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., supra note 23. Id. at 656. Id. Id. Sehwani, Incorporated v. In-N-Out Burger, Inc., G.R. No. 171053, 15 October 2007, 536 SCRA 225.

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33. 34. 35. 36. 37. 38.

Id. Id. at 240. Rollo, pp. 129-130. Id. at 112-113. Id. at 1251-1263. Penned by Bureau of Legal Affairs Director Estrellita Beltran-Abelardo. IPC No. 14-2008-00107; Decision No. 2008-232.

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THIRD DIVISION [G.R. No. 180073. November 25, 2009.] PROSOURCE INTERNATIONAL, INC., petitioner, YV. HORPHAG RESEARCH MANAGEMENT SA, respondent.

DECISION

NACHURA, J : p

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Court of Appeals (CA) Decision 1(1) dated July 27, 2007 and Resolution 2(2) dated October 15, 2007 in CA-G.R. CV No. 87556. The assailed decision affirmed the Regional Trial Court (RTC) 3(3) Decision 4(4) dated January 16, 2006 and Order 5(5) dated May 3, 2006 in Civil Case No. 68048; while the assailed resolution denied petitioner's motion for reconsideration. The facts are as follows: Respondent Horphag Research Management SA is a corporation duly organized and existing under the laws of Switzerland and the owner 6(6) of trademark PYCNOGENOL, a food supplement sold and distributed by Zuellig Pharma Corporation. Respondent later discovered that petitioner Prosource International, Inc. was also distributing a similar food supplement using the mark PCO-GENOLS since 1996. 7(7) This prompted respondent to demand that petitioner cease and desist from using the aforesaid mark. 8(8) Without notifying respondent, petitioner discontinued the use of, and withdrew from the market, the products under the name PCO-GENOLS as of June 19, 2000. It, likewise, changed its mark from PCO-GENOLS to PCO-PLUS. 9(9) On August 22, 2000, respondent filed a Complaint Copyright 1994-2014

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for Infringement of 1

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Trademark with Prayer for Preliminary Injunction against petitioner, praying that the latter cease and desist from using the brand PCO-GENOLS for being confusingly similar with respondent's trademark PYCNOGENOL. It, likewise, prayed for actual and nominal damages, as well as attorney's fees. 11(11) In its Answer, 12(12) petitioner contended that respondent could not file the infringement case considering that the latter is not the registered owner of the trademark PYCNOGENOL, but one Horphag Research Limited. It, likewise, claimed that the two marks were not confusingly similar. Finally, it denied liability, since it discontinued the use of the mark prior to the institution of the infringement case. Petitioner thus prayed for the dismissal of the complaint. By way of counterclaim, petitioner prayed that respondent be directed to pay exemplary damages and attorney's fees. 13(13) CIaDTE

During the pre-trial, the parties admitted the following: 1. Defendant [petitioner] is a corporation duly organized and existing under the laws of the Republic of the Philippines with business address at No. 7 Annapolis Street, Greenhills, San Juan, Metro Manila; 2. The trademark PYCNOGENOL of the plaintiff is duly registered with the Intellectual Property Office but not with the Bureau of Food and Drug (BFAD). 3. The defendant's product PCO-GENOLS is duly registered with the BFAD but not with the Intellectual Property Office (IPO). 4. The defendant corporation discontinued the use of and had withdrawn from the market the products under the name of PCO-GENOLS as of June 19, 2000, with its trademark changed from PCO-GENOLS to PCO-PLUS. 5. Plaintiff corporation sent a demand letter to the defendant dated 02 June 2000. 14(14)

On January 16, 2006, the RTC decided in favor of respondent. It observed that PYCNOGENOL and PCO-GENOLS have the same suffix "GENOL" which appears to be merely descriptive and thus open for trademark registration by combining it with other words. The trial court, likewise, concluded that the marks, when read, sound similar, and thus confusingly similar especially since they both refer to food supplements. The court added that petitioner's liability was not negated by its act of pulling out of the market the products bearing the questioned mark since the fact remains that from 1996 until June 2000, petitioner had infringed respondent's product Copyright 1994-2014

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by using the trademark PCO-GENOLS. As respondent manifested that it was no longer interested in recovering actual damages, petitioner was made to answer only for attorney's fees amounting to P50,000.00. 15(15) For lack of sufficient factual and legal basis, the court dismissed petitioner's counterclaim. Petitioner's motion for reconsideration was likewise denied. On appeal to the CA, petitioner failed to obtain a favorable decision. The appellate court explained that under the Dominancy or the Holistic Test, PCO-GENOLS is deceptively similar to PYCNOGENOL. It also found just and equitable the award of attorney's fees especially since respondent was compelled to litigate. 16(16) Hence, this petition, assigning the following errors: I.

THAT THE COURT OF APPEALS ERRED IN AFFRIMING THE RULING OF THE LOWER [COURT] THAT RESPONDENT'S TRADEMARK P[YC]NOGENOLS (SIC) WAS INFRINGED BY PETITIONER'S PCO-GENOLS.

II.

THAT THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ATTORNEY'S FEES IN FAVOR OF RESPONDENT HORPHAG RESEARCH MANAGEMENT S.A. IN THE AMOUNT OF Php50,000.00. 17(17)

The petition is without merit. It must be recalled that respondent filed a complaint for trademark infringement against petitioner for the latter's use of the mark PCO-GENOLS which the former claimed to be confusingly similar to its trademark PYCNOGENOL. Petitioner's use of the questioned mark started in 1996 and ended in June 2000. The instant case should thus be decided in light of the provisions of Republic Act (R.A.) No. 166 18(18) for the acts committed until December 31, 1997, and R.A. No. 8293 19(19) for those committed from January 1, 1998 until June 19, 2000. SHECcD

A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others. Inarguably, a trademark deserves protection. 20(20) Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define what constitutes trademark infringement, as follows: Copyright 1994-2014

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Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy of colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Sec. 155. Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark: 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.

In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, the following constitute the elements of trademark infringement: ICacDE

(a) A trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office[;] (b) Copyright 1994-2014

[It] is used by another person in connection with the sale, offering

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for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers[;] (c)

[T]he trademark is used for identical or similar goods[;] and

(d) [S]uch act is done without the consent of the trademark registrant or assignee. 21(21)

On the other hand, the elements of infringement under R.A. No. 8293 are as follows: (1)

The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered;

(2)

The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer;

(3)

The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services;

(4)

The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and

(5)

It is without the consent of the trademark or trade name owner or the assignee thereof. 22(22)

In the foregoing enumeration, it is the element of "likelihood of confusion" that is the gravamen of trademark infringement. But "likelihood of confusion" is a relative concept. The particular, and sometimes peculiar, circumstances of each case are determinative of its existence. Thus, in trademark infringement cases, precedents must Copyright 1994-2014

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be evaluated in the light of each particular case. 23(23)

CIScaA

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement. 24(24) If the competing trademark contains the main, essential and dominant features of another, and confusion or deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to deceive purchasers. 25(25) Courts will consider more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets, and market segments. 26(26) In contrast, the Holistic Test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. 27(27) The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels in order that the observer may draw his conclusion whether one is confusingly similar to the other. 28(28) The trial and appellate courts applied the Dominancy Test in determining whether there was a confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial court found, and the CA affirmed, that: Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix "GENOL" which on evidence, appears to be merely descriptive and furnish no indication of the origin of the article and hence, open for trademark registration by the plaintiff thru combination with another word or phrase such as PYCNOGENOL, Exhibits "A" to "A-3". Furthermore, although the letters "Y" between P and C, "N" between O and C and "S" after L are missing in the [petitioner's] mark PCO-GENOLS, nevertheless, when the two words are pronounced, the sound effects are confusingly similar not to mention that they are both described by their manufacturers as a food supplement and thus, identified as such by their public consumers. And although there were dissimilarities in the trademark due to the type of letters used as well as the size, color and design employed on their individual packages/bottles, still the close relationship of the competing products' name in sounds as they were pronounced, clearly indicates that purchasers could be misled into believing that they are the same and/or originates from a common source and manufacturer. Copyright 1994-2014

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29(29)

We find no cogent reason to depart from such conclusion. This is not the first time that the Court takes into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al.,  cited in McDonald's Corporation v. L.C. Big Mak Burger, Inc., 31(31) the Court held: EITcaH

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that "SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop"; "Jantzen" and "Jass-Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-Mark Law and Practice", pp. 419-421, cities, as coming within the purview of the idem sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-Up" and "Lemon-Up". In Co Tiong vs. Director of Patents, this Court unequivocally said that "Celdura" and "Cordura" are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark "Sapolin", as the sound of the two names is almost the same. 32(32)

Finally, we reiterate that the issue of trademark infringement is factual, with both the trial and appellate courts finding the allegations of infringement to be meritorious. As we have consistently held, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court. 33(33) Hence, petitioner is liable for trademark infringement. We, likewise, sustain the award of attorney's fees in favor of respondent. Article 2208 of the Civil Code enumerates the instances when attorney's fees are awarded, viz.: Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

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1.

When exemplary damages are awarded;

2.

When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his

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interest; 3.

In criminal cases of malicious prosecution against the plaintiff;

4.

In case of a clearly unfounded civil action or proceeding against the plaintiff;

5.

Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff"s plainly valid, just and demandable claim;

6.

In actions for legal support;

7.

In actions for the recovery of wages of household helpers, laborers and skilled workers;

8.

In actions for indemnity under workmen's compensation and employer's liability laws; ITScAE

9.

In a separate civil action to recover civil liability arising from a crime;

10.

When at least double judicial costs are awarded;

11.

In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

As a rule, an award of attorney's fees should be deleted where the award of moral and exemplary damages is not granted. 34(34) Nonetheless, attorney's fees may be awarded where the court deems it just and equitable even if moral and exemplary damages are unavailing. 35(35) In the instant case, we find no reversible error in the grant of attorney's fees by the CA. WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated July 27, 2007 and its Resolution dated October 15, 2007 in CA-G.R. CV No. 87556 are AFFIRMED. SO ORDERED. Corona, Chico-Nazario, Velasco, Jr. and Peralta, JJ., concur. Copyright 1994-2014

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)RRWQRWHV 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.

Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Juan Q. Enriquez, Jr. and Marlene Gonzales-Sison, concurring; rollo, pp. 38-47. Id. at 48. Branch 167, Pasig City. Penned by Judge Alfredo C. Flores; rollo, pp. 230-234. Id. at 248-250. Evidenced by Registration No. 62413 issued by the Bureau of Patents, Trademarks and Technology Transfer. Rollo, p. 39. Id. at 163-164. Id. at 68. Id. at 49-54. Id. at 50-51. Id. at 57-61. Id. at 60. Id. at 68-69. Id. at 233-234. Id. at 44-46. Id. at 26. Trademark Law. Intellectual Property Code. Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493 SCRA 333, 345. Id. at 360. Ruben E. Agpalo, The Law on Trademark, Infringement and Unfair Competition (2000), pp. 142-143. Philip Morris, Inc. v. Fortune Tobacco Corporation, supra note 20, at 356. Philip Morris, Inc. v. Fortune Tobacco Corporation, id; Mighty Corporation v. E. & J. Gallo Winery, G.R. No. 154342, July 14, 2004, 434 SCRA 473, 506. Mighty Corporation v. E. & J. Gallo Winery, supra note 24, at 506-507. McDonald's Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993, August 18, 2004, 437 SCRA 10, 32. Philip Morris, Inc. v. Fortune Tobacco Corporation, supra note 20, at 356-357. Mighty Corporation v. E. & J. Gallo Winery, supra note 24, at 507. Rollo, p. 45. 125 Phil. 295 (1966). Supra note 26. McDonald's Corporation v. L.C. Big Mak Burger, Inc., supra note 26, at 34. Philip Morris, Inc. v. Fortune Tobacco Corporation, supra note 20, at 361-362. Francisco v. Co, G.R. No. 151339, January 31, 2006, 481 SCRA 241; Ibaan Rural

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35.

Bank, Inc. v. Court of Appeals, 378 Phil. 707 (1999). Villanueva v. Court of Appeals, G.R. No. 132955, October 27, 2006, 505 SCRA 564; Carlos v. Sandoval, G.R. Nos. 135830, 136035 and 137743, September 30, 2005, 471 SCRA 266.

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EN BANC [G.R. No. L-24295. September 30, 1971.] GENERAL GARMENTS CORPORATION, petitioner, YV THE DIRECTOR OF PATENTS and PURITAN SPORTSWEAR CORPORATION, respondents. Rafael R. Lasam for petitioner. Solicitor General Antonio A. Alafriz, Assistant General Pacifico P. de Castro and Solicitor Celso P. Ylagan for respondent Director of Patents. Paredez, Poblador, Cruz and Nazareno for respondent Corporation. SYLLABUS 1. COMMERCIAL LAW; CORPORATIONS; FOREIGN CORPORATIONS WITHOUT A LICENSE NOT ALLOWED TO SUE; EXCEPTION. — That respondent is a juridical person should be beyond serious dispute. The fact that it may not transact business in the Philippines unless it has obtained a license for that purpose, nor maintain a suit in Philippine courts for the recovery of any debt, claim or demand without such license (Secs. 68 and 69, Corporation Law) does not make respondent any less a juridical person. Indeed an exception to the license requirement has been recognized in this jurisdiction, namely, where a foreign corporation sues on an isolated transaction. 2. ID.; ID.; FOREIGN CORPORATION; LICENSE REQUIRED TO TRANSACT BUSINESS IN THE PHILIPPINES; REASON. — As first enunciated in Marshall-Wells Co. vs. Elser & Co. (46 Phil. 70, 74 (1924), "the object of the statute (Secs. 68 and 69, Corporation Law) was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts . . . the implication of the law (being) that it was never the purpose of the legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine Courts . . ." The principle has since then been applied in a number of other cases. Copyright 1994-2014

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3. ID.; ID.; FOREIGN CORPORATION SUING ON ISOLATED TRANSACTION. — The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been established through the natural development of its trade for a long period of years, in the doing of which it does not seek to enforce any legal or contract rights arising from, or growing out of any business which it has transacted in the Philippine Islands. 4. ID.; ID.; RIGHT TO USE CORPORATE OR TRADE NAME, A RIGHT IN REM. — "The right to the use of the corporate or trade name is a property right, a right in rem, which it may assert and protect 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." 5. ID.; TRADEMARKS AND TRADE NAMES; LAW AGAINST DEPREDATIONS ON TRADEMARKS OF NON-NATIONALS INTENDED FOR PROTECTION OF PURCHASERS. — "The lawful entry into the Philippines of goods bearing the trademark since 1949 should entitle the owner of the trademark to the right to use the same to the exclusion of others. Modern trade and commerce demands that depredations on legitimate trademarks of non-nationals should not be countenanced." It may be added here that the law against such depredations is not only for the protection of the owner of the trademark who has acquired prior use thereof but also, and more importantly, for the protection of purchasers from confusion, mistake or deception as to the goods they are buying. This is clear from a reading of Section 4 (d) of the Trademark Law. 6. ID.; ID.; SUIT FOR INFRINGEMENT OF TRADE MARK AND SUIT FOR CANCELLATION OF REGISTRATION THEREOF, DISTINGUISHED. — In any event, respondent in the present case is not suing for infringement or unfair competition under Section 21-A, but for cancellation under Section 17, on one of the grounds enumerated in Section 4. The first kind of action, it may be stated, is cognizable by the Courts of First Instance (Sec. 27), the second partakes of an administrative proceeding before the Patent Office (Section 18, in relation to Sec. 8). And while a suit under Section 21-A requires that the mark or tradename alleged to have been infringed has been "registered or assigned" to the suing foreign corporation, a suit for cancellation of the registration of a mark or tradename under Section 17 has no such requirement. For such mark or tradename should not have been registered in the first place (and consequently may be cancelled if so registered) if it "consists of or comprises a mark or tradename which so resembles a mark or tradename . . . previously used in the Philippines by another and not abandoned, as to be likely, when Copyright 1994-2014

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applied to or used in connection with goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; . . ." (Sec. 4 [d]).

DECISION

MAKALINTAL, J : p

The General Garments Corporation, organized and existing under the laws of the Philippines, is the owner of the trademark "Puritan," under Registration No. 10059 issued on November 15, 1962 by the Philippine Patent Office, for assorted men's wear, such as sweaters, shirts jackets, undershirts and briefs. On March 9, 1964 the Puritan Sportswear Corporation, organized and existing in and under the laws of the state of Pennsylvania, U.S.A., filed a petition with the Philippine Patent Office for the cancellation of the trademark "Puritan" registered in the name of General Garments Corporation, alleging ownership and prior use in the Philippines of the said trademark on the same kinds of goods, which use it had not abandoned; and alleging further that the registration thereof by General Garments Corporation had been obtained fraudulently and in violation of Section 17(c) of Republic Act No. 166, as amended, in relation to Section 4(d) thereof. On March 30, 1964 General Garments Corporation moved to dismiss the petition on several grounds, all of which may be synthesized in one single issue: whether or not Puritan Sportswear Corporation, which is a foreign corporation not licensed to do business and not doing business in the Philippines, has legal capacity to maintain a suit in the Philippine Patent Office for cancellation of a trademark registered thereon. The Director of Patents denied the motion to dismiss on August 6, 1964, and denied likewise the motion for reconsideration on March 5, 1965, whereupon General Garments Corporation, hereinafter referred to as petitioner, filed the instant petition for review. "Section 17(c) and Section 4(d) of the Trade Law provide respectively as follows: "SEC. 17. Grounds for cancellation. — Any person, who believes that he is or will be damaged by the registration of a mark or trade-name, may, upon the payment of the prescribed fee, apply to cancel said registration upon any of Copyright 1994-2014

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the following grounds: xxx

xxx

xxx

(c) That the registration was obtained fraudulently or contrary to the provisions of section four, Chapter II thereof; . . ." "SEC. 4. Registration of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx

xxx

xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; or . . ."

Petitioner contends that Puritan Sportswear Corporation (hereinafter referred to as respondent), being a foreign corporation which is not licensed to do and is not doing business in the Philippines, is not considered as a person under Philippine laws and consequently is not comprehended within the term "any person" who may apply for cancellation of a mark or trade-name under Section 17(c) of the Trademark Law aforequoted. That respondent is a juridical person should be beyond serious dispute. The fact that it may not transact business in the Philippines unless it has obtained a license for that purpose, nor maintain a suit in Philippine courts for the recovery of any debt, claim or demand without such license (Sec. 68 and 69, Corporation Law) does not make respondent any less a juridical person. Indeed an exception to the license requirement has been recognized in this jurisdiction, namely, where a foreign corporation sues on an isolated transaction. As first enunciated in Marshall-Wells Co. v. Elser & Co. 1(1) "the object of the statute (Sec. 68 and 69, Corporation Law) was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts . . . the implication of the law (being) that it was never the purpose of the legislature to exclude a foreign corporation which happens to obtain an isolated order for business from the Philippines, from securing redress in the Philippine Courts . . ." The principle has since then been applied in a number of other cases. 2(2) Copyright 1994-2014

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To recognize respondent as a juridical person, however, does not resolve the issue in this case. It should be postulated at this point that respondent is not suing in our courts "for the recovery of any debt, claim or demand," for which a license to transact business in the Philippines is required by Section 69 of the Corporation Law, subject only to the exception already noted. Respondent went to the Philippine Patent Office on a petition for cancellation of a trademark registered by petitioner, invoking Section 17(c) in relation to Section 4(d) of the Trademark Law. A more or less analogous question arose in Western Equipment & Supply Co. v. Reyes, 51 Phil. 115. The syllabus of the report, which is a correct statement of the doctrine laid down in the decision, reads as follows: "A foreign corporation which has never done . . . business in the Philippine Islands and which is unlicensed and unregistered to do business here, but is widely and favorably known in the Islands through the use therein of its products bearing its corporate and trade name has a legal right to maintain an action in the Islands. xxx

xxx

xxx

"The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been established through the natural development of its trade for a long period of years, in the doing of which it does not seek to enforce any legal or contract rights arising from, or growing out of any business which it has transacted in the Philippine Islands. "The right to the use of the corporate or trade name is a property right, a right in rem, which it may assert and protect 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."

In Asari Yoko Co., Ltd. v. Kee Boc (Jan. 20, 1961) 1 SCRA 1, the plaintiff, a Japanese corporation which had acquired prior use in the Philippines of the trademark "RACE" for men's shirts and undershirts but which had not shown prior registration thereof, successfully maintained a suit opposing the application of the defendant, a local businessman, to register the same trademark for similar goods produced by him. This Court said: "The lawful entry into the Philippines of goods bearing the trademark since 1949 should entitle the owner of the trademark to the right to use the same to the exclusion of others. Modern trade and commerce demands that depredations on legitimate trademarks of non-nationals should not be countenanced." It may be added here that the law against such depredations is not only for the protection of the owner Copyright 1994-2014

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of the trademark who has acquired prior use thereof but also, and more importantly, for the protection of purchasers from confusion, mistake or deception as to the goods they are buying. This is clear from a reading of Section 4(d) of the Trademark Law. Petitioner argues that the ruling in Western Equipment has been superseded by the later decision of this Court in Mentholatum Go., Inc. v. Mangaliman (1941), 72 Phil. 524, where it was held that inasmuch as Mentholatum Co., Inc. was a foreign corporation doing business in the Philippines without the license required by Section 68 of the Corporation Law it could not prosecute an action for infringement of its trademark which was the subject of local registration. The court itself, however, recognized a distinction between the two cases, in that in Western Equipment the foreign corporation was not engaged in business in the Philippines, and observed that if it had been so engaged without first obtaining a license "another and a very different question would be presented." Parenthetically, it may be stated that the ruling in the Mentholatum case was subsequently derogated when Congress, purposely to "counteract the effects" of said case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark Law, which allows a foreign corporation or juristic person to bring an action in Philippine courts for infringement of a mark or trade-name, 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 complaint." Petitioner argues that Section 21-A militates against respondent's capacity to maintain a suit for cancellation, since it requires, before a foreign corporation may bring an action, that its trademark or tradename has been registered under the Trademark Law. The argument misses the essential point in the said provision, which is that the foreign corporation is allowed thereunder to sue "whether or not it has been licensed to do business in the Philippines" pursuant to the Corporation Law (precisely to contract the effects of the decision in the Mentholatum case). In any event, respondent in the present case is not suing for infringement or unfair competition under Section 21-A, but for cancellation under Section 17, on one of the grounds enumerated in Section 4. The first kind of action, it may be stated, is cognizable by the Courts of First Instance (Sec. 27); the second partakes of an administrative proceeding before the Patent Office (Sec. 18, in relation to Sec. 8). And while a suit under Section 21-A requires that the mark or tradename alleged to have been infringed has been "registered or assigned" to the suing foreign corporation, a suit for cancellation of the registration of a mark or tradename under Section 17 has Copyright 1994-2014

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no such requirement. For such mark or trade-name should not have been registered in the first place (and consequently may be cancelled if so registered) if it "consists of or comprises a mark or tradename which go resembles a mark or tradename . . . previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; . . ." (Sec. 4d) Petitioner's last argument is that under Section 37 of the Trademark Law respondent is not entitled to the benefits of said law because the Philippines is not a signatory to any international treaty or convention relating to marks or tradenames or to the repression of unfair competition. Section 37 reads in part: "SEC. 37. 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 any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties as long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section."

As correctly pointed out by respondents, this provision was incorporated in the law in anticipation of the eventual adherence of the Philippines to any international convention or treaty for the protection of industrial property. It speaks of 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 any international convention or treaty relating to industrial property to which the Philippines may be a party. In other words, the provision will be operative only when the Philippines becomes a party to such a convention or treaty. That this was the intention of Congress is clear from the explanatory note to House Bill No. 1157 (now Republic Act 166), in reference to Section 37, which is the only provision in Chapter XI of the Trademark Law on Foreign Industrial Property: "The necessary provisions to qualify the Philippines under the international convention for the protection of industrial property have been specifically incorporated in the Act." 3(3) In the meantime, regardless of Section 37, aliens or foreign corporations are accorded benefits under the law. Thus, under Section 2, for instance, the trade-marks, trade-names and service-marks owned by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in the Philippines, provided that the country of which the applicant for registration is a citizen grants by law substantially similar privileges to Copyright 1994-2014

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citizens of the Philippines. WHEREFORE, the petition is dismissed, and the resolution of the Director of Patents dated August 6, 1964 is affirmed, with costs. Concepcion, C .J ., Reyes, J.B.L., Dizon, Zaldivar, Castro, Fernando, Teehankee, Barredo and Villamor, JJ ., concur. Makasiar, J ., reserves his vote. )RRWQRWHV 1. 2.

3.

46 Phil 70, 74 (1924). Central Republic Bank and Trust Co. v. Bustamente (1941) 71 Phil. 359; Pacific Vegetable Oil Corporation v. Singzon, L-7917, April 29, 1955; Eastboard Navigation, Ltd. v. Juan Ysmael Co., Inc. (1957) 102 Phil. 1; Atlantic Mutual Insurance Co. v. Cebu Stevedoring Co., Inc. (1966) 17 SCRA 1037. Congressional Record, House of Representatives, Vol. II, No. 51, May 12, 1947, at page 1016.

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FIRST DIVISION [G.R. Nos. 63796-97. May 21, 1984.] LA CHEMISE LACOSTE, S. A., petitioner, YV HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents.

[G.R. No. 65659. May 21, 1984.] GOBINDRAM HEMANDAS SUJANANI, petitioner, YV 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. SYLLABUS 1. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; FOREIGN CORPORATION ACTING THROUGH A MIDDLEMAN TRANSACTING IN OWN NAME DEEMED NOT "DOING BUSINESS" IN THE PHILIPPINES; CASE AT BAR. — In the present case, the petitioner is a foreign corporation. 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. Applying Rule I Section 1 (g) of the rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree Copyright 1994-2014

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No. 1789, otherwise known as the Omnibus Investment Code, 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. 2. REMEDIAL LAW; ACTIONS; PARTIES TO AN ACTION; CAPACITY TO SUE; FOREIGN CORPORATION NOT DOING BUSINESS IN THE PHILIPPINES NEEDS NO LICENSE TO SUE BEFORE PHILIPPINE COURTS FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION. — 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 (Western Equipment and Supply Co. vs. Reyes, 51 Phil. 115). 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. 3. ID.; CRIMINAL PROCEDURE; PROSECUTION OF CRIMINAL CASES IS IN THE NAME OF THE STATE, NOT FOREIGN CORPORATION WHICH FILES COMPLAINT. — 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 allow 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. 4. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; RIGHT TO SUE IN PHILIPPINE COURTS; ACCORDED BY PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY TO WHICH PHILIPPINES AND FRANCE ARE PARTIES. — 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 Copyright 1994-2014

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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. 5. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH WARRANTS; PROBABLE CAUSE, ESSENTIAL TO ISSUANCE. — 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). 6. ID.; ID.; ID.; PROBABLE CAUSE, DEFINED. — 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 vs. 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 commission, violating a given provision of our criminal laws." 7. ID.; ID.; ID.; DETERMINATION OF PROBABLE CAUSE, NO FIXED RULE. — The question of whether or not a 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 abide to by international commitments is at stake. 8. ID.; ID.; ID.; ID.; MOTION TO QUASH WARRANT; GRANT THEREOF IN CASE AT BAR CONSTITUTES GRAVE ABUSE OF DISCRETION. — The respondent court, therefore, complied with the constitutional and statutory requirements 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. Copyright 1994-2014

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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 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 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. 9. MERCANTILE LAW; PATENTS OFFICE; CERTIFICATE OF REGISTRATION IN THE SUPPLEMENTAL REGISTER; NOT A PRIMA FACIE EVIDENCE OF REGISTRANT'S RIGHT. — A certificate of registration in the Supplemental Register is not a 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 can not 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, Vol. 2, pp. 513-515). 10. ID.; ID.; ID.; PURPOSE. — 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. 11. REMEDIAL LAW; CRIMINAL ACTION; PROSECUTION OF CIVIL ACTION; PREJUDICIAL QUESTION; CASE AT BAR, NOT A CASE OF. — The case which suspends a criminal prosecution under Section 5, Rule 111 of the Revised Rules of Court on prejudicial questions must be a civil case which is determinative of the innocence or, subject to the availability of other defenses, the guilt of the accused. Copyright 1994-2014

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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 (Flordelis v. Castillo, 58 SCRA 301). 12. MERCANTILE LAW; LAW ON TRADEMARKS AND TRADENAMES; PURPOSE OF LAW PROTECTING TRADEMARKS. — The purpose of the law protecting a trademark can not 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 a 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. Modem trade and commerce demands that depredations on legitimate trademarks of non-nationals 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). 13. ID.; ID.; LAW THEREOF BASED ON THE PRINCIPLE OF BUSINESS INTEGRITY AND COMMON JUSTICE. — 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, deceit, trickery or unfair methods of any sort. This necessarily precludes the trading by one dealer upon the good name and reputation built by another (Baltimore v. Moses, 182 Md 229, 34 A(2d) 338). 14. ID.; ID.; ID.; CASE AT BAR. — 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.

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DECISION

GUTIERREZ, JR., J : p

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. LLjur

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. LLphil

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. SR-2225 (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 Copyright 1994-2014

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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 letter-complaint 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. Copyright 1994-2014

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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. LLjur

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 Copyright 1994-2014

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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. Cdpr

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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 corporation 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 Copyright 1994-2014

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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), Copyright 1994-2014

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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. prcd

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 allow 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: Copyright 1994-2014

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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 6bis

"(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 Copyright 1994-2014

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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 10bis. "(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: Copyright 1994-2014

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"[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

". . . 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 Copyright 1994-2014

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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. cdll

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 Copyright 1994-2014

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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. cdrep

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. cdrep

Hemandas relied heavily below and before us on the argument that it is the Copyright 1994-2014

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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 registered 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;" Copyright 1994-2014

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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. L-10612, 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). Cdpr

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 Copyright 1994-2014

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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 pend 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 Copyright 1994-2014

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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. LLpr

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 S.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 Industrial 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. Copyright 1994-2014

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"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 trademark 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 non-nationals 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 Copyright 1994-2014

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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). cdphil

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, deceit, 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 Sujanani v. 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 Copyright 1994-2014

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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 v. 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: "1. 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: "1. 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 Copyright 1994-2014

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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 "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 rule-making 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: Copyright 1994-2014

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"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 Copyright 1994-2014

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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 Copyright 1994-2014

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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, neckties, etc. — the list is quite lengthy — and 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. LLphil

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 made 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. Teehankee, Melencio-Herrera, Plana, Relova and De la Fuente, JJ ., concur.

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SPECIAL FORMER SECOND DIVISION [G.R. No. 75420. November 15, 1991.] KABUSHI KAISHA ISETAN, also known and trading as ISETAN CO., LTD., petitioner, YV THE INTERMEDIATE APPELLATE COURT, THE DIRECTOR OF PATENTS, and ISETANN DEPARTMENT STORE, INC. respondents. Agcaoili & Associates for petitioner. Cruz, Durian, Agabin, Atienza, Alday & Tuason for private respondent. SYLLABUS 1. REMEDIAL LAW; ACTIONS; APPEALS; STRINGENT APPLICATION OF PERIOD OF APPEAL APPLIED IN THE ABSENCE OF COMPELLING EQUITABLE CONSIDERATIONS FOR RELAXATION OF RULE; CASE AT BAR. — The Court dismissed the petition in a resolution dated July 8, 1987, on the ground that it was filed fourteen (14) days later. However, on motion for reconsideration, whereby the petitioner appealed to this Court on equitable grounds stating that it has a strong and meritorious case, the petition was given due course in a resolution dated May 19, 1988 to enable us to examine more fully any possible denial of substantive justice. The parties were then required to submit their memoranda. After car0efully considering the records of this case, we reiterate our July 8, 1987 resolution dismissing the petition. There are no compelling equitable considerations which call for the application of the rule enunciated in Serrano v. Court of Appeals (139 SCRA 179 [1985]) and Orata v. Intermediate Appellate Court, et al. (185 SCRA 148 [1990]) that considerations of substantial justice manifest in the petition may relax the stringent application of technical rules so as not to defeat an exceptionally meritorious petition. 2. ID.; EVIDENCE; FINDINGS OF FACT OF THE PATENT OFFICE, UPHELD ON APPEAL. — Regarding the petitioner's claims of substantial justice which led us to give due course, we decline to disturb the rulings of the Patent Office and the Court of Appeals. The rule is that the findings of facts of the Director of Copyright 1994-2014

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patents are conclusive on the Supreme Court, provided they are supported by substantial evidence. 3. MERCANTILE LAW; TRADEMARKS; ACTUAL USE, PREREQUISITE TO ACQUISITION OF OWNERSHIP. — A fundamental principle of Philippine Trademarks Law is that actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a tradename. 4. ID.; ID.; ID.; PRIOR REGISTRANT CANNOT CLAIM EXCLUSIVE USE OF TRADENAME. — A prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce. 5. ID.; ID.; ID.; MERE ADOPTION OF A PARTICULAR TRADENAME WITHOUT ACTUAL USE THEREOF, INSUFFICIENT; CASE AT BAR. — The records show that the petitioner has never conducted any business in the Philippines. It has never promoted its tradename or trademark in the Philippines. It has absolutely no business goodwill in the Philippines. It is unknown to Filipinos except the very few who may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine government. Under the law, it has no right to the remedy it seeks. There can be no question from the records that the petitioner has never used its tradename or trademark in the Philippines. The mere origination or adoption of a particular tradename without actual use thereof in the market is insufficient to give any exclusive right to its use (Johnson Mfg, Co. v. Leader Filling Stations Corp. 196 N.E. 852, 291 Mass. 394), even though such adoption is publicly declared, such as by use of the name in advertisements, circulars, price lists, and on signs and stationery. (Consumers Petroleum Co. v. Consumers Co. of Ill. 169 F 2d 153). 6. ID.; PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY; DOES NOT AUTOMATICALLY EXCLUDE OTHER COUNTRIES FROM USING A TRADENAME USED IN ONE COUNTRY. — The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world have signed it from using a tradename which happens to be used in one country.

DECISION

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GUTIERREZ, JR., J : p

This is a petition for review on certiorari which seeks to set aside — (1) the decision of the Court of Appeals dated June 2, 1986 in AC-G.R. SP No. 008873 entitled "Kabushi Kaisha Isetan, also known and trading as Isetan Company Limited v. Isetann Department Store, Inc." dismissing the petitioner's appeal from the decision of the Director of Patents; and (2) the Resolution dated July 11, 1986 denying the petitioner's motion for reconsideration. As gathered from the records, the facts are as follows: Petitioner Kabushi Kaisha Isetan is a foreign corporation organized and existing under the laws of Japan with business address at 14-1 Shinjuku, 3-Chrome, Shinjuku, Tokyo, Japan. It is the owner of the trademark "Isetan" and the "Young Leaves Design". The petitioner alleges that it first used the trademark Isetan on November 5, 1936. It states that the trademark is a combination of "Ise" taken from "Iseya" the first name of the rice dealer in Kondo, Tokyo in which the establishment was first located and "Tan" which was taken from "Tanji Kosuge the First". The petitioner claims to have expanded its line of business internationally from 1936 to 1974. The trademark "Isetan" and "Young Leaves Design" were registered in Japan covering more than 34 classes of goods. On October 3, 1983, the petitioner applied for the registration of "Isetan" and "Young Leaves Design" with the Philippine Patent Office under Permanent Serial Nos. 52422 and 52423 respectively, (Rollo, p. 43) Private respondent, Isetann Department Store, on the other hand, is a domestic corporation organized and existing under the laws of the Philippines with business address at 423-430 Rizal Avenue, Sta. Cruz, Manila, Philippines. LLjur

It claims that it used the word "Isetann" as part of its corporated name and on its products particularly on shirts in Joymart Department Store sometime in January 1979. The suffix "Tann" means an altar, the place of offering in Chinese and this was adopted to harmonize the corporate name and the corporate logo of two hands in cup that symbolizes the act of offering to the Supreme Being for business blessing. On May 30, 1980 and May 20, 1980, the private respondent registered "Isetann Department Store, Inc." and Isetann and Flower Design in the Philippine Patent Office under SR. Reg. Nos. 4701 and 4714, respectively, as well as with the Bureau of Copyright 1994-2014

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Domestic Trade under Certificate of Registration No. 32020. (Rollo, pp. 43-44) On November 28, 1980, the petitioner filed with the Phil. Patent Office two (2) petitions for the cancellation of Certificates of Supplemental Registration Nos. SR-4717 and SR-4701 stating among others that: " . . . except for the additional letter 'N' in the word "Isetan", the mark registered by the registrant is exactly the same as the trademark ISETAN owned by the petitioner and that the young leaves registered by the registrant is exactly the same as the young leaves design owned by the petitioner."

The petitioner further alleged that private respondent's act of registering a trademark which is exactly the same as its trade mark and adopting a corporate name similar to that of the petitioner were with the illegal and immoral intention of cashing in on the long established goodwill and popularity of the petitioner's reputation, thereby causing great and irreparable injury and damage to it (Rollo, p. 521). It argued that both the petitioner's and respondent's goods move in the same channels of trade, and ordinary people will be misled to believe that the products of the private respondent originated or emanated from, are associated with, or are manufactured or sold, or sponsored by the petitioner by reason of the use of the challenged trademark. The petitioner also invoked the Convention of Paris of March 20, 1883 for the Protection of Industrial Property of which the Philippines and Japan are both members, The petitioner stressed that the Philippines' adherence to the Paris Convention committed the government to the protection of trademarks belonging not only to Filipino citizens but also to those belonging to nationals of other member countries who may seek protection in the Philippines. (Rollo, p. 522) The petition was docketed as Inter Partes Cases Nos. 1460 and 1461 (Rollo, p. 514). Meanwhile, the petitioner also filed with the Securities and Exchange Commission (SEC) a petition to cancel the mark "ISETAN" as part of the registered corporate name of Isetann Department Store, Inc. which petition was docketed as SEC Case No. 2051 (Rollo, p. 524). On May 17, 1985, this petition was denied in a decision rendered by SEC's Hearing Officer, Atty. Joaquin C. Garaygay. prcd

On appeal, the Commission reversed the decision of the Hearing Officer on February 25, 1986. It directed the private respondent to amend its Articles of Incorporation within 30 days from finality of the decision. Copyright 1994-2014

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On April 15, 1986, however, respondent Isetann Department Store filed a motion for reconsideration. (Rollo, pp. 325-353). And on September 10, 1987, the Commission reversed its earlier decision dated February 25, 1986 thereby affirming the decision rendered by the Hearing Officer on May 17, 1985. The Commission stated that since the petitioner's trademark and tradename have never been used in commerce on the petitioner's products marketed in the Philippines, the trademark or tradename have not acquired a reputation and goodwill deserving of protection from usurpation by local competitors. (Rollo, p. 392) This SEC decision which denied and dismissed the petition to cancel was submitted to the Director of Patents as part of the evidence for the private respondent. On January 24, 1986, the Director of Patents after notice and hearing rendered a joint decision in Inter Partes Cases Nos. 1460 and 1461, the dispositive portion of which reads: "WHEREFORE, all the foregoing considered, this Office is constrained to hold that the herein Petitioner has not successfully made out a case of cancellation. Accordingly, Inter Partes Cases Nos. 1460 and 1461 are, as they are hereby, DISMISSED. Hence, Respondent's Certificate of Supplemental Registration No. 4717 issued on May 20, 1980 covering the tradename 'ISETANN DEPT. STORE, INC. & FLOWER DESIGN' are, as they are hereby ordered to remain in full force and effect for the duration of their term unless sooner or later terminated by law. The corresponding application for registration in the Principal Register of the Trademark and of the tradename aforesaid are hereby given due course. Let the records of these cases be transmitted to the Trademark Examining Division for appropriate action in accordance with this Decision."

On February 21, 1986, Isetan Company Limited moved for the reconsideration of said decision but the motion was denied on April 2, 1986 (Rollo, pp. 355-359). From this adverse decision of the Director of Patents, the petitioner appealed to the Intermediate Appellate Court (now Court of Appeals). On June 2, 1986, the IAC dismissed the appeal on the ground that it was filed out of time. The petitioner's motion for reconsideration was likewise denied in a resolution Copyright 1994-2014

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dated July 11, 1986. Hence, this petition. Initially, the Court dismissed the petition in a resolution dated July 8, 1987, on the ground that it was filed fourteen (14) days later. However, on motion for reconsideration, whereby the petitioner appealed to this Court on equitable grounds stating that it has a strong and meritorious case, the petition was given due course in a resolution dated May 19, 1988 to enable us to examine more fully any possible denial of substantive justice. The parties were then required to submit their memoranda. (Rollo, pp. 2-28; Resolution, pp. 271; 453). After carefully considering the records of this case, we reiterate our July 8, 1987 resolution dismissing the petition. There are no compelling equitable considerations which call for the application of the rule enunciated in Serrano v. Court of Appeals (139 SCRA 179 [1985]) and Orata v. Intermediate Appellate Court, et al. (185 SCRA 148 [1990]) that considerations of substantial justice manifest in the petition may relax the stringent application of technical rules so as not to defeat an exceptionally meritorious petition. llcd

There is no dispute and the petitioner does not question the fact that the appeal was filed out of time. Not only was the appeal filed late in the Court of Appeals, the petition for review was also filed late with us. In common parlance, the petitioner's case is "twice dead" and may no longer be reviewed. The Court of Appeals correctly rejected the appeal on the sole ground of late filing when it ruled: "Perfection of an appeal within the time provided by law is jurisdictional, and failure to observe the period is fatal. The decision sought to be appealed is one rendered by the Philippine Patent Office, a quasi-judicial body. Consequently, under Section 23(c) of the Interim Rules of Court, the appeal shall be governed by the provisions of Republic Act No. 5434, which provides in its Section 2; SECTION 2. Appeals to Court of Appeals. — Appeals to the Court of Appeals shall be filed within fifteen (15) days from notice of the ruling, award, order, decision or judgment or from the date of its last publication, if publication is required by law for its effectivity; or in case a motion for reconsideration is Copyright 1994-2014

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filed within that period of fifteen (15) days, then within ten (10) days from notice or publication, when required by law, of the resolution denying the motion for reconsideration. No more than one motion for reconsideration shall be allowed any party. If no appeal is filed within the periods here fixed, the ruling, award, order, decision or judgment shall become final and may be executed as provided by existing law. Attention is invited to that portion of Section 2 which states that in case a motion for reconsideration is filed, an appeal should be filed within ten (10) days from notice of the resolution denying the motion for reconsideration."

The petitioner received a copy of the Court of Appeals' resolution denying its motion for reconsideration on July 17, 1986. It had only up to August 1, 1986 to file a petition for review with us. The present petition was posted on August 2, 1986 and received by us on August 8, 1986. There is no question that it was again, filed late because the petitioner filed an ex-parte motion for admission explaining the delay. The decision of the Patent Office has long become final and executory. So has the Court of Appeals decision. Regarding the petitioner's claims of substantial justice which led us to give due course, we decline to disturb the rulings of the Patent Office and the Court of Appeals. A fundamental principle of Philippine Trademarks Law is that actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a tradename. cdphil

The Trademark Law, Republic Act No. 166, as amended, under which this case was heard and decided provides: "SECTION 2. What are registrable. — Trademarks, tradenames and service marks owned by persons, corporation, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act: Provided, That said trademarks, tradenames, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the Copyright 1994-2014

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foreign country to the Government of the Republic of the Philippines. (As amended by R.A. No. 865). SECTION 2-A. Ownership of trademarks, tradenames and service marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a tradename, or a service mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, tradename, service mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to this law. (As amended by R.A. No. 638)"

These provisions have been interpreted in Sterling Products International, Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way: "A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. xxx

xxx

xxx

" . . . Adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. . . . ."

In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce. We rule in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]): "3. The Trademark law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not Copyright 1994-2014

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present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as 'samples' and 'of no commercial value'. The evidence for respondent must be clear, definite and free from inconsistencies. (Sy Ching v. Gaw Lui, 44 SCRA 148-149) 'Samples' are not for sale and therefore, the fact of exporting them; to the Philippines cannot be considered to be equivalent to the 'use' contemplated by the law. Respondent did not expect income from such 'samples'. There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines." (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied)

The records show that the petitioner has never conducted any business in the Philippines. It has never promoted its tradename or trademark in the Philippines. It has absolutely no business goodwill in the Philippines. It is unknown to Filipinos except the very few who may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine government. Under the law, it has no right to the remedy it seeks. LexLib

There can be no question from the records that the petitioner has never used its tradename or trademark in the Philippines. The petitioner's witnesses, Mr. Mayumi Takayama and Mr. Hieoya Murakami, admitted that: 1)

The petitioner's company is not licensed to do business in the Philippines;

2)

The petitioner's trademark is not registered under Philippine law; and

3) The petitioner's trademark is not being used on products in trade, manufacture, or business in the Philippines. It was also established from the testimony of Atty. Villasanta, petitioner's witness, that the petitioner has never engaged in promotional activities in the Philippines to popularize its trademark because not being engaged in business in the Philippines, there is no need for advertising. The claim of the petitioner that millions of dollars have been spent in advertising the petitioner's products, refers to advertising in Japan or other foreign places. No promotional activities have been undertaken in the Philippines, by the petitioner's own admission. Any goodwill, reputation, or knowledge regarding the name Isetann is purely Copyright 1994-2014

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the work of the private respondent. Evidence was introduced on the extensive promotional activities of the private respondent. It might be pertinent at this point to stress that what is involved in this case is not so much a trademark as a tradename. Isetann Department Store, Inc. is the name of a store and not of products sold in various parts of the country. This case must be differentiated from cases involving products bearing such familiar names as "Colgate", "Singer", "Toyota", or "Sony" where the products are marketed widely in the Philippines. There is no product with the name "Isetann" popularized with that brand name in the Philippines. Unless one goes to the store called Isetann in Manila, he would never know what the name means. Similarly, until a Filipino buyer steps inside a store called "Isetan" in Tokyo or Hongkong, that name would be completely alien to him. The records show that among Filipinos, the name cannot claim to be internationally well-known. The rule is that the findings of facts of the Director of Patents are conclusive on the Supreme Court, provided they are supported by substantial evidence. (Chua Che v. Phil. Patent Office, 13 SCRA 67 [1965]; Chung Te v. Ng Kian Giab, 18 SCRA 747 [1966]; Marvex Commercial Co., Inc. v. Petra Hawpia & Co., 18 SCRA 1178 [1966]; Lim Kiah v. Kaynee, Co. 25 SCRA 485 [1968]; Kee Boc v. Dir. of Patents, 34 SCRA 570 [1970]. The conclusions of the Director of Patents are likewise based on applicable law and jurisprudence: "What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory. There is where his business is carried on where the goodwill symbolized by the trademark has immediate value; where the infringer may profit by infringement. LLphil

There is nothing new in what we now say. Plaintiff itself concedes (Brief for Plaintiff-Appellant, p. 88) that the principle of territoriality of the Trademark law has been recognized in the Philippines, citing Ingenohl v. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of trademarks 'rests upon the doctrine of nationality or territoriality." (2 Callmann, Unfair Competition and Trademarks, 1945, ed., p. 1006) (Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellachaft, 27 SCRA 1214 [1969]; Emphasis supplied)

The mere origination or adoption of a particular tradename without actual use thereof in the market is insufficient to give any exclusive right to its use (Johnson Copyright 1994-2014

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Mfg, Co. v. Leader Filling Stations Corp. 196 N.E. 852, 291 Mass. 394), even though such adoption is publicly declared, such as by use of the name in advertisements, circulars, price lists, and on signs and stationery. (Consumers Petroleum Co. v. Consumers Co. of Ill. 169 F 2d 153). The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world have signed it from using a tradename which happens to be used in one country. To illustrate — If a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename "Rapid Transportation", it does not necessarily follow that "Rapid" can no longer be registered in Uganda, Fiji, or the Philippines. As stated by the Director of Patents — "Indeed, the Philippines is a signatory to this Treaty and, hence, we must honor our obligation thereunder on matters concerning internationally known or well known marks. However, this Treaty provision clearly indicated the conditions which must exist before any trademark owner can claim and be afforded rights such as the Petitioner herein seeks and those conditions are that: a)

the mark must be internationally known or well known;

b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar kinds of goods, and d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris Convention. Article by Dr. Bogach, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985)".

The respondent registered its trademark in 1979. It has continuously used that name in commerce. It has established a goodwill through extensive advertising. The people who buy at Isetann Store do so because of Isetann's efforts. There is no showing that the Japanese firm's registration in Japan or Hongkong has any influence whatsoever on the Filipino buying public. cdrep

WHEREFORE, premises considered, the petition is hereby DISMISSED. SO ORDERED. Copyright 1994-2014

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Fernan, C.J., Paras and Bidin, JJ., concur.

Separate Opinion PADILLA, J ., concurring: It appears that on 28 November 1980, petitioner filed with the Philippine Patent Office two (2) petitions for cancellation of Certificates of Supplemental Registration Nos. SR-4717 and SR-4701, docketed therein as Inter Partes Cases Nos. 1460 and 1461. On 24 January 1986, the Director of Patents rendered a joint decision dismissing the petitions in the aforesaid cases. Petitioner moved for reconsideration on 21 February 1986 but the motion was denied on 2 April 1986. LLpr

Petitioner appealed to the Intermediate Appellate Court (now Court of Appeals), the appeal docketed therein as AC-G.R. SP NO. 08873. On 2 June 1986, the appellate court rendered a decision dismissing the appeal for having been filed out of time. It held: "In the case at bar, appellant admits that it received on April 11, 1986, a copy of the Resolution dated April 2, 1986, denying its motion for reconsideration. Under the law, therefore, appellant had only up to April 21, 1986 within which to file its notice of appeal to this Court. Upon these premises, it becomes all but too obvious that the notice of appeal which was filed only on May 5, 1986, was filed when the decision sought to be appealed had already become final. The notice of appeal was in fact filed 24 days after receipt of the Resolution denying appellant's motion for reconsideration, which period is beyond the original period of 15 days provided for under Section 2 of Republic Act No. 5434 and, of course, also of the 15 days provided under Batas Pambansa Bilang 129."

Petitioner moved for reconsideration but its motion was denied in the resolution of the Court of Appeals dated 11 July 1986. Hence, the present petition for review on certiorari. Copyright 1994-2014

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In Bello vs. Fernando, G.R. No. L-16970, 30 January 1962, 4 SCRA 135, the Court speaking thru Mr. Justice J.B.L. Reyes held: "'The right to appeal is not a natural right nor a part of due process; it is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law (Aguila v. Navarro, 55 Phil. 898; Santiago v. Valenzuela, 78 Phil. 397). . . . ; and compliance with the (this) period for appeal is considered absolutely indispensable for the prevention of needless delays and to the orderly and speedy discharge of judicial business (Altavas Conlu v. C.A., L-14027, January 29, 1960) so that if said period is not complied with, the judgment becomes final and executory and the appellate court does not acquire jurisdiction over the appeal (Layda v. Legaspi, 38 Phil. 83; Pampolina v. Suiza, 12 Phil. 99; Caisip v. Cabangon, L-14684, Aug. 26, 1960). cdrep

"Indeed, this Court has ruled, time and again, that compliance with the reglementary period for perfecting an appeal is not merely mandatory, but jurisdictional." (Aguilar vs. Blanco, G.R. No. L-32392, 31 August 1988, 165 SCRA 180).

The perfection of an appeal within the reglementary period is not, therefore, a mere technicality but mandatory and jurisdictional. Since petitioner's appeal to the Court of Appeals from the decision of the Director of Patents was admittedly filed out of time, and there was no compelling reason given as to why the appeal was filed out of time, the appellate court acquired no jurisdiction over said appeal and the decision of the Director of Patents had become final and executory. I see, therefore, no need or reason to go into the merits of the abortive appeal. The decision of the Court of Appeals dismissing the petitioner's appeal should, therefore, be AFFIRMED and the present petition should be DISMISSED.

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THIRD DIVISION [G.R. No. 91332. July 16, 1993.] PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC REUNIES, S.A., petitioners, YV THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents. Quasha, Asperilla, Ancheta, Peña & Nolasco Law Office for petitioners. Teresita Gandionco-Oledan for private respondent. SYLLABUS 1. MERCANTILE LAW; TRADEMARK LAW; FOREIGN CORPORATION NOT ENGAGED IN LOCAL COMMERCE, MAY SUE FOR INFRINGEMENT. — To sustain a successful prosecution of their suit for infringement, petitioners, as foreign corporations not engaged in local commerce, rely on Section 21-A of the Trademark Law to drive home the point that they are not precluded from initiating a cause of action in the Philippines on account of the principal perception that another entity is pirating their symbol without any lawful authority to do so. Judging from a perusal of the aforequoted Section 21-A, the conclusion reached by petitioners is certainly correct for the proposition in support thereof is embedded in Philippine legal jurisprudence. 2. ID.; ID.; ID.; ALLEGATION OF PERSONALITY TO SUE, MANDATORY REQUIREMENT. — On May 21, 1984, Section 21-A, the provision under consideration, was qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign corporation not doing business in the Philippines may have the right to sue before Philippine Courts, but existing adjective axioms require that qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded (2 Agbayani, Commercial Laws of the Philippines, 1991 Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a foreign corporation suing under Section 21-A to simply allege its alien origin. Rather, it must additionally allege Copyright 1994-2014

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its personality to sue. Relative to this condition precedent, it may be observed that petitioners were not remiss in averring their personality to lodge a complaint for infringement especially so when they asserted that the main action for infringement is anchored on an isolated transaction (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037 [1966], 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103) 3. ID.; ID.; ID.; ID.; CASE AT BAR. — Given these confluence of existing laws amidst the cases involving trademarks, there can be no disagreement to the guiding principle in commercial law that foreign corporations not engaged in business in the Philippines may maintain a cause of action for infringement primarily because of Section 21-A of the Trademark Law when the legal standing to sue is alleged, which petitioners have done in the case at hand. 4. ID.; ID.; ACTUAL COMMERCIAL USE OF TRADEMARK, NECESSARY FOR ACQUISITION OF OWNERSHIP THEREOF. — In assailing the justification arrived at by respondent court when it recalled the writ of preliminary injunction, petitioners are of the impression that actual use of their trademarks in Philippine commercial dealings is not an indispensable element under Article 2 of the Paris Convention. Yet petitioner's perception along this line is nonetheless resolved by Sections 2 and 2-A of the Trademark Law which speak loudly about the necessity of actual commercial use of the trademark in the local forum. 5. INTERNATIONAL LAW; RULES ON INTERNATIONAL LAW GIVEN AN EQUAL STANDING, NOT SUPERIOR, TO NATIONAL LEGISLATIVE ENACTMENTS; CASE AT BAR. — Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 6). 6. REMEDIAL LAW; PROVISIONAL REMEDIES; PRELIMINARY INJUNCTION; RELUCTANCE TO ISSUE WRIT, DEFERENCE TO LOWER COURTS OVER ASSAILED INTERLOCUTORY ORDERS. — We can not help but Copyright 1994-2014

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notice the manner the ascription was framed which carries with it the implied but unwarranted assumption of the existence of petitioners' right to relief. It must be emphasized that this aspect of exclusive dominion to the trademarks, together with the corollary allegation of irreparable injury, has yet to be established by petitioners by the requisite quantum of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of preliminary injunction is due to judicial deference to the lower courts, involved as there is a mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a remedial measure which is but ancillary to the main action for infringement still pending factual determination before the court of origin. 7. ID.; ID.; ID.; EXISTENCE OF RIGHT TO BE PROTECTED, INDISPENSABLE; NOT MET IN CASE AT BAR. — More telling are the allegations of petitioners in their complaint as well as in the very petition filed with this Court indicating that they are not doing business in the Philippines, for these frank representations are inconsistent and incongruent with any pretense of a right which can be breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58, Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show that there exists a right to be protected and that the facts against which injunction is directed are violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that albeit petitioners are holders of certificate of registration in the Philippines of their symbols as admitted by private respondent, the fact of exclusive ownership cannot be made to rest solely on these documents since dominion over trademarks is not acquired by the mere fact of registration alone and does not perfect a trademark right (Unno Commercial Enterprises, Inc. vs. General Milling Corporation, 120 SCRA 804 [1983]). 8. ID.; ID.; ID.; PRIOR PROOF OF TRANSGRESSION OF ACTUAL EXISTING RIGHT, INDISPENSABLE REQUIREMENT. — What we are simply conveying is another basic tenet in remedial law that before injunctive relief may properly issue, complainant's right or title must be undisputed and demonstrated on the strength of one's own title to such a degree as to unquestionably exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence, inasmuch as the possibility of irreparable damages, without prior proof of transgression of an actual existing right, is no ground for injunction being mere damnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971]; Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p. 82). Copyright 1994-2014

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9. ID.; ID.; ID.; GROUNDS FOR DENIAL AND/OR DISSOLUTION OF WRIT. — Under Section 6, Rule 58 of the Revised Rules of Court, injunction may be refused, or, if granted, may be dissolved, on the following instances: (1) If there is insufficiency of the complaint as shown by the allegations therein. Refusal or dissolution may be granted in this case with or without notice to the adverse party. (2) If it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof would cause great damage to the defendant, while the plaintiff can be fully compensated for such damages as he may suffer. The defendant, in this case, must file a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may suffer by the refusal or the dissolution of the injunction. (3) On other grounds upon affidavits on the part of the defendant which may be opposed by the plaintiff also by affidavits. Modification of the injunction may also be ordered by the court if it appears that the extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court, 1986 ed., p. 99; Francisco, supra, at p. 268.) 10. ID.; ID.; ID.; FOREIGN CORPORATION NOT DOING BUSINESS IN THE PHILIPPINES NOT ENTITLED TO ISSUANCE OF WRIT OF PRELIMINARY INJUNCTION IN THE ABSENCE OF THEIR RIGHT TO BE PROTECTED; CASE AT BAR. — In view of the explicit representation of petitioners in the complaint that they are not engaged in business in the Philippines, it inevitably follows that no conceivable damage can be suffered by them not to mention the foremost consideration heretofore discussed on the absence of their "right" to be protected. WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED. 11. ID.; ID.; ID.; ERRONEOUS LIFTING OF WRIT MAY BE CURED BY APPEAL AND NOT BY PETITION FOR CERTIORARI. — Assuming in gratia argumenti that respondent court erroneously lifted the writ it previously issued, the same may be cured by appeal and not in the form of a petition for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). 12. ID.; ID.; ID.; WRIT MAY BE DISSOLVED WITHOUT PREVIOUS NOTICE TO ADVERSE PARTY AND WITHOUT HEARING. — Verily, and mindful of the rule that a writ of preliminary injunction is an interlocutory order which is always under the control of the court before final judgment petitioners criticism must fall flat on the ground, so to speak, more so when extinction of the previously issued writ can even be made without previous notice to the adverse party Copyright 1994-2014

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and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1947]; 3 Moran, Rules of Court, 1970 ed., p. 81).

DECISION

MELO, J : p

In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc., and Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the faculty conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of Court when respondent Court of Appeals lifted the writ of preliminary injunction it earlier had issued against Fortune Tobacco Corporation, herein private respondent, from manufacturing and selling "MARK" cigarettes in the local market. llcd

Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and "LARK", also for cigarettes, must be protected against unauthorized appropriation, petitioners twice solicited the ancillary writ in the course of the main suit for infringement but the court of origin was unpersuaded. Before we proceed to the generative facts of the case at bar, it must be emphasized that resolution of the issue on the propriety of lifting the writ of preliminary injunction should not be construed as a prejudgment of the suit below. Aware of the fact that the discussion we are about to enter into involves a mere interlocutory order, a discourse on the aspect of infringement must thus be avoided. With these caveat, we shall now shift our attention to the events which spawned the controversy. As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized under the laws of the State of Virginia, United States of America, and does business at 100 Park Avenue, New York, New York, United States of America. The two other plaintiff foreign corporations, which are wholly-owned subsidiaries of Philip Morris, Inc., are similarly not doing business in the Philippines but are suing on an isolated transaction. As registered owners of "MARK VII", "MARK TEN", and "LARK" per certificates of registration issued by the Philippine Patent Office on April 26, 1973, May 28, 1964, and March 25, 1964, plaintiffs-petitioners asserted that defendant Fortune Tobacco Corporation has no right to manufacture and sell Copyright 1994-2014

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cigarettes bearing the allegedly identical or confusingly similar trademark "MARK" in contravention of Section 22 of the Trademark Law, and should, therefore, be precluded during the pendency of the case from performing the acts complained of via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No. 13132). For its part, Fortune Tobacco Corporation admitted petitioners' certificates of registration with the Philippine Patent Office subject to the affirmative and special defense on misjoinder of party plaintiffs. Private respondent alleged further that it has been authorized by the Bureau of Internal Revenue to manufacture and sell cigarettes bearing the trademark "MARK", and that "MARK" is a common word which cannot be exclusively appropriated (p. 158, Court of Appeals Rollo in AC-G.R. SP No. 13132). On March 28, 1983, petitioners' prayer for preliminary injunction was denied by the Presiding Judge of Branch 166 of the Regional Trial Court of the National Capital Judicial Region stationed at Pasig, premised upon the following propositions: Plaintiffs admit in paragraph 2 of the complaint that ". . . they are not doing business in the Philippines and are suing on an isolated transaction . . ." This simply means that they are not engaged in the sale, manufacture, importation, expor[t]ation and advertisement of their cigarette products in the Philippines. With this admission, defendant asks: ". . . how could defendant's "MARK" cigarettes cause the former "irreparable damage" within the territorial limits of the Philippines?" Plaintiffs maintain that since their trademarks are entitled to protection by treaty obligation under Article 2 of the Paris Convention of which the Philippines is a member and ratified by Resolution No. 69 of the Senate of the Philippines and as such, have the force and effect of law under Section 12, Article XVII of our Constitution and since this is an action for a violation or infringement of a trademark or trade name by defendant, such mere allegation is sufficient even in the absence of proof to support it. To the mind of the Court, precisely, this is the issue in the main case to determine whether or not there has been an invasion of plaintiffs' right of property to such trademark or trade name. This claim of plaintiffs is disputed by defendant in paragraphs 6 and 7 of the Answer; hence, this cannot be made a basis for the issuance of a writ of preliminary injunction. There is no dispute that the First Plaintiff is the registered owner of trademar[k] "MARK VII" with Certificate of Registration No. 18723, dated April 26, 1973 while the Second Plaintiff is likewise the registered owner of trademark "MARK TEN" under Certificate of Registration No. 11147, dated May 28, 1963 and the Third Plaintiff is a registrant of trademark "LARK" as shown by Certificate of Registration No. 10953 dated March 23, 1964, in Copyright 1994-2014

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addition to a pending application for registration of trademark "MARK VII" filed on November 21, 1980 under Application Serial No. 43243, all in the Philippine Patent Office. In the same manner, defendant has a pending application for registration of the trademark "LARK" cigarettes with the Philippine Patent Office under Application Serial No. 44008. Defendant contends that since plaintiffs are "not doing business in the Philippines" coupled by the fact that the Director of Patents has not denied their pending application for registration of its trademark "MARK", the grant of a writ of preliminary injunction is premature. Plaintiffs contend that this act(s) of defendant is but a subterfuge to give semblance of good faith intended to deceive the public and patronizers into buying the products and create the impression that defendant's goods are identical with or come from the same source as plaintiffs' products or that the defendant is a licensee of plaintiffs when in truth and in fact the former is not. But the fact remains that with its pending application, defendant has embarked in the manufacturing, selling, distributing and advertising of "MARK" cigarettes. The question of good faith or bad faith on the part of defendant are matters which are evidentiary in character which have to be proven during the hearing on the merits; hence, until and unless the Director of Patents has denied defendant's application, the Court is of the opinion and so holds that issuance of a writ of preliminary injunction would not lie. There is no question that defendant has been authorized by the Bureau of Internal Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of Ruben B. Ancheta, Acting Commissioner addressed to Fortune Tobacco Corporation dated April 3, 1981, marked as Annex "A", defendant's "OPPOSITION, etc." dated September 24, 1982). However, this authority is qualified ". . . that the said brands have been accepted and registered by the Patent Office not later than six (6) months after you have been manufacturing the cigarettes and placed the same in the market." However, this grant ". . . does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your indicated trademarks/brands". As aforestated, the registration of defendant's application is still pending in the Philippine Patent Office. It has been repeatedly held in this jurisdiction as well as in the United States that the right or title of the applicant for injunction remedy must be clear and free from doubt. Because of the disastrous and painful effects of an injunction, Courts should be extremely careful, cautious and conscionable in the exercise of its discretion consistent with justice, equity and fair play. "There is no power the exercise of which is more delicate which requires greater caution, deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than the issuing of an injunction; it is Copyright 1994-2014

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the strong arm of equity that never ought to be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. The right must be clear, the injury impending or threatened, so as to be averted only by the protecting preventive process of injunction." (Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.) "Courts of equity constantly decline to lay down any rule which injunction shall be granted or withheld. There is wisdom in this course, for it is impossible to foresee all exigencies of society which may require their aid to protect rights and restrain wrongs." (Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.) "It is the strong arm of the court; and to render its operation benign and useful, it must be exercised with great discretion, and when necessary requires it." (Attorney-General v. Utica Inc. Co., P. John Ch. (N.Y.) 371.) Having taken a panoramic view of the position[s] of both parties as viewed from their pleadings, the picture reduced to its minimum size would be this: At the crossroads are the two (2) contending parties, plaintiffs vigorously asserting the rights granted by law, treaty and jurisprudence to restrain defendant in its activities of manufacturing, selling, distributing and advertising its "MARK" cigarettes and now comes defendant who countered and refused to be restrained claiming that it has been authorized temporarily by the Bureau of Internal Revenue under certain conditions to do so as aforestated coupled by its pending application for registration of trademark "MARK" in the Philippine Patent Office. This circumstance in itself has created a dispute between the parties which to the mind of the Court does not warrant the issuance of a writ of preliminary injunction. "It is well-settled principle that courts of equity will refuse an application for the injunctive remedy where the principle of law on which the right to preliminary injunction rests is disputed and will admit of doubt, without a decision of the court of law establishing such principle although satisfied as to what is a correct conclusion of law upon the facts. The fact, however, that there is no such dispute or conflict does not in itself constitute a justifiable ground for the court to refuse an application for the injunctive relief." (Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg. 94.) cdphil

Hence, the status quo existing between the parties prior to the filing of this case should be maintained. For after all, an injunction, without reference Copyright 1994-2014

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to the parties, should not be violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No. 91332.)

In the process of denying petitioners' subsequent motion for reconsideration of the order denying issuance of the requested writ, the court of origin took cognizance of the certification executed on January 30, 1984 by the Philippine Patent Office attesting to the fact that private respondent's application for registration is still pending appropriate action. Apart from this communication, what prompted the trial court judge to entertain the idea of prematurity and untimeliness of petitioners' application for a writ of preliminary injunction was the letter from the Bureau of Internal Revenue dated February 2, 1984 which reads: MRS. TERESITA GANDIONGCO OLEDAN Legal Counsel Fortune Tobacco Corporation Madam: In connection with your letter dated January 25, 1984, reiterating your query as to whether your label approval automatically expires or becomes null and void after six (6) months if the brand is not accepted and by the patent office, please be informed that no provision in the Tax Code or revenue regulation that requires an applicant to comply with the aforementioned condition in order that his label approved will remain valid and existing. Based on the document you presented, it shows that registration of this particular label is still pending resolution by the Patent Office. These being so, you may therefore continue with the production of said brand of cigarette until this Office is officially notified that the question of ownership of "MARK" brand is finally resolved. Very truly yours, TEODORO D. PAREÑO Chief, Manufactured Tobacco Tax Division TAN-P6531-D 2830-A-6 (p. 348, Rollo.)

