Intellectual Property Law cases

EN BANC

[G.R. No. 118295. May 2, 1997]

WIGBERTO E. TAADA 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, vs. 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 OSMEA, 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. DECISION PANGANIBAN, J.: 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.

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 [1] signing of the Final Act in Marrakesh, Morocco and the ratification of the WTO Agreement by its members.

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 x x x, (the reduction of) costs and uncertainty associated with exporting x x x, 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.

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 x x x (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 prescribe 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 mandamusunder 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,

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Secretary Navarro on behalf of the Republic of the Philippines, agreed:

(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. On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the [3] President of the Philippines, 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. On August 13, 1994, the members of the Philippine Senate received another letter from the President of the [4] Philippines 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. [5] 1083, a resolution entitled Concurring in the Ratification of the Agreement Establishing the World Trade Organization. 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 [6] Establishing the World Trade Organization. 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 1 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 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

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the Instrument of Ratification, declaring:

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 [8] Commitments in Financial Services. In his Memorandum dated May 13, 1996, 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 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. 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 [9] Paper, 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 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 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 [10] petitioners into the following: 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. 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. Taada 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: (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 petitions 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, [11] rather than skirted or deflected by procedural matters. 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 [12] upheld. Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court [13] (as in the instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide. The jurisdiction of this Court to adjudicate the matters [15] Constitution, as follows:

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raised in the petition is clearly set out in the 1987

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 departments duty and power to strike down grave abuse of discretion on [16] the part of any branch or instrumentality of government including Congress. It is an innovation in our political law. As [17] 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. [18]

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. 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 andmandamus 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 governments 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 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 xx xx xx xx Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. xx xx xx xx Article XII NATIONAL ECONOMY AND PATRIMONY xx xx xx xx Sec. 10. x x x. 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. xx xx xx xx Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive. Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions quoted in [19] their memorandum: 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 enterprises purchases or use of imported products be limited to an amount related to the volume or value of local products that it exports. 2. TRIMS that are inconsistent with the obligations of general elimination 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 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 [20] obligations as provided in the annexed agreements. 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 selfexecuting 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 sufficient provisions to protect developing countries like the Philippines from the harshness of sudden trade liberalization. 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 [21] [22] article in the 1935 Constitution is called the basic political creed of the nation by Dean Vicente Sinco. These [23] 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 [24] enactment of laws. As held in the leading case ofKilosbayan, 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. In the same light, we held in Basco vs. Pagcor implement them, thus:

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that broad constitutional principles need legislative enactments to

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 Oposa vs. Factoran, [26] Jr., 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. x x x 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 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.

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. x x x xxxxxxxxx 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 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 [27] and patrimony and in the use of Filipino labor, domestic materials and locally-produced goods; (2) by mandating the [28] State to adopt measures that help make them competitive; and (3) by requiring the State to develop a self-reliant and [29] independent national economy effectively controlled by Filipinos. 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 [30] utilizes all forms and arrangements of exchange on the basis of equality and reciprocity; 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. [31]

It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al., 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 [32] 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.

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 members vote equal in weight to that of any other. There is no WTO equivalent of the UN Security Council. 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 [33] may withdraw from the Agreement upon the expiration of six months from the date of notice of withdrawals. Hence, poor countries can protect their common interests more effectively through the WTO than through one-onone 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 [34] economic development. These basic principles are found in the preamble 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 worlds 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 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, x x x. (underscoring 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. 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.

Constitution Does Not Rule Out Foreign Competition [35]

Furthermore, 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. 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 [36] economy, especially in such strategic industries as in the development of natural resources and public utilities. 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 [37] envisioning a trade policy based on equality and reciprocity, 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.

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 countrys 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 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 [38] change necessitated by unfolding events. As one eminent political law writer and respected jurist 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 fullgrown 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.

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 [39] administrative procedures with its obligations as provided in the annexed Agreements. 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 x x x but also to the flow of investments and money x x x as well as to a whole slew of agreements [40] on socio-cultural matters x x x. More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in the [41] Congress. 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 x x x [42] such limitations and restrictions as Congress may provide, 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, [43] freedom, cooperation and amity, with all nations." By the doctrine of incorporation, the country is bound by generally [44] 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 x x x. A state which has contracted valid international obligations is bound to make in its legislations such [45] modifications as may be necessary to ensure the fulfillment of the obligations undertaken. 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 [46] of international organizations. 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 [47] its destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here.

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 47-A 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. 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. 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) 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, 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 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 [48] the larger country gaining enhanced success to the smaller countrys market. 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 x x x cooperation and amity with all nations.

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 [49] Trade-Related Aspects of Intellectual Property Rights (TRIPS) intrudes on the power of the Supreme Court to [50] promulgate rules concerning pleading, practice and procedures. To understand the scope and meaning of Article 34, TRIPS,

[51]

it will be fruitful to restate its full text as follows:

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 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. (underscoring 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. So too, since the Philippine is a signatory to most international conventions on patents, trademarks and copyrights, [52] the adjustment in legislation and rules of procedure will not be substantial.

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 [53] President. They contend that the second letter of the President to the Senate which enumerated what constitutes the Final Act should have been the subject of concurrence of the Senate. A final act, sometimes called protocol de clture, 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 [54] 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 text of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations is contained in just one [55] page 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 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 [56] 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 [57] systems and refinancing available in the normal course of business. On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed included as its [58] integral parts, 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). It should be added that the Senate was well-aware of what it was concurring in as shown by the members [59] deliberation on August 25, 1994. After reading the letter of President Ramos dated August 11, 1994, the senators of the [60] Republic minutely dissected what the Senate was concurring in, as follows: 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 Taada 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 Taada and later on Senator Tolentino since they were the ones that raised this question yesterday? Senator Taada, please. SEN. TAADA: 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. SEN. TAADA. . . . of President Ramos, Mr. Chairman. THE CHAIRMAN. Thank you, Senator Taada. 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. 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 to 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 yesterdays session and I dont 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.

Epilogue In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are invoking this Courts 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 [61] 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 [62] [63] of law. Failure on the part of the petitioner to show grave abuse of discretion will result in the dismissal of the petition. 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 Senates processes, this Court cannot find any cogent reason to impute grave abuse of discretion to the Senates exercise [64] of its power of concurrence in the WTO Agreement granted it by Sec. 21 of Article VII of the Constitution. 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 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. 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.

[65]

The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance 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. WHEREFORE, the petition is DISMISSED for lack of merit. 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., in the result.

G.R. No. L-28744 April 29, 1971 ACOJE MINING CO., INC., petitioner-applicant, vs. THE DIRECTOR OF PATENTS, respondent. Manuel M. Antonio and Roman G. Pacia for petitioner. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Frine' C. Zaballero, Solicitor Antonio M. Martinez and Attorney Amado L. Marquez for respondent. FERNANDO, J.: 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 1 forth in the American Wire & Cable Co. care. 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 2 cited mark is being used on edible oil, Class 47." 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 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, 3 soy sauce and edible oil, is such "that purchasers would be misled into believing that they have a common source." 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 4 for the Court in American Wire & Cable Co. v. Director of Patents: "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 5 newer brand for it." 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 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 that respondent Director ought to have reached a different conclusion. Petitioner has successfully made out a 6 case for registration. 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., took no part.

G.R. No. L-48226

December 14, 1942

ANA L. ANG, petitioner, vs. TORIBIO TEODORO, respondent. Cirilo Lim for petitioner. Marcial P. Lichauco and Manuel M. Mejia for respondent.

OZAETA, J.: 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 trade-mark on September 29, 1915, and as 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 or 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 trademarks 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 Reyes, with Justice Padilla as ponente, reversed that judgment, holding that by uninterrupted an exclusive use since 191 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. First. 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 translate in English," it means "strong, durable, lasting." He invokes section 2 of Act No. 666, which provides that words or devices which related 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., 16), 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. The cite several cases in 1 which similar words have been sustained as valid trade-marks, such as "Holeproof" for hosiery, "ideal for tooth 2 3 brushes, and "Fashionknit" for neckties and sweaters.

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!" Tibay is a root word from which are derived the verbmagpatibay (to strenghten; the nouns pagkamatibay (strength, durability), katibayan (proof, support, strength),katibay-tibayan (superior strength); and the adjectives matibay (strong, durable, lasting), napakatibay (very strong),kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang Tibay" is an exclamation denoting administration 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 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" 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. Second. 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 of 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. Salfield, 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 trademark. 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.) Third. 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 actions 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, "the general class of merchandise 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 same class of merchandise, or which to 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 2 authorizes the Director of Commerce to establish classes of merchandise 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 class of articles 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 kin," "general class of merchandise," "same class of merchandise," "classes of 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 now showing that she in unfairly or fraudulently using that 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 un-like 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 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 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. Then 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. Level Brothers Company (G.R. No. 46817), decided by this Court on April 18, 1941, the respondent company (plaintiff below) was granted injunctive relief against the use by the petitioner of the trademark "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 4 5 supplies, against its use for bicycles. "Penslar," for medicines and toilet articles, against its use for cigars; "Rolls-Royce," 6 7 for automobiles. against its use for radio tubes; "Vogue," as the name of a magazine, against its use for hats; "Kotex," 8 for sanitary napkins, against the use of "Rotex" for vaginal syringes; "Sun-Maid," for raisins, against its use for 9 10 flour; "Yale," for locks and keys, against its use for electric flashlights; and "Waterman," for fountain pens, against its 11 use for razor blades. lawphil.net 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 cites 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 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 12 respondent. As observed in another case, 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. Yulo, C.J., Moran, Paras and Bocobo, JJ., concur.

G.R. No. 103543 July 5, 1993 ASIA BREWERY, INC., petitioner, vs. THE HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents. Abad Santos & Associates and Sycip, Salazar, Hernandez & Gatmaitan for petitioner. Roco, Bunag, Kapunan Law Office for private respondent.

GRIÑO-AQUINO, J.: 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 committed trademark infringement or unfair competition against" SMC (p. 189, Rollo). 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 the 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 in the amount of P250,000.00 plus costs to 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 1 opinions of the Special Sixth Division 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 if 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

(2) The defendant Asia Brewery Inc. is hereby ordered 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 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 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 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; Emphasis 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; Emphasis 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 thetest 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 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, 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: 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 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 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 of 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 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 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 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 form the others. 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 if not infringement of its trademark, but unfair competition arising form 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 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 standards 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. 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 3 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 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 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 of 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. Petitioner 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, that 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. 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., took no part. 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 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. 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 aside 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. 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.

# 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 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. 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 aside 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.

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.

G.R. No. L-20170

August 10, 1965

BERT R. BAGANO, petitioner, vs. THE DIRECTOR OF PATENTS and THE INTERNATIONAL PHARMACEUTICALS, INC., respondents. Francis M. Zosa and Cristeta Castillo-Bagano for petitioner. Isabelo V. Gandiongco for respondent International Pharmaceuticals, Inc. Solicitor General for respondent Director of Patents. PAREDES, J.: This is an inter-partes proceedings, in connection with the registration of the Trademark "EFFICASCENT OIL," between petitioner herein and the respondent International Pharmaceuticals, Inc. A brief on the facts shows that on June 23, 1959, Bert R. Bagano filed with the Philippines Patent Office, a petition for registration of the trademark "Efficascent Oil" in his favor. On August 17, 1958, respondent International Pharmaceuticals, Inc. also presented with said office a petition for registration of the same trademark. The petitions, referring to the same trademark, were heard for the purpose of establishing the question of priority of adoption and use. The Director of Patents, on June 29, 1962, rendered judgment, the pertinent portions of which recite: ... . It is alleged and claimed in their respective applications that Bert. R. Bagano, hereafter referred to as Senior Party, had adopted and has been using his trademark since February 1, 1959, which he tried to amend in the course of the hearing to December 18, 1958, while the International Pharmaceutical, Inc., hereinafter referred to as Junior Party, has adopted and had been, through its predecessor in interest, continuously using its trademark since June 8, 1949. The evidence on record shows that it was the Junior Party's predecessor in interest, Miguel K. Chiong of Cebu City, who owned and who was given permit by the Board of Pharmaceutical Examiners and Inspectors to prepare through his pharmaceutical laboratory called Tropical Herb Service his pharmaceutical preparation bearing the mark "EFFICOL" which was duly analyzed and found to be not adulterated and misbranded under Laboratory No. D-48-1075, on October 4, 1948 (Exh. "H"). He later changed the mark of his product to "EFFICASCENT OIL" and the name of his laboratory to Tropical Pharmaceutical Laboratory. The changes were duly approved and noted in the record of the Board of Pharmaceutical Examiners and Inspectors on June 8, 1949 (Exh. I). Another permit, numbered 49, was issued on February 15, 1954 to Miguel K. Chiong to operate a pharmaceutical and drug manufacturing laboratory called Tropical Pharmaceutical Laboratory under the management of pharmacist Cristeta Castillo Bagano (Exhs. J & N). On January 16, 1959, Miguel K. Chiong, together with his daughter Rebecca Chiong Llaguno sold the formula of his pharmaceutical product registered under No. D3-718 with the Board of Pharmaceutical Examiners and Inspectors together with its goodwill, tradename and the right to manufacture the said "EFFICASCENT OIL" for P10,000.00 to be paid in installments, to the Wong Brothers namely, George, David, Sergio, Pio and Sixto, all of Cebu City (Exh. G). Upon payment of the remaining balance of the selling price, the final deed of sale was executed on June 9, 1960 (Exh. G-1). The Wong brothers thereafter formed a corporation, the International Pharmaceutical, Inc., to operate a laboratory for the manufacture of said product, among its other pharmaceutical products, and to distribute the same (Exh. K). Again, said pharmaceutical product was submitted by the Junior Party to, and was duly analyzed by, the Public Health Research Laboratory under Laboratory No. D59-1010, and was found not adulterated nor misbranded and so was permitted, under permit No. 157, issued on June 5, 1959, by the Drug and Cosmetic Inspection to continue to manufacture and sell the same (Exhs. L, M & O). On the side of the Junior Party, we do find in conclusion that, as the prior and continuous use by its predecessor in interest inures to its benefit, it has adopted and has been continuously using its trademark on its pharmaceutical preparation thru its predecessor in interest since 1949, as shown by sales invoices (Exhs. P to P30). On the side of the Senior Party, we find no convincing and conclusive proof that he had adopted and used his alleged trademark earlier than the date of first use by the Junior Party. The "purchaser's contract" (Exhs. 7 to 8-E) submitted together with his uncorroborated testimony when he testified in his behalf as his witness, failed to

satisfactorily show that he is actually the manufacturer and owner of the products listed in the said contract. It tends to show that he has been dealing only on the product bearing the mark "EFFICASCENT OIL" since December 12, 1958, which, if considered as his date of first use, is very much later than June 8, 1949, the date of first use asserted by the Junior Party. We consider it quite significantly important that while on the one hand the Junior Party has submitted evidence that it has been duly given permit by the proper government authority to manufacture and sell its product bearing the mark "EFFICASCENT OIL," the Senior Party, on the other hand, has not been issued such permit to show prior use and adoption. From the above facts and circumstances, the International Pharmaceuticals, Inc. has priority of adoption and use of its trademark, and has a better right to its registration than the Senior Party. WHEREFORE, Application Serial No. 7213 of International Pharmaceuticals, Inc. should be, as it is hereby given due course. Application Serial No. 7114 of Bert R. Bagano is hereby rejected. The above judgment is now before Us for Review on four (4) counts, all of which pose the issue of whether the respondent Director of Patents was right in concluding that the appellee International Pharmaceuticals, Inc., had priority of adoption and use of the trademark "EFFICASCENT OIL." It is almost trite to state here that in cases of the nature as the one at bar, only questions of law are to be raised in order that this Court could exercise its appellate jurisdiction and review the decision. Basically, the errors assigned call for an examination of the evidence, which is primarily a question of fact. When the Director of Patents found that respondent International Pharmaceuticals, Inc., had priority of adoption and use, which is fully supported by the evidence, documentary and testimonial, such was a conclusion of fact to which this Court is bound. The petitioner claims that the evidence adduced by the respondent company, was hearsay and self-serving. The respondent Director of Patents found otherwise, to which We agree. The evidence on record consisted of permits granted by the Board of Pharmaceutical Examiners and Inspectors to Miguel K. Chiong, predecessor-in-interest of respondent International Pharmaceuticals, Inc., to prepare, sell and distribute his product "EFFICOL" (Exh. H), which name was later changed to "EFFICASCENT OIL" with the approval of the same Board (Exh. I). Exhibits P to P-30, sales invoices, also showed that the product "EFFICASCENT OIL" had been sold to the public since 1949 to 1959. It was also shown that after Chiong sold his rights to the product, the purchasers thereof (the Wong Brothers) subsequently formed a corporation (respondent International Pharmaceuticals, Inc.) for the purpose of operating a laboratory and selling drugs, one of which is the preparation known as "EFFICASCENT OIL" (Exh. K) and that this product was submitted for analysis to the Drug and Cosmetics Inspection Division (Exh. M). Petitioner claims that the mere issuance of permits to prepare did not necessarily connote the ownership and sale to the public of the product. Granting this to be true, under the facts obtaining in the case, We are inclined to believe that respondent had priority of adoption and use of the trademark. This conclusion is augmented if We take into consideration the fact that petitioner's wife had been admittedly in the employ of Miguel K. Chiong, from 1948 to 1957, as a pharmacist, and, therefore, had knowledge of the manufacture and sale of the product. The evidence on record, therefore, sufficiently supports the finding of priority of adoption and use by the respondent International Pharmaceuticals, Inc. of the trademark "EFFICASCENT OIL," thereby giving more right to its registration than petitioner. PREMISES CONSIDERED, the decision appealed from should be, as it is hereby affirmed in all respects, with costs against petitioner in both instances. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Barrera, J., on leave.

G.R. No. 71189 November 4, 1992 FABERGE, INCORPORATED, petitioner, vs. THE INTERMEDIATE APPELLATE COURT and CO BENG KAY, respondents. MELO, J.: The Director of Patents authorized herein private respondent Co Beng Kay to register the trademark "BRUTE" for the briefs manufactured and sold by his Corporation in the domestic market vis-a-vis petitioner's opposition grounded on similarity of said trademark with petitioner's own symbol "BRUT" which it previously registered for after shave lotion, shaving cream, deodorant, talcum powder, and toilet soap. Thereafter, respondent court, through Justice Gopengco with Justices Patajo and Racela, Jr. concurring, was initially persuaded by petitioner's plea for reversal directed against the permission granted by the Director of Patents, but the decision of the Second Special Cases Division handed down on April 29, 1983 was later reconsidered in favor of herein private respondent (pp. 46-54; pp. 34-36, Rollo). Hence, the petition at bar assailing the action of respondent court in affirming the ruling of the Director of Patents (Page 7, Petition; Page 16, Rollo). In essence, it appears that in the course of marketing petitioner's "BRUT" products and during the pendency of its application for registration of the trademark "BRUT 33 and DEVICE" for antiperspirant, personal deodorant, cream shave, after shave/shower lotion, hair spray, and hair shampoo (page 236, Rollo), respondent Co Beng Kay of Webengton Garments Manufacturing applied for registration of the disputed emblem "BRUTE" for briefs. Opposition raised by petitioner anchored on similarity with its own symbol and irreparable injury to the business reputation of the first user was to no avail. When the legal tussle was elevated to respondent court, Justice Gopengco remarked that: Indeed, a look at the marks "BRUT," "BRUT 33" and "BRUTE" shows that such marks are not only similar in appearance but they are even similar in sound and in the style of presentation. It is reasonable to believe that this similarity is sufficient to cause confusion and even mistake and deception in the buying public as to the origin for source of the goods bearing such trademarks. It should be considered that, although the mark "BRUTE" was applied for, only for briefs, yet such product has the same outlet — such as department stores and haberdashery stores in the Philippines — as the goods covered by the trademarks "BRUT" and "BRUTE 33" so that such confusion, mistake or deception is not unlikely to occur. The argument of appellee, that in modern marketing, goods of similar use are grouped in one section of the supermarket and thus it is unlikely that cosmetics be mixed with textile or wearing apparel, is hardly convincing enough, for a look at the modern department stores shows that merchandise intended for the use of men are now placed in a section which is then labelled "Men's Accessories." It is not unlikely, therefore, that in said section, appellant's products, which are cosmetics for men's use, be placed beside appellee's product, and cause such confusion or mistake as to the source of the goods displayed in the section. To avoid this, the Director of Patents held: The marks KEYSTON (on shirts) and KEYSTONE (on shoes and slippers), the latter having been previously registered are clearly similar in sound and appearance that confusion or mistake, or deception among purchasers as to origin and source of goods is likely to occur. Shirts and shoes are both wearing apparel and there is no gainsaying the truth that these items are ordinarily displayed in the same manner and sold through the same retail outlets such as department and haberdashery stores in the Philippines. (ExParte Keystone Garment Manufacturing Co., Decision No. 245 of the Director of Patents, January 25, 1963.) It is also not disputed that on account of the considerable length of time that appellant has marketed its products bearing the trademarks "BRUT" and "BRUT 33," and its maintenance of high quality of its products through the years, appellant has earned and established immense goodwill among its customers. We agree with appellant that should appellee be allowed to use the trademark "BRUTE" on the briefs manufactured by him, appellee would be cashing in on the goodwill already established by appellant, because, as already stated above, appellant's cosmetics and appellee's briefs are not entirely unrelated since both are directed to the fashion trade and in the marketing process, they may find themselves side by side in the "Men's Accessories Section" of the market, thus easily leading the buying public to believe that such briefs come from the same source as appellant's cosmetics, and be induced to buy said briefs, to the undue advantage of appellee. Again, if after purchasing such briefs, the public finds

them to be of non-competitive quality, or not of the high quality expected of appellant's products, then appellant's reputation and goodwill will be ruined, to its damage and prejudice. Thus, for the protection of the goodwill already established by a party, the Supreme Court held: When one applies for the registration of a trademark or label which is almost the same or 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 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. (Chuanchow Soy & Canning Co. vs. Dir. of Patents and Villapanta, 108 Phil. 833, 836.) The test of confusing similarity which would preclude the registration of a trademark 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. In short, the law does not require that the competing marks must be so identical as to produce actual error or mistakes. It would be sufficient, for purposes of the law, that the similarity between the two labels be such that there is a possibility or likelihood of the purchaser of the older brand mistaking the newer brand for it. (Gopengco, Mercantile Law Compendium, 1983 ed., p. 684; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480). (pp. 3-6, Decision; pp. 48-51, Rollo). On June 5, 1984, respondent's Motion for Reconsideration merited the nod of approval of the appellate court brought about by private respondent's suggestion that the controlling ruling is that laid down in Philippine Refining Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), ESSO Standard Eastern, Inc. vs. Court of Appeals (116 SCRA 336 [1982]); Hickok Manufacturing Co., Inc. vs. CA (116 SCRA 378 [1982]), and Acoje Mining Co., Inc. vs. Director of Patents (38 SCRA 480 [1971], to the effect that the identical trademark can be used by different manufacturers for products that are noncompeting and unrelated. (pp. 34-36, Rollo) Petitioner is of the impression that respondent court could not have relied on the rulings of this Court in the ESSOand the PRC cases when the original decision was reconsidered since respondent court already expressed the opinion in the text of the previous discourse that the facts in said cases "are not found in the case at bar" (Page 12, Brief for the Petitioner, Page 202, Rollo). Petitioner likewise emphasis American jurisprudential doctrines to the effect that sale of cosmetics and wearing apparel under similar marks is likely to cause confusion. Instead of applying the ESSO, PRC and Hickok cases, petitioner continues to asseverate, the rule as announced in Ang vs.Teodoro (74 Phil. 50 [1942]) as reiterated in Sta. Ana vs. Maliwat and Evalle (24 SCRA (1968) 101) should be applied. In additional, it seems that petitioner would want this Court to appreciate petitioner's alleged application for registration of the trademark "BRUT 33 DEVICE" for briefs as an explicit proof that petitioner intended to expand its mark "BRUT" to other goods, following the sentiment expressed by Justice J.B.L. Reyes in the Sta. Ana case (supra, at page 1025) that relief is available where the junior user's goods are not remote from any product that the senior user would be likely to make or sell (Pages 26-27, Brief for the Petitioner). Besides, petitioner insists that in view of the repeal of Republic Act No. 166 (which advocated the related goods theory) by Republic Act No. 666 which deleted the phrase found in the old law that the merchandise must be substantially the same descriptive properties, respondent Court should have heeded the pronouncement in the Angcase that there can be unfair competition even if the goods are noncompeting (supra, at page 54). On the other hand, private respondent echoes the glaring difference in physical appearance of its products with petitioner's own goods by stressing the observations of the Director of Patents on May 3, 1978: Considered in their entireties as depicted in the parties' sample box and can containers, the involved trademarks are grossly different in their overall appearance that even at a distance a would-be purchaser could easily distinguish what is BRUTE brief and what is BRUT after shave lotion, lotion and the like. Opposer's mark BRUT or BRUT 33, as shown in Exhibit "6", is predominantly colored green with a blue and white band at the middle portion of the container. Also appearing therein in bold letters is opposer's name "FABERGE" and a notation "Creme Shave". On the other hand, respondent's mark as shown in Exh. "4-A" prominently displays the representation of a muscular man, underneath of which appears the trademark BRUTE with a notation "Bikini Brief" . . . Equally visible at the other portions of respondent's labels are the pictorial representation of "briefs" which unmistakably suggest that the product contained in the box container is that of a man's brief. The fact therefore is obvious that the goods upon which the

conflicting trademarks are used are clearly different and the intended purpose of such goods are likewise not the same. Accordingly, a purchaser who is out in the market for the purpose of buying respondent's BRUTE brief would definitely be not mistaken or misled into buying instead opposer's BRUT after shave lotion or deodorant. Additional, the meaning or connotation of the bare word marks of opposer, BRUT, and BRUTE of respondent, are clearly different and not likely to be confused with each other. BRUT simply means "dry", and also, "to browse"; while BRUTE means "ferocious, sensual", and in Latin, it signifies "heavy". Gleaned from the respective meanings of the two marks in question, they both suggest the resultanteffects of the application of the products, upon which the said trademarks are employed, which fact all the more renders confusion or deception of purchasers a remote possibility. The products covered by petitioner's trademarks "BRUT" and "BRUT 33 & Device" enjoying its so-called "goodwill" are after-shave lotion, shaving cream, deodorant, talcum powder, toilet soap, anti-perspirant, personal deodorant, cream shave, after shave/shower lotion, hair spray and hair shampoo. Petitioner has never applied for, registered nor used its trademarks for briefs in commerce or trade in the Philippines. Private respondent seeks to register his trademark "BRUTE" only for briefs which is a product noncompetitive to and entirely unrelated with petitioner's aforementioned products. (pp. 3-4, Brief for the Respondent) in order to impress upon Us that the controlling norm is the comparison of the trademarks in their entirely as they appear in their labels to determine whether there is confusing similarity. Moreover, private respondent asserts that briefs and cosmetics do not belong to the same class nor do they have the same descriptive properties such that the use of a trademark on one's goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different nature in line with the ruling of this Court inHickok Manufacturing Co., Inc. vs. Court of Appeals (116 SCRA 387 [1982]). Furthermore, respondent belies petitioner's claim that the latter had applied for registration of the trademark "BRUT 33 DEVICE" for briefs since the documents on file with the Director of Patents attached to respondent's legal Brief does not include the so-called application by petitioner of the alleged trademark for briefs. To the legal query of whether private respondent may appropriate the trademark "BRUTE" for the briefs it manufactures and sells to the public albeit petitioner had previously registered the symbol "BRUT" and "BRUT 33" for its own line of times, it is but apropos to shift Our attention to the pertinent provisions of the new Civil Code vis-a-vis Republic Act No. 166, as amended, the special law patterned after the United States Trademark Act of 1946 (Director of Patents, Circular Release No. 36, 45 O.G. 3704; Martin, Commentaries and Jurisprudence on the Philippine Commercial Laws, 1986 Revised Edition, Volume 2, page 489), thus: Art. 520. A trade-mark or trade-name duly registered in the proper government bureau or office is owned by and pertains to the person, corporation, or firm registering the same, subject to the provisions of special laws. Art. 521. The goodwill of a business is property, and may be transferred together with the right to use the name under which the business is conducted. Art. 522. Trade-marks and trade-names are governed by special laws. xxx xxx xxx 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 Republic of the Philippines. (As amended by Rep. Act No. 865).