It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark Division of the then Philippine Patent Office that Fortune's application for its trademark is still pending before said office (p. 311, Rollo). Copyright 1994-2014

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Petitioners thereafter cited supervening events which supposedly transpired since March 28, 1983, when the trial court first declined issuing a writ of preliminary injunction, that could alter the results of the case in that Fortune's application had been rejected, nay, barred by the Philippine Patent Office, and that the application had been forfeited by abandonment, but the trial court nonetheless denied the second motion for issuance of the injunctive writ on April 22, 1987, thus: For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants have fallen far short of the legal requisites that would justify the grant of the writ of preliminary injunction prayed for. For one, they did not even bother to establish by competent evidence that the products supposedly affected adversely by defendant's trademark now subject of an application for registration with the Philippine Patents Office, are in actual use in the Philippines. For another, they concentrated their fire on the alleged abandonment and forfeiture by defendant of said application for registration. The Court cannot help but take note of the fact that in their complaint plaintiffs included a prayer for issuance of a writ of preliminary injunction. The petition was duly heard, and thereafter the matter was assiduously discussed lengthily and resolved against plaintiffs in a 15-page Order issued by the undersigned's predecessor on March 28, 1983. Plaintiff's motion for reconsideration was denied in another well-argued 8 page Order issued on April 5, 1984, and the matter was made to rest. However, on the strength of supposed changes in the material facts of this case, plaintiffs came up with the present motion citing therein the said changes which are: that defendant's application had been rejected and barred by the Philippine Patents Office, and that said application has been deemed abandoned and forfeited. But defendant has refiled the same. Plaintiff's arguments in support of the present motion appear to be a mere rehash of their stand in the first above-mentioned petition which has already been ruled upon adversely against them. Granting that the alleged changes in the material facts are sufficient grounds for a motion seeking a favorable grant of what has already been denied, this motion just the same cannot prosper. In the first place there is no proof whatsoever that any of plaintiffs' products which they seek to protect from any adverse effect of the trademark applied for by defendant, is in actual use and available for commercial purposes anywhere in the Philippines. Secondly, as shown by plaintiffs' own evidence furnished by no less than the chief of Trademarks Division of the Philippine Copyright 1994-2014

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Patent Office, Atty. Enrique Madarang, the abandonment of an application is of no moment, for the same can always be refiled. He said there is no specific provision in the rules prohibiting such refiling (TSN, November 21, 1986, pp. 60 & 64, Raviera). In fact, according to Madarang, the refiled application of defendant is now pending before the Patents Office. Hence, it appears that the motion has no leg to stand on. (pp. 350-351, Rollo in G.R. No. 91332.) LLpr

Confronted with this rebuff, petitioners filed a previous petition for certiorari before the Court, docketed as G.R. No. 78141, but the petition was referred to the Court of Appeals. The Court of Appeals initially issued a resolution which set aside the court of origin's order dated April 22, 1987, and granted the issuance of a writ of preliminary injunction enjoining Fortune, its agents, employees, and representatives, from manufacturing, selling, and advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the First Division of the Court of Appeals in CA-G.R. SP No. 13132, remarked: There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII", "MARK TEN", and "LARK". (Annexes B, C and D, petition). As found and reiterated by the Philippine Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks of petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No. 166, as amended (pp. 106, 139, SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the mark "MARK" under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases." (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material facts which occurred after March 28, 1983", are not also questioned by respondents. Pitted against the petitioners' documentary evidence, respondents pointed to (1) the letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting Commissioner of Internal Revenue, temporarily granting the request of private respondent for a permit to manufacture two (2) new brands of cigarettes one of which is brand "MARK" filter-type blend, and (2) the certification dated September 26, 1986 of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon the written request of private respondents' counsel dated September 17, 1986 attesting that the records of his office would show that the "trademark MARK" for cigarettes is now the subject of a pending Copyright 1994-2014

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application under Serial No. 59872 filed on September 16, 1986. Private respondent's documentary evidence provides the reasons neutralizing or weakening their probative values. The penultimate paragraph of Commissioner Diaz' letter of authority reads: "Please be informed further that the authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your above-named brands/trademarks." while Director Sandico's certification contained similar conditions as follows: "This Certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor the right to register if contrary to the provisions of the Trademark Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases." The temporary permit to manufacture under the trademark "MARK" for cigarettes and the acceptance of the second application filed by private respondent in the height of their dispute in the main case were evidently made subject to the outcome of the said main case or Civil Case No. 47374 of the respondent Court. Thus, the Court has not missed to note the absence of a mention in the Sandico letter of September 26, 1986 of any reference to the pendency of the instant action filed on August 18, 1982. We believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. vs. Quintillan, 125 SCRA 276). The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 119 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Copyright 1994-2014

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Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse of discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same. (Service Specialists, Inc. vs. Sheriff of Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.) llcd

After private respondent Fortune's motion for reconsideration was rejected, a motion to dissolve the disputed writ of preliminary injunction with offer to post a counterbond was submitted which was favorably acted upon by the Court of Appeals, premised on the filing of a sufficient counterbond to answer for whatever perjuicio petitioners may suffer as a result thereof, to wit: The private respondent seeks to dissolve the preliminary injunction previously granted by this Court with an offer to file a counterbond. It was pointed out in its supplemental motion that lots of workers employed will be laid off as a consequence of the injunction and that the government will stand to lose the amount of specific taxes being paid by the private respondent. The specific taxes being paid is the sum total of P120,120,295.98 from January to July 1989. The petitioners argued in their comment that the damages caused by the infringement of their trademark as well as the goodwill it generates are incapable of pecuniary estimation and monetary evaluation and not even the counterbond could adequately compensate for the damages it will incur as a result of the dissolution of the bond. In addition, the petitioner further argued that doing business in the Philippines is not relevant as the injunction pertains to an infringement of a trademark right. After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons for Us to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary injunction. The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark in Copyright 1994-2014

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question and the filing of the counterbond will amply answer for such damages. While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction, the motion to file a counterbond is granted. (pp. 53-54, Rollo in G.R. No. 91332.)

Petitioners, in turn, filed their own motion for re-examination geared towards reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R. No. 91332). Hence, the instant petition casting three aspersions that respondent court gravely abused its discretion tantamount to excess of jurisdiction when: I. . . . it required, contrary to law and jurisprudence, that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines; II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court; and III. . . . after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain private respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized the private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the mandates of the Trademark Law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, and the admonitions of the Supreme Court. (pp. 24-25, Petition; pp. 25-26, Rollo.)

To sustain a successful prosecution of their suit for infringement, petitioners, as foreign corporations not engaged in local commerce, rely on Section 21-A of the Trademark Law reading as follows: SECTION 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or assigned under this act may bring an action hereunder for infringement, for unfair competition, or false Copyright 1994-2014

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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 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. (As inserted by Sec. 7 of Republic Act No. 638.)

to drive home the point that they are not precluded from initiating a cause of action in the Philippines on account of the principal perception that another entity is pirating their symbol without any lawful authority to do so. Judging from a perusal of the aforequoted Section 21-A, the conclusion reached by petitioners is certainly correct for the proposition in support thereof is embedded in Philippine legal jurisprudence. Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50 [1971]) by then Justice (later Chief Justice) Makalintal that: Parenthetically, it may be stated that the ruling in the Mentholatum case was subsequently derogated when Congress, purposely to "counteract the effects" of said case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark Law, which allows a foreign corporation or juristic person to bring an action in Philippine courts for infringement of a mark or tradename, 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 complaint." Petitioner argues that Section 21-A militates against respondent's capacity to maintain a suit for cancellation, since it requires, before a foreign corporation may bring an action, that its trademark or tradename has been registered under the Trademark Law. The argument misses the essential point in the said provision, which is that the foreign corporation is allowed thereunder to sue "whether or not it has been licensed to do business in the Philippines" pursuant to the Corporation Law (precisely to counteract the effects of the decision in the Mentholatum case). (at p. 57.)

However, on May 21, 1984, Section 21-A, the provision under consideration, was qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign corporation not doing business in the Philippines may have the right to sue before Philippine Courts, but existing adjective axioms require that qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded (2 Agbayani, Commercial Laws of the Philippines, 1991 Copyright 1994-2014

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Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a foreign corporation suing under Section 21-A to simply allege its alien origin. Rather, it must additionally allege its personality to sue. Relative to this condition precedent, it may be observed that petitioners were not remiss in averring their personality to lodge a complaint for infringement (p. 75, Rollo in AC-G.R. SP No. 13132) especially so when they asserted that the main action for infringement is anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103). Another point which petitioners considered to be of significant interest, and which they desire to impress upon us is the protection they enjoy under the Paris Convention of 1965 to which the Philippines is a signatory. Yet, insofar as this discourse is concerned, there is no necessity to treat the matter with an extensive response because adherence of the Philippines to the 1965 international covenant due to pact sunt servanda had been acknowledged in La Chemise (supra at page 390). Given these confluence of existing laws amidst the cases involving trademarks, there can be no disagreement to the guiding principle in commercial law that foreign corporations not engaged in business in the Philippines may maintain a cause of action for infringement primarily because of Section 21-A of the Trademark Law when the legal standing to sue is alleged, which petitioners have done in the case at hand. LibLex

In assailing the justification arrived at by respondent court when it recalled the writ of preliminary injunction, petitioners are of the impression that actual use of their trademarks in Philippine commercial dealings is not an indispensable element under Article 2 of the Paris Convention in that: (2) . . . no condition as to the possession of a domicile or establishment in the country where protection is claimed may be required of persons entitled to the benefits of the Union for the enjoyment of any industrial property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)

Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of the Trademark Law which speak loudly about the necessity of actual commercial use of the trademark in the local forum: SEC. 2. What are registrable. — Trademarks, tradenames and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance Copyright 1994-2014

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with the provisions of this Act; Provided, That said trademarks, tradenames, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed; And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended by R.A. No. 865). SEC. 2-A. Ownership of trademarks, tradenames and service marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a tradename, or a service mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, tradename, service mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As amended by R.A. No. 638). (Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203 SCRA 583 [1991], at pp. 589-590; italics ours.)

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 16). prLL

The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez, Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]), have been construed in this manner: A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership Copyright 1994-2014

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over a trademark or a tradename. xxx

xxx

xxx

These provisions have been interpreted in Sterling Products International, Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way: "A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. xxx

xxx

xxx

". . . Adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark . . ." In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce. We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]): "3. The Trademark law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as 'samples' and 'of no commercial value'. The evidence for respondent must be clear, definite and free from inconsistencies. (Sy Ching v. Gaw Lui, 44 SCRA 148-149) 'Samples' are not for sale and therefore, the fact of exporting them; to the Philippines cannot be considered to be Copyright 1994-2014

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equivalent to the 'use' contemplated by the law. Respondent did not expect income from such 'samples'. There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines." (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied) The records show that the petitioner has never conducted any business in the Philippines. It has never promoted its tradename or trademark in the Philippines. It is unknown to Filipinos except the very few who may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine government. Under the law, it has no right to the remedy it seeks. (at pp. 589-591.)

In other words, petitioners may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. Going back to the first assigned error, we can not help but notice the manner the ascription was framed which carries with it the implied but unwarranted assumption of the existence of petitioners' right to relief. It must be emphasized that this aspect of exclusive dominion to the trademarks, together with the corollary allegation of irreparable injury, has yet to be established by petitioners by the requisite quantum of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of preliminary injunction is due to judicial deference to the lower courts, involved as there is a mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a remedial measure which is but ancillary to the main action for infringement still pending factual determination before the court of origin. It is virtually needless to stress the obvious reality that critical facts in an infringement case are not before us more so when even Justice Feliciano's opinion observes that "the evidence is scanty" and that petitioners "have yet to submit actual copies or photographs of their registered marks as used in cigarettes" while private respondent has not, for its part, "submitted the actual labels or packaging materials used in selling its 'Mark' cigarettes." Petitioners, therefore, may not be Copyright 1994-2014

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permitted to presume a given state of facts on their so-called right to the trademarks which could be subjected to irreparable injury and in the process, suggest the fact of infringement. Such a ploy would practically place the cart ahead of the horse. To our mind, what appears to be the insurmountable barrier to petitioners' portrayal of whimsical exercise of discretion by the Court of Appeals is the well-taken remark of said court that: The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark in question and the filing of the counterbond will amply answer for such damages. (p. 54, Rollo in G.R. No. 91332.)

More telling are the allegations of petitioners in their complaint (p. 319, Rollo in G.R. No. 91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332) indicating that they are not doing business in the Philippines, for these frank representations are inconsistent and incongruent with any pretense of a right which can be breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58, Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show that there exists a right to be protected and that the facts against which injunction is directed are violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that albeit petitioners are holders of certificate of registration in the Philippines of their symbols as admitted by private respondent, the fact of exclusive ownership cannot be made to rest solely on these documents since dominion over trademarks is not acquired by the mere fact of registration alone and does not perfect a trademark right (Unno Commercial Enterprises, Inc. vs. General Milling Corporation, 120 SCRA 804 [1983]). Even if we disregard the candid statements of petitioners anent the absence of business activity here and rely on the remaining statements of the complaint below, still, when these averments are juxtaposed with the denials and propositions of the answer submitted by private respondent, the supposed right of petitioners to the symbol have thereby been controverted. This is not to say, however, that the manner the complaint was traversed by the answer is sufficient to tilt the scales of justice in favor of private respondent. Far from it. What we are simply conveying is another basic tenet in remedial law that before injunctive relief may properly issue, complainant's right or title must be undisputed and demonstrated on the strength of one's own title to such a degree as to unquestionably exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence, inasmuch as the possibility of Copyright 1994-2014

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irreparable damage, without prior proof of transgression of an actual existing right, is no ground for injunction being mere damnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971]; Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p. 82). On the economic repercussion of this case, we are extremely bothered by the thought of having to participate in throwing into the streets Filipino workers engaged in the manufacture and sale of private respondent's "MARK" cigarettes who might be retrenched and forced to join the ranks of the many unemployed and unproductive as a result of the issuance of a simple writ of preliminary injunction and this, during the pendency of the case before the trial court, not to mention the diminution of tax revenues represented to be close to a quarter million pesos annually. On the other hand, if the status quo is maintained, there will be no damage that would be suffered by petitioners inasmuch as they are not doing business in the Philippines. With reference to the second and third issues raised by petitioners on the lifting of the writ of preliminary injunction, it cannot be gainsaid that respondent court acted well within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court: Section 6. Grounds for objection to, or for motion of dissolution of injunction. — The injunction may be refused or, if granted ex parte, may be dissolved, upon the insufficiency of the complaint as shown by the complaint itself, with or without notice to the adverse party. It may also be refused or dissolved on other grounds upon affidavits on the part of the defendants which may be opposed by the plaintiff also by affidavits. It may further be refused or, if granted, may be dissolved, if it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof, as the case may be, would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may suffer by the refusal or the dissolution of the injunction. If it appears that the extent of the preliminary injunction granted is too great, it must be modified.

Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on the following instances: (1) If there is insufficiency of the complaint as shown by the allegations therein. Refusal or dissolution may be granted in this case with or without notice to the adverse party. (2) Copyright 1994-2014

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the injunction, the issuance or continuance thereof would cause great damage to the defendant, while the plaintiff can be fully compensated for such damages as he may suffer. The defendant, in this case, must file a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may suffer by the refusal or the dissolution of the injunction. (3) On other grounds upon affidavits on the part of the defendant which may be opposed by the plaintiff also by affidavits. Modification of the injunction may also be ordered by the court if it appears that the extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court, 1986 ed., p. 99; Francisco, supra, at p. 268.)

In view of the explicit representation of petitioners in the complaint that they are not engaged in business in the Philippines, it inevitably follows that no conceivable damage can be suffered by them not to mention the foremost consideration heretofore discussed on the absence of their "right" to be protected. At any rate, and assuming in gratia argumenti that respondent court erroneously lifted the writ it previously issued, the same may be cured by appeal and not in the form of a petition for certiorari (Clark vs. Philippine Ready Mix Concrete Co. 88 Phil. 460 [1951]). Verily, and mindful of the rule that a writ of preliminary injunction is an interlocutory order which is always under the control of the court before final judgment, petitioners' criticism must fall flat on the ground, so to speak, more so when extinction of the previously issued writ can even be made without previous notice to the adverse party and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1947]; 3 Moran, Rules of Court, 1970 ed., p. 81). WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED. SO ORDERED. Bidin, J., concurs. Davide, Jr., J., concurs in the result. Romero, J., took no part; related to counsel.

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Separate Opinions FELICIANO, J ., dissenting: I find myself unable to join in the opinion prepared by my distinguished brother, Melo, J. It seems to me that the issues involved in this case are rather more complex than what has been assumed to be the case by the majority opinion. For this and related reasons, there is set out below a statement of the relevant facts (as I see them) that is more extensive than what is ordinarily found in dissenting opinions. Petitioner Philip Morris, Inc. is a corporation organized and existing under the law of Virginia, U.S.A. Petitioners Benson & Hedges (Canada), Inc. and Fabriques de Tabac Reunies, S.A., both wholly owned subsidiaries of Philip Morris, Inc., are organized and existing under the law of Canada and Switzerland, respectively. Philip Morris, Inc. is registered owner of the trademark "MARK VII" for cigarettes. Its ownership thereof is evidenced by Philippine Patent Office Trademark Certificate of Registration No. 18723, dated 26 April 1973. The statement attached to the Certificate of Registration states that the trademark "MARK VII" had been registered in the United States Patent Office, on the Principal Register, under Certificate of Registration No. 888,931 issued on 7 April 1970. The statement also requested that that trademark be registered in the Philippine Patent Office on the Principal Register in accordance with Section 37 of R.A. No. 166, as amended. cdasia

Benson & Hedges (Canada), Inc. is the registered owner of the trademark "MARK TEN" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 11147, dated 28 May 1964, on the Principal Register. This Trademark Certificate of Registration was originally issued in the name of Canadian Tabacofina Ltd. and later assigned to Benson & Hedges (Canada), Inc. Petitioners alleged that the name Canadian Tabacofina Ltd. was later changed to Benson & Hedges (Canada) Ltd. This Trademark Certificate of Registration was renewed on 28 May 1984. The statement attached thereto stated that the "date of first use of the trademark 'MARK TEN' in trade in or with the Philippines is April 15, 1963," and that that trademark had "been in actual use in commerce over the Philippines continuously for two months." Copyright 1994-2014

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Fabriques de Tabac Reunies, S.A. is registered owner of the trademark "LARK" also for cigarettes, as evidenced by Philippine Patent Office Trademark Certificate of Registration No. 10953, dated 25 March 1964. This Trademark Certificate of Registration was originally issued in the name of Liggett and Myres Tobacco Company and later assigned to Fabriques de Tabac Reunies, S.A. Petitioners alleged that the name of Liggett and Myres Tobacco Company was changed later to Fabriques de Tabac Reunies, S.A. The statement attached to this Certificate of Registration states that the trademark "LARK" was first used by Liggett and Myres Tobacco Company on 31 May 1920, and first used by it "in commerce in or with the Philippines on February 6, 1963" and has been continuously used by it "in trade in or with the Philippines since February 6, 1963." Sometime before 17 October 1981, private respondent Fortune Tobacco Corporation ("Fortune") commenced manufacturing and selling in the Philippines cigarettes under the brandname "MARK." Fortune also filed on 13 February 1981 with the Philippine Patent Office an application for registration of "MARK" as a trademark for cigarettes. By a letter dated 17 October 1981, petitioners through their lawyers wrote to Fortune stating that the manufacturing, selling and advertising of "MARK" cigarettes by Fortune constituted an "infringement or an act of unfair competition with" petitioners' "well-known international trademarks used on cigarettes and tobacco products which were registered worldwide and with the Philippine Patent Office." Petitioners listed their Philippine Certificates of Registration for the trademarks "MARK VII," "MARK TEN," and "LARK." Petitioners then asked Fortune "to cease and desist from further manufacturing, selling or advertising 'MARK' cigarettes," otherwise appropriate court actions would be filed without further notice. prcd

On 18 August 1982, petitioners commenced action before the Court of First Instance of Pasig, Metro Manila (Civil Case No. 47374). In their complaint, petitioners alleged that they were not doing business in the Philippines but had nonetheless the right and the capacity to bring the instant suit; that they were owners of Philippine Patent Office Trademark Certificates of Registration which were in full force and effect, covering "MARK VII," "MARK TEN," and "LARK," all for cigarettes (except the last which also covered chewing and smoking tobacco); that they had registered those trademarks in their respective countries of origin and in other countries of the world and that by virtue of their "long and extensive use [had] gained international fame and acceptance;" that they had their respective real and effective industrial or commercial establishments in the United States, Canada and Copyright 1994-2014

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Switzerland, which countries were, like the Philippines, members of the Convention of Paris for the Protection of Industrial Property; that under that Convention each member-country undertakes to prohibit the use of a trademark which constitutes a reproduction, imitation or translation of a mark already belonging to a person entitled to the benefits of the Convention and use for identical or similar goods; that petitioner Fabriques de Tabac Reunies, S.A. had long been using the trademark "LARK" throughout the world, including the Philippines where its products bearing the trademark "LARK" had been sold in the duty-free market, and advertised and marketed in the Philippines at least since 1964 and have continued to be so to the present; that Fortune had without previous consent, authority or license from petitioners, with knowledge of the popularity of petitioners' marks and their Philippine registrations, manufactured, advertised and sold cigarettes bearing the identical or confusingly similar trademark "MARK" which unauthorized use constituted an act of infringement under Section 22 of R.A. No. 166, as amended; that thereby the public and the patronizers of petitioners' products were being deceived into buying Fortune's cigarettes under the impression and mistaken belief that Fortune's cigarettes were identical with, or came from the same source as, petitioners' products or that Fortune was licensee of petitioners, which it was not; that the infringement by Fortune of petitioners' trademarks have inflicted damages upon petitioners; that the continued unauthorized and unlicensed manufacture and sale by Fortune of its infringing products during the litigation would work injustice and cause irreparable injury to petitioners in violation of their property rights and moreover tend to render the judgment which the court might render ineffectual. Petitioners accordingly asked for a writ of preliminary injunction to restrain Fortune from manufacturing or selling "MARK" cigarettes, and after trial, to make such preliminary injunction permanent and to order Fortune's infringing materials to be destroyed, and for damages. Fortune filed an Opposition to petitioners' prayer for preliminary injunction. On 28 March 1983, the trial court 1 (1)issued an Order denying petitioners' motion for preliminary injunction. In rendering that order, the trial court, while noting that petitioners were holders of Philippine Certificates of Trademark Registration, relied heavily on three (3) factors: Firstly, that petitioners were foreign corporations not doing business in the Philippines; Secondly, that Fortune's application for a registration as trademark of the word "MARK" for cigarettes was then pending before the Philippine Patent Office; and Copyright 1994-2014

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Thirdly, that Fortune was the "only party authorized" by the Bureau of Internal Revenue ("BIR") to manufacture cigarettes bearing the mark "MARK" in the Philippines.

In respect of the first point, the trial court was obviously heavily influenced by Fortune's argument that because petitioners were not doing business in the Philippines, which meant that "they [were] not engaged in the sale, manufacture, importation, exportation and advertisement of their cigarettes products in the Philippines," Fortune's manufacture and sale of its "MARK" cigarettes could not be said to be causing petitioners "irreparable damage" within the Philippines. In respect of the second point, the trial judge felt that because the Director of Patents had not, at that point, denied Fortune's pending application for registration of its trademark "MARK," the grant of a preliminary injunction was premature. With regard to the third point, the judge noted a letter dated 30 January 1979 2 (2)of the then Acting Commissioner of Internal Revenue Mr. Conrado P. Diaz, temporarily granting the request of Fortune for a permit to manufacture two (2) new brands of cigarettes, one of which was "MARK." The trial judge also noted that the BIR letter contained the following paragraph: "Please be informed further that this authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your above named brands/trademarks." 3(3)

The trial judge, however, apparently gave no weight at all to this caveat. Petitioners sought, on 15 April 1983, reconsideration of Judge Reyes' Order denying preliminary injunction. After Fortune had filed an Opposition to petitioners' Motion for Reconsideration, and petitioners had filed their Reply and Fortune a Rejoinder, and after an offer of exhibits by the parties respectively, Judge Reyes issued on 5 April 1984 another Order denying the Motion for Reconsideration. In his second order, the trial judge laid great stress on the fact that Fortune's application for registration of its trademark "MARK" for cigarettes remained pending before the Philippine Patent Office and that the BIR's approval of Fortune's application to manufacture and sell its "MARK" cigarettes remained subsisting. On that basis, Judge Reyes denied petitioners' motion for reconsideration. More than two (2) years later, petitioners filed a "Second Motion for Issuance of Preliminary Injunction" dated 1 September 1986. In their Second Motion, petitioners invited attention to Paper No. 3, dated 6 April 1983, relating to Fortune's Copyright 1994-2014

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application for registration of its brandname "MARK." This Paper No. 3 reproduced a letter to Fortune's counsel by Bienvenido A. Palisoc, Senior Trademark Examiner, and Wilfredo T. Jaramillo, Trademark Examiner, stating that: "This application [for registration of 'Mark'] has been examined. Caption mark of the application must tally with the drawing on file. Subject mark is confusingly similar with the following marks on file: a. b. c. d.

'Mark' with Reg. No. SR-2659 for cigarettes. 'Mark VII' with Reg. No. 18723 for cigarettes. 'Mark Ten' with Reg. No. 11147 for cigarettes. 'Lark' with Reg. No. 10953 for cigarettes.

Hence, registration is barred under Sec. 4 (d) of Rep. Act No. 166 as amended. Subject mark has no trademark significance and can not serve its purpose as to indicate the source and origin of goods. Furthermore, the word 'Mark' is generic and therefore incapable of exclusive appropriation. Makati, Metro Manila, April 6, 1983." 4(4) (Emphasis supplied)

Petitioners also invited attention to a certification dated 8 August 1986 issued by Mr. Luis M. Daca, Jr., Assistant Director, Philippine Patent Office, to the effect that Fortune's application for the mark "MARK" for cigarettes was declared abandoned as of 16 February 1986 and was now deemed forfeited. In addition, petitioners explained in some detail how Fortune's use of its mark "MARK" was "destructive of [petitioners'] property right to [their] registered trademarks." 5(5) Further, petitioners assailed Fortune's argument that issuance of preliminary injunction would cause "loss of revenue and taxes to the Government" and that more damages would be sustained by Fortune than by petitioners since the petitioners do not market their cigarettes in the Philippines. After Fortune had filed an Opposition to petitioners' Second Motion, the trial court, this time presided over by Judge Nicolas Galing, issued an Order dated 22 April 1987 denying once more the motion for issuance of a writ of preliminary injunction. In this order, Judge Galing relied on two (2) points: firstly, according to the trial judge, petitioners had not shown that the products they sought to protect from Copyright 1994-2014

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Fortune's "MARK" cigarettes were "in actual use and available for commercial purposes anywhere in the Philippines;" and secondly, it appeared that while Fortune's original application had been abandoned, it could be refiled and was in fact re-filed. Thus, Judge Galing in effect reiterated Judge Reyes's position that until the Director of Patents had definitively acted upon Fortune's application for registration of "MARK," petitioners' prayer for preliminary injunction could not be granted. Petitioners then filed a Petition for Review with the Supreme Court, which Petition was docketed as G.R. No. 78141. The Court ordered respondents to file their Comments on the Petition and on 30 September 1987, the Court referred the Petition to the Court of Appeals. In due course of time, the Court of Appeals, through Cacdac, Jr., J., 6(6) rendered a decision on 5 May 1989 setting aside the 22 April 1987 order of the trial court and ordering issuance of a writ of preliminary injunction upon filing of a bond by petitioners in the sum of P200,000.00 to be approved by the appellate court, "enjoining the private respondents, its agents, employees and representatives from manufacturing, selling and/or advertising 'MARK' cigarettes until further orders." The Court of Appeals said in pertinent part: "There is no dispute that petitioners are the registered owners of the trademarks for cigarettes 'MARK VII,' 'MARK TEN,' and 'LARK'. (Annexes B, C and D, Petition). As found and reiterated by the Philippine Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark 'MARK' is 'confusingly similar' to the trademarks of petitioners, hence, registration was barred under Sec. 4(d) of Rep. Act No. 166, as amended (pp. 106, 139 SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the mark 'MARK' under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases.' (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as 'the changes in material facts which occurred after March 28, 1983', are not also questioned by respondents." 7(7) (Emphasis supplied)

The Court of Appeals also noted the BIR letter of 30 January 1979 temporarily granting Fortune's request for a permit to manufacture two (2) new brands of cigarettes, including one branded "MARK," and the caveat (earlier noted) 8 (8)that the BIR's authorization would not give Fortune any protection against any person or entity whose rights may be prejudiced by infringement or unfair competition on the part Fortune. The Court of Appeals also referred to the certificate dated 26 September Copyright 1994-2014

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1986 of Mr. Cesar G. Sandico, then Director of Patents, issued upon request of Fortune's counsel stating that there was a pending application for registration of the trademark "MARK" for cigarettes under Serial No. 59872, filed on 16 September 1986, noting at the same time, that Director Sandico's certification contained the following caveat or qualification: "This certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor the right to register as contrary to the provisions of the Trademark Law, Republic Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases." (Emphasis supplied)

The Court of Appeals then went on to say that: "[We] believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan Cattle Co. v. Quintillan, 125 SCRA 276). The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. v. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. Statement House, 151 SCRA 636). Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse of discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same (Service Specialists, Inc. v. Sheriff of Manila, 145 SCRA 139)." 9 (9)(Emphasis supplied)

Fortune moved for reconsideration of the Decision of the Court of Appeals insisting that petitioners must first prove their "clear, unmistakable and unquestioned right to the writ, coupled with the possible damages it would suffer;" that petitioners Copyright 1994-2014

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had not suffered any "great and irreparable injury to speak of" because "petitioners have never done business in this country in the past nor in the future;" that, on the other hand, Fortune had been authorized by the BIR to manufacture "MARK" cigarettes, "thereby generating much needed funds for the Government;" that Fortune's application for registration of its brandname "MARK" with the Philippine Patent Office "still pending" and not "finally rejected" by the Director of Patents. On 12 July 1989, the Court of Appeals issued a Minute Resolution stating that the issues and arguments in Fortune's motion for reconsideration had been "fully discussed" in the Decision sought to be reconsidered, that no new arguments were raised, and accordingly denied the Motion for Reconsideration. Fortune then filed a "Motion to Dissolve Writ of Preliminary Injunction with Offer to File Counterbond" dated 25 July 1989, where it reiterated the basic arguments it previously made. A "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of Counterbond" dated 17 August 1989 was next filed by Fortune. In this "Supplemental Motion," Fortune averred that it had paid to the BIR for 1988 the amount of P181,940,177.38 for specific taxes; while for January to July 1989, it had paid the amount of P120,120,735.28. Fortune also referred to its employees assigned to the manufacture of "MARK" cigarettes who were apparently apprehensive that their services would eventually be terminated and that they would join the ranks of the unemployed. dctai

Petitioners filed an Opposition to the "Motion to Dissolve" and a Comment on the "Supplemental Motion" of Fortune. On 14 September 1989, the Court of Appeals once more through Cacdac, Jr., J. issued a Resolution lifting the preliminary injunction it had earlier granted upon the filing of counterbond by private respondent in the amount of P400,000.00 to answer for any damages petitioners may suffer as a consequence of such lifting. In its Resolution, the Court of Appeals referred to the "lots of workers employed [who] will be laid off as a consequence of the injunction" and that Government "will stand to lose the amount of specific taxes being paid by" Fortune. It then went on to say: "After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons for Us to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary Copyright 1994-2014

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injunction. The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademarks in question and the filing of the counterbond will amply answer for such damages. While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction, the motion to file a counterbond is granted." 10 (10)(Emphasis supplied)

Petitioners filed a Motion for Reconsideration, without success. In the instant Petition, petitioners make the following basic submissions: "1. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it required, contrary to law and jurisprudence that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines; 2. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when it lifted the injunction in violation of Section 6 of Rule 58 of the rules of Court; 3. that the Court of Appeals gravely abused its discretion amounting to excess of jurisdiction when, after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to issue the writ of injunction to restrain respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the mandates of the trademark law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, and the admonitions of the Supreme Court." 11(11)

The Court required private respondent to file a comment. The comment reiterated the basic arguments made by private respondent before the Court of Copyright 1994-2014

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Appeals: a. that petitioners are not suffering any irreparable damage by the lifting of the preliminary injunction by the Court of appeals. Whatever damages they might suffer are "based purely on speculation, since by judicial admission, petitioners are not doing business in the Philippines. Private respondent stressed that petitioners "are not manufacturing, importing or selling 'MARK TEN,' 'MARK VII' or 'LARK' in this country," notwithstanding "false allegation" that petitioners have been "using" the said trademarks "in commerce and trade" in the Philippines since 1963 up to the present. b. that whatever damage petitioners may be suffering is negligible when compared to the taxes that would have to be foregone by the Government considering that private respondent "paid an annual specific tax of P240 Million only on the manufacture and sale of "MARK cigarettes." Private respondent claims that, in contrast, petitioners which are foreign corporations "based in three different countries" have not contributed anything to Government tax revenues. c. that the Court of Appeals lifted the writ of preliminary injunction it had earlier issued upon the submission of a counter bond in double the amount of the bond submitted by petitioners, under Section 6, Rule 58 of the Rules of Court, which act was within the sound discretion of the Court of Appeals. Private respondent also stressed that the right of petitioners to the injunction was still being litigated before the trial court.

Reformulating the issues raised by the petitioners here, we think the principal issues may be reduced to the following: firstly, is there a clear legal right to the relief asked by petitioners in the form of a preliminary injunction to restrain private respondent from manufacturing, selling and distributing cigarettes under the trademark "MARK"? The second question is: are private respondent's acts complained of by petitioners causing irreparable injury to petitioners' rights in the premises? These two (2) basic issues are obviously related and need to be addressed together. I The first point that needs to be stressed is that petitioners have Philippine Certificates of Registration for their trademarks "MARK TEN", "MARK VII" and "LARK" in the Principal Register. Upon the other hand, private respondent's trademark "MARK" is not registered in the Principal Register in the Office of the Director of Patents; private respondent is Copyright 1994-2014

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simply an applicant for registration of a mark, the status of which application may be noted later. LLjur

It is important to stress the legal effects of registration of a trademark in the Principal Register in the Office of the Director of Patents. Section 20 of R.A. No. 166, as amended, sets out the principal legal effects of such registration: "Sec. 20. Certificate 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." (Emphases supplied)

In Lorenzana v. Macagba, 12 (12)the Court distinguished between the effects of registration in the Principal Register and registration in the Supplemental Register in the following manner: "(1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark, and his right to the exclusive use thereof . There is no such presumption in registrations in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark (Unno Commercial Enterprises v. Gen. Milling Corp., 120 SCRA 804 [1983]) and proceedings therein pass on the issue of ownership, which may be contested through opposition or interference proceedings, or after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claims of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. (Le Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 [1984]: 'Registration in the Supplemental Register . . . serves as notice that the registrant is using or has appropriated the trademark.') It is not subject to opposition although it may be cancelled after its issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement, while registration in the Supplemental Register is not. (3) In application for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registration in the Supplemental Register. Certificates of registration under both Registers are also different from each other. Copyright 1994-2014

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(4) Proof of registration in the Principal Register may be filed with the Bureau of Customs to exclude foreign goods bearing infringing marks while it does not hold true for registrations in the Supplemental Register." 13 (13)(Emphasis supplied)

When taken with the companion presumption of regularity of performance of official duty, it will be seen that issuance of a Certificate of Registration of a trademark in the Principal Register also gives rise to the presumption that all requirements of Philippine law necessary for a valid registration (including prior use in commerce in the Philippines for at least two [2] months) were complied with and satisfied. In contrast, private respondent filed an application for registration of its mark "MARK" for cigarettes with the Director of Patents soon after it commenced manufacturing and selling cigarettes trademarked with "MARK." This application was abandoned or "forfeited", 14 (14)for failure of private respondent to file a necessary Paper with the Director of Patent. It also appears, however, that private respondent later re-filed or reinstated its application for registration of "MARK" 15 (15)and that, so far as the record here before us is concerned, this application remains merely an application and has not been granted and a Certificate of Registration in the Principal Register issued. 16 (16)While final action does not appear as yet to have been taken by the Director of Patents on private respondent's application, there was at least a preliminary determination of the trademark examiners that the trademark "MARK" was "confusingly similar" with petitioners' marks "MARK VII," "MARK TEN" and "LARK" and that accordingly, registration was barred under Section 4 (d) of R.A. No. 166, as amended. 17(17) In the trial court, both Judge Reyes and Judge Galing took the position that until the Director of Patents shall have finally acted on private respondent's application for registration of "MARK," petitioners cannot be granted the relief of preliminary injunction. It is respectfully submitted that this position is both erroneous and unfortunate. In reliance upon that position, private respondent has kept its application for registration alive and pending. The Director of Patents in turn may well have refrained from taking final action on that application, even in the absence of a restraining order from the courts, out of deference to the courts. The pendency of the application before the Director of Patents is not in itself a reason for denying preliminary injunction. Our courts have jurisdiction and authority to determine whether or not "MARK" is an infringement on petitioners' registered trademarks. Under our case law, the issuance of a Certificate of Registration of a trademark in the Principal Register by the Director of Patents would not prevent a court from ruling on whether or not the trademark so granted registration is confusingly similar with a Copyright 1994-2014

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previously registered trademark, where such issue is essential for resolution of a case properly before the court. A fortiori, a mere application for registration cannot be a sufficient reason for denying injunctive relief, whether preliminary or definitive. In the case at bar, petitioners' suit for injunction and for damages for infringement, and their application for a preliminary injunction against private respondent, cannot be resolved without resolving the issue of claimed confusing similarity. In the case at bar, the evidence of record is scanty. Petitioners have not submitted actual copies or photographs of their registered marks as used in cigarettes. Private respondent has not, for its part, submitted the actual labels or packaging material used in selling its "MARK" cigarettes. Petitioners have appended to their Petition a photocopy of an advertisement of "MARK" cigarettes. Private respondent has not included in the record a copy of its application for registration of "MARK" for cigarettes, which would include a facsimile of the trademark being applied for. It should be noted that "MARK" and "LARK," when read or pronounced orally, constitute idem sonans in striking degree. Further, "MARK" has taken over the dominant word in "MARK VII" and "MARK TEN." These circumstances, coupled with private respondent's failure to explain how or why it chose, out of all the words in the English language, the word "mark" to refer to its cigarettes, lead me to the submission that there is a prima facie basis for holding, as the Patent Office has held and as the Court of Appeals did hold originally, that private respondent's "MARK" infringes upon petitioners' registered trademarks. II There is thus no question as to the legal rights of petitioners as holders of trademarks registered in the Philippines. Private respondent, however, resists and assails petitioners' effort to enforce their legal rights by heavily underscoring the fact that petitioners are not registered to do business in the Philippines and are not in fact doing business in the Philippines. It is thus necessary to determine what consequences, if any, flow from this circumstance so far as enforcement of petitioners' rights as holders of registered Philippine trademarks is concerned. It should be stressed at the outset that that circumstance has no legal impact upon the right of petitioners to own and register their trademarks in the Philippines. Section 2 of R.A. No. 166 as amended expressly recognizes as registrable, under this statute, marks which are owned by corporations domiciled in any foreign country: "Sec. 2. What are registrable. — Trademarks, trade names and service marks owned by persons, corporations, partnerships or associations Copyright 1994-2014

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domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trade marks, trade names or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And provided further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines." (Emphases in the original)

It is also entirely clear that foreign corporations and corporations domiciled in a foreign country are not disabled from bringing suit in Philippine courts to protect their rights as holders of trademarks registered in the Philippines. Under Section 21-A of R.A. No. 166, as amended, any foreign corporation which is a holder of a trademark registered under Philippine law may bring an action for infringement of such mark or for unfair competition or for false designation of origin and false description "whether or not it has been licensed to do business in the Philippines under the [Corporation Law] at the time it brings complaint, subject to the proviso that: ". . . 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 similar privilege to corporate or juristic persons of the Philippines." (Emphases supplied)

The rule thus embodied in Section 21-A of R.A. No. 166 as amended is also set out in Article 2 of the Paris Convention for the Protection of Industrial Property ("Paris Convention"), to which the Philippines, the United States, Canada and Switzerland are all parties. 18 (18)Article 2 of the Paris Convention provides in relevant part: "Article 2 (1) Nationals of any country 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; all without prejudice to the rights specially provided for by this Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided that the conditions and formalities imposed upon nationals are complied with. Copyright 1994-2014

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(2) However, no requirement as to domicile or establishment in the country where protection is claimed may be imposed upon nationals of countries of the Union for the enjoyment of any industrial property rights. xxx

xxx

xxx

(Emphasis supplied)

Article 2, paragraph 1 of the Paris Convention embodies the principle of "national treatment" or "assimilation with nationals," one of the basic rules of the Convention. 19 (19)Under Article 2, paragraph 1 of the Paris Convention, nationals of Canada, Switzerland and the United States who are all countries of the Paris Union are entitled to enjoy in the Philippines, also a country of the Union, the advantages and protections which Philippine law grants to Philippine nationals. Article 2 paragraph 2 of the Paris Convention restrains the Philippines from imposing a requirement of local incorporation or establishment of a local domicile as a pre-requisite for granting to foreign nationals the protection which nationals of the Philippines are entitled to under Philippine law in respect of their industrial property rights. It should be noted that Article 2, paragraph 2 also constitutes proof of compliance with the requirement of reciprocity between, on the one hand, the Philippines and, on the other hand, Canada, Switzerland and the United States required under Section 21-A of R.A. No. 166 as amended. The net effect of the statutory and treaty provisions above referred to is that a corporate national of a member country of the Paris Union is entitled to bring in Philippine courts an action for infringement of trademarks, or for unfair competition, without necessity for obtaining registration or a license to do business in the Philippines, and without necessity of actually doing business in the Philippines. Article 2 as quoted above is in effect with respect to all four (4) countries. Such has been the rule in our jurisdiction even before the enactment of R.A. No. 166 and before the Philippines became a party to the Paris Convention. In Western Equipment and Supplies Company, et al. v. Reyes, etc., et al., 20(20) petitioner Western Electrical Company, a U.S. manufacturer of electrical and telephone equipment and supplies not doing business in the Philippines, commenced action in a Philippine court to protect its corporate name from unauthorized use thereof by certain Philippine residents. The Philippine residents sought to organize a Philippine corporation to be known as "Western Electrical Company" for the purpose of manufacturing and selling electrical and telephone equipment in the Philippines. The local residents resisted the suit by contending, inter alia, that the petitioner Copyright 1994-2014

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Western Electrical Company had never transacted business in the Philippines and that registration of private respondent's articles of incorporation could not in any way injure petitioner. The Supreme Court, in rejecting this argument, stated that: ". . . a foreign corporation which has never done business in the Philippines — but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate name and tradename has a legal right to maintain an action in the [Philippines]. The purpose of such a suit is to protect its reputation, corporate name and goodwill which has been established through the natural development of its trade for a long period of years in the doing of which it does not seek to enforce any legal or contract rights arising from or closing out of any business which it has transacted in the Philippines . . ." 21(21) (Emphasis supplied)

Similarly, in Asari Yoko v. Kee Boc, 22(22) a Japanese corporation, also not engaged in any business in the Philippines, successfully opposed an application for registration of its trademark "Race Brand" on shirts and undershirts by a local businessman, even though the Japanese company had not previously registered its own mark "Race Brand" in the Philippines. Again, in General Garments Corporation v. Director of Patents and Puritan Sportswear Corporation, 23 (23)Puritan Sportswear Corporation, an entity organized in Pennsylvania, U.S.A. and not doing business in the Philippines, filed a petition for cancellation of the mark "Puritan" which was registered in the name of petitioner General Garments Corporation for assorted men's wear, undershirts, briefs, shirts, sweaters and jackets. Puritan Sportswear alleged ownership and prior use of the trademark "Puritan" in the Philippines. Petitioner General Garments, on the other hand, contended that Puritan Sportswear, being a foreign corporation not licensed to do, and not doing, business in the Philippines, could not maintain an action for cancellation of a trademark. The Court, in upholding the Director of Patents' cancellation of the registration of the mark "Puritan" in the name of General Garments, said: ". . . such mark should not have been registered in the first place (and consequently may be cancelled if so required) if it consists of or comprises a mark or tradename which so resembles a mark or tradename . . . previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers." 24 (24)(Emphasis supplied)

In Converse Rubber Corporation v. Universal Rubber Products, Inc., 25(25) Copyright 1994-2014

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petitioner Converse Rubber Corporation was an American manufacturer of rubber shoes, not doing business on its own in the Philippines and not licensed to do business in the Philippines, opposed the application for registration of the trademark "Universal Converse and Device" to be used also in rubber shoes and rubber slippers by private respondent Universal Rubber Products, Inc. ("Universal"). In reversing the Director of Patents and holding that Universal's application must be rejected, the Supreme Court said: "The sales of 12 to 20 pairs a month of petitioner's rubber shoes cannot be considered insignificant, considering that they appear to be of high expensive quality, which not too many basketball players can afford to buy. Any sale made by a legitimate trader from his store is a commercial act establishing trademark rights since such sales are made in due course of business to the general public, not only to limited individuals. It is a matter of public knowledge that all brands of goods filter into the market, indiscriminately sold by jobbers, dealers and merchants not necessarily with the knowledge or consent of the manufacturer. Such actual sale of goods in the local market establishes trademark use which serves as the basis for any action aimed at trademark pre-emption. It is a corollary logical deduction that while Converse Rubber Corporation is not licensed to do business in the country and is not actually doing business here, it does not mean that its goods are not being sold here or that it has not earned a reputation or goodwill as regards its products. The Director of Patents was, therefore, remiss in ruling that the proofs of sales presented 'was made by a single witness who had never dealt with nor had never known opposer [petitioner] . . . without Opposer having a direct or indirect hand in the transaction to be the basis of trademark pre-emption." 26 (26)(Emphasis supplied)

Three (3) other cases may be noted. The first is La Chemise Lacoste, S.A. v. Fernandez 27(27) La Chemise Lacoste, S.A. although a foreign corporation not engaged in and not licensed to do business in the Philippines, was accorded protection for its trademarks "Lacoste", "Chemise Lacoste," and "Crocodile Device" for clothing and sporting apparel. The Court recognized that those marks were "world famous trademarks which the Philippines, as a party to the Paris Union, is bound to protect." Similarly, in Del Monte Corporation, et al. v. Court of Appeals, et al., 28(28) petitioner Del Monte Corporation was a company organized under the laws of the United States and not engaged in business in the Philippines. Because both the Philippines and the United States are signatories to the Convention of Paris, which grants to nationals of the parties the rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition, the Court, having found that private respondent's label was an infringement of Del Monte's Copyright 1994-2014

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trademark, held Del Monte entitled to recover damages.

LibLex

In Puma Sportschuhfabriken Rudolf Dassler, K .G. v. Intermediate Appellate Court, et al, 29 (29)petitioner Puma was a foreign corporation existing under the laws of the Federal Republic of Germany not registered to do business and not doing business in the Philippines, filed a complaint for infringement of trademark and for issuance of a writ of preliminary injunction against a local manufacturing company. Reversing the Court of Appeals, this Court held that Puma had legal capacity to bring the suit in the Philippines under Section 21-A of R.A. No. 166 as amended and under the provisions of the Paris Convention to which both the Philippines and the Federal Republic of Germany are parties. The Court also noted that "Puma" is an internationally known brandname. The relevancy of the doctrines set out in the cases above cited are conceded by my distinguished brother Melo, J. in the majority opinion. The majority opinion, however, goes on to say: "In other words, petitioners may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market."

With great respect, certain essential qualifications must be made respecting the above paragraph. Firstly, of the petitioners' three (3) marks here involved, two (2) of them — i.e., "MARK TEN" and "LARK" — were registered in the Philippines on the basis of actual use in the Philippines, precisely in accordance with the requirements of Section 2-A and Section 5 (A) of R.A. No. 166 as amended. The pre-registration use in commerce and trade in the Philippines for at least two (2) months as required by the statute, is explicitly stated in the Certificates of Registration. The very fact that the appropriate Philippine Government office issued the Certificates of Registration necessarily gave rise to the presumption that such pre-registration use had in fact been shown to the satisfaction of the Philippines Patent Office (now the Bureau of Patents, Trademarks and Technology Transfer ["BPTTT"]). It is important to note that Copyright 1994-2014

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respondent Fortune has not purported to attack the validity of the trademarks "Mark Ten" and "Lark" by pretending that no pre-registration use in commerce in the Philippines had been shown. 30(30) The third mark of petitioners — "MARK VII" — was registered in the Philippines on the basis of Section 37 of R.A. No. 166 as amended, i.e., on the basis of registration in the country of origin and under the Paris Convention. In such a registration, by the express provisions of Section 37 (B) of R.A. No. 166 as amended, prior (pre-registration) use in commerce in the Philippines need not be alleged. Whether the Philippine trademark was based on actual use in the Philippine (under Section 2-A) or on registration in a foreign country of origin (under Section 37), the statute appears to require that trademarks (at least trademarks not shown to be internationally "well-known") must continue to be used in trade and commerce in the Philippines. It is, however, essential to point out that such continued use, as a requirement for the continued right to the exclusive use of the registered trademark, is presumed so long as the Certificate of Registration remains outstanding and so long as the registered trademark owner complies with the requirements of Section 12 of R.A. No. 166 as amended of filing affidavits with the BPTTT on the 5th, 10th and 15th anniversaries of the date of issuance of the Certificate of Registration, showing that the trademark is still in use or showing that its non-use is not due to any intention to abandon the same. In the case at bar, again, respondent Fortune has not explicitly pretended that the petitioners' trademarks have been abandoned by non-use in trade and commerce in the Philippines although it appears to insinuate such non-use and abandonment by stressing that petitioners are not doing business in the Philippines. That petitioners are not doing business and are not licensed to do business in the Philippines, does not by any means mean either that petitioners have not complied with the requirements of Section 12 of R.A. No. 166 relating to affidavits of continued use, or that petitioners' trademarks are not in fact used in trade and commerce in the Philippines. In the Converse case, as earlier noted, the Court held that the circumstance that the foreign owner of a Philippine trademark is not licensed to do business and is not doing business in the Philippines, does not mean that petitioner's goods (that is, goods bearing petitioner's trademark) are not sold in the Philippines. For cigarettes bearing petitioners' trademarks may in fact be imported into and be available for sale in the Philippines through the acts of importers or distributors. Petitioners have stated that their "Mark VII," "Mark Ten" and "Lark" cigarettes are in fact brought into the country and available for sale here in, e.g., duty-free shops, though not imported into or sold in the Philippines by petitioners themselves. There is no legal requirement that the foreign registrant itself manufacture Copyright 1994-2014

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and sell its products here. All the statute requires is the use in trade and commerce in the Philippines, and that can be carried out by third party manufacturers operating under license granted by the foreign registrant or by the importation and distribution of finished products by independent importers or traders. The "use" of the trademark in such instances by the independent third parties constitutes use of the foreign registrant's trademarks to the benefit of the foreign registrant. 31(31) III We turn to petitioners' claim that they are suffering irreparable damage by reason of the manufacture and sale of cigarettes under the trademark "MARK." Here again, a basic argument of private respondent was that petitioners had not shown any damages because they are not doing business in the Philippines. I respectfully maintain that this argument is specious and without merit. That petitioners are not doing business and are not licensed to do business in the Philippines, does not necessarily mean that petitioners are not in a position to sustain, and do not in fact sustain, damage through trademark infringement on the part of a local enterprise. 32(32) Such trademark infringement by a local company may, for one thing, affect the volume of importation into the Philippines of cigarettes bearing petitioners' trademarks by independent or third party traders. The damage which petitioners claim they are sustaining by reason of the acts of private respondents, are not limited to impact upon the volume of actual imports into the Philippines of petitioners' cigarettes. Petitioners urge that private respondent's use of its confusingly similar trademark "MARK" is invasive and destructive of petitioners' property right in their registered trademarks because "a) Plaintiffs' undeniable right to the exclusive use of their registered trademarks is effectively effaced by defendant's use of a confusingly similar trademark; b Plaintiffs would lose control of the reputation of their products as their reputation will depend on defendant's commercial activities and the quality of defendant's products; c The market in the Philippines for plaintiffs' products will be pre-empted; d) Purchasers will think that defendant's goods are approved or sponsored by plaintiffs' Copyright 1994-2014

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e) Defendant will be allowed to benefit from the reputation of plaintiffs' goods and trademarks; f) Defendant will be effectively authorized to continually invade plaintiffs' property rights, for which invasion no fair and reasonable redress can be had in a court of law; and g) Plaintiffs will lose their goodwill and trade and the value of their registered trademarks will be irreparably diluted and the damages to be suffered by plaintiffs cannot be redressed fairly in terms of money." 33(33)

Modern authorities on trademark law view trademarks as symbols which perform three (3) distinct functions: first, they indicate origin or ownership of the articles to which they are attached; second, they guarantee that those articles come up to a certain standard of quality; third, they advertise the articles they symbolize. 3(34)4 The first two (2) functions have long been recognized in trademark law which characterizes the goodwill or business reputation symbolized by a trademark as a property right protected by law. Thus, the owner of a trademark is held entitled to exclude others from the use of the same, or of a confusingly similar, mark where confusion results in diversion of trade or financial injury. At the same time, trademarks warn against the imitation or faking of products and prevent the imposition of fraud upon the public. The first two (2) functions of trademarks were aptly stressed in, e.g., the La Chemise Lacoste case where the objectives of trademark protection were described in the following terms: ". . . 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 . . . 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 — and 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 items turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product . . ." 35(35)

The third or advertisement function of trademark has become of especial importance given the modern technology of communication and transportation and the growth of international trade. 36 (36)Through advertisement in the broadcast and print Copyright 1994-2014

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media, the owner of the trademark is able to establish a nexus between its trademarked products and the public in regions where the owner does not itself manufacture or sell its own products. 37 (37)Through advertisement, a well-established and well-earned reputation may be gained in countries where the trademark owner has itself no established business connection. 38 (38)Goodwill may thus be seen to be much less closely confined territorially than, say, a hundred or fifty years ago. 39 (39)It is no longer true that "a trademark of itself cannot travel to markets where there is no article to wear the badge and no trader to offer the article." 40 (40)Advertisement of trademarks is geared towards the promotion of use of the marked article and the attraction of potential buyers and users; 41 (41)by fixing the identity of the marked article in the public mind, it prepares the way for growth in such commerce whether the commerce be handled by the trademark owner itself or by its licensees or independent traders. That a registered trademark has value in itself apart from the trade physically accompanying its use, has been recognized by our Court. In Ang v. Teodoro, 42 (42)the Court was called upon to determine whether there was infringement in the use of the same trademark on articles which do not belong to the same class of goods which the lawful trademark owner manufactures and sells. In holding that there was infringing use in such case, the Court said: ". . . such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably result. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark . . . The owner of a trademark or tradename has a property right in which he is entitled to protection, since there is damage to him in the form of confusion of reputation or goodwill in the mind of the public as well as from confusion of goods." (Emphasis supplied)

In Sta. Ana v. Maliwat, 43(43) the Court, through J.B.L. Reyes, J., in holding that the Copyright 1994-2014

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use of the name "Flormen" with respect to shoes was infringement of the mark "Flormann" used in men's wear such as shirts, polo shirts and pants, said: "Modern law recognizes that the protection to which the owner of a trade-mark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusing of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 52 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577) . . ." 44(44) (Emphasis supplied)

Petitioners did not try to put a peso figure on their claimed damage arising from the erosion and possible eventual destruction of the symbolic value of their trademark. Such damage, while not easily quantifiable, is nonetheless real and effective. I submit, with respect, that such continuing damage falls clearly within the concept of irreparable damage or injury described in Social Security Commission v. Bayona 45(45) in the following terms: "Damages are irreparable within the meaning of the rule relative to the issuance of injunction where there is no standard by which their amount can be measured with reasonable accuracy (Crouc v. Central Labor Council, 83 ALR, 193). 'An irreparable injury which a court of equity will enjoin includes that degree of wrong of a repeated and continuing kind which produce hurt, inconvenience, or damage that can be estimated only by conjecture, and not by any accurate standard of measurement' (Phipps v. Rogue River Valley Canal Co., 7 ALR, 741). An irreparable injury to authorize an injunction consists of 'a serious charge of, or is destructive to, the property it affects, either physically or in the character in which it has been held and enjoined, or when the property has some peculiar quality or use, so that its pecuniary value will not fairly recompense the owner of the loss thereof' (Dunker v. Field and Tub Club, 92 P. 502). Respondent corporations made a lengthy discourse on the matter of irreparable injury they may suffer if the injunction were not issued, but the array of figures they have laid out merely succeeded in proving that the damage, if any they may suffer, is susceptible of mathematical computation. It is not then irreparable. As already stated, this term has a definite meaning in law. It does not have reference to the amount of damages that may be caused but rather to the difficulty of measuring the damages inflicted. If full compensation can be Copyright 1994-2014

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obtained by way of damages, equity will not apply the remedy of injunction (28 Am. Jur., 244; 43 C.J.S., 427, 446)." 46(46)

I next turn to private respondent's claim that issuance of an injunction would impose heavy damage upon itself and upon the Government. As noted, private respondent stated that it had paid many millions of pesos as ad valorem and VAT taxes to the Government in 1988 and 1989 in connection with its "MARK" cigarettes. 47 (47)Presumably, the total volume of its business associated with the manufacture and sale of cigarettes trademarked "MARK" would be even larger. In addition, private respondent suggests, albeit indirectly only, that hundreds if not thousands of its employees would find themselves unemployed if it were restrained from the manufacture and sale of "MARK" cigarettes. Private respondent's claims concerning alleged damages both to itself and to the Government, which obviously loomed very large in the mind of the majority here, and of the Court of Appeals when it lifted the injunction it had issued, appear to me to be extravagant indeed. Petitioners cannot claim to be entitled to an injunction which would restrain private respondent from manufacturing and selling cigarettes completely; petitioner do not pretend to be so entitled to such a comprehensive injunction. Petitioners seek only the reinstatement of the original injunction issued by the Court of Appeals, i.e., one that restrains private respondent from using the trademark "MARK" on its cigarettes. There is nothing to prevent private respondent from continuing to manufacture and sell cigarettes under any of its already existing and registered trademarks, of which it has several, or under some new and specially created trademark(s). Realistically, private respondent, if enjoined, would lose only the value of the cigarettes already branded with "MARK," the value of the packaging material imprinted with the same trademark (which cigarettes and material may well be amenable to re-cycling) and the cost of past advertisements of "MARK" in media, if any. Thus, the apprehension on the part of the majority which private respondent tried diligently to foment — that the Government would lose many millions of pesos in tax revenues and that many employees would lose their jobs, if an injunction is issued — is more apparent than real. The damages private respondent would sustain from reinstatement of the preliminary injunction are clearly quantifiable in pesos. Besides, as pointed out by petitioners to pay heed to private respondent's creative economic argument would ultimately mean that the greater the volume of sales and the profits of the infringer, the greater would be the infringer's claim to be entitled to continue infringement. I respectfully submit that the law should not countenance such a cynical result. cdphil

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My conclusion is that private respondent's claims concerning damage which it would sustain if the petitioners were granted the injunction they seek, did not constitute a sufficient basis for overturning the original decision of the Court of Appeals. The Resolution of the Court of Appeals granting private respondent's Motion to Dissolve, in effect disregarded everything that that Court had set out in its original Decision. The mere offer and filing of a counterbond does not, by itself , provide a sufficient basis for lifting the preliminary injunction earlier granted. For all the elements which supported the original issuance of a preliminary injunction continued to exist. Private respondent's hyperbolic claims concerning the damages that it and the Government would sustain by reason of an injunction, had been made earlier both before the trial court and the Court of Appeals. Finally, it is not enough to say as private respondent says, that the Court of Appeals in granting its Motion to Dissolve the preliminary injunction was merely exercising its discretion; for the Court of Appeals obviously was also exercising its discretion when it rendered its original Decision granting the preliminary injunction. I vote to grant due course to the Petition for Certiorari, to set aside the Resolution of the respondent Court of Appeals dated 14 September 1989 in C.A.-G.R. SP No. 13132 and to reinstate the Decision of that same Court dated 5 May 1989. )RRWQRWHV Feliciano, J.: Dissenting: 1. Then presided over by Judge Pastor P. Reyes. 2. Court of Appeals Decision, Rollo, p. 137. 3. Rollo, p. 339. 4. Id., p. 73. 5. id., p. 88. 6. With the concurrence of Nocon and G.C. Paras, JJ. 7. Rollo, p. 165. 8. Note 3. 9. Rollo, pp. 166-167. 10. Rollo, pp. 53-54. 11. Id. pp. 25-26. 12. 154 SCRA 723 (1987). 13. 154 SCRA at 728-729. 14. Certification, dated 8 August 1986, Annex "I" of the Petition, Rollo, p. 74. 15. Certification dated 30 January 1984, issued by Cesar C. San Diego, Director of Patents, certifying that as of that date, private respondent's "Application Serial No. 44008 for the registration of trademark 'MARK' and design filed on 13 February 1981 was still pending appropriate action." (Rollo, p. _______). Copyright 1994-2014

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16. 17.

18.

19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31.

32.

33.

This certification is quoted in the order dated 5 April 1984 of Judge Reyes; Rollo, p. 348. Section 4 (d) of R.A. No. 166, as amended, specifies the kinds of trademarks, tradenames or service marks which cannot be registered on the Principal Register: "(d) consists of or comprises a mark or tradename which so resembles mark or tradename registered in the Philippines or a mark or tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods or services of the applicant to cause confusion or mistake or to deceive purchasers; . . ." The Paris Convention was concurred in by the Senate by S.R. No. 69, May 10, 1965 and the Instrument of Ratification was signed by the President on October 11, 1965; List of Treaties and Other International Agreements of the Republic of the Philippines, p. 1 (1966; U.P. Law Center). The adhesion of the Philippines to the Convention became effective as of 27 September 1965; Canada on 12 June 1925; Switzerland on 7 July 1884; and the United States on 30 May 1887. The text of the Paris Convention and of the List of "Members-States of the International Union for the Protection of Industrial Property (Paris Union) as in April 1968" may be found in G.H.C. Bodenhausen, Guide to the Application of the Paris Convention for the Protection of Industrial Property (1968). G.H.C. Bodenhausen, supra, p. 27. 51 Phil. 115 (1927). 51 Phil. at. 1 SCRA 1 (1961). 41 SCRA 50 (1971). 41 SCRA at. 147 SCRA 154 (1987). 147 SCRA at 162. 129 SCRA 373 (1984). 181 SCRA 410 (1990). 158 SCRA 233 (1988). Such an attack was apparently made in Pag-Asa Industrial Corporation v. Court of Appeals, 118 SCRA 526 (1982) which the majority opinion cites. Accordingly, the importer or distributor does not acquire ownership of the trademark on the goods imported or distributed; e.g., Gabriel v. Perez, 55 SCRA 406 (1974); Unno Commercial Enterprises v. General Milling Corporation, 120 SCRA 804 (1983); Marvex Commercial Co., Inc. v. Petra Hawpia and Co., 18 SCRA 1178 (1966); Operators, Inc. v. Director of Patents, 15 SCRA 147 (1965). See generally, Western Equipment and Supply Co. v. Reyes, 51 SCRA 115 (1927); Asari Yoko Co. v. Kee Boc, 1 S 1 (1961); General Garments v. Director of Patents, 41 SCRA 50 (1971); La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984); Converse Rubber Corporation v. Universal Rubber Products, 147 SCRA 154 (1987). Petitioners' Second Motion for Issuance of Preliminary Injunction, filed with the trial

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34. 35. 36. 37. 38. 39. 40.

41. 42. 43. 44.

45.

46. 47.

court; Rollo, p. 88. See also the Petition for Certiorari filed with the Supreme Court, Rollo, p. 16. See 2 Callman, Unfair Competition and Trade Marks (1945), p. 804. See also Grass, "Territorial Scope of Trademark Rights," 44 U Miami L. Rev. 1075 (1990). La Chemise Lacoste, 129 SCRA at 403. See Schechter, "The Rational Basis of Trademark Protection," 40 Harv. L. Rev. 813 (1927); 2 Callman, supra at 810. 2 Callman, supra at 811, citing Coca-Cola Company v. Brown, 60 T 2d 319. See generally, 1 Nims, "Unfair Competition and Trademark, S. 35a (1947), p. 149. See also 1 Nims, supra at 150. See Hanover Star Milling Co. v. Metcalf, 240 U.S. 403 (1916); see also (Territorial Scope of Trademark Rights, supra at 1086. In Hanover Star Milling Company v. Metcalf, the United States Supreme Court realized that advertising had the potential for spreading business goodwill beyond the areas of actual market sales. The Court alluded to the possibility that, in certain instances, the protection of trademarks could extend beyond the zone of actual market penetration: "Into whatever markets the use of a trademark has extended, or its meaning has become known, there will the manufacturer or trader whose trade is pirated by an infringing use be entitled to protection and redress." See 2 Callman, supra at 811. 74 Phil. 50 (1942). 24 SCRA 1018 (1968). 24 SCRA at 1025. In Faberge, Inc. v. Intermediate Appellate Court (G.R. No. 71189, 4 November 1992), a Third Division Decision, the Court held that the use of the trademark "Brute" for men's briefs, was not an infringement of the mark "Brut 33 and Device" for anti-perspirants, personal deodorant, shaving cream, after shave-shower lotion, hair spray and hair shampoo. This case turned on interpretation of Section 20 of R.A. No. 166 as amended, which appeared to limit the exclusive right of the senior user to the goods specified in its Certificate of Registration. Faberge does not, as I read it, deny the existence of categories of damage or injury in trademark cases which transcend the quantifiable loss of volume of commercial sales. Moreover, the case at bar involves competing goods of one and the same class, i.e., cigarettes. 5 SCRA 126 (1962). See further Phil. Virginia Tobacco Adm. v. De los Angeles, 164 SCRA 543 (1988); Yu v. Court of Appeals, G.R. No. 86683, 21 January 1993; Golding v. Balatbat, 36 Phil. 941 (1917); Liongson v. Martinez, 36 Phil. 948 (1917). 5 SCRA at 130-131. See Certification, dated 11 August 1989, issued by Mr. Melchor B. Banares, Assistant BIR Commissioner, being Annex "A" to private respondent's "Supplemental Motion to Lift Writ of Preliminary Injunction with Offer of Counterbond" filed with the Court of Appeals; Rollo, p. 221.

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SECOND DIVISION [G.R. No. 158589. June 27, 2006.] PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., and FABRIQUES DE TABAC REUNIES, S.A., (now known as PHILIP MORRIS PRODUCTS S.A.), petitioners, vs. FORTUNE TOBACCO CORPORATION, respondent.

DECISION

GARCIA, J : p

Via this petition for review under Rule 45 of the Rules of Court, herein petitioners Philip Morris, Inc., Benson & Hedges (Canada) Inc., and Fabriques de Tabac Reunies, S.A. (now Philip Morris Products S.A.) seek the reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 66619, to wit: 1.

Decision dated January 21, 2003 1(1) affirming an earlier decision of the Regional Trial Court of Pasig City, Branch 166, in its Civil Case No. 47374, which dismissed the complaint for trademark infringement and damages thereat commenced by the petitioners against respondent Fortune Tobacco Corporation; and

2.

Resolution dated May 30, 2003 2(2) denying petitioners' motion for reconsideration.

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United States of America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the Philippine Patents Office (PPO), the registered owner of the trademark "MARK VII" for cigarettes. Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the registered owner of Copyright 1994-2014

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the trademark "MARK TEN" for cigarettes as evidenced by PPO Certificate of Registration No. 11147. And as can be seen in Trademark Certificate of Registration No. 19053, another subsidiary of Philip Morris, Inc., the Swiss company Fabriques de Tabac Reunies, S.A., is the assignee of the trademark "LARK," which was originally registered in 1964 by Ligget and Myers Tobacco Company. On the other hand, respondent Fortune Tobacco Corporation, a company organized in the Philippines, manufactures and sells cigarettes using the trademark "MARK." The legal dispute between the parties started when the herein petitioners, on the claim that an infringement of their respective trademarks had been committed, filed, on August 18, 1982, a Complaint for Infringement of Trademark and Damages against respondent Fortune Tobacco Corporation, docketed as Civil Case No. 47374 of the Regional Trial Court of Pasig, Branch 166. DCHIAS

The decision under review summarized what happened next, as follows: In the Complaint . . . with prayer for the issuance of a preliminary injunction, [petitioners] alleged that they are foreign corporations not doing business in the Philippines and are suing on an isolated transaction. . . . they averred that the countries in which they are domiciled grant . . . to corporate or juristic persons of the Philippines the privilege to bring action for infringement, . . . without need of a license to do business in those countries. [Petitioners] likewise manifested [being registered owners of the trademark "MARK VII" and "MARK TEN" for cigarettes as evidenced by the corresponding certificates of registration and an applicant for the registration of the trademark "LARK MILDS"]. . . . . [Petitioners] claimed that they have registered the aforementioned trademarks in their respective countries of origin and that, by virtue of the long and extensive usage of the same, these trademarks have already gained international fame and acceptance. Imputing bad faith on the part of the [respondent], petitioners claimed that the [respondent], without any previous consent from any of the [petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar trademark "MARK" . . . Accordingly, they argued that [respondent's] use of the trademark "MARK" in its cigarette products have caused and is likely to cause confusion or mistake, or would deceive purchasers and the public in general into buying these products under the impression and mistaken belief that they are buying [petitioners'] products. Invoking the provisions of the Paris Convention for the Protection of Industrial and Intellectual Property (Paris Convention, for brevity), to which the Philippines is a signatory . . ., [petitioners] pointed out that upon the request of an interested party, a country of the Union may prohibit the use of a Copyright 1994-2014

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trademark which constitutes a reproduction, imitation, or translation of a mark already belonging to a person entitled to the benefits of the said Convention. They likewise argued that, in accordance with Section 21-A in relation to Section 23 of Republic Act 166, as amended, they are entitled to relief in the form of damages . . . [and] the issuance of a writ of preliminary injunction which should be made permanent to enjoin perpetually the [respondent] from violating [petitioners'] right to the exclusive use of their aforementioned trademarks. ITAaCc

[Respondent] filed its Answer . . . denying [petitioners'] material allegations and . . . averred [among other things] . . . that "MARK" is a common word, which cannot particularly identify a product to be the product of the [petitioners] . . . xxx

xxx

xxx

Meanwhile, after the [respondent] filed its Opposition (Records, Vo. I, p. 26), the matter of the [petitioners'] prayer for the issuance of a writ of preliminary injunction was negatively resolved by the court in an Order . . . dated March 28, 1973. [The incidental issue of the propriety of an injunction would eventually be elevated to the CA and would finally be resolved by the Supreme Court in its Decision dated July 16, 1993 in G.R. No. 91332]. . . . . xxx

xxx

xxx

After the termination of the trial on the merits . . . trial court rendered its Decision . . . dated November 3, 1999 dismissing the complaint and counterclaim after making a finding that the [respondent] did not commit trademark infringement against the [petitioners]. Resolving first the issue of whether or not [petitioners] have capacity to institute the instant action, the trial court opined that [petitioners'] failure to present evidence to support their allegation that their respective countries indeed grant Philippine corporations reciprocal or similar privileges by law . . . justifies the dismissal of the complaint . . . . It added that the testimonies of [petitioners'] witnesses . . . essentially declared that [petitioners] are in fact doing business in the Philippines, but [petitioners] failed to establish that they are doing so in accordance with the legal requirement of first securing a license. Hence, the court declared that [petitioners] are barred from maintaining any action in Philippine courts pursuant to Section 133 of the Corporation Code. The issue of whether or not there was infringement of the [petitioners'] trademarks by the [respondent] was likewise answered . . . in the negative. It expounded that "in order for a name, symbol or device to constitute a trademark, it must, either by itself or by association, point distinctly to the origin or Copyright 1994-2014

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ownership of the article to which it is applied and be of such nature as to permit an exclusive appropriation by one person". Applying such principle to the instant case, the trial court was of the opinion that the words "MARK", "TEN", "LARK" and the Roman Numerals "VII", either alone or in combination of each other do not by themselves or by association point distinctly to the origin or ownership of the cigarettes to which they refer, such that the buying public could not be deceived into believing that [respondent's] "MARK" cigarettes originated either from the USA, Canada, or Switzerland. Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial court stated that the general rule is that an infringement exists if the resemblance is so close that it deceives or is likely to deceive a customer exercising ordinary caution in his dealings and induces him to purchase the goods of one manufacturer in the belief that they are those of another. . . . . The trial court ruled that the [petitioners] failed to pass these tests as it neither presented witnesses or purchasers attesting that they have bought [respondent's] product believing that they bought [petitioners'] "MARK VII", "MARK TEN" or "LARK", and have also failed to introduce in evidence a specific magazine or periodical circulated locally, which promotes and popularizes their products in the Philippines. It, moreover, elucidated that the words consisting of the trademarks allegedly infringed by [respondent] failed to show that they have acquired a secondary meaning as to identify them as [petitioners'] products. Hence, the court ruled that the [petitioners] cannot avail themselves of the doctrine of secondary meaning. As to the issue of damages, the trial court deemed it just not to award any to either party stating that, since the [petitioners] filed the action in the belief that they were aggrieved by what they perceived to be an infringement of their trademark, no wrongful act or omission can be attributed to them. . . . . 3(3) (Words in brackets supplied)

Maintaining to have the standing to sue in the local forum and that respondent has committed trademark infringement, petitioners went on appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV No. 66619. Eventually, the CA, in its Decision dated January 21, 2003, while ruling for petitioners on the matter of their legal capacity to sue in this country for trademark infringement, nevertheless affirmed the trial court's decision on the underlying issue of respondent's liability for infringement as it found that: . . . the appellants' [petitioners'] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not qualify as well-known marks entitled to protection Copyright 1994-2014

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even without the benefit of actual use in the local market and that the similarities in the trademarks in question are insufficient as to cause deception or confusion tantamount to infringement. Consequently, as regards the third issue, there is likewise no basis for the award of damages prayed for by the appellants herein. 4(4) (Word in bracket supplied)

With their motion for reconsideration having been denied by the CA in its equally challenged Resolution of May 30, 2003, petitioners are now with this Court via this petition for review essentially raising the following issues: (1) whether or not petitioners, as Philippine registrants of trademarks, are entitled to enforce trademark rights in this country; and (2) whether or not respondent has committed trademark infringement against petitioners by its use of the mark "MARK" for its cigarettes, hence liable for damages. In its Comment, 5(5) respondent, aside from asserting the correctness of the CA's finding on its liability for trademark infringement and damages, also puts in issue the propriety of the petition as it allegedly raises questions of fact. The petition is bereft of merit. Dealing first with the procedural matter interposed by respondent, we find that the petition raises both questions of fact and law contrary to the prescription against raising factual questions in a petition for review on certiorari filed before the Court. A question of law exists when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth or falsity of alleged facts. 6(6) Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of facts. 7(7) Unless the factual findings of the appellate court are mistaken, absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin, 8(8) we will not disturb them. SCETHa

It is petitioners' posture, however, that their contentions should be treated as purely legal since they are assailing erroneous conclusions deduced from a set of undisputed facts. Concededly, when the facts are undisputed, the question of whether or not the conclusion drawn therefrom by the CA is correct is one of law. 9(9) But, even if we consider and accept as pure questions of law the issues raised in this petition, still, the Court is not inclined to disturb the conclusions reached by the appellate court, the Copyright 1994-2014

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established rule being that all doubts shall be resolved in favor of the correctness of such conclusions. 10(10) Be that as it may, we shall deal with the issues tendered and determine whether the CA ruled in accordance with law and established jurisprudence in arriving at its assailed decision. A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt in by others. 11(11) Inarguably, a trademark deserves protection. For, as Mr. Justice Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.: 12(12) The protection of trademarks is the law's recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe what he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same — to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.

It is thus understandable for petitioners to invoke in this recourse their entitlement to enforce trademark rights in this country, specifically, the right to sue for trademark infringement in Philippine courts and be accorded protection against unauthorized use of their Philippine-registered trademarks. In support of their contention respecting their right of action, petitioners assert that, as corporate nationals of member-countries of the Paris Union, they can sue before Philippine courts for infringement of trademarks, or for unfair competition, without need of obtaining registration or a license to do business in the Philippines, and without necessity of actually doing business in the Philippines. To petitioners, these grievance right and mechanism are accorded not only by Section 21-A of Republic Act (R.A.) No. 166, as amended, or the Trademark Law, but also by Article 2 of the Paris Convention for the Protection of Industrial Property, otherwise known as the Paris Convention. Copyright 1994-2014

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In any event, petitioners point out that there is actual use of their trademarks in the Philippines as evidenced by the certificates of registration of their trademarks. The marks "MARK TEN" and "LARK" were registered on the basis of actual use in accordance with Sections 2-A 13(13) and 5(a) 14(14) of R.A. No. 166, as amended, providing for a 2-month pre-registration use in local commerce and trade while the registration of "MARK VII" was on the basis of registration in the foreign country of origin pursuant to Section 37 of the same law wherein it is explicitly provided that prior use in commerce need not be alleged. 15(15) Besides, petitioners argue that their not doing business in the Philippines, if that be the case, does not mean that cigarettes bearing their trademarks are not available and sold locally. Citing Converse Rubber Corporation v. Universal Rubber Products, Inc., 16(16) petitioners state that such availability and sale may be effected through the acts of importers and distributors. ITCHSa

Finally, petitioners would press on their entitlement to protection even in the absence of actual use of trademarks in the country in view of the Philippines' adherence to the Trade Related Aspects of Intellectual Property Rights or the TRIPS Agreement and the enactment of R.A. No. 8293, or the Intellectual Property Code (hereinafter the "IP Code"), both of which provide that the fame of a trademark may be acquired through promotion or advertising with no explicit requirement of actual use in local trade or commerce. Before discussing petitioners' claimed entitlement to enforce trademark rights in the Philippines, it must be emphasized that their standing to sue in Philippine courts had been recognized, and rightly so, by the CA. It ought to be pointed out, however, that the appellate court qualified its holding with a statement, following G.R. No. 91332, entitled Philip Morris, Inc., et al. v. The Court of Appeals and Fortune Tobacco Corporation, 17(17) that such right to sue does not necessarily mean protection of their registered marks in the absence of actual use in the Philippines. Thus clarified, what petitioners now harp about is their entitlement to protection on the strength of registration of their trademarks in the Philippines. As we ruled in G.R. No. 91332, 18(18) supra, so it must be here. Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages denied non-registrants or ordinary users, like respondent. But while petitioners enjoy the statutory presumptions arising from such registration, 19(19) i.e., as to the validity of the registration, ownership and the exclusive right to use the Copyright 1994-2014

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registered marks, they may not successfully sue on the basis alone of their respective certificates of registration of trademarks. For, petitioners are still foreign corporations. As such, they ought, as a condition to availment of the rights and privileges vis-à-vis their trademarks in this country, to show proof that, on top of Philippine registration, their country grants substantially similar rights and privileges to Filipino citizens pursuant to Section 21-A 20(20) of R.A. No. 166. In Leviton Industries v. Salvador, 21(21) the Court further held that the aforementioned reciprocity requirement is a condition sine qua non to filing a suit by a foreign corporation which, unless alleged in the complaint, would justify dismissal thereof, a mere allegation that the suit is being pursued under Section 21-A of R.A. No. 166 not being sufficient. In a subsequent case, 22(22) however, the Court held that where the complainant is a national of a Paris Convention- adhering country, its allegation that it is suing under said Section 21-A would suffice, because the reciprocal agreement between the two countries is embodied and supplied by the Paris Convention which, being considered part of Philippine municipal laws, can be taken judicial notice of in infringement suits. 23(23) As well, the fact that their respective home countries, namely, the United States, Switzerland and Canada, are, together with the Philippines, members of the Paris Union does not automatically entitle petitioners to the protection of their trademarks in this country absent actual use of the marks in local commerce and trade. CaDSHE

True, the Philippines' adherence to the Paris Convention 24(24) effectively obligates the country to honor and enforce its provisions 25(25) as regards the protection of industrial property of foreign nationals in this country. However, any protection accorded has to be made subject to the limitations of Philippine laws. 26(26) Hence, despite Article 2 of the Paris Convention which substantially provides that (1) nationals of member-countries shall have in this country rights specially provided by the Convention as are consistent with Philippine laws, and enjoy the privileges that Philippine laws now grant or may hereafter grant to its nationals, and (2) while no domicile requirement in the country where protection is claimed shall be required of persons entitled to the benefits of the Union for the enjoyment of any industrial property rights, 27(27) foreign nationals must still observe and comply with the conditions imposed by Philippine law on its nationals. Considering that R.A. No. 166, as amended, specifically Sections 2 28(28) and 2-A 29(29) thereof, mandates actual use of the marks and/or emblems in local Copyright 1994-2014

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commerce and trade before they may be registered and ownership thereof acquired, the petitioners cannot, therefore, dispense with the element of actual use. Their being nationals of member-countries of the Paris Union does not alter the legal situation. In Emerald Garment Mfg. Corporation v. Court of Appeals, 30(30) the Court reiterated its rulings in Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 31(31) Kabushi Kaisha Isetan v. Intermediate Appellate Court, 32(32) and Philip Morris v. Court of Appeals and Fortune Tobacco Corporation 33(33) on the importance of actual commercial use of a trademark in the Philippines notwithstanding the Paris Convention: The provisions of the 1965 Paris Convention . . . relied upon by private respondent and Sec. 21-A of the Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc., et al. vs. Court of Appeals: xxx

xxx

xxx

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirements of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal. . . . . Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of International Law are given a standing equal, not superior, to national legislative enactments. xxx

xxx

xxx

In other words, (a foreign corporation) may have the capacity to sue for infringement . . . but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as to the actual use of such trademark in local commerce. As it Copyright 1994-2014

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were, registration does not confer upon the registrant an absolute right to the registered mark. The certificate of registration merely constitutes prima facie evidence that the registrant is the owner of the registered mark. Evidence of non-usage of the mark rebuts the presumption of trademark ownership, 34(34) as what happened here when petitioners no less admitted not doing business in this country. 35(35) Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto convey an absolute right or exclusive ownership thereof. To borrow from Shangri-La International Hotel Management, Ltd. v. Development Group of Companies, Inc. 36(36) trademark is a creation of use and, therefore, actual use is a pre-requisite to exclusive ownership; registration is only an administrative confirmation of the existence of the right of ownership of the mark, but does not perfect such right; actual use thereof is the perfecting ingredient. 37(37) Petitioners' reliance on Converse Rubber Corporation 38(38) is quite misplaced, that case being cast in a different factual milieu. There, we ruled that a foreign owner of a Philippine trademark, albeit not licensed to do, and not so engaged in, business in the Philippines, may actually earn reputation or goodwill for its goods in the country. But unlike in the instant case, evidence of actual sales of Converse rubber shoes, such as sales invoices, receipts and the testimony of a legitimate trader, was presented in Converse. This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the infringement complaint herein having been filed in August 1982 and tried under the aegis of R.A. No. 166, as amended. The IP Code, however, took effect only on January 1, 1998 without a provision as to its retroactivity. 39(39) In the same vein, the TRIPS Agreement was inexistent when the suit for infringement was filed, the Philippines having adhered thereto only on December 16, 1994. With the foregoing perspective, it may be stated right off that the registration of a trademark unaccompanied by actual use thereof in the country accords the registrant only the standing to sue for infringement in Philippine courts. Entitlement to protection of such trademark in the country is entirely a different matter. This brings us to the principal issue of infringement. Section 22 of R.A. No. 166, as amended, defines what constitutes trademark infringement, as follows: Sec. 22. Copyright 1994-2014

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without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy of color ably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Petitioners would insist on their thesis of infringement since respondent's mark "MARK" for cigarettes is confusingly or deceptively similar with their duly registered "MARK VII," "MARK TEN" and "LARK" marks likewise for cigarettes. To them, the word "MARK" would likely cause confusion in the trade, or deceive purchasers, particularly as to the source or origin of respondent's cigarettes. The "likelihood of confusion" is the gravamen of trademark infringement. 40(40) But likelihood of confusion is a relative concept, the particular, and sometimes peculiar, circumstances of each case being determinative of its existence. Thus, in trademark infringement cases, more than in other kinds of litigation, precedents must be evaluated in the light of each particular case. 41(41) In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the dominancy test and the holistic test. 42(42) The dominancy test 43(43) sets sight on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constitutes infringement. Under this norm, the question at issue turns on whether the use of the marks involved would be likely to cause confusion or mistake in the mind of the public or deceive purchasers. 44(44) In contrast, the holistic test 45(45) entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. Upon consideration of the foregoing in the light of the peculiarity of this case, we rule against the likelihood of confusion resulting in infringement arising from the respondent's use of the trademark "MARK" for its particular cigarette product. For one, as rightly concluded by the CA after comparing the trademarks Copyright 1994-2014

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involved in their entirety as they appear on the products, 46(46) the striking dissimilarities are significant enough to warn any purchaser that one is different from the other. Indeed, although the perceived offending word "MARK" is itself prominent in petitioners' trademarks "MARK VII" and "MARK TEN," the entire marking system should be considered as a whole and not dissected, because a discerning eye would focus not only on the predominant word but also on the other features appearing in the labels. Only then would such discerning observer draw his conclusion whether one mark would be confusingly similar to the other and whether or not sufficient differences existed between the marks. 47(47) This said, the CA then, in finding that respondent's goods cannot be mistaken as any of the three cigarette brands of the petitioners, correctly relied on the holistic test. But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that a trademark serves as a tool to point out distinctly the origin or ownership of the goods to which it is affixed, 48(48) the likelihood of confusion tantamount to infringement appears to be farfetched. The reason for the origin and/or ownership angle is that unless the words or devices do so point out the origin or ownership, the person who first adopted them cannot be injured by any appropriation or imitation of them by others, nor can the public be deceived. 49(49) Since the word "MARK," be it alone or in combination with the word "TEN" and the Roman numeral "VII," does not point to the origin or ownership of the cigarettes to which they apply, the local buying public could not possibly be confused or deceived that respondent's "MARK" is the product of petitioners and/or originated from the U.S.A., Canada or Switzerland. And lest it be overlooked, no actual commercial use of petitioners' marks in local commerce was proven. There can thus be no occasion for the public in this country, unfamiliar in the first place with petitioners' marks, to be confused. For another, a comparison of the trademarks as they appear on the goods is just one of the appreciable circumstances in determining likelihood of confusion. Del Monte Corp. v. CA 50(50) dealt with another, where we instructed to give due regard to the "ordinary purchaser," thus: The question is not whether the two articles are distinguishable by their label when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As Copyright 1994-2014

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observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone.

When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary customer" but to the "ordinarily intelligent buyer" considering the type of product involved. 51(51) It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly by those who are already predisposed to a certain brand. Accordingly, the ordinary buyer thereof would be all too familiar with his brand and discriminating as well. We, thus, concur with the CA when it held, citing a definition found in Dy Buncio v. Tan Tiao Bok, 52(52) that the "ordinary purchaser" in this case means "one accustomed to buy, and therefore to some extent familiar with, the goods in question." Pressing on with their contention respecting the commission of trademark infringement, petitioners finally point to Section 22 of R.A. No. 166, as amended. As argued, actual use of trademarks in local commerce is, under said section, not a requisite before an aggrieved trademark owner can restrain the use of his trademark upon goods manufactured or dealt in by another, it being sufficient that he had registered the trademark or trade-name with the IP Office. In fine, petitioners submit that respondent is liable for infringement, having manufactured and sold cigarettes with the trademark "MARK" which, as it were, are identical and/or confusingly similar with their duly registered trademarks "MARK VII," "MARK TEN" and "LARK". This Court is not persuaded. In Mighty Corporation v. E & J Gallo Winery, 53(53) the Court held that the following constitute the elements of trademark infringement in accordance not only with Section 22 of R.A. No. 166, as amended, but also Sections 2, 2-A, 9-A 54(54) and 20 thereof: (a) a trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office, aASEcH

(b) is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such Copyright 1994-2014

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business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers, (c) (d) assignee.

the trademark is used for identical or similar goods, and such act is done without the consent of the trademark registrant or

As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN" and "LARK" for cigarettes in the Philippines, prior actual commercial use thereof had not been proven. In fact, petitioners' judicial admission of not doing business in this country effectively belies any pretension to the contrary. Likewise, we note that petitioners even failed to support their claim that their respective marks are well-known and/or have acquired goodwill in the Philippines so as to be entitled to protection even without actual use in this country in accordance with Article 6bis 55(55) of the Paris Convention. As correctly found by the CA, affirming that of the trial court: . . . the records are bereft of evidence to establish that the appellants' [petitioners'] products are indeed well-known in the Philippines, either through actual sale of the product or through different forms of advertising. This finding is supported by the fact that appellants admit in their Complaint that they are not doing business in the Philippines, hence, admitting that their products are not being sold in the local market. We likewise see no cogent reason to disturb the trial court's finding that the appellants failed to establish that their products are widely known by local purchasers as "(n)o specific magazine or periodical published in the Philippines, or in other countries but circulated locally" have been presented by the appellants during trial. The appellants also were not able to show the length of time or the extent of the promotion or advertisement made to popularize their products in the Philippines. 56(56)

Last, but not least, we must reiterate that the issue of trademark infringement is factual, with both the trial and appellate courts having peremptorily found allegations of infringement on the part of respondent to be without basis. As we said time and time again, factual determinations of the trial court, concurred in by the CA, are final Copyright 1994-2014

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and binding on this Court. 57(57) For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks prior to respondent's use of its mark and for petitioners' failure to demonstrate confusing similarity between said trademarks, the dismissal of their basic complaint for infringement and the concomitant plea for damages must be affirmed. The law, the surrounding circumstances and the equities of the situation call for this disposition. WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed decision and resolution of the Court of Appeals are AFFIRMED. Costs against the petitioners. SO ORDERED. Puno, Sandoval-Gutierrez, Corona and Azcuna, JJ., concur. )RRWQRWHV 1.

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Penned by Associate Justice Mercedes Gozo-Dadole (ret.) and concurred in by Associate Justices Bennie Adefuin-Dela Cruz (ret.) and Mariano C. del Castillo; Rollo, pp. 9-34. Id. at 36. CA Decision; Id. at 10-19. CA Decision; Id. at 33. Id. at 228-296. Ramos v. Pepsi-Cola Bottling Co. of the Phils., L-22533, February 9, 1967, 19 SCRA 289, 292. Moomba Mining Exploration Co. v. CA, G.R. No. 108846, October 26, 99, 317 SCRA 388, 397. Smith Kline Beckman Corporation v. CA, G.R. No. 126627, August 14, 2003, 409 SCRA 33, 39. F. D. Regalado, REMEDIAL LAW COMPENDIUM, Vol. 1, 1999 ed., p. 541. Ibid., citing Pilar Dev. Corp. v. IAC, et al., G.R. No. 72283, December 12, 1986, 146 SCRA 215. Sec. 38 of R.A. No. 166. 316 U.S. 203, 53 USPQ 323 [1942] cited in Societe Des Produits Nestle, S.A. v. Court of Appeals, G.R. No. 112012, April 4, 2001, 356 SCRA 207, 215. Sec. 2-A. Ownership of trademarks, trade names and servicemarks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, . . ., by actual use thereof in manufacture or trade, in business,

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14.

15.

16. 17. 18. 19.

20.

. . ., may appropriate to his exclusive use a trademark, a trade name, or a servicemark not so appropriated by another, to distinguish his merchandise, [or] business . . . from the merchandise, business or service of others. The ownership or possession of a trademark, trade name, servicemark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. SEC. 5. Requirements of the application. — . . . (a) Sworn statement of the applicant's domicile and citizenship, the date of the applicant's first use of the mark or trade-name, the date of the applicant's first use of the mark or trade-name in commerce or business, the goods, business or services in connection with which the mark or trade-name is used and the mode or manner in which the mark is used in connection with such goods, business or services, and that the person making the application believes himself, or the firm, corporation or association on whose behalf he makes the verification, to be the owner of the mark or trade-name sought to be registered, that the mark or trade-name is in use in commerce or business, and that to be best of his knowledge no person, firm, corporation or association has the right to use such mark or trade-name in commerce or business either in the identical form thereof or in such near resemblance thereto as might be calculated to deceive; . . . . Sec. 37. 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 repression of unfair competition to which the Philippines may be a 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 (sic) whether or not they form parts of marks." G.R. No. L-27906, January 8, 1987, 147 SCRA 154. Philip Morris, Inc., et al. vs. CA, et al., July 16, 1993, 224 SCRA 576, 595. Superseded by R.A. No. 8293 which took effect on January 1, 1998. SEC. 20. Certificate 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 . . ., and of the registrant's exclusive right to use the same . . ., subject to any conditions and limitations stated therein. (Superseded by Sec. 138 of R.A. No. 8293). SECTION 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or assigned under this Act may bring an action hereunder for infringement, . . ., whether or not it has been licensed to do business in the Philippines under Act [No. 1495] or the Corporation Law, at the time it brings 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. (Superseded by

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21. 22. 23. 24.

25. 26. 27.

28.

29.

Section 160 of R.A. No. 8293) G.R. No. L-40163, June 19, 1982, 114 SCRA 420. Puma Sportschufabriken Rudolf Dassler, K.G. v. IAC., G.R. No. 75067, February 26, 1988, 158 SCRA 233. Agpalo, The Law on Trademark, Infringement and Unfair Competition, 2000 ed., pp. 209-210. The Paris Convention is essentially a compact among the various member countries to accord in their own countries to citizens of the other contracting parties' trademarks and other rights comparable to those accorded their own citizens by their domestic laws. 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. (La Chemise Lacoste, S.A. v. Fernandez, G.R. No. L-63796-97, May 21, 1984, 129 SCRA 373.) See La Chemise Lacoste S.A. v. Fernandez, supra at pp. 386-387. Agpalo, The Law on Trademark, Infringement and Unfair Competition, supra at p. 199. ART. 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. Sec. 2. What are registrable. — Trademarks, tradenames and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trademarks, tradenames, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed; And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, . . . (As amended by R.A. No. 865). Sec. 2-A. Ownership of trademarks, trade names and servicemarks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a trade name, or a servicemark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, trade name, servicemark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the

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30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41.

42. 43.

44. 45.

46. 47. 48. 49. 50. 51. 52. 53. 54.

55.

same extent as are other property rights known to the law. (Now Sec. 122 of R.A. No. 8293.) G.R. No. 100098, December 29, 1995, 251 SCRA 600, 619-621. L-19906, April 30, 1969, 27 SCRA 1214. G.R. No. 75420, November 15, 1991, 203 SCRA 583. Supra. Emerald Garment Mfg. Corp. supra at p. 623. Petitioners' Complaint in the RTC; Rollo, p. 207. G.R. No. 159938, March 31, 2006. Supra note 32. Supra note 16. Sec. 241 of IP Code. McDonald's Corp. v. L.C. Big Mak Burger, Inc., G.R. No. 143993, August 18, 2004, 437 SCRA 10. Emerald Garment Mfg. Corporation v. CA, supra, citing Esso Standard Eastern Inc. v. CA, L-29971, August 31, 1982, 116 SCRA 336; also in Mighty Corporation v. E & J Gallo Winery, G.R. No. 154342, July 14, 2004, 434 SCRA 473, 504. Id. at p. 506. Applied in McDonald's Corp. v. L.C. Big Mak Burger, Inc., supra; Asia Brewery, Inc. v. CA, G.R. No. 103543, July 5, 1993, 224 SCRA 437; Converse Rubber Corp. v. Universal Rubber Products, Inc., supra; Phil. Nut Industry Inc. v. Standard Brands, Inc., et al., L-23035, July 31, 1975, 65 SCRA 575. Emerald Garment Mfg. Corporation v. Court of Appeals, supra at p. 615. Applied in Emerald Garment Mfg. Corporation v. Court of Appeals, supra; Del Monte Corp. v. CA, G.R. No. 78325, January 25, 1990, 181 SCRA 410; Fruit of the Loom, Inc. v. CA, et al., L-32747, September 29, 1984, 133 SCRA 405; Bristol Myers Co. v. Dir. of Patents, et al., L-21587, May 19, 1966, 17 SCRA 128. See CA Decision; Rollo, pp. 28-30. Mead Johnson & Co. v. N.V.J. Van Dorp. Ltd., et al., L-17501, April 27, 1963, 7 SCRA 768, 771. Gabriel v. Perez, et al., L-24075, January 31, 1974, 55 SCRA 406. 74 Am. Jur. 2d, Trademarks and Tradenames, Sec. 5. Supra at p. 417. Emerald Garment Mfg. Corp. v. CA, supra at p. 618. 42 Phil. 190 (1921). G.R. No. 154342, July 14, 2004, 434 SCRA 473, 496-497. Sec. 9-A. Equitable principles to govern proceedings. — In opposition proceedings and in all other inter partes proceedings . . . under this Act, equitable principles of laches, estoppel, and acquiescence where applicable, may be considered and applied. (As added by R.A. No. 638.) Art. 6bis provides: . . . the countries of the Union undertakes, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to

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56. 57.

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 of such well-known mark or an imitation liable to create confusion therewith. Rollo, p. 179. Sambar v. Levi Strauss & Co., G.R. No. 132604, March 6, 2002, 378 SCRA 364, 370.

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SECOND DIVISION [G.R. No. L-53672. May 31, 1982.] BATA INDUSTRIES, LTD., petitioner, YV THE HONORABLE COURT OF APPEALS; TIBURCIO S. EVALLE, DIRECTOR OF PATENTS, NEW OLYMPIAN RUBBER PRODUCTS CO., INC., respondents. Quasha, Asperilla, Ancheta, Valmonte, Peña & Marcos for petitioner. Andres C. Reyes, Sr. for private respondent. Gil V. R. Racho for private respondent in collaboration with Atty. Reyes. SYNOPSIS The Director of Patents ordered the registration of the trademark BATA in favor of respondent domestic company based on a finding that it is respondent-applicant's expense that created the enormous goodwill of the said trademark in the Philippines and not the opposer, and that opposer has technically abandoned its trademark BATA in the Philippines. Opposer, a Canadian corporation, is neither licensed nor doing business locally, although prior to World War II BATA shoes made by a Czechoslovakian corporation, and until 1948 shoes made by BATA Canada were sold in the Philippines. On appeal. the Court of Appeals reversed the decision of the Director of Patents. Subsequently, however, upon respondent's second motion for reconsideration, the Appellate Court, through a new set of justices, set aside the judgment of reversal and affirmed the decision of the Director of Patents. On Petition for review, the Supreme Court dismissed the same for lack of merit. Hence, this motion for reconsideration wherein petitioner-movant, in addition to points of law, insinuates that there was something wrong when a new set of Court of Appeals justices rendered a completely different decision. The Supreme Court denied petitioner's motion and affirmed the questioned judgment of the Court of Appeals which sustained the decision of the Director of Patents ordering the registration of the trademark BATA in favor of respondent. The Court held that there is nothing wrong and unusual when a Copyright 1994-2014

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decision is reconsidered by a division composed of the same justices who rendered the decision but more so when reconsideration is made by a different set of justices because the latter would have a fresh perspective unencumbered by the views expressed in the decision sought to be reconsidered. Motion denied.

SYLLABUS REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; RECONSIDERATION THEREOF BY A NEW SET OF COURT OF APPEALS JUSTICES, NOT UNUSUAL; JUSTIFIED IN CASE AT BAR. — There is nothing wrong and unusual when a decision is reconsidered. This is so when the reconsideration is made by a division composed of the same Court of Appeals justices who rendered the decision but much more so when the reconsideration is made by a different set of justices as happened in this case. Obviously, the new set of justices would have a fresh perspective unencumbered by the views expressed in the decision sought to be reconsidered. Nor should it be a cause for wonder why Justices Gutierrez, Agrava and Nocon had replaced the original justices. Justice Cortez resigned to become a candidate for the governorship of Cagayan (he was elected), while Justices Serrano and Jimenez retired upon reaching the age of 65.

RESOLUTION

ABAD SANTOS, J : p

On October 27, 1980, the petition in this case was denied for lack of merit. Petitioner moved to reconsider and as required, private respondent submitted comments. A hearing on the motion for reconsideration was held on June 7, 1982. This is Our resolution on the motion for reconsideration. In Inter Partes Case No. 654 of the Philippine Patent Office, New Olympian Rubber Products Co., Inc. sought the registration of the mark BATA for casual rubber shoes. It alleged that it has used the mark since July 1, 1970. Copyright 1994-2014

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Registration was opposed by Bata Industries, Ltd., a Canadian corporation, which alleged that it owns and has not abandoned the trademark BATA. cdphil

Stipulated by the parties were the following: 1.

Bata Industries, Ltd. has no license to do business in the Philippines;

2. It is not presently selling footwear under the trademark BATA in the Philippines; and 3. It has no licensing agreement with any local entity or firm to sell its products in the Philippines. Evidence received by the Philippine Patent Office showed that Bata shoes made by Gerbec and Hrdina of Czechoslovakia were sold in the Philippines prior to World War II. Some shoes made by Bata of Canada were perhaps also sold in the Philippines until 1948. However, the trademark BATA was never registered in the Philippines by any foreign entity. Under the circumstances, it was concluded that "opposer has, to all intents and purposes, technically abandoned its trademark BATA in the Philippines." Upon the other hand, the Philippine Patent Office found that New Olympian Rubber Products Co., Inc.: ". . . has overwhelmingly and convincingly established its right to the trademark BATA and consequently, its use and registration in its favor. There is no gainsaying the truth that the respondent has spent a considerable amount of money and effort in popularizing the trademark BATA for shoes in the Philippines through the advertising media since it was lawfully used in commerce on July 1, 1970. It can not be denied, therefore, that it is the respondent-applicant's expense that created the enormous goodwill of the trademark BATA in the Philippines and not the opposer as claimed in its opposition to the registration of the BATA mark by the respondent. "Additionally, on evidence of record, having also secured (three) copyright registrations for the word BATA, respondent-applicant's right to claim ownership of the trademark BATA in the Philippines, which it claims to be a Tagalog word which literally means 'a little child' (Exh. 5), is all the more fortified." Copyright 1994-2014

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The Philippine Patent Office dismissed the opposition and ordered the registration of the trademark BATA in favor of the domestic corporation. Appeal from the decision of the Philippine Patent Office was made to the Court of Appeals by Bata Industries, Ltd. In a decision penned by Justice Justiniano P. Cortez dated August 9, 1979, with Justices Mariano Serrano and Jose B. Jimenez concurring, the PPO decision was reversed. A motion for reconsideration filed by New Olympian Rubber Products Co., Inc. was denied on October 17, 1979, by the same justices. cdphil

However, in a resolution on a second motion for reconsideration penned by Justice Hugo E. Gutierrez who is now a member of this Court, to which Justices Corazon J. Agrava and Rodolfo A. Nocon concurred (with the former filing a separate opinion), the decision of August 9, 1979, was set aside and that of the Director of Patents was affirmed. In addition to points of law, Bata Industries, Ltd. questions "the circumstances surrounding the issuance of the questioned resolutions of the respondent Court of Appeals." In effect, it insinuates that there was something wrong when a new set of justices rendered a completely different decision. It should be stated that there is nothing wrong and unusual when a decision is reconsidered. This is so when the reconsideration is made by a division composed of the same justices who rendered the decision but much more so when the reconsideration is made by a different set of justices as happened in this case. Obviously, the new set of justices would have a fresh perspective unencumbered by the views expressed in the decision sought to be reconsidered. Nor should it be a cause for wonder why Justices Gutierrez, Agrava and Nocon had replaced the original justices. Justice Cortez resigned to become a candidate for the governorship of Cagayan (he was elected), while Justices Serrano and Jimenez retired upon reaching the age of 65. On the merits, the extended resolution penned by Justice Gutierrez does not have to be fortified by Us. We agree with Mr. Justice Gutierrez when he says: "We are satisfied from the evidence that any slight goodwill generated by the Czechoslovakian product during the Commonwealth years was completely abandoned and lost in the more than 35 years that have passed since the liberation of Manila from the Japanese troops. Copyright 1994-2014

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"The applicant-appellee has reproduced excerpts from the testimonies of the opposer-appellant's witnesses to prove that the opposer-appellant was never a user of the trademark BATA either before or after the war, that the appellant is not the successor-in-interest of Gerbec and Hrdina who were not is representatives or agents, and could not have passed any rights to the appellant, that there was no privity of interest between the Czechoslovakian owner and the Canadian appellant and that the Czechoslovakian trademark has been abandoned in Czechoslovakia. "We agree with the applicant-appellee that more than substantial evidence supports the findings and conclusions of the Director of Patents. The appellant has no Philippine goodwill that would be damaged by the registration of the mark in the appellee's favor. We agree with the decision of the Director of Patents which sustains, on the basis of clear and convincing evidence, the right of the appellee to the registration and protection of its industrial property, the BATA trademark."

WHEREFORE, the motion for reconsideration is hereby denied for lack of merit. No special pronouncement as to costs. Cdpr

SO ORDERED. Barredo (Chairman), Aquino, Guerrero, De Castro and Escolin JJ., concur. Concepcion Jr., J., on leave.

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THIRD DIVISION [G.R. No. 75067. February 26, 1988.] PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner, YV. THE INTERMEDIATE APPELLATE COURT and MIL-ORO MANUFACTURING CORPORATION, respondents.

SYLLABUS 1. REMEDIAL LAW; CIVIL ACTIONS; LEGAL CAPACITY TO SUE; A FOREIGN CORPORATION NOT DOING BUSINESS IN THE PHILIPPINE CAN SUE IN PHILIPPINE COURT FOR INFRINGEMENT. — 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 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." In the case of Converse Rubber Corporation v. Universal Rubber Products, Inc. (147 SCRA 165), we likewise re-affirmed our adherence to the Paris Convention: "The ruling in the aforecited case is in consonance with the Convention of 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.' 2. ID.; ID.; MOTION TO DISMISS; LIS PENDENS; PRINCIPLE NOT APPLICABLE TO ADMINISTRATIVE CASES. — Important 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. 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 Copyright 1994-2014

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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 a right, 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." 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. 3. ID.; PROVISIONAL REMEDIES; PRELIMINARY INJUNCTION; ISSUANCE THEREOF IN INFRINGEMENT CASES, UPHELD. — As regards the propriety of the issuance of the writ of preliminary injunction, 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. 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." (La Chemise Lacoste, S.A. v. Fernandez, supra)

DECISION

GUTIERREZ, JR., J : p

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 Copyright 1994-2014

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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 Copyright 1994-2014

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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, R.A. 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). This 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 adoptor 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, Copyright 1994-2014

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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 Copyright 1994-2014

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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 (RA) 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 Republic 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 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 Copyright 1994-2014

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widely and favorably known in the Philippines through the use therein of its products bearing its corporate and trade name, 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 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 Copyright 1994-2014

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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 Converse Rubber Corporation v. Universal Rubber Products, Inc. (147 SCRA 165), we likewise re-affirmed our adherence to the Paris Convention: "The ruling in the aforecited case is in consonance with the Convention of 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 repression 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 Parte 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): Copyright 1994-2014

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"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 l(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 a right, 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 injunction, 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 concerns 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 Copyright 1994-2014

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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 — and 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. Fernan, Feliciano, Bidin and Cortes, JJ., concur.

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SECOND DIVISION [G.R. Nos. L-27425 & L-30505. April 28, 1980.] CONVERSE RUBBER CORPORATION and EDWARDSON MANUFACTURING CORPORATION, plaintiffs-appellants, YV JACINTO RUBBER & PLASTICS CO., INC., and ACE RUBBER & PLASTICS CORPORATION, defendants-appellants. Sycip, Salazar, Luna & Associates for plaintiff-appellants. Juan R. David for defendants-appellants.

DECISION

BARREDO, J : p

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 Copyright 1994-2014

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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 Copyright 1994-2014

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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 Converse-names 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 Copyright 1994-2014

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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 all 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 shall, 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 Copyright 1994-2014

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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 Copyright 1994-2014

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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 would 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 of Custombuilt' in the Philippines market and has been enjoying 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 cripple, 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.) Copyright 1994-2014

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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 CANVAS 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 of the shoes in question, and We do not hesitate in holding that the 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 their 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 Copyright 1994-2014

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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. Copyright 1994-2014

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"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: Copyright 1994-2014

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". . . 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, goodwill 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 plaintiffs-appellees." (Pp. 21-22, Id.)

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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 Marshall-Wells Co. vs. Elser & Co., 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 Defendants-Appellants). 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: LLpr

"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 laws.' "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 the Philippine 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 Copyright 1994-2014

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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. (61 O. G. 8010) in any 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. 11-14.)

As can be seen, what is actually the only controversial matter in this case is that which refers to the assessment of 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 Copyright 1994-2014

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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 Copyright 1994-2014

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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 of 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 Copyright 1994-2014

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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 of the merits of the plaintiff's cause of action, its enforceability should have lesser force. The same must be true with stronger basis in the case of a permanent injunction issued as part of 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 resolved by it after hearing and reception of the evidence of both parties. As a matter of 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 appellant 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 is 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 Copyright 1994-2014

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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 was, 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: LLjur

"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 Copyright 1994-2014

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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 Copyright 1994-2014

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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.) Copyright 1994-2014

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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 well 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 statement 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 order of December 29, 1967 was still incomplete, with the added flaw that His Honor declared himself therein as having lost jurisdiction. On the other hand, while the third order of January 24, 1968 filled the omissions of the first two orders, it, however, reiterated the erroneous ruling of the second order regarding loss 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 indeed 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 for the imposition of the proper penalty. llcd

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 Copyright 1994-2014

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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. Aquino, J., concurs in the result.

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FIRST DIVISION [G.R. No. 78325. January 25, 1990.] DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners, YV COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents. Bito, Misa & Lozada for petitioners. Reynaldo F. Singson for private respondent.

DECISION

CRUZ, J : p

The petitioners are questioning the decision of the respondent court upholding the dismissal by the trial court of their complaint against the private respondent for infringement of trademark and unfair competition. cCESTA

Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not engaged in business in the Philippines. Both the Philippines and the United States are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition. Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the Philippines various agricultural products, including catsup, under the Del Monte trademark and logo. cdll

On October 27, 1965, Del Monte authorized Philpack to register with the Copyright 1994-2014

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Philippine Patent Office the Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1(1) On November 20, 1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its logo. 2(2)

Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by the Bureau of Domestic Trade on April 17, 1980, to engage in the manufacture, packing, distribution and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup. 3(3) This logo was registered in the Supplemental Register on September 20, 1983. 4(4) The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the private respondent bought from the junk shops for recycling. Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Monte's, Philpack warned it to desist from doing so on pain of legal action. Thereafter, claiming that the demand had been ignored, Philpack and Del Monte filed a complaint against the private respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of a writ of preliminary injunction. 5(5) In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo was substantially different from the Del Monte logo and would not confuse the buying public to the detriment of the petitioners. 6(6) After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were substantial differences between the logos or trademarks of the parties; that the defendant had ceased using the petitioners' bottles; and that in any case the defendant became the owner of the said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed to establish the defendant's malice or bad faith, which was an essential element of infringement of trademark or unfair competition. 7(7) This decision was affirmed in toto by the respondent court, which is now faulted in this petition for certiorari under Rule 45 of the Rules of Court. Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part as follows: Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or Copyright 1994-2014

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colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade name and apply such reproduction, counterfeit copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Sec. 29 of the same law states as follows: 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 for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, 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 likely 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) Copyright 1994-2014

Any person who by any artifice, or device, or who employs any

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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.

To arrive at a proper resolution of this case, it is important to bear in mind the following distinctions between infringement of trademark and unfair competition. (1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another. (2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair competition fraudulent intent is essential. (3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. 8(8)

In the challenged decision, the respondent court cited the following test laid down by this Court in a number of cases: In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels. 9(9)

and applying the same, held that there was no colorable imitation of the petitioners' trademark and logo by the private respondent. The respondent court agreed with the findings of the trial court that: In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit: 1.

As to the shape of label or make:

Del Monte: Semi-rectangular, with a crown or tomato shape design on top of the rectangle. Sunshine: Regular rectangle. 2. Copyright 1994-2014

As to brand printed on label:

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Del Monte: Tomato catsup mark. Sunshine: Fruit catsup. 3.

As to the words or lettering on label or mark:

Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines. Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro Manila. 4.

As to color of logo:

Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in white. Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow. 5.

As to shape of logo: Del Monte: In the shape of a tomato. Sunshine: Entirely different in shape.

6.

As to label below the cap:

Del Monte: Seal covering the cap down to the neck of the bottle, with picture of tomatoes with words "made from real tomatoes. "Sunshine: There is a label below the cap which says "Sunshine Brand." 7.

As to the color of the products: Del Monte: Darker red. Sunshine: Lighter than Del Monte.

While the Court does recognize these distinctions, it does not agree with the Copyright 1994-2014

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conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. 10(10) Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their label when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. 11(11) As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone. 12(12) It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. 13(13) The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. 14(14) Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. LexLib

A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. 15(15) The court therefore should be guided by its first impression, 16(16) for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17(17)

It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their Copyright 1994-2014

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carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. 18(18) The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. 19(19) Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. 20(20) We also note that the respondent court failed to take into consideration several factors which should have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased. 21(21) Among these, what essentially determines the attitude of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. 22(22) Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. 23(23) In this latter category is catsup. At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label are green and red-orange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato. EaIDAT

As previously stated, the person who infringes a trade mark does not normally copy out but only makes colorable changes, employing enough points of similarity to confuse the public with enough points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product, he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine chose, without a reasonable explanation, to use the same colors and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is that it was done deliberately to deceive. 24(24) It has been aptly observed that the ultimate ratio in cases of grave doubt is the Copyright 1994-2014

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rule that as between a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest dealing has already achieved favor with the public, any doubt should be resolved against the newcomer inasmuch as the field from which he can select a desirable trademark to indicate the origin of his product is obviously a large one. 25(25) Coming now to the second issue, we find that the private respondent is not guilty of infringement for having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26(26) we declared that: (1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark and his right to the exclusive use thereof. There is no such presumption in the registration in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein on the issue of ownership which may be contested through opposition or interference proceedings or, after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claim of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. It is not subject to opposition although it may be cancelled after the issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement while registration in the Supplemental Register is not. (3) In applications for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registrations in the Supplemental Register.

It can be inferred from the foregoing that although Del Monte has actual use of the bottle's configuration, the petitioners cannot claim exclusive use thereof because it has not been registered in the Principal Register. However, we find that Sunshine, despite the many choices available to it and notwithstanding that the caution "Del Monte Corporation, Not to be Refilled" was embossed on the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces. This clearly shows the private respondent's bad faith and its intention to capitalize on the latter's reputation and goodwill and pass off its own product as that of Del Monte. Copyright 1994-2014

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The Court observes that the reasons given by the respondent court in resolving the case in favor of Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label was not improper because the Bureau of Patent presumably considered other trademarks before approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27(27) where this Court declared that selling oil in containers of another with markings erased, without intent to deceive, was not unfair competition. Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the Principal Register but only in the Supplemental Register where the presumption of the validity of the trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent. Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated that since registration was only in the Supplemental Register, this did not vest the registrant with the exclusive right to use the label nor did it give rise to the presumption of the validity of the registration. On the argument that no unfair competition was committed, the Shell Case is not on all fours with the case at bar because: (1) In Shell, the absence of intent to deceive was supported by the fact that the respondent therein, before marketing its product, totally obliterated and erased the brands/mark of the different companies stenciled on the containers thereof, except for a single isolated transaction. The respondent in the present case made no similar effort. (2) In Shell, what was involved was a single isolated transaction. Of the many drums used, there was only one container where the Shell label was not erased, while in the case at hand, the respondent admitted that it made use of several Del Monte bottles and without obliterating the embossed warning. (3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a general rule, dealers are well acquainted with the manufacturer from whom they make their purchases and since they are more experienced, they cannot be so easily deceived like the inexperienced public. There may well be similarities and imitations which deceive all, but generally the interests of the dealers are not regarded with the same solicitude as are the interests of the ordinary consumer. For it is the form in which the wares come to the final buyer that is of significance. 28(28) Copyright 1994-2014

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As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the cancellation of the private respondent's registration and withdrawal of all its products bearing the questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles. Cdpr

The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides: Sec. 23. 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 the court may award as damages 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 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.

Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code, which provides: Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Art. 1157, or in every case where any property right has been invaded.

Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of P1,000.00. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24, 1986 and the Resolution dated April 27, 1987, are REVERSED and SET ASIDE and a new judgment is hereby rendered:. (1) Canceling the private respondent's Certificate of Registration No. Copyright 1994-2014

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SR-6310 and permanently enjoining the private respondent from using a label similar to that of the petitioners. (2) Prohibiting the private respondent from using the empty bottles of the petitioners as containers for its own products. (3) Ordering the private respondent to pay the petitioners nominal damages in the amount of P1,000.00, and the costs of the suit. LLpr

SO ORDERED. Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur. )RRWQRWHV 1. 2. 3. 4. 5. 6. 7. 8.

9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Original Records, pp. 29-30. Ibid., Annex 2 pp. 8-9; Annex 3, pp. 16-17. Id., Annex A, p. 41. Id., Annex B, pp. 42-43. Id., pp. 1-6. Id., pp. 38-40. Id., pp. 166-168. Decision penned by Judge Roque A. Tamayo, affirmed in the Court of Appeals by Coquia, J., ponente, with Luciano and Cui, JJ., concurring. Jose C. Vitug, Pendect of Commercial Law & Jurisprudence, 1st ed., p. 291 citing Compania General de Tabacos v. de Aljambra Cigar and Cigarette Manufacturing Co., 33 Phil 485; Ogura v. Chua, 59 Phil. 471; Parke Davies & Co. v. Kiu Foo & Co.., 60 Phil. 928. Mead Johnson Co. v. N.V.J. Von Dorp. Ltd., 7 SCRA 768; Bristol Myers Co. v. Director of Patents, 17 SCRA 128. Stuart v. F.G. Stewart Co., 91 F 243. Notaseme Hosiery v. Straus, 201 F 99. McLean v. Fleming, 96 US 245; Fischer v. Blank, 138 N.Y. 244; Tillman Bendel v. California Packing Corporation, 63 F 2d 498. Martini & Rossi v. Consumer's People's Products, 57 F 2d 599. Stuart v F.G. Stewart Co., 91 F 243. Helmet Co. v. Wm Wrigley Jr. Co., 245 E 842; Pennzoil Co. v. Pennsylvania Petroleum Co., 159 M.D. 187. William Waltke & Co. v. Geo. H. Schafer, 49 App D.C. 294; Ward Baking Co. v. Potter-Wringtington, 298 F 398. Vortex Mfg. Co. v. Ply-Rite Contracting Co., 33 F 2d 302. Hilton v. Hilton, 90 N.J. Eq. 564. Bickmore Gall Cure Co. v. Karns, 134 F 833; J.C. Penny Co. v. H.D. Lee Merchantile Co., 120 F 2d 949.

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20. 21. 22. 23. 24. 25. 26. 27. 28.

Baker and Master Printers Union of New Jersey, 34 F Supp. 808. 11 H.D. Nims, The Law of Unfair Competition and Trademark, 1947, p. 1027. Ibid., p. 1030. 11 Rudolf Callman, The Law of Unfair Competition and Trademark, 1945, pp. 1137, 1136. Ibid., Vol. III, 2nd ed. pp. 1527-1528 cited in Converse Rubber Corporation v. Universal Rubber Product Inc., 147 SCRA 155. William Waltke & Co. v. Geo. H. Schafer & Co., 49 App. D.C. 294; Standard Oil v. Michie, 34 F 2d 802. 154 SCRA 723. 11 SCRA 436. Supra., p. 1141.

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EN BANC [G.R. No. L-21587. May 19, 1966.] BRISTOL MYERS COMPANY, petitioner, YV THE DIRECTOR OF PATENTS and UNITED AMERICAN PHARMACEUTICALS, INC., respondents. Picazo & Agcaoili for petitioner. Sycip, Salazar, Luna & Associates for respondent United American Pharmaceuticals, Inc. Solicitor General Arturo A. Alafriz, Assistant Solicitor General A. A. Torres and Solicitor A. V. Sempio-Diy, for Director of Patents. SYLLABUS 1. TRADEMARK; TEST TO DETERMINE CONFUSING SIMILARITY. — In determining whether two trademarks are confusingly similar, the test is not simply to take their words and compare the spelling and pronunciation of said words. Rather, it is to consider the two marks in their entirety, as they appear in the respective labels, in relation to the goods to which they are attached. (Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd., G.R. No. L-17501, April 27, 1963.) 2. ID.; ID.; TRADEMARK HAVING THE SAME SUFFIX AND SIMILAR SOUNDING PREFIXES BUT WITH STRIKINGLY DIFFERENT BACKGROUNDS; CASE AT BAR. — The trademarks in question are not apt to confuse prospective customers. For though the words "BIOFERIN" and "BUFFERIN" have the same suffix and similar-sounding prefixes, they appear in their respective labels with strikingly different backgrounds and surroundings, as to color, size and design. Furthermore, the product covered by "BIOFERIN" is expressly stated as dispensable only upon doctor's prescription, while that of "BUFFERIN" does not require the same. The chances of being confused into purchasing one for the other are therefore all the more rendered negligible.

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DECISION

BENGZON, J.P., J : p

A petition for registration in the Principal Register of the Patent Office of the trademark "BIOFERIN" was filed on October 21, 1957 by United American Pharmaceuticals, Inc. Said domestic corporation first used the afore-stated trademark in the Philippines on August 13, 1957. It covers "a medicinal preparation of antihistaminic, analgesic, antipyretic with vitamin C and Bioflavenoid used in the treatment of common colds, influenza and other febrile diseases with capillary hemorrhagic tendencies." The product falls under Class 6 of the official classification, that is, "Medicines and Pharmaceutical Preparations". Bristol Myers Co., a corporation of the State of Delaware, U.S.A., filed on January 6, 1959 an opposition to the application. Said oppositor is the owner in the Philippines of the trademark "BUFFERIN" under Certificate of Registration No. 4578 issued by the Philippine Patent Office on March 3, 1954. Its trademark is also registered in the United States under Certificate of Registration No. 566190 issued on November 4, 1952. It was first used in the Philippines on May 13, 1953. The product covered by "BUFFERIN" also belongs to Class 6, Medicines and Pharmaceutical Preparations. Designated as "Antacid analgesic", it is intended for relief in cases of "simple headaches, neuralgia, colds, menstrual pain and minor muscular aches." The thrust of oppositor's contention was that the registration of the applicant's trademark "BIOFERIN" would violate its rights and interest in its registered trademark "BUFFERIN" as well as mislead and confuse the public as to the source and origin of the goods covered by the respective marks, in view of the allegedly practically the same spelling, pronunciation and letter type design of the two trademarks covering goods of the same class. The parties thereafter filed on January 18, 1961 a joint petition stipulating as to the facts and submitting the case upon the issue of whether or not, considering all the factors involved, in both trademarks — as the parties would discuss in their memoranda — there will be such confusing similarity between the two trademarks as will be likely to deceive the purchasing public. Copyright 1994-2014

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After submission of memoranda, on June 21, 1963 the Director of Patents rendered a decision granting the petition and dismissing the opposition, on the ground that, all factors considered, the trademarks in question are not confusingly similar, so that the damage feared by the oppositor will not result. From said decision the oppositor appealed to this Court by petition for review filed on July 24, 1963. The sole issue raised thereby is: Are the trademarks "BIOFERIN" and "BUFFERIN", as presented to the public in their respective labels, confusingly similar? Appellant contends that confusing similarity will obtain because both products are primarily used for the relief of pains such as headaches and colds; and because the words "BIOFERIN and "BUFFERIN" are practically the same in spelling and pronunciation. In determining whether two trademarks are confusingly similar, the test is not simply to take their words and compare the spelling and pronunciation of said words. Rather, it is consider the two marks in their entirety, as they appear in the respective labels, in relation to the goods to which they are attached. Said rule was enunciated by this Court through Justice Felix Bautista Angelo in Mead Johnson & Co., vs. N.V.J. Van Dorp, Ltd., L-17501, April 27, 1963, thus: "It is true that between petitioner's trademark 'ALACTA' and respondent's 'ALASKA' there are similarities in spelling, appears and sound for both are composed of six letters of three syllables each and each syllable has the same vowel, but in determining if they are confusingly similar a comparison of said words is not the only determining factor. The two marks in their marks in their entirety as they appear in the respective labels must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. . . ."

Applying this test to the trademarks involved in this case, it is at once evident that the Director of Patents did not err in finding no confusing similarity. For though the words "BIOFERING" and "BUFFERIN" and "Bufferin" have the same suffix and similar-sounding prefixes, they appear in their respective labels with strikingly different backgrounds and surroundings, as to color, size and design. For convenience we sum up these differences, as follows: Copyright 1994-2014

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Relevant Factors

"BIOFERIN" "BUFFERIN"

1.

Shape & Size of Rectangular about Label 3-3/4" 2-1/4" 3-3/4" 1-1/4"

2.

Color of Label Predominantly Predominantly YellowWhite

3.

Color background of word-mark

4.

Over-all Layout At the top center At left side of label — word-mark "BIOFE- "BUFFERIN"; with RIN"; below it are "Bristol Myers Co., contents of medicine, New York, N.Y." arranged horizontally; below it; at right side, at bottom, center, contents, indications, "United Pharma dosage are grouped ceuticals, Inc." together, printed in olive-green perpendicularly. background. At left side — dosage, printed perpendicularly; at right side, indications, also perpendicularly printed.

5.

Forms of Product Capsules — label says: label says: "50 capsules" "36 Tablets"

6.

Prescription Label states: "To be dispensed only by or on the prescription of a physicians"

Olive-green

Rectangular,

Blue

Tablets —

No such statement

Accordingly, taken as they will appear to a prospective customer, the trademarks in question are not apt to confuse. Furthermore, the product of the applicant is expressly stated as dispensable only upon doctor's prescription, while that of oppositor does not require the same. The chances of being confused into purchasing one for the other are therefore all the more rendered negligible. Although oppositor avers that some drugstores sell "BIOFERIN: without asking for a doctor's Copyright 1994-2014

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prescription, the same if true would be an irregularity not attributable to the applicant, who has already clearly stated the requirement of a doctor's prescription upon the face of the label of its product. Wherefore, the decision of the Director of Patents appealed from is hereby affirmed without costs. So ordered. Bengzon, C.J., Bautista Angelo, Concepcion, J.B.L. Reyes, Barrera, Dizon, Regala, Makalintal, Zaldivar and Sanchez, JJ., concur.

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FIRST DIVISION [G.R. No. 114508. November 19, 1999.] PRIBHDAS J. MIRPURI, petitioner, YV. COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents. Teresita Gandionco Oledan for petitioner. Castillo Laman Tan Pantaleon & San Jose for respondents. SYNOPSIS On June 15, 1970, Lolita Escobar filed an application with the Bureau of Patents for the registration of the trademark "Barbizon" docketed as Inter Partes No. 686. Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A. filed an opposition thereto based on Sections 4 (d) and 8 of the Trademark law by claiming that the mark BARBIZON of the applicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned. On June 18, 1978, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application. The decision became final, and Escobar was issued a certificate of registration. Later, Escobar assigned all her rights and interests over the trademark to petitioner Pribhdas J. Mirpuri. In 1979, the Bureau of Patents cancelled Escobar's certificate of registration for failure to file with the Bureau of Patents the Affidavit of Use of the Trademark as required under Section 12 of the Philippine Trademark Law. Mirpuri reapplied for the registration of the cancelled trademark of Barbizon docketed as Inter Partes No. 2049. Again, private respondent filed an opposition by citing mainly the protection of trademark under Article 6BIS is of the Convention of Paris and stating that opposer's goods bearing the trademark BARBIZON have been used in many countries including the Philippines for at least 40 years and has enjoyed international reputation and good will for their quality and to allow such registration will also violate Article 189 of the Revised Penal Code. Subsequently, the Director of Patents rendered a decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's reapplication for registration. On appeal, the Court of Appeals reversed Copyright 1994-2014

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the decision of the Director of Patents.

HSCATc

In this petition, it is noted that the oppositions in the first and second cases are based on different laws. The opposition in IPC No. 686 was based on specific provisions of the Trademark Law, i.e., Section 4 (d) on confusing similarity of trademarks and Section 8 on the requisite damage to file an opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6bis thereof, E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. This opposition also invoked Article 189 of the Revised Penal Code which is a statute totally different from the Trademark Law. Causes of action which are distinct and independent from each other, although arising out of the same contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. The mere fact that the same relief is sought in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the two actions are based on different statutes. Res judicata, therefore, does not apply to the instant case and respondent Court of Appeals did not err in so ruling. Petition was DENIED.