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 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 servicemark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or services 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 Sec. 1 of Rep. Act 638). xxx xxx xxx Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — . . . The owner of trademark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have right to register the same on the principal register, unless it: xxx xxx xxx 4(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 Sec. 11. Issuance and contents of the certificate. — Certificates of registration shall be issued in the name of the Republic of the Philippines under the seal of the Patent Office, and shall be signed by the Director, and a record thereof together with a copy of the specimen or facsimile and the statement of the applicant, shall be kept in books for that purpose. The certificate shall reproduce the specimen or facsimile of the mark or trade-name, contain the statement of the applicant and state that the mark or trade-name is registered under this Act, the date of the first use in commerce or business, the particular goods or services for which it is registered, the number and date of the registration, the term thereof, the date on which the application for registration was received in the Patent Office, a statement of the requirement that in order to maintain the registration, periodical affidavits of use within the specified times hereinafter in section twelve provided, shall be filed, and such other data as the rules and regulations may from time to time prescribe. xxx xxx xxx 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. Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the foregoing statutory enactments that private respondent may be permitted to register the trademark "BRUTE" for briefs produced by it notwithstanding petitioner's vehement protestations of unfair dealings in marketing its own set of items which are limited to: after-shave lotion, shaving cream, deodorant, talcum powder and toilet soap. In as much as petitioner has not ventured in the production of briefs, an item which is not listed in its certificate of registration, petitioner can not and should not be allowed to feign that private respondent had invaded petitioner's exclusive domain. To be sure, it is significant that petitioner failed to annex in its Brief the so-called "eloquent proof that petitioner indeed intended to expand its mark "BRUT" to other goods" (Page 27, Brief for the Petitioner; Page 202,Rollo). Even then, a mere application by petitioner in this aspect does not suffice and may not vest an exclusive right in its favor that can ordinarily be protected by the Trademark Law. In short, paraphrasing Section 20 of the Trademark Law as applied to the documentary evidence adduced by petitioner, the certificate of registration issued by the Director of Patents can confer upon petitioner the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin in Philippine Refining Co.,

Inc. vs. Ng Lam (115 SCRA 472 [1982]), when he stressed the principle enunciated by the United States Supreme Court in American Foundries vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by other for products which are of different description. Verily, this Court had the occasion to observe in the 1966 case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious objection was posed by the petitioner therein since the applicant utilized the emblem "Tango" for no other product than hair pomade in which petitioner does not deal. This brings Us back to the incidental issue raised by petitioner which private respondent sought to belie as regards petitioner's alleged expansion of its business. It may be recalled that petitioner claimed that it has a pending application for registration of the emblem "BRUT 33" for briefs (page 25, Brief for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude relief if the junior user's goods are not remote from any other product which the first user would be likely to make or sell (vide, at page 1025). Commenting on the former provision of the Trademark Law now embodied substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite jurist opined that the law in point "does not require that the articles of manufacture of the previous user and 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." (supra at page 1026). Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration following the clear message conveyed by section 20. How do We now reconcile the apparent conflict between Section 4(d) which was relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It would seem that Section 4(d) does not require that the goods manufactured by the second user be related to the goods produced by the senior user while Section 20 limits the exclusive right of the senior user only to those goods specified in the certificate of registration. But the rule has been laid down that the clause which comes later shall be given paramount significance over an anterior proviso upon the presumption that it expresses the latest and dominant purpose. (Graham Paper Co. vs. National Newspaper Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and, therefore, private respondent can appropriate its symbol for the briefs it manufactures because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken Bayer (27 SCRA 1214 [1969]): 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. (1226) Withal, judging from the physical attributes of petitioner's and private respondent's products, there can be no doubt that confusion or the likelihood of deception to the average purchaser is unlikely since the goods are non-competing and unrelated. In upholding registration of the brand "ESSO for cigarettes inspite previous appropriation of the same mark "ESSO" for petroleum products, then Justice, later Chief Justices Teehankee in Esso Standard Eastern, Inc.vs. Court of Appeals (116 SCRA 336 [1982] said: 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 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. xxx xxx xxx The trial court, relying on the old cases of Ang vs. Teodoro and Arce & Sons, Inc. vs. Selecta Biscuit Company, 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 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 colorable imitate any 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 trademarks LOTUS" and "when regard is had for the principle that the two trademark in their entirely 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. v. Ng Sam and Director of Patents, the Court upheld the patent director's registration of the same trademark CAMIA for therein respondent's product of ham notwithstanding its already being used by therein petitioner for a wide range of products: lard; butter, cooking oil, abrasive detergents, polishing material 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 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 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" 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' 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. Petitioner uses the trademark ESSO and holds certificate 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 non-competing 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." 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. xxx xxx xxx Respondent court correctly ruled that considering the general appearances of 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 trademark 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 is 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 trademark 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. (339; 341-346) The glaring discrepancies between the two products had been amply portrayed to such an extent that indeed, "a purchaser who is out in the market for the purpose of buying respondent's BRUTE brief would definitely be not mistaken or misled into buying BRUT after shave lotion or deodorant" as categorically opined in the decision of the Director of Patents relative to the inter-partes case. (supra, at page 7). Petitioner's bid to persuade Us into accepting the doctrines announced in the aforementioned cases of Sta. Ana vs.Maliwat and Ang vs. Teodoro hardly inspire belief. In Sta Ana, it was admitted that the marks were confusingly similar which is not so in the case at bar. In the 1942 case of Ang vs. Teodoro, Justice Ozaeta noted that pants and shirts are similar to shoes and slippers within the meaning of Sections 3, 7, 11, 13 and 20 of Act No. 666 which was the old Trademark Law enacted on March 6, 1903 prior to the present law. Obviously, the conclusion reached by theponente in the Ang case may not now be utilized by analogy to the case at bar due to variance in the factual and legal milieu. Neither can we agree with petitioner that the ruling in La Chemise Lacoste, S.A. vs. Fernandez (129 SCRA 373 [1984]) is applicable to the controversy at hand. The case adverted to by petitioner involved the same mark for the same class of shirts manufactured by the parties therein. It would appear that as a consequence of this discourse, there still remains hanging in mid-air the unanswered puzzle as to why an aspiring commercial enterprise, given the infinite choices available to it of names for the intend product, would select a trademark or tradename which somewhat resembles an existing emblem that had established goodwill. Our opinion hereinbefore expressed could even open the floodgates to similar incursions in the future when we interpreted Section 20 of the Trademark Law as an implicit permission to a manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the certificate of registration. But these nagging and disturbing points cannot win the day for petitioner, although We must hasten to add that in the final denouement, Our apprehensions in this regard are not entirely irreversible since Section 4(d) and 20 of the law in question may still be subjected to legislative modification in order to protect the original user of the symbol. WHEREFORE, the petition is hereby DISMISSED without pronouncement as to costs. SO ORDERED. Gutierrez, Jr., Bidin, Davide, Jr., and Romero, JJ., concur.

G.R. No. L-24075 January 31, 1974 CRISANTA Y. GABRIEL, petitioner, vs. DR. JOSE R. PEREZ and HONORABLE TIBURCIO EVALLE as Director of Patents, respondents. Paredes, Poblador, Cruz and Nazareno for petitioner. Jesus I. Santos for respondent Dr. Jose R. Perez. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio G. Ibarra and Solicitor Alicia V. Sempio-Diy for respondent Director of Patents. MAKASIAR, J.:1äwphï1.ñët 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 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. 1, 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. 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 and use of the trademark are concerned." (Pp. 59-61, Vol. IV, rec.) [No motion 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 appear 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 applicant was revived, but further consideration thereof was suspended by the Patents Office until final determination of the present case wondering that the matter of ownership of the trademark "WONDER" is in dispute (see p. 9, Vol. I, 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 whitens or sometimes softens the skin. (t.s.n., p. 48, Aug. 27, 1963). 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-l" 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 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 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-l"; 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.). I 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 Ching 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 distributor of the product by contract with the manufacturer, respondent Dr. Jose R. Perez (Exhs. "7", "F-1" 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, mere distributor." (P. 15, Vol. IV, rec.). Under Section 2 and 2-A of the Trademark Law, Republic Act No. 166, 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 right to and cannot register the said trademark (Marvex Commercial Co., Inc. vs. Petra Hawpia & Co., 18 SCR 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 the appealed decision, which further held that: The statute provides that "the owner of a trademark use 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 manufacture 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 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 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 have been designed thru her efforts as she was the one who hired the services of an artist who created the designed 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 decide not to continue with the agreement under Paragraph 1 thereof? What trademark would he 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, evidence 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 datedJuly 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 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 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 time 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. (25 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.1äwphï1.ñët

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, vs. 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. Romeo Lagman, Valdecantos, Evangelista Law Offices for petitioners. Jesus I. Santos Law Office for private respondent.

NOCON, J.: 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, 1 CA-G.R. CV No. 12866" which reversed and set aside the order of the Regional Trial Court in Civil Case No. C2 8147, 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 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 3 as "Dr. Perez Wonder Beauty Soap (Improved Formula)." 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 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 4 same trademark "WONDER" for beauty soap. 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 5 the plaintiff, and from advertising, selling and distributing the same products." 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. L6 24075. 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 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 7 implication that the product to be sold by her (Gabriel) is still that manufactured by respondent xxx xxx xxx 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 supplied) 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 8 registration is filed. (87 CJS 258-259, citing cases.) 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 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 9 (Sumera) would result in confusion in her business to her damage and prejudice. 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 10 for the trademark "WONDER" in the name of "The Testate Estate of Dr. Jose R. Perez." The foregoing decision of the Director of Patents was appealed before the Court of Appeals and the appellate court in CA11 G.R. SP-07446-R 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 xxx xxx 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 endevored 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 12 Lian, G.R. No. L-26523, Dec. 24, 1971, 42 SCRA 589, 605). 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 13 using the trademark "Wonder." 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. 14 Perhaps unaware of the events prior to the filing of the present complaint, 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, 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 15 of Dr. Jose R. Perez. This prompted Sumera to elevate the matter to the Court of Appeals in a petition forcertiorari questioning the court's order. Initially, the appellate court sustained the order of the trial court. Nevertheless, 16 upon motion for reconsideration of Sumera, the appellate court on September 8, 1961 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 manufacture, sale, etc. ofbleaching 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 inGabriel 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 hereby SET ASIDE and the 17 preliminary injunction issued pursuant to said order declared NULL and VOID. 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 18 failure to file the required Fifth Anniversary Affidavit of Use/Non Use. Gabriel then, alleging the above cancellation, filed 19 an "Omnibus Motion" on December 19, 1984, for the issuance of a restraining order, which was granted by the trial 20 court on January 4, 1985. However, on June 5, 1985, upon motion for reconsideration of Sumera, the court lifted its order of January 4, 1985 and 21 ordered the Sheriff to return to respondent the equipment, machineries and products seized. 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 22 equipment, machineries and products. Hence, Sumera sought again the intervention of the Court of Appeals and filed a petition for review on certiorari. On July 23 25, 1986, the appellate court in AC-G.R. SP No. 06915 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 opposition of Crisanta Gabriel of the registration of the application filed by Emilia M. 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. 24

Furthermore, the Former Third Division of the Appellate Court (in CA-G.R. No SP-1167-R [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, 25 distribution and sale of beauty soap.

xxx xxx xxx 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)petitioner'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 soap in favor of petitioner was upheld," as well as the decision of the hen Court of Appeals in CA-G.R. No. SP No. 07746-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. 26 Jose R. Perez). VII. Unfortunately, even before the foregoing decision was rendered, petitioner Gabriel on August 13, 1985, filed with the 27 Court a Manifestation and Motion to Dismiss Plaintiff's Complaint for having been Rendered Moot and Academic. 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, 28 resolved to dismiss the case. 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 right . . . ." This section is clear. It allows a 29 party to file "actions; and damages and injunction for infringement." xxx xxx xxx 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 30 full examination. 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.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 31 to the Supreme Court. We 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 32 ends of justice would not be subserved by the remand thereof. Moreover, the Supreme Court is clothed with ample authority to review matters, even though those not raised on appeal if it finds that their consideration is necessary in 33 arriving at a just disposition of the case. 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, 34 and upon proper showing, may also be granted injunction. 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 no 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: DRAWING 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 i 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 overunrelated goods. The law requires that in the adoption of a mark there should not be any likelihood of confusion, mistake or deception to the 35 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 36 laundry soap in bars and cakes. On the other hand, the mark "WONDER" registered to the testate estate of Jose R. 37 Perez was registered principally for beauty soap. 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 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 38 fraud and imposition. (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, 39 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 40 Hay showed that the mark "Wonder GH" was first used on July 1, 1958, while that of the mark "WONDER" in favor of 41 Dr. Perez was recorded to have been in use since March 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." 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 42 consumers; and c) it is not being used by the assignees. 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, 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.

G.R. No. L-44707 August 31, 1982 HICKOK MANUFACTURING CO., INC., petitioner, vs. COURT OF APPEALS ** and SANTOS LIM BUN LIONG, respondents. Sycip, Salazar, Feliciano, Hernandez & Castillo Law Offices for petitioner. Tañada, Sanchez, Tafiada & Tanada Law Offices and George R. Arbolario for respondents. & TEEHANKEE, J.:1äwphï1.ñët The Court affirms on the strength of controlling doctrine as reaffirmed in the companion case of Esso Standard Eastern 1 Inc. vs. Court of Appeals promulgated also on this date and the recent case of Philippine Refining Co., Inc. vs. Ng Sam 2 and Director of Parents the appealed decision of the Court of Appeals reversing the patent director's decision and instead dismissing petitioner's petition to cancel private respondent's registration of the trademark of HICKOK for its Marikina shoes as against petitioner's earlier registration of the same trademark for its other non-competing products. On the basis of the applicable reasons and considerations extensively set forth in the above-cited controlling precedents 3 and the leading case of Acoje Mining Co., Inc. vs. Director of Patents on which the appellate court anchored its decision at bar, said decision must stand affirmed, as follows: 1äwphï1.ñët An examination of the trademark of petitioner-appellee and that of registrant-appellant convinces us that there is a difference in the design and the coloring of, as well as in the words on the ribbons, the two trademarks. In petitioner-appellee's trademark for handkerchiefs (Exhibit 'Q'), the word 'HICKOK' is in red with white background in the middle of two branches of laurel in light gold. At the lower part thereof is a ribbon on which are the words 'POSITIVELY FINER' in light gold. In the trademark for underwear (Exhibit 'R'), the word 'HICKOK' is also in red with white background in the middle of two branches of laurel in dark gold with similar ribbons and the words 'POSITIVELY FINER' in dark gold. And in the trademark for briefs (Exhibit 'S'), the word 'HICKOK' is in white but with red background in the middle of two branches of laurel, the leaves being in dark gold with white edges, and with similar ribbon and words 'POSITIVELY FINER' in dark gold. In contrast, in respondent-appellant's trademark (Exhibit 'J'), the word 'HICKOK' is in white with gold background between the two branches of laurel in red, with the word 'SHOES' also in red below the word 'HICKOK'.ït¢@lFº The ribbon is in red with the words 'QUALITY AT YOUR FEET,' likewise in red. While the law does not require that the competing trademarks be Identical, the two marks must be considered in their entirety, as they appear in the respective labels, in relation to the goods to which they are attached. The case of H.E. Heacock Co. vs. American Trading Co., 56 Phil. 763, cited by petitioner - appellee, is hardly applicable here, because the defendant in that case imported and sold merchandise which are very similar to, and precisely of the same designs as, that imported and sold by the plaintiff. ... In the recent case of Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480, 482-483, the Supreme Court stated - 1äwphï1.ñët 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 on the trademark LOTUS. Even on the rare occasion that a mistake does occur, it can easily be rectified. Moreover, there is no denying that the possibility of confusion is remote considering 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 that respondent Director ought to have reached a different conclusion. Petitioner has successfully made out a case for registration. From the statements of the Supreme Court in the two cases aforementioned, we gather that there must be not only resemblance between the trademark of the plaintiff and that of the defendant, but also similarity of the goods to which the two trademarks are respectively attached. Since in this case the trademark of petitioner-appellee is used in the sale of leather wallets, key cases, money folds made of leather, belts, men's briefs, neckties, handkerchiefs and men's socks, and the trademark of registrant-appellant is used in the sale of shoes, which have different channels of trade, the Director of Patents, as in the case of Acoje Mining Co., Inc. vs. Director of Patents, supra, 'ought to have reached a different conclusion. It is established doctrine, as held in the above-cited cases, that "emphasis should be on the similarity of the products 4 involved and not on the arbitrary classification or general description of their properties or characteristics" and that "the mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the 5 same trademark by others on unrelated articles of a different kind." Taking into account the facts of record that petitioner, a foreign corporation registered the trademark for its diverse articles of men's wear such as wallets, belts and men's briefs which are all manufactured here in the Philippines by a licensee Quality House, Inc. (which pays a royalty of 1-1/2 % of the annual net sales) but are so labelled as to give the misimpression that the said goods are of foreign (stateside) manufacture and that respondent secured its trademark registration exclusively for shoes (which neither petitioner nor the licensee ever manufactured or traded in) and which are clearly labelled in block letters as "Made in Marikina, Rizal, Philippines," no error can be attributed to the appellate court in upholding respondent's registration of the same trademark 6 for his unrelated and non-competing product of Marikina shoes. ACCORDINGLY, the petition is dismissed and the appealed judgment of the Court of Appeals is hereby affirmed. Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur.1äwphï1.ñët Makasiar, J., is on leave. Vasquez, J., took no part.

THIRD DIVISION

IN-N-OUT BURGER, INC, Petitioner,

G .R . No. 17 9 12 7 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ.

- versus -

SEHWANI, INCORPORATED BENITAS FRITES, INC., Res p on d en ts .

AND/OR Promulgated:

December 24, 2008 x-------------------------------------------------x DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision

[2]

[1]

dated 18

dated 23 December

2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition. Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines.

[3]

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.

[4]

On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for IN-N-OUT and IN-N-OUT Burger & Arrow Design. Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark IN N OUT (the inside of the letter O formed like a star).

[5]

By virtue of a licensing agreement, Benita Frites,

Inc. was able to use the registered mark of respondent Sehwani, Incorporated. Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) IN-N-OUT; (2) IN-N-OUT Burger & Arrow Design; and (3) IN-N-OUT Burger Logo. These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use.

[6]

Petitioner pointed out that its internationally well-known

trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioners products.

[7]

Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark IN-N-OUT and to voluntarily cancel its trademark registration. In a letter-reply dated 23 October 2000, respondents refused to accede to petitioner demand, but expressed willingness to surrender the registration of respondent Sehwani, Incorporated of the IN N OUT trademark for a fair and reasonable consideration.

[8]

Petitioner was able to register the mark Double Double on 4 July 2002, based on their application filed on 2 June 1997.

[9]

It alleged that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that

respondent Benitas receipts bore the phrase, representing IN-N-OUT Burger.

[10]

It should be noted that that although

respondent Sehwahi, Incorporated registered a mark which appeared as IN N OUT (the inside of the letter O formed like a star), respondents used the mark IN-N-OUT. To

counter

petitioners

[11]

complaint,

respondents

filed

before

the

BLA-IPO

an

Answer

with

Counterclaim. Respondents asserted therein that they had been using the mark IN N OUT in the Philippines since 15 October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the mark IN N OUT (the inside of the letter O formed like a star). Upon approval of its application, a certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, IN N OUT. Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark IN N OUT, should be accorded the presumption of a valid registration of its mark with the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for the cancellation of a certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never operated in the Philippines.

[12]

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,

[13]

in favor of petitioner.According to said Decision, petitioner had the legal capacity to sue in

the Philippines, since its country of origin or domicile was a member of and a signatory to the Convention of Paris on Protection of Industrial Property. And although petitioner had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its corporate and trade name. Petitioners marks are internationally well-known, given the world-wide registration of the mark IN-N-OUT, and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case that In-NOut Burger and Arrow Design was an internationally well-known mark. Given these circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and mark IN-N-OUT in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark IN N OUT in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon petitioners goodwill by copying the mark IN-N-OUT Burger exactly. The inside of the letter O in the mark used by respondents formed a star. In addition, the simple act of respondent Sehwani, Incorporated of inquiring into the existence of a pending application for registration of the IN-N-OUT mark was not deemed fraudulent. The dispositive part of the Decision of the IPO Director for Legal Affairs reads:

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark IN-N-OUT (the inside of the letter O formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benitas Frites are hereby ordered to permanently cease and desist from using the mark IN-N-OUT and IN-N-OUT BURGER LOGO on its goods and in its business. With regards the mark Double-Double, considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown by evidence, Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently cease and desist from [14] using the mark Double-Double. NO COSTS.

Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents Motion for Reconsideration

[15]

and petitioners Motion for Partial Reconsideration [17]

Legal Affairs in Resolution No. 2004-18 2005,

[18]

[16]

were denied by the IPO Director for

dated 28 October 2004 and Resolution No. 2005-05 dated 25 April

respectively. Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the

case at bar. G.R. No. 171053 On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal. Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-200400004 ON A MERE TECHNICALITY THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENTS CERTIFICATE OF REGISTRATION FOR THE MARK IN-N-OUT, AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE.

Respondents thus prayed: WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order the Office of the Director General of the Intellectual Property Office to reinstate and give due course to [respondent]s Appeal No. 14-2004-00004. Other reliefs, just and equitable under the premises, are likewise prayed for.

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents Petition in CA-G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that

respondents appeal before the IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal Affairs was likewise affirmed. On 10 November 2005, respondents moved for the reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration. Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the [19]

title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.

This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,

[20]

finding that herein respondents

failed to file their Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008. G.R. No. 179127 Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005. During the pendency of petitioners appeal before the IPO Director General, the Court of Appeals already rendered on 21 October 2005 its Decision dismissing respondents Petition in CA-G.R. SP No. 88004. In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioners appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite respondents claims that they had been using the mark since 1982, they only started constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark IN-N-OUT. Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter O, a minor difference which still deceived purchasers. Respondents were not even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief over the respondents reasoning for the non-use of the star symbol.The IPO Director General also considered respondents use of petitioners registered mark Double-Double as a sign of bad faith and an intent to mislead the public.Thus, the IPO Director General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents acts of unfair competition, exemplary damages, and attorneys fees.

[21]

The fallo of the Decision reads:

WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED as follows: [Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]:

1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28); 2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00); 3. Attorneys fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00). All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside the channels of commerce. Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and Technology Transfer Bureau for their information and [22] records purposes.

Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the appellate court on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO PAY DAMAGES AND ATTORNEYS FEES TO RESPONDENTS THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIRS DECISION (1) CANCELLING PETITIONERS CERTIFICATE OF REGISTRATION FOR THE MARK IN-N-OUT, AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS

Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent; hence, they should not be held liable for damages. They argued that petitioner had never entered into any transaction involving its goods and services in the Philippines and, therefore, could not claim that its goods and services had already been identified in the mind of the public.Respondents added that the disputed mark was not well-known. Finally, they maintained that petitioners complaint was already barred by laches.

[23]

At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer: WHEREFORE, [respondents herein] respectfully pray that this Honorable Court: (a)

upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO Director Generals Decision dated 23 December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from this Honorable Court.

(b)

after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 and to maintain the status quo ante pending the resolution of the merits of this petition; and

(c)

after giving due course to this petition:

(i)

reverse and set aside the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 finding the [respondents] guilty of unfair competition and awarding damages and attorneys fees to the respondent

(ii)

in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December 2003 and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it finds [respondents] not guilty of unfair competition and hence not liable to the [petitioner] for damages and attorneys fees;

(iii)

reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it upheld [petitioner]s legal capacity to sue; that [petitioner]s trademarks are well-known; and that respondent has the exclusive right to use the same; and

(iv)

make the injunction permanent.

[Respondents] also pray for other reliefs, as may deemed just or equitable.

On 18 July 2006, the Court of Appeals promulgated a Decision

[25]

[24]

in CA-G.R. SP No. 92785 reversing the

Decision dated 23 December 2005 of the IPO Director General. The Court of Appeals, in its Decision, initially addressed petitioners assertion that respondents had committed forum shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping, distinguishing between the respondents two Petitions. The subject of Respondents Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO Director General dismissing respondents appeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents Petition in CA-G.R. SP No. 92785 sought the review of the 23 December 2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and the awarding of actual and exemplary damages, as well as attorneys fees, to petitioner. The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks. Consequently, the IPO Director General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of these provisions of the Intellectual Property Code. In the end, the Court of Appeals decreed: WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondents claims in its Complaint [26] docketed as IPV No. 10-2001-00004 are hereby DISMISSED.

The Court of Appeals, in a Resolution dated 31 July 2007, aforementioned Decision.

[27]

denied petitioners Motion for Reconsideration of its

Hence, the present Petition, where petitioner raises the following issues: I WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS; II WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

III WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM SHOPPING [28] PROPER.

As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision

[29]

in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director Generals

dismissal of respondents appeal for being filed beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks. Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other. Formal Defects of the Petition Respondents

contend

that

the

Verification/Certification

executed

by

Atty.

Edmund

Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition. Respondents point out that the Secretarys Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers ofVillaraza and Angangco to represent it in the present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretarys Certificate reads: th

Subscribed and sworn to me this 20 day of August 2007 in Irving California. Rachel A. Blake (Sgd.) [30] Notary Public

Respondents aver that the said Secretarys Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state that:

(1) petitioners Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required under Section 2 of Act No. [31]

2103 and Landingin v. Republic of the Philippines. Respondents

likewise

impugn

the

validity

of

the notarial certificate

of

Atty.

Aldrich Fitz B. Uy,

on

Atty. Barandas Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of attorneys number and the IBP membership number; and (4) a statement that the Verification/Certification was notarized within the notary publics territorial jurisdiction, as required under the 2004 Rules on Notarial Practice.

[32]

Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements enumerated therein refer to documents which require an acknowledgement, and not a mere jurat. A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually declares to the notary that the executor of a document has attested to the notary that the same is his/her own free act and deed.

[33]

A Secretarys Certificate, as that executed by petitioner in favor of the lawyers of [34]

the Angangco and Villaraza law office, only requires a jurat.

Even assuming that the Secretarys Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records.

[35]

The party itself need not sign the

verification. A partys representative, lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the verification.

[36]

Atty. Barranda, as petitioners counsel, was in the position to verify the truth and

correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such. Moreover,

the

Court

deems

it

proper

not

to

focus

on

the

supposed

technical

infirmities

of

Atty. Barandas Verification. It must be borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and non-compliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for compelling reasons.

[37]

The vital issues raised in

the instant Petition on the jurisdiction of the IPO Director for Legal Affairs and the IPO Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due course and resolve the same on the merits. This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their jurats or notarial certificates.Parties and their counsel should take care not to abuse the Courts zeal to resolve cases on their merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in their proper form before presenting said documents before Philippine courts.

Forum Shopping Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their earlier filing of the Petition in CA-G.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting to the Court of Appeals a patently false Certification of Non-forum Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004. Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues.

[38]

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under consideration.

[39]

After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would at first seem that respondents are guilty of forum shopping. There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that [T]he Bureau of Legal Affairs (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-N-OUT and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business are contrary to law and/or is (sic) not supported by evidence.

[40]

The same ground was again invoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased

as follows: The IPO Director General committed grave error in affirming the Bureau of Legal Affairs (sic) Decision (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-N-OUT, and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business.

[41]

Both

Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle of resjudicata. Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner.

In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals. True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although jurisdictional.

[42]

the

submission

of

a

certificate

against

forum

shopping

is

deemed

obligatory,

it

is

not

Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may

still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances. The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances. The Jurisdiction of the IPO The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision: Section 163. Jurisdiction of Court.All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws.

The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation. The Court disagrees with the Court of Appeals. Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus: Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall have the following functions:

10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents; 10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings. (b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties: (i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order; (ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following: (1) An assurance to comply with the provisions of the intellectual property law violated; (2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation (3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce; and (4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the Bureau of Legal Affairs. The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to guarantee compliance of his undertaking. (iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale, donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other goods, or any combination thereof, under such guidelines as he may provide; (iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of the offense; (v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each day of continuing violation; (vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable which shall not exceed one (1) year; (vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from the Office; (viii) (ix)

The assessment of damages; Censure; and

(x)

Other analogous penalties or sanctions.

10.3 The Director General may by Regulations establish the procedure to govern the [43] implementation of this Section. (Emphasis provided.)

Unquestionably, petitioners complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani, Incorporated, and damages for violation of petitioners intellectual property rights, falls within the jurisdiction of the IPO Director of Legal Affairs. The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of the IPO Director of Legal Affairs, to wit: Section 7. The Director General and Deputies Director General. 7.1 Fuctions.The Director General shall exercise the following powers and functions: xxxx b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau shall be appealable to the Secretary of Trade and Industry;

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts. Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read: Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action.Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws. xxxx Section 170. Penalties.Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section168, and Subsection169.1.

Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioners administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs. Unfair Competition The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark IN-N-OUT and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and executory Decision [44]

Burger,

dated15

October

2007 in

G.R.

No.

171053, Sehwani,

Incorporated

v.

In-N-Out

ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior

right to own and use the IN-N-OUT trademarks vis--vis respondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same.

[45]

Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner. The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actualfraudulent intent need not be shown.

[46]

In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair competition in this case, viz: The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter O Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioners] registered mark Double-Double for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioners] IN-N-OUT Burgers name and trademark IN-N-OUT with Arrow design. There is no evidence that the [respondents] were authorized by the [petitioner] to use the latters marks in the business. [Respondents] explanation that they are not using their own registered trademark due to the difficulty in printing the star does not justify the unauthorized use of the [petitioners] trademark instead. Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x.

xxxx [Respondents] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit GG, which shows the business establishment of [respondents] illustrates the imitation of [petitioners] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held: We also note that In-N-Out Burger is likewise, [petitioners] corporate name. It has used the IN-N-OUT Burger name in its restaurant business in Baldwin Park, Californiain the United States of America since 1948. Thus it has the exclusive right to use the tradenems In-N-Out Burger in the Philippines and the respondents are unlawfully using and appropriating the same. The Office cannot give credence to the [respondents] claim of good faith and that they have openly and continuously used the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason of respondents practices must always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable. In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not. [Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design.Even in their listing of menus, [respondents] used [Appellants] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] [47] even indicate representing IN-N-OUT. These acts cannot be considered acts in good faith.

Administrative proceedings are governed by the substantial evidence rule. A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.

[48]

As recounted by the IPO Director General in his decision, there

is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition. With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner: Section 156. Actions, and Damages and Injunction for Infringement.156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party.

In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by applying the reasonable percentage of 30% to the respondents gross sales, and then doubling the amount thereof on account of respondents actual intent to mislead the public or defraud the petitioner,

[49]

thus, arriving at the

amount of actual damages of P212,574.28. Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action.

[50]

While there is no hard and fast rule in determining the fair amount of exemplary damages, the award

of exemplary damages should be commensurate with the actual loss or injury suffered.

[51]

Thus, exemplary damages

of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded. In accordance with Article 2208(1) of the Civil Code, attorneys fees may likewise be awarded to petitioner since exemplary damages are awarded to it.Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven years, despite the respondents failure to present countervailing evidence. Considering moreover the reputation of petitioners counsel, the actual attorneys fees paid by petitioner would far exceed the amount that was awarded to it.

[52]

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED. The Decision of the IPO Director General, dated 23 December 2005, is hereby REINSTATED IN PART, with the modification that the amount of exemplary damages awarded be reduced to P250,000.00. SO ORDERED.

G.R. No. L-75420 November 15, 1991 KABUSHI KAISHA ISETAN, also known and trading as ISETAN CO., LTD., petitioner, vs. THE INTERMEDIATE APPELLATE COURT, THE DIRECTOR OF PATENTS, and ISETANN DEPARTMENT STORE, INC., respondents.

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. 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. No. 4701 and 4714, respectively, as well as with the Bureau of 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-4714 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 trademark 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 to 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. 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. 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. 4714 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 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 late. 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. 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-judicialbody. 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; Sec. 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 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 and received by us on August 8, 1986, 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. 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 Appeal 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 Trademark 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. The trademark Law, Republic Act No. 166, as amended, under which this case heard and decided provides: SEC. 2. What are registrable.- Trademark, tradenames and service marks owned by persons, corporation, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domicided 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 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)" 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 way 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 ruled 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 incosistencies. (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. 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 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 product 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 not 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. 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 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 Petrolum 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 which 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. WHEREFORE, premises considered, the petition is hereby DISMISSED. SO ORDERED. Fernan, C.J., Paras and Bidin, JJ., concur.

Separate Opinions

PADILLA, J., separate opinion: It appears that on 28 November 1980, petitioner filed with the Philippines 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. 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 beyong 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. 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 onlu 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).

"Indeed, this Court had 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 peititioner's appeal should, therefore, be AFFIRMED and the present petition should be DISMISSED.

# Separate Opinions PADILLA, J., separate opinion: It appears that on 28 November 1980, petitioner filed with the Philippines 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. 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 beyong 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. 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 onlu 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). "Indeed, this Court had 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 peititioner's appeal should, therefore, be AFFIRMED and the present petition should be DISMISSED.