SYLLABUS 1. MERCANTILE LAW; TRADEMARK LAW; TRADEMARK; DEFINED. — A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others." This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark", as "any visible sign capable of distinguishing goods." 2. ID.; ID.; ID.; FUNCTIONS. — In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article of his product. Modern authorities on trademark law view trademarks as Copyright 1994-2014

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performing three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they symbolize. 3. ID.; ID.; SYMBOLS; USED TO IDENTIFY OWNERSHIP OR ORIGIN OF ARTICLES. — Symbols have been used to identify the ownership or origin of articles for several centuries. As early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their flanks. Archaeological discoveries of ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glass works, bricks, etc. reveal some features which are thought to be marks or symbols. These marks were affixed by the creator or marker of the article, or by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices for the settlement of accounts, between an entrepreneur and his workmen. 4. ID.; ID.; COMPULSORY USE OF IDENTIFYING MARKS IN TRADES; PURPOSE. — In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper, etc. Every guild had its own mark and every master belonging to it had a special mark of his own. The marks were not trademarks but police marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into an area where the guild had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the artisan. For a similar reason, merchants also used merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon recovery after shipwreck or piracy. 5. ID.; ID.; TRADEMARK; GIVES THE CUSTOMER AN INDEX OR GUARANTEE OF QUALITY. — With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue monopoly but to give the customer an index or guarantee of quality. It was in the late 18th century when the industrial revolution gave rise to mass production and distribution of consumer goods that the mark became an important instrumentality of trade and commerce. By this time, trademarks did not merely identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the consuming public. 6. Copyright 1994-2014

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REPUTATION OF THE OWNER OF THE PRODUCT. — Eventually, they came to symbolize the goodwill and business reputation of the owner of the product and became a property right protected by law. The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the public." Subsequently, England and the United States enacted national legislation on trademarks as part of the law regulating unfair trade. It became the right of the trademark owner to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon the public. HESCcA

7. ID.; ID.; ID.; MOST EFFECTIVE AGENT FOR THE ACTUAL CREATION AND PROTECTION OF GOODWILL. — Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark actually sells the goods. The mark has become the "silent salesman," the conduit through which direct contact between the trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it has become a more convincing selling point than even the quality of the article to which it refers. In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the marked article has been fixed in the public mind through advertising. 8. REMEDIAL LAW; EFFECT OF FINAL JUDGMENT; RES, JUDICATA; ELUCIDATED. — Literally, res judicata, means, a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. In res judicata, the judgment in the first action is considered conclusive as to every matter, offered and received therein, as to any other admissible matter which might have been offered for that purpose, and all other matters that could have been adjudged therein. Res judicata is an absolute bar to a subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second actions, identity of parties, of subject matter and of causes of action. Copyright 1994-2014

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9. ID.; JUDGMENT ON THE MERITS; TRIAL WAS NOT NECESSARILY CONDUCTED. — A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections. It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual hearing or arguments on the facts of the case. 10. ID.; ID.; PRESENT IN CASE AT BAR. — In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was conducted, both parties filed their respective pleadings and were given opportunity to present evidence. They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on the issue of prior use, which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld. 11. MERCANTILE LAW; PARIS CONVENTION; ELUCIDATED. — The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin; and at the same time aims to repress unfair competition. The Convention is essentially a compact among various countries which, as members of the Union, have pledged to accord to citizens of the other member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws for an effective protection against unfair competition. In short, foreign nationals are to be given the same treatment in each of the member countries as that country makes available to its own citizens. Nationals of the various member nations are thus assured of a certain minimum of international protection of their industrial property. 12. ID.; ID.; PHILIPPINES IS A SIGNATORY. — The Convention was first signed by eleven countries in Paris on March 20, 1883. It underwent several revisions — at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, and at Stockholm in 1967. Both the Philippines and the United States of America, herein private respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the Philippines, Copyright 1994-2014

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through its Senate, concurred on May 10, 1965. The Philippines' adhesion became effective on September 27, 1965, and from this date, the country obligated itself to honor and enforce the provisions of the Convention. 13. ID.; ID.; ARTICLE 6BIS; GOVERNS PROTECTION OF WELL-KNOWN TRADEMARKS. — This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods. TIEHSA

14. ID.; ID.; ID.; DOES NOT REQUIRE LEGISLATIVE ENACTMENT TO GIVE EFFECT IN MEMBER COUNTRY. — It is a self-executing provision and does not require legislative enactment to give it effect in the member country. It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its ratification according to the public law of each state and the order for its execution. 15. ID.; ID.; ID.; POWER TO DETERMINE WHETHER A TRADEMARK IS WELL-KNOWN LIES IN COMPETENT AUTHORITY OF COUNTRY OF REGISTRATION OR USE. — The essential requirement under Article 6bis, is that the trademark to be protected must be "well-known" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a court. 16. ID.; ID.; VILLAFUERTE MEMORANDUM; ELUCIDATED. — In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several internationally-known trademarks and ordered the Director of Patents to require Philippine registrants of such marks to surrender their certificates of registration. 17. ID.; ID.; ONGPIN MEMORANDUM; LAID DOWN GUIDELINES FOR DIRECTOR OF PATENTS TO OBSERVE IN DETERMINING WHETHER A Copyright 1994-2014

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TRADEMARK IS ENTITLED TO PROTECTION. — In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of Patents to observe in determining whether a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent Office was ordered to refuse application for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to problems in trade and industry. 18. ID.; ID.; MINISTER OF TRADE AND INDUSTRY IS THE COMPETENT AUTHORITY TO DETERMINE WHETHER A TRADEMARK IS WELL-KNOWN IN THIS COUNTRY. — Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case of La Chemise Lacoste, S.A. v. Fernandez. This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the "competent authority" to determine whether a trademark is well-known in this country. 19. REMEDIAL LAW; EFFECT OF FINAL JUDGMENT; RES JUDICATA; DOES NOT APPLY TO RIGHTS, CLAIMS OR DEMANDS WHICH CONSTITUTE SEPARATE OR DISTINCT CAUSES OF ACTION AND WERE NOT PUT IN ISSUE IN THE FORMER ACTION ALTHOUGH IT INVOLVES THE SAME SUBJECT MATTER. — IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries, and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word and symbol "Barbizon," as the first and registered user of the mark attached to its products which have been sold and advertised worldwide for a considerable number of years Copyright 1994-2014

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prior to petitioner's first application for registration of her trademark in the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res judicata does not apply to rights, claims or demands, although growing out of the same subject matter, which constitute separate or distinct causes of action and were not put in issue in the former action. 20. ID.; ID.; ID.; EXTENDS ONLY TO FACTS, AND CONDITIONS AS THEY EXISTED AT THE TIME JUDGMENT WAS RENDERED. — Res judicata extends only to facts and conditions as they existed at the time judgment was rendered and to the legal rights and relations of the parties fixed by the facts so determined. When new facts or conditions intervene before the second suit, furnishing a new basis for the claims and defenses of the parties, the issues are no longer the same, and the former judgment cannot be pleaded as a bar to the subsequent action. 21. ID.; ID.; ID.; DOES NOT COVER ACTIONS BASED ON DIFFERENT STATUTES. — Causes of action which are distinct and independent from each other, although arising out of the same contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. The mere fact that the same relief is sought in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the two actions are based on different statutes. HSIDTE

22. MERCANTILE LAW; TRADEMARK LAW; TRADEMARK; DEALS WITH PSYCHOLOGICAL FUNCTION OF SYMBOLS. — Trademarks deal with the psychological function of symbols and the effect of these symbols on the public at large. Trademarks play a significant role in communication, commerce and trade, and serve valuable and interrelated business functions, both nationally and internationally. For this reason, all agreements concerning industrial property, like those on trademarks and tradenames, are intimately connected with economic development. 23. ID.; INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES; INDUSTRIAL PROPERTY; ENCOURAGES INVESTMENTS IN NEW IDEAS AND INVENTIONS. — Industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. They speed up transfer of technology and industrialization, and thereby bring about social and economic progress. These advantages have been acknowledged by the Philippine government itself. 24. ID.; ID.; STRENGTHENS THE INTELLECTUAL AND INDUSTRIAL Copyright 1994-2014

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PROPERTY SYSTEM IN THE COUNTRY. — The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our products." The Intellectual Property Code took effect on January 1, 1998 and by its express provision, repealed the Trademark Law, the Patent Law, Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, and the Decree on Compulsory Reprinting of Foreign Textbooks. The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the country's accession to the Agreement Establishing the World Trade Organization (WTO). 25. ID.; WORLD TRADE ORGANIZATION; ELUCIDATED. — The WTO is a common institutional framework for the conduct of trade relations among its members in matters related to the multilateral and plurilateral trade agreements annexed to the WTO Agreement. The WTO framework ensures a "single undertaking approach" to the administration and operation of all agreements and arrangements attached to the WTO Agreement. Among those annexed is the Agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPS. Members to this Agreement "desire to reduce distortions and impediments to international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade." To fulfill these objectives, the members have agreed to adhere to minimum standards of protection set by several Conventions. These Conventions are: the Berne Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the International Convention for the Protection of Performers, Procedures of Phonograms and Broadcasting Organizations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm on July 14, 1967. 26. ID.; ID.; TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS AGREEMENT; ELUCIDATED. — A major proportion of international trade depends on the protection of intellectual property rights. Since the late 1970's, the unauthorized counterfeiting of industrial property and trademarked products has had a considerable adverse impact on domestic and international trade revenues. The TRIPs Agreement seeks to grant adequate protection of intellectual property rights by creating a favorable economic environment to encourage the inflow of foreign investments, and strengthening the multi-lateral trading system to bring Copyright 1994-2014

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about economic, cultural and technological independence. 27. ID.; ID.; PROPELLED THE WORLD TOWARDS TRADE LIBERALIZATION AND ECONOMIC GLOBALIZATION. — The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has revolutionized international business and economic relations among states, and has propelled the world towards trade liberalization and economic globalization. Protectionism and isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a new era of global economic cooperation, reflecting the widespread desire to operate in a fairer and more open multilateral trading system." Conformably, the State must reaffirm its commitment to the global community and take part in evolving a new international economic order at the dawn of the new millennium. AaCTcI

DECISION

PUNO, J : p

The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the Philippines bound itself to honor and enforce in this country. As to whether or not the treaty affords protection to a foreign corporation against a Philippine applicant for the registration of a similar trademark is the principal issue in this case. cdphil

On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri, filed an application with the Bureau of Patents for the registration of the trademark "Barbizon" for use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and selling these products under the firm name "L & BM Commercial" since March 3, 1970. Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A., opposed the application. It claimed that: "The mark BARBIZON of respondent-applicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned. Copyright 1994-2014

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That opposer will be damaged by the registration of the mark BARBIZON and its business reputation and goodwill will suffer great and irreparable injury. That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark used and owned by opposer, constitutes an unlawful appropriation of a mark previously used in the Philippines and not abandoned and therefore a statutory violation of Section 4 (d) of Republic Act No. 166, as amended." 1(1)

This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties submitted the case for decision. LexLib

On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application, thus: "WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010 for the registration of the trademark BARBIZON, of respondent Lolita R. Escobar, is given due course. IT IS SO ORDERED." 2(2)

This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of registration for the trademark "Barbizon." The trademark was "for use in "brassieres and lady's underwear garments like panties." 3(3) Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under his firm name then, the "Bonito Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon" products. In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration. On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own application for registration of Escobar's trademark. Escobar later assigned her application to herein petitioner and this application was opposed by private respondent. The case was docketed as Inter Partes Case No. 2049 (IPC No. 2049). In its opposition, private respondent alleged that: Copyright 1994-2014

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"(a) The Opposer has adopted the trademark BARBIZON (word), sometime in June 1933 and has then used it on various kinds of wearing apparel. On August 14, 1934, Opposer obtained from the United States Patent Office a more recent registration of the said mark under Certificate of Registration No. 316, 161. On March 1, 1949, Opposer obtained from the United States Patent Office a more recent registration for the said trademark under Certificate of Registration No. 507, 214, a copy of which is herewith attached as Annex 'A.' Said Certificate of Registration covers the following goods — wearing apparel: robes, pajamas, lingerie, nightgowns and slips; (b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee design and used the said mark in various kinds of wearing apparel. On March 15, 1977, Opposer secured from the United States Patent Office a registration of the said mark under Certificate of Registration No. 1,061,277, a copy of which is herein enclosed as Annex 'B.' The said Certificate of Registration covers the following goods: robes, pajamas, lingerie, nightgowns and slips; (c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a Representation of a Woman and thereafter used the said trademark on various kinds of wearing apparel. Opposer obtained from the United States Patent Office registration of the said mark on April 5, 1983 under Certificate of Registration No. 1,233,666 for the following goods: wearing apparel: robes, pajamas, nightgowns and lingerie. A copy of the said certificate of registration is herewith enclosed as Annex 'C.' (d) All the above registrations are subsisting and in force and Opposer has not abandoned the use of the said trademarks. In fact, Opposer, through a wholly-owned Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing the goods covered by said registrations and selling them to various countries, thereby earning valuable foreign exchange for the country. As a result of respondent-applicant's misappropriation of Opposer's BARBIZON trademark, Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the damage and prejudice of Opposer and its wholly-owned subsidiary. LLpr

(e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries, including the Philippines, for at least 40 years and has enjoyed international reputation and good will for their quality. To protect its registrations in countries where the goods covered by the registrations are being sold, Opposer has procured the registration of the trademark BARBIZON in the following countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, Colombia, Denmark, Ecuador, France, West Copyright 1994-2014

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Germany, Greece, Guatemala, Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South Africa, Zambia, Egypt, and Iran, among others; (f) To enhance its international reputation for quality goods and to further promote goodwill over its name, marks and products, Opposer has extensively advertised its products, trademarks and name in various publications which are circulated in the United States and many countries around the world, including the Philippines; (g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R. Escobar under Registration No. 21920, issued on September 11, 1974, in violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent applicant acquired by assignment the 'rights' to the said mark previously registered by Lolita Escobar, hence respondent-applicant's title is vitiated by the same fraud and criminal act. Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita Escobar or herein respondent-applicant, to seasonably file the statutory affidavit of use. By applying for a re-registration of the mark BARBIZON subject of this opposition, respondent-applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar. (h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and Representation of a Woman trademarks qualify as well-known trademarks entitled to protection under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further amplified by the Memorandum of the Minister of Trade to the Honorable Director of Patents dated October 25, 1983 [sic], 4(4) Executive Order No. 913 dated October 7, 1963 and the Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated October 25, 1983. (i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON trademark and constitutes the dominant part of Opposer's two other marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a Woman. The continued use by respondent-applicant of Opposer's trademark BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial and criminal piracy and if allowed registration will violate not only the Trademark Law but also Article 189 of the Revised Penal Code and the commitment of the Philippines to an international treaty." 5(5)

Replying to private respondent's opposition, petitioner raised the defense of res Copyright 1994-2014

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judicata. On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International." Petitioner registered the name with the Department of Trade and Industry (DTI) for which a certificate of registration was issued in 1987. Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of petitioner's business name. On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and declared private respondent the owner and prior user of the business name "Barbizon International." Thus: "WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior user of the business name "BARBIZON INTERNATIONAL" under Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the name of respondent, is [sic] hereby ordered revoked and cancelled. . . . ." 6(6)

Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18, 1992, the Director rendered a decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's application for registration, to wit: "WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED BARRED by res judicata and is hereby DISMISSED. Accordingly, Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE. SO ORDERED." 7(7)

Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686 was not barred by judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau of Patents for further proceedings, viz: cdrep

"WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby remanded to the Bureau of Patents for further proceedings, in accordance with this pronouncement. No costs." 8(8)

In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its Copyright 1994-2014

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decision. 9(9) Hence, this recourse. Before us, petitioner raises the following issues: "1.

WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF, CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF PATENTS IS CONCERNED;

2.

WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE PRINCIPLE OF RES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION NO. 53920 ON NOVEMBER 16, 1992;

3.

WHETHER OR NOT THE REQUISITE THAT A 'JUDGMENT ON THE MERITS' REQUIRED A 'HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE EVIDENCE' AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF 'JUDGMENT ON THE MERITS' AS ONE OF THE REQUISITES TO CONSTITUTE RES JUDICATA;

4.

WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM NAME 'BARBIZON INTERNATIONAL' AND WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049 HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A. 166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE DIRECTOR OF PATENTS." 10(10)

Before ruling on the issues of the case, there is need for a brief background on the function and historical development of trademarks and trademark law. Copyright 1994-2014

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A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others." 11(11) This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods." 12(12) In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article as his product. 13(13) cdphil

Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they symbolize. 14(14) Symbols have been used to identify the ownership or origin of articles for several centuries. 15(15) As early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their flanks. 16(16) Archaeological discoveries of ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features which are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices for the settlement of accounts between an entrepreneur and his workmen. 17(17) In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper, etc. 18(18) Every guild had its own mark and every master belonging to it had a special mark of his own. The marks were not trademarks but police marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into an area where the guild had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the artisan. 19(19) For a similar reason, merchants also used merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon recovery after shipwreck Copyright 1994-2014

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or piracy. 20(20) With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue monopoly but to give the customer an index or guarantee of quality. 21(21) It was in the late 18th century when the industrial revolution gave rise to mass production and distribution of consumer goods that the mark became an important instrumentality of trade and commerce. 22(22) By this time, trademarks did not merely identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the consuming public. 23(23) Eventually, they came to symbolize the goodwill and business reputation of the owner of the product and became a property right protected by law. 24(24) The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the public." 25(25) Subsequently, England and the United States enacted national legislation on trademarks as part of the law regulating unfair trade. 26(26) It became the right of the trademark owner to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon the public. 27(27) Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark actually sells the goods. 28(28) The mark has become the "silent salesman," the conduit through which direct contact between the trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it has become a more convincing selling point than even the quality of the article to which it refers. 29(29) In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the marked article has been fixed in the public mind through advertising. 30(30) Whether in the print, broadcast or electronic communications medium, particularly on the Internet, 31(31) advertising has paved the way for growth and expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the whole world into one vast marketplace. prcd

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This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon" products have been sold in the Philippines since 1970. Petitioner developed this market by working long hours and spending considerable sums of money on advertisements and promotion of the trademark and its products. Now, almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a conquering hero," usurps the trademark and invades petitioner's market. 32(32) Justice and fairness dictate that private respondent be prevented from appropriating what is not its own. Legally, at the same time, private respondent is barred from questioning petitioner's ownership of the trademark because of res judicata. 33(33) Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. 34(34) In res judicata, the judgment in the first action is considered conclusive as to every matter offered and received therein, as to any other admissible matter which might have been offered for that purpose, and all other matters that could have been adjudged therein. 35(35) Res judicata is an absolute bar to a subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second actions, identity of parties, of subject matter and of causes of action. 36(36) The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim that all the four elements of res judicata have been complied with: that the judgment in IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over the subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of a hearing was immaterial because substantial issues were raised by the parties and passed upon by the Director of Patents. 37(37) The decision in IPC No. 686 reads as follows: "xxx

xxx

xxx.

Neither party took testimony nor adduced documentary evidence. They submitted the case for decision based on the pleadings which, together with the pertinent records, have all been carefully considered. Accordingly, the only issue for my disposition is whether or not the herein opposer would probably be damaged by the registration of the trademark BARBIZON sought by the respondent-applicant on the ground that it so Copyright 1994-2014

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resembles the trademark BARBIZON allegedly used and owned by the former to be 'likely to cause confusion, mistake or to deceive purchasers.' On record, there can be no doubt that respondent-applicant's sought-to-be-registered trademark BARBIZON is similar, in fact obviously identical, to opposer's alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable but very negligible difference lies in their respective appearances or manner of presentation. Respondent-applicant's trademark is in bold letters (set against a black background), while that of the opposer is offered in stylish script letters. It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in the Philippines prior to the date of application for the registration of the identical mark BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified notice of opposition is devoid of such material information. In fact, a reading of the text of said verified opposition reveals an apparent, if not deliberate, omission of the date (or year) when opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2, Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the identical mark by the herein respondent-applicant, since the opposer attempted neither to substantiate its claim of use in local commerce with any proof or evidence. Instead, the opposer submitted the case for decision based merely on the pleadings. On the other hand, respondent-applicant asserted in her amended application for registration that she first used the trademark BARBIZON for brassiere (or 'brasseire') and ladies underwear garments and panties as early as March 3, 1970. Be that as it may, there being no testimony taken as to said date of first use, respondent-applicant will be limited to the filing date, June 15, 1970, of her application as the date of first use (Rule 173, Rules of Practice in Trademark Cases). From the foregoing, I conclude that the opposer has not made out a case of probable damage by the registration of the respondent-applicant's mark BARBIZON. WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010, for the registration of the trademark BARBIZON of respondent Lolita R. Escobar, is given due course." 38(38) LLjur

The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that it was not. A judgment is on the merits when it Copyright 1994-2014

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determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections. 39(39) It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual hearing or arguments on the facts of the case. 40(40) In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was conducted, both parties filed their respective pleadings and were given opportunity to present evidence. They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on the issue of prior use, which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld. The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686 and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the same parties and the same subject matter, and have identical causes of action. Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner herein is the assignee of Escobar while private respondent is the same American corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private respondent counter-argues, however, that the two cases do not have identical causes of action. New causes of action were allegedly introduced in IPC No. 2049, such as the prior use and registration of the trademark in the United States and other countries worldwide, prior use in the Philippines, and the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private respondent also cited protection of the trademark under the Convention of Paris for the Protection of Industrial Property, specifically Article 6bis thereof, and the implementation of Article 6bis by two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents, as well as Executive Order (E.O.) No. 913. The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition. 41(41) The Convention is essentially a compact among various countries which, as members of the Union, have pledged to accord to Copyright 1994-2014

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citizens of the other member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws for an effective protection against unfair competition. 42(42) In short, foreign nationals are to be given the same treatment in each of the member countries as that country makes available to its own citizens. 43(43) Nationals of the various member nations are thus assured of a certain minimum of international protection of their industrial property. 44(44) The Convention was first signed by eleven countries in Paris on March 20, 1883. 45(45) It underwent several revisions — at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, 46(46) and at Stockholm in 1967. Both the Philippines and the United States of America, herein private respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the Philippines, through its Senate, concurred on May 10, 1965. 47(47) The Philippines' adhesion became effective on September 27, 1965, 48(48) and from this date, the country obligated itself to honor and enforce the provisions of the Convention. 49(49) Cdpr

In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the Paris Convention which reads as follows: "Article 6bis (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, an imitation, or a 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 this 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. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith." 50(50)

This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the Copyright 1994-2014

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registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods. Article 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51(51) It is a self-executing provision and does not require legislative enactment to give it effect in the member country. 52(52) It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its ratification according to the public law of each state and the order for its execution. 53(53) The essential requirement under Article 6bis is that the trademark to be protected must be "well-known" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a court. 54(54) Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued a Memorandum to the Director of Patents. The Minister ordered the Director that: "Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed 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, 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. You are also required to submit to the undersigned a progress report on Copyright 1994-2014

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the matter. For immediate compliance." 55(55)

Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the Director of Patents, viz: LLjur

"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 rule-making 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 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] 56(56) 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 6bis 57(57) thereof, as follows: 1.

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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;

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(c)

that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the date of such registration;

(d)

that the trademark has long been established and obtained goodwill and 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 6bis 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. xxx

xxx

xxx." 58(58)

In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several internationally-known trademarks and ordered the Copyright 1994-2014

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Director of Patents to require Philippine registrants of such marks to surrender their certificates of registration. cdrep

In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of Patents to observe in determining whether a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to problems in trade and industry. 59(59) Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case of La Chemise Lacoste, S.A. v. Fernandez. 60(60) This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the "competent authority" to determine whether a trademark is well-known in this country. 61(61) The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris Convention. Article 6bis was already in effect five years before the first case was instituted. Private respondent, however, did not cite the protection of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention and the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin Memorandum were invoked by private respondent. The Solicitor General argues that the issue of whether the protection of Article 6bis of the Convention and the two Memoranda is barred by res judicata has already been answered in Wolverine Worldwide, Inc. v. Court of Appeals. 62(62) In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a petition for cancellation of the registration certificate of private respondent, a Filipino Copyright 1994-2014

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citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the registrant of the internationally-known trademark in the United States and other countries, and cited protection under the Paris Convention and the Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the same trademark against respondent's predecessor-in-interest. The Patent Office dismissed the petitions, ordered the cancellation of registration of petitioner's trademark, and gave due course to respondent's application for registration. This decision was sustained by the Court of Appeals, which decision was not elevated to us and became final and executory. 63(63) Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said Memorandum and E.O. did not grant a new cause of action because it did "not amend the Trademark Law," . . . "nor did it indicate a new policy with respect to the registration in the Philippines of world-famous trademarks." 64(64) This conclusion was based on the finding that Wolverine's two previous petitions and subsequent petition dealt with the same issue of ownership of the trademark. 65(65) In other words, since the first and second cases involved the same issue of ownership, then the first case was a bar to the second case. cdrep

In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private respondent's opposition therein was merely anchored on: (a)

"confusing similarity" of its trademark with that of Escobar's;

(b)

that the registration of Escobar's similar trademark will cause damage to private respondent's business reputation and goodwill; and

(c)

that Escobar's use of the trademark amounts to an unlawful appropriation of a mark previously used in the Philippines which act is penalized under Section 4 (d) of the Trademark Law.

In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows: (a)

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as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as robes, pajamas, lingerie, nightgowns and slips; CD Technologies Asia, Inc.

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(b)

that the trademark "BARBIZON" was registered with the United States Patent Office in 1934 and 1949; and that variations of the same trademark, i.e., "BARBIZON" with Bee design and "BARBIZON" with the representation of a woman were also registered with the U.S. Patent Office in 1961 and 1976; cdll

(c)

that these marks have been in use in the Philippines and in many countries all over the world for over forty years. "Barbizon" products have been advertised in international publications and the marks registered in 36 countries worldwide;

(d)

Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud; and this fraudulent registration was cancelled in 1979, stripping Escobar of whatsoever right she had to the said mark;

(e)

Private respondent's trademark is entitled to protection as a well-known mark under Article 6bis of the Paris Convention, Executive Order No. 913, and the two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents;

(f)

Escobar's trademark is identical to private respondent's and its use on the same class of goods as the latter's amounts to a violation of the Trademark Law and Article 189 of the Revised Penal Code. Cdpr

IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries, and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word and symbol "Barbizon," 66(66) as the first and registered user of the mark attached to its products which have been sold and advertised worldwide for a considerable number of years prior to petitioner's first application for registration of her trademark in the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res judicata does not apply to rights, claims or demands, although growing out of the same subject matter, which constitute separate or distinct causes of action and were not put in issue in the former action. 67(67) Respondent corporation also introduced in the second case a fact that did not exist at the time the first case was filed and terminated. The cancellation of petitioner's Copyright 1994-2014

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certificate of registration for failure to file the affidavit of use arose only after IPC No. 686. It did not and could not have occurred in the first case, and this gave respondent another cause to oppose the second application. Res judicata extends only to facts and conditions as they existed at the time judgment was rendered and to the legal rights and relations of the parties fixed by the facts so determined. 68(68) When new facts or conditions intervene before the second suit, furnishing a new basis for the claims and defenses of the parties, the issues are no longer the same, and the former judgment cannot be pleaded as a bar to the subsequent action. 69(69) It is also noted that the oppositions in the first and second cases are based on different laws. The opposition in IPC No. 686 was based on specific provisions of the Trademark Law, i.e., Section 4 (d) 70(70) on confusing similarity of trademarks and Section 8 71(71) on the requisite damage to file an opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6bis thereof, E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. This opposition also invoked Article 189 of the Revised Penal Code which is a statute totally different from the Trademark Law. 72(72) Causes of action which are distinct and independent from each other, although arising out of the same contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. 73(73) The mere fact that the same relief is sought in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the two actions are based on different statutes. 74(74) Res judicata therefore does not apply to the instant case and respondent Court of Appeals did not err in so ruling. LLphil

Intellectual and industrial property rights cases are not simple property cases. Trademarks deal with the psychological function of symbols and the effect of these symbols on the public at large. 75(75) Trademarks play a significant role in communication, commerce and trade, and serve valuable and interrelated business functions, both nationally and internationally. For this reason, all agreements concerning industrial property, like those on trademarks and tradenames, are intimately connected with economic development. 76(76) Industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. They speed up transfer of technology and industrialization, and thereby bring about social and economic progress. 77(77) These advantages have been acknowledged by the Philippine government itself. The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures Copyright 1994-2014

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market access for our products." 78(78) The Intellectual Property Code took effect on January 1, 1998 and by its express provision, 79(79) repealed the Trademark Law, 80(80) the Patent Law, 81(81) Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, 82(82) and the Decree on Compulsory Reprinting of Foreign Textbooks. 83(83) The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the country's accession to the Agreement Establishing the World Trade Organization (WTO). 84(84) The WTO is a common institutional framework for the conduct of trade relations among its members in matters related to the multilateral and plurilateral trade agreements annexed to the WTO Agreement. 85(85) The WTO framework ensures a "single undertaking approach" to the administration and operation of all agreements and arrangements attached to the WTO Agreement. Among those annexed is the Agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPs. 86(86) Members to this Agreement "desire to reduce distortions and impediments to international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade." To fulfill these objectives, the members have agreed to adhere to minimum standards of protection set by several Conventions. 87(87) These Conventions are: the Berne Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm on July 14, 1967. 88(88) A major proportion of international trade depends on the protection of intellectual property rights. 89(89) Since the late 1970's, the unauthorized counterfeiting of industrial property and trademarked products has had a considerable adverse impact on domestic and international trade revenues. 90(90) The TRIPs Agreement seeks to grant adequate protection of intellectual property rights by creating a favorable economic environment to encourage the inflow of foreign investments, and strengthening the multi-lateral trading system to bring about economic, cultural and technological independence. 91(91) The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has revolutionized international business and economic relations among states, and has propelled the world towards trade liberalization and economic globalization. 92(92) Protectionism and isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a new era of global Copyright 1994-2014

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economic cooperation, reflecting the widespread desire to operate in a fairer and more open multilateral trading system." 93(93) Conformably, the State must reaffirm its commitment to the global community and take part in evolving a new international economic order at the dawn of the new millennium. cdrep

IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 28415 are affirmed. SO ORDERED. Davide, Jr., C.J., Kapunan, Pardo and Ynares-Santiago, JJ., concur. )RRWQRWHV 1. 2. 3. 4.

5. 6. 7. 8.

9. 10. 11. 12. 13.

14.

15. 16.

Decision No. 804 dated June 18, 1974 of the Director of Patents, Rollo, p. 36. Rollo, p. 38. Certificate of Registration No. 21920, Annex "E" to Memorandum of Petitioner, Rollo, p. 211. The Memorandum of the Minister of Trade to the Honorable Director of Patents should have been dated 20 November 1980 — Memorandum of the Private Respondent, p. 11, Rollo, p. 227. Comment of the Solicitor General, pp. 5-8, Rollo, pp. 116-119. CA Decision, p. 4, Rollo, p. 27. Id. CA Decision, p. 31. The decision was penned by Justice Fidel Purisima, now a member of this Court, and concurred in by Justices Jesus M. Elbinias and Angelina S. Gutierrez. Rollo, pp. 34-35. Petitioner, pp. 5-6, Rollo, pp. 11-12. Sec. 38, par. 2, R.A. 166. Sec. 121.1, Part III, R.A. 8293. Gabriel v. Perez, 55 SCRA 406, 417 [1974] citing 52 Am Jur, p. 508; Etepha v. Director of Patents, 16 SCRA 495, 497 [1966]; see also Phil. Refining Co., Inc. v. Ng Sam, 115 SCRA 472, 476-477 [1982]; also cited in Agpalo, Trademark Law and Practice in the Philippines, p. 5 [1990]. Dissenting Opinion of Justice Florentino Feliciano in Philip Morris, Inc. v. Court of Appeals, 224 SCRA 576, 624 [1993]; see William Jay Gross, The Territorial Scope of Trademark Rights, Univ. of Miami Law Review, vol. 44:1075 [March 1990]; see also Rudolf Callmann, The Law of Unfair Competition and Trademarks, vol. 2, pp. 804-814 [1945]. Harry D. Nims, The Law of Unfair Competition and Trademarks, 4th ed., pub. by Baker, Voorhis & Co., Inc., vol. 1, p. 509 [1947]. Frank H. Foster and Robert L. Shook, Patents, Copyrights, and Trademarks, pub. by

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17. 18. 19.

20. 21. 22. 23. 24. 25. 26. 27. 28.

29.

30. 31.

32. 33. 34. 35.

John Wiley & Sons, Inc., 2d ed. p. 19 [1993]. Stephen P. Ladas, Patents, Trademarks, and Related Rights, National and International Protection (Harvard University Press), vol. 1, pp. 3-4 [1975]. Foster and Shook, supra, at 20. Id., at 20-21; Ladas, supra, vol. 1, at 4-5; see Frank I. Schechter, The Rational Basis of Trademark Protection, 40 Harvard Law Review, 813, 814 [1927]; Callmann, supra, vol. 2, p. 807; see also Richard Wincor and Irving Mandell, Copyright, Patents and Trademarks: The Protection of Intellectual and Industrial Property, at 72 [1980]. Foster and Shook, supra, at 20; Schechter, supra, at 814. Callmann, supra, vol. 2, at 808. Foster and Shook, supra, at 22-23; Nims, supra, at 511. Callmann, supra, vol. 2, at 809-910. Foster and Shook, supra, at 21-22. Justice Holmes in Chadwick v. Covell, 151 Man 190, 23 NE 1068, 1069 [1890]; also cited in Nims, supra, at 37. Ladas, supra, vol. 1, at 8. See also Dissenting Opinion of Justice Feliciano in Philip Morris, supra, at 624-625. Schechter, supra. Trademarks have become products in their own right, valued as status symbols and indicators of the preferences and aspirations of those who use them — Alex Kozinski, Trademarks Unplugged, New York University Law Review, vol. 68: 960, 965-966 [Oct. 1993]. Kozinski, supra, at 965-966; Callmann, supra, vol. 2, at 881-812 [1945], citing Schechter, The Historical Foundations of the Law Relating to Trademarks [1925], Note 15, p. 64. Gross, supra, at 1099-1100; see also Dissenting opinion of Justice Feliciano in Philip Morris, supra, at 625-626. The Internet is a decentralized computer network linked together through routers and communications protocols that enable anyone connected to it to communicate with others likewise connected, regardless of physical location. Users of the Internet have a wide variety of communication methods available to them and a tremendous wealth of information that they may access. The growing popularity of the Net has been driven in large part by the World Wide Web, i.e., a system that facilitates use of the Net by sorting through the great mass of information available on it. Advertising on the Net and cybershopping are turning the Internet into a commercial marketplace. — Maureen O'Rourke, Fencing Cyberspace: Drawing Borders in a Virtual World, Minnesota Law Review, vol. 82: 609-611, 615-618 [Feb. 1998]. Petition, pp. 9-10, Rollo, pp. 15-16. Id. 46 Am Jur 2d, "Judgments," Sec. 394 [1969 ed.]. Section 49 (b), Rule 39 of the Revised Rules of Court — now Section 47 (b), Rule 39 of the 1997 Rules of Civil Procedure; Gabuya v. Layug, 250 SCRA 218, 221 [1995]; Vda. de Cruzo v. Carriaga, Jr., 174 SCRA 330, 338 [1989].

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36.

37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47.

48.

49. 50.

51.

De Knecht v. Court of Appeals, 290 SCRA 223, 237-238 [1998]; De Ramos v. Court of Appeals, 213 SCRA 207, 214-215 [1992]; American Inter-Fashion Corp. v. Office of the President, 197 SCRA 409, 417 [1991]; Wolverine Worldwide, Inc. v. Court of Appeals, 169 SCRA 627, 630 [1989]. Petition, pp. 8-10, Rollo, pp. 14-16; Comment of the Solicitor General, pp. 15-19, Rollo, pp. 126-130. Rollo, pp. 37-38. Mendiola v. Court of Appeals, 258 SCRA 492, 500 [1996]. Mendiola v. Court of Appeals, supra, at 500-501; Nabus v. Court of Appeals, 193 SCRA 732, 740 [1991] citing 50 C.J.S. 51-53. Article 1, Paris Convention, 61 O.G. 8010 [1965]. R. Agpalo, Trademark Law and Practice in the Philippines, p. 200 [1990]. Agpalo, supra, at 200-201. Rudolf Callmann, The Law of Unfair Competition and Trade-Marks, vol. 2, p. 1723 [1945]. Belgium, Brazil, France, Guatemala, Italy, the Netherlands, Portugal, Salvador, Serbia, Spain and Switzerland. 61 O.G. 8011. Note 18, Dissenting Opinion of Justice Florentino Feliciano in Philip Morris, Inc. v. Court of Appeals, 224 SCRA 599, 615 [1993]. The President of the Philippines signed the instrument of adherence on July 21, 1965 — Agpalo, supra, at 201. Id; see also Note 9, Smith Kline & French Laboratories, Ltd. v. Court of Appeals, 276 SCRA 224, 236 [1997]; Converse Rubber Corp. v. Universal Rubber Products, 147 SCRA 154, 165 [1987]. La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373, 389 [1984]. As revised under the Lisbon Act of 1958. At the time the Philippines ratified the Paris Convention in 1965, the last revision was the Lisbon Act. At present, the latest revision is the Stockholm Act passed on July 14, 1967 and amended on October 2, 1979. The Philippines acceded to the Stockholm Act on March 25, 1980 but only with respect to Articles 13-30. The Stockholm Act took effect in the Philippines on July 16, 1980, except as to its Articles 1-12 — Esteban B. Bautista, The TRIPS Agreement and the Philippines' Existing Treaty Obligations on Intellectual Property, The World Bulletin, pub. by the Institute of International and Legal Studies, UP Law Center, vol. 12:50 [Jan-June 1996]; Intellectual Property in the Phil., A Compilation of Phil. Laws and International Documents Pertaining to Intellectual Property, ed. by Aniano L. Luzung, pub. by Rex Bookstore, p. 416 [1995]. With the Philippines' adhesion to the WTO and the TRIPS Agreement in 1995, however, the country obligated itself to comply with Articles 1-12 and 19 of the Paris Convention — Article 2(1), TRIPs Agreement. Stephen P. Ladas, Patents, Trademarks, and Related Rights, National and International Protection, pub. by the Harvard University Press, vol. 2, at 1251-1252 [1975].

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52.

53. 54. 55. 56.

57. 58. 59. 60. 61.

62. 63. 64. 65. 66.

67. 68.

The Paris Convention has 3 classes of provisions: (1) provisions obligating members of the Union to create and maintain certain national law or regulations; (2) provisions merely referring to the national law of each country and making it applicable or permitting each country to pass such legislation as it may choose; and (3) provisions establishing common legislation for all members of the Union and obligating them to grant to persons entitled to the benefits of the Convention the rights and advantages specified in such provisions, notwithstanding anything in their national law to the contrary — Ladas, supra, at 209; see also Callman, supra, vol. 2, at 1723-1724. Provisions under the third class are self-executing and Article 6bis is one of them — Ladas, supra, vol. 1, at 209. Ladas, supra, vol. 1, p. 233. Ladas, supra, vol. 2, pp. 1252-1254. Also quoted in La Chemise Lacoste, S.A. v. Fernandez, supra, at 389-390. This CA decision, penned by then CA Justice Vicente V. Mendoza, now a member of this Court, was the same decision affirmed by the Supreme Court in La Chemise Lacoste v. Fernandez, G.R. Nos. L-63796-97 and L-65659, 129 SCRA 373 [1984]. Should have been "Article" 6bis. Also quoted in La Chemise Lacoste, S.A. v. Fernandez, supra, at 401-403. E.O. No. 913 is entitled "Strengthening the Rule-Making and Adjudicatory Powers of the Minister of Trade and Industry in Order to Further Protect Consumers." 129 SCRA 373 [1984]. Id. at 396; see also Ignacio S. Sapalo, Background Reading Material on the Intellectual Property System of the Philippines, revised ed., pub. by World Intellectual Property Office (WIPO), p. 76 [1994]. I. Sapalo was the Director of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT), Department of Trade and Industry (DTI) from 1987 to 1996. 169 SCRA 627 [1989]. Id. at 631. Id. at 633. Id. at 634. Private respondent presented evidence before the Director of Patents showing that the word "Barbizon" was derived from the name of a village in France. In this village, a mid-19th century school of French painting developed an art style depicting landscape and rural genre subjects from a direct observation of nature, with much attention to the expression of light and atmosphere. "Barbizon" was appropriated as a trademark in 1933 by Garfinkle and Ritter, private respondent's predecessor, to identify its goods with the same soft and warm atmosphere depicted in the barbizon style of painting — Exhibits "B" and "I," see Petition for Review, Court of Appeals Rollo, p. 3. Caina v. Court of Appeals, 239 SCRA 252, 264 [1994] citing Lord v. Garland, 168 P. 2d 5 [1946]; see also Martinez v. Court of Appeals, 139 SCRA 558, 564 [1985]. Caina v. Court of Appeals, supra, at 263 [1994]; see also Guevara v. Benito, 247 SCRA 570, 573 [1995].

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69.

70.

Id., citing Lord v. Garland, 168 P. 2d [1946]; Rhodes v. Van Steenberg, 225 F. Supp. 113 [1963]; Cowan v. Gulf City Fisheries, Inc., 381 So. 2d 158 [1980]; see also 46 Am Jur 2d, "Judgments," Secs. 443, 444 [1969 ed.]. Section 4 (d), R.A. 166 reads: "Sec. 4. Registration of trademarks, tradenames and servicemarks on the principal register. — There is hereby established a register of trademarks, tradenames and servicemarks which shall be known as the principal register. The owner of a trademark, tradename or servicemark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx

71.

72. 73. 74. 75.

76. 77. 78. 79. 80. 81. 82. 83. 84.

85.

xxx

xxx

(d) Consists of or comprises a mark or tradename which so resembles a mark or tradename registered in the Philippines or a mark or tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; . . . ." Section 8, R.A. 166 reads: "Sec. 8. Opposition. — Any person who believes that he would be damaged by the registration of a mark or tradename may, upon payment of the required fee and within thirty days after the publication under the first paragraph of Section 7 hereof, file with the Director an opposition to the application. . . . ." The Paris Convention became part of the Trademark Law only by reference in Section 37 of the latter. Of and by itself, the Paris Convention is a separate legal covenant. Nabus v. Court of Appeals, 193 SCRA 732, 743, 746 [1991]; see also 50 C.J.S. "Judgments, Sec. 674 — also cited in Nabus, at 743. Nabus, supra, at 743; see also 50 C.J.S. "Judgments," Secs. 649, 655 — also cited in Nabus. Mishawaka R. & W. Mfg. Co. v. S. S. Kresge Co., 86 L ed 1381, 316 U.S. 203, 205 [1942]; see also Gordon V. Smith, Trademark Valuation, pub. by John Wiley & Sons, Inc., pp. 38-39 [1997]. Ladas, supra, vol. 1, at 13. Id. Section 2, R.A. 8293, the Intellectual Property Code of 1998. Section 239, R.A. No. 8293. R.A. No. 166. R.A. No. 165. Presidential Decree (P.D.) No. 49. P.D. No. 285. Emma C. Francisco, The Policy of Intellectual Property Protection in the Philippines, The World Bulletin, pub. by the UP Law Center, vol. 12:1 [Jan-June 1996] — Ms. Francisco was the Director of the BPTTT in 1996. Michael Blakeney, Trade Related Aspects of Intellectual Property Rights: A Concise

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86.

87. 88. 89. 90.

Guide to the TRIPs Agreement, pub. by Sweet & Maxwell Ltd, at 37 [1996]; The WTO was created at the Uruguay Round of multilateral trade negotiations sponsored by the General Agreement on Tariffs and Trade (GATT) in 1994. The GATT was established in 1947 to promote a multilateral trading system among countries through non-discriminatory trade liberalization, and through fair and effective rules and disciplines. The GATT was composed of 120 contracting parties and observers that account for about 90% of the world trade. It, however, dealt with trade in tangible goods alone. As successor of the GATT, the WTO also covers trade in services, intellectual property rights and provides for an effective mechanism for dispute settlement — Growth Opportunities Into the 21st Century, A Question and Answer Primer Prepared by the Bureau of International Trade Relations, Department of Trade and Industry, pp. 1, 37 [1994], hereinafter referred to as DTI-BITR Primer; see News of the Uruguay Round of Multilateral Trade Negotiations, issued by the Information and Media Relations division of the GATT, Geneva, p. 5 [5 April 1994]; see also Tanada v. Angara, 272 SCRA 18 [1997]. The TRIPS Agreement is said to be the most comprehensive multilateral agreement on intellectual property. It addresses not only and more explicitly the primary regimes of intellectual property, viz., patent including the protection of new varieties of plants, trademarks including service marks, and copyright and its related rights; but also the non-traditional categories of geographical indications including appellations of origin, industrial design, lay-out design of integrated circuits, and undisclosed information including trade secrets. It also establishes standards of protection and rules of enforcement and provides for the uniform applicability of the WTO dispute settlement mechanism to resolve disputes among member states. — Anita S. Regalado, WTO Dispute Settlement Procedure: Its Impact on Copyright Protection, The Court Systems Journal, vol. 3: 67, 78 [March 1998]. Ma. Rowena R. Gonzales, Optimizing Rome in TRIPs: Finding the Appian Way, World Bulletin, pub. by the UP Law Center, vol. 12: 13, 18 [Jan.-June 1996]. TRIPS Agreement, Article 1, par. 3. As acknowledged in the Uruguay Round of the GATT — DTI-BITR Primer, supra, at p. 34. Id.; Blakeney, supra, at 1; Investors abandoned or postponed their investments in countries that did not afford protection from intellectual piracy (DTI-BITR Primer, supra, at 34); Worse, inadequate intellectual protection in certain countries gave rise to trade retaliation unilaterally imposed by rich trading partners — DTI-BITR Primer, supra, at 36; Blakeney, supra, at 4-6. The United States, in the 1984 amendment to Section 301 of the Trade Act of 1974, and later, Special 301 of the Omnibus Trade and Competitiveness Act of 1988, authorized the U.S. Trade Representative (USTR) to identify priority foreign countries which deny adequate protection of intellectual property rights to U.S. traders. Those countries were placed on a watchlist, with a view to fast-track investigation, followed by trade retaliation in the form of increased duties and import restrictions. Trade restrictions were imposed on Korea and Brazil in

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91. 92. 93.

1985, Brazil again in 1988 and India in 1992 — Blakeney, supra, at 4-6. By these acts, any trading partner of the U.S. became vulnerable to unilateral pressure — The GATT, the Uruguay Round and the Philippines, Speech of J. Antonio Buencamino, Director, Bureau of International Trade Relations, DTI, p. 4. Speech of J. Antonio Buencamino, Director, DTI-BITR, supra, at 4-5; DTI-BITR Primer, supra, at 34-36. Tanada v. Angara, 272 SCRA 18, 28 [1997]. Blakeney, supra, at 36-37 — citing The Marrakesh Declaration of 15 April 1995, par. 2.

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FIRST DIVISION [G.R. No. 143993. August 18, 2004.] MCDONALD’S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners, YV. L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, respondents. Abello Concepcion Regala & Cruz for petitioners. Vicente M. Joyas for respondents. SYNOPSIS Petitioners assail the decision of the Court of Appeals, which reversed the decision of the trial court, thus finding the respondent L.C. Mak Burger, Inc. not liable for trademark infringement and unfair competition. The Court of Appeals found that there is no likelihood of confusion that could arise in the use of respondents' "Big Mak" mark on hamburgers. In its petition filed before this Court, petitioners contend that the respondents' use, without petitioners' consent of a colorable imitation of the "Big Mac" mark in advertising and selling respondents' hamburger sandwiches would likely cause confusion in the mind of the purchasing public on the source of the hamburgers or the identity of the business. Petitioners further claim that the respondents are guilty of unfair competition for fraudulently passing off their hamburgers as "Big Mac" hamburgers. The Supreme Court found the respondents liable for trademark infringement. According to the Court, the respondents' use of the "Big Mak" mark results in likelihood of confusion. Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their hamburger sandwiches indicates their intent to imitate petitioners' "Big Mac" mark. Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was fortuitous, the inescapable conclusion is that respondents adopted the "Big Mak" mark to "ride on the coattails" of the more established "Big Mac" mark. Anent the charge of unfair competition, the Copyright 1994-2014

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Court found the respondents liable therefor. According to the Court, passing off or palming off takes place where the defendant by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors.

SYLLABUS 1. REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; PETITION FOR REVIEW; ONLY QUESTIONS OF LAW MAY BE RAISED THEREIN. — A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 ("Section 1") raising only questions of law. A question of law exists when the doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. Here, petitioners raise questions of fact and law in assailing the Court of Appeals' findings on respondent corporation's non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1. We took a similar course of action in Asia Brewery, Inc. v. Court of Appeals which also involved a suit for trademark infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting findings. 2. COMMERCIAL LAW; TRADEMARK LAW; TRADEMARK INFRINGEMENT; ELEMENTS. — To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion". Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement. 3. ID.; ID.; ID.; ID.; MARK WHEN VALID; GENERIC MARKS DISTINGUISHED FROM DESCRIPTIVE MARKS; "BIG MAC" MARK FALLS UNDER THE CLASS OF FANCIFUL OR ARBITRARY MARKS AS IT BEARS NO LOGICAL RELATION TO THE ACTUAL CHARACTERISTICS OF THE PRODUCT IT REPRESENTS. — A mark is valid if it is "distinctive" and thus not barred from registration under Section 4 of RA 166 ("Section 4"). However, once registered, not only the mark's validity but also the registrant's ownership of the mark is prima facie presumed. Respondents contend that of the two words in the "Big Mac" Copyright 1994-2014

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mark, it is only the word "Mac" that is valid because the word "Big" is generic and descriptive (proscribed under Section 4[e]), and thus "incapable of exclusive appropriation". The contention has no merit. The "Big Mac" mark, which should be treated in its entirety and not dissected word for word, is neither generic nor descriptive. Generic marks are commonly used as the name or description of a kind of goods, such as "Lite" for beer or "Chocolate Fudge" for chocolate soda drink. Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists, such as "Arthriticare" for arthritis medication. On the contrary, "Big Mac" falls under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents. As such, it is highly distinctive and thus valid. Significantly, the trademark "Little Debbie" for snack cakes was found arbitrary or fanciful. CSHcDT

4. ID.; ID.; ID.; REGISTRATION IN SUPPLEMENTAL REGISTER NOT PRIMA FACIE EVIDENCE OF VALIDITY OR REGISTRANT'S EXCLUSIVE RIGHT TO USE THE MARK ON THE GOODS SPECIFIED IN THE CERTIFICATE. — The Court also finds that petitioners have duly established McDonald's exclusive ownership of the "Big Mac" mark. Although Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to McDonald's. The Isaiyas Group, on the other hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the Principal Register, and thus not distinctive, has no real protection. Indeed, we have held that registration in the Supplemental Register is not even a prima facie evidence of the validity of the registrant's exclusive right to use the mark on the goods specified in the certificate. 5. ID.; ID.; ID.; CONFUSION; TYPES. — Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (product confusion) and confusion of business (source or origin confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., the Court distinguished these two types of confusion, thus: [Rudolf] Callman notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other". . . . The other is the confusion of business: "Here though the goods of the parties are different, the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist". Copyright 1994-2014

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6. ID.; ID.; ID.; CONFUSION OF BUSINESS, WHEN IT EXISTS. — Under Act No. 666, the first trademark law, infringement was limited to confusion of goods only, when the infringing mark is used on "goods of a similar kind". Thus, no relief was afforded to the party whose registered mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is likely to result in confusion on "the source or origin of such goods or services, or identity of such business". Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation. 7. ID.; ID.; ID.; REGISTERED TRADEMARK OWNER ENJOYS PROTECTION IN PRODUCT AND MARKET AREAS THAT ARE THE NORMAL POTENTIAL EXPANSION OF HIS BUSINESS. — The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared: Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). 8. ID.; ID.; ID.; DOMINANCY TEST DISTINGUISHED FROM HOLISTIC TEST. — In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. Copyright 1994-2014

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9. ID.; ID.; ID.; DOMINANCY TEST, ELABORATED. — This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from the adoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments. Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled: . . . It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . .) The Court reiterated the dominancy test in Lim Hoa v. Director of Patents, Phil. Nut Industry, Inc. v. Standard Brands Inc., Converse Rubber Corporation v. Universal Rubber Products, Inc., and Asia Brewery, Inc. v. Court of Appeals. In the 2001 case of Societe Des Produits Nestlé, S.A. v. Court of Appeals, the Court explicitly rejected the holistic test in this wise: [T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the "colorable imitation of a registered mark . . . or a dominant feature thereof". cAaETS

10. ID.; ID.; ID.; ID.; APPLICATION IN CASE AT BAR. — Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in likelihood of confusion. First, "Big Mak" sounds exactly the same as "Big Mac". Second, the first word in "Big Mak" is exactly the same as the first word in "Big Mac". Third, the first two letters in "Mak" are the same as the first two letters in "Mac". Fourth, the last letter in "Mak" while a "k" sounds the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in spelling, Copyright 1994-2014

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thus "Caloocan" is spelled "Kalookan". In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same. Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the features of "Big Mac". Applied to the same food product of hamburgers, the two marks will likely result in confusion in the public mind. The Court has taken into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. Certainly, "Big Mac" and "Big Mak" for hamburgers create even greater confusion, not only aurally but also visually. 11. ID.; ID.; ID.; ABSENT PROOF THAT THE RESPONDENT'S ADOPTION OF THE "BIG MAK" MARK WAS DUE TO HONEST MISTAKE OR WAS FORTUITOUS, THE INESCAPABLE CONCLUSION IS THAT THE RESPONDENTS ADOPTED IT TO RIDE ON THE COATTAILS OF THE MORE ESTABLISHED "BIG MAC" MARK. — Indeed, a person cannot distinguish "Big Mac" from "Big Mak" by their sound. When one hears a "Big Mac" or "Big Mak" hamburger advertisement over the radio, one would not know whether the "Mac" or "Mak" ends with a "c" or a "k". Petitioners' aggressive promotion of the "Big Mac" mark, as borne by their advertisement expenses, has built goodwill and reputation for such mark making it one of the easily recognizable marks in the market today. This increases the likelihood that consumers will mistakenly associate petitioners' hamburgers and business with those of respondents'. Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their hamburger sandwiches indicates their intent to imitate petitioners' "Big Mac" mark. Contrary to the Court of Appeals' finding, respondents' claim that their "Big Mak" mark was inspired by the first names of respondent Dy's mother (Maxima) and father (Kimsoy) is not credible. Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was fortuitous, the inescapable conclusion is that respondents adopted the "Big Mak" mark to "ride on the coattails" of the more established "Big Mac" mark. This saves respondents much of the expense in advertising to create market recognition of their mark and hamburgers. Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners' claim of trademark infringement. 12. ID.; ID.; ID.; NOT NEGATED BY FAILURE TO PRESENT PROOF OF FACTUAL CONFUSION. — Petitioners' failure to present proof of actual confusion Copyright 1994-2014

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does not negate their claim of trademark infringement. As noted in American Wire & Cable Co. v. Director of Patents, Section 22 requires the less stringent standard of "likelihood of confusion" only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential. 13. ID.; ID.; ID.; UNFAIR COMPETITION; ELEMENTS. — 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. 14. ID.; ID.; ID.; A FORM OF UNFAIR COMPETITION; TRADEMARK INFRINGEMENT; WHEN IT TAKES PLACE WITHOUT UNFAIR COMPETITION. — Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. Trademark infringement is a form of unfair competition. Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception on the public because of the general appearance of the goods. There can be trademark infringement without unfair competition as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. 15. ID.; ID.; ID.; UNFAIR COMPETITION; PASSING OFF OR PALMING OFF; WHEN IT TAKES PLACE. — Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors. Thus, the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor. The dissimilarities in the packaging are minor compared to the stark similarities in the words that give respondents' "Big Mak" hamburgers the general appearance of petitioners' "Big Mac" hamburgers. Section 29 (a) expressly provides that the similarity in the general appearance of the goods may be in the "devices or words" used on the wrappings. Respondents have applied on their plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. What attracts the attention of the buying public are the words "Big Mak" which are almost the same, aurally and visually, as the words "Big Mac". Copyright 1994-2014

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The dissimilarities in the material and other devices are insignificant compared to the glaring similarity in the words used in the wrappings. IcDHaT

16. ID.; ID.; ID.; ID.; COMMITTED WHERE THE DEFENDANT GIVES HIS GOODS THE GENERAL APPEARANCE OF GOODS OF ANOTHER MANUFACTURER; RESPONDENT IS LIABLE FOR UNFAIR COMPETITION IN CASE AT BAR. — Section 29 (a) also provides that the defendant gives "his goods the general appearance of goods of another manufacturer". Respondents' goods are hamburgers which are also the goods of petitioners. If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the "Big Mak" mark would not give their goods the general appearance of petitioners' "Big Mac" hamburgers. In such case, there is only trademark infringement but no unfair competition. However, since respondents chose to apply the "Big Mak" mark on hamburgers, just like petitioner's use of the "Big Mac" mark on hamburgers, respondents have obviously clothed their goods with the general appearance of petitioners' goods. Moreover, there is no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." Respondents introduced during the trial plastic wrappers and bags with the words "L.C. Big Mak Burger, Inc." to inform the public of the name of the seller of the hamburgers. However, petitioners introduced during the injunctive hearings plastic wrappers and bags with the "Big Mak" mark without the name "L.C. Big Mak Burger, Inc." Respondents' belated presentation of plastic wrappers and bags bearing the name of "L.C. Big Mak Burger, Inc." as the seller of the hamburgers is an after-thought designed to exculpate them from their unfair business conduct. As earlier stated, we cannot consider respondents' evidence since petitioners' complaint was based on facts existing before and during the injunctive hearings. Thus, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." and not those of petitioners who have the exclusive right to the "Big Mac" mark. This clearly shows respondents' intent to deceive the public. Had respondents' placed a notice on their plastic wrappers and bags that the hamburgers are sold by "L.C. Big Mak Burger, Inc.", then they could validly claim that they did not intend to deceive the public. In such case, there is only trademark infringement but no unfair competition. Respondents, however, did not give such notice. We hold that as found by the RTC, respondent corporation is liable for unfair competition. 17. ID.; ID.; ID.; AWARD OR DAMAGES AND ISSUANCE OF INJUNCTIVE WRIT FOR INFRINGEMENT; PROPER IN CASE AT BAR. — Under Section 23 ("Section 23") in relation to Section 29 of RA 166, a plaintiff who successfully maintains trademark infringement and unfair competition claims is Copyright 1994-2014

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entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of respondent corporation's gross sales for three (1988–1989 and 1991) of the six years (1984–1990) respondents have used the "Big Mak" mark. The RTC also did not err in awarding exemplary damages by way of correction for the public good in view of the finding of unfair competition where intent to deceive the public is essential. The award of attorney's fees and expenses of litigation is also in order.

DECISION

CARPIO, J : p

The Case This is a petition for review 1(1) of the Decision dated 26 November 1999 of the Court of Appeals 2(2) finding respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying reconsideration. The Court of Appeals’ Decision reversed the 5 September 1994 Decision 3(3) of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition. The Facts Petitioner McDonald’s Corporation (“McDonald’s”) is a corporation organized under the laws of Delaware, United States. McDonald’s operates, by itself or through its franchisees, a global chain of fast-food restaurants. McDonald’s 4(4) owns a family of marks 5(5) including the “Big Mac” mark for its “double-decker hamburger sandwich.” 6(6) McDonald’s registered this trademark with the United States Trademark Registry on 16 October 1979. 7(7) Based on this Home Registration, McDonald’s applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology (“PBPTT”), now Copyright 1994-2014

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the Intellectual Property Office (“IPO”). Pending approval of its application, McDonald’s introduced its “Big Mac” hamburger sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed registration of the “Big Mac” mark in the Principal Register based on its Home Registration in the United States. Like its other marks, McDonald’s displays the “Big Mac” mark in items 8(8) and paraphernalia 9(9) in its restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonald’s spent P10.5 million in advertisement for “Big Mac” hamburger sandwiches alone. 10(10) Petitioner McGeorge Food Industries (“petitioner McGeorge”), a domestic corporation, is McDonald’s Philippine franchisee. 11(11) Respondent L.C. Big Mak Burger, Inc. (“respondent corporation”) is a domestic corporation which operates fast-food outlets and snack vans in Metro Manila and nearby provinces. 12(12) Respondent corporation’s menu includes hamburger sandwiches and other food items. 13(13) Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto (“private respondents”) are the incorporators, stockholders and directors of respondent corporation. 14(14) On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the “Big Mak” mark for its hamburger sandwiches. McDonald’s opposed respondent corporation’s application on the ground that “Big Mak” was a colorable imitation of its registered “Big Mac” mark for the same food products. McDonald’s also informed respondent Francis Dy (“respondent Dy”), the chairman of the Board of Directors of respondent corporation, of its exclusive right to the “Big Mac” mark and requested him to desist from using the “Big Mac” mark or any similar mark. ADaSET

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional Trial Court of Makati, Branch 137 (“RTC”), for trademark infringement and unfair competition. In its Order of 11 July 1990, the RTC issued a temporary restraining order (“TRO”) against respondents enjoining them from using the “Big Mak” mark in the operation of their business in the National Capital Region. 15(15) On 16 August 1990, the RTC issued a writ of preliminary injunction replacing the TRO. 16(16) Copyright 1994-2014

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In their Answer, respondents admitted that they have been using the name “Big Mak Burger” for their fast-food business. Respondents claimed, however, that McDonald’s does not have an exclusive right to the “Big Mac” mark or to any other similar mark. Respondents point out that the Isaiyas Group of Corporations (“Isaiyas Group”) registered the same mark for hamburger sandwiches with the PBPTT on 31 March 1979. One Rodolfo Topacio (“Topacio”) similarly registered the same mark on 24 June 1983, prior to McDonald’s registration on 18 July 1985. Alternatively, respondents claimed that they are not liable for trademark infringement or for unfair competition, as the “Big Mak” mark they sought to register does not constitute a colorable imitation of the “Big Mac” mark. Respondents asserted that they did not fraudulently pass off their hamburger sandwiches as those of petitioners’ Big Mac hamburgers. 17(17) Respondents sought damages in their counterclaim. In their Reply, petitioners denied respondents’ claim that McDonald’s is not the exclusive owner of the “Big Mac” mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the “Big Mac” mark ahead of McDonald’s, the Isaiyas Group did so only in the Supplemental Register of the PBPTT and such registration does not provide any protection. McDonald’s disclosed that it had acquired Topacio’s rights to his registration in a Deed of Assignment dated 18 May 1981. 18(18) The Trial Court’s Ruling On 5 September 1994, the RTC rendered judgment (“RTC Decision”) finding respondent corporation liable for trademark infringement and unfair competition. However, the RTC dismissed the complaint against private respondents and the counterclaim against petitioners for lack of merit and insufficiency of evidence. The RTC held: Undeniably, the mark “B[ig] M[ac]” is a registered trademark for plaintiff McDonald’s, and as such, it is entitled [to] protection against infringement. xxx

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There exist some distinctions between the names “B[ig] M[ac]” and “B[ig] M[ak]” as appearing in the respective signages, wrappers and containers of the food products of the parties. But infringement goes beyond the physical features of the questioned name and the original name. There are still other factors to be considered.

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Significantly, the contending parties are both in the business of fast-food chains and restaurants. An average person who is hungry and wants to eat a hamburger sandwich may not be discriminating enough to look for a McDonald’s restaurant and buy a “B[ig] M[ac]” hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into his pocket and order a “B[ig] M[ak]” hamburger sandwich. Plaintiff McDonald’s fast-food chain has attained wide popularity and acceptance by the consuming public so much so that its air-conditioned food outlets and restaurants will perhaps not be mistaken by many to be the same as defendant corporation’s mobile snack vans located along busy streets or highways. But the thing is that what is being sold by both contending parties is a food item — a hamburger sandwich which is for immediate consumption, so that a buyer may easily be confused or deceived into thinking that the “B[ig] M[ak]” hamburger sandwich he bought is a food-product of plaintiff McDonald’s, or a subsidiary or allied outlet thereof. Surely, defendant corporation has its own secret ingredients to make its hamburger sandwiches as palatable and as tasty as the other brands in the market, considering the keen competition among mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence, the trademark “B[ig] M[ac]” has been infringed by defendant corporation when it used the name “B[ig] M[ak]” in its signages, wrappers, and containers in connection with its food business . . . Did the same acts of defendants in using the name “B[ig] M[ak]” as a trademark or tradename in their signages, or in causing the name “B[ig] M[ak]” to be printed on the wrappers and containers of their food products also constitute an act of unfair competition under Section 29 of the Trademark Law? The answer is in the affirmative . . . The . . . provision of the law concerning unfair competition is broader and more inclusive than the law concerning the infringement of trademark, which is of more limited range, but within its narrower range recognizes a more exclusive right derived by the adoption and registration of the trademark by the person whose goods or services are first associated therewith. . . . Notwithstanding the distinction between an action for trademark infringement and an action for unfair competition, however, the law extends substantially the same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No. 166) Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. The Copyright 1994-2014

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choice of “B[ig] M[ak]” as tradename by defendant corporation is not merely for sentimental reasons but was clearly made to take advantage of the reputation, popularity and the established goodwill of plaintiff McDonald’s. For, as stated in Section 29, a person is guilty of unfair competition 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 likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs have established their valid cause of action against the defendants for trademark infringement and unfair competition and for damages. 19(19)

The dispositive portion of the RTC Decision provides: WHEREFORE, judgment is rendered in favor of plaintiffs McDonald’s Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows: 1. The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent; 2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount of P400,000.00, exemplary damages in the amount of P100,000.00, and attorney’s fees and expenses of litigation in the amount of P100,000.00; 3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed for lack of merit as well as for insufficiency of evidence. 20(20)

Respondents appealed to the Court of Appeals. The Ruling of the Court of Appeals On 26 November 1999, the Court of Appeals rendered judgment (“Court of Appeals’ Decision”) reversing the RTC Decision and ordering McDonald’s to pay respondents P1,600,000 as actual and compensatory damages and P300,000 as moral damages. The Court of Appeals held: Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendants-appellants of its corporate name – the whole Copyright 1994-2014

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“L.C. B[ig] M[ak] B[urger], I[nc].” which appears on their food packages, signages and advertisements is an infringement of their trademark “B[ig] M[ac]” which they use to identify [their] double decker sandwich, sold in a Styrofoam box packaging material with the McDonald’s logo of umbrella “M” stamped thereon, together with the printed mark in red bl[o]ck capital letters, the words being separated by a single space. Specifically, plaintiffs-appellees argue that defendants-appellants’ use of their corporate name is a colorable imitation of their trademark “Big Mac”. DHACES

xxx

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To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the definition dictates, it is not sufficient that a similarity exists in both names, but that more importantly, the over-all presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. A careful comparison of the way the trademark “B[ig] M[ac]” is being used by plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants, would readily reveal that no confusion could take place, or that the ordinary purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-appellees’ trademark is used to designate only one product, a double decker sandwich sold in a Styrofoam box with the “McDonald's” logo. On the other hand, what the defendants-appellants corporation is using is not a trademark for its food product but a business or corporate name. They use the business name “L.C. Big Mak Burger, Inc.” in their restaurant business which serves diversified food items such as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendants-appellants’ corporate or business name appearing in the food packages and signages are written in silhouette red-orange letters with the “b” and “m” in upper case letters. Above the words “Big Mak” are the upper case letter “L.C.”. Below the words “Big Mak” are the words “Burger, Inc.” spelled out in upper case letters. Furthermore, said corporate or business name appearing in such food packages and signages is always accompanied by the company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper case “m” appearing therein and a blue lower garment. Finally, the defendants-appellants’ food packages are made of plastic material. xxx

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. . . [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the product and the manner that the tradename “Big Mak” is being used and presented to the public. As earlier noted, there are Copyright 1994-2014

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glaring dissimilarities between plaintiffs-appellees’ trademark and defendants-appellants’ corporate name. Plaintiffs-appellees’ product carrying the trademark “B[ig] M[ac]” is a double decker sandwich (depicted in the tray mat containing photographs of the various food products . . . sold in a Styrofoam box with the “McDonald’s” logo and trademark in red, bl[o]ck capital letters printed thereon . . . at a price which is more expensive than the defendants-appellants’ comparable food products. In order to buy a “Big Mac”, a customer needs to visit an air-conditioned “McDonald’s” restaurant usually located in a nearby commercial center, advertised and identified by its logo — the umbrella “M”, and its mascot — “Ronald McDonald”. A typical McDonald’s restaurant boasts of a playground for kids, a second floor to accommodate additional customers, a drive-thru to allow customers with cars to make orders without alighting from their vehicles, the interiors of the building are well-lighted, distinctly decorated and painted with pastel colors . . . . In buying a “B[ig] M[ac]”, it is necessary to specify it by its trademark. Thus, a customer needs to look for a “McDonald’s” and enter it first before he can find a hamburger sandwich which carry the mark “Big Mac”. On the other hand, defendants-appellants sell their goods through snack vans . . . Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same untenable. Unfair competition is defined as “the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or service, for those of another who has already established good will for his similar good, business or services, or any acts calculated to produce the same result” (Sec. 29, Rep. Act No. 166, as amended). To constitute unfair competition therefore it must necessarily follow that there was malice and that the entity concerned was in bad faith. In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants’ corporate name with the plaintiffs-appellees’ trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the name “M[ak]” in their corporate name was derived from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a settled rule that the law always presumes good faith such that any person who seeks to be awarded damages due to acts of Copyright 1994-2014

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another has the burden of proving that the latter acted in bad faith or with ill motive. 21(21)

Petitioners sought reconsideration of the Court of Appeals’ Decision but the appellate court denied their motion in its Resolution of 11 July 2000. Hence, this petition for review. Petitioners raise the following grounds for their petition: I.

II.

THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS’ CORPORATE NAME “L.C. BIG MAK BURGER, INC.” IS NOT A COLORABLE IMITATION OF THE MCDONALD’S TRADEMARK “BIG MAC”, SUCH COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT. A.

Respondents use the words “Big Mak” as trademark for their products and not merely as their business or corporate name.

B.

As a trademark, respondents’ “Big Mak” is undeniably and unquestionably similar to petitioners’ “Big Mac” trademark based on the dominancy test and the idem sonans test resulting inexorably in confusion on the part of the consuming public.

THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN THE MARK “BIG MAK” AND THE WORD MARK “BIG MAC” AS AN INDICATION OF RESPONDENTS’ INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION. 22(22)

Petitioners pray that we set aside the Court of Appeals’ Decision and reinstate the RTC Decision. In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises only questions of fact. On the merits, respondents contend that the Court of Appeals committed no reversible error in finding them not liable for trademark infringement and unfair competition and in ordering petitioners to pay damages. The Issues The issues are: Copyright 1994-2014

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1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule 45. ADEaHT

2. On the merits, (a) whether respondents used the words “Big Mak” not only as part of the corporate name “L.C. Big Mak Burger, Inc.” but also as a trademark for their hamburger products, and (b) whether respondent corporation is liable for trademark infringement and unfair competition. 23(23) The Court’s Ruling The petition has merit. On Whether the Questions Raised in the Petition are Proper for a Petition for Review A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 (“Section 1”) 24(24) raising only questions of law. A question of law exists when the doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. 25(25) Here, petitioners raise questions of fact and law in assailing the Court of Appeals’ findings on respondent corporation’s non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1. 26(26) We took a similar course of action in Asia Brewery, Inc. v. Court of Appeals  which also involved a suit for trademark infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting findings. On the Manner Respondents Used “Big Mak” in their Business Petitioners contend that the Court of Appeals erred in ruling that the corporate name “L.C. Big Mak Burger, Inc.” appears in the packaging for respondents’ hamburger products and not the words “Big Mak” only. The contention has merit. Copyright 1994-2014

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The evidence presented during the hearings on petitioners’ motion for the issuance of a writ of preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for their hamburger sandwiches bore the words “Big Mak.” The other descriptive words “burger” and “100% pure beef” were set in smaller type, along with the locations of branches. 28(28) Respondents’ cash invoices simply refer to their hamburger sandwiches as “Big Mak.” 29(29) It is respondents’ snack vans that carry the words “L.C. Big Mak Burger, Inc.” 30(30) It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their hamburger sandwiches relied on by the Court of Appeals. 31(31) Respondents’ plastic wrappers and bags were identical with those petitioners presented during the hearings for the injunctive writ except that the letters “L.C.” and the words “Burger, Inc.” in respondents’ evidence were added above and below the words “Big Mak,” respectively. Since petitioners’ complaint was based on facts existing before and during the hearings on the injunctive writ, the facts established during those hearings are the proper factual bases for the disposition of the issues raised in this petition. On the Issue of Trademark Infringement Section 22 (“Section 22) of Republic Act No. 166, as amended (“RA 166”), the law applicable to this case, 32(32) defines trademark infringement as follows: Infringement, what constitutes. — Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. 33(33)

Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used, without petitioners’ consent, a colorable imitation of the “Big Mac” mark in advertising and selling respondents’ hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the source of the Copyright 1994-2014

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hamburgers or the identity of the business. To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff’s mark; (2) the plaintiff’s ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in “likelihood of confusion.” 34(34) Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement. 35(35) On the Validity of the “Big Mac ”Mark and McDonald’s Ownership of such Mark A mark is valid if it is “distinctive” and thus not barred from registration under Section 4 36(36) of RA 166 (“Section 4”). However, once registered, not only the mark’s validity but also the registrant’s ownership of the mark is prima facie presumed. 37(37) Respondents contend that of the two words in the “Big Mac” mark, it is only the word “Mac” that is valid because the word “Big” is generic and descriptive (proscribed under Section 4[e]), and thus “incapable of exclusive appropriation.” 38(38)

The contention has no merit. The “Big Mac” mark, which should be treated in its entirety and not dissected word for word, 39(39) is neither generic nor descriptive. Generic marks are commonly used as the name or description of a kind of goods, 40(40) such as “Lite” for beer 41(41) or “Chocolate Fudge” for chocolate soda drink. 42(42) Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists, 43(43) such as “Arthriticare” for arthritis medication. 44(44) On the contrary, “Big Mac” falls under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents. 45(45) As such, it is highly distinctive and thus valid. Significantly, the trademark “Little Debbie” for snack cakes was found arbitrary or fanciful. 46(46) The Court also finds that petitioners have duly established McDonald’s exclusive ownership of the “Big Mac” mark. Although Topacio and the Isaiyas Group registered the “Big Mac” mark ahead of McDonald’s, Topacio, as petitioners disclosed, Topacio had already assigned his rights to McDonald’s. The Isaiyas Group, on the other hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the Principal Register, and thus not distinctive, has no real Copyright 1994-2014

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protection. 47(47) Indeed, we have held that registration in the Supplemental Register is not even a prima facie evidence of the validity of the registrant’s exclusive right to use the mark on the goods specified in the certificate. 48(48) On Types of Confusion Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (product confusion) and confusion of business (source or origin confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., 49(49) the Court distinguished these two types of confusion, thus: [Rudolf] Callman notes two types of confusion. The first is the confusion of goods “in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other.” . . . The other is the confusion of business: “Here though the goods of the parties are different, the defendant’s product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist.”