G.R. No. 175936

September 3, 2007

CHAN CUAN and CHIEN-YIN SHAO a.k.a. HENRY SHAO, petitioners, vs. CHIANG KAI SHEK COLLEGE, INC. and SANTIAGO CUA, respondents. DECISION GARCIA, J.: Via this petition for review on certiorari, herein petitioners Chan Cuan and Chien-Yin Shao, a.k.a. Henry Shao, seek to set 1 aside the Decision dated October 10, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 95467, entitled "Chiang Kai 2 Shek College, Inc. and Santiago Cua v. Hon. Aida E. Layug, et al.," and its Resolution of December 21, 2006, denying the petitioners’ motion for reconsideration. The assailed decision nullified the Order dated July 27, 2006 of the Regional Trial Court (RTC) of Manila, Branch 46 (Commercial Court), which denied the herein respondents application for the issuance of a writ of preliminary injunction in its Civil Case No. 115404, a derivative suit thereat instituted by the herein respondents against the petitioners. In short, petitioners presently urge the Court to uphold the adverted RTC Order of July 27, 2006. As found by the appellate court in the decision under review, the facts are: On July 3, 2006 x x x Chiang Kai Shek College, Inc. (corporation), a non-stock, non-profit educational institution, and Santiago Cua, in his official capacity as honorary chairman of the board of trustees of the corporation, longest active member of the board of trustees, and incumbent member of the corporation, instituted a derivative suit by filing before public respondent judge a complaint against x x x Chan Cuan in his capacity as chairman of the board of trustees of the corporation and Chien-Yin Shao, a.k.a. Henry Shao, in his personal capacity as he is allegedly not a member of the corporation, nor a member of the board of trustees, nor does he hold any office or position in the corporation, alleging that Chan Cuan and Chien-Yin Shao conspired to violate the provisions of the by-laws of the corporation, in flagrant violation of the rights and interests of the corporation of and to the extreme damage and prejudice of the other trustees, members and the entire community of Chiang Kai Shek College. In particular, [respondents] alleged that Chan Cuan and Chien-Yin Shao are doing, threatening, procuring and suffering to be done the conduct of an election of the officers of the corporation’s board of trustees on July 7, 2006 without having first complied with the prerequisites under the corporation’s by-laws, more specifically on Chien-Yin Shao’s prior admission as member of the corporation. [Respondents] prayed that public respondent judge, through a writ of preliminary injunction, compel Chan Cuan to comply with the aforesaid prerequisite and accordingly hold, at a meeting scheduled on July 7, 2006, a meeting of the general membership of the corporation for the sole purpose of electing the new members of the board of trustees pursuant to the corporation’s by-laws, and thereafter to conduct the first regular meeting of the newly elected members of the board to in turn elect the officers of the corporation. On July 4, 2006, the Office of the Executive Judge issued an Order to the effect that a 72-hour temporary restraining order is issued "enjoining respondent Chan Cuan and/or the board (i) from postponing and deferring the scheduled meeting of the general membership of the corporation, scheduled on July 7, 2006, only for the purpose, and no other, to elect new members of the board of trustees from members of the corporation who have been duly admitted as such in accordance with the by-laws of the corporation, and (ii) from conducting the meeting for any other purpose than to duly elect new members of the board of trustees." The 72hour temporary restraining order was further extended to a twenty (20)-day TRO in public respondent’s Order dated 6 July 2006. On July 7, 2006, Chan Cuan convened the scheduled meeting pursuant to the aforesaid Order, informing the body that the court had ordered the meeting to be held without any postponement, to elect the board of trustees and only for the duly admitted members of the corporation to vote. The listing of the twentyone supposedly admitted members of the corporation distributed by Chan Cuan and to serve as official ballot for the election of members of the board included the name of Chien-Yin Shao. Santiago Cua and some other members and trustees protested Chien-Yin Shao’s inclusion in the list but Chan Cuan brushed the protests aside. The election proceeded despite the protestations and objections from Santiago Cua, and Chien-Yin Shao voted and was voted for. Chan Cuan also scheduled the election of the chairman and other officers of the corporation by the new board of trustees on July 14, 2006. In view of these supervening events, [respondents] filed their Supplemental Complaint, praying, among other things, that Chien-Yin Shao be enjoined and prohibited from participating, voting or be voted for in the election of the officers of the board of trustees until his status as member of the corporation is clarified and resolved, and that the elections held on July 7, 2006 be nullified as contrary to the conditions of the temporary restraining order. On July 12, 2006, public respondent, acting on [respondents’] Supplemental Complaint, issued and Order, to wit:

"Wherefore, the court rules to give substance to the spirit of the TRO and to prevent confusion respondent [now petitioner] Chan Cuan is ordered to withhold any action in the matter of the election until the status of Henry Shao as a member of the corporation has been clarified and the issue thereon is finally resolved. Further the election scheduled on July 14, 2006 be suspended until further order from the court." Public respondent (judge) thereafter conducted hearings in relation to the prayer for the issuance of a writ of preliminary mandatory injunction and on the main issue of the status of Chien-Yin Shao as member of the corporation. [Respondents’] contention was that Chien-Yin Shao was not duly admitted as member of the corporation as he was not recommended for admission by the Board of Trustees and was not endorsed for approval at the members’ regular annual meeting as required by the corporation’s by-laws. Santiago Cua denied having seconded Chien-Yin Shao’s nomination as member of the corporation. Chan Cuan and Chien-Yin Shao insisted that Chien-Yin Shao was a duly admitted member of the corporation, presenting evidence to the effect that on the joint special meeting of the board of trustees and members of the corporation held on April 19, 2004, Pedro Tan Tiong Sian nominated Henry Shao as member of the corporation, Santiago Cua seconded the nomination, the nomination was discussed by all present, and Chien-Yin Shao was unanimously voted for as member of the corporation. On July 27, 2006, public respondent issued the assailed Order, declaring that [respondents] failed to convince the court that they are entitled to the issuance of preliminary mandatory injunction, and hence the application was denied. Public respondent ruled that based on the appreciation and evaluation of evidence, [respondents] are estopped to question the status of Chien-Yin Shao as a member of the corporation, noting that it was even Santiago Cua who had seconded the nomination/invitation for Chien-Yin Shao’s admission as member of the corporation and through Santiago Cua’s acquiescence of Chien-Yin Shao’s membership without raising such issue for almost two years, Santiago Cua is estopped to question the same. Giving weight to Chan Cuan’s testimony that it is considered as socially improper for Chien-Yin Shao, being a prominent and distinguished member of the Chinese community, to apply by himself for membership in the corporation, public respondent held that the corporation’s conduct of its affairs, including admission of new members to the corporation, is not run solely by its by-laws but also by tradition which is germane in a conservative association like Chiang Kai Shek where culture, habits, beliefs and customs are elements that must be given consideration. Public respondent finally ruled that [respondents] failed to prove existence of irreparable injury or that continuance of the act complained of – that is, membership of Chien-Yin Shao in the corporation – during the litigation would probably 3 work injustice to [respondents]. (Words in brackets supplied) From the aforementioned July 27, 2006 Order of the trial court, herein respondents filed with the CA on July 31, 2006 a petition for certiorari, thereat docketed as CA-G.R. SP No. 95467, questioning the aforesaid July 27, 2006 Order of the trial court. This was followed by their supplemental petition on August 1, 2006. On August 4, 2006, the appellate court issued a temporary restraining order enjoining the parties to maintain and preserve the status quo ante pending resolution of the main case (Civil Case No. 115404) before the trial court. 4

Eventually, on October 10, 2006, the appellate court came out with the herein decision granting the respondents’ aforementioned petition for certiorari and annulling and setting aside the adverted July 27, 2006 Order of the trial court, thus: WHEREFORE, the petition is GRANTED. The assailed Order of public respondent dated 27 July 2006 in Civil Case No. 115404 is NULLIFIED and SET ASIDE. Upon approval of the injunction bond in the amount of Two Hundred Thousand Pesos (P200,000.00) which petitioners (i.e. Chiang Kai Shek College, Inc. and Santiago Cua) are hereby DIRECTED to file to answer for all damages which private respondents may sustain by reason of the injunction if the trial court should finally decide that petitioners are not entitled thereto, let a Writ of Preliminary Injunction ISSUE enjoining and prohibiting the participation of Chien-Yin Shao as member and officer of the board of trustees of Chiang Kai Shek College, Inc. pending final resolution of the derivative suit filed by petitioners, Chiang Kai Shek College, Inc. and Santiago Cua, against private respondents, Chan Cuan and Chien-Yin Shao, a.k.a. Henry Shao, in Civil Case No. 115404 by and which public respondent is DIRECTED to proceed with. SO ORDERED. With their motion for reconsideration having been denied by the appellate court in its equally challenged Resolution of December 21, 2006, petitioners are now with this Court via the present recourse, claiming that the CA I

XXX ERRED IN TOTALLY IGNORING PETITIONERS’ ARGUMENTS THAT SANTIAGO CUA ERRED IN FILING A DERIVATIVE SUIT AS THE NATURE OF THE CASE IS ONE OF QUO WARRANTO. II XXX ERRONEOUSLY DISREGARDED THE FINDINGS OF THE LOWER COURT THAT CHIEN-YIN SHAO IS A LEGITIMATE MEMBER/TRUSTEE OF CHIANG KAI SHEK COLLEGE, INC. AND THERE IS NO LEGAL OR FACTUAL BASIS TO DISQUALIFY HIM AND THAT SANTIAGO CUA IS IN ESTOPPEL. III XXX ERRED IN THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION AS SANTIAGO CUA FAILED TO PRESENT EVIDENCE THAT HE OR CHIANG KAI SHEK COLLEGE, INC. WILL SUFFER IRREPARABLE OR SERIOUS DAMAGE OR INJURY, AND WITHOUT PROOF OF DAMAGE, THERE IS NO LEGAL BASIS TO ISSUE THE WRIT. IV XXX ERRED IN GRANTING RESPONDENTS’ PETITION FOR CERTIORARI, PROHIBITION AND MANDAMUS AND ISSUING A WRIT OF PRELIMINARY INJUNCTION WHEN THE ACTS SOUGHT TO BE ENJOINED HAVE 5 ALREADY BECOME FAIT ACCOMPLI OR AN ACCOMPLISHED OR CONSUMMATED ACTS. 6

Acting on the petition, the Court, in its resolution of January 22, 2007, required the respondents to comment thereon. In the same resolution, the Court enjoined the implementation of the assailed CA decision and issued astatus quo order directing the parties to maintain the status quo existing after the issuance of the trial court’s Order dated July 27, 2006 and before the filing of the petition in CA-G.R. SP No. 95467, "until further orders from the Court." 7

8

On February 16, 2007, respondents filed the required comment, followed by petitioners’ reply to comment. 9

In a subsequent resolution of March 26, 2007, the Court resolved to give due course to the petition and to decide the same on the basis of the pleadings already on record. 10

The day after - March 27, 2007 - respondents filed a Very Urgent Motion to Immediately Lift Status Quo Order, therein praying the Court to immediately lift its status quo order "to allow the trial court to proceed with, or resume the proceedings in the derivative suit, in order that the issue on petitioner Shao’s membership in the corporation be resolved soonest before the case becomes moot and academic or a decision therein becomes ineffectual." And now, to the merits of the instant petition. By way of a preliminary statement, the Court cannot help but note that the appellate court’s decision does not contain a clear delineation of what it believes to be the facts upon which it based its ruling. What was merely stated in its decision was a chronology of the case and events and the parties’ respective submissions. For sure, it did not embark upon a determination of its own understanding of what transpired for purposes of disposing of the respondents’ petition before it. Worse, the decision does not contain a detailed discussion and resolution of the issues raised by the parties. Thus, in disposing of the respondents’ petition in CA-G.R. SP No. 95467, the appellate court plainly made the following enunciation, couched in general terms: Reviewing the records, we are convinced of the necessity and propriety of the issuance of injunctive relief. We deem that it would have been more prudent of public respondent to have granted petitioners’ [now respondents’] application for preliminary injunction, enjoining the participation of Chien-Yin Shao as member of the corporation, much more as trustee and officer of the board, pending resolution of the complaint instituted by petitioners against Chan Cuan and Chien-Yin Shao. It is indubitably clear that issue of Chien-Yin Shao’s due admission as member of the corporation constitutes the very core of the controversy as raised in the complaint filed before public respondent. Denial of the injunctive relief sought, in effect allowing Chien-Yin Shao to participate as member of the corporation and as the newly-elected chairman of the corporation’s board of trustees, renders the derivative suit, the most foremost purpose of which, among other reliefs sought, is to assail Chien-Yin Shao’s alleged qualification as member of the corporation, moot and academic and ineffectual.

We have placed in scrutiny the assailed Order and to Us, it did not write finis to the derivative suit. While the Order mentions of Santiago Cua being in estoppel to question the status of Chien-Yin Shao as a duly admitted member of the corporation, a reading of the same leaves us with the strong impression that the suit remains pending, with issues such as whether Chien-Yin Shao is a member of the corporation or not, still up for final determination. Thus, the urgent need for injunctive relief pending such final determination. xxx

xxx

xxx

Public respondent underscored petitioners’ failure to prove existence of irreparable injury or that continuance of the act complained, Chien-Yin Shao’s participation in the corporation as member and chairman of the board of trustees pending final determination of the validity of his admission to the corporation would probably work injustice to petitioners. We do not agree. We are convinced that the applicants, Santiago Cua and Chiang Kai Shek College, Inc., have sufficiently shown existence of the requisites, under the rules and jurisprudence, for the issuance of a writ of preliminary injunction. Prudence dictates that public respondent grant the injunctive 11 relief prayed for. (Emphasis and italics supplied). 12

In Philippine Ports Authority v. Pier 8 Arrastre & Stevedoring Services, Inc. and Levi Strauss & Co. v. Clinton Apparelle, 13 Inc., the Court conceded that it is not enough, in granting the writ of injunction, to simply say that it appeared after hearing that plaintiff is entitled to the relief prayed for, and nothing else. We reechoed the ruling with greater clarity 14 in University of the Philippines (U.P.) v. Catungal: The court must state its own findings of fact and cite the particular law to justify the grant of preliminary injunction. Utmost care in this regard is demanded, and it has been truly said: 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 the strong arm of equity that never ought to be extended unless to cases of great injury, where courts law cannot afford an adequate or commensurate remedy in damages. An examination of the parties’ inherently conflicting claims, exacerbated by the ambivalent, subjective tenor of the appellate court’s decision – which in effect ill-accomplished any by way of enlightening the parties on their respective rights and obligations under the law - gives us the impression that the right claimed by the respondents as basis for seeking injunctive relief is far from clear. While it is true that respondents’ claimed right is not required to be categorically established at this stage, yet it is nevertheless necessary to show, at least incipiently, that such right exists and is not countermanded by the petitioners’ own evidence which appears to present a veritable challenge to the respondents’ cause. In our view, the respondents have failed to justify their plea for injunctive relief, and the trial court correctly rejected their plea therefor. Lacking in a thorough determination of the preliminary facts, the appellate court’s decision cannot be sustained. Instead, we must look to what has been established by the trial court’s own determination as embodied in its assailed Order of July 27, 2006. This Court, being not one of facts, must rely on the findings of fact made by the trial court, which as well 15 commend great respect in even injunction cases. Thus far, the evidence presented shows that petitioner Chien-Yin Shao was a faculty member of Chiang Kai Shek College sometime in 1954-1956. He became its President in 1989 up to 1994. The Chiang Kai Shek Alumni Association, Inc. appointed him as member of the Board of Advisers, and later an honorary member in 1990. These facts are not denied by 16 the respondents. The corporate by-laws, specifically Article II, Section 1 (Membership), of Chiang Kai Shek College, Inc. states: Any member or an honorary member of Chiang Kai Shek College Alumni Association, Inc. who is of good moral character and reputation in the community; who supports and believes in the principles of democracy and liberty; who subscribes to the purposes of the Corporation; and who agrees to comply with and be bound by these ByLaws, is eligible for membership. An applicant shall first be recommended for admission by the Board of Trustees and then endorsed for approval at the members’ regular annual meeting. Such recommendation for admission requires a 2/3 majority vote of the entire membership of the Board of Trustees and shall be further approved by a 2/3 majority vote of the entire membership of the Corporation. The Board of Trustees may prescribe additional qualifications for membership as the purposes for which the Corporation is organized may require. The record likewise reveals that it has been the tradition of the corporation, which tradition has been observed for the last sixty (60) years to the present, to hold regular meetings six (6) times a year, although its by-laws provide for just one.

In addition, the record discloses that in a joint special meeting of the board of trustees and members of the corporation held on April 19, 2004, there being a quorum and respondent Santiago Cua was present, Shao was nominated, unanimously voted for and approved to become a regular member of the corporation. Cua even seconded Shao’s nomination. Another regular member, Chuang Tzi Shun, was demoted to honorary member. No one then present, 17 Cua included, objected to these two specific corporate acts. Other witnesses for the petitioners attest to the truth of the 18 foregoing facts. In respondents’ Comment to this petition, they conceded that "respondent Santiago Cua filed the derivative suit as a nominal party in behalf of respondent Chiang Kai Shek College, Inc. to redress wrongs committed by herein petitioners, consisting of violations of the corporation’s by-laws in connection with the election of trustees by allowing petitioner ChienYin Shao to be elected as a trustee despite his lack of qualification for not being a member of said x x x 19 corporation." This is the main thesis of respondents’ suit against the petitioners, and, therefore, the resolution of the present petition is understandably circumscribed by the foregoing cause of action of the respondents. It appears from the evidence preliminarily made available, however, that Shao became a regular member of Chiang Kai Shek College, Inc. in 1994 when he was nominated and unanimously voted as one. Respondent Cua, during that meeting at which Shao was elected as a regular member of the corporation, was then present and did not object to the same; the documentary evidence is clear on this, as the minutes taken of said meeting betrays his (Cua’s) presence and the unanimity of corporate action. Being so, a preliminary injunctive writ may not issue. The Rules of Civil Procedure provides that a preliminary injunction may be granted when it is established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action 20 or proceeding, and tending to render the judgment ineffectual. Having failed to object to Shao’s election to regular membership, respondent Cua may not now question the same. Since injunction is the strong arm of equity, he who applies for it must come with clean hands. For, among the maxims of equity 21 are that (1) he who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. For purposes of the injunction proceedings, Cua has not shown the requisite injustice he may suffer as a result of Shao’s election to regular membership. He even acceded to it. A preliminary injunction is a provisional remedy, an adjunct to the main case subject to the latter’s outcome. Its sole objective is to preserve the status quo until the trial court hears fully the merits of the case. Its primary purpose is not to correct a wrong already consummated, or to redress an injury already sustained, or to punish wrongful acts already 22 committed, but to preserve and protect the rights of the litigants during the pendency of the case. From the record, it may be seen that if respondent Cua suffered any perceived injury or wrong at all, the same had already been consummated. In the first place, Cua, in the lower court, prayed, inter alia, in his complaint in Civil Case No. 115404, that petitioner Chan Cuan be compelled by mandatory injunction to hold a meeting for the sole purpose of electing a new set of board of trustees, which Chan Cuan did, as ordered by the trial court. As a result of that meeting, Shao was elected to the board of trustees. And yet now, before us, Cua wants to annul the elections which he himself sought in the first instance. This, we cannot allow. Taking cue from his failure to object to Shao’s entry into the corporation as a regular member in 2004, Cua may not be allowed the injunctive remedy he now seeks. Any perceived injury he suffered was 23 brought by him upon himself. Injunction is not a remedy that will dispose of the main case without trial on the merits. If Shao were to be enjoined from sitting as elected member and trustee, then we would be assuming the proposition which the respondents themselves are inceptively bound to prove, whereas the preliminary evidence shows otherwise. The claim that the by-laws of the corporation provide that the admission to membership of Shao should have been taken up in a regular annual meeting and not in a joint special meeting, may not deprive Shao of the privilege of membership, in the wake of the trial court’s appreciation of the initial evidence which shows that by practice and tradition, the by-laws of the corporation prescribing the annual regular meeting of the members and trustees have not been followed for the last sixty years; instead, the corporation has been holding its meetings at least six times each year. Time and again, this Court has ruled that the matter of the issuance of a writ of preliminary injunction is addressed to the sound discretion of the trial court; the exercise of such discretion by the trial court is generally not interfered with save in

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cases of manifest abuse. The general rule, therefore, and indeed one of the fundamental principles of appellate procedure is that decisions of a trial court which "lie in discretion" will not be reviewed on appeal, whether the case be civil 25 or criminal, at law or in equity. Injunction is accepted as the strong arm of equity or a transcendent remedy to be used cautiously and sparingly as it affects the respective rights of the parties, and only upon full conviction on the part of the court of its extreme necessity 26 should it issue. We do not see that necessity at this point. The respondents’ claim that both petitioners have committed other acts, if any, prejudicial to the interests of the corporation, the school and the academic community of Chiang Kai Shek College in general, is still has to be proved at the trial on the merits of the main case or subjected, initially, to the tests of sufficiency and the various rigors of the Rules. 27 These are matters appropriately litigated in a derivative suit. IN VIEW WHEREOF, the assailed decision of the CA dated October 10, 2006 in CA-G.R. SP No. 95467, as reiterated in its Resolution of December 21, 2006, is REVERSED and SET ASIDE. The Order dated July 27, 2006 of the trial court is AFFIRMED in toto. All injunctive writs and restraining orders are LIFTED. No pronouncement as to costs. SO ORDERED.

G.R. No. 143993

August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners, vs. 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.

DECISION

CARPIO, J.: The Case 1

2

This is a petition for review of the Decision dated 26 November 1999 of the Court of Appeals 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 3 Appeals' Decision reversed the 5 September 1994 Decision 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. 4 McDonald's operates, by itself or through its franchisees, a global chain of fast-food restaurants. McDonald's owns a 5 6 family of marks including the "Big Mac" mark for its "double-decker hamburger sandwich." McDonald's registered this 7 trademark with the United States Trademark Registry on 16 October 1979. 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 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 thePrincipal Register based on its Home Registration in the United States. 8

9

Like its other marks, McDonald's displays the "Big Mac" mark in items and paraphernalia 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" 10 hamburger sandwiches alone. Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's Philippine 11 franchisee. Respondent L.C. Big Mak Burger, Inc. ("respondent corporation") is a domestic corporation which operates fast-food 12 outlets and snack vans in Metro Manila and nearby provinces. Respondent corporation's menu includes hamburger 13 sandwiches and other food items. 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 14 respondent corporation. 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. 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. 16 preliminary injunction replacing the TRO.

15

On 16 August 1990, the RTC issued a writ of

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 17 hamburger sandwiches as those of petitioners' Big Mac hamburgers. 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 18 Assignment dated 18 May 1981. 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. xxxx 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. xxxx 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. xxxx 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. xxxx The xxx provision of the law concerning unfair competition is broader and more inclusive than the lawconcerning 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. xxx 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 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 theactual manufacturer or dealer. Thus, plaintiffs have established their valid cause of action against the defendants for trademark infringement and unfair 19 competition and for damages. 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 ofP400,000.00, 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, Wiliam 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 20 insufficiency of evidence. 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 "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". xxxx 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 "McDonalds" logo. On the other hand, what the defendantsappellants 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 thereinand a blue lower garment. Finally, the defendants-appellants' food packages are made of plastic material. xxxx xxx [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 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 xxx sold in a Styrofoam box with the "McDonald's" logo and trademark in red, bl[o]ck capital letters printed thereon xxx 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 airconditioned "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 accommodateadditional 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 xxx. 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 xxxx 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 another has the burden of proving 21 that the latter acted in bad faith or with ill motive. 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. 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. II. 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 22 TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION. 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: 1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule 45. 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 23 trademark infringement and unfair competition. 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 24 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 25 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 26 the petition, this being one of the recognized exceptions to Section 1. We took a similar course of action in Asia 27 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. 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 28 29 branches. Respondents' cash invoices simply refer to their hamburger sandwiches as "Big Mak." It is respondents' 30 snack vans that carry the words "L.C. Big Mak Burger, Inc." It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their hamburger 31 sandwiches relied on by the Court of Appeals. 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, trademark infringement as follows:

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defines

Infringement, what constitutes. — Any person who [1] shall use, without the consent of the registrant, anyreproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection withthe 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 imitateany 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 33 of the remedies herein provided. 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 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 34 "likelihood of confusion." Of these, it is the element of likelihood of confusion that is the gravamen of trademark 35 infringement. On the Validity of the "Big Mac"Mark and McDonald's Ownership of such Mark 36

A mark is valid if it is "distinctive" and thus not barred from registration under Section 4 of RA 166 ("Section 4").However, 37 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" mark, it is only the word "Mac" that is valid because the word 38 "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 39 word, is neither generic nor descriptive. Generic marks are commonly used as the name or description of 40 41 42 a kindof 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 43 44 does not know it exists, such as "Arthriticare" for arthritis medication. On the contrary, "Big Mac" falls underthe class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it 45 represents. As such, it is highly distinctive and thus valid. Significantly, the trademark "Little Debbie" for snack cakes 46 was found arbitrary or fanciful. 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 47 no real protection. Indeed, we have held that registration in the Supplemental Register is not even a prima facie 48 evidence of the validity of the registrant's exclusive right to use the mark on the goods specified in the certificate. 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,

49

Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., thus:

the Court distinguished these two types of confusion,

[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." xxx 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." 50

Under Act No. 666, the first trademark law, infringement was limited to confusion of goods only, when the infringing mark 51 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 52 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 53 affiliation. 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: 1.15. Defendants have unduly prejudiced and clearly infringed upon the 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, 54 plaintiffs. (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]", xxx. Defendant Big Mak Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs.xxxx 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 55 particular, the mark "B[ig] M[ac]". (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. 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 airconditioned 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 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 inany way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 56 52 Am. Jur. 576, 577). (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 57 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. 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 sufficientthat 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 58 packaging. It is not enough to consider their words and compare the spelling and pronunciation of the words. 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 59 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. 60

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,

the Court ruled:

xxx 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 itnecessary 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; xxx) (Emphasis supplied.) 61

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents, Phil. Nut Industry, Inc. v. Standard 62 63 Brands Inc., Converse Rubber Corporation v. Universal Rubber Products, Inc., and Asia Brewery, Inc. v. Court 64 65 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. (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 xxx 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. 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 66 issue of confusing similarity. Thus, in Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., the Court held: 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 "TradeMark 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. Thisincreases 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. 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 equalnumber 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' xxx "B[ig] M[ac]" trademark, with their allegedsentiment-focused "explanation" merely 67 thought of as a convenient, albeit unavailing, excuse or defense for such an unfair choice of name. 68

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 69 "Big Mac" mark. This saves respondents much of the expense in advertising to create market recognition of their mark 70 and hamburgers. 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 71 in American Wire & Cable Co. v. Director of Patents, Section 22 requires the less stringent standard of "likelihood of 72 confusion" only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential. On the Issue of Unfair Competition Section 29 ("Section 29")

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of RA 166 defines unfair competition, thus:

xxxx 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 shalldeceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods orany 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 74 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 75 76 public. Actual fraudulent intent need not be shown. Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark 77 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 78 being deceived that the goods originate from the trademark owner. 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 79 marks in question. 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 80 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 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. xxxx 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 81 "Macky" displayed or printed between the words "Big" and "Mak." (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 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. 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

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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. The Remedies Available to Petitioners 83

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 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 84 the "Big Mak" mark. 85

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 86 litigation is also in order. 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, C.J. (Chairman), Quisumbing, Ynares-Santiago and Azcuna, JJ., concur.

G.R. No. 166115

February 2, 2007

McDONALD’S CORPORATION, Petitioner, vs. MACJOY FASTFOOD CORPORATION, Respondent. DECISION GARCIA, J.: In this petition for review on certiorari under Rule 45 of the Rules of Court, herein petitioner McDonald’s Corporation seeks the reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 57247, to wit: 1

1. Decision dated 29 July 2004 reversing an earlier decision of the Intellectual Property Office (IPO) which rejected herein respondent MacJoy FastFood Corporation’s application for registration of the trademark "MACJOY & DEVICE"; and 2

2. Resolution dated 12 November 2004 denying the petitioner’s motion for reconsideration. As culled from the record, the facts are as follows: On 14 March 1991, respondent MacJoy Fastfood Corporation, a domestic corporation engaged in the sale of fast food products in Cebu City, filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTT), now the Intellectual Property Office (IPO), an application, thereat identified as Application Serial No. 75274, for the registration of the trademark "MACJOY & DEVICE" for fried chicken, chicken barbeque, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo and steaks under classes 29 and 30 of the International Classification of Goods. Petitioner McDonald’s Corporation, a corporation duly organized and existing under the laws of the State of Delaware, 3 USA, filed a verified Notice of Opposition against the respondent’s application claiming that the trademark "MACJOY & DEVICE" so resembles its corporate logo, otherwise known as the Golden Arches or "M" design, and its marks "McDonalds," McChicken," "MacFries," "BigMac," "McDo," "McSpaghetti," "McSnack," and "Mc," (hereinafter collectively known as the MCDONALD’S marks) such that when used on identical or related goods, the trademark applied for would confuse or deceive purchasers into believing that the goods originate from the same source or origin. Likewise, the petitioner alleged that the respondent’s use and adoption in bad faith of the "MACJOY & DEVICE" mark would falsely tend to suggest a connection or affiliation with petitioner’s restaurant services and food products, thus, constituting a fraud upon the general public and further cause the dilution of the distinctiveness of petitioner’s registered and internationally recognized MCDONALD’S marks to its prejudice and irreparable damage. The application and the opposition thereto was docketed as Inter Partes Case No. 3861. Respondent denied the aforementioned allegations of the petitioner and averred that it has used the mark "MACJOY" for the past many years in good faith and has spent considerable sums of money for said mark’s extensive promotion in trimedia, especially in Cebu City where it has been doing business long before the petitioner opened its outlet thereat sometime in 1992; and that its use of said mark would not confuse affiliation with the petitioner’s restaurant services and food products because of the differences in the design and detail of the two (2) marks. 4

In a decision dated December 28, 1998, the IPO, ratiocinating that the predominance of the letter "M," and the prefixes "Mac/Mc" in both the "MACJOY" and the "MCDONALDS" marks lead to the conclusion that there is confusing similarity between them especially since both are used on almost the same products falling under classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food, sustained the petitioner’s opposition and rejected the respondent’s application, viz: WHEREFORE, the Opposition to the registration of the mark MACJOY & DEVICE for use in fried chicken and chicken barbecue, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo, and steaks is, as it is hereby, SUSTAINED. Accordingly, Application Serial No. 75274 of the herein Respondent-Applicant is REJECTED. Let the filewrapper of MACJOY subject matter of this case be sent to the Administrative, Financial and Human Resources Development Bureau for appropriate action in accordance with this Decision, with a copy to be furnished the Bureau of Trademarks for information and to update its record.

SO ORDERED. 5

In time, the respondent moved for a reconsideration but the IPO denied the motion in its Order of January 14, 2000. 6

Therefrom, the respondent went to the CA via a Petition for Review with prayer for Preliminary Injunction under Rule 43 of the Rules of Court, whereat its appellate recourse was docketed as CA-G.R. SP No. 57247. Finding no confusing similarity between the marks "MACJOY" and "MCDONALD’S," the CA, in its herein assailed 7 Decision dated July 29, 2004, reversed and set aside the appealed IPO decision and order, thus: WHEREFORE, in view of the foregoing, judgment is hereby rendered by us REVERSING and SETTING ASIDE the Decision of the IPO dated 28 December 1998 and its Order dated 14 January 2000 and ORDERING the IPO to give due course to petitioner’s Application Serial No. 75274. SO ORDERED. Explains the CA in its decision: xxx, it is clear that the IPO brushed aside and rendered useless the glaring and drastic differences and variations in style of the two trademarks and even decreed that these pronounced differences are "miniscule" and considered them to have been "overshadowed by the appearance of the predominant features" such as "M," "Mc," and "Mac" appearing in both MCDONALD’S and MACJOY marks. Instead of taking into account these differences, the IPO unreasonably shrugged off these differences in the device, letters and marks in the trademark sought to be registered. The IPO brushed aside and ignored the following irrefutable facts and circumstances showing differences between the marks of MACJOY and MCDONALD’S. They are, as averred by the petitioner [now respondent]: 1. The word "MacJoy" is written in round script while the word "McDonald’s" is written in single stroke gothic; 2. The word "MacJoy" comes with the picture of a chicken head with cap and bowtie and wings sprouting on both sides, while the word "McDonald’s" comes with an arches "M" in gold colors, and absolutely without any picture of a chicken; 3. The word "MacJoy" is set in deep pink and white color scheme while "McDonald’s" is written in red, yellow and black color combination; 4. The façade of the respective stores of the parties are entirely different. Exhibits 1 and 1-A, show that [respondent’s] restaurant is set also in the same bold, brilliant and noticeable color scheme as that of its wrappers, containers, cups, etc., while [petitioner’s] restaurant is in yellow and red colors, and with the mascot of "Ronald McDonald" being prominently displayed therein." (Words in brackets supplied.) 8

Petitioner promptly filed a motion for reconsideration. However, in its similarly challenged Resolution of November 12, 2004, the CA denied the motion, as it further held: Whether a mark or label of a competitor resembles another is to be determined by an inspection of the points of difference and resemblance as a whole, and not merely the points of resemblance. The articles and trademarks employed and used by the [respondent] Macjoy Fastfood Corporation are so different and distinct as to preclude any probability or likelihood of confusion or deception on the part of the public to the injury of the trade or business of the [petitioner] McDonald’s Corporation. The "Macjoy & Device" mark is dissimilar in color, design, spelling, size, concept and appearance to the McDonald’s marks. (Words in brackets supplied.) Hence, the petitioner’s present recourse on the following grounds: I. THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT’S "MACJOY & DEVICE" MARK IS NOT CONFUSINGLY SIMILAR TO PETITIONER’S "McDONALD’S MARKS." IT FAILED TO CORRECTLY APPLY THE DOMINANCY TEST WHICH HAS BEEN CONSISTENTLY APPLIED BY THIS HONORABLE COURT IN DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY BETWEEN COMPETING MARKS.