Under Act No. 666, 50(50) the first trademark law, infringement was limited to confusion of goods only, when the infringing mark is used on “goods of a similar kind.” 51(51) Thus, no relief was afforded to the party whose registered mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is likely to result in confusion on “the source or origin of such goods or services, or identity of such business.” 52(52) Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation. 53(53) On Whether Confusion of Goods and Confusion of Business are Applicable Petitioners claim that respondents’ use of the “Big Mak” mark on respondents’ hamburgers results in confusion of goods, particularly with respect to petitioners’ hamburgers labeled “Big Mac.” Thus, petitioners alleged in their complaint: IDTcHa

1.15. Defendants have unduly prejudiced and clearly infringed upon the Copyright 1994-2014

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property rights of plaintiffs in the McDonald’s Marks, particularly the mark “B[ig] M[ac]”. Defendants’ unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into believing that the products and services offered by defendant Big Mak Burger, and the business it is engaged in, are approved and sponsored by, or affiliated with, plaintiffs. 54(54) (Emphasis supplied)

Since respondents used the “Big Mak” mark on the same goods, i.e. hamburger sandwiches, that petitioners’ “Big Mac” mark is used, trademark infringement through confusion of goods is a proper issue in this case. Petitioners also claim that respondents’ use of the “Big Mak” mark in the sale of hamburgers, the same business that petitioners are engaged in, results in confusion of business. Petitioners alleged in their complaint: 1.10. For some period of time, and without the consent of plaintiff McDonald’s nor its licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs’ exclusive right to use and/or appropriate the McDonald’s marks, defendant Big Mak Burger acting through individual defendants, has been operating “Big Mak Burger”, a fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food products, and has caused to be printed on the wrapper of defendant’s food products and incorporated in its signages the name “Big Mak Burger”, which is confusingly similar to and/or is a colorable imitation of the plaintiff McDonald’s mark “B[ig] M[ac]”, . . . Defendant Big Mak Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs . . . 2.2 As a consequence of the acts committed by defendants, which unduly prejudice and infringe upon the property rights of plaintiffs McDonald’s and McGeorge as the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the McDonald’s marks, and which are likely to have caused confusion or deceived the public as to the true source, sponsorship or affiliation of defendants’ food products and restaurant business, plaintiffs have suffered and continue to suffer actual damages in the form of injury to their business reputation and goodwill, and of the dilution of the distinctive quality of the McDonald’s marks, in particular, the mark “B[ig] M[ac]”. 55(55) (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same food product that petitioners sell using the “Big Mac” mark. Thus, trademark infringement through confusion of business is also a proper issue in this case. Copyright 1994-2014

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Respondents assert that their “Big Mak” hamburgers cater mainly to the low-income group while petitioners’ “Big Mac” hamburgers cater to the middle and upper income groups. Even if this is true, the likelihood of confusion of business remains, since the low-income group might be led to believe that the “Big Mak” hamburgers are the low-end hamburgers marketed by petitioners. After all, petitioners have the exclusive right to use the “Big Mac” mark. On the other hand, respondents would benefit by associating their low-end hamburgers, through the use of the “Big Mak” mark, with petitioners’ high-end “Big Mac” hamburgers, leading to likelihood of confusion in the identity of business. Respondents further claim that petitioners use the “Big Mac” mark only on petitioners’ double-decker hamburgers, while respondents use the “Big Mak” mark on hamburgers and other products like siopao, noodles and pizza. Respondents also point out that petitioners sell their Big Mac double-deckers in a styrofoam box with the “McDonald’s” logo and trademark in red, block letters at a price more expensive than the hamburgers of respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers and plastic bags. Respondents further point out that petitioners’ restaurants are air-conditioned buildings with drive-thru service, compared to respondents’ mobile vans. These and other factors respondents cite cannot negate the undisputed fact that respondents use their “Big Mak” mark on hamburgers, the same food product that petitioners’ sell with the use of their registered mark “Big Mac.” Whether a hamburger is single, double or triple-decker, and whether wrapped in plastic or styrofoam, it remains the same hamburger food product. Even respondents’ use of the “Big Mak” mark on non-hamburger food products cannot excuse their infringement of petitioners’ registered mark, otherwise registered marks will lose their protection under the law. The registered trademark owner may use his mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court has recognized that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, the Court has declared: Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or Copyright 1994-2014

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trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). 56(56) (Emphasis supplied)

On Whether Respondents’ Use of the “Big Mak” Mark Results in Likelihood of Confusion In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test. 57(57) The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use of respondents’ “Big Mak” mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals ruled that “it is not sufficient that a similarity exists in both name(s), but that more importantly, the overall presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article.” The holistic test considers the two marks in their entirety, as they appear on the goods with their labels and packaging. It is not enough to consider their words and compare the spelling and pronunciation of the words. 58(58) Respondents now vigorously argue that the Court of Appeals’ application of the holistic test to this case is correct and in accord with prevailing jurisprudence. This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from the adoption of the dominant features of the registered mark, disregarding minor differences. 59(59) Courts will consider more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments. Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, 60(60) the Court Copyright 1994-2014

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ruled: . . . It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . .) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents, 61(61) Phil. Nut Industry, Inc. v. Standard Brands Inc., 62(62) Converse Rubber Corporation v. Universal Rubber Products, Inc., 63(63) and Asia Brewery, Inc. v. Court of Appeals. 64(64) In the 2001 case of Societe Des Produits Nestlé, S.A. v. Court of Appeals, 65(65) the Court explicitly rejected the holistic test in this wise: [T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. (Emphasis supplied)

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the “colorable imitation of a registered mark . . . or a dominant feature thereof.” Applying the dominancy test, the Court finds that respondents’ use of the “Big Mak” mark results in likelihood of confusion. First, “Big Mak” sounds exactly the same as “Big Mac.” Second, the first word in “Big Mak” is exactly the same as the first word in “Big Mac.” Third, the first two letters in “Mak” are the same as the first two letters in “Mac.” Fourth, the last letter in “Mak” while a “k” sounds the same as “c” when the word “Mak” is pronounced. Fifth, in Filipino, the letter “k” replaces “c” in spelling, thus “Caloocan” is spelled “Kalookan.” In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Copyright 1994-2014

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Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same. Clearly, respondents have adopted in “Big Mak” not only the dominant but also almost all the features of “Big Mac.” Applied to the same food product of hamburgers, the two marks will likely result in confusion in the public mind. The Court has taken into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. Thus, in Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., 66(66) the Court held: aAHTDS

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that “SALONPAS” and “LIONPAS” are confusingly similar in sound: “Gold Dust” and “Gold Drop”; “Jantzen” and “Jass-Sea”; “Silver Flash” and “Supper Flash”; “Cascarete” and “Celborite”; “Celluloid” and “Cellonite”; “Chartreuse” and “Charseurs”; “Cutex” and “Cuticlean”; “Hebe” and “Meje”; “Kotex” and “Femetex”; “Zuso” and “Hoo Hoo”. Leon Amdur, in his book “Trade-Mark Law and Practice”, pp. 419–421, cities, as coming within the purview of the idem sonans rule, “Yusea” and “U-C-A”, “Steinway Pianos” and “Steinberg Pianos”, and “Seven-Up” and “Lemon-Up”. In Co Tiong vs. Director of Patents, this Court unequivocally said that “Celdura” and “Cordura” are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name “Lusolin” is an infringement of the trademark “Sapolin”, as the sound of the two names is almost the same. (Emphasis supplied)

Certainly, “Big Mac” and “Big Mak” for hamburgers create even greater confusion, not only aurally but also visually. Indeed, a person cannot distinguish “Big Mac” from “Big Mak” by their sound. When one hears a “Big Mac” or “Big Mak” hamburger advertisement over the radio, one would not know whether the “Mac” or “Mak” ends with a “c” or a “k.” Petitioners’ aggressive promotion of the “Big Mac” mark, as borne by their advertisement expenses, has built goodwill and reputation for such mark making it one of the easily recognizable marks in the market today. This increases the likelihood that consumers will mistakenly associate petitioners’ hamburgers and business with Copyright 1994-2014

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those of respondents’. Respondents’ inability to explain sufficiently how and why they came to choose “Big Mak” for their hamburger sandwiches indicates their intent to imitate petitioners’ “Big Mac” mark. Contrary to the Court of Appeals’ finding, respondents’ claim that their “Big Mak” mark was inspired by the first names of respondent Dy’s mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted: [R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative choice for a corporate name by using the names of his parents, especially since he was allegedly driven by sentimental reasons. For one, he could have put his father’s name ahead of his mother’s, as is usually done in this patriarchal society, and derived letters from said names in that order. Or, he could have taken an equal number of letters (i.e., two) from each name, as is the more usual thing done. Surely, the more plausible reason behind Respondents’ choice of the word “M[ak]”, especially when taken in conjunction with the word “B[ig]”, was their intent to take advantage of Petitioners’ . . . “B[ig] M[ac]” trademark, with their alleged sentiment-focused “explanation” merely thought of as a convenient, albeit unavailing, excuse or defense for such an unfair choice of name. 67(67)

Absent proof that respondents’ adoption of the “Big Mak” mark was due to honest mistake or was fortuitous, 68(68) the inescapable conclusion is that respondents adopted the “Big Mak” mark to “ride on the coattails” of the more established “Big Mac” mark. 69(69) This saves respondents much of the expense in advertising to create market recognition of their mark and hamburgers. 70(70) Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners’ claim of trademark infringement. On the Lack of Proof of Actual Confusion Petitioners’ failure to present proof of actual confusion does not negate their claim of trademark infringement. As noted in American Wire & Cable Co. v. Director of Patents, 71(71) Section 22 requires the less stringent standard of “likelihood of confusion” only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential. 72(72) On the Issue of Unfair Competition Copyright 1994-2014

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Section 29 (“Section 29”) 73(73) of RA 166 defines unfair competition, thus: xxx

xxx

xxx

Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, 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 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. (Emphasis supplied)

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. 74(74) 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. 75(75) Actual fraudulent intent need not be shown. 76(76) Copyright 1994-2014

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Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. Trademark infringement is a form of unfair competition. 77(77) Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception on the public because of the general appearance of the goods. There can be trademark infringement without unfair competition as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. 78(78) To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off their hamburgers as “Big Mac” hamburgers. Petitioners add that respondents’ fraudulent intent can be inferred from the similarity of the marks in question. 79(79) Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors. 80(80) Thus, the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor. The RTC described the respective marks and the goods of petitioners and respondents in this wise: The mark “B[ig] M[ac]” is used by plaintiff McDonald’s to identify its double decker hamburger sandwich. The packaging material is a styrofoam box with the McDonald’s logo and trademark in red with block capital letters printed on it. All letters of the “B[ig] M[ac]” mark are also in red and block capital letters. On the other hand, defendants’ “B[ig] M[ak]” script print is in orange with only the letter “B” and “M” being capitalized and the packaging material is plastic wrapper. . . Further, plaintiffs’ logo and mascot are the umbrella “M” and “Ronald McDonald’s”, respectively, compared to the mascot of defendant Corporation which is a chubby boy called “Macky” displayed or printed between the words “Big” and “Mak.” 81(81) (Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the general appearance of petitioners’ “Big Mac” hamburgers. The dissimilarities in the packaging are minor compared to the stark Copyright 1994-2014

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similarities in the words that give respondents’ “Big Mak” hamburgers the general appearance of petitioners’ “Big Mac” hamburgers. Section 29(a) expressly provides that the similarity in the general appearance of the goods may be in the “devices or words” used on the wrappings. Respondents have applied on their plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. What attracts the attention of the buying public are the words “Big Mak” which are almost the same, aurally and visually, as the words “Big Mac.” The dissimilarities in the material and other devices are insignificant compared to the glaring similarity in the words used in the wrappings. Section 29(a) also provides that the defendant gives “his goods the general appearance of goods of another manufacturer.” Respondents’ goods are hamburgers which are also the goods of petitioners. If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the “Big Mak” mark would not give their goods the general appearance of petitioners’ “Big Mac” hamburgers. In such case, there is only trademark infringement but no unfair competition. However, since respondents chose to apply the “Big Mak” mark on hamburgers, just like petitioner’s use of the “Big Mac” mark on hamburgers, respondents have obviously clothed their goods with the general appearance of petitioners’ goods. ASTcEa

Moreover, there is no notice to the public that the “Big Mak” hamburgers are products of “L.C. Big Mak Burger, Inc.” Respondents introduced during the trial plastic wrappers and bags with the words “L.C. Big Mak Burger, Inc.” to inform the public of the name of the seller of the hamburgers. However, petitioners introduced during the injunctive hearings plastic wrappers and bags with the “Big Mak” mark without the name “L.C. Big Mak Burger, Inc.” Respondents’ belated presentation of plastic wrappers and bags bearing the name of “L.C. Big Mak Burger, Inc.” as the seller of the hamburgers is an after-thought designed to exculpate them from their unfair business conduct. As earlier stated, we cannot consider respondents’ evidence since petitioners’ complaint was based on facts existing before and during the injunctive hearings. Thus, there is actually no notice to the public that the “Big Mak” hamburgers are products of “L.C. Big Mak Burger, Inc.” and not those of petitioners who have the exclusive right to the “Big Mac” mark. This clearly shows respondents’ intent to deceive the public. Had respondents’ placed a notice on their plastic wrappers and bags that the hamburgers are sold by “L.C. Big Mak Burger, Inc.”, then they could validly claim that they did not intend to deceive the public. In such case, there is only trademark infringement but no unfair competition. 82(82) Respondents, however, did Copyright 1994-2014

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not give such notice. We hold that as found by the RTC, respondent corporation is liable for unfair competition. The Remedies Available to Petitioners Under Section 23 83(83) (“Section 23”) in relation to Section 29 of RA 166, a plaintiff who successfully maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of respondent corporation’s gross sales for three (1988–1989 and 1991) of the six years (1984–1990) respondents have used the “Big Mak” mark. 84(84)

The RTC also did not err in awarding exemplary damages by way of correction for the public good 85(85) in view of the finding of unfair competition where intent to deceive the public is essential. The award of attorney’s fees and expenses of litigation is also in order. 86(86) WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November 1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition. SO ORDERED. Davide, Jr., C .J ., Quisumbing, Ynares-Santiago and Azcuna, JJ ., concur. )RRWQRWHV 1. 2. 3. 4. 5.

Under Rule 45 of the 1997 Rules of Civil Procedure. Penned by Associate Justice Eloy R. Bello, Jr. with Presiding Justice Jainal D. Rasul and Associate Justice Ruben T. Reyes concurring. Penned by Judge Santiago Ranada, Jr. Itself a registered service mark. Some of McDonald’s registered marks representing food items (f) and services (s) are: McDONALD’S HAMBURGERS (s); McDONALD’S (f); RONALD McDONALD (s); McDONALDLAND (s); McCHEESE & DESIGN (f); EGG

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6.

7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

24.

25. 26. 27. 28. 29.

McMUFFIN (s); EGG McMUFFIN (f); McDONALDLAND (f); McDONALD’S & ARCHES (s); McFEAST (f); McCHICKEN (f); McDONALD’S & ARCHES (f); McDONUTS (f); McPIZZA (f); McPIZZA (s); McHAPPY DAY (s); MINI MAC (s); McDOUBLE (f); TOGETHER-McDONALD’S & YOU (s); CHICKEN McNUGGETS (f); McDONALD’S & YOU (s); SUPER MAC (f); McSNACK (s); MAC FRIES (f); McRIB (f); MAPLE McCRISP (f); LITE MAC (f); BIG MAC (s); CHICKEN McSWISS (f); McMUFFIN (f); McD.L.T. (f). (McDonald’s Corporation v. McBagel’s, Inc., 649 F.Supp. 1268 [1986]). Aside from Big Mac sandwiches, McDonald’s menu includes cheeseburgers, special sandwiches, fried french potatoes, chicken nuggets, fried fish sandwiches, shakes, hot pies, sundaes, softdrinks, and other beverages. Certificate of Registration No. 1,126,102. Table napkins, tray liners, cups and food wrappers. Labels, promotional items and packages. TSN (Arlene Manalo), 26 July 1990, pp. 34–35. McDonald’s and petitioner McGeorge are referred to as petitioners. Rizal, Laguna, Bulacan and Quezon. E.g. pizzas, noodles, siopaos, hotdog sandwiches, ham sandwiches, fish burgers, fruit juices, softdrinks and other beverages. Respondent corporation and private respondents are referred to as respondents. Records, p. 37. Ibid., pp. 457–458. Ibid., pp. 414–426. Ibid., pp. 460–463. Rollo, pp. 149–154. Records, pp. 1431–1432. Rollo, pp. 233–237 (Capitalization in the original). Ibid., p. 24. While petitioners seek to hold liable respondent corporation only, the Court’s opinion will refer not only to the latter but also to all the respondents as all of them filed the pleadings in this petition. This provision states: “Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.” Ramos, et al. v. Pepsi-Cola Bottling Co. of the Phils., et al., 125 Phil. 701 (1967). Ducusin, et al. v. CA, et al., 207 Phil. 248 (1983). G.R. No. 103543, 5 July 1993, 224 SCRA 437. Exhibits E-1 to 2, F-1 to 2 and G-1 to 2. Exhibits E, F and G.

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30. 31. 32.

33. 34. 35.

36.

Exhibits L-10, L-16 to 27. Exhibits 34, 36–37. RA 166 has been superseded by Republic Act No. 8293 (“RA 8293”), the Intellectual Property Code of the Philippines, which took effect on 1 January 1998. Section 22 is substantially identical with Section 16 of the United States’ 1946 Trademark Act (“Lanham Act”). Superseded by Section 155 of RA 8293 (“Section 155”). See A & H Sportswear Co. v. Victoria’s Secret Stores, Inc., 167 F.Supp.2d 770 (2001). Shaley’s Inc. v. Covalt, 704 F.2d 426 (1983). Also referred to as the “lynchpin” (Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 [1999]) or “touchstone” (VMG Enterprises, Inc. v. F. Quesada and Franco, Inc., 788 F. Supp. 648 [1992]) of trademark infringement. This provision states: “Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: (a) Consists of or comprises immoral, deceptive or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute; (b) Consists of or comprises the flag or coat of arms or other insignia of the Philippines or any of its political subdivisions, or of any foreign nation, or any simulation thereof; (c) Consists of or comprises a name, portrait, or signature identifying a particular living individual except by his written consent, or the name, signature, or portrait of a deceased President of the Philippines, during the life of his widow, if any, except by the written consent of the widow; (d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or a trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; or (e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (f) Except as expressly excluded in paragraphs (a), (b), (c) and (d) of this section nothing herein shall prevent the registration of a mark or trade-name used by

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37.

38. 39.

40. 41. 42. 43. 44. 45. 46. 47. 48.

the applicant which has become distinctive of the applicant’s goods, business or services. The Director may accept as prima facie evidence that the mark or trade-name has become distinctive, as applied to or used in connection with the applicant’s goods, business or services, proof of substantially exclusive and continuous use thereof as a mark or trade-name by the applicant in connection with the sale of goods, business or services for five years next preceding the date of the filing of the application for its registration.” This has been superseded by Section 123 of RA 8293. Section 20, RA 166. This provision states: “Certificate 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.” This has been superseded by Section 138 of RA 8293. Neither RA 166 nor RA 8293 provides when the presumption of validity and ownership becomes indubitable. In contrast, under the Lanham Act, as amended, (15 United States Code § 1065), such takes place once the trademark has become “incontestable” i.e. after the mark owner files affidavits stating that the mark is registered and has been in continuous use for five consecutive years; that there is no pending proceeding; and that there has been no adverse decision concerning the registrant’s ownership or right to registration (See Luis Vuitton Malletier and Oakley, Inc. v. Veit, 211 F.Supp.2d 556 [2002]). However, both RA 166 (Section 12) and RA 8293 (Section 145) require the filing of the affidavit attesting to the continuous use of the mark for five years and, under Section 145, failure to file such affidavit will result in the removal of the mark from the Register. Rollo, pp. 525–527. Societe Des Produits Nestlé, S.A. v. Court of Appeals, G.R. No. 112012, 4 April 2001, 356 SCRA 207; McKee Baking Co. v. Interstate Brands Corporation, 738 F. Supp. 1272 (1990). Societe Des Produits Nestlé, S.A. v. Court of Appeals, supra note 39; Miller Brewing Co. v. Heileman Brewing Co., 561 F.2d 75 (1977). Miller Brewing Co. v. Heileman Brewing Co., supra note 40. A. J. Canfield Co. v. Honickman, 808 F.2d 291 (1986). Societe Des Produits Nestlé, S.A. v. Court of Appeals, supra note 39 citing § 43(A) of the Lanham Act, as amended. Bernard v. Commerce Drug Co., 964 F.2d 1338 (1992). Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366 (1980). McKee Baking Co. v. Interstate Brands Corporation, supra note 39. See A. Miller and M. Davis, Intellectual Property, Patents, Trademarks and Copyright in a Nutshell 177–178 (1983). See Lorenzana v. Macagba, No. L-33773, 22 October 1987, 154 SCRA 723; La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al. 214 Phil. 332 (1984). RA 8293

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49. 50. 51.

52.

53. 54. 55.

no longer provides for a Supplemental Register and instead mandates a single registry system (Section 137). Under Section 239, marks registered in the Supplemental Register under RA 166 will remain in force but are no longer subject to renewal. 137 Phil. 838 (1969). Enacted on 6 March 1903. Section 3 of Act No. 666 provides: “The ownership or possession of a trade-mark, heretofore or hereafter appropriated, as in the foregoing section provided, shall be recognized and protected in the same manner and to the same extent, as are other property rights known to the law. To this end any person entitled to the exclusive use of a trade-mark to designate the origin or ownership of goods he has made or deals in may recover damages in a civil action from any person who has sold goods of a similar kind, bearing such trade-mark, and the measure of the damages suffered, at the option of the complaining party, shall be either the reasonable profit which the complaining party would have made had the defendant not sold the goods with the trade-mark aforesaid, or the profit which the defendant actually made out of the sale of the goods with the trade-mark, and in cases where actual intent to mislead the public or to defraud the owner of the trade-mark shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing, may have a preliminary injunction, restraining the defendant temporarily from use of the trade-mark pending the hearing, to be granted or dissolved in the manner provided in the Code of Civil Procedure, and such injunction upon final hearing, if the complainant’s property in the trade-mark and the defendant’s violation thereof shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for damages to be rendered in the same cause as above provided.” (Emphasis supplied) The United States Congress had introduced the same amendment to the Lanham Act in 1946. In 1962, the US Congress again amended Section 16 of the Lanham Act (“Sec. 43(A)”) by deleting the phrase “the source or origin of such goods or services, or identity of such business” in the definition of trademark infringement. This led courts in that jurisdiction to hold that post-sale confusion by the public at large (Esercizio v. Roberts, 944 F.2d 1235 [1991]. See also Koppers Company, Inc. v. Krup-Koppers, 517 F.Supp. 836 [1981]) or “subliminal confusion,” defined as confusion on a subliminal or subconscious level, causing the consumer to identify the properties and reputation of one product with those of another, although he can identify the particular manufacturer of each, (Ortho Pharmaceutical Corporation v. American Cyanamid Company, 361 F.Supp. 1032 [1973]. See also Farberware, Inc. v. Mr. Coffee, Inc., 740 F.Supp. 291 (1990); Dreyfus Fund Incorporated v. Royal Bank of Canada, 525 F. Supp. 1108 [1981]) are sufficient to sustain a trademark infringement claim. Section 155 substantially reproduces Sec. 43(A). Agpalo, The Law on Trademark, Infringement and Unfair Competition 45–46 (2000). Records, p. 5. Ibid., pp. 4, 6–7.

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56. 57.

58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83.

Sta. Ana v. Maliwat, et al., 133 Phil. 1006 (1968). Societe Des Produits Nestlé, S.A. v. Court of Appeals, supra note 39; Emerald Garment Manufacturing Corporation v. Court of Appeals, G.R. No. 100098, 29 December 1995, 251 SCRA 600. V. Amador, Trademarks Under The Intellectual Property Code 260 (1999). Ibid., p. 263. 95 Phil. 1 (1954). 100 Phil. 214 (1956). No. L-23035, 31 July 1975, 65 SCRA 575. No. L-27906, 8 January 1987, 147 SCRA 154. Supra note 27. Supra note 39. 125 Phil. 295 (1966). Rollo, pp. 588–589. Time v. Life Television Co. of St. Paul, 123 F. Supp. 470 (1954); Conde Nast Publications v. Vogue School of Fashion Modelling, 105 F. Supp. 325 (1952); Hanson v. Triangle Publications, 163 F.2d 74 (1947). See Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F.3d 466 (1994). No. L-26557, 18 February 1970, 31 SCRA 544. PACCAR Inc. v. Tele Scan Technologies, L.L.C., 319 F.3d 243 (2003). Reiterated in Section 168 of RA 8293. V. Amador, supra note 58 at 278. Shell Co. of the Philippines, Ltd. v. Ins. Petroleum Refining Co., Ltd., 120 Phil. 434 (1964); “La Insular” v. Jao Oge, 42 Phil. 366 (1921). Alhambra Cigar, etc., Co. v. Mojica, 27 Phil. 266 (1914). Co Tiong Sa v. Director of Patents, supra note 60; Clarke v. Manila Candy Co., 36 Phil. 100 (1917). See Q-Tips, Inc. v. Johnson & Johnson, 108 F.Supp 845 (1952). Rollo, pp. 40–45. Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 (1999). Rollo, pp. 148–149. See Q-Tips, Inc. v. Johnson & Johnson, supra note 78. This provision 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

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84. 85. 86.

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.” TSN, (Francis Dy), 15 March 1993, p. 32; TSN (Francis Dy), 22 March 1993, pp. 1–2. Article 2229, Civil Code. Article 2208(1), Civil Code.

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FIRST DIVISION [G.R. No. 111580. June 21, 2001.] SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT LTD., SHANGRI-LA PROPERTIES, INC., MAKATI SHANGRI-LA HOTEL AND RESORT, INC. and KUOK PHILIPPINE PROPERTIES, INC., petitioners, YV. THE COURT OF APPEALS, HON. FELIX M. DE GUZMAN, as Judge, RTC of Quezon City, Branch 99 and DEVELOPERS GROUP OF COMPANIES, INC., respondents.

[G.R. No. 114802. June 21, 2001.] DEVELOPERS GROUP OF COMPANIES, INC., petitioner, vs. THE COURT OF APPEALS, HON. IGNACIO S. SAPALO, in his capacity as Director, Bureau of Patents, Trademarks and Technology Transfer, and SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT, LTD.,respondents. Oreta Suarez & Narvasa Law Firm for petitioners. Carag Cabales Jamora & Somera for private respondents. SYNOPSIS The Shangri-La Group (petitioner in G.R. No. 111580 and respondent G.R. No. 114802), filed with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) a petition praying for the cancellation of the registration of the "Shangri-La" mark and "S" device/logo issued to the Developers Group of Companies, Inc., on the ground that the same was illegally and fraudulently obtained and appropriated for the latter's restaurant business. The Shangri-La Group alleged that it has been using the said mark and logo for its corporate affairs and business since March 1962. Likewise, the Shangri-La Group filed with the BPTTT its own application for registration of the Copyright 1994-2014

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subject mark and logo. The Developers Group filed an opposition to the application. Almost three (3) years later, the Developers Group instituted with the Regional Trial Court a complaint for infringement and damages with prayer for injunction against the Shangri-La Group. The Shangri-La Group moved for the suspension of the proceedings in the infringement case on account of the pendency of the administrative proceedings before the BPTTT. This was denied by the trial court. The Shangri-La Group filed a Motion for Reconsideration. Soon thereafter, it also filed a Motion to Inhibit against Presiding Judge. The trial court denied both motions. The Shangri-La Group filed a petition for certiorari before the Court of Appeals, however, the Court of Appeals dismissed the petition as well as the Motion for Reconsideration. Hence, the petition in G.R. No. 111580. Meanwhile, the Developers Group filed with the BPTTT an Urgent Motion to Suspend Proceedings, invoking the pendency of the infringement case it filed before the Regional Trial Court of Quezon City. The motion was denied and the Motion for Reconsideration as well. From the denial of the BPTTT, the Developers Group filed with the Court of Appeals a petition for certiorari, mandamus and prohibition, which was dismissed for lack of merit. This brought about the petition for review in G.R. No. 111580. The Supreme Court ordered the two petitions consolidated. The core issue therein simply was whether despite the institution of an Inter Partes case for cancellation of a mark with the BPTTT (now the Bureau of Legal Affairs, Intellectual Property Office) by one party, the adverse party can file a subsequent action for infringement with the regular courts of justice in connection with the same registered mark. On the issue involved in this consolidated petitions, the Supreme Court ruled in the affirmative. According to the Court, in applying Section 151.2 of Republic Act No. 8293, otherwise known as the Intellectual Property Code in the case at bar, the earlier institution of an Inter Partes case by the Shangri-La Group for the cancellation of the "Shangri-La" mark and "S" device/logo with the BPTTT cannot effectively bar the subsequent filing of an infringement case by registrant Developers Group. The law and the rules are explicit. The issue raised before the BPTTT was quite different from that raised in the trial court. Before the BPTTT was the issue of whether the mark registered by Developers Group is subject to cancellation, as the Shangri-La Group claims prior ownership of the disputed mark. On the other hand, the issue raised before the trial court was whether the Shangri-La Group infringed upon the right of Developers Group within the contemplation of Section 22 of Republic Act 166. However, while the instant petitions were still pending with the Supreme Court, the infringement court rendered its decision upholding the validity of the registration of Copyright 1994-2014

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the service mark "Shangri-La" and "S-Logo" in the name of the Developers Group. The said decision was appealed with the Court of Appeals. There can be no denying that the infringement court may validly pass upon the right of registration. With the decision of the Regional Trial Court upholding the validity of the registration of the service mark "Shangri-La" and "S" logo in the name of Developers Group, the cancellation case filed with the Bureau became moot. To allow the Bureau to proceed with the cancellation case would lead to a possible result contradictory to that which the Regional Trial Court had rendered, albeit the same was still on appeal. The Supreme Court dismissed the petition in G.R. No. 111580 for being moot and academic, and in connection with G.R. No. 114802, it ordered the Bureau of Legal Affairs, Intellectual Property Office, to suspend further proceedings in Inter Partes Case No. 3145, to await the final outcome of the appeal in Civil Case No. Q-91-8476. EADCHS

SYLLABUS 1. COMMERCIAL LAW; TRADEMARKS LAW; EARLIER INSTITUTION OF AN INTER PARTES CASE BY SHANGRI-LA GROUP FOR CANCELLATION OF "SHANGRI-LA" MARK AND "S" LOGO WITH THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER CANNOT EFFECTIVELY BAR SUBSEQUENT FILING OF AN INFRINGEMENT CASE BY REGISTRANT DEVELOPERS GROUP; RATIONALE. — As applied in the case at bar, the earlier institution of an Inter Partes case by the Shangri-La Group for the cancellation of the "Shangri-La" mark and "S" device/logo with the BPTTT cannot effectively bar the subsequent filing of an infringement case by registrant Developers Group. The law and the rules are explicit. The rationale is plain: Certificate of Registration No. 31904, upon which the infringement case is based, remains valid and subsisting for as long as it has not been cancelled by the Bureau or by an infringement court. As such, Developers Group's Certificate of Registration in the principal register continues as "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." Since the certificate still subsists, Developers Group may thus file a corresponding infringement suit and recover damages from any person who infringes upon the former's rights. Furthermore, the issue raised before the BPTTT is quite different from that raised in the trial court. The issue raised before the BPTTT was whether the mark registered by Developers Group is subject to cancellation, as the Shangri-La Group claims prior ownership of the disputed mark. Copyright 1994-2014

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On the other hand, the issue raised before the trial court was whether the Shangri-La Group infringed upon the rights of Developers Group within the contemplation of Section 22 of Republic Act 166. HEDCAS

2. ID.; ID.; INFRINGEMENT CASE IN CASE AT BAR CAN AND SHOULD PROCEED INDEPENDENTLY FROM CANCELLATION CASE WITH BUREAU OF LEGAL AFFAIRS, INTELLECTUAL PROPERTY OFFICE; REASONS. — Following both law and the jurisprudence enunciated in Conrad and Company, Inc. v Court of Appeals, the infringement case can and should proceed independently from the cancellation case with the Bureau so as to afford the owner of certificates of registration redress and injunctive writs. In the same light, so must the cancellation case with the BPTTT (now the Bureau of Legal Affairs, Intellectual Property Office) continue independently from the infringement case so as to determine whether a registered mark may ultimately be cancelled. However, the Regional Trial Court, in granting redress in favor of Developers Group, went further and upheld the validity and preference of the latter's registration over that of the Shangri-La Group.

DECISION

YNARES-SANTIAGO, J : p

On June 21, 1988, the Shangri-La International Hotel Management, Ltd., Shangri-La Properties, Inc., Makati Shangri-La Hotel and Resort, Inc. and Kuok Philippine Properties, Inc. (hereinafter collectively referred as the "Shangri-La Group"), filed with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) a petition, docketed as Inter Partes Case No. 3145, praying for the cancellation of the registration of the "Shangri-La" mark and "S" device/logo issued to the Developers Group of Companies, Inc., on the ground that the same was illegally and fraudulently obtained and appropriated for the latter's restaurant business. The Shangri-La Group alleged that it is the legal and beneficial owners of the subject mark and logo; that it has been using the said mark and logo for its corporate affairs and business since March 1962 and caused the same to be specially designed for their international hotels in 1975, much earlier than the alleged first use thereof by the Developers Group in 1982. Copyright 1994-2014

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Likewise, the Shangri-La Group filed with the BPTTT its own application for registration of the subject mark and logo. The Developers Group filed an opposition to the application, which was docketed as Inter Partes Case No. 3529. Almost three (3) years later, or on April 15, 1991, the Developers Group instituted with the Regional Trial Court of Quezon City, Branch 99, a complaint for infringement and damages with prayer for injunction, docketed as Civil Case No. Q-91-8476, against the Shangri-La Group. On January 8, 1992, the Shangri-La Group moved for the suspension of the proceedings in the infringement case on account of the pendency of the administrative proceedings before the BPTTT. 1(1) This was denied by the trial court in a Resolution issued on January 16, 1992. 2(2) The Shangri-La Group filed a Motion for Reconsideration. 3(3) Soon thereafter, it also filed a Motion to Inhibit against Presiding Judge Felix M. de Guzman. 4(4) On July 1, 1992, the trial court denied both motions. 5(5) The Shangri-La Group filed a petition for certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 29006. 6(6) On February 15, 1993, the Court of Appeals rendered its decision dismissing the petition for certiorari. 7(7) The Shangri-La Group filed a Motion for Reconsideration, which was denied on the ground that the same presented no new matter that warranted consideration. 8(8) Hence, the instant petition, docketed as G.R. No. 111580, based on the following grounds: THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT: I.

THE INFRINGEMENT CASE SHOULD BE DISMISSED OR AT LEAST SUSPENDED; AND

II.

THE HONORABLE PRESIDING JUDGE SHOULD INHIBIT HIMSELF FROM TRYING THE INFRINGEMENT CASE. 9(9)

Meanwhile, on October 28, 1991, the Developers Group filed in Inter Partes Case No. 3145 an Urgent Motion to Suspend Proceedings, invoking the pendency of the infringement case it filed before the Regional Trial Court of Quezon City. 10(10) On January 10, 1992, the BPTTT, through Director Ignacio S. Sapalo, issued an Order Copyright 1994-2014

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denying the Motion. 11(11) A Motion for Reconsideration was filed which was, however, denied in a Resolution dated February 11, 1992. 12(12) From the denial by the BPTTT of its Urgent Motion to Suspend Proceedings and Motion for Reconsideration, the Developers Group filed with the Court of Appeals a petition for certiorari, mandamus and prohibition, docketed as CA-G.R. SP No. 27742. 13(13) On March 29, 1994, the Court of Appeals dismissed the petition for lack of merit. 14(14) A petition for review was thereafter filed, docketed as G.R. No. 114802, raising the issue of: WHETHER OR NOT, GIVEN THE ESTABLISHED FACTS AND CIRCUMSTANCES ON RECORD AND THE LAW AND JURISPRUDENCE APPLICABLE TO THE MATTER, THE RESPONDENT COURT ERRED IN HOLDING THAT, INASMUCH AS BOTH THE CIVIL ACTION AND THE ADMINISTRATIVE PROCEEDINGS HERE INVOLVED MAY CO-EXIST AND THE LAW DOES NOT PROVIDE FOR ANY PREFERENCE BY ONE OVER THE OTHER, THE RESPONDENT DIRECTOR HAD JURISDICTION TO RULE AS HE DID AND HAD NOT INCURRED ANY GRAVE ABUSE OF DISCRETION CORRECTIBLE BY THE EXTRAORDINARY REMEDIES OF CERTIORARI, PROHIBITION AND MANDAMUS. 15(15)

On February 2, 1998, G.R. Nos. 111580 and 114802 were ordered consolidated. cSCTID

The core issue is simply whether, despite the institution of an Inter Partes case for cancellation of a mark with the BPTTT (now the Bureau of Legal Affairs, Intellectual Property Office) by one party, the adverse party can file a subsequent action for infringement with the regular courts of justice in connection with the same registered mark. We rule in the affirmative. Section 151.2 of Republic Act No. 8293, otherwise known as the Intellectual Property Code, provides, as follows — SECTION 151.2. Notwithstanding the foregoing provisions, the court or the administrative agency vested with jurisdiction to hear and adjudicate any action to enforce the rights to a registered mark shall likewise exercise Copyright 1994-2014

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jurisdiction to determine whether the registration of said mark may be cancelled in accordance with this Act. The filing of a suit to enforce the registered mark with the proper court or agency shall exclude any other court or agency from assuming jurisdiction over a subsequently filed petition to cancel the same mark. On the other hand, the earlier filing of petition to cancel the mark with the Bureau of Legal Affairs shall not constitute a prejudicial question that must be resolved before an action to enforce the rights to same registered mark may be decided. (Italics provided)

Similarly, Rule 8, Section 7, of the Regulations on Inter Partes Proceedings, provides to wit SECTION 7. Effect of filing of a suit before the Bureau or with the proper court. — The filing of a suit to enforce the registered mark with the proper court or Bureau shall exclude any other court or agency from assuming jurisdiction over a subsequently filed petition to cancel the same mark. On the other hand, the earlier filing of petition to cancel the mark with the Bureau shall not constitute a prejudicial question that must be resolved before an action to enforce the rights to same registered mark may be decided. (Italics supplied)

Hence, as applied in the case at bar, the earlier institution of an Inter Partes case by the Shangri-La Group for the cancellation of the "Shangri-La" mark and "S" device/logo with the BPTTT cannot effectively bar the subsequent filing of an infringement case by registrant Developers Group. The law and the rules are explicit. The rationale is plain: Certificate of Registration No. 31904, upon which the infringement case is based, remains valid and subsisting for as long as it has not been cancelled by the Bureau or by an infringement court. As such, Developers Group's Certificate of Registration in the principal register continues as "'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." 16(16) Since the certificate still subsists, Developers Group may thus file a corresponding infringement suit and recover damages from any person who infringes upon the former's rights. 17(17) Furthermore, the issue raised before the BPTTT is quite different from that raised in the trial court. The issue raised before the BPTTT was whether the mark registered by Developers Group is subject to cancellation, as the Shangri-La Group claims prior ownership of the disputed mark. On the other hand, the issue raised before the trial court was whether the Shangri-La Group infringed upon the rights of Developers Group within the contemplation of Section 22 of Republic Act 166. Copyright 1994-2014

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The case of Conrad and Company, Inc. v. Court of Appeals 18(18) is in point. We held: We cannot see any error in the above disquisition. It might be mentioned that while an application for the administrative cancellation of a registered trademark on any of the grounds enumerated in Section 17 of Republic Act No. 166, as amended, otherwise known as the Trade-Mark Law, falls under the exclusive cognizance of BPTTT (Sec. 19, Trade-Mark Law), an action, however, for infringement or unfair competition, as well as the remedy of injunction and relief for damages, is explicitly and unquestionably within the competence and jurisdiction of ordinary courts. xxx

xxx

xxx

Surely, an application with BPTTT for an administrative cancellation of a registered trade mark cannot per se have the effect of restraining or preventing the courts from the exercise of their lawfully conferred jurisdiction. A contrary rule would unduly expand the doctrine of primary jurisdiction which, simply expressed, would merely behoove regular courts, in controversies involving specialized disputes, to defer to the findings or resolutions of administrative tribunals on certain technical matters. This rule, evidently, did not escape the appellate court for it likewise decreed that for "good cause shown, the lower court, in its sound discretion, may suspend the action pending outcome of the cancellation proceedings" before the BPTTT.

However, while the instant Petitions have been pending with this Court, the infringement court rendered a Decision, dated March 8, 1996, in Civil Case No. Q-91-8476, 19(19) the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff Developers Group of Companies, Inc. and against defendants Shangri-La International Hotel Management, Ltd., Shangri-La Properties, Inc., Makati Shangri-La Hotel and Resort, Inc., and Kuok Philippine Properties, Inc. — a)

Upholding the validity of the registration of the service mark "Shangri-La" and "S-Logo" in the name of plaintiff;

b)

Declaring defendants' use of said mark and logo as an infringement of plaintiff's right thereto;

c)

Ordering defendants, their representatives, agents, licensees, assignees and other persons acting under their authority and with their permission, to permanently cease and desist from using and/or continuing to use said

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mark and logo, or any copy, reproduction or colorable imitation thereof, in the promotion, advertisement, rendition of their hotel and allied projects and services or in any other manner whatsoever; d)

Ordering defendants to remove said mark and logo from any premises, objects, materials and paraphernalia used by them and/or destroy any and all prints, signs, advertisements or other materials bearing said mark and logo in their possession and/or under their control; and

e)

Ordering defendants, jointly and severally, to indemnify plaintiff in the amounts of P2,000,000.00 as actual and compensatory damages, P500,000.00 as attorney's fees and expenses of litigation.

Let a copy of this Decision be certified to the Director, Bureau of Patents, Trademarks and Technology Transfer, for his information and appropriate action in accordance with the provisions of Section 25, Republic Act No. 166. Costs against defendants. SO ORDERED. 20(20)

The said Decision is now on appeal with respondent Court of Appeals. 21(21) CADSHI

Following both law and the jurisprudence enunciated in Conrad and Company, Inc. v. Court of Appeals, 22(22) the infringement case can and should proceed independently from the cancellation case with the Bureau so as to afford the owner of certificates of registration redress and injunctive writs. In the same light, so must the cancellation case with the BPTTT (now the Bureau of Legal Affairs, Intellectual Property Office) continue independently from the infringement case so as to determine whether a registered mark may ultimately be cancelled. However, the Regional Trial Court, in granting redress in favor of Developers Group, went further and upheld the validity and preference of the latter's registration over that of the Shangri-La Group. There can be no denying that the infringement court may validly pass upon the right of registration. Section 161 of Republic Act No. 8293 provides to wit SECTION 161. Authority to Determine Right to Registration — In any action involving a registered mark the court may determine the right to registration, order the cancellation of the registration, in whole or in part, and Copyright 1994-2014

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otherwise rectify the register with respect to the registration of any party to the action in the exercise of this. Judgment and orders shall be certified by the court to the Director, who shall make appropriate entry upon the records of the Bureau, and shall be controlled thereby. (Sec. 25, R.A. No. 166a). (Italics supplied)

With the decision of the Regional Trial Court upholding the validity of the registration of the service mark "Shangri-La" and "S" logo in the name of Developers Group, the cancellation case filed with the Bureau hence becomes moot. To allow the Bureau to proceed with the cancellation case would lead to a possible result contradictory to that which the Regional Trial Court has rendered, albeit the same is still on appeal. Such a situation is certainly not in accord with the orderly administration of justice. In any event, the Court of Appeals has the competence and jurisdiction to resolve the merits of the said RTC decision. We are not unmindful of the fact that in G.R. No. 114802, the only issue submitted for resolution is the correctness of the Court of Appeals' decision sustaining the BPTTT's denial of the motion to suspend the proceedings before it. Yet, to provide a judicious resolution of the issues at hand, we find it apropos to order the suspension of the proceedings before the Bureau pending final determination of the infringement case, where the issue of the validity of the registration of the subject trademark and logo in the name of Developers Group was passed upon. WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing G.R. No. 111580 for being moot and academic, and ordering the Bureau of Legal Affairs, Intellectual Property Office, to suspend further proceedings in Inter Partes Case No. 3145, to await the final outcome of the appeal in Civil Case No. Q-91-8476. SO ORDERED. Davide, Jr., C.J., Puno and Pardo, JJ., concur. Kapunan, J., took no part. )RRWQRWHV 1. 2. 3. 4. 5.

Rollo, G.R. No. 111580, pp. 59-64. Ibid., pp. 80-81. Id., pp. 82-88. Id., pp. 94-99. Id., pp. 118-119.

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6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.

Id., pp. 120-144. Id., pp. 37-49; penned by Associate Justice Alfredo Marigomen and concurred in by Associate Justices Santiago M. Kapunan and Cancio C. Garcia. Id., p. 51. Id., p. 17. Rollo, G.R. No. 114802, pp. 94-98. Ibid., pp. 99-103. Id., at p. 110. Id., pp. 111-130. Id., pp. 42-59; Associate Justice Cezar D. Francisco, ponente, Associate Justices Manuel C. Herrera and Buenaventura J. Guerrero, concurring. Id., p. 19. Republic Act No. 166, Section 20. Id., at Sections 22 and 23. G.R. No. 115115, 246 SCRA 691 [1995]. See Manifestation and Motion to Dismiss, Annex "A", Rollo, G.R. No. 11150, pp. 359-366. Id., at pp. 365-366. Rollo, p. 320. Supra.

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SECOND DIVISION [G.R. No. 78298. January 30, 1989.] WOLVERINE WORLDWIDE, INC., petitioner, YV HONORABLE COURT OF APPEALS AND LOLITO P. CRUZ, respondents. K.V. Faylona & Associates for petitioner. Florencio Z. Sioson for private respondent Lolito P. Cruz. SYLLABUS 1. REMEDIAL LAW; CIVIL ACTIONS; RES JUDICATA; REQUISITES. — A judgment to be a bar to a subsequent case, the following requisites must concur: (1) it must be a final judgment; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be identity between the two cases, as to parties, subject matter, and cause of action. 2. ID.; ID.; FINALITY OF JUDGMENT OR ORDER, HOW DETERMINED. — A judgment or order is final, as to give it the authority of res judicata, if it can no longer be modified by the court issuing it or by any other court. 3. ID.; ID.; RES JUDICATA; EQUALLY APPLICABLE TO CASES AND PROCEEDINGS BEFORE THE PHILIPPINE PATENT OFFICE. — Generally, the fundamental principle of res judicata applies to all cases and proceedings in whatever form they may be. We now expressly affirm that this principle applies, in the appropriate cases, to proceedings for cancellation of trademarks before the Philippine Patent Office (now Bureau of Patents, Trademarks and Technology Transfer). 4. ID.; ID.; ID.; ID.; CASE AT BAR. — Between the earlier petitions and the present one there is substantial identity of parties, subject matter, and cause of action. The petitioner in all of these cases is Wolverine Worldwide, Inc. The respondent-registrant in this case is the assignee of Randelson Agro-Industrial Development, Inc. (formerly known as Randelson Shoes, Inc.) which in turn, acquired its right from Ramon Angeles, the original respondents-registrant. As regards the Copyright 1994-2014

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subject matter, all of these cases refer to the cancellation of registration of the trademark HUSH PUPPIES and DEVICE of a Dog. Finally, there is identity of cause of action, which is the alleged wrongful or erroneous registration of the trademark. "Res judicata now bars the petitioner from reopening, by way of another petition for cancellation (the present Inter Partes Case No. 1807), the issue of ownership of the trademark HUSH PUPPIES. Otherwise, there will never be an end to litigation. 5. MERCANTILE LAW; TRADEMARK; PROTECTION AGAINST UNFAIR COMPETITION, GUARANTEED UNDER THE TRADEMARK LAW. — The protection against unfair competition, and other benefits, accorded to owners of internationally known marks, as mandated by the Paris Convention, is already guaranteed under the Trademark Law. 6. ID.; ID.; OWNERSHIP, BASIS OF REGISTRATION. — Ownership is the basis of registration of a trademark.

DECISION

SARMIENTO, J : p

The subject of this petition for review is the resolution of the Court of Appeals 1(1) granting the private respondents' motion for reconsideration and reviving the decision of the Director of Patents which ordered the dismissal, on the ground of res judicata, of Inter Partes Case No. 807 instituted by the petitioner herein. On February 8, 1984, the petitioner, a foreign corporation organized and existing under the laws of the United States, brought a petition before the Philippine Patent Office, docketed as Inter Partes Case No. 1807, for the cancellation of Certificate of Registration No. 24986-B of the trademark HUSH PUPPIES and DOG DEVICE issued to the private respondent, a Filipino citizen. In support of its petition for cancellation, the petitioner alleged, inter alia, that it is the registrant of the internationally known trademark HUSH PUPPIES and the DEVICE of a Dog in the United States and in other countries which are members of the Paris Convention for the Protection of Industrial Property; that the goods sold by the private respondent, on the one hand, and by the petitioner, on the other hand, belong to the same class such that the private respondent's use of the same trademark Copyright 1994-2014

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in the Philippines (which is a member of said Paris Convention) in connection with the goods he sells constitutes an act of unfair competition, as defined in the Paris Convention. Subsequently, the private respondent moved to dismiss the petition on the ground of res judicata, averring that in 1973, or more than ten years before this petition (Inter Partes Case No. 1807) was filed, the same petitioner filed two petitions for cancellation (Inter Partes Cases Nos. 700 and 701) and was a party to an interference proceeding (Inter Partes Case No. 709), all of which involved the trademark HUSH PUPPIES and DEVICE, before the Philippine Patent Office. The Director of Patents had ruled in all three inter partes cases in favor of Ramon Angeles, the private respondent's predecessor-in-interest, to wit: WHEREFORE, for all the foregoing considerations, 1. The petitions seeking cancellation of Registration Nos. SR-1099 and SR-1526, respectively, are both denied and accordingly DISMISSED; 2. Respondent-Registrant/Junior Party-Applicant, Roman Angeles, is hereby adjudged as the prior user and adopter of the trademark HUSH PUPPIES & DEVICE, under Appl. Serial No. 17174, and therefore, the same given due course; and 3. Registration No. 14969 of Dexter Sales Company, assignor to Wolverine Worldwide, Inc., covering the trademark HUSH PUPPIES & Representation of a Dogie Head, is hereby CANCELLED. 2(2)

On June 29, 1979, the Court of Appeals affirmed the above decision, finding the same to be in accordance with law and supported by substantial evidence. 3(3) In the present case, after both parties had submitted their respective memoranda, the Director of Patents rendered the questioned decision (in Inter Partes Case No. 1807), the dispositive portion of which states: WHEREFORE, in view of the foregoing considerations this Office is constrained to hold that Respondent's Motion to Dismiss be, as it is hereby, GRANTED and that the subject Petition for Cancellation be, as it is hereby DISMISSED. Accordingly, Certificate of Registration No. 24986-B issued on May 3, 1983 to the herein Respondent-Registrant, Lolito P. Cruz, for the trademark "HUSH PUPPIES" for use on shoes is, as it is hereby, declared valid and subsisting for the duration of its term unless sooner cancelled in accordance Copyright 1994-2014

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with law. 4(4)

On appeal, the Court of Appeals at first set aside the Director's decision; 5(5) however, upon reconsideration the latter was revived. 6(6) The principal legal question raised in this petition for review is whether or not the present petition for cancellation (Inter Partes Case No. 1807) is barred by res judicata in the light of the final and executory decision in Inter Partes Cases Nos. 700, 701, and 709. cdll

We rule in the affirmative. The Court has repeatedly held that for a judgment to be a bar to a subsequent case, the following requisites must concur: (1) it must be a final judgment; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be identity between the two cases, as to parties, subject matter, and cause of action. 7(7) Contrary to the petitioner's assertion, the judgment in Inter Partes Cases Nos. 700, 701, and 709 had long since become final and executory. That Sec. 17 of Republic Act 166, also known as the Trademark Law, allows the cancellation of a registered trademark is not a valid premise for the petitioner's proposition that a decision granting registration of a trademark cannot be imbued with the character of absolute finality as is required in res judicata. A judgment or order is final, as to give it the authority of res judicata, if it can no longer be modified by the court issuing it or by any other court. 8(8) In the case at bar, the decision of the Court of Appeals affirming that of the Director of Patents, in the cancellation cases filed in 1973, was never appealed to us. Consequently, when the period to appeal from the Court of Appeals to this Court lapsed, with no appeal having been perfected, the foregoing judgment denying cancellation of registration in the name of private respondent's predecessor-in-interest but ordering cancellation of registration in the name of the petitioner's predecessor-in-interest, became the settled law in the case. In the words of the Court of Appeals: The subsequent failure of appellant-oppositor to elevate the decision of the Court of Appeals, which affirmed the ruling of the Director of Patents, to the Supreme Court, sounded the death knell of appellant-oppositor's instant case. Having become final and executory, the decision in Case No. 967 now bars the prosecution of the present action under the principle of res judicata. 9(9)

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judicata applies to all cases and proceedings in whatever form they may be. 10(10) We now expressly affirm that this principle applies, in the appropriate cases, to proceedings for cancellation of trademarks before the Philippine Patent Office (now Bureau of Patents, Trademarks and Technology Transfer). In Ipekjan Merchandising Co., Inc. vs Court of Tax Appeals, we said: To say that the doctrine applies exclusively to decisions rendered by what are usually understood as courts would be to unreasonably circumscribe the scope thereof. The more equitable attitude is to allow extension of the defense to decisions of bodies upon whom judicial powers have been conferred. 11(11)

Undoubtedly, final decisions, orders, and resolutions, of the Director of Patents are clothed with a judicial character as they are, in fact, reviewable by the Court of Appeals and by us. The subject judgment is undeniably on the merits of the case, rendered after both parties have actually submitted their evidence. Between the earlier petitions and the present one there is substantial identity of parties, subject matter, and cause of action. The petitioner in all of these cases is Wolverine Worldwide, Inc. The respondent-registrant in this case is the assignee of Randelson Agro-Industrial Development, Inc. (formerly known as Randelson Shoes, Inc.) which in turn, acquired its right from Ramon Angeles, the original respondents-registrant. As regards the subject matter, all of these cases refer to the cancellation of registration of the trademark HUSH PUPPIES and DEVICE of a Dog. Finally, there is identity of cause of action, which is the alleged wrongful or erroneous registration of the trademark. It is argued, however, that res judicata does not apply in this particular instance because when the May 9, 1977 decision was handed down by the Director of Patents, Executive Order No. 913 dated October 7, 1983 and the resulting memorandum of Minister Roberto Ongpin dated October 25, 1983 had not yet been issued. (The validity of this memorandum was later upheld by this Court in La Chemise Lacoste, S.A. vs. Fernandez and Sujanani vs. Ongpin). 12(12) The petitioner underscores the following specific directive contained in the abovementioned memorandum of Minister Ongpin for the Director of Patents: LexLib

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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 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. 13(13)

It is thus contended that despite the previous grant of registration to the private respondent, the present petition for cancellation could still be brought, and the same should be granted by the Director of Patents, pursuant to the abovequoted clause. Stated otherwise, the petitioner suggests that the petition is not barred by res judicata because while the former petitions were filed under Republic Act 166, the present one was brought pursuant to the cited memorandum which expressly sanctions the cancellation of registration of a trademark granted even prior to the same memorandum. In the first place, the subject memorandum never amended, nor was it meant to amend, the Trademark Law. It did not indicate a new policy with respect to the registration in the Philippines of world-famous trademarks. The protection against unfair competition, and other benefits, accorded to owners of internationally known marks, as mandated by the Paris Convention, is already guaranteed under the Trademark Law. 14(14) Thus, the subject memorandum, as well as Executive Order No. 913, merely reiterated the policy already existing at the time of its issuance. As accurately enunciated by the Court of Appeals: Such being the case, appellant-oppositor could have properly ventilated the issue of whether or not it fell within the protective ambit of the Paris Convention in the previous proceedings which culminated in the registration of the Hush Puppies trademark in appellee-movant's name, i.e., in Case No. 967 before the Philippine Patent Office. The Director of Patents in that case, after hearing both parties and thereafter, deciding that appellee-movant was entitled to the registration of the trademark in its name, must have concluded that appellant-oppositor had not established the fact that it was entitled to the application of the favorable provisions of the Paris Convention. 15(15)

Furthermore, we agree with the conclusion of the Court of Appeals that the memorandum discussed here is subject to the doctrine of res judicata. The same memorandum has, in the words of the Court of Appeals: . . . no room for application where the oppositor previously availed of Copyright 1994-2014

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the same remedy to contest and cancel the registration of subject trademark but did not prevail, against the same registrant regarding the same subject matter (the trademark in question) and for the same cause of action. This is the more so when, as in this present controversy, the certificate of registration, cancellation of which is sought anew, was issued by the Patent Office after due hearing in the prior appropriate inter partes case, pursuant to a decision of the Director of Patents which was affirmed on appeal by the Court of Appeals, and has become final and executory. 16(16)

In the same light, the repeated filing of petitions for cancellation founded on substantially the same ground as provided in Sec. 17 of the Trademark Law, we rule, is not permissible. For to allow without any limitation whatsoever such a practice would be clearly violative of the time-honored doctrine of res judicata. The present petition for cancellation raises basically the same issue of ownership of the trademark HUSH PUPPIES, which issue was already discussed and settled in Inter Partes Cases Nos. 700, 701, and 709. As pointed out by the private respondent, the petitioner itself expressly recognized the issue of ownership when in the brief it filed in the Court of Appeals it included the following in the assignment of errors: That the Philippine Patent Office erred in holding that respondent-appellee has established prior use and adoption of the trademark HUSH PUPPIES and is the true and lawful owner thereof, instead of petitioner-appellant herein. (Emphasis supplied). 17(17)

The aforesaid cases, involving as they were the registration of a trademark, necessarily litigated the issue of ownership of such trademark because ownership is, indeed, the basis of registration of a trademark. 18(18) Thus, Section 4 of R.A. 166 provides: ". . . The owner of a trademark, trade name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register . . . "Res judicata now bars the petitioner from reopening, by way of another petition for cancellation (the present Inter Partes Case No. 1807), the issue of ownership of the trademark HUSH PUPPIES. Otherwise, there will never be an end to litigation. WHEREFORE, the petition for review is DENIED. No. costs. SO ORDERED. Paras, Padilla and Regalado, JJ., concur. Melencio-Herrera, J., took no part in the deliberations. Copyright 1994-2014

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)RRWQRWHV 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

Purisima, Fidel P., J., ponente; Nocon, Rodolfo A. and Ramirez, Pedro A., JJ., concurring. Decision, 4; Rollo, 31. Ibid. Ibid., 1; 28. Ibid., 10; 37. No. L-15430, Sept. 30, 1963, 9 SCRA 75. Deang vs. Intermediate Appellate Court, No. L-71313, Sept. 24, 1987, 154 SCRA 254. 2 Moran, Comments on the Rules of Court, 351-352 (1979). Resolution, 3; Rollo, 23. Republic vs. Director of Lands, No. L-35376, Sept. 11, 1980, 99 SCRA 657. No. L-15430, Sept. 30, 1963, 9 SCRA 75. Nos. L-63796-97, May 21, 1984 and No. L-65659, May 21, 1984, respectively, 129 SCRA 373. Ibid., 402. Sec. 37, Republic Act 166. Resolution, 3; Rollo, 23. Ibid., 6; 26. Memorandum of the Private Respondent, 8; Rollo, 138. Operators, Inc. vs. Director of Patents, No. L-17901, Oct. 29, 1965, 15 SCRA 148.

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SECOND DIVISION [G.R. No. 169974. April 20, 2010.] SUPERIOR COMMERCIAL ENTERPRISES, INC., petitioner, vs. KUNNAN ENTERPRISES LTD. AND SPORTS CONCEPT & DISTRIBUTOR, INC., respondents.

DECISION

BRION, J : p

We review in this petition for review on certiorari 1(1) the (1) decision 2(2) of the Court of Appeals (CA) in CA-G.R. CV No. 60777 that reversed the ruling of the Regional Trial Court of Quezon City, Branch 85 (RTC), 3(3) and dismissed the petitioner Superior Commercial Enterprises, Inc.'s (SUPERIOR) complaint for trademark infringement and unfair competition (with prayer for preliminary injunction) against the respondents Kunnan Enterprises Ltd. (KUNNAN) and Sports Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA resolution 4(4) that denied SUPERIOR's subsequent motion for reconsideration. The RTC decision that the CA reversed found the respondents liable for trademark infringement and unfair competition, and ordered them to pay SUPERIOR P2,000,000.00 in damages, P500,000.00 as attorney's fees, and costs of the suit. THE FACTUAL ANTECEDENTS On February 23, 1993, SUPERIOR 5(5) filed a complaint for trademark infringement and unfair competition with preliminary injunction against KUNNAN 6(6) and SPORTS CONCEPT 7(7) with the RTC, docketed as Civil Case No. Q-93014888. In support of its complaint, SUPERIOR first claimed to be the owner of the Copyright 1994-2014

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trademarks, trading styles, company names and business names 8(8) "KENNEX", 9(9) "KENNEX & DEVICE", 10(10) "PRO KENNEX" 11(11) and "PRO-KENNEX" (disputed trademarks). 12(12) Second, it also asserted its prior use of these trademarks, presenting as evidence of ownership the Principal and Supplemental Registrations of these trademarks in its name. Third, SUPERIOR also alleged that it extensively sold and advertised sporting goods and products covered by its trademark registrations. Finally, SUPERIOR presented as evidence of its ownership of the disputed trademarks the preambular clause of the Distributorship Agreement dated October 1, 1982 (Distributorship Agreement) it executed with KUNNAN, which states: HCIaDT

Whereas, KUNNAN intends to acquire the ownership of KENNEX trademark registered by the [sic] Superior in the Philippines. Whereas, the [sic] Superior is desirous of having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines." [Emphasis supplied.] 13(13)

In its defense, KUNNAN disputed SUPERIOR's claim of ownership and maintained that SUPERIOR — as mere distributor from October 6, 1982 until December 31, 1991 — fraudulently registered the trademarks in its name. KUNNAN alleged that it was incorporated in 1972, under the name KENNEX Sports Corporation for the purpose of manufacturing and selling sportswear and sports equipment; it commercially marketed its products in different countries, including the Philippines since 1972. 14(14) It created and first used "PRO KENNEX," derived from its original corporate name, as a distinctive trademark for its products in 1976. KUNNAN also alleged that it registered the "PRO KENNEX" trademark not only in the Philippines but also in 31 other countries, and widely promoted the "KENNEX" and "PRO KENNEX" trademarks through worldwide advertisements in print media and sponsorships of known tennis players. On October 1, 1982, after the expiration of its initial distributorship agreement with another company, 15(15) KUNNAN appointed SUPERIOR as its exclusive distributor in the Philippines under a Distributorship Agreement whose pertinent provisions state: 16(16) Whereas, KUNNAN intends to acquire ownership of KENNEX trademark registered by the Superior in the Philippines. Whereas, the Superior is desirous of having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines. Now, therefore, the parties hereto agree as follows: Copyright 1994-2014

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1.

KUNNAN in accordance with this Agreement, will appoint the sole distributorship right to Superior in the Philippines, and this Agreement could be renewed with the consent of both parties upon the time of expiration. aTcIEH

2.

The Superior, in accordance with this Agreement, shall assign the ownership of KENNEX trademark, under the registration of Patent Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of its ten (10) years contract of distributorship, and it is required that the ownership of the said trademark shall be genuine, complete as a whole and without any defects.

3.

KUNNAN will guarantee to the Superior that no other third parties will be permitted to supply the KENNEX PRODUCTS in the Philippines except only to the Superior. If KUNNAN violates this stipulation, the transfer of the KENNEX trademark shall be null and void.

4.

If there is a necessity, the Superior will be appointed, for the protection of interest of both parties, as the agent in the Philippines with full power to exercise and granted the power of attorney, to pursue any case of Pirating, Infringement and Counterfeiting the [sic] KENNEX trade mark in the Philippine territory.

5.

The Superior will be granted from [sic] KUNNAN's approval before making and selling any KENNEX products made in the Philippines and the other countries, and if this is the situation, KUNNAN is entitled to have a royalty of 5%-8% of FOB as the right. SIcEHC

6.

Without KUNNAN's permission, the Superior cannot procure other goods supply under KENNEX brand of which are not available to supply [sic] by KUNNAN. However, in connection with the sporting goods, it is permitted that the Superior can procure them under KENNEX brand of which are not available to be supplied by KUNNAN. [Emphasis supplied.]

Even though this Agreement clearly stated that SUPERIOR was obligated to assign the ownership of the KENNEX trademark to KUNNAN, the latter claimed that the Certificate of Registration for the KENNEX trademark remained with SUPERIOR because Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIOR's President and General Manager, misled KUNNAN's officers into believing that KUNNAN was not qualified to hold the same due to the "many requirements set by the Philippine Patent Office" that KUNNAN could not meet. 17(17) KUNNAN further asserted that Copyright 1994-2014

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SUPERIOR deceived it into assigning its applications for registration of the "PRO KENNEX" trademark in favor of SUPERIOR, through an Assignment Agreement dated June 14, 1983 whose pertinent provisions state: 18(18) 1. In consideration of the distributorship relationship between KUNNAN and Superior, KUNNAN, who is the seller in the distributorship relationship, agrees to assign the following trademark applications owned by itself in the Philippines to Superior who is the buyer in the distributorship relationship. Trademark PROKENNEX PROKENNEX PROKENNEX

Application Number

Class

49999 49998 49997

28 25 18

2. Superior shall acknowledge that KUNNAN is still the real and truthful owner of the abovementioned trademarks, and shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN. 3. Superior agrees that it will return back the abovementioned trademarks to KUNNAN without hesitation at the request of KUNNAN at any time. KUNNAN agrees that the cost for the concerned assignment of the abovementioned trademarks shall be compensated by KUNNAN. TAHIED

4. Superior agrees that the abovementioned trademarks when requested by KUNNAN shall be clean and without any incumbency. 5. Superior agrees that after the assignment of the abovementioned trademarks, it shall have no right to reassign or license the said trademarks to any other parties except KUNNAN. [Emphasis supplied]

Prior to and during the pendency of the infringement and unfair competition case before the RTC, KUNNAN filed with the now defunct Bureau of Patents, Trademarks and Technology Transfer 19(19) separate Petitions for the Cancellation of Registration Trademark Nos. 41032, SR 6663, 40326, 39254, 4730 and 49998, docketed as Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813 and 3814, as well as Opposition to Application Serial Nos. 84565 and 84566, docketed as Inter Partes Cases Nos. 4101 and 4102 (Consolidated Petitions for Cancellation) involving the KENNEX and PRO KENNEX trademarks. 20(20) In essence, KUNNAN filed the Petition for Cancellation and Opposition on the ground that SUPERIOR fraudulently registered and appropriated the disputed trademarks; as Copyright 1994-2014

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mere distributor and not as lawful owner, it obtained the registrations and assignments of the disputed trademarks in violation of the terms of the Distributorship Agreement and Sections 2-A and 17 of Republic Act No. 166, as amended. 21(21) On December 3, 1991, upon the termination of its distributorship agreement with SUPERIOR, KUNNAN appointed SPORTS CONCEPT as its new distributor. Subsequently, KUNNAN also caused the publication of a Notice and Warning in the Manila Bulletin's January 29, 1993 issue, stating that (1) it is the owner of the disputed trademarks; (2) it terminated its Distributorship Agreement with SUPERIOR; and (3) it appointed SPORTS CONCEPT as its exclusive distributor. This notice prompted SUPERIOR to file its Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction against KUNNAN. 22(22) The RTC Ruling On March 31, 1998, the RTC issued its decision 23(23) holding KUNNAN liable for trademark infringement and unfair competition. The RTC also issued a writ of preliminary injunction enjoining KUNNAN and SPORTS CONCEPT from using the disputed trademarks. DaCTcA

The RTC found that SUPERIOR sufficiently proved that it was the first user and owner of the disputed trademarks in the Philippines, based on the findings of the Director of Patents in Inter Partes Case No. 1709 and 1734 that SUPERIOR was "rightfully entitled to register the mark 'KENNEX' as user and owner thereof." It also considered the "Whereas clause" of the Distributorship Agreement, which categorically stated that "KUNNAN intends to acquire ownership of [the] KENNEX trademark registered by SUPERIOR in the Philippines." According to the RTC, this clause amounts to KUNNAN's express recognition of SUPERIOR's ownership of the KENNEX trademarks. 24(24) KUNNAN and SPORTS CONCEPT appealed the RTC's decision to the CA where the appeal was docketed as CA-G.R. CV No. 60777. KUNNAN maintained that SUPERIOR was merely its distributor and could not be the owner of the disputed trademarks. SUPERIOR, for its part, claimed ownership based on its prior use and numerous valid registrations. Intervening Developments: The IPO and CA Rulings In the course of its appeal to the CA, KUNNAN filed on December 19, 2003 a Copyright 1994-2014

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Manifestation and Motion praying that the decision of the Bureau of Legal Affairs (BLA) of the Intellectual Property Office (IPO), dated October 30, 2003, in the Consolidated Petitions for Cancellation be made of record and be considered by the CA in resolving the case. 25(25) The BLA ruled in this decision — In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and convincingly established its rights to the mark "PRO KENNEX". It was proven that actual use by Respondent-Registrant is not in the concept of an owner but as a mere distributor (Exhibits "I", "S" to "S-1", "P" and "P-1" and "Q" and "Q-2") and as enunciated in the case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50 SCRA 406, "a mere distributor of a product bearing a trademark, even if permitted to use said trademark has no right to and cannot register the said trademark." EAcCHI

WHEREFORE, there being sufficient evidence to prove that the Petitioner-Opposer (KUNNAN) is the prior user and owner of the trademark "PRO-KENNEX", the consolidated Petitions for Cancellation and the Notices of Opposition are hereby GRANTED. Consequently, the trademark "PRO-KENNEX" bearing Registration Nos. 41032, 40326, 39254, 4730, 49998 for the mark PRO-KENNEX issued in favor of Superior Commercial Enterprises, Inc., herein Respondent-Registrant under the Principal Register and SR No. 6663 are hereby CANCELLED. Accordingly, trademark application Nos. 84565 and 84566, likewise for the registration of the mark PRO-KENNEX are hereby REJECTED. Let the file wrappers of PRO-KENNEX subject matter of these cases be forwarded to the Administrative Finance and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for information and update of its record. 26(26)

On February 4, 2005, KUNNAN again filed another Manifestation requesting that the IPO Director General's decision on appeal dated December 8, 2004, denying SUPERIOR's appeal, be given weight in the disposition of the case. 27(27) The dispositive portion of the decision reads: 28(28) WHEREFORE, premises considered, there is no cogent reason to disturb Decision No. 2003-35 dated 30 October 2003 rendered by the Director of the Bureau of Legal Affairs. Accordingly, the instant appeal is DENIED and the appealed decision is hereby AFFIRMED.

We take judicial notice that SUPERIOR questioned the IPO Director General's Copyright 1994-2014

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ruling before the Court of Appeals on a petition for review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 87928 (Registration Cancellation Case). On August 30, 2007, the CA rendered its decision dismissing SUPERIOR's petition. 29(29) On December 3, 2007, the CA decision was declared final and executory and entry of judgment was accordingly made. Hence, SUPERIOR's registration of the disputed trademarks now stands effectively cancelled. The CA Ruling On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777, reversing and setting aside the RTC's decision of March 31, 1998. 30(30) It dismissed SUPERIOR's Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction on the ground that SUPERIOR failed to establish by preponderance of evidence its claim of ownership over the KENNEX and PRO KENNEX trademarks. The CA found the Certificates of Principal and Supplemental Registrations and the "whereas clause" of the Distributorship Agreement insufficient to support SUPERIOR's claim of ownership over the disputed trademarks. cEaDTA

The CA stressed that SUPERIOR's possession of the aforementioned Certificates of Principal Registration does not conclusively establish its ownership of the disputed trademarks as dominion over trademarks is not acquired by the fact of registration alone; 31(31) at best, registration merely raises a presumption of ownership that can be rebutted by contrary evidence. 32(32) The CA further emphasized that the Certificates of Supplemental Registration issued in SUPERIOR's name do not even enjoy the presumption of ownership accorded to registration in the principal register; it does not amount to a prima facie evidence of the validity of registration or of the registrant's exclusive right to use the trademarks in connection with the goods, business, or services specified in the certificate. 33(33) In contrast with the failure of SUPERIOR's evidence, the CA found that KUNNAN presented sufficient evidence to rebut SUPERIOR's presumption of ownership over the trademarks. KUNNAN established that SUPERIOR, far from being the rightful owner of the disputed trademarks, was merely KUNNAN's exclusive distributor. This conclusion was based on three pieces of evidence that, to the CA, clearly established that SUPERIOR had no proprietary interest over the disputed trademarks. First, the CA found that the Distributorship Agreement, considered in its entirety, positively confirmed that SUPERIOR sought to be the KUNNAN's exclusive distributor. The CA based this conclusion on the following provisions of the Copyright 1994-2014

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Distributorship Agreement: (1) that SUPERIOR was "desirous of [being] appointed as the sole distributor by KUNNAN in the territory of the Philippines;" IHAcCS

(2) that "KUNNAN will appoint the sole distributorship right to Superior in the Philippines;" and (3) that "no third parties will be permitted to supply KENNEX PRODUCTS in the Philippines except only to Superior."

The CA thus emphasized that the RTC erred in unduly relying on the first whereas clause, which states that "KUNNAN intends to acquire ownership of [the] KENNEX trademark registered by SUPERIOR in the Philippines" without considering the entirety of the Distributorship Agreement indicating that SUPERIOR had been merely appointed by KUNNAN as its distributor. Second, the CA also noted that SUPERIOR made the express undertaking in the Assignment Agreement to "acknowledge that KUNNAN is still the real and truthful owner of the [PRO KENNEX] trademarks," and that it "shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN." To the CA, these provisions are clearly inconsistent with SUPERIOR's claim of ownership of the disputed trademarks. The CA also observed that although the Assignment Agreement was a private document, its authenticity and due execution was proven by the similarity of Mr. Tan Bon Diong's signature in the Distributorship Agreement and the Assignment Agreement. Third, the CA also took note of SUPERIOR's Letter dated November 12, 1986 addressed to Brig. Gen. Jose Almonte, identifying itself as the "sole and exclusive licensee and distributor in the Philippines of all its KENNEX and PRO-KENNEX products." Attached to the letter was an agreement with KUNNAN, identifying the latter as the "foreign manufacturer of all KENNEX products." The CA concluded that in this letter, SUPERIOR acknowledged its status as a distributor in its dealings with KUNNAN, and even in its transactions with third persons. Based on these reasons, the CA ruled that SUPERIOR was a mere distributor and had no right to the registration of the disputed trademarks since the right to register a trademark is based on ownership. Citing Section 4 of Republic Act No. 166 34(34) and established jurisprudence, 35(35) the CA held that SUPERIOR — as an exclusive distributor — did not acquire any proprietary interest in the principal's (KUNNAN's) trademark. SaIEcA

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The CA denied SUPERIOR's motion for reconsideration for lack of merit in its Resolution dated October 4, 2005. THE PETITION In the present petition, SUPERIOR raises the following issues: I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS NOT THE TRUE AND RIGHTFUL OWNER OF THE TRADEMARKS "KENNEX" AND "PRO-KENNEX" IN THE PHILIPPINES II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS A MERE DISTRIBUTOR OF RESPONDENT KUNNAN IN THE PHILIPPINES III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT OF QUEZON CITY IN CIVIL CASE NO. Q-93-14888, LIFTING THE PRELIMINARY INJUNCTION ISSUED AGAINST RESPONDENTS KUNNAN AND SPORTS CONCEPT AND DISMISSING THE COMPLAINT FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION WITH PRELIMINARY INJUNCTION

THE COURT'S RULING We do not find the petition meritorious. On the Issue of Trademark Infringement We first consider the effect of the final and executory decision in the Registration Cancellation Case on the present case. This decision — rendered after the CA decision for trademark infringement and unfair competition in CA-G.R. CV No. 60777 (root of the present case) — states: As to whether respondent Kunnan was able to overcome the presumption of ownership in favor of Superior, the former sufficiently Copyright 1994-2014

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established the fraudulent registration of the questioned trademarks by Superior. The Certificates of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal Register) for the KENNEX trademark were fraudulently obtained by petitioner Superior. Even before PROKENNEX products were imported by Superior into the Philippines, the same already enjoyed popularity in various countries and had been distributed worldwide, particularly among the sports and tennis enthusiasts since 1976. Riding on the said popularity, Superior caused the registration thereof in the Philippines under its name when it knew fully well that it did not own nor did it manufacture the PROKENNEX products. Superior claimed ownership of the subject marks and failed to disclose in its application with the IPO that it was merely a distributor of KENNEX and PROKENNEX products in the Philippines. CacHES

While Superior accepted the obligation to assign Certificates of Registration Nos. SR-4730 and 33487 to Kunnan in exchange for the appointment by the latter as its exclusive distributor, Superior however breached its obligation and failed to assign the same to Kunnan. In a letter dated 13 February 1987, Superior, through Mr. Tan Bon Diong, misrepresented to Kunnan that the latter cannot own trademarks in the Philippines. Thus, Kunnan was misled into assigning to Superior its (Kunnan's) own application for the disputed trademarks. In the same assignment document, however. Superior was bound to ensure that the PROKENNEX trademarks under Registration Nos. 40326, 39254, and 49998 shall be returned to Kunnan clean and without any incumbency when requested by the latter. In fine, We see no error in the decision of the Director General of the IPO which affirmed the decision of the Director of the Bureau of Legal Affairs canceling the registration of the questioned marks in the name of petitioner Superior and denying its new application for registration, upon a finding that Superior is not the rightful owner of the subject marks. WHEREFORE, the foregoing considered, the petition is DISMISSED.

The CA decided that the registration of the "KENNEX" and "PRO KENNEX" trademarks should be cancelled because SUPERIOR was not the owner of, and could not in the first place have validly registered these trademarks. Thus, as of the finality of the CA decision on December 3, 2007, these trademark registrations were effectively cancelled and SUPERIOR was no longer the registrant of the disputed trademarks. HICSTa

Section 22 of Republic Act No. 166, as amended ("RA 166"), 36(36) the law applicable to this case, defines trademark infringement as follows: Copyright 1994-2014

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Section 22. Infringement, what constitutes. — Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. [Emphasis supplied]

Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for infringement. Corollary to this, Section 19 of RA 166 provides that any right conferred upon the registrant under the provisions of RA 166 37(37) terminates when the judgment or order of cancellation has become final, viz.: Section 19. Cancellation of registration. — If the Director finds that a case for cancellation has been made out he shall order the cancellation of the registration. The order shall not become effective until the period for appeal has elapsed, or if appeal is taken, until the judgment on appeal becomes final. When the order or judgment becomes final, any right conferred by such registration upon the registrant or any person in interest of record shall terminate. Notice of cancellation shall be published in the Official Gazette. [Emphasis supplied.]

Thus, we have previously held that the cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final. 38(38) In the present case, by operation of law, specifically Section 19 of RA 166, the trademark infringement aspect of SUPERIOR's case has been rendered moot and academic in view of the finality of the decision in the Registration Cancellation Case. In short, SUPERIOR is left without any cause of action for trademark infringement since the cancellation of registration of a trademark deprived it of protection from infringement from the moment judgment or order of cancellation became final. To be sure, in a trademark infringement, title to the trademark is indispensable to a valid cause of action and such title is shown by its certificate of registration. 39(39) With its certificates of registration over the disputed trademarks effectively cancelled with finality, SUPERIOR's case for trademark infringement lost its legal basis and no Copyright 1994-2014

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longer presented a valid cause of action.

HEASaC

Even assuming that SUPERIOR's case for trademark infringement had not been rendered moot and academic, there can be no infringement committed by KUNNAN who was adjudged with finality to be the rightful owner of the disputed trademarks in the Registration Cancellation Case. Even prior to the cancellation of the registration of the disputed trademarks, SUPERIOR — as a mere distributor and not the owner — cannot assert any protection from trademark infringement as it had no right in the first place to the registration of the disputed trademarks. In fact, jurisprudence holds that in the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate before application for registration is filed. 40(40) Thus, the CA in the Registration Cancellation Case correctly held: As a mere distributor, petitioner Superior undoubtedly had no right to register the questioned mark in its name. Well-entrenched in our jurisdiction is the rule that the right to register a trademark should be based on ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply for the registration of the same. Under the Trademark Law, only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. An exclusive distributor does not acquire any proprietary interest in the principal's trademark and cannot register it in his own name unless it is has been validly assigned to him.

In addition, we also note that the doctrine of res judicata bars SUPERIOR's present case for trademark infringement. The doctrine of res judicata embraces two (2) concepts: the first is "bar by prior judgment" under paragraph (b) of Rule 39, Section 47, and the second is "conclusiveness of judgment" under paragraph (c) thereof. In the present case, the second concept — conclusiveness of judgment — applies. Under the concept of res judicata by conclusiveness of judgment, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit. 41(41) Stated differently, facts and issues actually and directly resolved in a former suit cannot again be raised in any future case between the Copyright 1994-2014

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same parties, even if the latter suit may involve a different cause of action. 42(42) This second branch of the principle of res judicata bars the re-litigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action. 43(43) acCTIS

Because the Registration Cancellation Case and the present case involve the same parties, litigating with respect to and disputing the same trademarks, we are bound to examine how one case would affect the other. In the present case, even if the causes of action of the Registration Cancellation Case (the cancellation of trademark registration) differs from that of the present case (the improper or unauthorized use of trademarks), the final judgment in the Registration Cancellation Case is nevertheless conclusive on the particular facts and issues that are determinative of the present case. To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion." 44(44) Based on these elements, we find it immediately obvious that the second element — the plaintiff's ownership of the mark — was what the Registration Cancellation Case decided with finality. On this element depended the validity of the registrations that, on their own, only gave rise to the presumption of, but was not conclusive on, the issue of ownership. 45(45) In no uncertain terms, the appellate court in the Registration Cancellation Case ruled that SUPERIOR was a mere distributor and could not have been the owner, and was thus an invalid registrant of the disputed trademarks. Significantly, these are the exact terms of the ruling the CA arrived at in the present petition now under our review. Thus, whether with one or the other, the ruling on the issue of ownership of the trademarks is the same. Given, however, the final and executory ruling in the Registration Cancellation Case on the issue of ownership that binds us and the parties, any further discussion and review of the issue of ownership — although the current CA ruling is legally correct and can stand on its own merits — becomes a pointless academic discussion. DaScHC

On the Issue of Unfair Competition Our review of the records shows that the neither the RTC nor the CA made any factual findings with respect to the issue of unfair competition. In its Complaint, Copyright 1994-2014

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SUPERIOR alleged that: 46(46) 17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises, Ltd., is intending to appoint the defendant Sports Concept and Distributors, Inc. as its alleged distributor for sportswear and sporting goods bearing the trademark "PRO-KENNEX." For this reason, on January 20, 1993, the plaintiff, through counsel, wrote the defendant Sports Concept and Distributor's, Inc. advising said defendant that the trademark "PRO-KENNEX" was registered and owned by the plaintiff herein. 18. The above information was affirmed by an announcement made by the defendants in The Manila Bulletin issue of January 29, 1993, informing the public that defendant Kunnan Enterprises, Ltd. has appointed the defendant Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and sporting goods and equipment bearing the trademarks "KENNEX and "PRO-KENNEX" which trademarks are owned by and registered in the name of plaintiff herein as alleged hereinabove. xxx

xxx

xxx

27. The acts of defendants, as previously complained herein, were designed to and are of the nature so as to create confusion with the commercial activities of plaintiff in the Philippines and is liable to mislead the public as to the nature and suitability for their purposes of plaintiff's business and the defendant's acts are likely to discredit the commercial activities and future growth of plaintiff's business.

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition 47(47) are (1) confusing similarity in the general appearance of the goods; and (2) intent to deceive the public and defraud a competitor. 48(48) Jurisprudence also formulated the following "true test" of unfair competition: whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to recover can exist. 49(49) DTSIEc

In the present case, no evidence exists showing that KUNNAN ever attempted Copyright 1994-2014

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to pass off the goods it sold (i.e., sportswear, sporting goods and equipment) as those of SUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to adduce any evidence to show that KUNNAN by the above-cited acts intended to deceive the public as to the identity of the goods sold or of the manufacturer of the goods sold. In McDonald's Corporation v. L.C. Big Mak Burger, Inc., 50(50) we held that there can be trademark infringement without unfair competition such as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. In this case, no issue of confusion arises because the same manufactured products are sold; only the ownership of the trademarks is at issue. Furthermore, KUNNAN's January 29, 1993 notice by its terms prevents the public from being deceived that the goods originated from SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer of the goods bearing the trademarks "KENNEX" and "PRO KENNEX." This notice states in full: 51(51) NOTICE AND WARNING Kunnan Enterprises Ltd. is the owner and first user of the internationally-renowned trademarks KENNEX and PRO KENNEX for sportswear and sporting goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks KENNEX and PRO KENNEX in the industrial property offices of at least 31 countries worldwide where KUNNAN Enterprises Ltd. has been selling its sportswear and sporting goods and equipment bearing the KENNEX and PRO KENNEX trademarks. Kunnan Enterprises Ltd. further informs the public that it had terminated its Distributorship Agreement with Superior Commercial Enterprises, Inc. on December 31, 1991. As a result, Superior Commercial Enterprises, Inc. is no longer authorized to sell sportswear and sporting goods and equipment manufactured by Kunnan Enterprises Ltd. and bearing the trademarks KENNEX and PRO KENNEX. xxx

xxx

xxx

In its place, KUNNAN has appointed SPORTS CONCEPT AND DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO KENNEX. The public is advised to buy sporting goods and equipment bearing these trademarks only from SPORTS CONCEPT AND DISTRIBUTORS, INC. to ensure that the products they are buying are Copyright 1994-2014

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manufactured by Kunnan Enterprises Ltd. [Emphasis supplied.]

CcAESI

Finally, with the established ruling that KUNNAN is the rightful owner of the trademarks of the goods that SUPERIOR asserts are being unfairly sold by KUNNAN under trademarks registered in SUPERIOR's name, the latter is left with no effective right to make a claim. In other words, with the CA's final ruling in the Registration Cancellation Case, SUPERIOR's case no longer presents a valid cause of action. For this reason, the unfair competition aspect of the SUPERIOR's case likewise falls. WHEREFORE, premises considered, we DENY Superior Commercial Enterprises, Inc.'s petition for review on certiorari for lack of merit. Cost against petitioner Superior Commercial Enterprises, Inc. TacESD

SO ORDERED. Carpio, Del Castillo, Abad and Perez, JJ., concur. )RRWQRWHV 1. 2.

3. 4. 5. 6. 7. 8.

9.

10.

Under Rule 45 of the RULES OF COURT. Dated June 22, 2005; penned by Associate Justice Japar B. Dimaampao and concurred in by Associate Justice Renato C. Dacudao and Associate Justice Edgardo F. Sundiam (both retired); rollo, pp. 33-50. CA rollo, pp. 11-22. Dated October 4, 2005; rollo, pp. 51-52. SUPERIOR is a domestic corporation duly organized under Philippine laws; id at 34. KUNNAN is foreign corporation organized under the laws of Taiwan, Republic of China, doing business in the Philippines; id. SPORTS CONCEPT is a domestic corporation organized under Philippine laws; id. SUPERIOR claimed that it registered the business name "PRO-KENNEX SPORTS PRODUCTS" with the Bureau of Domestic Trade on February 10, 1983 under Certificate of Registration No. 03767. It also claimed that it registered the business name "PRO-KENNEX (PHIL.) SPORTS PRODUCTS" with the Bureau of Domestic Trade on February 10, 1983 under Certificate of Registration No. 03767, which it renewed on April 4, 1988 with Certificate of Registration No. 14693 dated April 4, 1988; id at 35. SUPERIOR alleged that it first used the mark "KENNEX" in the Philippines on March 15, 1978 and registered the mark in its name under Supplemental Registration No. 34478 dated May 31, 1985 to be used for the following goods, namely: "tennis racket, pelota racket, pingpong racket, goal net, volleyball net and tennis shoulder bags;" id. at 12. SUPERIOR also claimed that it first used the mark "KENNEX & DEVICE OF

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11.

12.

13. 14.

15. 16. 17. 18. 19.

20. 21. 22. 23.

LETTER 'K' INSIDE A CIRCLE OF THORNS" in the Philippines on March 15, 1978; the mark was registered in its name under Supplemental Registration No. 4730 dated May 23, 1980 to be used for the following goods: "tennis racket, pelota racket, pingpong, squash racket, badminton racket, basketball, tennis ball, soccer ball, foot ball, badminton shuttlecock, sports clothing, head ban, wrist band, basketball goal net, tennis net, volleyball net, tennis shoulder bag, handbag and sport rubber shoes, tennis string;" id. SUPERIOR also alleged that the trademark "PROKENNEX" was first used in the Philippines by KUNNAN on August 1, 1982 and was registered under the former's name as assignee under Principal Certificate of Registration No. 39254 dated July 13, 1988 for the following goods: "handbags, travelling bags and trunks;" id. at 13. SUPERIOR also claimed that the trademark "PRO-KENNEX" was first used by KUNNAN on January 2, 1980 and is registered under the former's name as assignee under Principal Certificate of Registration No. 40326 dated August 12, 1988 for the following goods: "tennis rackets, squash rackets, racketball rackets, badminton rackets and fishing rods." However, SUPERIOR claims that it first used the trademark "PRO-KENNEX" with the word "ball design" and "tennis racket" on January 2, 1980 and is registered in its name under Certificate of Registration No. 41032 dated September 2, 1988 for the following sporting goods: "tennis racket and accessories." The trademark "PRO-KENNEX" with the design ball and racket is claimed to be first used by SUPERIOR on January 2, 1980 and is registered under Supplemental Certificate of Registration No. 6663 dated November 2, 1984 for the following goods: "sporting goods such as tennis racket and accessories;" id. Id. at 102. KUNNAN alleged that it has manufactured products bearing the KENNEX and PRO KENNEX trademarks and sold them in the Philippines, initially through the importation by independent outlets and the subsequently through agreements with local distributors; id. at 90-91. KUNNAN also alleged that its initial distributorship agreement was with Bonmark Sportsmasters, Inc. from August 21, 1982 to January 3, 1983; id. at 91. Id. at 102-103. Id. at 92. Id. at 94. On January 1, 1998, Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines, took effect which abolished among other offices, the Bureau of Patents, Trademarks and Technology Transfer and transferred its functions to the newly created Intellectual Property Office. Id. at 36. Id. at 82. Id. at 36-37. The dispositive portion of the decision reads: WHEREFORE, it is hereby ordered that it appearing from the established facts

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24. 25. 26.

27. 28. 29. 30.

31.

that great and irreparable damage and injury has resulted and will continue to result to the Plaintiff, let a writ of preliminary injunction be issued enjoining the defendants KUNNAN ENTERPRISES LIMITED, and SPORTS CONCEPT AND DISTRIBUTOR, INC., their officers, employees, agents, representatives, or assigns and other persons acting for and in their behalf, from using, in connection with its business the trademarks KENNEX, PRO-KENNEX AND KENNEX and DEVICE OF LETTER "K" INSIDE A CIRCLE OF THORNS and the like and any other marks and trade names which are identical or confusingly similar to plaintiff's marks and trade names. a.) All infringing matter in the possession of defendants, its officers, employees, agents, representatives, or assigns should be delivered to this Court or the plaintiff and be accordingly destroyed; b.) Defendants are hereby ordered to render an accounting of the sales from the time it commenced using the marks and trade names of the plaintiff up to the time of judgment, including the profits derived from said sales; c.) Defendants are hereby ordered to pay plaintiff the amount of P2,000,000.00 which is the reasonable profit which plaintiff could have made, had not defendant infringed the plaintiff's trademarks; d.) Defendants are likewise ordered to pay plaintiff's attorney's fees and expenses of litigation in the amount of P500,000.00; e.) Defendants should pay the cost of the suit. SO ORDERED. Id. at 37. CA rollo, pp. 11-22. Rollo, p. 39. Id. at 93. While the dispositive portion of the BLA Decision dated October 30, 2003 referred only to the PRO-KENNEX trademark, Certificate of Registration No. 4730 which covers the KENNEX trademarks was cancelled in the same Decision. This oversight was remedied in the Director General's Decision dated December 8, 2004 which noted that the "registrations and the applications cover the mark PRO-KENNEX except Registration No. 4730 which refers to the mark KENNEX;" id. at 53-54. Supra note 23. Id. at 67. Decision penned by Guevara-Salonga, J., with Roxas and Garcia, JJ., concurring. The dispositive portion of which states: WHEREFORE, the Appeal is GRANTED. The Decision dated 31 March 1998 of the Regional Trial Court of Quezon City, Branch 85 is hereby REVERSED and SET ASIDE. The Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction, docketed as Civil Case No. Q-93-14888, is DISMISSED. SO ORDERED. Rollo, p. 49. Citing Phillip Morris v. Court of Appeals, G.R. No. 91332, July 16, 1993, 224 SCRA

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32. 33. 34.

35.

36.

37.

38. 39. 40. 41.

42. 43. 44. 45. 46. 47.

576, 596. Citing Emerald Garment Manufacturing Corp. v. Court of Appeals, G.R. No. 100098, December 29, 1995, 251 SCRA 600, 622-623. Citing La Chemise Lacoste, S.A. v. Fernandez, G.R. Nos. L-63796-97 and L-65659, May 21, 1984, 129 SCRA 373, 392. The provision states: . . . The owner of a trademark, a trade-name or service mark used to distinguish his goods, business or services from the goods, business or services of other shall have the right to register the same. . . . See Marvex Commercial Co. Inc. v. Petra Hawpia & Milling Co., G.R. No. L-19297, December 22, 1966, 18 SCRA 1178, 1180; Unno Commercial Enterprises, Inc. v. General Milling Corporation, G.R. No. L-28554, February 28, 1983, 120 SCRA 804, 808-809; Gabriel v. Perez, G.R. No. L-24075, January 31, 1974, 55 SCRA 406. An Act to Provide for the Registration and Protection of Trademarks, Trade-Names, and Service-Marks, Defining Unfair Competition and False Marking and Providing Remedies Against the Same, and for Other Purposes. Section 20 of RA 166 considers the trademark registration certificate as prima facie evidence of the validity of the registration, the registrant's ownership and exclusive right to use the trademark in connection with the goods, business or services as classified by the Director of Patents and as specified in the certificate, subject to the conditions and limitations stated therein. See Mighty Corporation v. E. & J. Gallo Winery, G.R. No. 154342, July 14, 2004, 434 SCRA 473, 495. See Heirs of Crisanta Y. Gabriel-Almoradie v. Court of Appeals, G.R. No. 91385, January 4, 1994, 229 SCRA 15, 32-33. Western Equipment & Supply Co. v. Reyes, 51 Phil. 115 (1927). Gabriel v. Perez, G.R. No. L-24075, January 31, 1974, 55 SCRA 406. RULES OF COURT, Section 47(c), Rule 39 — Effect of judgments or final orders. — The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows: xxx xxx xxx (c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. See also Gutierrez v. Court of Appeals, 193 SCRA 437 (1991). Tan v. Court of Appeals, G.R. No. 142401, August 20, 2001. Mata v. Court of Appeals, 376 Phil. 525 (1999). McDonald's Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993, August 18, 2004, 437 SCRA 10. Supra note 31. Original Records, pp. 5-8. Under Section 29 of RA 166, any person who employs deception or any other means

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48. 49. 50. 51.

contrary to good faith by which he passes off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who commits any acts calculated to produce said result, is guilty of unfair competition. Unfair competition include the following acts: 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 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. [Emphasis supplied.] Supra note 42. Coca-Cola Bottlers, Inc. v. Quintin J. Gomez, G.R. No. 154491, November 14, 2008. G.R. No. 143993, August 18, 2004, 437 SCRA 10. Original Records, p. 14.

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SECOND DIVISION [G.R. No. 170891. November 24, 2009.] MANUEL C. ESPIRITU, JR., AUDIE LLONA, FREIDA F. ESPIRITU, CARLO F. ESPIRITU, RAFAEL F. ESPIRITU, ROLANDO M. MIRABUNA, HERMILYN A. MIRABUNA, KIM ROLAND A. MIRABUNA, KAYE ANN A. MIRABUNA, KEN RYAN A. MIRABUNA, JUANITO P. DE CASTRO, GERONIMA A. ALMONITE and MANUEL C. DEE, who are the officers and directors of BICOL GAS REFILLING PLANT CORPORATION, petitioners, YV. PETRON CORPORATION and CARMEN J. DOLOIRAS, doing business under the name "KRISTINA PATRICIA ENTERPRISES", respondents.

DECISION

ABAD, J : p

This case is about the offense or offenses that arise from the reloading of the liquefied petroleum gas cylinder container of one brand with the liquefied petroleum gas of another brand. 7KH)DFWVDQGWKH&DVH Respondent Petron Corporation (Petron) sold and distributed liquefied petroleum gas (LPG) in cylinder tanks that carried its trademark "Gasul." 1(1) Respondent Carmen J. Doloiras owned and operated Kristina Patricia Enterprises (KPE), the exclusive distributor of Gasul LPGs in the whole of Sorsogon. 2(2) Jose Nelson Doloiras (Jose) served as KPE's manager. Bicol Gas Refilling Plant Corporation (Bicol Gas) was also in the business of selling and distributing LPGs in Sorsogon but theirs carried the trademark "Bicol Copyright 1994-2014

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Savers Gas." Petitioner Audie Llona managed Bicol Gas. In the course of trade and competition, any given distributor of LPGs at times acquired possession of LPG cylinder tanks belonging to other distributors operating in the same area. They called these "captured cylinders." According to Jose, KPE's manager, in April 2001 Bicol Gas agreed with KPE for the swapping of "captured cylinders" since one distributor could not refill captured cylinders with its own brand of LPG. At one time, in the course of implementing this arrangement, KPE's Jose visited the Bicol Gas refilling plant. While there, he noticed several Gasul tanks in Bicol Gas' possession. He requested a swap but Audie Llona of Bicol Gas replied that he first needed to ask the permission of the Bicol Gas owners. That permission was given and they had a swap involving around 30 Gasul tanks held by Bicol Gas in exchange for assorted tanks held by KPE. TCASIH

KPE's Jose noticed, however, that Bicol Gas still had a number of Gasul tanks in its yard. He offered to make a swap for these but Llona declined, saying the Bicol Gas owners wanted to send those tanks to Batangas. Later Bicol Gas told Jose that it had no more Gasul tanks left in its possession. Jose observed on almost a daily basis, however, that Bicol Gas' trucks which plied the streets of the province carried a load of Gasul tanks. He noted that KPE's volume of sales dropped significantly from June to July 2001. On August 4, 2001 KPE's Jose saw a particular Bicol Gas truck on the Maharlika Highway. While the truck carried mostly Bicol Savers LPG tanks, it had on it one unsealed 50-kg Gasul tank and one 50-kg Shellane tank. Jose followed the truck and when it stopped at a store, he asked the driver, Jun Leorena, and the Bicol Gas sales representative, Jerome Misal, about the Gasul tank in their truck. They said it was empty but, when Jose turned open its valve, he noted that it was not. Misal and Leorena then admitted that the Gasul and Shellane tanks on their truck belonged to a customer who had them filled up by Bicol Gas. Misal then mentioned that his manager was a certain Rolly Mirabena. Because of the above incident, KPE filed a complaint 3(3) for violations of Republic Act (R.A.) 623 (illegally filling up registered cylinder tanks), as amended, and Sections 155 (infringement of trade marks) and 169.1 (unfair competition) of the Intellectual Property Code (R.A. 8293). The complaint charged the following: Jerome Misal, Jun Leorena, Rolly Mirabena, Audie Llona, and several John and Jane Does, described as the directors, officers, and stockholders of Bicol Gas. These directors, officers, and stockholders were eventually identified during the preliminary Copyright 1994-2014

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investigation. Subsequently, the provincial prosecutor ruled that there was probable cause only for violation of R.A. 623 (unlawfully filling up registered tanks) and that only the four Bicol Gas employees, Mirabena, Misal, Leorena, and petitioner Llona, could be charged. The charge against the other petitioners who were the stockholders and directors of the company was dismissed. Dissatisfied, Petron and KPE filed a petition for review with the Office of the Regional State Prosecutor, Region V, which initially denied the petition but partially granted it on motion for reconsideration. The Office of the Regional State Prosecutor ordered the filing of additional informations against the four employees of Bicol Gas for unfair competition. It ruled, however, that no case for trademark infringement was present. The Secretary of Justice denied the appeal of Petron and KPE and their motion for reconsideration. Undaunted, Petron and KPE filed a special civil action for certiorari with the Court of Appeals 4(4) but the Bicol Gas employees and stockholders concerned opposed it, assailing the inadequacy in its certificate of non-forum shopping, given that only Atty. Joel Angelo C. Cruz signed it on behalf of Petron. In its Decision 5(5) dated October 17, 2005, the Court of Appeals ruled, however, that Atty. Cruz's certification constituted sufficient compliance. As to the substantive aspect of the case, the Court of Appeals reversed the Secretary of Justice's ruling. It held that unfair competition does not necessarily absorb trademark infringement. Consequently, the court ordered the filing of additional charges of trademark infringement against the concerned Bicol Gas employees as well. CcAHEI

Since the Bicol Gas employees presumably acted under the direct order and control of its owners, the Court of Appeals also ordered the inclusion of the stockholders of Bicol Gas in the various charges, bringing to 16 the number of persons to be charged, now including petitioners Manuel C. Espiritu, Jr., Freida F. Espiritu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. de Castro, Geronima A. Almonite, and Manuel C. Dee (together with Audie Llona), collectively, petitioners Espiritu, et al. The court denied the motion for reconsideration of these employees and stockholders in its Resolution dated January 6, 2006, hence, the present petition for review 6(6) before this Court. 7KH,VVXHV3UHVHQWHG Copyright 1994-2014

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The petition presents the following issues: 1. Whether or not the certificate of non-forum shopping that accompanied the petition filed with the Court of Appeals, signed only by Atty. Cruz on behalf of Petron, complied with what the rules require; 2. Whether or not the facts of the case warranted the filing of charges against the Bicol Gas people for: a) Filling up the LPG tanks registered to another manufacturer without the latter's consent in violation of R.A. 623, as amended; b) Trademark infringement consisting in Bicol Gas' use of a trademark that is confusingly similar to Petron's registered "Gasul" trademark in violation of section 155 also of R.A. 8293; and c) Unfair competition consisting in passing off Bicol Gas-produced LPGs for Petron-produced Gasul LPG in violation of Section 168.3 of R.A. 8293.

7KH&RXUW V5XOLQJV First. Petitioners Espiritu, et al. point out that the certificate of non-forum shopping that respondents KPE and Petron attached to the petition they filed with the Court of Appeals was inadequate, having been signed only by Petron, through Atty. Cruz. But, while procedural requirements such as that of submittal of a certificate of non-forum shopping cannot be totally disregarded, they may be deemed substantially complied with under justifiable circumstances. 7(7) One of these circumstances is where the petitioners filed a collective action in which they share a common interest in its subject matter or raise a common cause of action. In such a case, the certification by one of the petitioners may be deemed sufficient. 8(8) Here, KPE and Petron shared a common cause of action against petitioners Espiritu, et al., namely, the violation of their proprietary rights with respect to the use of Gasul tanks and trademark. Furthermore, Atty. Cruz said in his certification that he was executing it "for and on behalf of the Corporation, and co-petitioner Carmen J. Doloiras." 9(9) Thus, the object of the requirement — to ensure that a party takes no recourse to multiple forums — was substantially achieved. Besides, the failure of KPE to sign the certificate of non-forum shopping does not render the petition defective with respect to Petron which signed it through Atty. Cruz. 10(10) The Court of Appeals, Copyright 1994-2014

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therefore, acted correctly in giving due course to the petition before it.

DaCTcA

Second. The Court of Appeals held that under the facts of the case, there is probable cause that petitioners Espiritu, et al. committed all three crimes: (a) illegally filling up an LPG tank registered to Petron without the latter's consent in violation of R.A. 623, as amended; (b) trademark infringement which consists in Bicol Gas' use of a trademark that is confusingly similar to Petron's registered "Gasul" trademark in violation of Section 155 of R.A. 8293; and (c) unfair competition which consists in petitioners Espiritu, et al. passing off Bicol Gas-produced LPGs for Petron-produced Gasul LPG in violation of Section 168.3 of R.A. 8293. Here, the complaint adduced at the preliminary investigation shows that the one 50-kg Petron Gasul LPG tank found on the Bicol Gas' truck "belonged to [a Bicol Gas] customer who had the same filled up by BICOL GAS." 11(11) In other words, the customer had that one Gasul LPG tank brought to Bicol Gas for refilling and the latter obliged. R.A. 623, as amended, 12(12) punishes any person who, without the written consent of the manufacturer or seller of gases contained in duly registered steel cylinders or tanks, fills the steel cylinder or tank, for the purpose of sale, disposal or trafficking, other than the purpose for which the manufacturer or seller registered the same. This was what happened in this case, assuming the allegations of KPE's manager to be true. Bicol Gas employees filled up with their firm's gas the tank registered to Petron and bearing its mark without the latter's written authority. Consequently, they may be prosecuted for that offense. But, as for the crime of trademark infringement, Section 155 of R.A. 8293 (in relation to Section 170) 13(13) provides that it is committed by any person who shall, without the consent of the owner of the registered mark: 1. Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the Copyright 1994-2014

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sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.

KPE and Petron have to show that the alleged infringer, the responsible officers and staff of Bicol Gas, used Petron's Gasul trademark or a confusingly similar trademark on Bicol Gas tanks with intent to deceive the public and defraud its competitor as to what it is selling. 14(14) Examples of this would be the acts of an underground shoe manufacturer in Malabon producing "Nike" branded rubber shoes or the acts of a local shirt company with no connection to La Coste, producing and selling shirts that bear the stitched logos of an open-jawed alligator. IHTASa

Here, however, the allegations in the complaint do not show that Bicol Gas painted on its own tanks Petron's Gasul trademark or a confusingly similar version of the same to deceive its customers and cheat Petron. Indeed, in this case, the one tank bearing the mark of Petron Gasul found in a truck full of Bicol Gas tanks was a genuine Petron Gasul tank, more of a captured cylinder belonging to competition. No proof has been shown that Bicol Gas has gone into the business of distributing imitation Petron Gasul LPGs. As to the charge of unfair competition, Section 168.3 (a) of R.A. 8293 (also in relation to Section 170) describes the acts constituting the offense as follows: 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;

Essentially, what the law punishes is the act of giving one's goods the general appearance of the goods of another, which would likely mislead the buyer into believing that such goods belong to the latter. Examples of this would be the act of Copyright 1994-2014

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manufacturing or selling shirts bearing the logo of an alligator, similar in design to the open-jawed alligator in La Coste shirts, except that the jaw of the alligator in the former is closed, or the act of a producer or seller of tea bags with red tags showing the shadow of a black dog when his competitor is producing or selling popular tea bags with red tags showing the shadow of a black cat. Here, there is no showing that Bicol Gas has been giving its LPG tanks the general appearance of the tanks of Petron's Gasul. As already stated, the truckfull of Bicol Gas tanks that the KPE manager arrested on a road in Sorsogon just happened to have mixed up with them one authentic Gasul tank that belonged to Petron. The only point left is the question of the liability of the stockholders and members of the board of directors of Bicol Gas with respect to the charge of unlawfully filling up a steel cylinder or tank that belonged to Petron. The Court of Appeals ruled that they should be charged along with the Bicol Gas employees who were pointed to as directly involved in overt acts constituting the offense. Bicol Gas is a corporation. As such, it is an entity separate and distinct from the persons of its officers, directors, and stockholders. It has been held, however, that corporate officers or employees, through whose act, default or omission the corporation commits a crime, may themselves be individually held answerable for the crime. 15(15) IATSHE

Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with Bicol Gas, its manager, petitioner Audie Llona, claimed that he would be consulting with the owners of Bicol Gas about it. Subsequently, Bicol Gas declined the offer to swap cylinders for the reason that the owners wanted to send their captured cylinders to Batangas. The Court of Appeals seized on this as evidence that the employees of Bicol Gas acted under the direct orders of its owners and that "the owners of Bicol Gas have full control of the operations of the business." 16(16) The "owners" of a corporate organization are its stockholders and they are to be distinguished from its directors and officers. The petitioners here, with the exception of Audie Llona, are being charged in their capacities as stockholders of Bicol Gas. But the Court of Appeals forgets that in a corporation, the management of its business is generally vested in its board of directors, not its stockholders. 17(17) Stockholders are basically investors in a corporation. They do not have a hand in running the day-to-day business operations of the corporation unless they are at the same time directors or officers of the corporation. Before a stockholder may be held criminally liable for acts committed by the corporation, therefore, it must be shown that he had Copyright 1994-2014

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knowledge of the criminal act committed in the name of the corporation and that he took part in the same or gave his consent to its commission, whether by action or inaction. The finding of the Court of Appeals that the employees "could not have committed the crimes without the consent, [abetment], permission, or participation of the owners of Bicol Gas" 18(18) is a sweeping speculation especially since, as demonstrated above, what was involved was just one Petron Gasul tank found in a truck filled with Bicol Gas tanks. Although the KPE manager heard petitioner Llona say that he was going to consult the owners of Bicol Gas regarding the offer to swap additional captured cylinders, no indication was given as to which Bicol Gas stockholders Llona consulted. It would be unfair to charge all the stockholders involved, some of whom were proved to be minors. 19(19) No evidence was presented establishing the names of the stockholders who were charged with running the operations of Bicol Gas. The complaint even failed to allege who among the stockholders sat in the board of directors of the company or served as its officers. The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C. Espiritu, Jr. as the registered owner of the truck that the KPE manager brought to the police for investigation because that truck carried a tank of Petron Gasul. But the act that R.A. 623 punishes is the unlawful filling up of registered tanks of another. It does not punish the act of transporting such tanks. And the complaint did not allege that the truck owner connived with those responsible for filling up that Gasul tank with Bicol Gas LPG. WHEREFORE, the Court REVERSES and SETS ASIDE the Decision of the Court of Appeals in CA-G.R. SP 87711 dated October 17, 2005 as well as its Resolution dated January 6, 2006, the Resolutions of the Secretary of Justice dated March 11, 2004 and August 31, 2004, and the Order of the Office of the Regional State Prosecutor, Region V, dated February 19, 2003. The Court REINSTATES the Resolution of the Office of the Provincial Prosecutor of Sorsogon in I.S. 2001-9231 (inadvertently referred in the Resolution itself as I.S. 2001-9234), dated February 26, 2002. The names of petitioners Manuel C. Espiritu, Jr., Freida F. Espititu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. De Castro, Geronima A. Almonite and Manuel C. Dee are ORDERED excluded from the charge. SO ORDERED. Copyright 1994-2014

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Carpio, Leonardo-de Castro, Brion and Del Castillo, JJ., concur. )RRWQRWHV 1.

2. 3. 4. 5.

6. 7. 8. 9. 10. 11. 12.

The LPG cylinders and the trademark "Gasul" are registered under the name of Petron in the Intellectual Property Office under Registration Nos. 142, 147, 57945 and 61920. CA rollo, pp. 52-57. As shown by a dealership agreement. Id. at 60-71. Docketed as I.S. 2001-9231 but was inadvertently referred to in subsequent documents and proceedings as I.S. 2001-9234. Docketed as CA-G.R. SP 87711. CA rollo, pp. 371-399. Penned by Associate Justice Renato C. Dacudao and concurred in by Associate Justices Rodrigo V. Cosico and Lucas P. Bersamin (now a member of this Court). Under Rule 45 of the Rules of Court. Cavile v. Heirs of Cavile, 448 Phil. 302, 311 (2003); MC Engineering, Inc. v. National Labor Relations Commission, 412 Phil. 614, 622-623 (2001). San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 412. CA rollo, p. 43. See Toyota Motor Phils. Corp. Workers Association v. National Labor Relations Commission, G.R. Nos. 158786 & 158789, October 19, 2007, 537 SCRA 171, 199. Rollo, p. 54. Sec. 1. Persons engaged or licensed to engage in the manufacture, bottling, or selling of soda water, mineral or aerated waters, cider, milk, cream or other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other similar containers, or in the manufacture, compressing or selling of gases such as oxygen, acetylene, nitrogen, carbon dioxide, ammonia, hydrogen, chloride, helium, sulphur dioxide, butane, propane, freon, methyl chloride or similar gases contained in steel cylinders, tanks, flasks, accumulators or similar containers, with their names or the names of their principals of products, or other marks of ownership stamped or marked thereon, may register with the Philippines Patent Office a description of the names or marks, and the purpose for which the containers so marked are used by them, under the same conditions, rules, and regulations, made applicable by law or regulation to the issuance of trademarks. Sec. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler, or seller, who has successfully registered the marks of ownership in accordance with the provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy or traffic in, or wantonly destroy the same, whether filled or not to use the same for drinking vessels or glasses or drain pipes, foundation pipes, for any other purpose

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13.

14. 15. 16. 17. 18. 19.

than that registered by the manufacturer, bottler or seller. Any violation of this section shall be punished by a fine of not more than one thousand pesos or imprisonment of not more than one year or both. Sec. 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, Section 168 and Subsection 169.1. McDonald's Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 439 (2004). Ching v. Secretary of Justice, G.R. No. 164317, February 6, 2006, 481 SCRA 609, 635-636. CA rollo, pp. 396-397. Section 23, P.D. 902-A. CA rollo, p. 397. As shown by certified true copies of birth certificates of Carlo F. Espiritu, Rafael F. Espiritu, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, and Ken Ryan A. Mirabuna. Rollo, pp. 492-496.

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EN BANC [G.R. No. L-8072. October 31, 1956.] LIM HOA, petitioner, YV. DIRECTOR OF PATENTS, respondent. Perfecta E. de Vera for petitioner. Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo F. Torres and Solicitor Meliton G. Soliman for respondent. SYLLABUS 1. TRADEMARK; INFRINGEMENT OF, HOW DETERMINED — It has been consistently held that the question of infringement of a trademark is so to be determined by the test of dominancy. Similarity in size, form, and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. (Co Tiong Sa vs. Director of Patents, L-5372, May 24, 1954. 2. ID.; ID.; MARKS WHICH WOULD LIKELY CAUSE CONFUSION OR EVEN DECEPTION; CASE AT BAR. — The two roosters appearing on the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of different sexes, belong to the same family of the chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys an food seasoning product for the kitchen, the brand of "Manok" or "Marca Manok" would most likely be upper most in her mind and would influence her in selecting the product, regardless of whether the brand pictures a hen or a rooster or two rooster. To her, they are all manok. Therein lies the confusion, even deception.

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DECISION

MONTEMAYOR, J : p

On April 26, 1949, the petitioner, Lim Hoa, filed with the Patent Office an application for the registration of a trademark, consisting of a representation of two midget roosters in an attitude of combat with the word "Bantam" printed above them, he claiming that he had used said trademark on a food seasoning product since April 25 of that year. The application was published in the Official Gazette in its issue of February, 1953, released for circulation on April 18, of the same year. On April 30, 1953, the Agricom Development Co., Inc., a domestic corporation, opposed the application on several grounds, among others, that the trademark sought to be registered was confusingly similar to its register mark, consisting of a pictorial representation of a hen with the words "Hen Brand" and "Marca Manok", which mark or brand was also used on a food seasoning product, before the use of the trademark by the applicant. It is a fact that the family of C. Javier Advincula, since the year 1946, had adopted and used as a trademark of said food seasoning product manufactured by it, the pictorial representation of a hen. In 1947, the members of the Advincula family organized the Agricom Development Co., Inc., the oppositor in this case, and said corporation took over the manufacture of the same food product of the Advincula family, including the use of the brand of the pictorial representation of a hen but adding to it the word "Hen". In the year 1948, an addition was made to the brand with the words "Ve-Tsin, Hen Brand" and "Marca Manok," and since then, on its food seasoning product at different times, labels were used, in different colors but bearing the representation of a hen and the words just mentioned. So that the application to register applicant's brand, consisting of two roosters is an attitude of combat, with the word "Bantam" printed above them, came along after the use and registration of the mark or brand of the oppositor corporation and its predecessor, the Advincula family. After considering the application and the opposition thereto, and after comparing the two brands, the Director of Patents issued his order dated June 26, 1954, wherein he found and held that to allow the registration of the applicant's trademark would likely cause confusion or mistake or deceive purchasers, and he refused registration of said trademark, under Rule 178 of the Revised Rules of Copyright 1994-2014

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Practice in Trademark Cases, 1953. The petitioner is now appealing said order. After a careful examination of the facts above mentioned, and after comparing the two brands, we do not hesitate to say and to hold that there is such similarity between the two brands as to cause confusion in the mind of the public that buys the food seasoning product on the strength and on the indication of the trademark or brand identifying or distinguishing the same. In the case of Go Tiong Sa vs. Director of Patents, (95 Phil., 1), we had occasion to say the following: ". . . It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form, and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. (C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F. 489, 495, citing Eagle White Lead Co. v. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F 2d 588, 590, citing Procter and Gamble Co. vs. J. L. Prescot Co., 49 F 2d 959, 18 CCPA, Patents, 1433; Pepsodent Co. vs. Comfort Manufacturing Co., 83 F 2d 906; 23 CCPA, Patents, 124)"

The danger of confusion in trademarks and brands which are similar may not be so great in the case of commodities or articles of relatively great value, such as, radio and television sets, air conditioning units, machinery, etc., for the prospective buyer, generally the head of the family or a businessman, before making the purchase, reads the pamphlets and all literature available, describing the article he is planning to buy, and perhaps even makes comparisons with similar articles in the market. He is not likely to be deceived by similarity in the trademarks because he makes a more or less thorough study of the same and may even consult his friends about the relative merit and performance of the article or machinery, as compared to others also for sale. But in the sale of a food seasoning product, a kitchen article of everyday consumption, the circumstances are far different. Said product is generally purchased by cooks and household help, sometimes illiterate who are guided by pictorial representations and the sound of the word descriptive of said representation. The two roosters appearing in the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of different sexes, belong to the same family of chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys a food seasoning product for the kitchen the brand of Copyright 1994-2014

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"Manok" or "Marca Manok" would most likely be upper most in her mind and would influence her in selecting the product, regardless of whether the brand pictures a hen or a rooster or two roosters. To her, they are all manok. Therein lies the confusion, even deception. We do not see why applicant could not have stretched his imagination even a little and extended his choice to other members of the animal kingdom, as a brand to differentiate his product from similar products in the market. In a similar case decided by this Tribunal wherein, although one brand consisting of the representation of a rooster was already being used by one party, another party wanted to register a similar brand, consisting of two roosters on a similar product, namely, candy, this Court said: "Counsel for defendant insists that there is no real resemblance between a picture of one rooster and a picture of two roosters; that no person could or would be deceived by the use by the defendant of a trade-mark wholly distinct from that of the plaintiff; that the fact that the defendant used two roosters as its trademark clearly discloses its innocence of any intent to deceive, since a comparison of the trade-mark of the plaintiff with that of the defendant makes apparent at once that was not intended to be an imitation of the other. "We ask, however, why, with all the birds in the air, and all the fishes in the sea, and all the animals on the face of the earth to chose from, the defendant company selected two roosters as its trade- mark, although its directors, and managers must have been well aware of the long-continued use of a rooster by the plaintiff in connection with the sale and advertisement of his goods? "There is nothing in the picture of one or more roosters which in itself is descriptive of the goods sold by the plaintiff or by the defendant corporation, or suggestive of the quality of these goods. A cat, or dog, a carabao, a shark, or an eagle stamped upon the container in which candies are sold would serve as well as a rooster for purposes of identification as the product of defendant's factory. Why did defendant select two roosters as its trade-mark? We can not doubt that it was because the plaintiff's candies had acquired a certain reputation under the trade-mark of a rooster, and the defendant corporation hoped to profit unjustly by that reputation. Defendant knew that the use of a single rooster would be prohibited as a technical infringement of plaintiff's trade-mark, but it hoped that it could avoid that danger by the use of two roosters; and at the same time get such advantage as it must have believed it could secure from the use of a design on the containers of its goods, not absolutely identical with that used by the plaintiff, but so similar in the dominant idea as to confuse or mislead the purchasers. . . ." (Clarke vs. Manila Candy Co., 100 Phil. 36) Copyright 1994-2014

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In view of the foregoing, the order appealed from is hereby affirmed, with costs. We do not deem it necessary to discuss and rule upon the other questions raised in the appeal. Paras, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., and Felix, JJ., concur.

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FIRST DIVISION [G.R. No. 112012. April 4, 2001.] SOCIETE DES PRODUITS NESTLE, S.A. and NESTLE PHILIPPINES, INC., petitioners, YV. COURT OF APPEALS and CFC CORPORATION, respondents. Tan Manzano & Velez for petitioners. Hilario A. Perez for private respondent. SYNOPSIS Private respondent CFC Corporation filed with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the trademark "FLAVOR MASTER" for its instant coffee. Petitioners opposed the application alleging that the use by private respondent of the trademark FLAVOR MASTER and its registration would likely cause confusion in the trade or deceive purchasers as the goods of private respondent might be mistaken as having originated from petitioners. Private respondent elevated the matter before the Court of Appeals when the BPTTT denied its application. The appellate court reversed the decision of the BPTTT and ordered the latter to approve private respondent's application. In it's Decision, the appellate court held that the test to be applied in this case should be the totality or holistic test reasoning, since what is of paramount consideration is the ordinary purchaser who is, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and is therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. The appellate court found that the general appearances of the labels bearing the respective trademarks were so distinct from each other that petitioners cannot assert that the dominant features, if any, of its trademarks were used or appropriated in private respondent's own. Hence, petitioners brought this petition for review. Copyright 1994-2014

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The Supreme Court held that the term "MASTER" had acquired a certain connotation to mean the coffee products MASTER ROAST and MASTER BLEND produced by petitioners. Hence the use by private respondent of the term "MASTER" in the trademark for its coffee product FLAVOR MASTER was likely to cause confusion or even to deceive the ordinary purchasers. The Court did not agree with the appellate court's reasoning. The Court held that if the ordinary purchaser is "undiscerningly rash" in buying such common and inexpensive household products as instant coffee, and would, therefore, be "less inclined to closely examine specific details of similarities and dissimilarities" between the two competing products, then it would be less likely for the ordinary purchaser to notice that private respondent's trademark FLAVOR MASTER carries the colors orange and mocha while that of petitioners' uses red and brown. The Court found that the application of the totality or holistic test was improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item. The Court believed that the dominancy test is more suitable in light of its peculiar factual milieu. It must be emphasized that the products bearing the trademarks in question are "inexpensive and common" household items bought off the shelf by "undiscerningly rash" purchasers. As such, if the ordinary purchaser is "undiscerningly rash", then he would not have the time nor the inclination to make a keen and perceptive examination of the physical discrepancies in the trademarks of the products in order to exercise his choice. Assailed decision reversed and set aside.

SYLLABUS 1. COMMERCIAL LAW; TRADEMARK LAW; TRADEMARK; DEFINED. — A trademark has been generally defined as "any word, name, symbol or device adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured and sold by others." 2. ID.; ID.; ID.; MANUFACTURER'S TRADEMARK IS ENTITLED TO PROTECTION — A manufacturer's trademark is entitled to protection. As Mr. Justice Frankfurter observed in the case of Mishawaka Mfg. Co. v. Kresge Co.: The protection of trademarks is the law's recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods Copyright 1994-2014

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by them. A trade-mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, due aim is the same — to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress. 3. ID.; ID.; ID.; SHOULD NOT LIKELY CAUSE CONFUSION OR MISTAKE OR DECEIVE PURCHASERS; COLORABLE IMITATION, EXPLAINED; DOMINANCY TEST DISTINGUISHED FROM HOLISTIC TEST. — The law prescribes a more stringent standard in that there should not only be confusing similarity but that it should not likely cause confusion or mistake or deceive purchasers. Colorable imitation denotes such a close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be the other. In determining if colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test and the Holistic Test. The test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitute infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. 4. ID.; ID.; ID.; INFRINGEMENT CASES MUST BE DECIDED ON ITS OWN MERITS. — The Court of Appeals applied some judicial precedents which are not on all fours with this case. It must be emphasized that in infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard, Inc. v. Court of Appeals, we ruled that the likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. In trademark cases, even more than in any other litigation, precedent must be studied in light of the facts of the particular case. The wisdom of the likelihood of confusion test lies in its recognition that each trademark infringement case presents its own unique set of facts. Indeed, the complexities attendant to an accurate assessment of likelihood of confusion require that the entire panoply of elements constituting the Copyright 1994-2014

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relevant factual landscape be comprehensively examined. 5. ID.; ID.; ID.; RULING IN DEL MONTE CASE (181 SCRA 410) NOT APPLICABLE TO CASE AT BAR. — The Court of Appeals' application of the case of Del Monte Corporation v. Court of Appeals is, therefore, misplaced. In Del Monte, the issue was about the alleged similarity of Del Monte's logo with that of Sunshine Sauce Manufacturing Industries. Both corporations market the catsup product which is an inexpensive and common household item. Since Del Monte alleged that Sunshine's logo was confusingly similar to or was a colorable imitation of the former's logo, there was a need to go into the details of the two logos as well as the shapes of the labels or marks, the brands printed on the labels, the words or lettering on the labels or marks and the shapes and colors of the labels or marks. The same criteria, however, cannot be applied in the instant petition as the facts and circumstances herein are peculiarly different from those in the Del Monte case. 6. ID.; ID.; ID.; TOTALITY RULE; INAPPLICABLE TO CASE AT BAR. — The Court of Appeals erred in applying the totality rule as defined in the cases of Bristol Myers v. Director of Patents; Mead Johnson & Co. v. NVJ Van Dorf Ltd.; and American Cyanamid Co. v. Director of Patents. The totality rule states that "the test is not simply to take their words and compare the spelling and pronunciation of said words. In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels." 7. ID.; ID.; ID.; JURISPRUDENTIAL PRECEDENTS; APPLICABILITY THEREOF IN INFRINGEMENT CASES. — As this Court has often declared, each case must be studied according to the peculiar circumstances of each case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point. In the case at bar, other than the fact that both Nestle's and CFC's products are inexpensive and common household items, the similarity ends there. What is being questioned here is the use by CFC of the trademark MASTER. In view of the difficulty of applying jurisprudential precedents to trademark cases due to the peculiarity of each case, judicial fora should not readily apply a certain test or standard just because of seeming similarities. As this Court has pointed above, there could be more telling differences than similarities as to make a jurisprudential precedent inapplicable. 8. Copyright 1994-2014

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IMPROPER IN CASE AT BAR; REASON. — If the ordinary purchaser is "undiscerningly rash" in buying such common and inexpensive household products as instant coffee, and would therefore be "less inclined to closely examine specific details of similarities and dissimilarities" between the two competing products, then it would be less likely for the ordinary purchaser to notice that CFC's trademark FLAVOR MASTER carries the colors orange and mocha while that of Nestle's uses red and brown. The application of the totality or holistic test is improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item. It must be emphasized that the products bearing the trademarks in question are "inexpensive and common" household items bought off the shelf by "undiscerningly rash" purchasers. As such, if the ordinary purchaser is "undiscerningly rash", then he would not have the time nor the inclination to make a keen and perceptive examination of the physical discrepancies in the trademarks of the products in order to exercise his choice. 9. ID.; ID.; ID.; DOMINANCY TEST; APPLICABLE TO CASE AT BAR. — While this Court agrees with the Court of Appeals' detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu. Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. 10. ID.; ID.; ID.; GENERIC TERMS DISTINGUISHED FROM DESCRIPTIVE TERMS. — The word "MASTER" is neither a generic nor a descriptive term. As such, said term can not be invalidated as a trademark and, therefore, may be legally protected. Generic terms are those which constitute "the common descriptive name of an article or substance," or comprise the "genus of which the particular product is a species," or are "commonly used as the name or description of a kind of goods," or "imply reference to every member of a genus and the exclusion of individuating characters," or "refer to the basic nature of the wares or services provided rather than to the more idiosyncratic characteristics of a particular Copyright 1994-2014

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product," and are not legally protectable. On the other hand, a term is descriptive and therefore invalid as a trademark if, as understood in its normal and natural sense, it "forthwith conveys the characteristics, functions, qualities or ingredients of a product to one who has never seen it and does not know what it is," or "if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods," or if it clearly denotes what goods or services are provided in such a way that the consumer does not have to exercise powers of perception or imagination. 11. ID.; ID.; ID.; SUGGESTIVE TERMS, EXPLAINED. — The term "MASTER" is a suggestive term brought about by the advertising scheme of Nestle. Suggestive terms are those which, in the phraseology of one court, require "imagination, thought and perception to reach a conclusion as to the nature of the goods." Such terms, "which subtly connote something about the product," are eligible for protection in the absence of secondary meaning. While suggestive marks are capable of shedding "some light" upon certain characteristics of the goods or services in dispute, they nevertheless involve "an element of incongruity," "figurativeness," or " imaginative effort on the part of the observer." This is evident from the advertising scheme adopted by Nestle in promoting its coffee products. In this case, Nestle has, over time, promoted its products as "coffee perfection worthy of masters like Robert Jaworski and Ric Puno Jr."

DECISION

YNARES-SANTIAGO, J : p

This is a petition for review assailing the Decision of the Court of Appeals in CA-G.R. SP No. 24101, 1(1) reversing and setting aside the decision of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT), 2(2) which denied private respondent's application for registration of the trademark, FLAVOR MASTER. On January 18, 1984, private respondent CFC Corporation filed with the BPTTT an application for the registration of the trademark "FLAVOR MASTER" for instant coffee, under Serial No. 52994. The application, as a matter of due course, was published in the July 18, 1988 issue of the BPTTT's Official Gazette. Petitioner Societe Des Produits Nestle, S.A., a Swiss company registered under Copyright 1994-2014

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Swiss laws and domiciled in Switzerland, filed an unverified Notice of Opposition, 3(3) claiming that the trademark of private respondent's product is "confusingly similar to its trademarks for coffee and coffee extracts, to wit: MASTER ROAST and MASTER BLEND." Likewise, a verified Notice of Opposition was filed by Nestle Philippines, Inc., a Philippine corporation and a licensee of Societe Des Produits Nestle S.A., against CFC's application for registration of the trademark FLAVOR MASTER. 4(4) Nestle claimed that the use, if any, by CFC of the trademark FLAVOR MASTER and its registration would likely cause confusion in the trade; or deceive purchasers and would falsely suggest to the purchasing public a connection in the business of Nestle, as the dominant word present in the three (3) trademarks is "MASTER"; or that the goods of CFC might be mistaken as having originated from the latter. In answer to the two oppositions, CFC argued that its trademark, FLAVOR MASTER, is not confusingly similar with the former's trademarks, MASTER ROAST and MASTER BLEND, alleging that, "except for the word MASTER (which cannot be exclusively appropriated by any person for being a descriptive or generic name), the other words that are used respectively with said word in the three trademarks are very different from each other — in meaning, spelling, pronunciation, and sound". CFC further argued that its trademark, FLAVOR MASTER, "is clearly very different from any of Nestle's alleged trademarks MASTER ROAST and MASTER-BLEND, especially when the marks are viewed in their entirety, by considering their pictorial representations, color schemes and the letters of their respective labels." In its Decision No. 90-47 dated December 27, 1990, the BPTTT denied CFC's application for registration. 5(5) CFC elevated the matter to the Court of Appeals, where it was docketed as CA-G.R. SP No. 24101. The Court of Appeals defined the issue thus: "Does appellant CFC's trade dress bear a striking resemblance with appellee's trademarks as to create in the purchasing public's mind the mistaken impression that both coffee products come from one and the same source?" aEHADT

As stated above, the Court of Appeals, in the assailed decision dated September 23, 1993, reversed Decision No. 90-47 of the BPTTT and ordered the Director of Patents to approve CFC's application. The Court of Appeals ruled: Were We to take even a lackadaisical glance at the overall appearance of the contending marks, the physical discrepancies between appellant CFC's and Copyright 1994-2014

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appellee's respective logos are so ostensible that the casual purchaser cannot likely mistake one for the other. Appellant CFC's label (Exhibit "4") is predominantly a blend of dark and lighter shade of orange where the words "FLAVOR MASTER", "FLAVOR" appearing on top of "MASTER", shaded in mocha with thin white inner and outer sidings per letter and identically lettered except for the slightly protruding bottom curve of the letter "S" adjoining the bottom tip of the letter "A" in the word "MASTER", are printed across the top of a simmering red coffee cup. Underneath "FLAVOR MASTER" appears "Premium Instant Coffee" printed in white, slim and slanted letters. Appellees' "MASTER ROAST" label (Exhibit "7"), however, is almost double the width of appellant CFC's. At the top is printed in brown color the word "NESCAFE" against a white backdrop. Occupying the center is a square-shaped configuration shaded with dark brown and picturing a heap of coffee beans, where the word "MASTER" is inscribed in the middle. "MASTER" in appellees' label is printed in taller capital letters, with the letter "M" further capitalized. The letters are shaded with red and bounded with thin gold-colored inner and outer sidings. Just above the word "MASTER" is a red window like portrait of what appears to be a coffee shrub clad in gold. Below the "MASTER" appears the word "ROAST" impressed in smaller, white print. And further below are the inscriptions in white: "A selection of prime Arabica and Robusta coffee." With regard to appellees' "MASTER BLEND" label (Exhibit "6") of which only a xeroxed copy is submitted, the letters are bolder and taller as compared to appellant CFC's and the word "MASTER" appears on top of the word "BLEND" and below it are the words "100% pure instant coffee" printed in small letters. From the foregoing description, while the contending marks depict the same product, the glaring dissimilarities in their presentation far outweigh and dispel any aspect of similitude. To borrow the words of the Supreme Court in American Cyanamid Co. v. Director of Patents (76 SCRA 568), appellant CFC's and appellees' labels are entirely different in size, background, colors, contents and pictorial arrangement; in short, the general appearances of the labels bearing the respective trademarks are so distinct from each other that appellees cannot assert that the dominant features, if any, of its trademarks were used or appropriated in appellant CFC's own. The distinctions are so well-defined so as to foreclose any probability or likelihood of confusion or deception on the part of the normally intelligent buyer when he or she encounters both coffee products at the grocery shelf. The answer therefore to the query is a clear-cut No. 6(6)

Petitioners are now before this Court on the following assignment of errors: 1. RESPONDENT COURT GRAVELY ERRED IN REVERSING AND SETTING ASIDE THE DECISION (NO. 90-47) OF THE DIRECTOR OF THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY Copyright 1994-2014

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TRANSFER (BPTTT) DATED DECEMBER 27, 1990. 2. RESPONDENT COURT ERRED IN FINDING THAT APPELLANT CFC'S TRADE DRESS IS BEYOND THE SCOPE OF THE PROSCRIPTION LAID DOWN BY JURISPRUDENCE AND THE TRADEMARK LAW. 3. RESPONDENT COURT ERRED IN HOLDING THAT THE TOTALITY RULE, RATHER THAN THE TEST OF DOMINANCY, APPLIES TO THE CASE. 4. RESPONDENT COURT ERRED IN INVOKING THE TOTALITY RULE APPLIED IN THE CASES OF BRISTOL MYERS V. DIRECTOR OF PATENTS, ET AL. (17 SCRA 128), MEAD JOHNSON & CO. V. NVJ VAN DORF LTD., (7 SCRA 768) AND AMERICAN CYANAMID CO. V. DIRECTOR OF PATENTS (76 SCRA 568).