A. The McDonald’s Marks belong to a well-known and established "family of marks" distinguished by the use of the prefix "Mc" and/or "Mac" and the corporate "M" logo design. B. The prefix "Mc" and/or "Mac" is the dominant portion of both Petitioner’s McDonald’s Marks and the Respondent’s "Macjoy & Device" mark. As such, the marks are confusingly similar under the Dominancy Test. C. Petitioner’s McDonald’s Marks are well-known and world-famous marks which must be protected under the Paris Convention. II. THE COURT OF APPEALS ERRED IN RULING THAT THE DECISION OF THE IPO DATED 28 DECEMBER 1998 AND ITS ORDER DATED 14 JANUARY 2000 WERE NOT BASED ON SUBSTANTIAL EVIDENCE. 9

In its Comment, the respondent asserts that the petition should be dismissed outright for being procedurally defective: first, because the person who signed the certification against forum shopping in behalf of the petitioner was not specifically authorized to do so, and second, because the petition does not present a reviewable issue as what it challenges are the factual findings of the CA. In any event, the respondent insists that the CA committed no reversible error in finding no confusing similarity between the trademarks in question. The petition is impressed with merit. Contrary to respondent’s claim, the petitioner’s Managing Counsel, Sheila Lehr, was specifically authorized to sign on 10 behalf of the petitioner the Verification and Certification attached to the petition. As can be gleaned from the petitioner’s Board of Director’s Resolution dated December 5, 2002, as embodied in the Certificate of the Assistant Secretary dated 11 December 21, 2004, Sheila Lehr was one of those authorized and empowered "to execute and deliver for and on behalf of [the petitioner] all documents as may be required in connection with x x x the protection and maintenance of any foreign patents, trademarks, trade-names, and copyrights owned now or hereafter by [the petitioner], including, but not limited to, x x x documents required to institute opposition or cancellation proceedings against conflicting trademarks, and to do such other acts and things and to execute such other documents as may be necessary and appropriate to effect and carry out the intent of this resolution." Indeed, the afore-stated authority given to Lehr necessarily includes the authority to execute and sign the mandatorily required certification of non-forum shopping to support the instant petition for review which stemmed from the "opposition proceedings" lodged by the petitioner before the IPO. Considering that the person who executed and signed the certification against forum shopping has the authority to do so, the petition, therefore, is not procedurally defective. As regards the respondent’s argument that the petition raises only questions of fact which are not proper in a petition for review, suffice it to say that the contradictory findings of the IPO and the CA constrain us to give due course to the petition, this being one of the recognized exceptions to Section 1, Rule 45 of the Rules of Court. True, this Court is not the 12 proper venue to consider factual issues as it is not a trier of facts. Nevertheless, when the factual findings of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or 13 contrary to the findings culled by the court of origin, as here, this Court will review them. The old Trademark Law, Republic Act (R.A.) No. 166, as amended, defines a "trademark" as any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used by a manufacturer or merchant on his 14 goods to identify and distinguish them from those manufactured, sold, or dealt in by others. Under the same law, the registration of a trademark is subject to the provisions of Section 4 thereof, paragraph (d) of which is pertinent to this case. The provision reads: Section 4. Registration of trademarks, trade-names and service-marks on the principal register. – There is hereby established a register of trademarks, tradenames and service-marks which shall be known as the principal register. The owner of the trade-mark, trade-name or service-mark used to distinguish his 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 Essentially, the issue here is whether there is a confusing similarity between the MCDONALD’S marks of the petitioner and the respondent’s "MACJOY & DEVICE" trademark when applied to Classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food. In determining similarity and likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the 15 holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that 16 might cause confusion or deception. In contrast, the holistic test requires the court to consider the entirety of the marks 17 as applied to the products, including the labels and packaging, in determining confusing similarity. Under the latter test, 18 a comparison of the words is not the only determinant factor. 1awphi1.net Here, the IPO used the dominancy test in concluding that there was confusing similarity between the two (2) trademarks in question as it took note of the appearance of the predominant features "M", "Mc" and/or "Mac" in both the marks. In reversing the conclusion reached by the IPO, the CA, while seemingly applying the dominancy test, in fact actually applied the holistic test. The appellate court ruled in this wise: Applying the Dominancy test to the present case, the IPO should have taken into consideration the entirety of the two marks instead of simply fixing its gaze on the single letter "M" or on the combinations "Mc" or "Mac". A mere cursory look of the subject marks will reveal that, save for the letters "M" and "c", no other similarity exists in the subject marks. We agree with the [respondent] that it is entirely unwarranted for the IPO to consider the prefix "Mac" as the predominant feature and the rest of the designs in [respondent’s] mark as details. Taking into account such paramount factors as color, designs, spelling, sound, concept, sizes and audio and visual effects, the prefix "Mc" will appear to be the only similarity in the two completely different marks; and it is the prefix "Mc" that would thus appear as the miniscule detail. When pitted against each other, the two marks reflect a distinct and disparate visual impression that negates any possible confusing similarity in the mind of the buying public. (Words in brackets supplied.) Petitioner now vigorously points out that the dominancy test should be the one applied in this case. We agree. In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can 19 be deduced because each case must be decided on its merits. In such cases, even more than in any other litigation, 20 precedent must be studied in the light of the facts of the particular case. That is the reason why in trademark cases, 21 jurisprudential precedents should be applied only to a case if they are specifically in point. While we agree with the CA’s detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has consistently used and applied the dominancy 22 test in determining confusing similarity or likelihood of confusion between competing trademarks. 23

Notably, in McDonalds Corp. v. LC Big Mak Burger, Inc., a case where the trademark "Big Mak" was found to be confusingly similar with the "Big Mac" mark of the herein the petitioner, the Court explicitly held: This Court, xxx, 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. 24

Moreover, in Societe Des Produits Nestle, S.A. v. CA the Court, applying the dominancy test, concluded that the use by the respondent therein of the word "MASTER" for its coffee product "FLAVOR MASTER" was likely to cause confusion with therein petitioner’s coffee products’ "MASTER ROAST" and "MASTER BLEND" and further ruled:

xxx, 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 marketplace. The totality or holistic test only relies on visual comparisons 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. Applying the dominancy test to the instant case, the Court finds that herein petitioner’s "MCDONALD’S" and respondent’s "MACJOY" marks are confusingly similar with each other such that an ordinary purchaser can conclude an association or relation between the marks. To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as dominant features. The first letter "M" in both marks puts emphasis on the prefixes "Mc" and/or "Mac" by the similar way in which they are 25 depicted i.e. in an arch-like, capitalized and stylized manner. For sure, it is the prefix "Mc," an abbreviation of "Mac," which visually and aurally catches the attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way as did "McDonalds," "MacFries," "McSpaghetti," "McDo," "Big Mac" and the rest of the MCDONALD’S marks which all use the prefixes Mc and/or Mac. Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the respondent’s trademark application for the "MACJOY & DEVICE" trademark covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioner’s trademark registration for the MCDONALD’S marks in the Philippines covers goods which are similar if not identical to those covered by the respondent’s application. Thus, we concur with the IPO’s findings that: In the case at bar, the predominant features such as the "M," "Mc," and "Mac" appearing in both McDonald’s marks and the MACJOY & DEVICE" easily attract the attention of would-be customers. Even non-regular customers of their fastfood restaurants would readily notice the predominance of the "M" design, "Mc/Mac" prefixes shown in both marks. Such that the common awareness or perception of customers that the trademarks McDonalds mark and MACJOY & DEVICE are one and the same, or an affiliate, or under the sponsorship of the other is not far-fetched. The differences and variations in styles as the device depicting a head of chicken with cap and bowtie and wings sprouting on both sides of the chicken head, the heart-shaped "M," and the stylistic letters in "MACJOY & DEVICE;" in contrast to the arch-like "M" and the one-styled gothic letters in McDonald’s marks are of no moment. These minuscule variations are overshadowed by the appearance of the predominant features mentioned hereinabove. Thus, with the predominance of the letter "M," and prefixes "Mac/Mc" found in both marks, the inevitable conclusion is there is confusing similarity between the trademarks Mc Donald’s marks and "MACJOY AND DEVICE" especially considering the fact that both marks are being used on almost the same products falling under Classes 29 and 30 of the International Classification of Goods i.e. Food and ingredients of food. With the existence of confusing similarity between the subject trademarks, the resulting issue to be resolved is who, as between the parties, has the rightful claim of ownership over the said marks. We rule for the petitioner. A mark is valid if it is distinctive and hence not barred from registration under the Trademark Law. However, once 26 registered, not only the mark’s validity but also the registrant’s ownership thereof is prima facie presumed. 27

Pursuant to Section 37 of R.A. No. 166, as amended, as well as the provision regarding the protection of industrial 28 property of foreign nationals in this country as embodied in the Paris Convention under which the Philippines and the petitioner’s domicile, the United States, are adherent-members, the petitioner was able to register its MCDONALD’S 29 marks successively, i.e., "McDonald’s" in 04 October, 1971 ; the corporate logo which is the "M" or the golden arches 30 31 design and the "McDonald’s" with the "M" or golden arches design both in 30 June 1977 ; and so on and so forth. On the other hand, it is not disputed that the respondent’s application for registration of its trademark "MACJOY & 32 DEVICE" was filed only on March 14, 1991 albeit the date of first use in the Philippines was December 7, 1987.

Hence, from the evidence on record, it is clear that the petitioner has duly established its ownership of the mark/s. Respondent’s contention that it was the first user of the mark in the Philippines having used "MACJOY & DEVICE" on its restaurant business and food products since December, 1987 at Cebu City while the first McDonald’s outlet of the petitioner thereat was opened only in 1992, is downright unmeritorious. For the requirement of "actual use in commerce x x x in the Philippines" before one may register a trademark, trade-name and service mark under the Trademark 33 Law pertains to the territorial jurisdiction of the Philippines and is not only confined to a certain region, province, city or barangay. Likewise wanting in merit is the respondent’s claim that the petitioner cannot acquire ownership of the word "Mac" because it is a personal name which may not be monopolized as a trademark as against others of the same name or surname. As stated earlier, once a trademark has been registered, the validity of the mark is prima facie presumed. In this case, the respondent failed to overcome such presumption. We agree with the observations of the petitioner regarding the respondent’s explanation that the word "MACJOY" is based on the name of its president’s niece, Scarlett Yu Carcell. In the words of the petitioner: First of all, Respondent failed to present evidence to support the foregoing claim which, at best, is a mere self-serving assertion. Secondly, it cannot be denied that there is absolutely no connection between the name "Scarlett Yu Carcel" and "MacJoy" to merit the coinage of the latter word. Even assuming that the word "MacJoy" was chosen as a term of endearment, fondness and affection for a certain Scarlett Yu Carcel, allegedly the niece of Respondent’s president, as well as to supposedly bring good luck to Respondent’s business, one cannot help but wonder why out of all the possible letters or combinations of letters available to Respondent, its president had to choose and adopt a mark with the prefix "Mac" as the dominant feature thereof. A more plausible explanation perhaps is that the niece of Respondent’s president 34 was fond of the food products and services of the Respondent, but that is beside the point." By reason of the respondent’s implausible and insufficient explanation as to how and why out of the many choices of words it could have used for its trade-name and/or trademark, it chose the word "MACJOY," the only logical conclusion deducible therefrom is that the respondent would want to ride high on the established reputation and goodwill of the MCDONALD’s marks, which, as applied to petitioner’s restaurant business and food products, is undoubtedly beyond question. Thus, the IPO was correct in rejecting and denying the respondent’s application for registration of the trademark 35 "MACJOY & DEVICE." As this Court ruled in Faberge Inc. v. IAC, citing Chuanchow Soy & Canning Co. v. Dir. of 36 Patents and Villapanta: When one applies for the registration of a trademark or label which is almost the same or 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 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. WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP NO. 57247, are REVERSED and SET ASIDE and the Decision of the Intellectual Property Office in Inter Partes Case No. 3861 is REINSTATED. No pronouncement as to costs. SO ORDERED.

PAGODA PHILIPPINES, INC., G.R. No. 160966 Petitioner, Present: Panganiban, J., Chairman, Sandoval-Gutierrez, - versus - Corona, Carpio Morales, and Garcia, JJ Promulgated: UNIVERSAL CANNING, INC.,

*

Respondent. October 11, 2005 x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- -- -- x

DECISION

PANGANIBAN, J.:

he Rules on voluntary inhibition do not give judges the unfettered discretion to desist from hearing a case. The motion for inhibition must be grounded on just and valid causes. The mere imputation of bias or partiality is not T

enough basis for them to inhibit, especially when the charge is groundless. The Case

Before us is a Petition for Review

[1]

under Rule 45 of the Rules of Court, challenging the August 14, 2003 Decision

Court of Appeals (CA) in CA-GR SP No. 77514 and the November 24, 2003 Resolution

[3]

[2]

of the

denying petitioners Motion for

Reconsideration. The decretal portion or fallo of the assailed Decision reads as follows: WHEREFORE, foregoing considered, the instant petition for mandamus is hereby GRANTED. Public respondents Order dated May 22, 2003, voluntarily inhibiting himself from the case is hereby SET ASIDE. Public respondent is DIRECTED to continue hearing the case and dispose of the same with utmost dispatch.

The Facts

The facts are narrated by the CA as follows: [Petitioner] filed a civil complaint against [respondent] for Trademark Infringement, False Representation and Unfair Competition with Damages and Injunction. The case was docketed as Civil Case [N]o. 02102988. [Petitioner] claimed that [respondents] Familys Brand Sardines is confusingly similar with [petitioners] Family Brand Sardines. [Petitioner] insisted that it has superior right to use the trademark Family than [respondent]. [Respondent] filed an Answer with Compulsory Counter-claim and Motion to Dismiss and Prayer for the Issuance of a Temporary Restraining Order and/or Preliminary Injunction. [Respondent] prayed that [petitioner] be enjoined from using the trademark Family and to pay damages. [Respondent] further asked [Judge Antonio M. Eugenio, Jr.] to set the hearing for its motion to dismiss the action on the grounds of lack of authority of the affiant of the complaint to institute the action, insufficient verification and failure to exhaust administrative remedies. After hearing, [Judge Eugenio] issued a temporary restraining order enjoining [petitioner] to use the trademark Family. On March 21, 2003, [Judge Eugenio] dismissed without prejudice, [petitioners] complaint on the ground of insufficient verification as invoked by [respondent]. [Respondent] filed a motion for reconsideration of the Order dismissing [petitioners] complaint, claiming that the defect in the verification has been rendered moot and academic by subsequent rulings respective to the application for preliminary injunction and that the attending circumstances of the case warrant liberal compliance [with] the rule. [Petitioner] filed a Motion for Voluntary Inhibition, requesting [Judge Eugenio] to inhibit himself from proceeding to hear, try and decide the pending incidents of the case to afford [petitioner] an impartial trial. [Respondent] opposed [petitioners] Motion for Voluntary Inhibition. On May 22, 2003, [Judge Eugenio] issued an Order voluntarily inhibiting himself from further hearing the case. Hence, [the] petition [filed with the CA] by [respondent] for mandamus to compel [Judge Eugenio] to [4] continue to hear the pending incidents of the case.

Ruling of the Court of Appeals

Finding no valid and just reason for the voluntary inhibition of Judge Eugenio, the CA issued the writ of mandamus. It ruled that the present case fell within the exception that mandamus would lie in instances of gross abuse of discretion.

Hence, this Petition.

[5]

Issue

The issue was worded by petitioner in this wise: The principal issue raised by the petitioner for this Honorable Court to resolve is whether or not a petition for mandamus is the proper remedy to assail a purely discretionary act of Judge Antonio Eugenio, Jr. of voluntarily inhibiting himself from hearing Civil Case No. 02-102988 and corollary thereto, whether Judge Eugenio, Jr. who inhibited himself in accordance with the law and the Rules, can be compelled to perform [6] an act he had already decided not to do with the intention of assuring the litigants of an impartial trial.

The Court believes that there are actually two issues to be settled in this case: first, whether mandamus is the proper remedy to assail an order of voluntary inhibition; and second, whether there was a valid and just reason for the voluntary inhibition of the trial court judge.

The Courts Ruling

The Petition is unmeritorious. First Issue: Remedy Against the Order of Voluntary Inhibition

At the outset, we note that petitioner, in an effort to cover its bases, filed the present Petition as both a petition for review under Rule 45 and a petition for certiorari under Rule 65 of the Rules of Court. The applicable rule is Rule 45, which clearly provides that decisions, final orders or resolutions of the CA in any case -- regardless of the nature of the action or proceeding involved -- may be appealed to this Court through a petition for review. This remedy is a continuation of the

appellate process over the original case.

[7]

It is basic that where Rule 45 is available, and in fact availed of as a remedy --

as in this case -- recourse under Rule 65 cannot be allowed either as an add-on or as a substitute for appeal.

[8]

The procedural infirmity notwithstanding, this Court shall deal with this Petition as one filed under Rule 45 only and shall treat the alleged grave abuse of discretion on the part of the CA as an allegation of reversible error. Petitioner claims that respondent erred when the latter questioned the trial judges Order of Voluntary Inhibition -supposedly a purely discretionary act -- through a Petition for Mandamus filed with the CA. While, ordinarily, mandamus will not prosper to compel a discretionary act, the writ shall issue in instances of gross abuse of discretion, manifest injustice or palpable excess of authority, equivalent to denial of a settled right to which petitioner is entitled; and when there is no other plain, speedy and adequate remedy.

[9]

This Court has recognized that [a] judges

decision to refuse to act on account of some disqualification is not conclusive, and his competency may be determined on an application for mandamus to compel him to act.

[10]

Second Issue: Inhibition

Section 1 of Rule 137 of the Rules of Court provides: Section 1. Disqualification of judges. No judge or judicial officer shall sit in any case in which he, or his wife or child, is pecuniarily interested as heir, legatee, creditor or otherwise, or in which he is related to either party within the sixth degree of consanguinity or affinity, or to counsel within the fourth degree, computed according to the rules of the civil law, or in which he has been executor, administrator, guardian, trustee or counsel, or in which he has presided in any inferior court when his ruling or decision is the subject of review, without the written consent of all parties in interest, signed by them and entered upon the record. A judge may, in the exercise of his sound discretion, disqualify himself from sitting in a case, for just or valid reasons other than those mentioned above.

The Rules contemplate two kinds of inhibition: compulsory and voluntary. Under the first paragraph of the cited Rule, it is conclusively presumed that judges cannot actively and impartially sit in the instances mentioned. The second paragraph, which embodies voluntary inhibition, leaves to the sound discretion of the judges concerned whether to sit in a case for other just and valid reasons, with only their conscience as guide.

[11]

In Umale v. Villaluz,

[12]

the Court traced the history of the second paragraph of the above-quoted provision, which had

been added only as an amendment to the Rules of Court in 1964. Prior to that year, the question on whether to take cognizance of the case did not depend upon the discretion of the judges not legally disqualified to sit in a given case. If those concerned were not disqualified, it was their official duty to proceed with the case or else risk being called upon to account for their dereliction. They could not voluntarily inhibit themselves on grounds of prejudice or bias, extreme delicacy, or even if they themselves took great interest and an active part in the filing of the case. Gutierrez v. Santos

[13]

and Del Castillo v. Javelona

[14]

paved the way for the recognition of other circumstances for disqualification --

those that depended upon the exercise of discretion of the judges concerned.

The judges right, however, must be weighed against their duty to decide cases without fear of repression. Verily, the second paragraph of Section 1 of Rule 137 does not give judges the unfettered discretion to decide whether to desist from hearing a case. The inhibition must be for just and valid causes. The mere imputation of bias or partiality is not enough ground for them to inhibit, especially when the charge is without basis. This Court has to be shown acts or conduct clearly indicative of arbitrariness or prejudice before it can brand them with the stigma of bias or partiality.

[15]

A perusal of the records of the case fails to reveal that any bias or prejudice motivated Judge Eugenio in issuing the Writ of Preliminary Injunction in favor of respondent or in dismissing petitioners Complaint. Neither did this Court find any questionable or suspicious circumstances leading to the issuance of those Orders, as suggested by petitioner. This Court has repeatedly held that for bias and prejudice to be considered valid reasons for the voluntary inhibition of judges, mere suspicion is not enough. Bare allegations of their partiality will not suffice in the absence of clear and convincing evidence to overcome the presumption that a judge will undertake his noble role to dispense justice according to law and evidence and without fear or favor.

[16]

In his questioned Order of Inhibition, Judge Eugenio himself satisfactorily clarified his actuations and the circumstances leading to the issuance of the questioned injunction and Order of dismissal. Obviously not believing that he had been motivated by bias or prejudice, he nonetheless granted petitioners Motion to Inhibit. Understandably, he did so with the intention to uphold the integrity of the judiciary as an institution worthy of public trust and confidence. Under the circumstances, however, to affirm his Order of Inhibition would open the floodgates to a form of forum-shopping, in which litigants would be allowed to shop for a judge more sympathetic to their cause.

[17]

Such action would be antithetical to the

speedy and fair administration of justice. WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

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.: 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

1. Decision dated January 21, 2003 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

2. Resolution dated May 30, 2003 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 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. The decision under review summarized what happened next, as follows: In the Complaint xxx 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. xxx they averred that the countries in which they are domiciled grant xxx to corporate or juristic persons of the Philippines the privilege to bring action for infringement, xxx 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"]. xxx. [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" xxx 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 xxx, [petitioners] pointed out that upon the request of an interested party, a country of the Union may 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 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 xxx [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. [Respondent] filed its Answer xxx denying [petitioners’] material allegations and xxx averred [among other things] xxx that "MARK" is a common word, which cannot particularly identify a product to be the product of the [petitioners] xxx xxx lawphil.net

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 xxx 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

xxx

After the termination of the trial on the merits xxx trial court rendered its Decision xxx 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 xxx justifies the dismissal of the complaint xxx. It added that the testimonies of [petitioners’] witnesses xxx 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 xxx 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 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. xxx. 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 3 trademark, no wrongful act or omission can be attributed to them. xxx. (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: xxx the appellants’ [petitioners’] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not qualify as well-known marks entitled to protection 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

4

regards the third issue, there is likewise no basis for the award of damages prayed for by the appellants herein. (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. 5

In its Comment, 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 6 a question of fact when the doubt or difference arises as to the truth or falsity of alleged facts. 7

Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of facts. Unless the factual findings of the appellate court are mistaken, absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary to 8 the findings culled by the court of origin, we will not disturb them. 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 9 correct is one of law. 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 established rule being that all 10 doubts shall be resolved in favor of the correctness of such conclusions. 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 11 in by others. Inarguably, a trademark deserves protection. For, as Mr. Justice Frankfurter observed in Mishawaka Mfg. 12 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 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 membercountries 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.

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 13 14 use in accordance with Sections 2-A and 5(a) 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 15 not be alleged. 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 16 Rubber Products, Inc., petitioners state that such availability and sale may be effected through the acts of importers and distributors. 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, 17 Inc., et al. v. The Court of Appeals and Fortune Tobacco Corporation, 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

supra, so it must be here.

Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages denied non-registrants or 19 ordinary users, like respondent. But while petitioners enjoy the statutory presumptions arising from such registration, i.e., as to the validity of the registration, ownership and the exclusive right to use the 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 20 privileges to Filipino citizens pursuant to Section 21-A of R.A. No. 166. 21

In Leviton Industries v. Salvador, 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 22 case, 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, 23 can be taken judicial notice of in infringement suits. 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. 24

True, the Philippines’ adherence to the Paris Convention effectively obligates the country to honor and enforce its 25 provisions as regards the protection of industrial property of foreign nationals in this country. However, any protection 26 accorded has to be made subject to the limitations of Philippine laws. 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 27 required of persons entitled to the benefits of the Union for the enjoyment of any industrial property rights, foreign nationals must still observe and comply with the conditions imposed by Philippine law on its nationals. 28

29

Considering that R.A. No. 166, as amended, specifically Sections 2 and 2-A thereof, mandates actual use of the marks and/or emblems in local 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. 30

In Emerald Garment Mfg. Corporation v. Court of Appeals, the Court reiterated its rulings in Sterling Products 31 International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, Kabushi Kaisha Isetan v. Intermediate Appellate 32 33 Court, and Philip Morris v. Court of Appeals and Fortune Tobacco Corporation 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. Xxx. 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 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 34 the registered mark. Evidence of non-usage of the mark rebuts the presumption of trademark ownership, as what 35 happened here when petitioners no less admitted not doing business in this country. 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 36 of Companies, Inc. 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 37 perfect such right; actual use thereof is the perfecting ingredient. 38

Petitioners’ reliance on Converse Rubber Corporation 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 39 on January 1, 1998 without a provision as to its retroactivity. 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. 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 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. 40

The "likelihood of confusion" is the gravamen of trademark infringement. 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 41 particular case. In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the dominancy test and the 42 43 holistic test. The dominancy test 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 44 purchasers. 45

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. 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 involved in their entirety as they appear on the 46 products, 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 47 not sufficient differences existed between the marks. 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 48 as a tool to point out distinctly the origin or ownership of the goods to which it is affixed, 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 49 appropriation or imitation of them by others, nor can the public be deceived. 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 50 determining likelihood of confusion. Del Monte Corp. v. CA 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 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 51 "ordinarily intelligent buyer" considering the type of product involved. 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 52 Bok, 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. 53

In Mighty Corporation v. E & J Gallo Winery, the Court held that the following constitute the elements of trademark 54 infringement in accordance not only with Section 22 of R.A. No. 166, as amended, but also Sections 2, 2-A, 9-A and 20 thereof: (a) a trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office, (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 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) the trademark is used for identical or similar goods, and (d) such act is done without the consent of the trademark registrant or assignee.lawphil.net 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 55 with Article 6bis of the Paris Convention. As correctly found by the CA, affirming that of the trial court: xxx 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 56 advertisement made to popularize their products in the Philippines.

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 57 time and time again, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court. 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.

G.R. No. 110318 August 28, 1996 COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, UNITED ARTISTS CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and WARNER BROTHERS, INC., petitioners, vs. COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A. PELINDARIO, respondents.

REGALADO, J.:p 1

Before us is a petition for review on certiorari of the decision of the Court of Appeals promulgated on July 22, 2 1992 and its resolution of May 10, 1993 denying petitioners' motion for reconsideration, both of which sustained 3 the order of the Regional Trial Court, Branch 133, Makati, Metro Manila, dated November 22, 1988 for the 4 quashal of Search Warrant No. 87-053 earlier issued per its own order on September 5, 1988 for violation of Section 56 of Presidential Decree No. 49, as amended, otherwise known as the "Decree on the Protection of Intellectual Property." The material facts found by respondent appellate court are as follows: Complainants thru counsel lodged a formal complaint with the National Bureau of Investigation for violation of PD No. 49, as amended, and sought its assistance in their anti-film piracy drive. Agents of the NBI and private researchers made discreet surveillance on various video establishments in Metro Manila including Sunshine Home Video Inc. (Sunshine for brevity), owned and operated by Danilo A. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila. On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the court a quo against Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films all of which were enumerated in a list attached to the application; and, television sets, video cassettes and/or laser disc recordings equipment and other machines and paraphernalia used or intended to be used in the unlawful exhibition, showing, reproduction, sale, lease or disposition of videograms tapes in the premises above described. In the hearing of the application, NBI Senior Agent Lauro C. Reyes, upon questions by the court a quo, reiterated in substance his averments in his affidavit. His testimony was corroborated by another witness, Mr. Rene C. Baltazar. Atty. Rico V. Domingo's deposition was also taken. On the basis of the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V. Domingo, Search Warrant No. 87-053 for violation of Section 56 of PD No. 49, as amended, was issued by the court a quo. The search warrant was served at about 1:45 p.m. on December 14, 1987 to Sunshine and/or their representatives. In the course of the search of the premises indicated in the search warrant, the NBI Agents found and seized various video tapes of duly copyrighted motion pictures/films owned or exclusively distributed by private complainants, and machines, equipment, television sets, paraphernalia, materials, accessories all of which were included in the receipt for properties accomplished by the raiding team. Copy of the receipt was furnished and/or tendered to Mr. Danilo A. Pelindario, registered ownerproprietor of Sunshine Home Video. On December 16, 1987, a "Return of Search Warrant" was filed with the Court. A "Motion To Lift the Order of Search Warrant" was filed but was later denied for lack of merit (p. 280, Records). A Motion for reconsideration of the Order of denial was filed. The court a quo granted the said motion for reconsideration and justified it in this manner: It is undisputed that the master tapes of the copyrighted films from which the pirated films were allegedly copies (sic), were never presented in the proceedings for the issuance of the search warrants in question. The orders of the Court granting the search warrants and denying the urgent motion to lift order of search warrants were, therefore, issued in 5 error. Consequently, they must be set aside. (p. 13, Appellant's Brief)

Petitioners thereafter appealed the order of the trial court granting private respondents' motion for reconsideration, thus lifting the search warrant which it had theretofore issued, to the Court of Appeals. As stated at the outset, said appeal was dismissed and the motion for reconsideration thereof was denied. Hence, this petition was brought to this Court particularly challenging the validity of respondent court's retroactive application of the ruling 6 in 20th Century Fox Film Corporation vs. Court of Appeals, et al., in dismissing petitioners' appeal and upholding the quashal of the search warrant by the trial court. I Inceptively, we shall settle the procedural considerations on the matter of and the challenge to petitioners' legal standing in our courts, they being foreign corporations not licensed to do business in the Philippines. Private respondents aver that being foreign corporations, petitioners should have such license to be able to maintain an action in Philippine courts. In so challenging petitioners' personality to sue, private respondents point to the fact that petitioners are the copyright owners or owners of exclusive rights of distribution in the Philippines of copyrighted motion pictures or films, and also to the appointment of Atty. Rico V. Domingo as their attorney-infact, as being constitutive of "doing business in the Philippines" under Section 1 (f)(1) and (2), Rule 1 of the Rules of the Board of Investments. As foreign corporations doing business in the Philippines, Section 133 of Batas Pambansa Blg. 68, or the Corporation Code of the Philippines, denies them the right to maintain a suit in Philippine courts in the absence of a license to do business. Consequently, they have no right to ask for the 7 issuance of a search warrant. 8