The petition is impressed with merit. A trademark has been generally defined as "any word, name, symbol or device adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured and sold by others." 7(7) A manufacturer's trademark is entitled to protection. As Mr. Justice Frankfurter observed in the case of Mishawaka Mfg. Co. v. Kresge Co.: 8(8) The protection of trade-marks is the law's recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, due aim is the same — to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.

Section 4 (d) of Republic Act No. 166 or the Trademark Law, as amended, which was in force at the time, provides thus: Registration of trade-marks, trade-names and service-marks on the Copyright 1994-2014

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principal register. — There is hereby established a register of trade-marks, trade-names and service marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx

xxx

xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; xxx

xxx

xxx

(Emphasis supplied)

The law prescribes a more stringent standard in that there should not only be confusing similarity but that it should not likely cause confusion or mistake or deceive purchasers. Hence, the question in this case is whether there is a likelihood that the trademark FLAVOR MASTER may cause confusion or mistake or may deceive purchasers that said product is the same or is manufactured by the same company. In other words, the issue is whether the trademark FLAVOR MASTER is a colorable imitation of the trademarks MASTER ROAST and MASTER BLEND. Colorable imitation denotes such a close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be the other. 9(9) In determining if colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test and the Holistic Test. 10(10) The test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitute infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. 11(11) In the case at bar, the Court of Appeals held that: The determination of whether two trademarks are indeed confusingly Copyright 1994-2014

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similar must be taken from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. The Supreme Court in Del Monte Corporation v. CA, 181 SCRA 410, held that: "The question is not whether the two articles are distinguishable by their labels when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone." From this perspective, the test of similarity is to consider the two marks in their entirety, as they appear in the respective labels, in relation to the goods to which they are attached (Bristol Myers Company v. Director of Patents, et al., 17 SCRA 128, citing Mead Johnson & Co. v. NVJ Van Dorp, Ltd., et al., 7 SCRA 768). The mark must be considered as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it (Del Monte Corp. v. CA, supra), as what appellees would want it to be when they essentially argue that much of the confusion springs from appellant CFC's use of the word "MASTER" which appellees claim to be the dominant feature of their own trademarks that captivates the prospective consumers. Be it further emphasized that the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other (Mead Johnson & Co. v. NVJ Van Dorp, Ltd., supra). 12(12)

The Court of Appeals applied some judicial precedents which are not on all fours with this case. It must be emphasized that in infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. 13(13) In Esso Standard, Inc. v. Court of Appeals, 14(14) we ruled that the likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. In trademark cases, even more than in any other litigation, precedent must be studied in light of the facts of the particular case. The wisdom of the likelihood of confusion test lies in its recognition that each trademark infringement case presents its own unique set of facts. Indeed, the complexities attendant to an accurate assessment Copyright 1994-2014

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of likelihood of confusion require that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined. 15(15) The Court of Appeals' application of the case of Del Monte Corporation v. Court of Appeals 16(16) is, therefore, misplaced. In Del Monte, the issue was about the alleged similarity of Del Monte's logo with that of Sunshine Sauce Manufacturing Industries. Both corporations market the catsup product which is an inexpensive and common household item. DTIaHE

Since Del Monte alleged that Sunshine's logo was confusingly similar to or was a colorable imitation of the former's logo, there was a need to go into the details of the two logos as well as the shapes of the labels or marks, the brands printed on the labels, the words or lettering on the labels or marks and the shapes and colors of the labels or marks. The same criteria, however, cannot be applied in the instant petition as the facts and circumstances herein are peculiarly different from those in the Del Monte case. In the same manner, the Court of Appeals erred in applying the totality rule as defined in the cases of Bristol Myers v. Director of Patents; 17(17) Mead Johnson & Co. v. NVJ Van Dorf Ltd.; 18(18) and American Cyanamid Co. v. Director of Patents. 19(19) The totality rule states that "the test is not simply to take their words and compare the spelling and pronunciation of said words. In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels." 20(20) As this Court has often declared, each case must be studied according to the peculiar circumstances of each case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point. In the above cases cited by the Court of Appeals to justify the application of the totality or holistic test to this instant case, the factual circumstances are substantially different. In the Bristol Myers case, this Court held that although both BIOFERIN and BUFFERIN are primarily used for the relief of pains such as headaches and colds, and their names are practically the same in spelling and pronunciation, both labels have strikingly different backgrounds and surroundings. In addition, one is dispensable only upon doctor's prescription, while the other may be purchased over-the-counter. Copyright 1994-2014

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In the Mead Johnson case, the differences between ALACTA and ALASKA are glaring and striking to the eye. Also, ALACTA refers to "Pharmaceutical Preparations which Supply Nutritional Needs," falling under Class 6 of the official classification of Medicines and Pharmaceutical Preparations to be used as prescribed by physicians. On the other hand, ALASKA refers to "Foods and Ingredients of Foods" falling under Class 47, and does not require medical prescription. In the American Cyanamid case, the word SULMET is distinguishable from the word SULMETINE, as the former is derived from a combination of the syllables "SUL" which is derived from sulfa and "MET" from methyl, both of which are chemical compounds present in the article manufactured by the contending parties. This Court held that the addition of the syllable "INE" in respondent's label is sufficient to distinguish respondent's product or trademark from that of petitioner. Also, both products are for medicinal veterinary use and the buyer will be more wary of the nature of the product he is buying. In any case, both products are not identical as SULMET's label indicates that it is used in a drinking water solution while that of SULMETINE indicates that they are tablets. It cannot also be said that the products in the above cases can be bought off the shelf except, perhaps, for ALASKA. The said products are not the usual "common and inexpensive" household items which an "undiscerningly rash" buyer would unthinkingly buy. In the case at bar, other than the fact that both Nestle's and CFC's products are inexpensive and common household items, the similarity ends there. What is being questioned here is the use by CFC of the trademark MASTER. In view of the difficulty of applying jurisprudential precedents to trademark cases due to the peculiarity of each case, judicial fora should not readily apply a certain test or standard just because of seeming similarities. As this Court has pointed above, there could be more telling differences than similarities as to make a jurisprudential precedent inapplicable. Nestle points out that the dominancy test should have been applied to determine whether there is a confusing similarity between CFC's FLAVOR MASTER and Nestle's MASTER ROAST and MASTER BLEND. We agree. As the Court of Appeals itself has stated, "[t]he determination of whether two trademarks are indeed confusingly similar must be taken from the viewpoint of the Copyright 1994-2014

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ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products." 21(21) The basis for the Court of Appeals' application of the totality or holistic test is the "ordinary purchaser" buying the product under "normally prevalent conditions in trade" and the attention such products normally elicit from said ordinary purchaser. An ordinary purchaser or buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. 22(22) The Court of Appeals held that the test to be applied should be the totality or holistic test reasoning, since what is of paramount consideration is the ordinary purchaser who is, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and is therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. This Court cannot agree with the above reasoning. If the ordinary purchaser is "undiscerningly rash" in buying such common and inexpensive household products as instant coffee, and would therefore be "less inclined to closely examine specific details of similarities and dissimilarities" between the two competing products, then it would be less likely for the ordinary purchaser to notice that CFC's trademark FLAVOR MASTER carries the colors orange and mocha while that of Nestle's uses red and brown. The application of the totality or holistic test is improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item. It must be emphasized that the products bearing the trademarks in question are "inexpensive and common" household items bought off the shelf by "undiscerningly rash" purchasers. As such, if the ordinary purchaser is "undiscerningly rash", then he would not have the time nor the inclination to make a keen and perceptive examination of the physical discrepancies in the trademarks of the products in order to exercise his choice. While this Court agrees with the Court of Appeals' detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court Copyright 1994-2014

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believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu. Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. 23(23) The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that: From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposer's mark. The word MASTER is printed across the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in the TV and radio commercials and other advertisements made in promoting the product. This can be gleaned from the fact that Robert Jaworski and Atty. Ric Puno Jr., the personalities engaged to promote the product, are given the titles Master of the Game and Master of the Talk Show, respectively. In due time, because of these advertising schemes the mind of the buying public had come to learn to associate the word MASTER with the opposer's goods. . . . It is the observation of this Office that much of the dominance which the word MASTER has acquired through Opposer's advertising schemes is carried over when the same is incorporated into respondent-applicant's trademark FLAVOR MASTER. Thus, when one looks at the label bearing the trademark FLAVOR MASTER (Exh. 4) one's attention is easily attracted to the word MASTER, rather than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which bear the competing marks or as to the origins thereof is not farfetched. . . . 24(24)

In addition, the word "MASTER" is neither a generic nor a descriptive term. As such, said term can not be invalidated as a trademark and, therefore, may be legally protected. Generic terms 25(25) are those which constitute "the common descriptive name of an article or substance," or comprise the "genus of which the particular product is a species," or are "commonly used as the name or description of a kind of Copyright 1994-2014

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goods," or "imply reference to every member of a genus and the exclusion of individuating characters," or "refer to the basic nature of the wares or services provided rather than to the more idiosyncratic characteristics of a particular product," and are not legally protectable. On the other hand, a term is descriptive 26(26) and therefore invalid as a trademark if, as understood in its normal and natural sense, it "forthwith conveys the characteristics, functions, qualities or ingredients of a product to one who has never seen it and does not know what it is," or "if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods," or if it clearly denotes what goods or services are provided in such a way that the consumer does not have to exercise powers of perception or imagination. Rather, the term "MASTER" is a suggestive term brought about by the advertising scheme of Nestle. Suggestive terms 27(27) are those which, in the phraseology of one court, require "imagination, thought and perception to reach a conclusion as to the nature of the goods." Such terms, "which subtly connote something about the product," are eligible for protection in the absence of secondary meaning. While suggestive marks are capable of shedding "some light" upon certain characteristics of the goods or services in dispute, they nevertheless involve "an element of incongruity," "figurativeness," or " imaginative effort on the part of the observer." DHCcST

This is evident from the advertising scheme adopted by Nestle in promoting its coffee products. In this case, Nestle has, over time, promoted its products as "coffee perfection worthy of masters like Robert Jaworski and Ric Puno Jr." In associating its coffee products with the term "MASTER" and thereby impressing them with the attributes of said term, Nestle advertised its products thus: Robert Jaworski. Living Legend. A true hard court hero. Fast on his feet. Sure in every shot he makes. A master strategist. In one word, unmatched. MASTER ROAST. Equally unmatched. Rich and deeply satisfying. Made from a unique combination of the best coffee beans — Arabica for superior taste and aroma, Robusta for strength and body. A masterpiece only NESCAFE, the world's coffee masters, can create. MASTER ROAST. Coffee perfection worthy of masters like Robert Jaworski. 28(28) In the art of conversation, Ric Puno Jr. is master. Witty. Well-informed. Confident. Copyright 1994-2014

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In the art of coffee-making, nothing equals Master Roast, the coffee masterpiece from Nescafe, the world's coffee masters. A unique combination of the best coffee beans — Arabica for superior taste and aroma, Robusta for strength and body. Truly distinctive and rich in flavor. Master Roast. Coffee perfection worthy of masters like Ric Puno Jr. 29(29)

The term "MASTER", therefore, has acquired a certain connotation to mean the coffee products MASTER ROAST and MASTER BLEND produced by Nestle. As such, the use by CFC of the term "MASTER" in the trademark for its coffee product FLAVOR MASTER is likely to cause confusion or mistake or even to deceive the ordinary purchasers. In closing, it may not be amiss to quote the case of American Chicle Co. v. Topps Chewing Gum, Inc., 30(30) to wit: Why it should have chosen a mark that had long been employed by [plaintiff] and had become known to the trade instead of adopting some other means of identifying its goods is hard to see unless there was a deliberate purpose to obtain some advantage from the trade that [plaintiff] had built up. Indeed, it is generally true that, as soon as we see that a second comer in a market has, for no reason that he can assign, plagiarized the "make-up" of an earlier comer, we need no more; [W]e feel bound to compel him to exercise his ingenuity in quarters further afield.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. SP NO. 24101 is REVERSED and SET ASIDE and the decision of the Bureau of Patents, Trademarks and Technology Transfer in Inter Partes Cases Nos. 3200 and 3202 is REINSTATED. SO ORDERED. Davide, Jr., C.J., Kapunan and Pardo, JJ., concur. Puno, J., is on official leave. )RRWQRWHV 1. 2.

Penned by Associate Justice Ricardo J. Francisco and concurred in by Associate Justices Lourdes K. Tayao-Jaguros and Eubulo G. Verzola. Penned by Director Ignacio S. Sapalo.

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3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

Inter Partes Case No. 3202. Inter Partes Case No. 3200. Rollo, pp. 35-48. Ibid., pp. 33-34. Bass Buster, Inc. v. Gapen Mfg. Co., 420 F. Supp. 144, 156, 191 USPQ 315, 325 (W.D. Mo. 1976) 316 U.S. 203, 53 USPQ 323 [1942]. Etepha v. Director of Patents, et al., 16 SCRA 495, 497-498 [1966]. Ibid. Id. Rollo, p. 32. Emerald Garment Manufacturing Corporation v. Court of Appeals, 251 SCRA 600 [1995]. 116 SCRA 336 [1982] as cited In Emerald Garment Manufacturing Corporation v. Court of Appeals, supra. Thompson Medical Co. v. Pfizer, Inc., 753 F. 2d 208, 225 USPQ 124 (2d Cir. 1985). 181 SCRA 410 [1990]. 17 SCRA 128 [1966]. 7 SCRA 768 [1963]. 76 SCRA 568 [1977]. Mead Johnson & Co. v. NVJ Van Dorf Ltd., supra. Rollo, p. 32. Del Monte Corporation v. Court of Appeals, 181 SCRA 410 [1990]. Federal Unfair Competition: Lanham Act §43(a), p. 3-76. Rollo, pp. 38-39. Federal Unfair Competition: Lanham Act §43(a), p. 3-22.1. Id., p. 3-36. Id., p. 3-54. Exhibit ''N". Exhibit "O". 208 F. 2d 560, 562-63, 99 USPQ 362, 364-65 (2d Cir. 1953).

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FIRST DIVISION [G.R. No. 100098. December 29, 1995.] EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, YV HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC., respondents. Julio C. Contreras for petitioner. Sycip, Salazar, Hernandez & Gatmaitan for private respondent. SYLLABUS 1. COMMERCIAL LAW; TRADEMARK LAW; INFRINGEMENT; DECISION ON EACH CASE MUST BE BASED ON ITS OWN MERIT. — In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v. Court of Appeals, 116 SCRA 336 (1982), we held: ". . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case." Likewise, it has been observed that: "In determining whether a particular name or mark is a "colorable imitation" of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product's purchasers; location of the business; the likelihood of deception or the mark or name's tendency to confuse; etc." TCIHSa

2. ID.; ID.; ID.; COLORABLE IMITATION, CONSTRUED. — The essential element of infringement is colorable imitation. This term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, Copyright 1994-2014

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or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." "Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article." 3. ID.; ID.; ID.; ID.; TEST IN THE DETERMINATION. — In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals, 224 SCRA 437 (1993), and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990), and its proponent cases. As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. 4. ID.; ID.; REQUISITES FOR THE ACQUISITION OF OWNERSHIP OVER TRADEMARK. — Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166). In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214 (1969), we declared: . . . "It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a preexisting right. Registration does not, however, perfect a trademark right." The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. Copyright 1994-2014

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5. ID.; ID.; DETERMINATION OF PRIOR USER OF TRADEMARK; FINDINGS OF FACTS BY THE DIRECTOR OF PATENTS, CONCLUSIVE UPON THE SUPREME COURT. — The determination as to who is the prior user of the trademark is a question of fact and it is this Court's working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 6. ID.; ID.; NATURE OF SUPPLEMENTAL REGISTER. — Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of marks which are not registrable on the principal register due to some defects. ScaCEH

DECISION

KAPUNAN, J : p

In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald Garment Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29 November 1990 in CA-G.R. SP No. 15266 declaring petitioner's trademark to be confusingly similar to that of private respondent and the resolution dated 17 May 1991 denying petitioner's motion for reconsideration. The record reveals the following antecedent facts: On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized under the laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for Cancellation of Registration No. SR 5054 (Supplemental Register) for the trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued on 27 October 1980 in the name of petitioner Emerald Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine laws. The petition was docketed as Inter Partes Case No. 1558. 1(1) Copyright 1994-2014

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Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris Convention for the Protection of Industrial Property, averred that petitioner's trademark "so closely resembled its own trademark, 'LEE' as previously registered and used in the Philippines, and not abandoned, as to be likely, when applied to or used in connection with petitioner's goods, to cause confusion, mistake and deception on the part of the purchasing public as to the origin of the goods." 2(2) In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and unmistakably different from that of private respondent and that its certificate of registration was legally and validly granted. 3(3) On 20 February 1984, petitioner caused the publication of its application for registration of the trademark "STYLISTIC MR. LEE" in the Principal Register." 4(4) On 27 July 1984, private respondent filed a notice of opposition to petitioner's application for registration also on grounds that petitioner's trademark was confusingly similar to its "LEE" trademark. 5(5) The case was docketed as Inter Partes Case No. 1860. On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985, issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common question of law was involved. 6(6) On 19 July 1988, the Director of Patents rendered a decision granting private respondent's petition for cancellation and opposition to registration. The Director of Patents found private respondent to be the prior registrant of the trademark "LEE" in the Philippines and that it had been using said mark in the Philippines. 7(7) Moreover, the Director of Patents, using the test of dominancy, declared that petitioner's trademark was confusingly similar to private respondent's mark because "it is the word 'Lee' which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. It is undeniably the dominant feature of the mark." 8(8) On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that the same would cause it great and irreparable damage and injury. Private respondent submitted its opposition on 22 Copyright 1994-2014

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August 1988. 9(9) On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioner's motion to stay execution subject to the following terms and conditions: 1. That under this resolution, Respondent-Registrant is authorized only to dispose of its current stock using the mark "STYLISTIC MR. LEE"; 2. That Respondent-Registrant is strictly prohibited from further production, regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock; 3. That this relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals and, if the Respondent's appeal loses, all goods bearing the mark "STYLISTIC MR. LEE" shall be removed from the market, otherwise such goods shall be seized in accordance with the law. SO ORDERED. 10(10)

On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the Director of Patents dated 19 July 1988 in all respects. 11(11)

In said decision the Court of Appeals expounded, thus: xxx

xxx

xxx.

Whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; that duplication or imitation is not necessary, a similarity in the dominant features of the trademark would be sufficient. The word "LEE" is the most prominent and distinctive feature of the appellant's trademark and all of the appellee's "LEE" trademarks. It is the mark which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. While it is true that there are other words such as "STYLISTIC", printed in the appellant's label, such word is printed in such small letters over the word "LEE" that it is not conspicuous enough to draw the attention of ordinary buyers whereas the word "LEE" is printed across the label in big, bold letters and of the same color, style, type and Copyright 1994-2014

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size of lettering as that of the trademark of the appellee. The alleged difference is too insubstantial to be noticeable. Even granting arguendo that the word "STYLISTIC" is conspicuous enough to draw attention, the goods may easily be mistaken for just another variation or line of garments under the appellee's "LEE" trademarks in view of the fact that the appellee has registered trademarks which use other words in addition to the principal mark "LEE" such as "LEE RIDERS", "LEESURES" and "LEE LEENS". The likelihood of confusion is further made more probable by the fact that both parties are engaged in the same line of business. It is well to reiterate that the determinative factor in ascertaining whether or not the marks are confusingly similar to each other is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. xxx

xxx

xxx.

The appellee has sufficiently established its right to prior use and registration of the trademark "LEE" in the Philippines and is thus entitled to protection from any infringement upon the same. It is thus axiomatic that one who has identified a peculiar symbol or mark with his goods thereby acquires a property right in such symbol or mark, and if another infringes the trademark, he thereby invokes this property right. The merchandise or goods being sold by the parties are not that expensive as alleged to be by the appellant and are quite ordinary commodities purchased by the average person and at times, by the ignorant and the unlettered. Ordinary purchasers will not as a rule examine the small letterings printed on the label but will simply be guided by the presence of the striking mark "LEE". Whatever difference there may be will pale in insignificance in the face of an evident similarity in the dominant features and overall appearance of the labels of the parties. 12(12) xxx

xxx

xxx.

On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision of the Court of Appeals. Private respondent opposed said motion on 8 January 1991 on grounds that it involved an impermissible change of theory on appeal. Petitioner allegedly raised entirely new and unrelated arguments and defenses not previously raised in the proceedings below such as laches and a claim that private respondent appropriated the style and appearance of petitioner's trademark when it registered its "LEE" mark Copyright 1994-2014

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under Registration No. 44220. 13(13) On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's motion for reconsideration and ruled thus: xxx

xxx

xxx.

A defense not raised in the trial court cannot be raised on appeal for the first time. An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. The object of requiring the parties to present all questions and issues to the lower court before they can be presented to this Court is to have the lower court rule upon them, so that this Court on appeal may determine whether or not such ruling was erroneous. The purpose is also in furtherance of justice to require the party to first present the question he contends for in the lower court so that the other party may not be taken by surprise and may present evidence to properly meet the issues raised. Moreover, for a question to be raised on appeal, the same must also be within the issues raised by the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided based upon such theory presented in the court below, he will not be permitted to change his theory on appeal. To permit him to do so would be unfair to the adverse party. A question raised for the first time on appeal, there having opportunity to raise them in the court of origin constitutes a change of theory which is not permissible on appeal. In the instant case, appellant's main defense pleaded in its answer dated March 23, 1982 was that there was "no confusing similarity between the competing trademark involved. On appeal, the appellant raised a single issue, to wit:

The only issue involved in this case is whether or not respondent-registrant's trademark "STYLISTIC MR. LEE" is confusingly similar with the petitioner's trademarks "LEE or LEE RIDERS, LEE-LEENS and LEE-SURES." Appellant's main argument in this motion for reconsideration on the other hand is that the appellee is estopped by laches from asserting its right to its trademark. Appellant claims although belatedly that appellee went to court with "unclean hands" by changing the appearance of its trademark to make it identical to the appellant's trademark. Neither defenses were raised by the appellant in the proceedings before Copyright 1994-2014

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the Bureau of Patents. Appellant cannot raise them now for the first time on appeal, let alone on a mere motion for reconsideration of the decision of this Court dismissing the appellant's appeal. While there may be instances and situations justifying relaxation of this rule, the circumstance of the instant case, equity would be better served by applying the settled rule it appearing that appellant has not given any reason at all as to why the defenses raised in its motion for reconsideration was not invoked earlier. 14(14) xxx

xxx

xxx.

Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors: I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE OF A FOURTH "LEE" TRADEMARK IMITATING THAT OF THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN EIGHT MONTHS AFTER THE BUREAU OF PATENT'S DECISION DATED JULY 19, 1988. II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF ESTOPPEL BY LACHES MUST BE RAISED IN THE PROCEEDINGS BEFORE THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER. III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE RESPONDENT'S PRIOR REGISTRATION OF ITS TRADEMARK AND DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO PROVE COMMERCIAL USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION. 15(15) In addition, petitioner reiterates the issues it raised in the Court of Appeals: I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONER'S TRADEMARK STYLISTIC MR. LEE, IS CONFUSINGLY SIMILAR WITH THE PRIVATE RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEE-LEENS AND LEE-SURES. II. PETITIONER'S EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER AND ITS TRADEMARK IS DIFFERENT Copyright 1994-2014

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FROM THAT OF THE PRIVATE RESPONDENT. III. PETITIONER'S TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE RESPONDENT'S AND THE REGISTRATION OF ITS TRADEMARK IS PRIMA FACIE EVIDENCE OF GOOD FAITH. IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK CANNOT BE CONFUSED WITH PRIVATE RESPONDENT'S LEE TRADEMARK. 16(16) Petitioner contends that private respondent is estopped from instituting an action for infringement before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A of R.A. No. 166, otherwise known as the Law on Trade-marks, Trade-names and Unfair Competition: SEC. 9-A. Equitable principles to govern proceedings. — In opposition proceedings and in all other inter partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and acquiescence, where applicable, may be considered and applied.

Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE" since 1 May 1975, yet, it was only on 18 September 1981 that private respondent filed a petition for cancellation of petitioner's certificate of registration for the said trademark. Similarly, private respondent's notice of opposition to petitioner's application for registration in the principal register was belatedly filed on 27 July 1984. 17(17) Private respondent counters by maintaining that petitioner was barred from raising new issues on appeal, the only contention in the proceedings below being the presence or absence of confusing similarity between the two trademarks in question. 18(18) We reject petitioner's contention. Petitioner's trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that "marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette." 19(19) The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, 20(20) the date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to petitioner. Copyright 1994-2014

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It was only on the date of publication and issuance of the registration certificate that private respondent may be considered "officially" put on notice that petitioner has appropriated or is using said mark, which, after all, is the function and purpose of registration in the supplemental register. 21(21) The record is bereft of evidence that private respondent was aware of petitioner's trademark before the date of said publication and issuance. Hence, when private respondent instituted cancellation proceedings on 18 September 1981, less than a year had passed. Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of opposition to petitioner's application for registration in the principal register since said application was published only on 20 February 1984. 22(22) From the time of publication to the time of filing the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. 23(23) More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently contends that its trademark "STYLISTIC MR. LEE" is entirely different from and not confusingly similar to private respondent's "LEE" trademark. Private respondent maintains otherwise. It asserts that petitioner's trademark tends to mislead and confuse the public and thus constitutes an infringement of its own mark, since the dominant feature therein is the word "LEE." The pertinent provision of R.A. No. 166 (Trademark Law) states thus: SEC. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Practical application, however, of the aforesaid provision is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, Copyright 1994-2014

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no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v.Court of Appeals, 24(24) we held: . . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. It is unquestionably true that, as stated in Coburn vs.Puritan Mills, Inc.: "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case." xxx

xxx

xxx.

Likewise, it has been observed that: In determining whether a particular name or mark is a "colorable imitation" of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product's purchasers; location of the business; the likelihood of deception or the mark or name's tendency to confuse; etc. 25(25)

Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." 26(26) Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article. 27(27)

In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals 28(28) and other cases 29(29) and the Holistic Test developed in Del Monte Copyright 1994-2014

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Corporation v.Court of Appeals 30(30) and its proponent cases. 31(31) As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. xxx

xxx

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. . . If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC), 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . . .) 32(32) xxx

xxx

xxx.

On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. xxx

xxx

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In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. 33(33) xxx

xxx

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Applying the foregoing tenets to the present controversy and taking into account the factual circumstances of this case, we considered the trademarks involved as a whole and rule that petitioner's "STYLISTIC MR. LEE" is not confusingly similar to private respondent's "LEE" trademark. Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its label the word "LEE" is prominent, the trademark should be considered as a whole Copyright 1994-2014

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and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of the following variables that must be factored in. First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soy sauce or soap which are of minimal cost. Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, 34(34) we noted that: . . . Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. . . .

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted. Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved. The definition laid down in Dy Buncio v.Tan Tiao Bok 35(35) is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely Copyright 1994-2014

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to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase." There is no cause for the Court of Appeals' apprehension that petitioner's products might be mistaken as "another variation or line of garments under private respondent's 'LEE' trademark". 36(36) As one would readily observe, private respondent's variation follows a standard format "LEERIDERS," "LEESURES" and "LEELEENS." It is, therefore, improbable that the public would immediately and naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another variation under private respondent's "LEE" mark. As we have previously intimated the issue of confusing similarity between trademarks is resolved by considering the distinct characteristics of each case. In the present controversy, taking into account these unique factors, we conclude that the similarities in the trademarks in question are not sufficient as to likely cause deception and confusion tantamount to infringement Another way of resolving the conflict is to consider the marks involved from the point of view of what marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4(e): CHAPTER II-A. — The Principal Register (Inserted by Sec. 2, Rep. Act No. 638.) SEC. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx

xxx

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(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (Italics ours.) xxx Copyright 1994-2014

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"LEE" is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term. . . . It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, "Wellington" is a surname, and its first user has no cause of action against the junior user of "Wellington" as it is incapable of exclusive appropriation. 37(37)

In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) which explicitly provides that: CHAPTER II.

Registration of Marks and Trade-names.

SEC. 2. What are registrable. — Trade-marks, trade-names, and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships, or associations domiciled in any foreign country may be registered in accordance with the provisions of this act: Provided, That said trade-marks, trade-names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And Provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended.) (Italics ours.) SEC. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in lawful business, or who renders any lawful service in commerce, by actual use hereof in manufacture or trade, in business and in the service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or services from others. The ownership or possession of Copyright 1994-2014

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trade-mark, trade-name, service-mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights to the law. (As amended.) (Italics ours.)

The provisions of the 1965 Paris Convention for the Protection of Industrial Property 38(38) relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) 39(39) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals: 40(40) xxx

xxx

xxx

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx

xxx

xxx.

In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx

xxx

xxx.

Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEE RIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969 to Copyright 1994-2014

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1973. 41(41) However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 42(42) we declared: xxx

xxx

xxx.

A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx

xxx

xxx.

It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. (Italics ours.) xxx

xxx

xxx.

To augment its arguments that it was, not only the prior registrant, but also the prior user, private respondent invokes Sec. 20 of the Trademark Law, thus: SEC. 20. Certificate of registration prima facie evidence of validity. — A certificate of registration of a mark or tradename shall be a 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.

The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. Moreover, the aforequoted provision applies only to registrations in the principal register. 43(43) Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of Copyright 1994-2014

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marks which are not registrable on the principal register due to some defects. 44(44) The determination as to who is the prior user of the trademark is a question of fact and it is this Court's working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 45(45) In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark "LEE" which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its "LEE" mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines 46(46) based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. 47(47) Similarly, we give little weight to the numerous vouchers representing various advertising expenses in the Philippines for "LEE" products. 48(48) It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May 1981. 49(49) On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its "STYLISTIC MR. LEE" trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. 50(50) Our rulings in Pagasa Industrial Corp. v. Court of Appeals 51(51) and Converse Rubber Corp. v. Universal Rubber Products, Inc., 52(52) respectively, are instructive: The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value." The evidence for respondent must be clear, definite and free from inconsistencies. "Samples" are not for sale and therefore, the fact of Copyright 1994-2014

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exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by law. Respondent did not expect income from such "samples." There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. xxx

xxx

xxx.

The sales invoices provide the best proof that there were actual sales of petitioner's product in the country and that there was actual use for a protracted period of petitioner's trademark or part thereof through these sales.

For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for infringement must necessarily fail. WHEREFORE, premises considered, the questioned decision and resolution are hereby REVERSED and SET ASIDE. SO ORDERED. Bellosillo and Hermosisima, Jr., JJ., concur. Davide, Jr., J., I vote to deny the petition there being no showing of an exception to inclusiveness of findings of BPTTT and of CA. Padilla, J., I dissent. I vote to deny the petition; I agree with BPTTT and the CA that petitioner's trademark "STYLISTIC MR. LEE" is confusingly similar to private respondent's earlier registered trademarks "LEE" or "LEE RIDER, LEE-LEENS and LEE-SURES" such that the trademark "STYLISTIC MR. LEE" is an infringement of the earlier registered trademarks. )RRWQRWHV 1. 2. 3. 4. 5.. 6. 7. 8. 9.

Rollo, pp. 3, 27, 53. Id., at 27, 55. Id., at 27, 54. Id., at 3, 27. Id., at 54. Ibid. Id., at 39. Id., at 38. Id., at 4.

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10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

20. 21. 22. 23. 24. 25.

26. 27. 28. 29.

30. 31.

Id., at 42. Id., at 33. Id., at 31-33. Id., at 175. Id., at 23-25. Id., at 7, 14-15. Ibid. Id., at 12, 158. Id., at 193. The whole paragraph reads as follows: Chapter IV-A. — The supplemental register. SEC. 19-A. xxx xxx xxx. Marks and trade-names for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette. Whenever any person believes that he is or will be damaged by the registration of a mark or trade-name on this register, he may at any time apply to the director to cancel such registration. Upon receiving the application, the director shall give notice thereof to the registrant. If it is found after a hearing that the registrant was not entitled to register the mark at the time of his application for registration thereof, or that the mark was not used by the registrant or has been abandoned, the registration shall be cancelled by the director. Supra, see Note 1. Sec. 19-A, R.A. No. 166; La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984). Supra, see Note 4. Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p. 32, citing La Insular v.Jao Oge, 47 Phil. 75, (1924); La Insular v.Yu So, 45 Phil. 398 (1923). 116 SCRA 336 (1982). Jaime N. Salazar, Trademarks and Tradenames, 55 SCRA 422 (1974); See also Colorable Imitation of Trademarks, Tradenames, Labels, Packages, Wrappers, etc., 16 SCRA 502 (1966). Etepha v.Director of Patents, 16 SCRA 495 (1966). Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p. 41. 224 SCRA 437 (1993). Co Tiong v. Director of Patents, 95 Phil. 1 (1954); Lim Hoa v.Director of Patents; 100 Phil. 214 (1956); American Wire & Cable Co. v.Director of Patents, 31 SCRA 544 (1970); Phil. Nut Industry, Inc. v. Standard Brands, Inc., 65 SCRA 575 (1975); Converse Rubber Corp. v.Universal Rubber Products, Inc., 147 SCRA 154 (1987). 181 SCRA 410 (1990). Mead Johnson & Co. v. N.V.J. Van Dorp, Ltd., 7 SCRA 771 (1963); Bristol Myers Co. v. Director of Patents, 17 SCRA 128 (1966); Fruit of the Loom, Inc. v. CA, 133 SCRA 405 (1984).

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32. 33. 34. 35. 36. 37. 38.

39.

40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52.

Supra, see note 28. Fruit of the Loom, Inc. v. CA, supra, see note 31. Supra, see note 30. 42 Phil. 190 (1921). Supra, see note 12. Ruben Agpalo, Trademark Law and Practice in the Philippines, 1990, p. 18, citing Ang Si Heng v. Wellington Dept. Store, Inc., 92 Phil. 448 (1953). The Philippines became a signatory thereto on 27 September 1965. The Paris Convention is essentially a compact among 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 laws. 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 nation to assure to nationals of countries of the Union an effective protection against unfair competition. (Ruben Agpalo, Trademark Law And Practice in the Philippines, 1990, pp. 200-201.) SEC. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or assigned under this Act may bring an action hereinunder 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 complaint: Provided, That the country of which the said foreign 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. (As amended.) 224 SCRA 576 (1993). Rollo, p. 170; Exhibits A, B, C, & C-l. 27 SCRA 1214 (1969); Reiterated in Kabushi Kaisha Isetan v. Intermediate Appellate Court, 203 SCRA 583 (1991). La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984). Ibid. Unno Commercial Enterprises, Inc. v. General Milling Corp., 120 SCRA 804 (1983); Kabushi Kaisha Isetan v. Intermediate Appellate Court, 203 SCRA 583 (1991). Rollo, p. 177. Original Records, p. 52. Exhibits F-1 to F-59. Exhibit E. Exhibits 1-e to 1-o. 118 SCRA 526 (1982). 147 SCRA 154 (1987).

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FIRST DIVISION [G.R. No. 78325. January 25, 1990.] DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners, YV COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents. Bito, Misa & Lozada for petitioners. Reynaldo F. Singson for private respondent.

DECISION

CRUZ, J : p

The petitioners are questioning the decision of the respondent court upholding the dismissal by the trial court of their complaint against the private respondent for infringement of trademark and unfair competition. cCESTA

Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not engaged in business in the Philippines. Both the Philippines and the United States are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition. Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the Philippines various agricultural products, including catsup, under the Del Monte trademark and logo. cdll

On October 27, 1965, Del Monte authorized Philpack to register with the Copyright 1994-2014

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Philippine Patent Office the Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1(1) On November 20, 1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its logo. 2(2)

Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by the Bureau of Domestic Trade on April 17, 1980, to engage in the manufacture, packing, distribution and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup. 3(3) This logo was registered in the Supplemental Register on September 20, 1983. 4(4) The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the private respondent bought from the junk shops for recycling. Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Monte's, Philpack warned it to desist from doing so on pain of legal action. Thereafter, claiming that the demand had been ignored, Philpack and Del Monte filed a complaint against the private respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of a writ of preliminary injunction. 5(5) In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo was substantially different from the Del Monte logo and would not confuse the buying public to the detriment of the petitioners. 6(6) After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were substantial differences between the logos or trademarks of the parties; that the defendant had ceased using the petitioners' bottles; and that in any case the defendant became the owner of the said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed to establish the defendant's malice or bad faith, which was an essential element of infringement of trademark or unfair competition. 7(7) This decision was affirmed in toto by the respondent court, which is now faulted in this petition for certiorari under Rule 45 of the Rules of Court. Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part as follows: Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or Copyright 1994-2014

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colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade name and apply such reproduction, counterfeit copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Sec. 29 of the same law states as follows: 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 for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, 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 likely 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) Copyright 1994-2014

Any person who by any artifice, or device, or who employs any

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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.

To arrive at a proper resolution of this case, it is important to bear in mind the following distinctions between infringement of trademark and unfair competition. (1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another. (2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair competition fraudulent intent is essential. (3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. 8(8)

In the challenged decision, the respondent court cited the following test laid down by this Court in a number of cases: In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels. 9(9)

and applying the same, held that there was no colorable imitation of the petitioners' trademark and logo by the private respondent. The respondent court agreed with the findings of the trial court that: In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit: 1.

As to the shape of label or make:

Del Monte: Semi-rectangular, with a crown or tomato shape design on top of the rectangle. Sunshine: Regular rectangle. 2. Copyright 1994-2014

As to brand printed on label:

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Del Monte: Tomato catsup mark. Sunshine: Fruit catsup. 3.

As to the words or lettering on label or mark:

Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines. Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro Manila. 4.

As to color of logo:

Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in white. Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow. 5.

As to shape of logo: Del Monte: In the shape of a tomato. Sunshine: Entirely different in shape.

6.

As to label below the cap:

Del Monte: Seal covering the cap down to the neck of the bottle, with picture of tomatoes with words "made from real tomatoes. "Sunshine: There is a label below the cap which says "Sunshine Brand." 7.

As to the color of the products: Del Monte: Darker red. Sunshine: Lighter than Del Monte.

While the Court does recognize these distinctions, it does not agree with the Copyright 1994-2014

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conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. 10(10) Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their label when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. 11(11) As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone. 12(12) It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. 13(13) The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. 14(14) Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. LexLib

A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. 15(15) The court therefore should be guided by its first impression, 16(16) for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17(17)

It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their Copyright 1994-2014

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carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. 18(18) The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. 19(19) Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. 20(20) We also note that the respondent court failed to take into consideration several factors which should have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased. 21(21) Among these, what essentially determines the attitude of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. 22(22) Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. 23(23) In this latter category is catsup. At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label are green and red-orange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato. EaIDAT

As previously stated, the person who infringes a trade mark does not normally copy out but only makes colorable changes, employing enough points of similarity to confuse the public with enough points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product, he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine chose, without a reasonable explanation, to use the same colors and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is that it was done deliberately to deceive. 24(24) It has been aptly observed that the ultimate ratio in cases of grave doubt is the Copyright 1994-2014

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rule that as between a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest dealing has already achieved favor with the public, any doubt should be resolved against the newcomer inasmuch as the field from which he can select a desirable trademark to indicate the origin of his product is obviously a large one. 25(25) Coming now to the second issue, we find that the private respondent is not guilty of infringement for having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26(26) we declared that: (1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark and his right to the exclusive use thereof. There is no such presumption in the registration in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein on the issue of ownership which may be contested through opposition or interference proceedings or, after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claim of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. It is not subject to opposition although it may be cancelled after the issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement while registration in the Supplemental Register is not. (3) In applications for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registrations in the Supplemental Register.

It can be inferred from the foregoing that although Del Monte has actual use of the bottle's configuration, the petitioners cannot claim exclusive use thereof because it has not been registered in the Principal Register. However, we find that Sunshine, despite the many choices available to it and notwithstanding that the caution "Del Monte Corporation, Not to be Refilled" was embossed on the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces. This clearly shows the private respondent's bad faith and its intention to capitalize on the latter's reputation and goodwill and pass off its own product as that of Del Monte. Copyright 1994-2014

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The Court observes that the reasons given by the respondent court in resolving the case in favor of Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label was not improper because the Bureau of Patent presumably considered other trademarks before approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27(27) where this Court declared that selling oil in containers of another with markings erased, without intent to deceive, was not unfair competition. Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the Principal Register but only in the Supplemental Register where the presumption of the validity of the trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent. Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated that since registration was only in the Supplemental Register, this did not vest the registrant with the exclusive right to use the label nor did it give rise to the presumption of the validity of the registration. On the argument that no unfair competition was committed, the Shell Case is not on all fours with the case at bar because: (1) In Shell, the absence of intent to deceive was supported by the fact that the respondent therein, before marketing its product, totally obliterated and erased the brands/mark of the different companies stenciled on the containers thereof, except for a single isolated transaction. The respondent in the present case made no similar effort. (2) In Shell, what was involved was a single isolated transaction. Of the many drums used, there was only one container where the Shell label was not erased, while in the case at hand, the respondent admitted that it made use of several Del Monte bottles and without obliterating the embossed warning. (3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a general rule, dealers are well acquainted with the manufacturer from whom they make their purchases and since they are more experienced, they cannot be so easily deceived like the inexperienced public. There may well be similarities and imitations which deceive all, but generally the interests of the dealers are not regarded with the same solicitude as are the interests of the ordinary consumer. For it is the form in which the wares come to the final buyer that is of significance. 28(28) Copyright 1994-2014

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As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the cancellation of the private respondent's registration and withdrawal of all its products bearing the questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles. Cdpr

The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides: Sec. 23. 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 the court may award as damages 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 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.

Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code, which provides: Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Art. 1157, or in every case where any property right has been invaded.

Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of P1,000.00. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24, 1986 and the Resolution dated April 27, 1987, are REVERSED and SET ASIDE and a new judgment is hereby rendered:. (1) Canceling the private respondent's Certificate of Registration No. Copyright 1994-2014

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SR-6310 and permanently enjoining the private respondent from using a label similar to that of the petitioners. (2) Prohibiting the private respondent from using the empty bottles of the petitioners as containers for its own products. (3) Ordering the private respondent to pay the petitioners nominal damages in the amount of P1,000.00, and the costs of the suit. LLpr

SO ORDERED. Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur. )RRWQRWHV 1. 2. 3. 4. 5. 6. 7. 8.

9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Original Records, pp. 29-30. Ibid., Annex 2 pp. 8-9; Annex 3, pp. 16-17. Id., Annex A, p. 41. Id., Annex B, pp. 42-43. Id., pp. 1-6. Id., pp. 38-40. Id., pp. 166-168. Decision penned by Judge Roque A. Tamayo, affirmed in the Court of Appeals by Coquia, J., ponente, with Luciano and Cui, JJ., concurring. Jose C. Vitug, Pendect of Commercial Law & Jurisprudence, 1st ed., p. 291 citing Compania General de Tabacos v. de Aljambra Cigar and Cigarette Manufacturing Co., 33 Phil 485; Ogura v. Chua, 59 Phil. 471; Parke Davies & Co. v. Kiu Foo & Co.., 60 Phil. 928. Mead Johnson Co. v. N.V.J. Von Dorp. Ltd., 7 SCRA 768; Bristol Myers Co. v. Director of Patents, 17 SCRA 128. Stuart v. F.G. Stewart Co., 91 F 243. Notaseme Hosiery v. Straus, 201 F 99. McLean v. Fleming, 96 US 245; Fischer v. Blank, 138 N.Y. 244; Tillman Bendel v. California Packing Corporation, 63 F 2d 498. Martini & Rossi v. Consumer's People's Products, 57 F 2d 599. Stuart v F.G. Stewart Co., 91 F 243. Helmet Co. v. Wm Wrigley Jr. Co., 245 E 842; Pennzoil Co. v. Pennsylvania Petroleum Co., 159 M.D. 187. William Waltke & Co. v. Geo. H. Schafer, 49 App D.C. 294; Ward Baking Co. v. Potter-Wringtington, 298 F 398. Vortex Mfg. Co. v. Ply-Rite Contracting Co., 33 F 2d 302. Hilton v. Hilton, 90 N.J. Eq. 564. Bickmore Gall Cure Co. v. Karns, 134 F 833; J.C. Penny Co. v. H.D. Lee Merchantile Co., 120 F 2d 949.

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20. 21. 22. 23. 24. 25. 26. 27. 28.

Baker and Master Printers Union of New Jersey, 34 F Supp. 808. 11 H.D. Nims, The Law of Unfair Competition and Trademark, 1947, p. 1027. Ibid., p. 1030. 11 Rudolf Callman, The Law of Unfair Competition and Trademark, 1945, pp. 1137, 1136. Ibid., Vol. III, 2nd ed. pp. 1527-1528 cited in Converse Rubber Corporation v. Universal Rubber Product Inc., 147 SCRA 155. William Waltke & Co. v. Geo. H. Schafer & Co., 49 App. D.C. 294; Standard Oil v. Michie, 34 F 2d 802. 154 SCRA 723. 11 SCRA 436. Supra., p. 1141.

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EN BANC [G.R. No. L-20635. March 31, 1966.] ETEPHA, A.G., petitioner, YV. DIRECTOR OF PATENTS and WESTMONT PHARMACEUTICALS, INC., respondents. McClure, Salas & Gonzales for petitioner. Sycip, Salazar, Luna & Associates, for respondent. SYLLABUS 1. TRADEMARKS; OBJECTS OF. — The objects of a trademark 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. 2. ID.; INFRINGEMENT OF TRADEMARKS; "COLORABLE IMITATION" EXPLAINED. — The validity of a cause for infringement is predicated upon colorable imitation. The phrase "colorable imitation" denotes such a "close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." (87 C.J.S., p. 287.) 3. ID.; ID.; MARK BARRED FROM REGISTRATION; WORD "TUSSIN", HOW MAY IT BECOME SUBJECT OF TRADEMARK. — "TUSSIN" is merely descriptive; it is generic; it furnishes to the buyer no indication of the origin of the goods; it is open for appropriation by anyone. It is accordingly barred from registration as trademark. But while "tussin" by itself cannot thus be used exclusively to identify one's goods, it may properly become the subject of a trademark "by combination with another word or phrase". (Annotations, Lawyers' Reports, Annotated, 1918 A, p. 966.) 4. ID.; ID.; SIMILARITY AND DISSIMILARITY OF TRADEMARKS. HOW DETERMINED. — A practical approach to the problem of similarity or Copyright 1994-2014

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dissimilarity is to go into the whole of the two trademarks pictured in their manner of display. Inspection should be undertaken from the viewpoint of prospective buyer. The trademark complained of should be compared and contrasted with the purchaser's memory (not in juxtaposition) of the trade mark said to be infringed. (87 C.J.S., pp. 288-291) Some such factors as `sound; appearance; form, style, shape, size or format; color; ideas connoted by marks; the meaning, spelling, and pronunciation of words used; and the setting in which the words appear" may be considered, (87 C.J.S., pp. 291-292.) For, indeed, trademark infringement is a form of unfair competition. (Clarke vs. Manila Candy Co., 36 Phil. 100, 106; Co Tiong Sa vs. Director of Patents, 95 Phil., 1, 4,) 5. ID.; ID.; WHEN THERE IS CONFUSION BETWEEN TRADEMARK. — Confusion is likely between trademarks only if their over-all presentations in any of the particulars of sound, appearance, or meaning are such as would lead the purchasing public into believing that the products to which the marks are applied emanated from the same source. 6. ID.; ID.; "PERTUSSIN" AND "ATUSSIN" COMPARED. — Considering the two labels in question — Pertussin and Atussin — as they appear on the respective labels, these words are presented to the public in different styles of writing and methods of design. The horizontal plain, block letters of Atussin and the diagonally and artistically upward writing of Pertussin leave distinct visual impressions. One look is enough to denude the mind of that illuminating similarity so essential for a trademark infringement case to prosper. Moreover, the two words do not sound alike — when pronounced. There is not as much as phonetic similarity between the two. In Pertussin the pronunciation of the prefix "Per", whether correct or incorrect, includes a combination of three letters P, e and r; whereas, in Atussin the whole word starts with the single letter A added to the suffix "tussin". Appeals to the ear are dissimilar. And this, because in a word- combination, the part that comes first is the most pronounced. 7. ID.; ID.; SOLUTION OF TRADEMARK INFRINGEMENT; CLASS OF PERSONS WHO BUY SHOULD BE CONSIDERED. — In the solution of a trademark infringement problem, regard too should be given to the class of persons who buy the particular product and the circumstances ordinarily attendant to its acquisition. (87 C.J.S., p. 295). The medicinal preparations, clothed with the trade marks in question, are unlike articles of everyday use such as candies, ice cream, milk, soft drinks and the like which may be freely obtained by anyone, anytime, anywhere. Petitioner's and respondent's products are to be dispensed upon medical prescription. An intending buyer must have to go first to a licensed doctor of medicine; he receives Copyright 1994-2014

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instructions as to what to purchase; he examines the product sold to him; he checks to find out whether it conforms to the medical prescription. Similarly, the pharmacist or druggist verifies the medicine sold. The margin of error in the acquisition of one for the other is quite remote. It is possible that buyers might be able to obtain Pertussin or Atussin without prescription. When this happens, then the buyer must be one thoroughly familiar with what he intends to get, else he would not have the temerity to ask for a medicine — specifically needed to cure a given ailment. For a person who purchases with open eyes is hardly the man to be deceived.

DECISION

SANCHEZ, J : p

To the question: May trademark ATUSSIN be registered, given the fact that PERTUSSIN, another trademark, had been previously registered in the Patent Office? — The Director of Patents answered affirmatively. Hence this appeal. On April 23, 1959, respondent Westmont Pharmaceuticals, Inc., a New York corporation, sought registration of trademark "Atussin" placed on its "medicinal preparation of expectorant antihistaminic, bronchodilator sedative, ascorbic acid (Vitamin C) used in the treatment of cough". The trademark is used exclusively in the Philippines since January 21, 1959. 1(1) Petitioner, Etepha, A.G., a Liechtenstein (principality) corporation, objected. Petitioner claims that it will be damaged because Atussin is so confusedly similar to its Pertussin (Registration No. 6089, issued on September 25, 1957) used on a preparation for the treatment of coughs, that the buying public will be misled into believing that Westmont's product is that of petitioner's which allegedly enjoys goodwill. 1. The objects of a trademark 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". 2(2) Our over-all task then is to ascertain whether or not Atussin so resembles Pertussin "as to be likely, when applied to or used in connection with the goods . . . of the applicant, to cause confusion or Copyright 1994-2014

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mistake or to deceive purchasers". 3(3) And, we are to be guided by the rule that the validity of a cause for infringement is predicated upon colorable imitation. The phrase "colorable imitation" denotes such a "close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other". 4(4) 2. That the word "tussin" figures as a component of both trademarks is nothing to wonder at. The Director of Patents aptly observes that it is "the common practice in the drug and pharmaceutical industries to 'fabricate' marks by using syllables or words suggestive of the ailments for which they are intended and adding thereto distinctively prefixes or suffixes". 5(5) And appropriately to be considered now is the fact that, concededly, the "tussin" (in Pertussin and Atussin) was derived from the Latin root word "tussis" meaning cough. 6(6) "Tussin" is merely descriptive; it is generic; it furnishes to the buyer no indication of the origin of the goods; it is open for appropriation by anyone. It is accordingly barred from registration as trademark. With jurisprudence holding the line, we feel safe in making the statement that any other conclusion would result in "appellant having practically a monopoly" 7(7) of the word "tussin" in a trademark. 8(8) While "tussin" by itself cannot thus be used exclusively to identify one's goods, it may properly become the subject of a trademark "by combination with another word or phrase" 9(9) And this union of words is reflected in petitioner's Pertussin and respondent's Atussin, the first with prefix "Per" and the second with prefix "A". 3. A practical approach to the problem of similarity or dissimilarity is to go into the whole of the two trademarks pictured in their manner of display. Inspection should be undertaken from the viewpoint of a prospective buyer. The trademark complained of should be compared and contrasted with the purchaser's memory (not in juxtaposition) of the trademark said to be infringed. 10(10) Some such factors as "sound; appearance; form, style, shape, size or format; color; ideas connoted by marks; the meaning, spelling, and pronunciation of words used; and the setting in which the words appear" may be considered. 11(11) For, indeed, trademark infringement is a form of unfair competition. 12(12) We take a casual look at the two labels — without spelling out the details — bearing in mind the easy-to-remember earmarks thereof. Respondent's label underscores the trademark Atussin in bold, block letters horizontally written. In petitioner's on the other hand, Pertussin is printed diagonally upward and across in Copyright 1994-2014

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semi-script style with flourishes and with only the first letter "P" capitalized. Each label plainly shows the source of the medicine: petitioner's at the foot bears "Etepha Ltd. Schaan Fl", and on top, "Apothecary E. Taeschner's"; respondent's projects "Westmont Pharmaceuticals, Inc. New York, USA" at the bottom, and on the lower left side the word "Westmont" upon a white diamond shaped enclosure and in red ink — a color different from that of the words above and below it. Printed prominently along the left, bottom and right edges of petitioner's label are indications of the use: "for bronchial catarrh — whooping-cough — coughs and asthma". Respondent's for its part briefly represents what its produce actually is — a "cough syrup". The two labels are entirely different in colors, contents, arrangement of words thereon, sizes, shapes and general appearance. The contrast in pictorial effects and appeals to the eye is so pronounced that the label of one cannot be mistaken for that of the other, not even by persons unfamiliar with the two trademarks. 13(13) On this point, the following called from a recent decision of the United States Court of Customs and Patent Appeals (June 15, 1955) is persuasive: 14(14) "Confusion is likely between trademarks. however, only if their over all presentations in any of the particulars of sound, appearance or meaning are such as would lead the purchasing public into believing that the products to which the marks are applied emanated from the same source. In testing this issue, fixed legal rules exist — if not in harmony, certainly in abundance — but, in the final analysis, the application of these rules in any given situation necessarily reflects a matter of individual judgment largely predicated on opinion. There is, however, and can be no disagreement with the rule that the purchaser is confused, if at all by the marks as a whole."

4. We now consider exclusively the two words — Pertussin and Atussin — as they appear on the respective labels. As previously adverted to, these words are presented to the public in different styles of writing and methods of design. The horizontal plain, block letters of Atussin and the diagonally and artistically upward writing of Pertussin leave distinct visual impressions. One look is enough to denude the mind of that illuminating similarity so essential for a trademark infringement case to prosper. 5. As we take up Pertussin and Atussin once again, we cannot escape notice of the fact that the two words do not sound alike, — when pronounced. There is not as much as phonetic similarity between the two. The Solicitor General well-observed that in Pertussin the pronunciation of the prefix "Per", whether correct or incorrect, includes a combination of three letters P, e and r; whereas, in Atussin the whole word starts with the single letter A added to the suffix "tussin". Appeals to the ear are Copyright 1994-2014

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dissimilar. And this, because in a word-combination, the part that comes first is the most pronounced. An expositor of the applicable rule here is the decision in the Syrocol-Cheracol controversy. 15(15) There, the ruling is that trademark Syrocol (a cough medicine preparation) is not confusedly similar to trademark Cheracol (also a cough medicine preparation). Reason: the two words "do not look or sound enough alike to justify a holding of trademark infringement", and the "only similarity is in the last syllable, and that is not uncommon in names given drug compounds". 6. In the solution of a trademark infringement problem, regard too should be given to the class of persons who buy the particular product and the circumstances ordinarily attendant to its acquisition. 16(16) The medicinal preparations, clothed with the trademarks in question, are unlike articles of everyday use such as candies, ice cream, milk, soft drinks and the like which may be freely obtained by anyone, anytime, anywhere. Petitioner's and respondent's products are to be dispensed upon medical prescription. The respective labels say so. An intending buyer must have to go first to a licensed doctor of medicine: he receives instructions as to what to purchase; he reads the doctor's prescription; he knows what he is to buy. He is not of the incautious, unwary, unobservant or unsuspecting type; he examines the product sold to him; he checks to find out whether it conforms to the medical prescription. The common trade channel is the pharmacy or the drugstore. Similarly, the pharmacist or druggist verifies the medicine sold. The margin of error in the acquisition of one for the other is quite remote. We concede the possibility that buyers might be able to obtain Pertussin or Atussin without prescription. When this happens, then the buyer must be one thoroughly familiar with what he intends to get, else he would not have the temerity to ask for a medicine — specifically needed to cure a given ailment. In which case, the more improbable it will be to palm off one for the other. For a person who purchases with open eyes is hardly the man to be deceived. For the reasons given, the appealed decision of respondent Director of Patents, — giving due course to the application for the registration of trademark ATUSSIN, is hereby affirmed. Costs against petitioner. So ordered. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala, Makalintal, Bengzon, J.P. and Zaldivar, JJ., concur. Dizon, J., took no part. )RRWQRWHV Copyright 1994-2014

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1. 2. 3. 4. 5.

6. 7.

8.

9. 10. 11. 12. 13.

14. 15. 16.

Section 2 of the Trade Mark Law requires actual use in the Philippines of not less than two-months before application may be filed. 52 Am. Jur., p. 508, citing cases. Section 4(d), Trade Mark Law. 87 Corpus Juris Secundum, p. 287. The Director of Patents cites the following: "NUMOTOZINE" (Reg. No. 1990-S. renewed under Reg. No. 7461-R) for treatment of pneumonia, bronchitis, pleurisy. etc.; "ASCARICIDOL" (Reg. No. 6090) and "ASCAROL" (Reg. No. 4114), both for expelling intestinal worms such as ascaris; "DIARROL" (Reg. No. 5864) for treatment of diarrhea, dysentery and intestinal disorders; "ASMAKOL" (Reg. No. SR-104), ASMADREN" (Reg. No. 4353), "ASMOL" (Reg. No. 5379), all for treatment of asthma. Webster's Third International Dictionary, 1964 ed., p. 2470. Miles Laboratories, Inc., vs. Pepsodent Co., 104 F (2d), 205, 207. Here the marks peso-seltzer and alka seltzer were involved. The U.S. Court of customs and Patent Appeals held that "seltzer" was descriptive, and could not be appropriated. In Dixi-Cola Laboratories, Inc., et al. vs. Coca-cola Co., 117 F (2nd), 352. 360 the Circuit Court of Appeals in refusing to enjoin use of Dixi-Cola, held that "Cola" is descriptive and generic. See also Coca-Cola Co. vs. Carlisle Bottling Works 43 F (2d) 101, 103, where "Cola" was held to be descriptive, so that "Roxa Kola" is not an infringement of "Coca-Cola". Annotations. Lawyers' Reports, Annotated, 1918 A, p. 966. 87 Corpus Juris Secundum, pp. 288-291. 87 Corpus Juris Secundum, 291-292. Clarke vs. Manila Candy Co., 36 Phil. 100, 106; Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4. Mead Johnson & Co., vs. N.V.J. Van Dorp Ltd., et al., G.R. L-17501, April 27, 1963. In this case, this Court held that the trademark ALASKA does not infringe the registered trademark ALACTA. This court, after comparing the sizes of the containers and the color pattern, was impressed more by the dissimilarities (in the labels attached to the containers) than by the similarities appearing thereon. The present case, we believe, is within the coverage of the Mead Johnson decision. Lekas & Drivas, Inc. vs. Tenth Avenue Trading Corp., 223 F(2d). pp. 294, 296; italics supplied. The Upjohn Co. vs. Schwartz, etc., 246 F(2d), pp. 254, 262. 87 Corpus Juris Secundum, p. 295.

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FIRST DIVISION [G.R. No. L-23035. July 31, 1975.] PHILIPPINE NUT INDUSTRY, INC., petitioner, YV. STANDARD BRANDS INCORPORATED and TIBURCIO S. EVALLE, as Director of Patents, respondents. Perfecta E. De Vera for petitioner. Paredes, Poblador, Cruz & Nazareno for private respondent. Solicitor General Arturo A. Alafriz, Acting Assistant Solicitor General Isidro C. Borromeo and Solicitor Francisco J. Bautista for respondent Director. SYNOPSIS Challenged in this petition for review is the decision of respondent Director of Patents which ordered the cancellation of petitioner's certificate of registration for the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS," upon complaint of private respondent, owner of the trademark "PLANTERS COCKTAIL PEANUTS." The Director of Patents found that in the labels using the two trademarks in question, the dominant part is the word "PLANTERS", displayed "in a very similar manner" so much so that "as to appearance and general impression," there is "a very confusing similarity" and concluded that petitioner "was not entitled to register the mark at the time of its filing the application for registration" as private respondent would be damaged by such registration. On petition for review, the Supreme Court affirmed the decision of the Director of Patents with costs against petitioner.

SYLLABUS 1. PATENTS; TRADEMARK; TEST TO DETERMINE INFRINGEMENT. — In cases involving infringement of trademarks, it has been held that there is infringement when the use of the mark involved would be likely to cause confusion or Copyright 1994-2014

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mistake in the mind of the public or to deceive purchasers as to the origin or source of the commodity; that whether or not a trademark causes confusion and likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy," meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; and that duplication or imitation is not necessary, a similarity of the dominant features of the trademark would be sufficient. 2. ID.; ID.; ID.; WHAT CONSTITUTES A DOMINANT FEATURE OF A LABEL. — An ordinary word like PLANTERS may be considered as the dominant and striking mark of a label where it is used not merely to describe the nature of the product, but to project the source or origin thereof, and it is so printed across the label in bold letters that it easily attracts and catches the eye of the ordinary consumer and it is that word and none other that sticks in his mind when he thinks of the product. 3. ID.; ID.; ID.; LABELS AS THE BEST EVIDENCE. — In cases involving infringement of trademarks, there can be no better evidence as to what dominant feature of a label and as to whether there is a confusing similarity in the contesting trademarks than the labels themselves. A visual and graphic presentation of the labels will constitute the best argument for one or the other. 4. ID.; ID.; ID.; ADOPTING A DISTINCTIVE OR DOMINANT MARK OF ANOTHER'S TRADEMARK. — Admittedly, no producer or manufacturer may have a monopoly of any color scheme or form of words in a label. But when a competitor adopts a distinctive or dominant mark or feature of another's trademark and with it makes use of the same color ensemble, employs similar words written in a style, type and size of lettering almost identical with those found in the other trademark, the intent to pass to the public his product as that of the other is quite obvious. 5. ID.; ID.; ID.; DOCTRINE OF SECONDARY MEANING. — A word or phrase originally incapable of exclusive appropriation with reference to an article on the market because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. Thus, the word "Selecta" which is a common ordinary term in the sense that it may be used or employed by any one in promoting his business or enterprise, but which once adopted or coined in connection with one's business as an emblem, sign or device or characterize its product or as a badge of authenticity may acquire a secondary meaning as to be exclusively Copyright 1994-2014

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associated with its products and business, so that its use by another may lead to confusion in trade cause damage to its business. 6. ID.; ID.; ID.; ID.; CASE AT BAR. — The doctrine of secondary meaning is applicable to the case at bar it appearing that the term PLANTERS has been used by and closely associated with respondent for its canned salted peanuts since 1938 and said terms has become a distinctive mark or symbol insofar as salted peanuts are concerned, and by priority of use, respondent has acquired a preferential right to its adoption as its trademark warranting protection against its usurpation by another. Ubi Jus ibi remedium. Where there is a right there is a remedy. 7. ID.; ID.; ID.; ABANDONMENT; NON-USE OF TRADEMARK DUE TO LEGAL RESTRICTION NOT CONSIDERED AS ABANDONMENT. — The non-use of a trademark or an article of merchandise due to legal restrictions or circumstances beyond one's control is not to be considered as an abandonment. Said rule was correctly applied to the case at bar where the use of the trademark was interrupted during the Japanese occupation and in fact was discontinued when the importation of the product covered by the trademark was prohibited by the Central Bank Regulations. 8. ID.; ID.; ID.; ONE MAY NOT BE ALLOWED TO A FREE RIDE ON SELLING POWER OF PRODUCTS OF ANOTHER. — A person must not be allowed to get a free ride on the reputation and selling power of the products of another, for a self-respecting person or a reputable business concern does not remain in the shelter of another's popularity and goodwill.

DECISION

MUÑOZ PALMA, J : p

Challenged in this petition for review is the decision of respondent Director of Patents which orders the cancellation of Certificate of Registration No. SR-416 issued in favor of herein petitioner Philippine Nut Industry, Inc. (hereinafter called Philippine Nut) for the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS," upon complaint of Standard Brands Inc. (hereinafter to be called Standard Brands). Copyright 1994-2014

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The records of the case show the following incidents: Philippine Nut, a domestic corporation, obtained from the Patent Office on August 10, 1961, Certificate of Registration No. SR-416 covering the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS," the label used on its product of salted peanuts. On May 14, 1962, Standard Brands a foreign corporation, 1(1) filed with the Director of Patents Inter Partes Case No. 268 asking for the cancellation of Philippine Nut's certificate of registration on the ground that "the registrant was not entitled to register the mark at the time of its application for registration thereof" for the reason that it (Standard Brands) is the owner of the trademark "PLANTERS COCKTAIL PEANUTS" covered by Certificate of Registration No. SR-172, issued by the Patent Office on July 28, 1958. Standard Brands alleged in its petition that Philippine Nut's trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" closely resembles and is confusingly similar to its trademark "PLANTERS COCKTAIL PEANUTS" used also on salted peanuts, and that the registration of the former is likely to deceive the buying public and cause damage to it. On June 1, 1962, Philippine Nut filed its answer invoking the special defense that its registered label is not confusingly similar to that of Standard Brands as the latter alleges. At the hearing of October 4, 1962, the parties submitted a partial stipulation of facts. On December 12, 1962, an amended partial stipulation of facts was submitted, the pertinent agreements contained in which are: (1) that Standard Brands is the present owner of the trademark "PLANTERS COCKTAIL PEANUTS" covered by Certificate of Registration No. SR-172 issued on July 28, 1958; (2) that Standard Brands trademark was first used in commerce in the Philippines in December, 1938 and (3) that Philippine Nut's trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" was first used in the Philippines on December 20, 1958 and registered with the Patent Office on August 10, 1961. On December 10, 1963, after the presentation of oral and documentary evidence and the filing by the parties of their memoranda, respondent Director of Patents rendered Decision No. 281 giving due course to Standard Brand's petition and ordering the cancellation of Philippine Nut's Certificate of Registration No. SR-416. The Director of Patents found and held that in the labels using the two trademarks in question, the dominant part is the word "Planters", displayed "in a very similar manner" so much so that "as to appearance and general impression" there is "a very Copyright 1994-2014

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confusing similarity," and he concluded that Philippine Nut "was not entitled to register the mark at the time of its filing the application for registration" as Standard Brands will be damaged by the registration of the same. Its motion for reconsideration having been denied, Philippine Nut came up to this Court for a review of said decision. In seeking a reversal of the decision of respondent Director of Patents, petitioner brings forth eleven assigned errors all of which revolve around one main issue: is the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" used by Philippine Nut on its label for salted peanuts confusingly similar to the trademark "PLANTERS COCKTAIL PEANUTS" used by Standard Brands on its product so as to constitute an infringement of the latter's trademark rights and justify its cancellation? 2(2) The applicable law to the case is found in Republic Act 166 otherwise known as the Trade-Mark Law from which We quote the following pertinent provisions: "Chapter II-A — "Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, tradename or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: "(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; . . ." (emphasis Ours) "Sec. 17. Grounds for cancellation — Any person, who believes that he is or will be damaged by the registration of a mark or tradename, may, upon the payment of the prescribed fee, apply to cancel said registration upon any of the following grounds: "(c) That the registration was obtained fraudulently or contrary to the provisions of section four, Chapter II hereof, . . ." Copyright 1994-2014

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"Sec. 22. Infringement, what constitutes. — Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided." (emphasis supplied)

In the cases involving infringement of trademark brought before the Court, it has been consistently held that there is infringement of trademark when the use of the mark involved would be likely to cause confusion or mistake in the mind of the public or to deceive purchasers as to the origin or source of the commodity; that whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; that duplication or imitation is not necessary, a similarity in the dominant features of the trademarks would be sufficient. 3(3) 1. The first argument advanced by petitioner which We believe goes to the core of the matter in litigation is that the Director of Patents erred in holding that the dominant portion of the label of Standard Brands in its cans of salted peanuts consists of the word PLANTERS which has been used in the label of Philippine Nut for its own product. According to petitioner, PLANTERS cannot be considered as the dominant feature of the trademarks in question because it is a mere descriptive term, an ordinary word which is defined in Webster International Dictionary as "one who or that which plants or sows, a farmer or an agriculturist." (pp. 10-11, petitioner's brief). We find the argument without merit. While it is true that PLANTERS is an ordinary word, nevertheless it is used in the labels not to describe the nature of the product, but to project the source or origin of the salted peanuts contained in the cans. The word PLANTERS printed across the upper portion of the label in bold letters easily attracts and catches the eye of the ordinary consumer and it is that word and none other that sticks in his mind when he thinks of salted peanuts. Copyright 1994-2014

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In cases of this nature there can be no better evidence as to what is the dominant feature of a label and as to whether there is a confusing similarity in the contesting trademarks than the labels themselves. A visual and graphic presentation of the labels will constitute the best argument for one or the other, hence, we are reproducing hereunder a picture of the cans of salted peanuts of the parties to the case. The picture below is part of the documentary evidence appearing in the original records, and it clearly demonstrates the correctness of the finding of respondent Director that the word PLANTERS is the dominant, striking mark of the labels in question.