In refutation, petitioners flatly deny that they are doing business in the Philippines, and contend that private respondents have not adduced evidence to prove that petitioners are doing such business here, as would require them to be licensed by the Securities and Exchange Commission, other than averments in the quoted portions of petitioners' "Opposition to Urgent Motion to Lift Order of Search Warrant" dated April 28, 1988 and Atty. Rico V. Domingo's affidavit of December 14, 1987. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right does not conclusively prove the act of doing business nor establish the presumption of doing 9 business. The Corporation Code provides: Sec. 133. Doing business without a license. — No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. The obtainment of a license prescribed by Section 125 of the Corporation Code is not a condition precedent to the maintenance of any kind of action in Philippine courts by a foreign corporation. However, under the aforequoted provision, no foreign corporation shall be permitted to transact business in the Philippines, as this phrase is understood under the Corporation Code, unless it shall have the license required by law, and until it complies with 10 the law intransacting business here, it shall not be permitted to maintain any suit in local courts. As thus interpreted, any foreign corporation not doing business in the Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction of the court. It is not the absence of the prescribed license but "doing business" in the Philippines without such license which debars the foreign corporation from access to our courts. In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity to bring an action. 11 Such license is not necessary if it is not engaged in business in the Philippines. Statutory provisions in many jurisdictions are determinative of what constitutes "doing business" or "transacting business" within that forum, in which case said provisions are controlling there. In others where no such definition or qualification is laid down regarding acts or transactions failing within its purview, the question rests primarily on facts and intent. It is thus held that all the combined acts of a foreign corporation in the State must be considered, and every circumstance is material which indicates a purpose on the part of the corporation to engage in some 12 part of its regular business in the State. No general rule or governing principles can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged in the light of its own peculiar environmental 13 circumstances. The true tests, however, seem to be whether the foreign corporation is continuing the body or

substance of the business or enterprise for which it was organized or whether it has substantially retired from it 14 and turned it over to another. As a general proposition upon which many authorities agree in principle, subject to such modifications as may be necessary in view of the particular issue or of the terms of the statute involved, it is recognized that a foreign corporation is "doing," "transacting," "engaging in," or "carrying on" business in the State when, and ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be 15 distinguished from merely casual, sporadic, or occasional transactions and isolated acts. The Corporation Code does not itself define or categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence has, however, held that the term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the 16 functions normally incident to or in progressive prosecution of the purpose and subject of its organization. This traditional case law definition has evolved into a statutory definition, having been adopted with some qualifications in various pieces of legislation in our jurisdiction. 1

For instance, Republic Act No. 5455 7 provides: Sec. 1. Definitions and scope of this Act. — (1) . . . ; and the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. 18

Presidential Decree No. 1789, in Article 65 thereof, defines "doing business" to include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. The implementing rules and regulations of said presidential decree conclude the enumeration of acts constituting "doing business" with a catch-all definition, thus: Sec. 1(g). "Doing Business" shall be any act or combination of acts enumerated in Article 65 of the Code. In particular "doing business" includes: xxx xxx xxx (10) Any other act or acts which imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and object of the business organization. Finally, Republic Act No. 7042

19

embodies such concept in this wise:

Sec. 3. Definitions. — As used in this Act: xxx xxx xxx

(d) the phrase "doing business shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. Based on Article 133 of the Corporation Code and gauged by such statutory standards, petitioners are not barred from maintaining the present action. There is no showing that, under our statutory or case law, petitioners are doing, transacting, engaging in or carrying on business in the Philippines as would require obtention of a license before they can seek redress from our courts. No evidence has been offered to show that petitioners have performed any of the enumerated acts or any other specific act indicative of an intention to conduct or transact business in the Philippines. 20

Accordingly, the certification issued by the Securities and Exchange Commission stating that its records do not show the registration of petitioner film companies either as corporations or partnerships or that they have been licensed to transact business in the Philippines, while undeniably true, is of no consequence to petitioners' right to bring action in the Philippines. Verily, no record of such registration by petitioners can be expected to be found for, as aforestated, said foreign film corporations do not transact or do business in the Philippines and, therefore, do not need to be licensed in order to take recourse to our courts. Although Section 1(g) of the Implementing Rules and Regulations of the Omnibus Investments Code lists, among others — (1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, or by an agent of such foreign firm, not acting independently of the foreign firm amounting to negotiations or fixing of the terms and conditions of sales or service contracts, regardless of where the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. The arrangements agreed upon as to manner, time and terms of delivery of the goods or the transfer of title thereto is immaterial. A foreign firm which does business through the middlemen acting in 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 own account, and not in the name or for the account of a principal. Thus, where a foreign firm is represented in the Philippines 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. as acts constitutive of "doing business," the fact that petitioners are admittedly copyright owners or owners of exclusive distribution rights in the Philippines of motion pictures or films does not convert such ownership into an indicium of doing business which would require them to obtain a license before they can sue upon a cause of action in local courts. Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of petitioners, with express authority pursuant to a special power of attorney, inter alia — To lay criminal complaints with the appropriate authorities and to provide evidence in support of both civil and criminal proceedings against any person or persons involved in the criminal infringement of copyright or concerning the unauthorized importation, duplication, exhibition or distribution of any cinematographic work(s) — films or video cassettes — of which . . . is the owner of copyright or the owner of exclusive

rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such cinematographic work(s), to initiate and prosecute on behalf of . . . criminal or civil actions in the Philippines against any person or persons unlawfully distributing, exhibiting, selling or offering for sale any films or video cassettes of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the 21 respective owners of copyright in such works. tantamount to doing business in the Philippines. We fail to see how exercising one's legal and property rights and taking steps for the vigilant protection of said rights, particularly the appointment of an attorney-in-fact, can be deemed by and of themselves to be doing business here. As a general rule, a foreign corporation will not be regarded as doing business in the State simply because it 22 enters into contracts with residents of the State, where such contracts are consummated outside the State. In fact, a view is taken that a foreign corporation is not doing business in the State merely because sales of its product are made there or other business furthering its interests is transacted there by an alleged agent, whether a corporation or a natural person, where such activities are not under the direction and control of the foreign 23 corporation but are engaged in by the alleged agent as an independent business. It is generally held that sales made to customers in the State by an independent dealer who has purchased and 24 obtained title from the corporation to the products sold are not a doing of business by the corporation. Likewise, a foreign corporation which sells its products to persons styled "distributing agents" in the State, for distribution by them, is not doing business in the State so as to render it subject to service of process therein, where the contract with these purchasers is that they shall buy exclusively from the foreign corporation such goods as it 25 manufactures and shall sell them at trade prices established by it. It has moreover been held that the act of a foreign corporation in engaging an attorney to represent it in a Federal 26 court sitting in a particular State is not doing business within the scope of the minimum contact test. With much more reason should this doctrine apply to the mere retainer of Atty. Domingo for legal protection against contingent acts of intellectual piracy. In accordance with the rule that "doing business" imports only acts in furtherance of the purposes for which a foreign corporation was organized, it is held that the mere institution and prosecution or defense of a suit, particularly if the transaction which is the basis of the suit took place out of the State, do not amount to the doing of business in the State. The institution of a suit or the removal thereof is neither the making of a contract nor the doing of business within a constitutional provision placing foreign corporations licensed to do business in the State under the same regulations, limitations and liabilities with respect to such acts as domestic corporations. Merely engaging in litigation has been considered as not a sufficient minimum contact to warrant the exercise of 2 jurisdiction over a foreign corporation. 7 As a consideration aside, we have perforce to comment on private respondents' basis for arguing that petitioners are barred from maintaining suit in the Philippines. For allegedly being foreign corporations doing business in the Philippines without a license, private respondents repeatedly maintain in all their pleadings that petitioners have 28 thereby no legal personality to bring an action before Philippine Courts. Among the grounds for a motion to dismiss under the Rules of Court 29 30 are lack of legal capacity to sue and that the complaint states no cause of action. Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to 31 appear in the case, or does not have the character or representation he claims. On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party in interest, hence 32 grounded on failure to state a cause of action. The term "lack of capacity to sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiff's general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party in interest. Correspondingly, the first can be 33 a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently 34 states no cause of action. Applying the above discussion to the instant petition, the ground available for barring recourse to our courts by an unlicensed foreign corporation doing or transacting business in the Philippines should properly be "lack of capacity to sue," not "lack of personality to sue." Certainly, a corporation whose legal rights have been violated is

undeniably such, if not the only, real party in interest to bring suit thereon although, for failure to comply with the licensing requirement, it is not capacitated to maintain any suit before our courts. Lastly, on this point, we reiterate this Court's rejection of the common procedural tactics of erring local companies which, when sued by unlicensed foreign corporations not engaged in business in the Philippines, invoke the latter's supposed lack of capacity to sue. The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of public policy. It was never intended to favor nor insulate from suit unscrupulous establishments or nationals in case of breach of valid obligations or violation of legal rights of 35 unsuspecting foreign firms or entities simply because they are not licensed to do business in the country. II We now proceed to the main issue of the retroactive application to the present controversy of the ruling in20th 36 Century Fox Film Corporation vs. Court of Appeals, et al., promulgated on August 19, 1988, that for the determination of probable cause to support the issuance of a search warrant in copyright infringement cases involving videograms, the production of the master tape for comparison with the allegedly pirate copies is necessary. Petitioners assert that the issuance of a search warrant is addressed to the discretion of the court subject to the determination of probable cause in accordance with the procedure prescribed therefore under Sections 3 and 4 of Rule 126. As of the time of the application for the search warrant in question, the controlling criterion for the 3 finding of probable cause was that enunciated in Burgos vs. Chief of Staff 7 stating that: Probable cause for a search warrant is defined as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched. According to petitioners, after complying with what the law then required, the lower court determined that there was probable cause for the issuance of a search warrant, and which determination in fact led to the issuance and service on December 14, 1987 of Search Warrant No. 87-053. It is further argued that any search warrant so issued in accordance with all applicable legal requirements is valid, for the lower court could not possibly have been expected to apply, as the basis for a finding of probable cause for the issuance of a search warrant in copyright infringement cases involving videograms, a pronouncement which was not existent at the time of such determination, on December 14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on August 19, 1988, or over eight months later. Private respondents predictably argue in support of the ruling of the Court of Appeals sustaining the quashal of the search warrant by the lower court on the strength of that 20th Century Fox ruling which, they claim, goes into the very essence of probable cause. At the time of the issuance of the search warrant involved here, although the 20th Century Fox case had not yet been decided, Section 2, Article III of the Constitution and Section 3, Rule 126 of the 1985 Rules on Criminal Procedure embodied the prevailing and governing law on the matter. The ruling in 20th Century Fox was merely an application of the law on probable cause. Hence, they posit that there was no law that was retrospectively applied, since the law had been there all along. To refrain from applying the 20th Century Fox ruling, which had supervened as a doctrine promulgated at the time of the resolution of private respondents' motion for reconsideration seeking the quashal of the search warrant for failure of the trial court to require presentation of the master tapes prior to the issuance of the search warrant, would have 38 constituted grave abuse of discretion. Respondent court upheld the retroactive application of the 20th Century Fox ruling by the trial court in resolving petitioners' motion for reconsideration in favor of the quashal of the search warrant, on this renovated thesis: And whether this doctrine should apply retroactively, it must be noted that in the 20th Century Fox case, the lower court quashed the earlier search warrant it issued. On certiorari, the Supreme Court affirmed the quashal on the ground among others that the master tapes or copyrighted films were not presented for comparison with the purchased evidence of the video tapes to determine whether the latter is an unauthorized reproduction of the former. If the lower court in the Century Fox case did not quash the warrant, it is Our view that the Supreme Court would have invalidated the warrant just the same considering the very strict requirement set by the Supreme Court for the determination of "probable cause" in copyright infringement cases as enunciated in

this 20th Century Fox case. This is so because, as was stated by the Supreme Court in the said case, the master tapes and the pirated tapes must be presented for comparison to satisfy the requirement of "probable cause." So it goes back to the very existence of probable 39 cause. . . . Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair play, it is our considered view that the 20th Century Fox ruling cannot be retroactively applied to the instant case to justify the quashal of Search Warrant No. 87-053. Herein petitioners' consistent position that the order of the lower court of September 5, 1988 denying therein defendants' motion to lift the order of search warrant was properly issued, there having been satisfactory compliance with the then prevailing standards under the law for determination of probable cause, is indeed well taken. The lower court could not possibly have expected more evidence from petitioners in their application for a search warrant other than what the law and jurisprudence, then existing and judicially accepted, required with respect to the finding of probable cause. Article 4 of the Civil Code provides that "(l)aws shall have no retroactive effect, unless the contrary is provided. Correlatively, Article 8 of the same Code declares that "(j)udicial decisions applying the laws or the Constitution shall form part of the legal system of the Philippines." Jurisprudence, in our system of government, cannot be considered as an independent source of law; it cannot 40 create law. While it is true that judicial decisions which apply or interpret the Constitution or the laws are part of the legal system of the Philippines, still they are not laws. Judicial decisions, though not laws, are nonetheless evidence of what the laws mean, and it is for this reason that they are part of the legal system of the 41 Philippines. Judicial decisions of the Supreme Court assume the same authority as the statute 42 itself. Interpreting the aforequoted correlated provisions of the Civil Code and in light of the above disquisition, this 43 Court emphatically declared in Co vs. Court of Appeals, et al. that the principle of prospectivity applies not only to original or amendatory statutes and administrative rulings and circulars, but also, and properly so, to judicial 44 decisions. Our holding in the earlier case of People vs. Jabinal echoes the rationale for this judicial declaration, viz.: Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, and this is the reason why under Article 8 of the New Civil Code, "Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system." The interpretation upon a law by this Court constitutes, in a way, a part of the law as of the date that the law was originally passed, since this Court's construction merely establishes the contemporaneous legislative intent that the law thus construed intends to effectuate. The settled rule supported by numerous authorities is a restatement of the legal maxim "legis interpretatio legis vim obtinet" — the interpretation placed upon the written law by a competent court has the force of law. . . . , but when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply to parties who had relied on the old doctrine and acted on the faith thereof . . . . (Emphasis supplied). This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et al.,

45

where the Court expounded:

. . . . But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. . . . . 46

The reasoning behind Senarillos vs. Hermosisima that judicial interpretation of a statute constitutes part of the law as of the date it was originally passed, since the Court's construction merely establishes the contemporaneous legislative intent that the interpreted law carried into effect, is all too familiar. Such judicial doctrine does not amount to the passage of a new law but consists merely of a construction or interpretation of a pre-existing one, and that is precisely the situation obtaining in this case. It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different

view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively 4 and should not apply to parties who relied on the old doctrine and acted in good faith. 7 To hold otherwise would be to deprive the law of its quality of fairness and justice then, if there is no recognition of what had transpired 48 prior to such adjudication. There is merit in petitioners' impassioned and well-founded argumentation: The case of 20th Century Fox Film Corporation vs. Court of Appeals, et al., 164 SCRA 655 (August 19, 1988) (hereinafter 20th Century Fox) was inexistent in December of 1987 when Search Warrant 87-053 was issued by the lower court. Hence, it boggles the imagination how the lower court could be expected to apply the formulation of 20th Century Fox in finding probable cause when the formulation was yet nonexistent. xxx xxx xxx In short, the lower court was convinced at that time after conducting searching examination questions of the applicant and his witnesses that "an offense had been committed and that the objects sought in connection with the offense (were) in the place sought to be searched" (Burgos v. Chief of Staff, et al., 133 SCRA 800). It is indisputable, therefore, that at the time of the application, or on December 14, 1987, the lower court did not commit any error nor did it fail to comply with any legal requirement for the valid issuance of search warrant. . . . (W)e believe that the lower court should be considered as having followed the requirements of the law in issuing Search Warrant No. 87-053. The search warrant is therefore valid and binding. It must be noted that nowhere is it found in the allegations of the Respondents that the lower court failed to apply the law as then interpreted in 1987. Hence, we find it absurd that it is (sic) should be seen otherwise, because it is simply impossible to have required the lower court to apply a formulation which will only be defined six months later. Furthermore, it is unjust and unfair to require compliance with legal and/or doctrinal requirements which are inexistent at the time they were supposed to have been complied with. xxx xxx xxx . . . If the lower court's reversal will be sustained, what encouragement can be given to courts and litigants to respect the law and rules if they can expect with reasonable certainty that upon the passage of a new rule, their conduct can still be open to question? This certainly breeds instability in our system of dispensing justice. For Petitioners who took special effort to redress their grievances and to protect their property rights by resorting to the remedies provided by the law, it is most unfair that fealty to the rules and procedures then obtaining would bear but fruits of 49 injustice. Withal, even the proposition that the prospectivity of judicial decisions imports application thereof not only to future cases but also to cases still ongoing or not yet final when the decision was promulgated, should not be countenanced in the jural sphere on account of its inevitably unsettling repercussions. More to the point, it is felt that the reasonableness of the added requirement in 20th Century Fox calling for the production of the master tapes of the copyrighted films for determination of probable cause in copyright infringement cases needs revisiting and clarification. It will be recalled that the 20th Century Fox case arose from search warrant proceedings in anticipation of the filing of a case for the unauthorized sale or renting out of copyrighted films in videotape format in violation of Presidential Decree No. 49. It revolved around the meaning of probable cause within the context of the constitutional provision against illegal searches and seizures, as applied to copyright infringement cases involving videotapes. Therein it was ruled that — The presentation of master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time

of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant. For a closer and more perspicuous appreciation of the factual antecedents of 20th Century Fox, the pertinent portions of the decision therein are quoted hereunder, to wit: In the instant case, the lower court lifted the three questioned search warrants against the private respondents on the ground that it acted on the application for the issuance of the said search warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its questioned order dated January 2, 1986: According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact. On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from master tapes allegedly belonging to the Twentieth Century Fox, because, according to him it is of his personal knowledge. At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified that when the complaint for infringement was brought to the NBI, the master tapes of the allegedly pirated tapes were shown to him and he made comparisons of the tapes with those purchased by their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were not shown to the Court during the application gives some misgivings as to the truth of that bare statement of the NBI agent on the witness stand. Again as the application and search proceedings is a prelude to the filing of criminal cases under PD 49, the copyright infringement law, and although what is required for the issuance thereof is merely the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time-honored precept that proceedings to put a man to task as an offender under our laws should be interpreted in strictissimi juris against the government and liberally in favor of the alleged offender. xxx xxx xxx This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of Rights in our 1973 Constitution. So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and were compared to the purchased and seized video tapes from the respondents' establishments, it should be dismissed as not supported by competent evidence and for

that matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein. But the glaring fact is that "Cocoon," the first video tape mentioned in the search warrant, was not even duly registered or copyrighted in the Philippines. (Annex C of Opposition p. 152 record.) So, that lacking in the requisite presentation to the Court of an alleged master tape for purposes of comparison with the purchased evidence of the video tapes allegedly pirated and those seized from respondents, there was no way to determine whether there really was piracy, or copying of the film of the complainant Twentieth Century Fox. xxx xxx xxx The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable cause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who acted as witnesses did not have personal knowledge of the subject matter of their testimony which was the alleged commission of the offense by the private respondents. Only the petitioner's counsel who was also a witness during the application for the issuance of the search warrants stated that he had personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes taken from master tapes belonging to the petitioner. However, the lower court did not give much credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were not shown to the court during the application (Emphasis ours). The italicized passages readily expose the reason why the trial court therein required the presentation of the master tapes of the allegedly pirated films in order to convince itself of the existence of probable cause under the factual milieu peculiar to that case. In the case at bar, respondent appellate court itself observed: We feel that the rationale behind the aforequoted doctrine is that the pirated copies as well as the master tapes, unlike the other types of personal properties which may be seized, were available for presentation to the court at the time of the application for a search warrant to determine the existence of the linkage of the copyrighted films with the pirated ones. Thus, there is no reason not the present them (Emphasis 50 supplied ). In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the pirated copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. Judicial dicta should always be construed within the factual matrix of their parturition, otherwise a careless interpretation thereof could unfairly fault the writer with the vice of overstatement and the reader with the fallacy of undue generalization. In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search warrant with the lower 51 52 court following a formal complaint lodged by petitioners, judging from his affidavit and his deposition, did testify on matters within his personal knowledge based on said complaint of petitioners as well as his own investigation and surveillance of the private respondents' video rental shop. Likewise, Atty. Rico V. Domingo, in 53 54 his capacity as attorney-in-fact, stated in his affidavit and further expounded in his deposition that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the purpose of selling any of the copyrighted films. Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene C. Baltazar, a private researcher retained by Motion Pictures Association of America, Inc. (MPAA, Inc.), who was likewise presented as a witness 55 during the search warrant proceedings. The records clearly reflect that the testimonies of the abovenamed witnesses were straightforward and stemmed from matters within their personal knowledge. They displayed none of the ambivalence and uncertainty that the witnesses in the 20th Century Fox case exhibited. This categorical forthrightness in their statements, among others, was what initially and correctly convinced the trial court to make a finding of the existence of probable cause. There is no originality in the argument of private respondents against the validity of the search warrant, obviously borrowed from 20th Century Fox, that petitioners' witnesses — NBI Agent Lauro C. Reyes, Atty. Rico V. Domingo

and Rene C. Baltazar — did not have personal knowledge of the subject matter of their respective testimonies and that said witnesses' claim that the video tapes were pirated, without stating the manner by which these were 56 pirated, is a conclusion of fact without basis. The difference, it must be pointed out, is that the records in the present case reveal that (1) there is no allegation of misrepresentation, much less a finding thereof by the lower court, on the part of petitioners' witnesses; (2) there is no denial on the part of private respondents that the tapes seized were illegitimate copies of the copyrighted ones not have they shown that they were given any authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer for sale, lease, distribution or circulation the said video tapes; and (3) a discreet but extensive surveillance of the suspected area was undertaken by petitioners' witnesses sufficient to enable them to execute trustworthy affidavits and depositions regarding matters discovered in the course thereof and of which they have personal knowledge. It is evidently incorrect to suggest, as the ruling in 20th Century Fox may appear to do, that in copyright infringement cases, the presentation of master tapes of the copyrighted films is always necessary to meet the requirement of probable cause and that, in the absence thereof, there can be no finding of probable cause for the issuance of a search warrant. It is true that such master tapes are object evidence, with the merit that in this class of evidence the ascertainment of the controverted fact is made through demonstrations involving the direct use of 5 the senses of the presiding magistrate. 7 Such auxiliary procedure, however, does not rule out the use of testimonial or documentary evidence, depositions, admissions or other classes of evidence tending to prove 58 the factum probandum, especially where the production in court of object evidence would result in delay, 59 inconvenience or expenses out of proportion to its evidentiary value. Of course, as a general rule, constitutional and statutory provisions relating to search warrants prohibit their issuance except on a showing of probable cause, supported by oath or affirmation. These provisions prevent the issuance of warrants on loose, vague, or doubtful bases of fact, and emphasize the purpose to protect against all 60 general searches. Indeed, Article III of our Constitution mandates in Sec. 2 thereof that no search warrant shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized; and Sec. 3 thereof provides that any evidence obtained in violation of the preceding section shall be inadmissible for any purpose in any proceeding. These constitutional strictures are implemented by the following provisions of Rule 126 of the Rules of Court: Sec. 3. Requisites for issuing search warrant. — A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized. Sec. 4. Examination of complainant; record. — The judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath the complainant and any witnesses he may produce on facts personally known to them and attach to the record their sworn statements together with any affidavits submitted. Sec. 5. Issuance and form of search warrant. — If the judge is thereupon satisfied of the existence of facts upon which the application is based, or that there is probable cause to believe that they exist, he must issue the warrant, which must be substantially in the form prescribed by these Rules. The constitutional and statutory provisions of various jurisdictions requiring a showing of probable cause before a search warrant can be issued are mandatory and must be complied with, and such a showing has been held to be an unqualified condition precedent to the issuance of a warrant. A search warrant not based on probable cause is 61 a nullity, or is void, and the issuance thereof is, in legal contemplation, arbitrary. It behooves us, then, to review the concept of probable cause, firstly, from representative holdings in the American jurisdiction from which we patterned our doctrines on the matter. Although the term "probable cause" has been said to have a well-defined meaning in the law, the term is exceedingly difficult to define, in this case, with any degree of precision; indeed, no definition of it which would justify the issuance of a search warrant can be formulated which would cover every state of facts which might arise, and no formula or standard, or hard and fast rule, may be laid down which may be applied to the facts of 62 63 every situation. As to what acts constitute probable cause seem incapable of definition. There is, of necessity, 64 no exact test.

At best, the term "probable cause" has been understood to mean a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in the belief that the person accused is 65 guilty of the offense with which he is charged; or the existence of such facts and circumstances as would excite an honest belief in a reasonable mind acting on all the facts and circumstances within the knowledge of the 66 magistrate that the charge made by the applicant for the warrant is true. Probable cause does not mean actual and positive cause, nor does it import absolute certainty. The determination of the existence of probable cause is not concerned with the question of whether the offense charged has been or is being committed in fact, or whether the accused is guilty or innocent, but only whether the affiant has 6 reasonable grounds for his belief. 7 The requirement is less than certainty or proof , but more than suspicion or 68 possibility. In Philippine jurisprudence, probable cause has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the 69 objects sought in connection with the offense are in the place sought to be searched. It being the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as practicable after the application therefor is 70 filed, the facts warranting the conclusion of probable cause must be assessed at the time of such judicial determination by necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter. As already stated, the definition of probable cause enunciated in Burgos, Sr. vs. Chief of Staff, et al., supra,vis-avis the provisions of Sections 3 and 4 of Rule 126, were the prevailing and controlling legal standards, as they continue to be, by which a finding of probable cause is tested. Since the propriety of the issuance of a search warrant is to be determined at the time of the application therefor, which in turn must not be too remote in time from the occurrence of the offense alleged to have been committed, the issuing judge, in determining the existence of probable cause, can and should logically look to the touchstones in the laws theretofore enacted and the decisions already promulgated at the time, and not to those which had not yet even been conceived or formulated. It is worth noting that neither the Constitution nor the Rules of Court attempt to define probable cause, obviously for the purpose of leaving such matter to the court's discretion within the particular facts of each case. Although the Constitution prohibits the issuance of a search warrant in the absence of probable cause, such constitutional inhibition does not command the legislature to establish a definition or formula for determining what shall 71 constitute probable cause. Thus, Congress, despite its broad authority to fashion standards of reasonableness 72 for searches and seizures, does not venture to make such a definition or standard formulation of probable cause, nor categorize what facts and circumstances make up the same, much less limit the determination thereof to and within the circumscription of a particular class of evidence, all in deference to judicial discretion and 73 probity. Accordingly, to restrict the exercise of discretion by a judge by adding a particular requirement (the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the law for a finding of probable cause is beyond the realm of judicial competence or statesmanship. It serves no purpose but to stultify and constrict the judicious exercise of a court's prerogatives and to denigrate the judicial duty of determining the existence of probable cause to a mere ministerial or mechanical function. There is, to repeat, no law or rule which requires that the existence of probable cause is or should be determined solely by a specific kind of evidence. Surely, this could not have been contemplated by the framers of the Constitution, and we do not believe that the Court intended the statement in 20th Century Fox regarding master tapes as the dictum for all seasons and reasons in infringement cases. Turning now to the case at bar, it can be gleaned from the records that the lower court followed the prescribed procedure for the issuance of a search warrant: (1) the examination under oath or affirmation of the complainant and his witnesses, with them particularly describing the place to be searched and the things to be seized; (2) an examination personally conducted by the judge in the form of searching questions and answers, in writing and under oath of the complainant and witnesses on facts personally known to them; and, (3) the taking of sworn statements, together with the affidavits submitted, which were duly attached to the records. Thereafter, the court a quo made the following factual findings leading to the issuance of the search warrant now subject of this controversy:

In the instant case, the following facts have been established: (1) copyrighted video tapes bearing titles enumerated in Search Warrant No. 87-053 were being sold, leased, distributed or circulated, or offered for sale, lease, distribution, or transferred or caused to be transferred by defendants at their video outlets, without the written consent of the private complainants or their assignee; (2) recovered or confiscated from defendants' possession were video tapes containing copyrighted motion picture films without the authority of the complainant; (3) the video tapes originated from spurious or unauthorized persons; and (4) said video tapes were exact reproductions of the films listed in the search warrant whose copyrights or distribution rights were owned by complainants. The basis of these facts are the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Atty. Rico V. Domingo, and Rene C. Baltazar. Motion Pictures Association of America, Inc. (MPAA) thru their counsel, Atty. Rico V. Domingo, filed a complaint with the National Bureau of Investigation against certain video establishments one of which is defendant, for violation of PD No. 49 as amended by PD No. 1988. Atty. Lauro C. Reyes led a team to conduct discreet surveillance operations on said video establishments. Per information earlier gathered by Atty. Domingo, defendants were engaged in the illegal sale, rental, distribution, circulation or public exhibition of copyrighted films of MPAA without its written authority or its members. Knowing that defendant Sunshine Home Video and its proprietor, Mr. Danilo Pelindario, were not authorized by MPAA to reproduce, lease, and possess for the purpose of selling any of its copyrighted motion pictures, instructed his researcher, Mr. Rene Baltazar to rent two video cassettes from said defendants on October 21, 1987. Rene C. Baltazar proceeded to Sunshine Home Video and rented tapes containing Little Shop of Horror. He was issued rental slip No. 26362 dated October 21, 1987 for P10.00 with a deposit of P100.00. Again, on December 11, 1987, the returned to Sunshine Home Video and rented Robocop with rental slip No. 25271 also for P10.00: On the basis of the complaint of MPAA thru counsel, Atty. Lauro C. Reyes personally went to Sunshine Home Video at No. 6 Mayfair Center, Magallanes Commercial Center, Makati. His last visit was on December 7, 1987. There, he found the video outlet renting, leasing, distributing video cassette tapes whose titles were copyrighted and without the authority of MPAA. Given these facts, a probable cause exists. . . .

74

The lower court subsequently executed a volte-face, despite its prior detailed and substantiated findings, by stating in its order of November 22, 1988 denying petitioners' motion for reconsideration and quashing the search warrant that — . . . The two (2) cases have a common factual milieu; both involve alleged pirated copyrighted films of private complainants which were found in the possession or control of the defendants. Hence, the necessity of the presentation of the master tapes from which the pirated films were allegedly copied is 75 necessary in the instant case, to establish the existence of probable cause. Being based solely on an unjustifiable and improper retroactive application of the master tape requirement generated by 20th Century Fox upon a factual situation completely different from that in the case at bar, and without anything more, this later order clearly defies elemental fair play and is a gross reversible error. In fact, this observation of the Court in La Chemise Lacoste, S.A. vs. Fernandez, et al., supra, may just as easily apply to the present case: A review of the grounds invoked . . . 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. . . . As correctly pointed out by petitioners, a blind espousal of the requisite of presentation of the master tapes in copyright infringement cases, as the prime determinant of probable cause, is too exacting and impracticable a requirement to be complied with in a search warrant application which, it must not be overlooked, is only an ancillary proceeding. Further, on realistic considerations, a strict application of said requirement militates against the elements of secrecy and speed which underlie covert investigative and surveillance operations in police enforcement campaigns against all forms of criminality, considering that the master tapes of a motion picture required to be presented before the court consists of several reels contained in circular steel casings which, because of their bulk, will definitely draw attention, unlike diminutive objects like video tapes which can be easily 76 concealed. With hundreds of titles being pirated, this onerous and tedious imposition would be multiplied a hundredfold by judicial fiat, discouraging and preventing legal recourses in foreign jurisdictions.

Given the present international awareness and furor over violations in large scale of intellectual property rights, calling for transnational sanctions, it bears calling to mind the Court's admonition also in La Chemise Lacoste, supra, that — . . . . 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. III 7

The amendment to Section 56 of Presidential Decree No. 49 by Presidential Decree No. 1987, 7 which should here be publicized judicially, brought about the revision of its penalty structure and enumerated additional acts considered violative of said decree on intellectual property, namely, (1) directly or indirectly transferring or causing to be transferred any sound recording or motion picture or other audio-visual works so recorded with intent to sell, lease, publicly exhibit or cause to be sold, leased or publicly exhibited, or to use or cause to be used for profit such articles on which sounds, motion pictures, or other audio-visual works are so transferred without the written consent of the owner or his assignee; (2) selling, leasing, distributing, circulating, publicly exhibiting, or offering for sale, lease, distribution, or possessing for the purpose of sale, lease, distribution, circulation or public exhibition any of the abovementioned articles, without the written consent of the owner or his assignee; and, (3) directly or indirectly offering or making available for a fee, rental, or any other form of compensation any equipment, machinery, paraphernalia or any material with the knowledge that such equipment, machinery, paraphernalia or material will be used by another to reproduce, without the consent of the owner, any phonograph record, disc, wire, tape, film or other article on which sounds, motion pictures or other audio-visual recordings may be transferred, and which provide distinct bases for criminal prosecution, being crimes independently punishable under Presidential Decree No. 49, as amended, aside from the act of infringing or aiding or abetting such infringement under Section 29. The trial court's finding that private respondents committed acts in blatant transgression of Presidential Decree No. 49 all the more bolsters its findings of probable cause, which determination can be reached even in the absence of master tapes by the judge in the exercise of sound discretion. The executive concern and resolve expressed in the foregoing amendments to the decree for the protection of intellectual property rights should be matched by corresponding judicial vigilance and activism, instead of the apathy of submitting to technicalities in the face of ample evidence of guilt. The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of the 78 copyright. A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know what works he was indirectly copying, or did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at his peril. In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute a 79 piracy. The question of whether there has been an actionable infringement of a literary, musical, or artistic work 80 in motion pictures, radio or television being one of fact, it should properly be determined during the trial. That is the stage calling for conclusive or preponderating evidence, and not the summary proceeding for the issuance of a search warrant wherein both lower courts erroneously require the master tapes. In disregarding private respondent's argument that Search Warrant No. 87-053 is a general warrant, the lower court observed that "it was worded in a manner that the enumerated seizable items bear direct relation to the offense of violation of Sec. 56 of PD 49 as amended. It authorized only the seizur(e) of articles used or intended 81 to be used in the unlawful sale, lease and other unconcerted acts in violation of PD 49 as amended. . . . On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al.,

82

instructs and enlightens:

A search warrant may be said to particularly describe the things to be seized when the description therein is as specific as the circumstances will ordinarily allow (People vs. Rubio, 57 Phil. 384); or when the description expresses a conclusion of fact — not of law — by which the warrant officer may be guided in making the search and seizure (idem., dissent of Abad Santos, J.,); or when the things described are limited to those which bear direct relation to the offense for which the warrant is being issued (Sec 2, Rule 126, Revised Rules of Court). . . . If the articles desired to be seized have any direct relation to an offense committed, the applicant must necessarily have some evidence, other than those articles, to prove the said offense; and the articles subject of search and seizure should come in handy merely to strengthen such evidence. . . . On private respondents' averment that the search warrant was made applicable to more than one specific offense on the ground that there are as many offenses of infringement as there are rights protected and, therefore, to issue one search warrant for all the movie titles allegedly pirated violates the rule that a search warrant must be issued only in connection with one specific offense, the lower court said: . . . . As the face of the search warrant itself indicates, it was issued for violation of Section 56, PD 49 as amended only. The specifications therein (in Annex A) merely refer to the titles of the copyrighted motion pictures/films belonging to private complainants which defendants were in control/possession for sale, 83 lease, distribution or public exhibition in contravention of Sec. 56, PD 49 as amended. That there were several counts of the offense of copyright infringement and the search warrant uncovered several contraband items in the form of pirated video tapes is not to be confused with the number of offenses charged. The search warrant herein issued does not violate the one-specific-offense rule. It is pointless for private respondents to insist on compliance with the registration and deposit requirements under Presidential Decree No. 49 as prerequisites for invoking the court's protective mantle in copyright infringement cases. As explained by the court below: Defendants-movants contend that PD 49 as amended covers only producers who have complied with the requirements of deposit and notice (in other words registration) under Sections 49 and 50 thereof. Absent such registration, as in this case, there was no right created, hence, no infringement under PD 49 as amended. This is not well-taken. As correctly pointed out by private complainants-oppositors, the Department of Justice has resolved this legal question as far back as December 12, 1978 in its Opinion No. 191 of the then Secretary of Justice Vicente Abad Santos which stated that Sections 26 and 50 do not apply to cinematographic works and PD No. 49 "had done away with the registration and deposit of cinematographic works" and that "even without prior registration and deposit of a work which may be entitled to protection under the Decree, the creator can file action for infringement of its rights". He cannot demand, however, payment of damages arising from infringement. The same opinion stressed that "the requirements of registration and deposit are thus retained under the Decree, not as conditions for the acquisition of copyright and other rights, but as prerequisites to a suit for damages". The statutory interpretation of the Executive Branch being correct, is entitled (to) weight and respect. xxx xxx xxx Defendants-movants maintain that complainant and his witnesses led the Court to believe that a crime existed when in fact there was none. This is wrong. As earlier discussed, PD 49 as amended, does not require registration and deposit for a creator to be able to file an action for infringement of his rights. These conditions are merely pre-requisites to an action for damages. So, as long as the proscribed acts 84 are shown to exist, an action for infringement may be initiated. 85

Accordingly, the certifications from the Copyright Section of the National Library, presented as evidence by private respondents to show non-registration of some of the films of petitioners, assume no evidentiary weight or significance whatsoever. Furthermore, a closer review of Presidential Decree No. 49 reveals that even with respect to works which are required under Section 26 thereof to be registered and with copies to deposited with the National Library, such as books, including composite and cyclopedic works, manuscripts, directories and gazetteers; and periodicals, including pamphlets and newspapers; lectures, sermons, addresses, dissertations prepared for oral delivery; and

letters, the failure to comply with said requirements does not deprive the copyright owner of the right to sue for infringement. Such non-compliance merely limits the remedies available to him and subjects him to the corresponding sanction. The reason for this is expressed in Section 2 of the decree which prefaces its enumeration of copyrightable works with the explicit statement that "the rights granted under this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works." This means that under the present state of the law, the copyright for a work is acquired by an intellectual creator from the moment of creation even in the absence of registration and deposit. As has been authoritatively clarified: The registration and deposit of two complete copies or reproductions of the work with the National Library within three weeks after the first public dissemination or performance of the work, as provided for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing a copyright of the work, but rather to avoid the penalty for non-compliance of the deposit of said two copies and in order to recover 86 damages in an infringement suit. One distressing observation. This case has been fought on the basis of, and its resolution long delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so much as an attempt to adduce any credible evidence showing that they conduct their business legitimately and fairly. The fact that private respondents could not show proof of their authority or that there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners' copyrighted films immeasurably bolsters the lower court's initial finding of probable cause. That private respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal and civil liability for their unlawful business practices. What is more deplorable is that the reprehensible acts of some unscrupulous characters have stigmatized the Philippines with an unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of the General Agreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts must not be glossed over but should be denounced and repressed lest the Philippines become an international pariah in the global intellectual community. WHEREFORE, the assailed judgment and resolution of respondent Court of Appeals, and necessarily inclusive of the order of the lower court dated November 22, 1988, are hereby REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholding the validity of Search Warrant No. 87-053 is hereby REINSTATED, and said court is DIRECTED to take and expeditiously proceed with such appropriate proceedings as may be called for in this case. Treble costs are further assessed against private respondents. SO ORDERED. Narvasa, C.J., Padilla, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco, Hermosisima, Jr., Panganiban and Torres, Jr., JJ., concur. Bellosillo, J., took no part.

G.R. No. 131522 July 19, 1999 PACITA I. HABANA, ALICIA L. CINCO and JOVITA N. FERNANDO, petitioners, vs. FELICIDAD C. ROBLES and GOODWILL TRADING CO., INC., respondents. PARDO, J.: 1

2

The case before us is a petition for review on certiorari to set aside the (a) decision or the Court of Appeals , and (b) the 3 resolution denying petitioners' motion for reconsideration, in which the appellate court affirmed the trial court's dismissal of the complaint for infringement and/or unfair competition and damages but deleted the award for attorney's fees.1âwphi1.nêt The facts are as follows: Petitioners are authors and copyright owners of duly issued certificates of copyright registration covering their published works, produced through their combined resources and efforts, entitled COLLEGE ENGLISH FOR TODAY (CET for brevity), Books 1 and 2, and WORKBOOK FOR COLLEGE FRESHMAN ENGLISH, Series 1. Respondent Felicidad Robles and Goodwill Trading Co., Inc. are the author/publisher and distributor/seller of another published work entitled "DEVELOPING ENGLISH PROFICIENCY" (DEP for brevity), Books 1 and 2 (1985 edition) which book was covered by copyrights issued to them. In the course of revising their published works, petitioners scouted and looked around various bookstores to check on other textbooks dealing with the same subject matter. By chance they came upon the book of respondent Robles and upon perusal of said book they were surprised to see that the book was strikingly similar to the contents, scheme of presentation, illustrations and illustrative examples in their own book, CET. After an itemized examination and comparison of the two books (CET and DEP), petitioners found that several pages of the respondent's book are similar, if not all together a copy of petitioners' book, which is a case of plagiarism and copyright infringement. Petitioners then made demands for damages against respondents and also demanded that they cease and desist from further selling and distributing to the general public the infringed copies of respondent Robles' works. However, respondents ignored the demands, hence, on July 7, 1988; petitioners filed with the Regional Trial Court, 4 5 Makati, a complaint for "Infringement and/or unfair competition with damages" against private respondents. In the complaint, petitioners alleged that in 1985, respondent Felicidad C. Robles being substantially familiar with the contents of petitioners' works, and without securing their permission, lifted, copied, plagiarized and/or transposed certain portions of their book CET. The textual contents and illustrations of CET were literally reproduced in the book DEP. The plagiarism, incorporation and reproduction of particular portions of the book CET in the book DEP, without the authority or consent of petitioners, and the misrepresentations of respondent Robles that the same was her original work and concept adversely affected and substantially diminished the sale of the petitioners' book and caused them actual damages by way of unrealized income. Despite the demands of the petitioners for respondents to desist from committing further acts of infringement and for respondent to recall DEP from the market, respondents refused. Petitioners asked the court to order the submission of all copies of the book DEP, together with the molds, plates and films and other materials used in its printing destroyed, and for respondents to render an accounting of the proceeds of all sales and profits since the time of its publication and sale. Respondent Robles was impleaded in the suit because she authored and directly committed the acts of infringement complained of, while respondent Goodwill Trading Co., Inc. was impleaded as the publisher and joint co-owner of the copyright certificates of registration covering the two books authored and caused to be published by respondent Robles with obvious connivance with one another. 6

On July 27, 1988, respondent Robles filed a motion for a bill of particulars which the trial court approved on August 17, 1988. Petitioners complied with the desired particularization, and furnished respondent Robles the specific portions,

inclusive of pages and lines, of the published and copyrighted books of the petitioners which were transposed, lifted, copied and plagiarized and/or otherwise found their way into respondent's book. 7

On August 1, 1988, respondent Goodwill Trading Co., Inc. filed its answer to the complaint and alleged that petitioners had no cause of action against Goodwill Trading Co., Inc. since it was not privy to the misrepresentation, plagiarism, incorporation and reproduction of the portions of the book of petitioners; that there was an agreement between Goodwill and the respondent Robles that Robles guaranteed Goodwill that the materials utilized in the manuscript were her own or that she had secured the necessary permission from contributors and sources; that the author assumed sole responsibility and held the publisher without any liability. 8

On November 28, 1988, respondent Robles filed her answer , and denied the allegations of plagiarism and copying that petitioners claimed. Respondent stressed that (1) the book DEP is the product of her independent researches, studies and experiences, and was not a copy of any existing valid copyrighted book; (2) DEP followed the scope and sequence or syllabus which are common to all English grammar writers as recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS), so any similarity between the respondents book and that of the petitioners was due to the orientation of the authors to both works and standards and syllabus; and (3) the similarities may be due to the authors' exercise of the "right to fair use of copyrigthed materials, as guides." Respondent interposed a counterclaim for damages on the ground that bad faith and malice attended the filing of the complaint, because petitioner Habana was professionally jealous and the book DEP replaced CET as the official textbook 9 of the graduate studies department of the Far Eastern University. During the pre-trial conference, the parties agreed to a stipulation of 10 facts and for the trial court to first resolve the issue of infringement before disposing of the claim for damages. After the trial on the merits, on April 23, 1993, the trial court rendered its judgment finding thus: WHEREFORE, premises considered, the court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED; that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for cost of suit. IT IS SO ORDERED. Done in the City of Manila this 23rd day of April, 1993. (s/t) MARVIE R. ABRAHAM SINGSON Assisting Judge S. C. Adm. Order No. 124-92

11

12

On May 14, 1993, petitioners filed their notice of appeal with the trial court , and on July 19, 1993, the court directed its 13 branch clerk of court to forward all the records of the case to the Court of Appeals. In the appeal, petitioners argued that the trial court completely disregarded their evidence and fully subscribed to the arguments of respondent Robles that the books in issue were purely the product of her researches and studies and that the copied portions were inspired by foreign authors and as such not subject to copyright. Petitioners also assailed the 14 findings of the trial court that they were animated by bad faith in instituting the complaint. On June 27, 1997, the Court of Appeals rendered judgment in favor of respondents Robles and Goodwill Trading Co., Inc. The relevant portions of the decision state: It must be noted, however, that similarity of the allegedly infringed work to the author's or proprietor's copyrighted work does not of itself establish copyright infringement, especially if the similarity results from the fact that both works deal with the same subject or have the same common source, as in this case. Appellee Robles has fully explained that the portion or material of the book claimed by appellants to have been copied or lifted from foreign books. She has duly proven that most of the topics or materials

contained in her book, with particular reference to those matters claimed by appellants to have been plagiarized were topics or matters appearing not only in appellants and her books but also in earlier books on College English, including foreign books, e.i. Edmund Burke's "Speech on Conciliation", Boerigs' "Competence in English" and Broughton's, "Edmund Burke's Collection." xxx xxx xxx Appellant's reliance on the last paragraph on Section II is misplaced. It must be emphasized that they 15 failed to prove that their books were made sources by appellee. The Court of Appeals was of the view that the award of attorneys' fees was not proper, since there was no bad faith on the part of petitioners Habana et al. in instituting the action against respondents. On July 12, 1997, petitioners filed a motion for reconsideration, 17 Resolution dated November 25, 1997.

16

however, the Court of Appeals denied the same in a

Hence, this petition. In this appeal, petitioners submit that the appellate court erred in affirming the trial court's decision. Petitioners raised the following issues: (1) whether or not, despite the apparent textual, thematic and sequential similarity between DEP and CET, respondents committed no copyright infringement; (2) whether or not there wasanimus furandi on the part of respondent when they refused to withdraw the copies of CET from the market despite notice to withdraw the same; and (3) whether or not respondent Robles abused a writer's right to fair use, in violation of Section 11 of 18 Presidential Decree No. 49. We find the petition impressed with merit. The complaint for copyright infringement was filed at the time that Presidential Decree No. 49 was in force. At present, all laws dealing with the protection of intellectual property rights have been consolidated and as the law now stands, the protection of copyrights is governed by Republic Act No. 8293. Notwithstanding the change in the law, the same principles are reiterated in the new law under Section 177. It provides for the copy or economic rights of an owner of a copyright as follows: Sec. 177. Copy or Economic rights. — Subject to the provisions of chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts: 177.1 Reproduction of the work or substanlial portion of the work; 177.2 Dramatization, translation, adaptation, abridgement, arrangement or other transformation of the work; 177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership; 177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; (n) 177.5 Public display of the original or copy of the work; 177.6 Public performance of the work; and 177.7 Other communication to the public of the work The law also provided for the limitations on copyright, thus:

19

Sec. 184.1 Limitations on copyright. — Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: (a) the recitation or performance of a work, once it has been lawfully made accessible to the public, if done privately and free of charge or if made strictly for a charitable or religious institution or society; [Sec. 10(1), P.D. No. 49] (b) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries; Provided, that the source and the name of the author, if appearing on the work are mentioned; (Sec. 11 third par. P.D. 49) xxx xxx xxx (e) The inclusion of a work in a publication, broadcast, or other communication to the public, sound recording of film, if such inclusion is made by way of illustration for teaching purposes and is compatible with fair use: Provided, That the source and the name of the author, if appearing in the work is 20 mentioned; In the above quoted provisions, "work" has reference to literary and artistic creations and this includes books and other 21 literary, scholarly and scientific works. A perusal of the records yields several pages of the book DEP that are similar if not identical with the text of CET. On page 404 of petitioners' Book 1 of College English for Today, the authors wrote: Items in dates and addresses: He died on Monday, April 15, 1975. Miss Reyes lives in 214 Taft Avenue, Manila

22

On page 73 of respondents Book 1 Developing English Today, they wrote: He died on Monday, April 25, 1975. Miss Reyes address is 214 Taft Avenue Manila

23

On Page 250 of CET, there is this example on parallelism or repetition of sentence structures, thus: The proposition is peace. Not peace through the medium of war; not peace to be hunted through the labyrinth of intricate and endless negotiations; not peace to arise out of universal discord, fomented from principle, in all parts of the empire; not peace to depend on the juridical determination of perplexing questions, or the precise marking of the boundary of a complex government. It is simple peace; sought in its natural course, and in its ordinary haunts. It is peace sought in the spirit of peace, and laid in principles purely pacific. — Edmund Burke, "Speech on Criticism."

24

25

On page 100 of the book DEP , also in the topic of parallel structure and repetition, the same example is found in toto. The only difference is that petitioners acknowledged the author Edmund Burke, and respondents did not. In several other pages contained in CET.

26

the treatment and manner of presentation of the topics of DEP are similar if not a rehash of that

We believe that respondent Robles' act of lifting from the book of petitioners substantial portions of discussions and examples, and her failure to acknowledge the same in her book is an infringement of petitioners' copyrights. When is there a substantial reproduction of a book? It does not necessarily require that the entire copyrighted work, or even a large portion of it, be copied. If so much is taken that the value of the original work is substantially diminished, 27 there is an infringement of copyright and to an injurious extent, the work is appropriated. In determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author 28 are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute piracy. The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in the doing by any person, without the consent of the owner of the 29 copyright, of anything the sole right to do which is conferred by statute on the owner of the copyright. The respondents' claim that the copied portions of the book CET are also found in foreign books and other grammar books, and that the similarity between her style and that of petitioners can not be avoided since they come from the same background and orientation may be true. However, in this jurisdiction under Sec 184 of Republic Act 8293 it is provided that: Limitations on Copyright. Notwithstanding the provisions of Chapter V, the following shall not constitute infringement of copyright: xxx xxx xxx (c) The making of quotations from a published work if they are compatible with fair use and only to the extent justified for the purpose, including quotations from newspaper articles and periodicals in the form of press summaries: Provided, That the source and the name of the author, if appearing on the work, are mentioned. A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such cases, did not know whether or not he was infringing any copyright; he at least knew that what he was copying was not his, and he copied at 30 his peril. The next question to resolve is to what extent can copying be injurious to the author of the book being copied. Is it enough that there are similarities in some sections of the books or large segments of the books are the same? In the case at bar, there is no question that petitioners presented several pages of the books CET and DEP that more or less had the same contents. It may be correct that the books being grammar books may contain materials similar as to some technical contents with other grammar books, such as the segment about the "Author Card". However, the numerous pages that the petitioners presented showing similarity in the style and the manner the books were presented and the identical examples can not pass as similarities merely because of technical consideration. The respondents claim that their similarity in style can be attributed to the fact that both of them were exposed to the APCAS syllabus and their respective academic experience, teaching approach and methodology are almost identical because they were of the same background. However, we believe that even if petitioners and respondent Robles were of the same background in terms of teaching experience and orientation, it is not an excuse for them to be identical even in examples contained in their books. The similarities in examples and material contents are so obviously present in this case. How can similar/identical examples not be considered as a mark of copying? We consider as an indicia of guilt or wrongdoing the act of respondent Robles of pulling out from Goodwill bookstores the book DEP upon learning of petitioners' complaint while pharisaically denying petitioners' demand. It was further noted that when the book DEP was re-issued as a revised version, all the pages cited by petitioners to contain portion of their book College English for Today were eliminated.

In cases of infringement, copying alone is not what is prohibited. The copying must produce an "injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners' book materials that were the result of the latter's research work and compilation and misrepresented them as her own. She circulated the book DEP for commercial use did not acknowledged petitioners as her source. Hence, there is a clear case of appropriation of copyrighted work for her benefit that respondent Robles committed. Petitioners' work as authors is the product of their long and assiduous research and for another to represent it as her own is injury enough. In copyrighting books the purpose is to give protection to the intellectual product of an author. This is precisely what the law on copyright protected, under Section 184.1 (b). Quotations from a published work if they are compatible with fair use and only to the extent justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries are allowed provided that the source and the name of the author, if appearing on the work, are mentioned. In the case at bar, the least that respondent Robles could have done was to acknowledge petitioners Habana et. al. as the source of the portions of DEP. The final product of an author's toil is her book. To allow another to copy the book without appropriate acknowledgment is injury enough. WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA-G. R. CV No. 44053 are SET ASIDE. The case is ordered remanded to the trial court for further proceedings to receive evidence of the parties to ascertain the damages caused and sustained by petitioners and to render decision in accordance with the evidence submitted to it. SO ORDERED. Kapunan and Ynares-Santiago, JJ., concur. Davide, Jr., C.J., I dissent, please see dissenting opinion. Melo, J., no part, personal reason. Separate Opinions DAVIDE, JR., C.J., dissenting opinion: I am unable to join the majority view. From the following factual and procedural antecedents, I find no alternative but to sustain both the trial court and the Court of Appeals. On 12 July 1988, HABANA, et al. filed with the trial court a complaint for infringement and unfair competition, with damages against private respondent Felicidad C. Robles (hereafter ROBLES) and her publisher and distributor, Goodwill Trading Co., Inc. (hereafter GOODWILL). The case was docketed as Civil Case No. 88-1317. HABANA, et al. averred in their complaint that they were the co-authors and joint copyright owners of their published 1 works College English for Today, Books 1 and 2 (hereafter CET) and Workbook for College Freshman English, Series 1 ; they discovered that ROBLES' own published works, Developing English Proficiency, Books 1 and 2, (hereafter DEP), published and distributed in 1985, exhibited an uncanny resemblance, if not outright physical similarity, to CET as to content, scheme, sequence of topics and ideas, manner of presentation and illustrative examples; the plagiarism, incorporation and reproduction of particular portions of CET into DEP could not be gainsaid since ROBLES was substantially familiar with CET and the textual asportation was accomplished without their authority and/or consent; ROBLES and GOODWILL jointly misrepresented DEP (over which they shared copyright ownership) "as the former's original published works and concept;" and "notwithstanding formal demands made . . . to cease and desist from the sale and distribution of DEP, [ROBLES and GOODWILL] persistently failed and refused to comply therewith." HABANA et al. then prayed for the court to: (1) order the submission and thereafter the destruction of all copies of DEP, together with the molds, plates, films and other materials used in the printing thereof; (2) require ROBLES and GOODWILL to render an accounting of the sales of the "infringing works from the time of its (sic) inceptive publication up to the time of judgment, as well as the amount of sales and profits . . . derived;" and (3) to enjoin ROBLES and GOODWILL to solidarily pay actual, moral and exemplary damages, as well as attorney's fees and expenses of litigation.

In its Answer, GOODWILL denied culpability since "it had no knowledge or information sufficient to form a belief as to the allegations of plagiarism, incorporation and reproduction" and hence "could not be privy to the same, if (there were) any;" and that in an Agreement with co-defendant ROBLES, the latter would be solely responsible for acts of plagiarism or violations of copyright or any other law, to the extent of answering for any and all damages GOODWILL may suffer. GOODWILL also interposed a compulsory counterclaim against PACITA, et al. and a crossclaim against its co-defendant anchored on the aforementioned Agreement. In her answer, ROBLES asserted that: (1) DEP was the exclusive product of her independent research, studies and experience; (2) DEP, particularly the segments where the alleged literal similitude appeared, were admittedly influenced or inspired by earlier treatises, mostly by foreign authors; but that "influences and/or inspirations from other writers" like the methodology and techniques as to presentation, teaching concept and design, research and orientation which she employed, fell within the ambit of general information, ideas, principles of general or universal knowledge which were commonly and customarily understood as incapable of private and exclusive use, appropriation or copyright; and (3) her works were the result of the legitimate and reasonable exercise of an author's "right to fair use of even copyrighted materials as [a] guide." She further claimed that her various national and regional professional activities in general education, language and literature, as well as her teaching experience in graduate and post graduate education would obviate the remotest possibility of plagiarism. ROBLES likewise suggested that any similarity between DEP and CET as regards scope and sequence could be attributed to "the orientation of the authors to the scope and sequence or syllabus — which incorporates standards known among English grammar book writers — of the subject-matter for Basic Communication Arts recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS)." While the syllabus was admittedly adopted in DEP, she claimed to have treated quite differently in DEP the very ideas, techniques or principles expressed in CET such that neither textbook could be considered a copy or plagiarism of the other. 2

At the pre-trial conference, the parties agreed to a stipulation of facts and for the court to first resolve the issue of infringement before disposing of the claims for damages. After trial on the merits, the trial court rendered its decision in favor of defendants, the dispositive portion of which reads: WHEREFORE, premises considered, the Court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED: that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for costs of suit. IT IS SO ORDERED.

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Noting that the law applicable to the case was Presidential Decree No. 49, the trial court found that HABANA, et al. failed to discharge their onus of proving that ROBLES and GOODWILL committed acts constituting copyright infringement. Moreover, the trial court found that "the cause of action or acts complained of [were] not covered by said decree" as Section 10 thereof barred authors of works already lawfully made accessible to the public from prohibiting the reproductions, translations, adaptations, recitation and performance of the same, while Section 11 allowed the utilization of reproductions, quotations and excerpts of such works. The trial court thus agreed with ROBLES that "the complained acts [were] of general and universal knowledge and use which plaintiffs cannot claim originality or seek redress to the law for protection" and observed that DEP and CET had the same sources, consisting chiefly of earlier works, mostly foreign books. GOODWILL's crossclaim against ROBLES, counterclaim against HABANA, et al. as well as ROBLES' compulsory counterclaim against GOODWILL were all dismissed for lack of factual and legal bases. HABANA, et al. appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 44053. Before said court HABANA, et al., in the main, argued that the trial court totally disregarded their evidence and merely subscribed to ROBLES' arguments. The Court of Appeals, however, likewise disposed of the controversy in favor of ROBLES and 5 GOODWILL. However, the Court of Appeals modified the trial court's decision by reversing the award for attorney's fees. It held that the good faith and sincerity of HABANA, et al. in commencing the action negated the basis therefor. Their motion for reconsideration having been denied for want of cogent reasons, HABANA, et al., instituted this petition. They claim that the Court of Appeals committed reversible error in failing to appreciate: (1) the insuperable evidence and facts admitted and proved demonstrating plagiarism or piracy and instead afforded full weight and credit to ROBLES' matrix of general, hypothetical and sweeping statements and/or defenses; (2) ROBLES' and GOODWILL's animo furandi or intent to appropriate or copy CET with the non-removal of the damaging copies of DEP from the bookstores despite notice to withdraw the same; and (3) the fact that ROBLES abused a writer's right to fair use, in violation of Section 11 of P.D. No.

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49. They invoke Laktaw v. Paglinawan which, they theorize is on all fours with the case at bar. ROBLES contends that appeal by certiorari does not lie in this case for the challenged decision and the trial court's judgment were amply supported by evidence, pertinent laws and jurisprudence. Hence, her counterclaim for moral damages should, therefore, be granted or for us to order the remand of the case to the trial court for reception of evidence on damages. GOODWILL, on its part, stood pat on its disclaimer, with the assertion that no proof was ever introduced. that it co-authored DEP or that it singly or in cabal with ROBLES committed any act constituting copyright infringement. The core issue then is whether or not the Court of Appeals erred in affirming the trial court's judgment that despite the apparent textual, thematic and sequential similarity between DEP and CET, no copyright was committed by ROBLES and GOODWILL. While the complaint, in Civil Case No. 88-1317 was filed during the effectivity of P.D. No. 49, the provisions of the new 8 intellectual property law, R.A. No. 8293, nevertheless bears significance here. It took effect on 1 January 1998, but its Section 239.3 clearly states that its provisions shall apply to works in which copyright protection obtained prior to the effectivity of the Act subsists, provided, however, that the application of the Act shall not result in the diminution of such protection. Also, the philosophy behind both statutes as well as the essential principles of copyright protection and copyright infringement have, to a certain extent, remained the same. A copyright may be accurately defined as the right granted by statute to the proprietor of an intellectual production to its 9 10 exclusive use and enjoyment to the extent specified in the statute. Under Section 177 of R.A. No. 8293, the copy or economic right (copyright and economic right are used interchangeably in the statute) consists of the exclusive right to carry out, authorize or prevent the following acts: 177.1 Reproduction of the work or substantial portion of the work; 177.2 Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work; 177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership; 177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; 177.5 Public display of the original or a copy of the work; 177.6 Public performance of the work; and 177.7 Other communication to the public of the work. "The work," as repeatedly mentioned, refers to the literary and artistic works defined as original intellectual creations in the literary and artistic domain protected from the moment of their creation and enumerated in Section 172.1, which includes 11 books and other literary, scholarly, scientific and artistic works. 12

Stripped in the meantime of its indisputable social and beneficial functions, the use of intellectual property or creations should basically promote the creator or author's personal and economic gain. Hence, the copyright protection extended to the creator should ensure his attainment of some form of personal satisfaction and economic reward from the work he produced. Without conceding the suitability of Laktaw as precedent, the Court there quoted Manresa and explained: He who writes a book, or carves a statute, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of the land has the absolute right to sell it or its fruits. But while the owner of the land, by selling it and its fruits, perhaps fully realizes all its economic value, by receiving its benefits and utilities, which are represented for example, by the price, on the other hand the author of a book, statue or invention does not reap all the benefits and advantages of his own property by disposing of it, for the most important form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies, everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to

reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort 13 made in the production of the book is in no way rewarded. The execution, therefore, of any one or more of the exclusive rights conferred by law on a copyright owner, without his consent, constitutes copyright infringement. In essence, copyright infringement, known in general as "piracy," is a 14 trespass on a domain owned and occupied by a copyright owner; it is violation of a private right protected by law. With the invasion of his property rights, a copyright owner is naturally entitled to seek redress, enforce and hold accountable the defrauder or usurper of said economic rights. Now, did ROBLES and GOODWILL infringe upon the copyright of HABANA et al. by publishing DEP, which the latter alleged to be a reproduction, or in the least, a substantial reproduction of CET? Both the trial court and respondent court found in the negative. I submit they were correct. To constitute infringement, the usurper must have copied or appropriated the "original" work of an author or copyright 15 16 proprietor; absent copying, there can be no infringement of copyright. In turn, a work is deemed by law an original if 17 the author created it by his own skill, labor and judgment. On its part, a copy is that which comes so near to the original so as to give to every person seeing it the idea created by the original. It has been held that the test of copyright infringement is whether an ordinary observer comparing the works can readily see that one has been copied from the 18 19 20 other. A visual comparison of the portions of CET juxtaposed against certain pages of DEP, would inescapably lead to a conclusion that there is a discernible similarity between the two; however, as correctly assessed by respondent court and the lower court, no conclusion, can be drawn that DEP, in legal contemplation, is a copy of CET. Was DEP a substantial reproduction of CET? To constitutes a substantial reproduction, it is not necessary that the entire copyrighted work, or even a large portion of it, be copied, if so much is taken that the value of the original is substantially 21 diminished, or if the labors of the original author are substantially, and to an injurious extent, appropriated. But the similarity of the books here does not amount to an appropriation of a substantial portion of CET. If the existence of 22 substantial similarities does not of itself establish infringement, mere similarities (not substantial similarities) in some sections of the books in question decisively militate against a claim for infringement where the similarities had been convincingly established as proceeding from a number of reasons and/or factors. 1. As both books are grammar books, they inevitably deal with the same subjects typically and ordinarily treated by writers 23 of such genre, e.g., system of book classification, the different kinds of card catalogs and their entries, use of punctuation marks, paragraphs, the characteristics of an effective paragraph, language structure, different parts of a book, etc. These standard subjects fall within the domain of ideas, concepts, universal and general knowledge that have, as 24 admitted by the protagonists here, been in existence for quite a long time. As such, HABANA, et al. cannot demand monopoly, by way of example, in the use of the recognized library classification systems (Dewey Decimal System and the Library of Congress System), or how a book can be divided into parts (frontispiece, title page, copyright page, preface, table of contents, etc.) or to the different headings used in a card catalogue (title card, author card and subject card), since these are of common or general knowledge. Even in this jurisdiction, no protection can be extended to such an idea, procedure, system method or operation, concept, principle, discovery or mere data, even if expressed, explained, 25 illustrated or embodied in a work. 26

2. As found by respondent court, CET and DEP had common sources and materials, such that the particular portions claimed to have been lifted and literally reproduced also appeared in earlier works, mostly by foreign authors. This is clear from the testimony of petitioner Dr. Pacita Habana: Q Let's clarify your position Dra. Habana. When defendants test (sic) showed 10 words similar to yours, you so concluded it was (sic) copied from yours but when I pointed out to you same (sic) words contained in the earlier book of Wills then you earlier in your test in your book (sic) you refused to admit that it was copied from Wills. A Yes, sir. We have never — all 35 words were copied from there. Q But what I am asking how could you conclude that by just similarity of 10 words of defendants words that was copied from yours [sic] and when I point out to you the similarity of that same words from the words earlier than yours (sic) you refused to admit that you copied? A I would like to change the final statement now that in the case of defendant Robles you pointed out her source very clear. She copied it from that book by Wills.