It is true that there are other words used such as "Cordial" in petitioner's can and "Cocktail" in Standard Brands', which are also prominently displayed, but these words are mere adjectives describing the type of peanuts in the labeled containers and are not sufficient to warn the unwary customer that the two products come from distinct sources. As a whole it is the word PLANTERS which draws the attention of the buyer and leads him to conclude that the salted peanuts contained in the two cans originate from one and the same manufacturer. In fact, when a housewife sends her housemaid to the market to buy canned salted peanuts, she will describe the brand she wants by using the word PLANTERS and not "Cordial" nor "Cocktail". 2. The next argument of petitioner is that respondent Director should not have based his decision simply on the use of the term PLANTERS, and that what he should have resolved is whether there is a confusing similarity in the trademarks of the parties. It is quite obvious from the record, that respondent Director's decision is based Copyright 1994-2014

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not only on the fact that petitioner herein adopted the same dominant mark of Standard Brands, that is, the word PLANTERS, but that it also used in its label the same coloring scheme of gold, blue, and white, and basically the same lay-out of words such as "salted peanuts" and "vacuum packed" with similar type and size of lettering as appearing in Standard Brands' own trademark, all of which result in a confusing similarity between the two labels. 4(4) Thus, the decision states: "Furthermore, as to appearance and general impression of the two trademarks, I find a very confusing similarity." (Emphasis supplied) 5(5) Referring again to the picture We have reproduced, the striking similarity between the two labels is quite evident not only in the common use of PLANTERS but also in the other words employed. As a matter of fact, the capital letter "C" of petitioner's "Cordial" is alike to the capital "C" of Standard's "Cocktail", with both words ending with an "l". Admittedly, no producer or manufacturer may have a monopoly of any color scheme or form of words in a label. But when a competitor adopts a distinctive or dominant mark or feature of another's trademark and with it makes use of the same color ensemble, employs similar words written in a style, type and size of lettering almost identical with those found in the other trademark, the intent to pass to the public his product as that of the other is quite obvious. Hence, there is good reason for Standard Brands' to ask why did petitioner herein use the word PLANTERS, the same coloring scheme, even almost identical size and contour of the cans, the same lay-out of words on its label when there is a myriad of other words, colors, phrases, symbols, and arrangements to choose from to distinguish its product from Standard Brands, if petitioner was not motivated to simulate the label of the latter for its own can of salted peanuts, and thereby deceive the public? A similar question was asked by this Court in Clarke vs. Manila Candy Co., 36 Phil. 100, when it resolved in favor of plaintiff a case of unfair competition based on an imitation of Clarke's packages and wrappers of its candies the main feature of which was one rooster. The Court queried thus: ". . . why, with all the birds in the air, and all the fishes in the sea, and all the animals on the face of the earth to choose from, the defendant company (Manila Candy Co.) selected two roosters as its trademark, although its directors and managers must have been well aware of the long-continued use of a rooster by the plaintiff with the sale and advertisement of its goods? . . . A cat, a dog, a carabao, a shark or an eagle stamped upon the container in which candies are sold would serve as well as a rooster for purposes of identification as the product of defendant's factory. Why did defendant select two roosters as its Copyright 1994-2014

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trademark?" (p 109, supra). Petitioner contends, however, that there are differences between the two trademarks, such as, the presence of the word "Philippine" above PLANTERS on its label, and other phrases to wit: "For Quality and Price, Its Your Outstanding Buy", the address of the manufacturer in Quezon City, etc., plus a pictorial representation of peanuts overflowing from a tin can, while in the label of Standard Brands it is stated that the product is manufactured in San Francisco, California, and on top of the tin can is printed "Mr. Peanut" and the representation of a "humanized peanut". (pp. 30-33, petitioner's brief) We have taken note of those alleged differences but We find them insignificant in the sense that they are not sufficient to call the attention of the ordinary buyer that the labeled cans come from distinct and separate sources. The word "Philippine" printed in small type in petitioner's label may simply give to the purchaser the impression that particular can of PLANTERS salted peanuts is locally produced or canned but that what he is buying is still PLANTERS canned salted peanuts and nothing else. As regards "Mr. Peanut" on Standard Brands' label, the same appears on the top cover and is not visible when the cans are displayed on the shelves, aside from the fact that the figure of "Mr. Peanut" is printed on the tin cover which is thrown away after opening the can, leaving no lasting impression on the consumer. It is also for this reason that We do not agree with petitioner that it is "Mr. Peanut and the Humanized Peanut" which is the trademark of Standard Brands salted peanuts, it being a mere descriptive pictorial representation of a peanut not prominently displayed on the very body of the label covering the can, unlike the term PLANTERS which dominates the label. It is correctly observed by respondent Director that the merchandize or goods being sold by the parties herein are very ordinary commodities purchased by the average person and many times by the ignorant and unlettered 6(6) and these are the persons who will not as a rule examine the printed small tellerings on the container but will simply be guided by the presence of the striking mark PLANTERS on the label. Differences there will always be, but whatever differences exist, these pale into insignificance in the face of an evident similarity in the dominant feature and overall appearance of the labels of the parties. "It is not necessary, to constitute trademark 'infringement', that every word of a trade-mark should be appropriated, but it is sufficient that enough be taken to deceive the public in the purchase of a protected article." (Bunte Bros. v. Standard Chocolates, D.C. Mass., 45 F. Supp. 478, 481). Copyright 1994-2014

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"A trade-name in order to be an 'infringement' upon another need not be exactly like it in form and sound, but it is enough if the one so resembles another as to deceive or mislead persons of ordinary caution into the belief that they are dealing with the one concern when in fact they are dealing with the other." (Foss v. Culbertson, 136 P. 2d 711, 718, 17 Wash. 2d 610). "Where a trade-mark contains a dominating or distinguishing word, and purchasing public has come to know and designate the article by such dominating word, the use of such word by another in marking similar goods may constitute Infringement though the marks aside from such dominating word may be dissimilar." (Queen Mfg. Co. v. Isaac Ginsberg & Bros., C.C.A. Mon:, 25 F. 2d 284, 287). "'Infringement' of trade-mark does not depend on the use of identical words, nor on the question whether they are so similar that a person looking at one would be deceived into the belief that it was the other, it being sufficient if one mark is so like another in form, spelling, or sound that one with not a very definite or clear recollection as to the real mark is likely to be confused or misled." (Northam Warren Corporation v. Universal Cosmetic C., C. C. A III., 18 F. 2d 714, 775).

3. What is next submitted by petitioner is that it was error for respondent Director to have enjoined it from using PLANTERS in the absence of evidence showing that the term has acquired secondary meaning. Petitioner, invoking American jurisprudence, asserts that the first user of a tradename composed of common words is given no special preference unless it is shown that such words have acquired secondary meaning, and this, respondent Standard Brands failed to do when no evidence was presented to establish that. fact. (pp. 14-16, petitioner's brief). The doctrine of secondary meaning is found in Sec. 4 (f), Chapter II-A of the Trade-Mark Law, viz: "Except as expressly excluded in paragraphs (a), (b), (c) and (d) of this section, nothing herein shall prevent the registration of a mark or trade-name used by the applicant which has become distinctive of the applicant's goods, business or services. The Director may accept as prima facie evidence that the mark or trade-name has become distinctive, as applied to or used in connection with the applicant's goods, business or services, proof of substantially exclusive and continuous use thereof as a mark or trade-name by the applicant in connection with the sale of goods, business or services for the five years next preceding the date of the filing of the application for its registration." (As amended by Sec. 3, Rep. Act No. 638.) Copyright 1994-2014

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This Court held that the doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. 7(7) By way of illustration, is the word "Selects" which according to this Court is a common ordinary term in the sense that it may be used or employed by any one in promoting his business or enterprise, but which once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge of authenticity, may acquire a secondary meaning as to be exclusively associated with its products and business, so that its use by another may lead to confusion in trade and cause damage to its business. 8(8) The applicability of the doctrine of secondary meaning to the situation now before Us is appropriate because there is oral and documentary evidence showing that the word PLANTERS has been used by and closely associated with Standard Brands for its canned salted peanuts since 1938 in this country. Not only is that fact admitted by petitioner in the amended stipulation of facts (see p. 2 of this Decision), but the matter has been established by testimonial (tsn October 4, 1962, pp. 2-8) and documentary evidence consisting of invoices covering the sale of "PLANTERS cocktail peanuts". (Exhibits C to C-4; D to D-10; E to E-10; F to F-2) In other words, there is evidence to show that the term PLANTERS has become a distinctive mark or symbol insofar as salted peanuts are concerned, and by priority of use dating as far back as 1938, respondent Standard Brands has acquired a preferential right to its adoption as its trademark warranting protection against its usurpation by another. Ubi jus ibi remedium. Where there is a right there is a remedy. Standard Brands has shown the existence of a property right (Arce Sons & Co. vs. Selecta Biscuit Co., Inc., supra, pp. 262-263) and respondent Director has afforded the remedy. Still on this point, petitioner contends that Standard Brands' use of the trademark PLANTERS was interrupted during the Japanese occupation and in fact was discontinued when the importation of peanuts was prohibited by Central Bank regulations effective July 1, 1953, hence it cannot be presumed that it has acquired a secondary meaning. We hold otherwise. Respondent Director correctly applied the rule that non-use of a trademark on an article of merchandize due to legal restrictions or circumstances beyond one's control is not to be considered as an abandonment. Copyright 1994-2014

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In the case of Andres Romero vs. Maiden Form Brassiere Co., Inc., L-18289, March 31, 1964, 10 SCRA 556, the same question was raised by petitioner Romero when he filed with the Bureau of Patents a petition to cancel the registration of the trademark "Adagio" for brassieres manufactured by Maiden Form Brassiere Co., Inc. His petition having been dismissed by the Director of Patents, Romero appealed to this Court and one of the issues posed by him was that when the Government imposed restrictions on importations of brassieres bearing that particular trademark, there was abandonment of the same by respondent company which entitled petitioner to adopt it for his own use and which in fact he had been using for a number of years. That argument was met by the Court in the words of Justice Jesus Barrera thus: ". . . The evidence on record shows, on the other hand, that the trademark 'Adagio' was first used exclusively in the Philippines by appellee in the year 1932. There being no evidence of use of the mark by others before 1932, or that appellee abandoned use thereof, the registration of the mark was made in accordance with the Trademark Law. Granting that appellant used the mark when appellee stopped using it during the period of time that the Government imposed restrictions on importation of respondent's brassiere being the trademark, such temporary non-use did not affect the rights of appellee because it was occasioned by government restrictions and was not permanent, intentional, and voluntary. 'To work an abandonment, the disuse must be permanent and not ephemeral; it must be intentional and voluntary, and not involuntary or even compulsory. There must be a thoroughgoing discontinuance of any trade-mark use of the mark in question' (Callman, Unfair Competition and Trademark, 2nd Ed., p. 1341). The use of the trademark by other manufacturers did not indicate an intention on the part of appellee to abandon it. 'The instances of the use by others of the term Budweiser, cited by the defendant, fail, even when liberally construed, to indicate an intention upon the part of the complainant to abandon its rights to that name. "To establish the defense of abandonment, it is necessary to show not only acts indicating a practical abandonment, but an actual intention to abandon.' Sanlehner v. Eisener & Mendelson Co., 179 U.S. 19, 21 S. Ct. 7 (45' L. Ed. 60).' (Anheuser-Busch, Inc. v. Budweiser Malt Products Corp., 287 F. 245.) "xxx

xxx

xxx

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abandon. Non-use of their ancient trade-mark and the adoption of new marks by the Carthusian Monks after they had been compelled to leave France was consistent with an intention to retain their right to use their old mark. Abandonment will not be inferred from a disuse over a period of years occasioned by statutory restrictions on the name of liquor.' (Nims, Unfair Competition and Trade-Mark, p. 1269.)" (pp. 562-564, supra) (emphasis Ours)

Applying the words of Justice Roman Ozaeta in the "Ang Tibay" case (Ang vs. Toribio Teodoro, p. 56, supra) to the case now before Us, petitioner herein must not be allowed to get a free ride on the reputation and selling power of Standard Brands PLANTERS salted peanuts, for a self-respecting person, or a reputable business concern as is the case here, does not remain in the shelter of another's popularity and goodwill but builds one of his own. 4. Findings of fact by the Director of Patents are conclusive and binding on this Court provided they are supported by substantial evidence. 9(9) The testimonial and documentary evidence in addition to the stipulation of facts submitted by the parties fully support the findings of respondent Director that (1) there is a confusing similarity between the labels or trademarks of Philippine Nut and Standard Brands used in their respective canned salted peanuts; (2) respondent Standard Brands has priority of adoption and use of the label with PLANTERS as the dominant feature and the same has acquired secondary meaning in relation to salted peanuts; and (3) there has been no abandonment or non-use of said trademark by Standard Brands which would justify its adoption by petitioner or any other competitor for the sale of salted peanuts in the market. PREMISES CONSIDERED, We AFFIRM the decision of respondent Director of Patents with costs against petitioner. So Ordered. Castro (Chairman), Makasiar, Esguerra and Martin, JJ., concur. Teehankee, J., is on leave. )RRWQRWHV 1.

2.

Standard Brands Incorporated is a corporation organized and existing under the laws of the State of Delaware, United States of America, with its principal business offices at 625 Madison Avenue, New York, New York, United States of America. (Amended Partial Stipulation of Facts, par. (a), page 34 original record). See p. 581 for a reproduction of the pictures of the cans for salted peanuts with

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3.

4. 5. 6. 7. 8. 9.

respective labels of the parties. Co Tiong Sa vs. Director of Patents, 1954, 95 Phil. 1, citing American Jurisprudence and Philippine cases, viz, Clarke vs. Manila Candy Co., 36 Phil. 100; Alhambra Cigar & Cigarette Co. vs. Mojica, 27 Phil. 266; Sapolin Co. vs. Balmaceda, et al., 67 Phil. 705; La Insular vs. Jao Oge, 47 Phil. 75. See also Forbes, Munn & Co. vs. Ang San To, 40 Phil. 272 Lim Hoa vs. Director of Patents, 100 Phil. 214; Operators, Incorporated vs. The Director of Patents, et al., No. L-17901, October 29, 1965, 15 SCRA, 147: Etepha, A.G. vs. Director of Patents and Westmont Pharmaceuticals, Inc., No. L-20635, March 31, 1966, 16 SCRA, 495; Crisanta Y. Gabriel vs. Dr. Jose R. Perez and Honorable Tiburcio Evalle as Director of Patents, No. L-24075, January 31, 1974, 55 SCRA, 406. See p. 3 for sample of Philippine Nut's label. Page 4 decision, DP, at page 86 of original record. p. 4, decision DP, supra. Ana Ang vs. Toribio Teodoro, 74 Phil. 50, 53, per Roman Ozaeta, J., citing G. & C. Merriam Co., vs. Saalfield, 198 F., 369, 373. Arce Sons & Co. vs. Selecta Biscuit Co., Inc., L-17981; L-14761, January 28, 1961, per Bautista Angelo, J., 1 SCRA 253. Chua Che vs. Philippines Patent Office, et al., L-18337, January 30, 1965, 13 SCRA 67; Bagano vs. The Director of Patents, et al., L-20170, August 10, 1965, 14 SCRA 883.

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THIRD DIVISION [G.R. No. 139300. March 14, 2001.] AMIGO MANUFACTURING, Inc., PEABODY CO., INC., respondent.

petitioner,

YV.

CLUETT

Arturo S. Santos for petitioner. V.E. Del Rosario & Partners for respondent. SYNOPSIS Petitioner Amigo Manufacturing, Inc. assailed the decision of the Court of Appeals affirming the Director of Patents' decision which cancelled its trademark 'Gold Top,' as used on men's socks, finding it deceptively sililar to 'Gold Toe.' The Bureau considered the totality of the similarities between the two sets of marks and found that they were of such degree, number and quality as to give the overall impression that the two products are confusingly if not deceptively the same. On appeal, the Supreme Court upheld the finding of the Bureau of Patents that it was respondent which had prior use of its trademark, as shown in the various Certificates of Registration issued in its favor. This finding is binding upon the courts, absent any sufficient evidence to the contrary. ECcTaH

SYLLABUS 1. COMMERCIAL LAW; INTELLECTUAL PROPERTY LAW; R.A. NO. 166 (THE TRADEMARK LAW); REGISTRATION OF A MARK OR TRADENAME CONSTITUTES PRIMA FACIE EVIDENCE OF REGISTRANT'S OWNERSHIP THEREOF; CASE AT BAR. — During the hearing at the Bureau of Patents, respondent presented Bureau registrations indicating the dates of first use in the Philippines of the trademark and the devices. . . . The registration of the above marks in favor of respondent constitutes prima facie evidence, which petitioner failed to overturn satisfactorily, of respondent's ownership of those marks, the dates of Copyright 1994-2014

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appropriation and the validity of other pertinent facts stated therein Indeed, Section 20 of Republic Act 166 provides as follows: "Sec. 20. Certificate 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." CIaHDc

2. ID.; ID.; ID.; SUPPLEMENTAL REGISTER; REGISTRATION GIVES NO PRESUMPTION OF OWNERSHIP OF TRADEMARK; CASE AT BAR. — [P]etitioner registered its trademark only with the supplemental register. In La Chemise Lacoste v. Fernandez, the Court held that registration with the supplemental register gives no presumption of ownership of the trademark. Said the Court: "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 [i]n the supplemental register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration 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, 1968." 3. REMEDIAL LAW; EVIDENCE; CREDIBILITY; FACTUAL FINDINGS OF ADMINISTRATIVE AGENCIES LIKE THE BUREAU OF PATENTS ARE GENERALLY ACCORDED GREAT RESPECT, IF NOT FINALITY; CASE AT BAR. — In any case, absent any clear showing to the contrary, this Court accepts the finding of the Bureau of Patents that it was respondent which had prior use of its trademark, as shown in the various Certificates of Registration issued in its favor. Verily, administrative agencies' findings of fact in matters falling under their jurisdiction are generally accorded great respect, if not finality. Thus, the Court has held: ". . . . By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not finality, by the courts. The findings of fact of an administrative agency must be respected as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even Copyright 1994-2014

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preponderant. It is not the task of an appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect of sufficiency of evidence." 4. COMMERCIAL LAW; INTELLECTUAL PROPERTY LAW; R.A. NO 166 (THE TRADEMARK LAW); TRADEMARK; TEST IN DETERMINING WHETHER TRADEMARKS ARE CONFUSINGLY SIMILAR; CASE AT BAR. — In Emerald Garment Manufacturing Corporation v. Court of Appeals, this Court stated that in determining whether trademarks are confusingly similar, jurisprudence has developed two kinds of tests, the Dominancy Test and the Holistic Test. In its words: "In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals and its proponent cases. As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. . . . If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Hanover Rubber Co., 107 F. 2d 588; . . . .) On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity." In the present case, a resort to either the Dominancy Test or the Holistic Test shows that colorable imitation exists between respondent's "Gold Toe" and petitioner's "Gold Top." A glance at petitioner's mark shows that it definitely has a lot of similarities and in fact looks like a combination of the trademark and devices that respondent has already registered; namely, "Gold Toe," the representation of a sock with a magnifying glass, the "Gold Toe" representation and "linenized." 5. ID.; ID.; ID.; ID.; EFFECT OF DUE REGISTRATION THEREOF. — Let it be remembered that duly registered trademarks are protected by law as intellectual properties and cannot be appropriated by others without violating the due process clause. An infringement of intellectual rights is no less vicious and condemnable as theft of material property, whether personal or real. Copyright 1994-2014

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6. ID.; ID.; ID.; ID.; THE APPLICATION FOR REGISTRATION THEREOF MUST SPECIFY THE DATE OF FIRST USE; CASE AT BAR. — [R]espondent registered its trademarks under the principal register, which means that the requirement of prior use had already been fulfilled. To emphasize, Section 5-A of Republic Act 166 requires the date of first use to be specified in the application for registration. Since the trademark was successfully registered, there exists a prima facie presumption of the correctness of the contents thereof, including the date of first use. Petitioner has failed to rebut this presumption. 7. INTERNATIONAL LAW; PARIS CONVENTION; ACCORDS PROTECTION AGAINST INFRINGEMENT OR ANY UNFAIR COMPETITION TO A NATIONAL OF A MEMBER NATION; CASE AT BAR. — Thus, applicable is the Union Convention for the Protection of Industrial Property adopted in Paris on March 20, 1883, otherwise known as the Paris Convention, of which the Philippines and the United States are members. Respondent is domiciled in the United States and is the registered owner of the "Gold Toe" trademark. Hence, it is entitled to the protection of the Convention. A foreign-based trademark owner, whose country of domicile is a party to an international convention relating to protection of trademarks, is accorded protection against infringement or any unfair competition as provided in Section 37 of Republic Act 166, the Trademark Law which was the law in force at the time this case was instituted.

DECISION

PANGANIBAN, J : p

The findings of the Bureau of Patents that two trademarks are confusingly and deceptively similar to each other are binding upon the courts, absent any sufficient evidence to the contrary. In the present case, the Bureau considered the totality of the similarities between the two sets of marks and found that they were of such degree, number and quality as to give the overall impression that the two products are confusingly if not deceptively the same. Statement of the Case Petitioner Amigo Manufacturing Inc. challenges, under Rule 45 of the Rules of Copyright 1994-2014

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Court, the January 14, 1999 Resolution 1(1) of the Court of Appeals (CA) in CA-GR SP No. 22792, which reversed, on reconsideration, its own September 29, 1998 Decision. 2(2) The dispositive portion of the assailed Resolution reads as follows: "WHEREFORE, the Motion for Reconsideration is GRANTED, and the Decision dated September 29, 1998 REVERSED. Consequently, the decision rendered by the Director of Patents dated September 3, 1990 is hereby AFFIRMED." AIDSTE

The Decision of the Director of Patents, referred to by the CA, disposed as follows: "WHEREFORE, the Petition is GRANTED. Consequently, Certificate of Registration No. SR-2206 issued to Respondent-Registrant [herein petitioner] is hereby cancelled. "Let the records of this case be remanded to the Patent/Trademark Registry and EDP Division for appropriate action in accordance with this Decision."

Petitioner also seeks the reversal of the June 30, 1999 CA Resolution 3(3) denying its own Motion for Reconsideration. The Facts The facts, which are undisputed, are summarized by the Court of Appeals in its original Decision, as follows: "The source of the controversy that precipitated the filing by [herein Respondent] Cluett Peabody Co., Inc. (a New York corporation) of the present case against [herein Petitioner] Amigo Manufacturing Inc. (a Philippine corporation) for cancellation of trademark is [respondent's] claim of exclusive ownership (as successor in interest of Great American Knitting Mills, Inc.) of the following trademark and devices, as used on men's socks:

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a)

GOLD TOE, under Certificate of Registration No. 6797 dated September 22, 1958;

b)

DEVICE, representation of a sock and magnifying glass on the toe of a sock, under Certificate of Registration No. 13465 dated January 25, 1968;

c)

DEVICE, consisting of a 'plurality of gold colored lines arranged

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in parallel relation within a triangular area of toe of the stocking and spread from each other by lines of contrasting color of the major part of the stocking' under Certificate of Registration No. 13887 dated May 9, 1968; and d)

LINENIZED, under Certificate of Registration No. 15440 dated April 13, 1970.

On the other hand, [petitioner's] trademark and device 'GOLD TOP, Linenized for Extra Wear' has the dominant color 'white' at the center and a 'blackish brown' background with a magnified design of the sock's garter, and is labeled 'Amigo Manufacturing Inc., Mandaluyong, Metro Manila, Made in the Philippines'. In the Patent Office, this case was heard by no less than six Hearing Officers: Attys. Rodolfo Gilbang, Rustico Casia, M. Yadao, Fabian Rufina, Neptali Bulilan and Pausi Sapak. The last named officer drafted the decision under appeal which was in due course signed and issued by the Director of Patents (who never presided over any hearing) adversely against the respondent Amigo Manufacturing, Inc. as heretofore mentioned (supra, p. 1). The decision pivots on two point: the application of the rule of idem sonans and the existence of a confusing similarity in appearance between two trademarks (Rollo, p. 33)." 4(4)

Ruling of the Court of Appeals In its assailed Resolution, the CA held as follows: "After a careful consideration of [respondent's] arguments and a re-appreciation of the records of this case, [w]e find [respondent's] motion for reconsideration meritorious. As shown by the records, and as correctly held by the Director of Patents, there is hardly any variance in the appearance of the marks 'GOLD TOP' and 'GOLD TOE' since both show a representation of a man's foot wearing a sock, and the marks are printed in identical lettering. Section 4(d) of R.A. No. 166 declares to be unregistrable, 'a mark which consists o[r] comprises a mark or trademark which so resembles a mark or tradename registered in the Philippines of tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive the purchasers. [Petitioner]'s mark is a combination of the different registered marks owned by [respondent]. As held in Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990), the Copyright 1994-2014

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question is not whether the two articles are distinguishable by their label when set aside but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in confounding it with the original. As held by the Court in the same decision[,] 'The most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts.' Furthermore, [petitioner]'s mark is only registered with the Supplemental Registry which gives no right of exclusivity to the owner and cannot overturn the presumption of validity and exclusiv[ity] given to a registered mark. "Finally, the Philippines and the United States are parties to the Union Convention for the Protection of Industrial Property adopted in Paris on March 20, 1883, otherwise known as the Paris Convention. (Puma Sportschuhfabriken Rudolf Dassler K.G. v. Intermediate Appellate Court, 158 SCRA 233). [Respondent] is domiciled in the United States of America and is the lawful owner of several trademark registrations in the United States for the mark 'GOLD TOE'. CaDEAT

xxx

xxx

xxx

By virtue of the Philippines' membership to the Paris Union, trademark rights in favor of the [respondent] were created. The object of the Convention is to accord a national of a member nation extensive protection against infringement and other types of unfair competition. (Puma Sportschuhfabriken Rudolf Dassler K.G. v. Intermediate Appellate Court, 158 SCRA 233; La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373)" 5(5)

Hence, this Petition. 6(6) Issues In its Memorandum, 7(7) petitioner raises the following issues for the consideration of this Court: "I Whether or not the Court of Appeals overlooked that petitioner's trademark was used in commerce in the Philippines earlier than respondent's actual use of its trademarks, hence the Court of Appeals erred in affirming the Decision of the Director of Patents dated September 3, 1990. "II Copyright 1994-2014

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Since the petitioner's actual use of its trademark was ahead of the respondent, whether or not the Court of Appeals erred in canceling the registration of petitioner's trademark instead of canceling the trademark of the respondent. "III Whether or not the Court of Appeals erred in affirming the findings of the Director of Patents that petitioner's trademark [was] confusingly similar to respondent's trademarks. "IV Whether or not the Court of Appeals erred in applying the Paris Convention in holding that respondent ha[d] an exclusive right to the trademark 'gold toe' without taking into consideration the absence of actual use in the Philippines." 8(8)

In the main, the Court will resolve three issues: (1) the date of actual use of the two trademarks; (2) their confusing similarities, and (3) the applicability of the Paris Convention. The Court's Ruling The Petition has no merit. First Issue: Dates of First Use of Trademark and Devices Petitioner claims that it started the actual use of the trademark "Gold Top and Device" in September 1956, while respondent began using the trademark "Gold Toe" only on May 15, 1962. It contends that the claim of respondent that it had been using the "Gold Toe" trademark at an earlier date was not substantiated. The latter's witnesses supposedly contradicted themselves as to the date of first actual use of their trademark, coming up with different dates such as 1952, 1947 and 1938. We do not agree. Based on the evidence presented, this Court concurs in the findings of the Bureau of Patents that respondent had actually used the trademark and the devices in question prior to petitioner's use of its own. During the hearing at the Bureau of Patents, respondent presented Bureau registrations indicating the dates of first use in the Philippines of the trademark and the devices as follows: a) March 16, Copyright 1994-2014

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1954, Gold Toe; b) February 1, 1952, the Representation of a Sock and a Magnifying Glass; c) January 30, 1932, the Gold Toe Representation; and d) February 28, 1952, "Linenized." aSCHIT

The registration of the above marks in favor of respondent constitutes prima facie evidence, which petitioner failed to overturn satisfactorily, of respondent's ownership of those marks, the dates of appropriation and the validity of other pertinent facts stated therein Indeed, Section 20 of Republic Act 166 provides as follows: "SECTION 20. Certificate of registration prima facie evidence of validity. — A certificate of registration of a mark or tradename shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or tradename, 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." 9(9)

Moreover, the validity of the Certificates of Registration was not questioned. Neither did petitioner present any evidence to indicate that they were fraudulently issued. Consequently, the claimed dates of respondent's first use of the marks are presumed valid. Clearly, they were ahead of petitioner's claimed date of first use of "Gold Top and Device" in 1958. Section 5-A of Republic Act No. 166 10(10) states that an applicant for a trademark or trade name shall, among others, state the date of first use. The fact that the marks were indeed registered by respondent shows that it did use them on the date indicated in the Certificate of Registration. On the other hand, petitioner failed to present proof of the date of alleged first use of the trademark "Gold Top and Device". Thus, even assuming that respondent started using it only on May 15, 1962, we can make no finding that petitioner had started using it ahead of respondent. Furthermore, petitioner registered its trademark only with the supplemental register. In La Chemise Lacoste v. Fernandez, 11(11) the Court held that registration with the supplemental register gives no presumption of ownership of the trademark. Said the Court: "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 Copyright 1994-2014

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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 [i]n the supplemental register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration 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, 1968."

As to the actual date of first use by respondent of the four marks it registered, the seeming confusion may have stemmed from the fact that the marks have different dates of first use. Clearly, however, these dates are indicated in the Certificates of Registration. In any case, absent any clear showing to the contrary, this Court accepts the finding of the Bureau of Patents that it was respondent which had prior use of its trademark, as shown in the various Certificates of Registration issued in its favor. Verily, administrative agencies' findings of fact in matters falling under their jurisdiction are generally accorded great respect, if not finality. Thus, the Court has held: ". . . . By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not finality, by the courts. The findings of fact of an administrative agency must be respected as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of an appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect of sufficiency of evidence." 12(12)

Second Issue: Similarity of Trademarks Citing various differences between the two sets of marks, petitioner assails the finding of the director of patents that its trademark is confusingly similar to that of respondent. Petitioner points out that the director of patents erred in his application of the idem sonans rule, claiming that the two trademarks "Gold Toe" and "Gold Top" do not sound alike and are pronounced differently. It avers that since the words gold and Copyright 1994-2014

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toe are generic, respondent has no right to their exclusive use. The arguments of petitioner are incorrect. True, it would not be guilty of infringement on the basis alone of the similarity in the sound of petitioner's "Gold Top" with that of respondent's "Gold Toe." Admittedly, the pronunciations of the two do not, by themselves, create confusion. The Bureau of Patents, however, did not rely on the idem sonans test alone in arriving at its conclusion. This fact is shown in the following portion of its Decision: "As shown by the drawings and labels on file, the mark registered by Respondent-Registrant under Registration No. SR-2206 is a combination of the abovementioned trademarks registered separately by the petitioner in the Philippines and the United States. "With respect to the issue of confusing similarity between the marks of the petitioner and that of the respondent-registrant applying the tests of idem sonans, the mark 'GOLD TOP & DEVICE' is confusingly similar with the mark 'GOLD TOE'. The difference in sound occurs only in the final letter at the end of the marks. For the same reason, hardly is there any variance in their appearance. 'GOLD TOE' and 'GOLD TOP' are printed in identical lettering. Both show [a] representation of a man's foot wearing a sock. 'GOLD TOP' blatantly incorporates petitioner's 'LINENIZED' which by itself is a registered mark." 13(13)

The Bureau considered the drawings and the labels, the appearance of the labels, the lettering, and the representation of a man's foot wearing a sock. Obviously, its conclusion is based on the totality of the similarities between the parties' trademarks and not on their sounds alone. DSIaAE

In Emerald Garment Manufacturing Corporation v. Court of Appeals, 14(14) this Court stated that in determining whether trademarks are confusingly similar, jurisprudence has developed two kinds of tests, the Dominancy Test 15(15) and the Holistic Test. 16(16) In its words: "In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals and its proponent cases. As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or Copyright 1994-2014

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deception and thus constitutes infringement. xxx

xxx

xxx

. . . . If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Hanover Rubber Co., 107 F. 2d 588; . . ..) xxx

xxx

xxx

On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity."

In the present case, a resort to either the Dominancy Test or the Holistic Test shows that colorable imitation exists between respondent's "Gold Toe" and petitioner's "Gold Top." A glance at petitioner's mark shows that it definitely has a lot of similarities and in fact looks like a combination of the trademark and devices that respondent has already registered; namely, "Gold Toe," the representation of a sock with a magnifying glass, the "Gold Toe" representation and "linenized." Admittedly, there are some minor differences between the two sets of marks. The similarities, however, are of such degree, number and quality that the overall impression given is that the two brands of socks are deceptively the same, or at least very similar to each another. An examination of the products in question shows that their dominant features are gold checkered lines against a predominantly black background and a representation of a sock with a magnifying glass. In addition, both products use the same type of lettering. Both also include a representation of a man's foot wearing a sock and the word "linenized" with arrows printed on the label. Lastly, the names of the brands are similar — "Gold Top" and "Gold Toe." Moreover, it must also be considered that petitioner and respondent are engaged in the same line of business. Petitioner cannot therefore ignore the fact that, when compared, most of the features of its trademark are strikingly similar to those of respondent. In addition, Copyright 1994-2014

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these representations are at the same location, either in the sock itself or on the label. Petitioner presents no explanation why it chose those representations, considering that these were the exact symbols used in respondent's marks. Thus, the overall impression created is that the two products are deceptively and confusingly similar to each other. Clearly, petitioner violated the applicable trademark provisions during that time. Let it be remembered that duly registered trademarks are protected by law as intellectual properties and cannot be appropriated by others without violating the due process clause. An infringement of intellectual rights is no less vicious and condemnable as theft of material property, whether personal or real. Third Issue: The Paris Convention Petitioner claims that the Court of Appeals erred in applying the Paris Convention. Although respondent registered its trademark ahead, petitioner argues that the actual use of the said mark is necessary in order to be entitled to the protection of the rights acquired through registration. As already discussed, respondent registered its trademarks under the principal register, which means that the requirement of prior use had already been fulfilled. To emphasize, Section 5-A of Republic Act 166 requires the date of first use to be specified in the application for registration. Since the trademark was successfully registered, there exists a prima facie presumption of the correctness of the contents thereof, including the date of first use. Petitioner has failed to rebut this presumption. Thus, applicable is the Union Convention for the Protection of Industrial Property adopted in Paris on March 20, 1883, otherwise known as the Paris Convention, of which the Philippines and the United States are members. Respondent is domiciled in the United States and is the registered owner of the "Gold Toe" trademark. Hence, it is entitled to the protection of the Convention. A foreign-based trademark owner, whose country of domicile is a party to an international convention relating to protection of trademarks, 17 is accorded protection against infringement or any unfair competition as provided in Section 37 of Republic Act 166, the Trademark Law which was the law in force at the time this case was instituted. In sum, petitioner has failed to show any reversible error on the part of the Court of Appeals. Hence, its Petition must fail. DCASIT

WHEREFORE, the Petition is hereby DENIED and the assailed Resolution Copyright 1994-2014

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AFFIRMED. Costs against petitioner. SO ORDERED. Melo, Vitug, Gonzaga-Reyes and Sandoval-Gutierrez, JJ., concur. )RRWQRWHV 1. 2. 3. 4. 5. 6.

7. 8. 9. 10.

11. 12.

Rollo, pp. 17-22; written by Justice Demetrio G. Demetria, with the concurrence of Justices Ramon A. Barcelona and Renato C. Dacudao. Rollo, pp. 11-15; written by Justice Emeterio C. Cui, with the concurrence of Justices Ramon A. Barcelona and Demetrio G. Demetria. Rollo, p. 36. CA Decision, pp. 2-3; rollo, pp. 12-13. Assailed Resolution, pp. 4-6; rollo, pp. 20-22. This case was deemed submitted for resolution on April 17, 2000, upon receipt by this Court of respondent's Memorandum, signed by Attys. Editha R. Hechanova and Daphne Ruby B. Grasparil. Petitioner's Memorandum, signed by Atty. Arturo S. Santos, was received by the Court on February 24, 2000. Rollo, pp. 273-298. Petitioner's Memorandum, pp. 4-5; rollo, pp. 276-277. This provision is substantially reproduced in Section 138 of RA 8293, otherwise known as "Intellectual Property Code of the Philippines." "Sec. 5. Requirements of the application. — The application for the registration of a mark or trade-name shall be in English or Spanish, or in the national language, with its corresponding English translation, and signed by the applicant, and shall include: (a) Sworn statement of the applicant's domicile and citizenship, the date of the applicant's first use of the mark or trade-name, the date of the applicant's first use of the mark or trade-name in commerce or business, the goods, business or services in connection with which the mark or trade-name is used and the mode or manner in which the mark is used in connection with such goods, business or services, and that the person making the application believes himself, or the firm, corporation or association on whose behalf he makes the verification, to be the owner of the mark or trade-name sought to be registered, that the mark or trade-name is in use in commerce or business, and that to the best of his knowledge, no person, firm, corporation or association has the right to use such mark or trade-name in commerce or business either in the identical form thereof or in such near resemblance thereto as might be calculated to deceive. . . . ." Under Section 124.2 of RA 8293, the applicant is now required to "file a declaration of actual use of the mark with evidence to that effect, as prescribed by the Regulations within three (3) years from the filing date of the application. . . . ." 129 SCRA 373, 393, May 21, 1984, per Gutierrez, J. Villaflor v. CA, 280 SCRA 297, 329-330, October 9, 1997, per Panganiban, J. See

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13. 14. 15.

16. 17.

also Bulilan v. Commission on Audit, 300 SCRA 445, December 22, 1998; Government Service Insurance System v. Court of Appeals, 296 SCRA 514, September 25, 1998; Prime Marine Services, Inc. v. National Labor Relations Commission, 297 SCRA 394, October 8, 1998. Decision of the Bureau of Patents, p. 3; rollo, p. 85. 251 SCRA 600, 615-616, December 29, 1995, per Kapunan, J. See Asia Brewery, Inc. v. Court of Appeals, 224 SCRA 437, July 5, 1993; Converse Rubber Corporation v. Universal Rubber Products, Inc., 147 SCRA 154, January 8, 1987. See Del Monte Corporation v. Court of Appeals, 181 SCRA 410, January 25, 1990; Fruit of the Loom, Inc. v. Court of Appeals, 133 SCRA 405, November 29, 1984. §37 of RA 166 reads: "Rights Sec. 37. 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 any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. No registration of a mark or trade-name in the Philippines by a person described in the preceding paragraph of this section shall be granted until such mark or trade-name has been registered in the country of origin of the applicant, unless the applicant alleges use in commerce. For the purposes of this section, the country of origin of the applicant is the country in which he has bona fide and effective industrial or commercial establishment, or if he has not such an establishment in the country in which he is domiciled, or if he has not a domicile in any of the countries described in the first paragraph of this section, the country of which he is a national. An application for registration of a mark or trade-name under the provisions of this Act filed by a person described in the first paragraph of this section who has previously duly filed an application for registration of the same mark or trade-name in one of the countries described in said paragraph shall be accorded the same force and effect as would be accorded to the same application if filed in the Philippines on the same date on which the application was first filed in such foreign country: Provided, That — (a) The application in the Philippines is filed within six months from the date on which the applica[tion] was first filed in the foreign country; and within three months from the date of filing or within such time as the Director shall in his discretion grant, the applicant shall furnish a certified copy of the application for or registration in the country of origin of the applicant, together with a translation thereof into English, if not in the English language;

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(b) The application conforms as nearly as practicable to the requirements of this Act, but use in commerce need not be alleged: (c) The rights acquired by third parties before the date of the filing of the first application in the foreign country shall in no way be affected by a registration obtained [for] an application filed under this paragraph; and (d) Nothing in this paragraph shall entitle the owner of a registration granted under this section to sue for acts committed prior to the date on which his mark or trade-name was registered in this country unless the registration is based on use in commerce. The registration of a mark under the provisions of this section shall be independent of the registration in the country of origin and the duration, validity or transfer in the Philippines of such registration shall be governed by the provisions of this Act. Trade-names 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 parts of marks. Any person designated in the first paragraph of this section as entitled to the benefits and subject to the provisions of this Act shall be entitled to effective protection against unfair competition, and the remedies provided herein for infringement of marks and trade-names shall be available so far as they may be appropriate in repressing acts of unfair competition. Citizens or residents of the Philippines shall have the same benefits as are granted by this section to persons described in the first paragraph hereof."

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SECOND DIVISION [G.R. No. 190065. August 16, 2010.] DERMALINE, INC., petitioner, YV. MYRA PHARMACEUTICALS, INC., respondent.

DECISION

NACHURA, J : p

This is a petition for review on certiorari 1(1) seeking to reverse and set aside the Decision dated August 7, 2009 2(2) and the Resolution dated October 28, 2009 3(3) of the Court of Appeals (CA) in CA-G.R. SP No. 108627. The antecedent facts and proceedings — On October 21, 2006, petitioner Dermaline, Inc. (Dermaline) filed before the Intellectual Property Office (IPO) an application for registration of the trademark "DERMALINE DERMALINE, INC." (Application No. 4-2006011536). The application was published for Opposition in the IPO E-Gazette on March 9, 2007. On May 8, 2007, respondent Myra Pharmaceuticals, Inc. (Myra) filed a Verified Opposition 4(4) alleging that the trademark sought to be registered by Dermaline so resembles its trademark "DERMALIN" and will likely cause confusion, mistake and deception to the purchasing public. Myra said that the registration of Dermaline's trademark will violate Section 123 5(5) of Republic Act (R.A.) No. 8293 (Intellectual Property Code of the Philippines). It further alleged that Dermaline's use and registration of its applied trademark will diminish the distinctiveness and dilute the goodwill of Myra's "DERMALIN," registered with the IPO way back July 8, 1986, renewed for ten (10) years on July 8, 2006. Myra has been extensively using "DERMALIN" commercially since October 31, 1977, and said mark is still valid and Copyright 1994-2014

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subsisting. Myra claimed that, despite Dermaline's attempt to differentiate its applied mark, the dominant feature is the term "DERMALINE," which is practically identical with its own "DERMALIN," more particularly that the first eight (8) letters of the marks are identical, and that notwithstanding the additional letter "E" by Dermaline, the pronunciation for both marks are identical. Further, both marks have three (3) syllables each, with each syllable identical in sound and appearance, even if the last syllable of "DERMALINE" consisted of four (4) letters while "DERMALIN" consisted only of three (3). CIcTAE

Myra also pointed out that Dermaline applied for the same mark "DERMALINE" on June 3, 2003 and was already refused registration by the IPO. By filing this new application for registration, Dermaline appears to have engaged in a fishing expedition for the approval of its mark. Myra argued that its intellectual property right over its trademark is protected under Section 147 6(6) of R.A. No. 8293. Myra asserted that the mark "DERMALINE DERMALINE, INC." is aurally similar to its own mark such that the registration and use of Dermaline's applied mark will enable it to obtain benefit from Myra's reputation, goodwill and advertising and will lead the public into believing that Dermaline is, in any way, connected to Myra. Myra added that even if the subject application was under Classification 44 7(7) for various skin treatments, it could still be connected to the "DERMALIN" mark under Classification 5 8(8) for pharmaceutical products, since ultimately these goods are very closely related. In its Verified Answer, 9(9) Dermaline countered that a simple comparison of the trademark "DERMALINE DERMALINE, INC." vis-à-vis Myra's "DERMALIN" trademark would show that they have entirely different features and distinctive presentation, thus it cannot result in confusion, mistake or deception on the part of the purchasing public. Dermaline contended that, in determining if the subject trademarks are confusingly similar, a comparison of the words is not the only determinant, but their entirety must be considered in relation to the goods to which they are attached, including the other features appearing in both labels. It claimed that there were glaring and striking dissimilarities between the two trademarks, such that its trademark "DERMALINE DERMALINE, INC." speaks for itself (Res ipsa loquitur). Dermaline further argued that there could not be any relation between its trademark for health and beauty services from Myra's trademark classified under medicinal goods against skin disorders. Copyright 1994-2014

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The parties failed to settle amicably. Consequently, the preliminary conference was terminated and they were directed to file their respective position papers. 10(10) On April 10, 2008, the IPO-Bureau of Legal Affairs rendered Decision No. 2008-70 11(11) sustaining Myra's opposition pursuant to Section 123.1 (d) of R.A. No. 8293. It disposed — WHEREFORE, the Verified Opposition is, as it is, hereby SUSTAINED. Consequently, Application Serial No. 4-2006-011536 for the mark 'DERMALINE, DERMALINE, INC. Stylized Wordmark' for Dermaline, Inc. under class 44 covering the aforementioned goods filed on 21 October 2006, is as it is hereby, REJECTED. Let the file wrapper of 'DERMALINE, DERMALINE, INC. Stylized Wordmark' subject matter of this case be forwarded to the Bureau of Trademarks (BOT) for appropriate action in accordance with this Decision. SO ORDERED. 12(12)

Aggrieved, Dermaline filed a motion for reconsideration, but it was denied under Resolution No. 2009-12 (D) 13(13) dated January 16, 2009. Expectedly, Dermaline appealed to the Office of the Director General of the IPO. However, in an Order 14(14) dated April 17, 2009, the appeal was dismissed for being filed out of time. TCaADS

Undaunted, Dermaline appealed to the CA, but it affirmed and upheld the Order dated April 17, 2009 and the rejection of Dermaline's application for registration of trademark. The CA likewise denied Dermaline's motion for reconsideration; hence, this petition raising the issue of whether the CA erred in upholding the IPO's rejection of Dermaline's application for registration of trademark. The petition is without merit. A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others. 15(15) Inarguably, it is an intellectual property deserving protection by law. In trademark controversies, each case must be scrutinized according to its peculiar circumstances, such that jurisprudential precedents should only be made to apply if Copyright 1994-2014

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they are specifically in point. 16(16) As Myra correctly posits, as a registered trademark owner, it has the right under Section 147 of R.A. No. 8293 to prevent third parties from using a trademark, or similar signs or containers for goods or services, without its consent, identical or similar to its registered trademark, where such use would result in a likelihood of confusion. In determining likelihood of confusion, case law has developed two (2) tests, the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception. 17(17) It is applied when the trademark sought to be registered contains the main, essential and dominant features of the earlier registered trademark, and confusion or deception is likely to result. Duplication or imitation is not even required; neither is it necessary that the label of the applied mark for registration should suggest an effort to imitate. The important issue is whether the use of the marks involved would likely cause confusion or mistake in the mind of or deceive the ordinary purchaser, or one who is accustomed to buy, and therefore to some extent familiar with, the goods in question. 18(18) Given greater consideration are the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets, and market segments. 19(19) The test of dominancy is now explicitly incorporated into law in Section 155.1 of R.A. No. 8293 which provides — 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; (emphasis supplied) DETcAH

On the other hand, the Holistic Test entails a consideration of the entirety of the marks as applied to the products, including labels and packaging, in determining confusing similarity. The scrutinizing eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels so that a conclusion may be drawn as to whether one is confusingly similar to the other. 20(20) Relative to the question on confusion of marks and trade names, jurisprudence Copyright 1994-2014

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has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent. 21(21) In rejecting the application of Dermaline for the registration of its mark "DERMALINE DERMALINE, INC.," the IPO applied the Dominancy Test. It declared that both confusion of goods and service and confusion of business or of origin were apparent in both trademarks. It also noted that, per Bureau Decision No. 2007-179 dated December 4, 2007, it already sustained the opposition of Myra involving the trademark "DERMALINE" of Dermaline under Classification 5. The IPO also upheld Myra's right under Section 138 of R.A. No. 8293, which provides that a certification of registration of a mark is prima facie evidence of the validity of the registration, the registrant's ownership of the mark, and of the registrant's exclusive right to use the same in connection with the goods and those that are related thereto specified in the certificate. We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there are no set rules that can be deduced as what constitutes a dominant feature with respect to trademarks applied for registration; usually, what are taken into account are signs, color, design, peculiar shape or name, or some special, easily remembered earmarks of the brand that readily attracts and catches the attention of the ordinary consumer. 22(22) Dermaline's insistence that its applied trademark "DERMALINE DERMALINE, INC." had differences "too striking to be mistaken" from Myra's "DERMALIN" cannot, therefore, be sustained. While it is true that the two marks are presented differently — Dermaline's mark is written with the first "DERMALINE" in script going diagonally upwards from left to right, with an upper case "D" followed by the rest of the letters in lower case, and the portion "DERMALINE, INC." is written in upper case letters, below and smaller than the long-hand portion; while Myra's mark "DERMALIN" is written in an upright font, with a capital "D" and followed by lower case letters — the likelihood of confusion is still apparent. This is because they are almost spelled in the same way, except for Dermaline's mark which ends with the letter "E," and they are pronounced practically in the same manner in three (3) Copyright 1994-2014

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syllables, with the ending letter "E" in Dermaline's mark pronounced silently. Thus, when an ordinary purchaser, for example, hears an advertisement of Dermaline's applied trademark over the radio, chances are he will associate it with Myra's registered mark. aECSHI

Further, Dermaline's stance that its product belongs to a separate and different classification from Myra's products with the registered trademark does not eradicate the possibility of mistake on the part of the purchasing public to associate the former with the latter, especially considering that both classifications pertain to treatments for the skin. Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. The Court is cognizant that the registered trademark owner enjoys protection in product and market areas that are the normal potential expansion of his business. Thus, we have held — Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). 23(23) (Emphasis supplied)

Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra, such that, considering the current proliferation of health and beauty products in the market, the purchasers would likely be misled that Myra has already expanded its business through Dermaline from merely carrying pharmaceutical topical applications for the skin to health and beauty services. Verily, when one applies for the registration of a trademark or label which is almost the same or that very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark. This is intended not only to avoid confusion on the part of the public, but also to protect an already used and registered trademark and an established goodwill. Copyright 1994-2014

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24(24)

Besides, the issue on protection of intellectual property, such as trademarks, is factual in nature. The findings of the IPO, upheld on appeal by the same office, and further sustained by the CA, bear great weight and deserves respect from this Court. Moreover, the decision of the IPO had already attained finality when Dermaline failed to timely file its appeal with the IPO Office of the Director General. WHEREFORE, the petition is DENIED. The Decision dated August 7, 2009 and the Resolution dated October 28, 2009 of the Court of Appeals in CA-G.R. SP No. 108627 are AFFIRMED. Costs against petitioner. aTADcH

SO ORDERED. Carpio, Peralta, Abad and Mendoza, JJ., concur. )RRWQRWHV 1. 2.

3. 4. 5.

6.

Rollo, pp. 3-18. Penned by Associate Justice Martin S. Villarama, Jr. (now a member of this Court), with Associate Justices Vicente S.E. Veloso and Normandie B. Pizarro, concurring; id. at 19-32. Id. at 32. Id. at 78-86. SEC. 123. Registrability. — 123.1. A mark cannot be registered if it: xxx xxx xxx (d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or priority date, in respect of: (i) The same goods or services, or (ii) Closely related goods or services, or (iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion; xxx xxx xxx (Emphasis supplied.) SEC. 147. Rights Conferred. — 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owner's consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. 147.2. The exclusive right of the owner of a well-known mark defined in Subsection 123.1 (e) which is registered in the Philippines, shall extend to goods and

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7.

8. 9. 10. 11. 12. 13. 14. 15.

16. 17. 18. 19. 20. 21.

services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided further, That the interests of the owner of the registered mark are likely to be damaged by such use. "FACIAL, BACK CLEANING, ACNE TREATMENT AND CONTROL SKIN PEELING (FACE, BODY, ARMPIT, ARMS AND LEGS), SLIMMING, HAIR GROWER TREATMENT, SKIN BLEACHING (FACE, BODY, ARMPIT, BODY & LEGS), DERMALIFT (FACE LIFTING, BODY TONING, EYEBAG REMOVAL), EXCESSIVE SWEATING, BODY ODOR TREATMENT AND CONTROL, OPEN PORES TREATMENT, STRETCH MARK TREATMENT, BODY MASSAGE, EYELASH PERMING, TATTOO (EYEBROW, UPPER AND LOWER LID, LIP), WOMEN'S HAIRCUT, MEN'S HAIRCUT, KID'S HAIRCUT, BLOW-DRY SETTING, UP-STYLE (LADIES), PERMING, TINT (TOUCH UP), HIGHLIGHTS (CAP), HIGHLIGHTS (FOIL), CELLOPHANE, HAIR COLOR, HAIR RELAXING, HAIR TREATMENT/SPA, HOT OIL, FULL MAKE-UP, EYE MAKE-UP, FOOT SPA WITH PEDICURE, FOOT SCRUB, MANICURE, EYEBROW THREADING, UPPER LIP THREADING, FULL BODY MASSAGE, HALF BODY MASSAGE, SAUNA." "TOPICAL ANTIBACTERIAL, ANTIFUNGAL, ANTISCABIES PREPARATIONS FOR THE TREATMENT OF SKIN DISORDERS." Rollo, pp. 87-93. Position Paper (for the Opposer), rollo, pp. 94-106; Position Paper for Dermaline, pp. 107-119. Id. at 37-50. Id. at 26. Id. at 52-53. Id. at 34-35. Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009, 605 SCRA 523, 528; McDonald's Corporation v. MacJoy Fastfood Corporation, G.R. No. 166115, February 2, 2007, 514 SCRA 95, 107. Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493 SCRA 333, 356. Amigo Manufacturing, Inc. v. Cluett Peabody Co., Inc., 406 Phil. 905, 918 (2001). Philip Morris, Inc. v. Fortune Tobacco Corporation, supra at 359, citing Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197 (1921). McDonald's Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 434 (2004). Mighty Corporation v. E. & J. Gallo Winery, 478 Phil. 615, 659 (2004). McDonald's Corporation v. L.C. Big Mak Burger, Inc., supra at 428, citing Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., 137 Phil. 838, 852 (1969).

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22. 23. 24.

Rollo, p. 47. McDonald's Corporation v. L.C. Big Mak Burger, Inc., supra at 432, citing Sta. Ana v. Maliwat, et al., 133 Phil. 1006, 1013 (1968). McDonald's Corporation v. L.C. Big Mak Burger, Inc., supra at 406, citing Faberge Incorporated v. Intermediate Appellate Court, G.R. No. 71189, November 4, 1992, 215 SCRA 316, 320 and Chuanchow Soy & Canning Co. v. Dir. of Patents and Villapania, 108 Phil. 833, 836.

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SECOND DIVISION [G.R. No. 164321. March 28, 2011.] SKECHERS, U.S.A., INC., petitioner, YV. INTER PACIFIC INDUSTRIAL TRADING CORP., and/or INTER PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, respondents.

TRENDWORKS INTERNATIONAL CORPORATION, petitioner-intervenor, YV. INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, respondents.

RESOLUTION

PERALTA, J : p

For resolution are the twin Motions for Reconsideration 1(1) filed by petitioner and petitioner-intervenor from the Decision rendered in favor of respondents, dated Copyright 1994-2014

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November 30, 2006.

aCHDAE

At the outset, a brief narration of the factual and procedural antecedents that transpired and led to the filing of the motions is in order. The present controversy arose when petitioner filed with Branch 24 of the Regional Trial Court (RTC) of Manila an application for the issuance of search warrants against an outlet and warehouse operated by respondents for infringement of trademark under Section 155, in relation to Section 170 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines. 2(2) In the course of its business, petitioner has registered the trademark "SKECHERS" 3(3) and the trademark "S" (within an oval design) 4(4) with the Intellectual Property Office (IPO). Two search warrants 5(5) were issued by the RTC and were served on the premises of respondents. As a result of the raid, more than 6,000 pairs of shoes bearing the "S" logo were seized. Later, respondents moved to quash the search warrants, arguing that there was no confusing similarity between petitioner's "Skechers" rubber shoes and its "Strong" rubber shoes. On November 7, 2002, the RTC issued an Order 6(6) quashing the search warrants and directing the NBI to return the seized goods. The RTC agreed with respondent's view that Skechers rubber shoes and Strong rubber shoes have glaring differences such that an ordinary prudent purchaser would not likely be misled or confused in purchasing the wrong article. Aggrieved, petitioner filed a petition for certiorari 7(7) with the Court of Appeals (CA) assailing the RTC Order. On November 17, 2003, the CA issued a Decision 8(8) affirming the ruling of the RTC. Subsequently, petitioner filed the present petition 9(9) before this Court which puts forth the following assignment of errors: A.

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WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN CONSIDERING MATTERS OF DEFENSE IN A CRIMINAL TRIAL FOR TRADEMARK INFRINGEMENT IN PASSING UPON THE VALIDITY OF THE SEARCH WARRANT WHEN IT SHOULD HAVE LIMITED ITSELF CD Technologies Asia, Inc.

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TO A DETERMINATION OF WHETHER THE TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN QUASHING THE SEARCH WARRANTS. TCaEIc

B.

WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN FINDING THAT RESPONDENTS ARE NOT GUILTY OF TRADEMARK INFRINGEMENT IN THE CASE WHERE THE SOLE TRIABLE ISSUE IS THE EXISTENCE OF PROBABLE CAUSE TO ISSUE A SEARCH WARRANT. 10(10)

In the meantime, petitioner-intervenor filed a Petition-in-Intervention 11(11) with this Court claiming to be the sole licensed distributor of Skechers products here in the Philippines. On November 30, 2006, this Court rendered a Decision 12(12) dismissing the petition. Both petitioner and petitioner-intervenor filed separate motions for reconsideration. In petitioner's motion for reconsideration, petitioner reconsideration of the earlier decision on the following grounds:

moved

for

(a)

THIS HONORABLE COURT MUST RE-EXAMINE THE FACTS OF THIS CASE DUE TO THE SIGNIFICANCE AND REPERCUSSIONS OF ITS DECISION.

(b)

COMMERCIAL QUANTITIES OF THE SEIZED ITEMS WITH THE UNAUTHORIZED REPRODUCTIONS OF THE "S" TRADEMARK OWNED BY PETITIONER WERE INTENDED FOR DISTRIBUTION IN THE PHILIPPINE MARKET TO THE DETRIMENT OF PETITIONER — RETURNING THE GOODS TO RESPONDENTS WILL ADVERSELY AFFECT THE GOODWILL AND REPUTATION OF PETITIONER.

(c)

THE SEARCH WARRANT COURT AND THE COURT OF APPEALS BOTH ACTED WITH GRAVE ABUSE OF DISCRETION.

(d)

THE SEARCH WARRANT COURT DID NOT PROPERLY RE-EVALUATE THE EVIDENCE PRESENTED DURING THE SEARCH WARRANT APPLICATION PROCEEDINGS.

(e)

THE SOLID TRIANGLE CASE IS NOT APPLICABLE IN THIS

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CASE, AS IT IS BASED ON A DIFFERENT FACTUAL MILIEU. PRELIMINARY FINDING OF GUILT (OR ABSENCE THEREOF) MADE BY THE SEARCH WARRANT COURT AND THE COURT OF APPEALS WAS IMPROPER. (f)

THE SEARCH WARRANT COURT OVERSTEPPED ITS DISCRETION. THE LAW IS CLEAR. THE DOMINANCY TEST SHOULD BE USED.

(g)

THE COURT OF APPEALS JURISDICTION. 13(13)

COMMITTED

ERRORS

OF

On the other hand, petitioner-intervenor's motion for reconsideration raises the following errors for this Court's consideration, to wit: (a)

THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO LAW AND JURISPRUDENCE IN ADOPTING THE ALREADY-REJECTED HOLISTIC TEST IN DETERMINING THE ISSUE OF CONFUSING SIMILARITY; dctai

(b)

THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED CONTRARY TO LAW IN HOLDING THAT THERE IS NO PROBABLE CAUSE FOR TRADEMARK INFRINGEMENT; AND

(c)

THE COURT OF APPEALS SANCTIONED THE TRIAL COURT'S DEPARTURE FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHEN IT UPHELD THE QUASHAL OF THE SEARCH WARRANT ON THE BASIS SOLELY OF A FINDING THAT THERE IS NO CONFUSING SIMILARITY. 14(14)

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the primary issue posed by them dwells on the issue of whether or not respondent is guilty of trademark infringement. After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision. The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293. Specifically, Section 155 of R.A. No. 8293 states: Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered mark: Copyright 1994-2014

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155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material. 15(15) HDaACI

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed tests — the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments. 16(16) In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words, but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other. 17(17) Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), Copyright 1994-2014

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where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent. 18(18) Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the IPO. While it is undisputed that petitioner's stylized "S" is within an oval design, to this Court's mind, the dominant feature of the trademark is the stylized "S," as it is precisely the stylized "S" which catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact that it used the same stylized "S", the same being the dominant feature of petitioner's trademark, already constitutes infringement under the Dominancy Test. This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be considered as highly identifiable to the products of petitioner alone. The CA even supported its conclusion by stating that the letter "S" has been used in so many existing trademarks, the most popular of which is the trademark "S" enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such reasoning, however, misses the entire point, which is that respondent had used a stylized "S," which is the same stylized "S" which petitioner has a registered trademark for. The letter "S" used in the Superman logo, on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA of the letter "S" used in the Superman trademark with petitioner's stylized "S" is not appropriate to the case at bar. Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on the font and the size of the lettering, the stylized "S" utilized by respondent is the very same stylized "S" used by petitioner; a stylized "S" which is unique and distinguishes petitioner's trademark. Indubitably, the likelihood of confusion is present as purchasers will associate the respondent's use of the stylized "S" as having been authorized by petitioner or that respondent's product is connected with petitioner's business. Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed petitioner's trademark. For its part, the RTC noted the following Copyright 1994-2014

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supposed dissimilarities between the shoes, to wit: 1.

The mark "S" found in Strong Shoes is not enclosed in an "oval design."

2.

The word "Strong" is conspicuously placed at the backside and insoles.

3.

The hang tags and labels attached to the shoes bears the word "Strong" for respondent and "Skechers U.S.A." for private complainant. CTHDcE

4.

Strong shoes are modestly priced compared to the costs of Skechers Shoes. 19(19)

While there may be dissimilarities between the appearances of the shoes, to this Court's mind such dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be readily observed by simply comparing petitioner's Energy 20(20) model and respondent's Strong 21(21) rubber shoes, respondent also used the color scheme of blue, white and gray utilized by petitioner. Even the design and "wavelike" pattern of the midsole and outer sole of respondent's shoes are very similar to petitioner's shoes, if not exact patterns thereof. At the side of the midsole near the heel of both shoes are two elongated designs in practically the same location. Even the outer soles of both shoes have the same number of ridges, five at the back and six in front. On the side of respondent's shoes, near the upper part, appears the stylized "S," placed in the exact location as that of the stylized "S" on petitioner's shoes. On top of the "tongue" of both shoes appears the stylized "S" in practically the same location and size. Moreover, at the back of petitioner's shoes, near the heel counter, appears "Skechers Sport Trail" written in white lettering. However, on respondent's shoes appears "Strong Sport Trail" noticeably written in the same white lettering, font size, direction and orientation as that of petitioner's shoes. On top of the heel collar of petitioner's shoes are two grayish-white semi-transparent circles. Not surprisingly, respondent's shoes also have two grayish-white semi-transparent circles in the exact same location. Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and frivolous that it is indubitable that respondent's products will cause confusion and mistake in the eyes of the public. Respondent's shoes may not be an exact replica of petitioner's shoes, but the features and overall design are so similar and alike that confusion is highly likely. In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc., 22(22) Copyright 1994-2014

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this Court, in a case for unfair competition, had opined that even if not all the details are identical, as long as the general appearance of the two products are such that any ordinary purchaser would be deceived, the imitator should be liable, to wit: 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 their 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. . . . 23(23)

Neither can the difference in price be a complete defense in trademark infringement. In McDonald's Corporation v. L.C. Big Mak Burger, Inc., 24(24) this Court held: Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited to guarding his goods or business from actual market competition with identical or similar products of the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). . . . 25(25) SIAEHC

Indeed, the registered trademark owner may use its mark on the same or similar products, in different segments of the market, and at different price levels depending on variations of the products for specific segments of the market. 26(26) The purchasing public might be mistaken in thinking that petitioner had ventured into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong Sport Trail might be associated or connected with petitioner's brand, Copyright 1994-2014

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which scenario is plausible especially since both petitioner and respondent manufacture rubber shoes. Withal, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods. 27(27) While respondent's shoes contain some dissimilarities with petitioner's shoes, this Court cannot close its eye to the fact that for all intents and purpose, respondent had deliberately attempted to copy petitioner's mark and overall design and features of the shoes. Let it be remembered, that defendants in cases of infringement do not normally copy but only make colorable changes. 28(28) The most successful form of copying is to employ enough points of similarity to confuse the public, with enough points of difference to confuse the courts. 29(29) WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED. The Decision dated November 30, 2006 is RECONSIDERED and SET ASIDE. SO ORDERED. Carpio, Nachura, Abad and Mendoza, JJ., concur. )RRWQRWHV 1. 2.

3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Rollo, pp. 1046-1071 & 1078-1118. An Act Prescribing the Intellectual Property Code and Establishing the Intellectual Property Office, Providing for Its Powers and Functions, and for Other Purposes. Took effect on January 1, 1998. Under Registration No. 63364; see rollo, p. 107. Under Registration No. 4-1996-110182; see rollo, p. 109. Search Warrant Nos. 02-2827 and 02-2828; see rollo, pp. 144-146, 147-148. Rollo, pp. 173-176. Id. at 195-220. Id. at 72-83. Id. at 11-59. Id. at 26-27. Id. at 557-603. Penned by Associate Justice Minita V. Chico-Nazario, with Chief Justice Artemio V. Panganiban and Associate Justices Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez and Romeo J. Callejo, Sr. concurring; id. at 1032-1045.

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13. 14. 15. 16.

17. 18.

19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29.

Rollo, p. 1079. Id. at 1047-1048. Emphasis supplied. Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009, 605 SCRA 523, 531; McDonald's Corporation v. MacJoy Fastfood Corporation, G.R. No. 166115, February 2, 2007, 514 SCRA 95, 106; McDonald's Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 434 (2004). Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493 SCRA 333, 357. McDonald's Corporation v. L.C. Big Mak Burger, Inc., supra note 16, at 428, citing Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., 137 Phil. 838, 852 (1969). Rollo, p. 174. See rollo, pp. 498-500, 572-574. Id. 186 Phil. 85 (1980). Id. at 94-95. Supra note 16. Id. at 432. Dermaline, Inc. v. Myra Pharmaceuticals, Inc., G.R. No. 190065, August 16, 2010. Berris Agricultural Co., Inc. v. Norvy Abyadang, G.R. No. 183404, October 13, 2010. Del Monte Corporation v. Court of Appeals, 260 Phil. 435, 443 (1990). Id.

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