Q So, she did not copy it from yours? A Alright, maybe she did not copy it but definitely it is a pattern of plagerism [sic].

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3. Similarity in orientation and style can likewise be attributed to the exposure of the authors to the APCAS syllabus and their respective academic experience, teaching approaches and methodology. It is not farfetched that they could have even influenced each other as textbook writers. ROBLES and Dr. Pacita Habana were faculty members of the Institute of 28 English of the Far Eastern University from 1964 to 1974. Both were ardent students, researchers, lecturers, textbook writers and teachers of English and grammar. They even used to be on friendly terms with each other, to the extent that Dr. Habana admitted that ROBLES assisted the former in the preparation of her doctoral dissertation. Given their nearidentical academic and professional background, it is natural they would use many expressions and definitions peculiar to teaching English grammar. It comes therefore with no surprise that there are similarities in some parts of the rival books. Indeed, it is difficult to conceive how writers on the same subject matter can very well avoid resorting to common sources 29 of information and materials and employing similar expressions and terms peculiar to the subject they are treating. To illustrate, an excerpt from page 21 of CET reads: Author Card The author card is the main entry card. It contains 1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living; 2. the title of the book, and the subtitle, if there is one; 3. the edition, if it is not the first; 4. the translator or illustrator, if there is any; 5. the imprint which includes the publisher, the place and date of publication; 6. the collation composed of the number of pages, volume, illustrations, and the size of the book; 7. the subjects with which the book deals [sic]; 8. the call number on the upper left-hand corner. Names beginning with Mc, or M are filed in the card catalog as though spelled out as MAC, for example Mc Graw — MacGraw. The same is true of St. and Saint. While a portion of DEP found on page 18 which discusses the author card provides: The author card is the main entry card containing: 1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living; 2. the title of the book, and the subtitle if there is one; 3. the edition, if it is not the first; 4. the translator or illustrator, if any; 5. the imprint which includes the publisher, the place and date of publication;

6. the collation, composed of the number of pages, volume, illustrations, and the size of the book; 7. the subject with which the book deals; and 8. the call number on the upper-left hand corner. Names beginning with MC, or M are filed in the card catalog considered spelled out as MAC, for example: Mcleod-Macleod. This is true also of St. and Saint. The entries found in an author card, having been developed over quite sometime, are expectedly uniform. Hence, HABANA et al. and ROBLES would have no choice but to articulate the terms particular to the entries in an identical manner. I thus find that the ruling of the respondent court is totally supported by the evidence on record. Of doctrinal persuasion is the principle that factual determinations of the Court of Appeals and the trial court are conclusive and binding upon this Court, and the latter will not, as a rule, disturb these findings unless compelling and cogent reasons necessitate a 30 reexamination, if not a reversal, of the same. Tested against this jurisprudential canon, to subject the challenged decision of the Court of Appeals to further scrutiny would be superfluous, if not, improvident. I am not persuaded by the claim of HABANA, et al. that Laktaw is on all fours with and hence applicable to the case at bar. There, this Court disposed that defendant, without the consent of and causing irreparable damage to Laktaw, reproduced the latter's literary work Diccionario Hisapano-Tagalog, and improperly copied the greater part thereof in the work Diccionariong Kastila-Tagalog published by defendant, in violation of Article 7 of the Law of 10 January 1879 on Intellectual Property. This Court anchored its decision on the following observations: (1) [O] the 23,560 Spanish words in the defendant's dictionary . . . only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words; (2) [T]he defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different meanings in Tagalog, given in plaintiffs dictionary, having reproduced, as to some words, everything that appears in the plaintiff's dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are numerous. . .; (3) [T]he printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog are also reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their meanings and equivalents in Tagalog from 31 the plaintiff's dictionary. Plainly, the rationale in Laktaw does not apply in this case. First, aside from an isolated accounting of the number of 32 words supposedly usurped in a segment of DEP from CET, the records do not disclose that all the words allegedly copied were tallied and that the words thus tallied were numerous enough to support a finding of copying. Second, as already conceded, while there is an identity in the manner by which some of the ideas and concepts were articulated, this prescinded from various factors already elucidated. Besides, ROBLES' testimony that she made an independent 33 investigation or research of the original works or authors she consulted was unrebutted; for germane here is the question of whether the alleged infringer could have obtained the same information by going to the same source by her 34 own independent research. ROBLES convinced the trial court and the Court of Appeals on this; thus, we are bound by this factual determination, as likewise explained earlier. Third, reproduction of the printer's errors or the author's blunders and inaccuracies in the infringing copy does not ipso facto constitute copying or plagiarism or infringement, but it is 35 conceded that they are telltale signs that infringement might have been committed. However, the records do not reveal this to be the case. Fourth, the law on intellectual property violated in Laktaw was a world and time apart from R.A. No. 8293 or even P.D. No. 49. Thus, under Article 7 of the Law of 10 January 1879, the Court ruled that nobody could reproduce another person's work without the owner's consent, even merely to annotate or add anything to it, or improve any edition thereof. The more recent laws on intellectual property, however, recognize recent advancements in technology transfer and information dissemination. They thus allow the use of copyrighted materials if compatible with fair use and to the extent justified for the purpose. In particular, the new laws sanction the fair use of copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research and similar

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purposes. Further, the limitations of the exclusive use of copyrighted materials under Sections 10 and 11 of P.D. No. 49 37 in consonance with the principle of fair use have been reproduced and incorporated in the new law. All told, Laktaw is inapplicable.1âwphi1.nêt Fair use has been defined as a privilege to use the copyrighted material in a reasonable manner without the consent of 38 the copyright owner or as copying the theme or ideas rather than their expression. No question of fair or unfair use arises however, if no copying is proved to begin with. This is in consonance with the principle that there can be no 39 infringement if there was no copying. It is only where some form of copying has been shown that it becomes necessary 40 to determine whether it has been carried to an "unfair," that is, illegal, extent. Consequently, there is no reason to address the issue of whether ROBLES abused a writer's right to fair use with the ascertainment that DEP was not a copy or a substantial copy of CET. WHEREFORE, I vote to DENY the petition and to AFFIRM the challenged decision of 27 June 1997 of the Court of Appeals. Separate Opinions DAVIDE, JR., C.J., dissenting opinion: I am unable to join the majority view. From the following factual and procedural antecedents, I find no alternative but to sustain both the trial court and the Court of Appeals. On 12 July 1988, HABANA, et al. filed with the trial court a complaint for infringement and unfair competition, with damages against private respondent Felicidad C. Robles (hereafter ROBLES) and her publisher and distributor, Goodwill Trading Co., Inc. (hereafter GOODWILL). The case was docketed as Civil Case No. 88-1317. HABANA, et al. averred in their complaint that they were the co-authors and joint copyright owners of their published 1 works College English for Today, Books 1 and 2 (hereafter CET) and Workbook for College Freshman English, Series 1 ; they discovered that ROBLES' own published works, Developing English Proficiency, Books 1 and 2, (hereafter DEP), published and distributed in 1985, exhibited an uncanny resemblance, if not outright physical similarity, to CET as to content, scheme, sequence of topics and ideas, manner of presentation and illustrative examples; the plagiarism, incorporation and reproduction of particular portions of CET into DEP could not be gainsaid since ROBLES was substantially familiar with CET and the textual asportation was accomplished without their authority and/or consent; ROBLES and GOODWILL jointly misrepresented DEP (over which they shared copyright ownership) "as the former's original published works and concept;" and "notwithstanding formal demands made . . . to cease and desist from the sale and distribution of DEP, [ROBLES and GOODWILL] persistently failed and refused to comply therewith." HABANA et al. then prayed for the court to: (1) order the submission and thereafter the destruction of all copies of DEP, together with the molds, plates, films and other materials used in the printing thereof; (2) require ROBLES and GOODWILL to render an accounting of the sales of the "infringing works from the time of its (sic) inceptive publication up to the time of judgment, as well as the amount of sales and profits . . . derived;" and (3) to enjoin ROBLES and GOODWILL to solidarily pay actual, moral and exemplary damages, as well as attorney's fees and expenses of litigation. In its Answer, GOODWILL denied culpability since "it had no knowledge or information sufficient to form a belief as to the allegations of plagiarism, incorporation and reproduction" and hence "could not be privy to the same, if (there were) any;" and that in an Agreement with co-defendant ROBLES, the latter would be solely responsible for acts of plagiarism or violations of copyright or any other law, to the extent of answering for any and all damages GOODWILL may suffer. GOODWILL also interposed a compulsory counterclaim against PACITA, et al. and a crossclaim against its co-defendant anchored on the aforementioned Agreement. In her answer, ROBLES asserted that: (1) DEP was the exclusive product of her independent research, studies and experience; (2) DEP, particularly the segments where the alleged literal similitude appeared, were admittedly influenced or inspired by earlier treatises, mostly by foreign authors; but that "influences and/or inspirations from other writers" like the methodology and techniques as to presentation, teaching concept and design, research and orientation which she employed, fell within the ambit of general information, ideas, principles of general or universal knowledge which were commonly and customarily understood as incapable of private and exclusive use, appropriation or copyright; and (3) her works were the result of the legitimate and reasonable exercise of an author's "right to fair use of even copyrighted materials as [a] guide." She further claimed that her various national and regional professional activities in general

education, language and literature, as well as her teaching experience in graduate and post graduate education would obviate the remotest possibility of plagiarism. ROBLES likewise suggested that any similarity between DEP and CET as regards scope and sequence could be attributed to "the orientation of the authors to the scope and sequence or syllabus — which incorporates standards known among English grammar book writers — of the subject-matter for Basic Communication Arts recommended by the Association of Philippine Colleges of Arts and Sciences (APCAS)." While the syllabus was admittedly adopted in DEP, she claimed to have treated quite differently in DEP the very ideas, techniques or principles expressed in CET such that neither textbook could be considered a copy or plagiarism of the other. 2

At the pre-trial conference, the parties agreed to a stipulation of facts and for the court to first resolve the issue of infringement before disposing of the claims for damages. After trial on the merits, the trial court rendered its decision in favor of defendants, the dispositive portion of which reads: WHEREFORE, premises considered, the Court hereby orders that the complaint filed against defendants Felicidad Robles and Goodwill Trading Co., Inc. shall be DISMISSED: that said plaintiffs solidarily reimburse defendant Robles for P20,000.00 attorney's fees and defendant Goodwill for P5,000.00 attorney's fees. Plaintiffs are liable for costs of suit. IT IS SO ORDERED.

3

4

Noting that the law applicable to the case was Presidential Decree No. 49, the trial court found that HABANA, et al. failed to discharge their onus of proving that ROBLES and GOODWILL committed acts constituting copyright infringement. Moreover, the trial court found that "the cause of action or acts complained of [were] not covered by said decree" as Section 10 thereof barred authors of works already lawfully made accessible to the public from prohibiting the reproductions, translations, adaptations, recitation and performance of the same, while Section 11 allowed the utilization of reproductions, quotations and excerpts of such works. The trial court thus agreed with ROBLES that "the complained acts [were] of general and universal knowledge and use which plaintiffs cannot claim originality or seek redress to the law for protection" and observed that DEP and CET had the same sources, consisting chiefly of earlier works, mostly foreign books. GOODWILL's crossclaim against ROBLES, counterclaim against HABANA, et al. as well as ROBLES' compulsory counterclaim against GOODWILL were all dismissed for lack of factual and legal bases. HABANA, et al. appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 44053. Before said court HABANA, et al., in the main, argued that the trial court totally disregarded their evidence and merely subscribed to ROBLES' arguments. The Court of Appeals, however, likewise disposed of the controversy in favor of ROBLES and 5 GOODWILL. However, the Court of Appeals modified the trial court's decision by reversing the award for attorney's fees. It held that the good faith and sincerity of HABANA, et al. in commencing the action negated the basis therefor. Their motion for reconsideration having been denied for want of cogent reasons, HABANA, et al., instituted this petition. They claim that the Court of Appeals committed reversible error in failing to appreciate: (1) the insuperable evidence and facts admitted and proved demonstrating plagiarism or piracy and instead afforded full weight and credit to ROBLES' matrix of general, hypothetical and sweeping statements and/or defenses; (2) ROBLES' and GOODWILL's animo furandi or intent to appropriate or copy CET with the non-removal of the damaging copies of DEP from the bookstores despite notice to withdraw the same; and (3) the fact that ROBLES abused a writer's right to fair use, in violation of Section 11 of P.D. No. 6 7 49. They invoke Laktaw v. Paglinawan which, they theorize is on all fours with the case at bar. ROBLES contends that appeal by certiorari does not lie in this case for the challenged decision and the trial court's judgment were amply supported by evidence, pertinent laws and jurisprudence. Hence, her counterclaim for moral damages should, therefore, be granted or for us to order the remand of the case to the trial court for reception of evidence on damages. GOODWILL, on its part, stood pat on its disclaimer, with the assertion that no proof was ever introduced. that it co-authored DEP or that it singly or in cabal with ROBLES committed any act constituting copyright infringement. The core issue then is whether or not the Court of Appeals erred in affirming the trial court's judgment that despite the apparent textual, thematic and sequential similarity between DEP and CET, no copyright was committed by ROBLES and GOODWILL. While the complaint, in Civil Case No. 88-1317 was filed during the effectivity of P.D. No. 49, the provisions of the new 8 intellectual property law, R.A. No. 8293, nevertheless bears significance here. It took effect on 1 January 1998, but its Section 239.3 clearly states that its provisions shall apply to works in which copyright protection obtained prior to the effectivity of the Act subsists, provided, however, that the application of the Act shall not result in the diminution of such

protection. Also, the philosophy behind both statutes as well as the essential principles of copyright protection and copyright infringement have, to a certain extent, remained the same. A copyright may be accurately defined as the right granted by statute to the proprietor of an intellectual production to its 9 10 exclusive use and enjoyment to the extent specified in the statute. Under Section 177 of R.A. No. 8293, the copy or economic right (copyright and economic right are used interchangeably in the statute) consists of the exclusive right to carry out, authorize or prevent the following acts: 177.1 Reproduction of the work or substantial portion of the work; 177.2 Dramatization, translation, adaptation, abridgment, arrangement or other transformation of the work; 177.3 The first public distribution of the original and each copy of the work by sale or other forms of transfer of ownership; 177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound recording, a computer program, a compilation of data and other materials or a musical work in graphic form, irrespective of the ownership of the original or the copy which is the subject of the rental; 177.5 Public display of the original or a copy of the work; 177.6 Public performance of the work; and 177.7 Other communication to the public of the work. "The work," as repeatedly mentioned, refers to the literary and artistic works defined as original intellectual creations in the literary and artistic domain protected from the moment of their creation and enumerated in Section 172.1, which includes 11 books and other literary, scholarly, scientific and artistic works. 12

Stripped in the meantime of its indisputable social and beneficial functions, the use of intellectual property or creations should basically promote the creator or author's personal and economic gain. Hence, the copyright protection extended to the creator should ensure his attainment of some form of personal satisfaction and economic reward from the work he produced. Without conceding the suitability of Laktaw as precedent, the Court there quoted Manresa and explained: He who writes a book, or carves a statute, or makes an invention, has the absolute right to reproduce or sell it, just as the owner of the land has the absolute right to sell it or its fruits. But while the owner of the land, by selling it and its fruits, perhaps fully realizes all its economic value, by receiving its benefits and utilities, which are represented for example, by the price, on the other hand the author of a book, statue or invention does not reap all the benefits and advantages of his own property by disposing of it, for the most important form of realizing the economic advantages of a book, statue or invention, consists in the right to reproduce it in similar or like copies, everyone of which serves to give to the person reproducing them all the conditions which the original requires in order to give the author the full enjoyment thereof. If the author of a book, after its publication, cannot prevent its reproduction by any person who may want to reproduce it, then the property right granted him is reduced to a very insignificant thing and the effort 13 made in the production of the book is in no way rewarded. The execution, therefore, of any one or more of the exclusive rights conferred by law on a copyright owner, without his consent, constitutes copyright infringement. In essence, copyright infringement, known in general as "piracy," is a 14 trespass on a domain owned and occupied by a copyright owner; it is violation of a private right protected by law. With the invasion of his property rights, a copyright owner is naturally entitled to seek redress, enforce and hold accountable the defrauder or usurper of said economic rights. Now, did ROBLES and GOODWILL infringe upon the copyright of HABANA et al. by publishing DEP, which the latter alleged to be a reproduction, or in the least, a substantial reproduction of CET? Both the trial court and respondent court found in the negative. I submit they were correct. To constitute infringement, the usurper must have copied or appropriated the "original" work of an author or copyright 15 16 proprietor; absent copying, there can be no infringement of copyright. In turn, a work is deemed by law an original if

17

the author created it by his own skill, labor and judgment. On its part, a copy is that which comes so near to the original so as to give to every person seeing it the idea created by the original. It has been held that the test of copyright infringement is whether an ordinary observer comparing the works can readily see that one has been copied from the 18 19 20 other. A visual comparison of the portions of CET juxtaposed against certain pages of DEP, would inescapably lead to a conclusion that there is a discernible similarity between the two; however, as correctly assessed by respondent court and the lower court, no conclusion, can be drawn that DEP, in legal contemplation, is a copy of CET. Was DEP a substantial reproduction of CET? To constitutes a substantial reproduction, it is not necessary that the entire copyrighted work, or even a large portion of it, be copied, if so much is taken that the value of the original is substantially 21 diminished, or if the labors of the original author are substantially, and to an injurious extent, appropriated. But the similarity of the books here does not amount to an appropriation of a substantial portion of CET. If the existence of 22 substantial similarities does not of itself establish infringement, mere similarities (not substantial similarities) in some sections of the books in question decisively militate against a claim for infringement where the similarities had been convincingly established as proceeding from a number of reasons and/or factors. 1. As both books are grammar books, they inevitably deal with the same subjects typically and ordinarily treated by writers 23 of such genre, e.g., system of book classification, the different kinds of card catalogs and their entries, use of punctuation marks, paragraphs, the characteristics of an effective paragraph, language structure, different parts of a book, etc. These standard subjects fall within the domain of ideas, concepts, universal and general knowledge that have, as 24 admitted by the protagonists here, been in existence for quite a long time. As such, HABANA, et al. cannot demand monopoly, by way of example, in the use of the recognized library classification systems (Dewey Decimal System and the Library of Congress System), or how a book can be divided into parts (frontispiece, title page, copyright page, preface, table of contents, etc.) or to the different headings used in a card catalogue (title card, author card and subject card), since these are of common or general knowledge. Even in this jurisdiction, no protection can be extended to such an idea, procedure, system method or operation, concept, principle, discovery or mere data, even if expressed, explained, 25 illustrated or embodied in a work. 26

2. As found by respondent court, CET and DEP had common sources and materials, such that the particular portions claimed to have been lifted and literally reproduced also appeared in earlier works, mostly by foreign authors. This is clear from the testimony of petitioner Dr. Pacita Habana: Q Let's clarify your position Dra. Habana. When defendants test (sic) showed 10 words similar to yours, you so concluded it was (sic) copied from yours but when I pointed out to you same (sic) words contained in the earlier book of Wills then you earlier in your test in your book (sic) you refused to admit that it was copied from Wills. A Yes, sir. We have never — all 35 words were copied from there. Q But what I am asking how could you conclude that by just similarity of 10 words of defendants words that was copied from yours [sic] and when I point out to you the similarity of that same words from the words earlier than yours (sic) you refused to admit that you copied? A I would like to change the final statement now that in the case of defendant Robles you pointed out her source very clear. She copied it from that book by Wills. Q So, she did not copy it from yours? A Alright, maybe she did not copy it but definitely it is a pattern of plagerism [sic].

27

3. Similarity in orientation and style can likewise be attributed to the exposure of the authors to the APCAS syllabus and their respective academic experience, teaching approaches and methodology. It is not farfetched that they could have even influenced each other as textbook writers. ROBLES and Dr. Pacita Habana were faculty members of the Institute of 28 English of the Far Eastern University from 1964 to 1974. Both were ardent students, researchers, lecturers, textbook writers and teachers of English and grammar. They even used to be on friendly terms with each other, to the extent that Dr. Habana admitted that ROBLES assisted the former in the preparation of her doctoral dissertation. Given their nearidentical academic and professional background, it is natural they would use many expressions and definitions peculiar to teaching English grammar. It comes therefore with no surprise that there are similarities in some parts of the rival books. Indeed, it is difficult to conceive how writers on the same subject matter can very well avoid resorting to common sources 29 of information and materials and employing similar expressions and terms peculiar to the subject they are treating.

To illustrate, an excerpt from page 21 of CET reads: Author Card The author card is the main entry card. It contains 1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living; 2. the title of the book, and the subtitle, if there is one; 3. the edition, if it is not the first; 4. the translator or illustrator, if there is any; 5. the imprint which includes the publisher, the place and date of publication; 6. the collation composed of the number of pages, volume, illustrations, and the size of the book; 7. the subjects with which the book deals [sic]; 8. the call number on the upper left-hand corner. Names beginning with Mc, or M are filed in the card catalog as though spelled out as MAC, for example Mc Graw — MacGraw. The same is true of St. and Saint. While a portion of DEP found on page 18 which discusses the author card provides: The author card is the main entry card containing: 1. the author's complete name on the first line, surname first, which may be followed by the date of his birth and death if he is no longer living; 2. the title of the book, and the subtitle if there is one; 3. the edition, if it is not the first; 4. the translator or illustrator, if any; 5. the imprint which includes the publisher, the place and date of publication; 6. the collation, composed of the number of pages, volume, illustrations, and the size of the book; 7. the subject with which the book deals; and 8. the call number on the upper-left hand corner. Names beginning with MC, or M are filed in the card catalog considered spelled out as MAC, for example: Mcleod-Macleod. This is true also of St. and Saint. The entries found in an author card, having been developed over quite sometime, are expectedly uniform. Hence, HABANA et al. and ROBLES would have no choice but to articulate the terms particular to the entries in an identical manner.

I thus find that the ruling of the respondent court is totally supported by the evidence on record. Of doctrinal persuasion is the principle that factual determinations of the Court of Appeals and the trial court are conclusive and binding upon this Court, and the latter will not, as a rule, disturb these findings unless compelling and cogent reasons necessitate a 30 reexamination, if not a reversal, of the same. Tested against this jurisprudential canon, to subject the challenged decision of the Court of Appeals to further scrutiny would be superfluous, if not, improvident. I am not persuaded by the claim of HABANA, et al. that Laktaw is on all fours with and hence applicable to the case at bar. There, this Court disposed that defendant, without the consent of and causing irreparable damage to Laktaw, reproduced the latter's literary work Diccionario Hisapano-Tagalog, and improperly copied the greater part thereof in the work Diccionariong Kastila-Tagalog published by defendant, in violation of Article 7 of the Law of 10 January 1879 on Intellectual Property. This Court anchored its decision on the following observations: (1) [O] the 23,560 Spanish words in the defendant's dictionary . . . only 3,108 words are the defendant's own, or, what is the same thing, the defendant has added only this number of words to those that are in the plaintiff's dictionary, he having reproduced or copied the remaining 20,452 words; (2) [T]he defendant also literally reproduced and copied for the Spanish words in his dictionary, the equivalents, definitions and different meanings in Tagalog, given in plaintiffs dictionary, having reproduced, as to some words, everything that appears in the plaintiff's dictionary for similar Spanish words, although as to some he made some additions of his own. Said copies and reproductions are numerous. . .; (3) [T]he printer's errors in the plaintiff's dictionary as to the expression of some words in Spanish as well as their equivalents in Tagalog are also reproduced, a fact which shows that the defendant, in preparing his dictionary, literally copied those Spanish words and their meanings and equivalents in Tagalog from 31 the plaintiff's dictionary. Plainly, the rationale in Laktaw does not apply in this case. First, aside from an isolated accounting of the number of 32 words supposedly usurped in a segment of DEP from CET, the records do not disclose that all the words allegedly copied were tallied and that the words thus tallied were numerous enough to support a finding of copying. Second, as already conceded, while there is an identity in the manner by which some of the ideas and concepts were articulated, this prescinded from various factors already elucidated. Besides, ROBLES' testimony that she made an independent 33 investigation or research of the original works or authors she consulted was unrebutted; for germane here is the question of whether the alleged infringer could have obtained the same information by going to the same source by her 34 own independent research. ROBLES convinced the trial court and the Court of Appeals on this; thus, we are bound by this factual determination, as likewise explained earlier. Third, reproduction of the printer's errors or the author's blunders and inaccuracies in the infringing copy does not ipso facto constitute copying or plagiarism or infringement, but it is 35 conceded that they are telltale signs that infringement might have been committed. However, the records do not reveal this to be the case. Fourth, the law on intellectual property violated in Laktaw was a world and time apart from R.A. No. 8293 or even P.D. No. 49. Thus, under Article 7 of the Law of 10 January 1879, the Court ruled that nobody could reproduce another person's work without the owner's consent, even merely to annotate or add anything to it, or improve any edition thereof. The more recent laws on intellectual property, however, recognize recent advancements in technology transfer and information dissemination. They thus allow the use of copyrighted materials if compatible with fair use and to the extent justified for the purpose. In particular, the new laws sanction the fair use of copyrighted work for criticism, comment, news reporting, teaching including multiple copies for classroom use, scholarship, research and similar 36 purposes. Further, the limitations of the exclusive use of copyrighted materials under Sections 10 and 11 of P.D. No. 49 37 in consonance with the principle of fair use have been reproduced and incorporated in the new law. All told, Laktaw is inapplicable. Fair use has been defined as a privilege to use the copyrighted material in a reasonable manner without the consent of 38 the copyright owner or as copying the theme or ideas rather than their expression. No question of fair or unfair use arises however, if no copying is proved to begin with. This is in consonance with the principle that there can be no 39 infringement if there was no copying. It is only where some form of copying has been shown that it becomes necessary 40 to determine whether it has been carried to an "unfair," that is, illegal, extent. Consequently, there is no reason to address the issue of whether ROBLES abused a writer's right to fair use with the ascertainment that DEP was not a copy or a substantial copy of CET.1âwphi1.nêt WHEREFORE, I vote to DENY the petition and to AFFIRM the challenged decision of 27 June 1997 of the Court of Appeals.

[G.R. No. 108946. January 28, 1999]

FRANCISCO G. JOAQUIN, JR., and BJ PRODUCTIONS, INC., petitioners, vs. FRANKLIN DRILON GABRIEL ZOSA, WILLIAM ESPOSO, FELIPE MEDINA, JR., and CASEY FRANCISCO, respondents. DECISION MENDOZA, J.: This is a petition for certiorari. Petitioners seek to annul the resolution of the Department of Justice, dated August 12, 1992, in Criminal Case No. Q-92-27854, entitled Gabriel Zosa, et al. v. City Prosecutor of Quezon City and Francisco Joaquin, Jr., and its resolution, dated December 3, 1992, denying petitioner Joaquins motion for reconsideration. Petitioner BJ Productions, Inc. (BJPI) is the holder/grantee of Certificate of Copyright No. M922, dated January 28, 1971, of Rhoda and Me, a dating game show aired from 1970 to 1977. On June 28, 1973, petitioner BJPI submitted to the National Library an addendum to its certificate of copyright specifying the shows format and style of presentation. On July 14, 1991, while watching television, petitioner Francisco Joaquin, Jr., president of BJPI, saw on RPN Channel 9 an episode of Its a Date, which was produced by IXL Productions, Inc. (IXL). On July 18, 1991, he wrote a letter to private respondent Gabriel M. Zosa, president and general manager of IXL, informing Zosa that BJPI had a copyright to Rhoda and Me and demanding that IXL discontinue airing Its a Date. In a letter, dated July 19, 1991, private respondent Zosa apologized to petitioner Joaquin and requested a meeting to discuss a possible settlement. IXL, however, continued airing Its a Date, prompting petitioner Joaquin to send a second letter on July 25, 1991 in which he reiterated his demand and warned that, if IXL did not comply, he would endorse the matter to his attorneys for proper legal action. Meanwhile, private respondent Zosa sought to register IXLs copyright to the first episode of Its a Date for which it was issued by the National Library a certificate of copyright on August 14, 1991. Upon complaint of petitioners, an information for violation of P.D. No. 49 was filed against private respondent Zosa together with certain officers of RPN Channel 9, namely, William Esposo, Felipe Medina, and Casey Francisco, in the Regional Trial Court of Quezon City where it was docketed as Criminal Case No. 92-27854 and assigned to Branch 104 thereof. However, private respondent Zosa sought a review of the resolution of the Assistant City Prosecutor before the Department of Justice. On August 12, 1992, respondent Secretary of Justice Franklin M. Drilon reversed the Assistant City Prosecutors [1] findings and directed him to move for the dismissal of the case against private respondents. Petitioner Joaquin filed a motion for reconsideration, but his motion was denied by respondent Secretary of Justice on December 3, 1992. Hence, this petition. Petitioners contend that: 1. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he invoked nonpresentation of the master tape as being fatal to the existence of probable cause to prove infringement, despite the fact that private respondents never raised the same as a controverted issue. 2. The public respondent gravely abused his discretion amounting to lack of jurisdiction when he arrogated unto himself the determination of what is copyrightable - an issue which is exclusively within the jurisdiction of the regional trial court to assess in a proper proceeding. Both public and private respondents maintain that petitioners failed to establish the existence of probable cause due to their failure to present the copyrighted master videotape of Rhoda and Me. They contend that petitioner BJPIs copyright covers only a specific episode of Rhoda and Me and that the formats or concepts of dating game shows are not covered by copyright protection under P. D. No. 49.

Non-Assignment of Error

Petitioners claim that their failure to submit the copyrighted master videotape of the television show Rhoda and Me was not raised in issue by private respondents during the preliminary investigation and, therefore, it was error for the Secretary of Justice to reverse the investigating prosecutors finding of probable cause on this ground.

A preliminary investigation falls under the authority of the state prosecutor who is given by law the power to direct [2] and control criminal actions. He is, however, subject to the control of the Secretary of Justice. Thus, Rule 112, 4 of the Revised Rules of Criminal Procedure, provides: SEC. 4. Duty of investigating fiscal. - If the investigating fiscal finds cause to hold the respondent for trial, he shall prepare the resolution and corresponding information. He shall certify under oath that he, or as shown by the record, an authorized officer, has personally examined the complainant and his witnesses, that there is reasonable ground to believe that a crime has been committed and that the accused is probably guilty thereof, that the accused was informed of the complaint and of the evidence submitted against him and that he was given an opportunity to submit controverting evidence. Otherwise, he shall recommend dismissal of the complaint. In either case, he shall forward the records of the case to the provincial or city fiscal or chief state prosecutor within five (5) days from his resolution. The latter shall take appropriate action thereon within ten (10) days from receipt thereof, immediately informing the parties of said action. No complaint or information may be filed or dismissed by an investigating fiscal without the prior written authority or approval of the provincial or city fiscal or chief state prosecutor. Where the investigating assistant fiscal recommends the dismissal of the case but his findings are reversed by the provincial or city fiscal or chief state prosecutor on the ground that a probable cause exists, the latter may, by himself, file the corresponding information against the respondent or direct any other assistant fiscal or state prosecutor to do so, without conducting another preliminary investigation. If upon petition by a proper party, the Secretary of Justice reverses the resolution of the provincial or city fiscal or chief state prosecutor, he shall direct the fiscal concerned to file the corresponding information without conducting another preliminary investigation or to dismiss or move for dismissal of the complaint or information. In reviewing resolutions of prosecutors, the Secretary of Justice is not precluded from considering errors, although unassigned, for the purpose of determining whether there is probable cause for filing cases in court. He must make his own finding of probable cause and is not confined to the issues raised by the parties during preliminary investigation. Moreover, his findings are not subject to review unless shown to have been made with grave abuse.

Opinion of the Secretary of Justice

Petitioners contend, however, that the determination of the question whether the format or mechanics of a show is entitled to copyright protection is for the court, and not the Secretary of Justice, to make. They assail the following portion of the resolution of the respondent Secretary of Justice: [T]he essence of copyright infringement is the copying, in whole or in part, of copyrightable materials as defined and enumerated in Section 2 of PD. No. 49. Apart from the manner in which it is actually expressed, however, the idea of a dating game show is, in the opinion of this Office, a non-copyrightable material. Ideas, concepts, formats, or schemes in their abstract form clearly do not fall within the class of works or materials susceptible of copyright [3] registration as provided in PD. No. 49. (Emphasis added.) It is indeed true that the question whether the format or mechanics of petitioners television show is entitled to copyright protection is a legal question for the court to make. This does not, however, preclude respondent Secretary of Justice from making a preliminary determination of this question in resolving whether there is probable cause for filing the case in court. In doing so in this case, he did not commit any grave error.

Presentation of Master Tape

Petitioners claim that respondent Secretary of Justice gravely abused his discretion in ruling that the master videotape should have been presented in order to determine whether there was probable cause for copyright th [4] infringement. They contend that 20 Century Fox Film Corporation v. Court of Appeals, on which respondent Secretary of Justice relied in reversing the resolution of the investigating prosecutor, is inapplicable to the case at bar because in the

present case, the parties presented sufficient evidence which clearly establish linkages between the copyrighted [5] show Rhoda and Me and the infringing TV show Its a Date. th

The case of 20 Century Fox Film Corporation involved raids conducted on various videotape outlets allegedly selling or renting out pirated videotapes. The trial court found that the affidavits of NBI agents, given in support of the application for the search warrant, were insufficient without the master tape. Accordingly, the trial court lifted the search warrants it had previously issued against the defendants. On petition for review, this Court sustained the action of the trial [6] court and ruled: The presentation of the master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioners argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant. This ruling was qualified in the later case of Columbia Pictures, Inc. v. Court of Appeals

[7]

in which it was held:

In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement cases where there is doubt as to the true nexus between the master tape and the pirated copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or [8] similar copyright infringement cases. . . . In the case at bar, during the preliminary investigation, petitioners and private respondents presented written descriptions of the formats of their respective televisions shows, on the basis of which the investigating prosecutor ruled: As may [be] gleaned from the evidence on record, the substance of the television productions complainants RHODA AND ME and Zosas ITS A DATE is that two matches are made between a male and a female, both single, and the two couples are treated to a night or two of dining and/or dancing at the expense of the show. The major concepts of both shows is the same. Any difference appear mere variations of the major concepts. That there is an infringement on the copyright of the show RHODA AND ME both in content and in the execution of the video presentation are established because respondents ITS A DATE is practically an exact copy of complainants RHODA AND ME because of substantial similarities as follows, to wit: RHODA AND ME ITS A DATE Set I Set I a. Unmarried participant a. same of one gender (searcher) appears on one side of a divider, while three (3) unmarried participants of the other gender are on the other side of the divider. This arrangement is done to ensure that the searcher does not see the searchees. b. Searcher asks a question b. same

to be answered by each of the searchees. The purpose is to determine who among the searchees is the most compatible with the searcher. c. Searcher speculates on the c. same match to the searchee. d. Selection is made by the d. Selection is use of compute (sic) methods, based on the or by the way questions are answer of the answered, or similar methods. Searchees. Set 2 Set 2 Same as above with the genders same of the searcher and searchees interchanged.

[9]

Petitioners assert that the format of Rhoda and Me is a product of ingenuity and skill and is thus entitled to copyright protection. It is their position that the presentation of a point-by-point comparison of the formats of the two shows clearly demonstrates the nexus between the shows and hence establishes the existence of probable cause for copyright infringement. Such being the case, they did not have to produce the master tape. [10]

To begin with, the format of a show is not copyrightable. Section 2 of P.D. No. 49, otherwise known as the DECREE ON INTELLECTUAL PROPERTY, enumerates the classes of work entitled to copyright protection, to wit: Section 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works: (A) Books, including composite and cyclopedic works, manuscripts, directories, and gazetteers; (B) Periodicals, including pamphlets and newspapers; (C) Lectures, sermons, addresses, dissertations prepared for oral delivery; (D) Letters; (E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb shows, the acting form of which is fixed in writing or otherwise; (F) Musical compositions, with or without words; (G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of art; models or designs for works of art; (H) Reproductions of a work of art; (I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and other works of applied art; (J) Maps, plans, sketches, and charts; (K) Drawings or plastic works of a scientific or technical character; (L) Photographic works and works produced by a process analogous to photography; lantern slides;

(M) Cinematographic works and works produced by a process analogous to cinematography or any process for making audio-visual recordings; (N) Computer programs; (O) Prints, pictorial illustrations advertising copies, labels, tags, and box wraps; (P) Dramatizations, translations, adaptations, abridgements, arrangements and other alterations of literary, musical or artistic works or of works of the Philippine government as herein defined, which shall be protected as provided in Section 8 of this Decree. (Q) Collections of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree which by reason of the selection and arrangement of their contents constitute intellectual creations, the same to be protected as such in accordance with Section 8 of this Decree. (R) Other literary, scholarly, scientific and artistic works. This provision is substantially the same as 172 of the INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES [11] (R.A. No. 8293). The format or mechanics of a television show is not included in the list of protected works in 2 of P.D. No. 49. For this reason, the protection afforded by the law cannot be extended to cover them. Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with respect to the subjects and by the persons, and on terms and [12] conditions specified in the statute. Since . . . copyright in published works is purely a statutory creation, a copyright may be obtained only for a work falling [13] within the statutory enumeration or description. Regardless of the historical viewpoint, it is authoritatively settled in the United States that there is no copyright [14] except that which is both created and secured by act of Congress . . . . P.D. No. 49, 2, in enumerating what are subject to copyright, refers to finished works and not to concepts. The copyright does not extend to an idea, procedure, process, system, method of operation, concept, principle, or discovery, [15] regardless of the form in which it is described, explained, illustrated, or embodied in such work. Thus, the new INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES provides: Sec. 175. Unprotected Subject Matter. - Notwithstanding the provisions of Sections 172 and 173, no protection shall extend, under this law, to any idea, procedure, system, method or operation, concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated or embodied in a work; news of the day and other miscellaneous facts having the character of mere items of press information; or any official text of a legislative, administrative or legal nature, as well as any official translation thereof. What then is the subject matter of petitioners copyright? This Court is of the opinion that petitioner BJPIs copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within the class of works mentioned in P.D. 49, 2(M), to wit: Cinematographic works and works produced by a process analogous to cinematography or any process for making audiovisual recordings; The copyright does not extend to the general concept or format of its dating game show. Accordingly, by the very nature of the subject of petitioner BJPIs copyright, the investigating prosecutor should have the opportunity to compare the videotapes of the two shows. Mere description by words of the general format of the two dating game shows is insufficient; the presentation of the master videotape in evidence was indispensable to the determination of the existence of probable cause. As aptly observed by respondent Secretary of Justice:

A television show includes more than mere words can describe because it involves a whole spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found by merely describing the general [16] copyright/format of both dating game shows. WHEREFORE, the petition is hereby DISMISSED. SO ORDERED. Puno, Quisumbing, and Buena, JJ., concur. Bellosillo, J., (Chairman), no part due to relation to one of the parties.

[G.R. No. 148222. August 15, 2003]

PEARL & DEAN (PHIL.), INCORPORATED, petitioner, vs. SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INCORPORATED,respondents. DECISION CORONA, J.: In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc. [1] [2] (P & D) assails the May 22, 2001 decision of the Court of Appeals reversing the October 31, 1996 decision of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS The May 22, 2001 decision of the Court of Appeals

[3]

contained a summary of this dispute:

Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of advertising display units simply referred to as light boxes. These units utilize specially printed posters sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to secure a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units. The advertising light boxes were marketed under the trademark Poster Ads. The application for registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology Transfer on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165. From 1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services to manufacture its advertising displays. Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and Dean agreed. On September 11, 1985, Pearl and Deans General Manager, Rodolfo Vergara, submitted for signature the contracts covering SM Cubao and SM Makati to SMIs Advertising Promotions and Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was returned signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding him that their agreement for installation of light boxes was not only for its SM Makati branch, but also for SM Cubao. SMI did not bother to reply. Instead, in a letter dated January 14, 1986, SMIs house counsel informed Pearl and Dean that it was rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply dated February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In the same letter, he pushed for the signing of the contract for SM Cubao. Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to fabricate its display units, offered to construct light boxes for Shoemarts chain of stores. SMI approved the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI. After its contract with Metro Industrial was terminated, SMI engaged the services of EYD Rainbow Advertising Corporation to make the light boxes. Some 300 units were fabricated in 1991. These were delivered on a staggered basis and installed at SM Megamall and SM City. Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out that aside from the two (2) reported SM branches, light boxes similar to those it manufactures were also installed in two (2) other SM stores. It further discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMIs different branches. Pearl and Dean noted that NEMI is a sister company of SMI. In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and NEMI enjoining them to cease using the subject light boxes and to remove the same from SMIs establishments. It also demanded the

discontinued use of the trademark Poster Ads, and the payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos (P20,000,000.00). Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light boxes and NEMI took down its advertisements for Poster Ads from the lighted display units in SMIs stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this instant case for infringement of trademark and copyright, unfair competition and damages. In denying the charges hurled against it, SMI maintained that it independently developed its poster panels using commonly known techniques and available technology, without notice of or reference to Pearl and Deans copyright. SMI noted that the registration of the mark Poster Ads was only for stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word Poster Ads is a generic term which cannot be appropriated as a trademark, and, as such, registration of such mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its complaint since its advertising display units contained no copyright notice, in violation of Section 27 of P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was purely intended to malign SMIs good name. On this basis, SMI, aside from praying for the dismissal of the case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl and Deans Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate of Trademark Registration No. 4165 dated September 12, 1988. NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor having engaged in the business of advertising. It repleaded SMIs averments, admissions and denials and prayed for similar reliefs and counterclaims as SMI. The RTC of Makati City decided in favor of P & D: Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of copyright under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of RA No. 166, as amended, and are hereby penalized under Section 28 of PD 49, as amended, and Sections 23 and 24 of RA 166, as amended. Accordingly, defendants are hereby directed: (1) to pay plaintiff the following damages: (a) actual damages - P16,600,000.00, representing profits derived by defendants as a result of infringement of plaintiffs copyright from 1991 to 1992 (b) moral damages - P1,000.000.00 (c) exemplary damages - P1,000,000.00 (d) attorneys fees - P1,000,000.00 plus (e) costs of suit; (2) to deliver, under oath, for impounding in the National Library, all light boxes of SMI which were fabricated by Metro Industrial Services and EYD Rainbow Advertising Corporation; (3) to deliver, under oath, to the National Library, all filler-posters using the trademark Poster Ads, for destruction; and (4) to permanently refrain from infringing the copyright on plaintiffs light boxes and its trademark Poster Ads. Defendants counterclaims are hereby ordered dismissed for lack of merit. SO ORDERED.

[4]

On appeal, however, the Court of Appeals reversed the trial court: Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a copyrightable class O work, we have to agree with SMI when it posited that what was copyrighted were the technical drawings only, and not the light boxes themselves, thus: 42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellants will not extend to the actual object. It has so been held under jurisprudence, of which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a copyright protection for a book entitled Seldens Condensed Ledger or Bookkeeping Simplified which purported to explain a new system of bookkeeping. Included as part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use in connection with the system explained in the work. These forms showed the entire operation of a day or a week or a month on a single page, or on two pages following each other. The defendant Baker then produced forms which were similar to the forms illustrated in Seldens copyrighted books. The Court held that exclusivity to the actual forms is not extended by a copyright. The reason was that to grant a monopoly in the underlying art when no examination of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters patent, not of copyright. And that is precisely the point. No doubt aware that its alleged original design would never pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by conveniently resorting to a copyright registration which merely employs a recordal system without the benefit of an in-depth examination of novelty. The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled Bridge Approach the drawing showed a novel bridge approach to unsnarl traffic congestion. The defendant constructed a bridge approach which was alleged to be an infringement of the new design illustrated in plaintiffs drawings. In this case it was held that protection of the drawing does not extend to the unauthorized duplication of the object drawn because copyright extends only to the description or expression of the object and not to the object itself. It does not prevent one from using the drawings to construct the object portrayed in the drawing. In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox, 379 F. 2d 84, it was held that there is no copyright infringement when one who, without being authorized, uses a copyrighted architectural plan to construct a structure. This is because the copyright does not extend to the structures themselves. In fine, we cannot find SMI liable for infringing Pearl and Deans copyright over the technical drawings of the latters advertising display units. xxx xxx xxx The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166, as amended, otherwise known as the Trademark Law, which reads: SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrants ownership of the mark or trade-name, and of the registrants exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. (underscoring supplied) The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark Poster Ads with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering the following products: stationeries such as letterheads, envelopes and calling cards and newsletters. With this as factual backdrop, we see no legal basis to the finding of liability on the part of the defendants-appellants for their use of the words Poster Ads, in the advertising display units in suit. Jurisprudence has interpreted Section 20 of the Trademark Law as an implicit permission to a manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the certificate of registration. The Supreme Court further emphasized the restrictive meaning of Section 20 when it stated, through Justice Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. While we do not discount the striking similarity between Pearl and Deans registered trademark and defendants-appellants Poster Ads design, as well as the parallel use by which said words were used in the parties respective advertising copies, we cannot find defendants-appellants liable for infringement of trademark. Poster Ads was registered by Pearl and Dean for specific use in its stationeries, in contrast to defendants-appellants who used the same words in their advertising display units. Why Pearl and Dean limited the use of its trademark to stationeries is simply beyond us. But, having already done so, it must stand by the consequence of the registration which it had caused. xxx xxx xxx We are constrained to adopt the view of defendants-appellants that the words Poster Ads are a simple contraction of the generic term poster advertising. In the absence of any convincing proof that Poster Ads has acquired a secondary meaning in this jurisdiction, we find that Pearl and Deans exclusive right to the use of Poster Ads is limited to what is written in its certificate of registration, namely, stationeries. Defendants-appellants cannot thus be held liable for infringement of the trademark Poster Ads. There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the monetary award granted by the lower court to Pearl and Dean has no leg to stand on. xxx xxx xxx WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is rendered [5] DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit. Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following errors for the Courts consideration: A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI; B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEANS TRADEMARK POSTER ADS WAS COMMITTED BY RESPONDENTS SM AND NEMI; C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TRIAL COURT, DESPITE THE LATTERS FINDING, NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN. D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEYS FEES [6] AND COSTS OF SUIT.

ISSUES In resolving this very interesting case, we are challenged once again to put into proper perspective four main concerns of intellectual property law patents, copyrights, trademarks and unfair competition arising from infringement of any of the first three. We shall focus then on the following issues: (1) if the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection (copyright certificate of registration) by the National Library, is the light box depicted in such engineering drawings ipso facto also protected by such copyright?

(2) or should the light box be registered separately and protected by a patent issued by the Bureau of Patents Trademarks and Technology Transfer (now Intellectual Property Office) in addition to the copyright of the engineering drawings? (3) can the owner of a registered trademark legally prevent others from using such trademark if it is a mere abbreviation of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT Petitioner P & Ds complaint was that SMI infringed on its copyright over the light boxes when SMI had the units manufactured by Metro and EYD Rainbow Advertising for its own account. Obviously, petitioners position was premised on its belief that its copyright over the engineering drawings extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings alone and not to the light box itself. We agree with the appellate court. First, petitioners application for a copyright certificate as well as Copyright Certificate No. PD-R2588 issued by the National Library on January 20, 1981 clearly stated that it was for a class O work under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then prevailing. Said Section 2 expressly enumerated the works subject to copyright: SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any of the following works: xxxxxxxxx (O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps; xxxxxxxxx Although petitioners copyright certificate was entitled Advertising Display Units (which depicted the box-type electrical devices), its claim of copyright infringement cannot be sustained. Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are limited to what the statute confers. It may be obtained and enjoyed only with respect to the subjects and by the persons, [7] and on terms and conditions specified in the statute. Accordingly, it can cover only the works falling within the statutory [8] enumeration or description. P & D secured its copyright under the classification class O work. This being so, petitioners copyright protection extended only to the technical drawings and not to the light box itself because the latter was not at all in the category of prints, pictorial illustrations, advertising copies, labels, tags and box wraps. Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same could have referred only to the technical drawings within the category of [9] pictorial illustrations. It could not have possibly stretched out to include the underlying light box. The strict application of the laws enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its copyright certificate was entitled Advertising Display Units. What the law does not include, it excludes, and for the good reason: the light box was not a literary or artistic piece which could be copyrighted under the copyright law. And no less clearly, neither could the lack of statutory authority to make the light box copyrightable be remedied by the simplistic act of entitling the copyright certificate issued by the National Library as Advertising Display Units. In fine, if SMI and NEMI reprinted P & Ds technical drawings for sale to the public without license from P & D, then no doubt they would have been guilty of copyright infringement. But this was not the case. SMIs and NEMIs acts complained of by P & D were to have units similar or identical to the light box illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for leasing out to different advertisers. Was this an infringement of petitioners copyright over the technical drawings? We do not think so. During the trial, the president of P & D himself admitted that the light box was neither a literary not an artistic work but [10] an engineering or marketing invention. Obviously, there appeared to be some confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and trademarks. In the leading case of Kho vs. Court of [11] Appeals, we ruled that these three legal rights are completely distinct and separate from one another, and the protection afforded by one cannot be used interchangeably to cover items or works that exclusively pertain to the others:

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods(trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT This brings us to the next point: if, despite its manufacture and commercial use of the light boxes without license from petitioner, private respondents cannot be held legally liable for infringement of P & Ds copyright over its technical drawings of the said light boxes, should they be liable instead for infringement of patent? We do not think so either. For some reason or another, petitioner never secured a patent for the light boxes. It therefore acquired no patent rights which could have protected its invention, if in fact it really was. And because it had no patent, petitioner could not legally prevent anyone from manufacturing or commercially using the contraption. In Creser Precision Systems, Inc. vs. [12] Court of Appeals, we held that there can be no infringement of a patent until a patent has been issued, since whatever right one has to the invention covered by the patent arises alone from the grant of patent. x x x (A)n inventor has no common law right to a monopoly of his invention. He has the right to make use of and vend his invention, but if he voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity. A patent, however, gives the inventor the right to exclude all others. As a patentee, he has the exclusive right of making, selling or using the [13] invention. On the assumption that petitioners advertising units were patentable inventions, petitioner revealed them fully to the public by submitting the engineering drawings thereof to the National Library. To be able to effectively and legally preclude others from copying and profiting from the invention, a patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is to bring new designs and [14] technologies into the public domain through disclosure. Ideas, once disclosed to the public without the protection of a [15] valid patent, are subject to appropriation without significant restraint. On one side of the coin is the public which will benefit from new ideas; on the other are the inventors who must be [16] protected. As held in Bauer & Cie vs. ODonnel, The act secured to the inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent others from exercising like privileges without the consent of the patentee. It was passed for the purpose of encouraging useful invention and promoting new and useful inventions by the protection and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the exclusive privileges granted the benefit of such inventions and improvements. The law attempts to strike an ideal balance between the two interests: (The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious advances in technology and design, in return for the exclusive right to practice the invention for a number of years. The inventor may keep his invention secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus [17] enabled to practice it and profit by its use. The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there [18] for the free use of the public. It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth investigation is required because in rewarding a useful invention, the rights and welfare of the community must be fairly dealt with and effectively guarded. To that end, the prerequisites to obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally strictly enforced. To begin with, a genuine invention or discovery must be demonstrated lest in the constant demand for new appliances, the heavy hand of tribute be laid on each slight [19] technological advance in art. There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a [20] person is claiming the creation of a work. The law confers the copyright from the moment of creation and the copyright certificate is issued upon registration with the National Library of a sworn ex-parte claim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright certificate over the technical drawings. Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO) to scrutinize the light boxs eligibility as a patentable invention. The irony here is that, had petitioner secured a patent instead, its exclusivity would have been for 17 years only. But through the simplified procedure of copyright-registration with the National Library without undergoing the rigor of defending the patentability of its invention before the IPO and the public the petitioner would be protected for 50 years. This situation could not have been the intention of the law. [21]

In the oft-cited case of Baker vs. Selden , the United States Supreme Court held that only the expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the copyright of a book which expounded on a new accounting system he had developed. The publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to those illustrated in the plaintiffs copyrighted book. The US Supreme Court ruled that: There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate. The mere statement of the proposition is so evident that it requires hardly any argument to support it. The same distinction may be predicated of every other art as well as that of bookkeeping. A treatise on the composition and use of medicines, be they old or new; on the construction and use of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright; but no one would contend that the copyright of the treatise would give the exclusive right to the art or manufacture described therein. The copyright of the book, if not pirated from other works, would be valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or thing described or explained has nothing to do with the validity of the copyright. To give to the author of the book an exclusive property in the art described therein, when no examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public. That is the province of letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must be subjected to the examination of the Patent Office before an exclusive right therein can be obtained; and a patent from the government can only secure it. The difference between the two things, letters patent and copyright, may be illustrated by reference to the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of great value in the healing art. If the discoverer writes and publishes a book on the subject (as regular physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the mixture as a new art, manufacture or composition of matter. He may copyright his book, if he pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all other inventions or discoveries. The copyright of a book on perspective, no matter how many drawings and illustrations it may contain, gives no exclusive right to the modes of drawing described, though they may never have been known or used before. By publishing the book without getting a patent for the art, the latter is given to the public. xxx Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book intended to convey instruction in the art, any person may practice and use the art itself which he has described and illustrated therein. The use of the art is a totally different thing from a publication of the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to make, sell and use account books prepared upon the plan set forth in such book. Whether the art might or might not have been patented, is a question, which is not before us. It was not patented, and is open and free to the use of the public. And, of course, in using the art, the ruled lines and headings of accounts must necessarily be used as incident to it. The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas produced by the peculiar nature of the art described in the books, which have been made the subject of copyright. In describing the art, the illustrations and diagrams employed happened to correspond more closely than usual with the actual work performed by the operator who uses the art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of the other is use. The former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters patent. (underscoring supplied)

ON THE ISSUE OF TRADEMARK INFRINGEMENT This issue concerns the use by respondents of the mark Poster Ads which petitioners president said was a contraction of poster advertising. P & D was able to secure a trademark certificate for it, but one where the goods [22] specified were stationeries such as letterheads, envelopes, calling cards and newsletters. Petitioner admitted it did not commercially engage in or market these goods. On the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the trademark certificate. Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate [23] Court, where we, invoking Section 20 of the old Trademark Law, ruled that the certificate of registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations specified in the certificate x x x. One who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of [24] a different description. Faberge, Inc. was correct and was in fact recently reiterated in Canon Kabushiki Kaisha vs. [25] Court of Appeals. Assuming arguendo that Poster Ads could validly qualify as a trademark, the failure of P & D to secure a trademark registration for specific use on the light boxes meant that there could not have been any trademark infringement since registration was an essential element thereof.

ON THE ISSUE OF UNFAIR COMPETITION If at all, the cause of action should have been for unfair competition, a situation which was possible even if P & D had [26] no registration. However, while the petitioners complaint in the RTC also cited unfair competition, the trial court did not find private respondents liable therefor. Petitioner did not appeal this particular point; hence, it cannot now revive its claim of unfair competition. But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair competition. By the nature of things, there can be no unfair competition under the law on copyrights although it is applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation as a trademark or tradename may, by long and exclusive use by a business (such that the name or phrase becomes associated with the business or [27] product in the mind of the purchasing public), be entitled to protection against unfair competition. In this case, there was no evidence that P & Ds use of Poster Ads was distinctive or well-known. As noted by the Court of Appeals, petitioners expert witnesses himself had testified that Poster Ads was too generic a name. So it was difficult to identify it with any [28] company, honestly speaking. This crucial admission by its own expert witness that Poster Ads could not be associated with P & D showed that, in the mind of the public, the goods and services carrying the trademark Poster Ads could not be distinguished from the goods and services of other entities. This fact also prevented the application of the doctrine of secondary meaning. Poster Ads was generic and incapable of being used as a trademark because it was used in the field of poster advertising, the very business engaged in by petitioner. Secondary meaning means that a word or phrase originally incapable of exclusive appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the trade and to that branch of the [29] purchasing public, the word or phrase has come to mean that the article was his property. The admission by petitioners own expert witness that he himself could not associate Poster Ads with petitioner P & D because it was too generic definitely precluded the application of this exception. Having discussed the most important and critical issues, we see no need to belabor the rest. All told, the Court finds no reversible error committed by the Court of Appeals when it reversed the Regional Trial Court of Makati City. WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated May 22, 2001 is AFFIRMED in toto. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

G.R. No. L-32339 March 29, 1988 PHOENIX PUBLISHING HOUSE, INC., petitioner vs. JOSE T. RAMOS AND SOCORRO C. RAMOS, doing business as National Book Store, and COURT OF APPEALS, respondents. PARAS, J.: This petition originated in an action for damages arising from an alleged infringement of petitioner's copyright for two books entitled "General Science Today for Philippine Schools, First Year" and "General Science Today for Philippine Schools, Second Year," both authored by Gilman, Van Houten and Cornista and first published in 1961. Named plaintiffs as "copyright proprietors of said books" were Phoenix Publishing House, Inc., Purita Dancel-Cornista, Phil N. Gilman, and L.F. Van Houten. The complaint charged that defendants, now herein private respondents 'reprinted, published, distributed and sold said books in gross violation of the Copyright Law and of plaintiffs' rights to their damage and prejudice" and prayed for actual, moral and exemplary damages as well as for attorney's fees and expenses of litigation. After trial, judgment was rendered, the dispositive portion of which is as follows— WHEREFORE, judgment is hereby rendered, dismissing plaintiff's action. Instead, judgment is (sic) hereby rendered in favor of the defendants and against the plaintiff (sic), and orders the latter to pay the defendants by way of damages as and for attorney's fees the amount of P5,000.00. The writ of preliminary injunction is hereby dissolved, and the copies of General Science Today mentioned in Exhibits M and M-1 are hereby ordered returned to the defendants against proper receipt. (p. 54, Rollo) From the aforesaid judgment, petitioner Phoenix Publishing House, Inc. appealed to the Court of Appeals (under CA-G.R. No. 39498-R) on the grounds that the lower court erred — 1. In not holding that appellees had lost their right to interpose the defense of illegality or irregularity of appellant's copyright; 2. In holding that appellant's copyright is not entitled to protection for allegedly not having been validly obtained; 3. In holding that the evidence presented was insufficient to establish that the books seized from appellees were spurious; 4. In holding that appellees were not liable for damages because they had no knowledge that the books they sold were pirated or spurious; and 5. In dismissing the complaint and sentencing appellant to pay attorney's fees. (p. 54, Rollo) In a Decision of the Court of Appeals promulgated on June 8, 1970 (penned by Justice Hermogenes Concepcion, Jr. and concurred in by Justices Eulogio S. Serrano and Lourdes P. San Diego), the lower court's judgment was affirmed. Against this Decision, petitioner filed the instant petition for review assigning several errors to have been allegedly committed by respondent court. In a Resolution dated August 25, 1970 the petition was given due course "but only insofar as the award of attorney's fees is concerned." On this issue, petitioner contends that respondent court erred in assigning attorney's fees against petitioner for no other apparent reason than for losing its case, contrary to the fundamental rules settled by jurisprudence that a penalty should not be set on the right to litigate (Tan Ti v. Alvear, 26 Phil. 566) nor should counsel's fees be awarded everytime a party wins a lawsuit (Jimenez v. Bucoy, 103 Phil. 40) unless it appears, which does not in petitioner's case, that the suit instituted by the losing party was clearly unfounded (Peralta et al. v. Alipio, 97 Phil. 719) and, at all events, the court must state the reason for the award of attorney's fees (Buan v. Camaganacan, 16 SCRA 321) which reason the decision in question does not indicate (pp. 11-12, Rollo).

The law limits the instances in which attomey's fees may be recovered. Thus, the Civil Code provides: ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (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 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; (9) In a separate civil action to recover civil liability arising from a crime; (10) 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. Obviously, this case cannot fall under pars. 1, 2, 3, 5, 6, 7, 8, 9 & 10 of the aforequoted article. If at all, award is under either pars. 4 or 11 thereof. The evidence on record however, shows that petitioner secured the corresponding copyrights ( Exhs. U and V) for its books. These copyrights were found to be all right by the Copyright Office and petitioner was always conceded to be the real owner thereof. It was on the strength of these facts that petitioner filed the complaint against respondents. Through a proper search warrant (Exh. "M") obtained after petitioner was convinced that respondents were selling spurious copies of its copyrighted books, the books were seized from respondents and were Identified to be spurious. In the face of these facts, it cannot be said that the case is clearly an unfounded civil action or proceeding (par. 4. Art. 2208). The lower court justified its award as follows: It is obvious, however, that the defendants had to get the services of counsel to vindicate themselves before the Court and those watching for the ultimate decision in the instant case. Considering the professional standing of defendant's counsel, and the nature and volume of the work performed by said counsel and discernible from the records of the instant case, and considering, further, that plaintiff itself assesses the services of its own counsel fee for defendants' attorneys in the amount of P5,000.00 would not be unconscionable. (p. 95, Record on Appeal) We do not find this as enough justification for such an award under par. 11 of Article 2208. In a long line of decisions, We have consistently ruled that it is not sound policy to place a penalty on the right to litigate. WHEREFORE, the decision of respondent Court of Appeals is MODIFIED by deleting therefrom the award of attorney's fees against petitioner. SO ORDERED.