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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

115758 March 19, 2002

ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, petitioner, vs. HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and COMPANY, and ANG TIAM CHAY, respondents. DE LEON, JR., J.: Before us is a petition for review on certiorari of the Decision1 dated May 24, 1993 of the Court of Appeals setting aside and declaring as null and void the Orders2 dated February 10, 1992 and March 19, 1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction. The facts of the case are as follows: On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages with a prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-10926, against the respondents Summerville General Merchandising and Company (Summerville, for brevity) and Ang Tiam Chay. The petitioner's complaint alleges that petitioner, doing business under the name and style of KEC Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she also has patent rights onChin Chun Su & Device and Chin Chun Su for medicated cream after purchasing the same from Quintin Cheng, the registered owner thereof in the Supplemental Register of the Philippine Patent Office on February 7, 1980 under Registration Certificate No. 4529; that respondent Summerville advertised and sold petitioner's cream products under the brand name Chin Chun Su, in similar containers that petitioner uses, thereby misleading the public, and resulting in the decline in the petitioner's business sales and income; and, that the respondents should be enjoined from allegedly infringing on the copyrights and patents of the petitioner. The respondents, on the other hand, alleged as their defense that Summerville is the exclusive and authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to register its trade name Chin Chun Su Medicated Cream with the Philippine Patent Office and other appropriate governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained the copyrights through misrepresentation and falsification; and, that the authority of Quintin Cheng, assignee of the patent registration certificate, to distribute and market Chin Chun Su products in the Philippines had already been terminated by the said Taiwanese Manufacturing Company. After due hearing on the application for preliminary injunction, the trial court granted the same in an Order dated February 10, 1992, the dispositive portion of which reads: ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is required to file with the Court a bond executed to defendants in the amount of five hundred thousand pesos (P500,000.00) to the effect that plaintiff will pay to defendants all damages which defendants may sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled thereto. SO ORDERED.3 The respondents moved for reconsideration but their motion for reconsideration was denied by the trial court in an Order dated March 19, 1992.4 On April 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary injunction issued by the trial court. After the

respondents filed their reply and almost a month after petitioner submitted her comment, or on August 14 1992, the latter moved to dismiss the petition for violation of Supreme Court Circular No. 28-91, a circular prohibiting forum shopping. According to the petitioner, the respondents did not state the docket number of the civil case in the caption of their petition and, more significantly, they did not include therein a certificate of non-forum shopping. The respondents opposed the petition and submitted to the appellate court a certificate of non-forum shopping for their petition. On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in favor of the respondents, the dispositive portion of which reads: WHEREFORE, the petition is hereby given due course and the orders of respondent court dated February 10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying petitioners' motion for reconsideration are hereby set aside and declared null and void. Respondent court is directed to forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the issue raised by the parties on the merits. SO ORDERED.5 In granting the petition, the appellate court ruled that: The registration of the trademark or brandname "Chin Chun Su" by KEC with the supplemental register of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in the principal register, which is duly protected by the Trademark Law.1wphi1.nt xxx xxx xxx

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393: "Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be on guard and there are certain defects, some obstacles which the use must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register. The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that 'registrants is presumed to be the owner of the mark until after the registration is declared cancelled' is, therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. As even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534)."6 The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents in contempt of court for publishing advertisements notifying the public of the promulgation of the assailed decision of the appellate court and stating that genuine Chin Chun Su products could be obtained only from Summerville General Merchandising and Co. In the meantime, the trial court went on to hear petitioner's complaint for final injunction and damages. On October 22, 1993, the trial court rendered a Decision7 barring the petitioner from using the trademark Chin Chun Su and upholding the right of the respondents to use the same, but recognizing the copyright of the petitioner over the oval shaped container of her beauty cream. The trial court did not award damages and costs to any of the parties but to their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorney's fees. The petitioner duly appealed the said decision to the Court of Appeals.

On June 3, 1994, the Court of Appeals promulgated a Resolution8 denying the petitioner's motions for reconsideration and for contempt of court in CA-G.R. SP No. 27803. Hence, this petition anchored on the following assignment of errors: I RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON PETITIONER'S MOTION TO DISMISS. II RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY RESOLVE PETITIONER'S MOTION FOR RECONSIDERATION. III IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED PETITIONER'S RIGHT TO DUE PROCESS. IV RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE RESPONDENTS IN CONTEMPT.9 The petitioner faults the appellate court for not dismissing the petition on the ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on her motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof, the appellate court denied the petitioner's right to seek the timely appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of court against the respondents. We rule in favor of the respondents. Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for the issuance of a writ of preliminary injunction is a proof 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, either for a limited period or perpetually. Thus, a preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded.10 This is the reason why we have ruled that it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent serious damage.11 In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the ground that she is entitled to the use of the trademark on Chin Chun Su and its container based on her copyright and patent over the same. We first find it appropriate to rule on whether the copyright and patent over the name and container of a beauty cream product would entitle the registrant to the use and ownership over the same to the exclusion of 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.12 In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise.13 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.14 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.15 Petitioner has no right to support her claim for the exclusive use of the subject trade name and its container. The name and container of a beauty cream product are proper subjects of a trademark inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the same in the sale of the beauty cream product, the user must sufficiently prove that she registered or used it before anybody else did. The petitioner's copyright and patent registration of the name and container would not guarantee her the right to the exclusive use of the same for the reason that they are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction order cannot be issued for the reason that the petitioner has not proven that she has a clear right over the said name and container to the exclusion of others, not having proven that she has registered a trademark thereto or used the same before anyone did. We cannot likewise overlook the decision of the trial court in the case for final injunction and damages. The dispositive portion of said decision held that the petitioner does not have trademark rights on the name and container of the beauty cream product. The said decision on the merits of the trial court rendered the issuance of the writ of a preliminary injunction moot and academic notwithstanding the fact that the same has been appealed in the Court of Appeals. This is supported by our ruling in La Vista Association, Inc. v. Court of Appeals16, to wit: Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiff's right thereto, that is, after the same issue has been decided on the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its nonexistence ceases to have any force and effect. (italics supplied) La Vista categorically pronounced that the issuance of a final injunction renders any question on the preliminary injunctive order moot and academic despite the fact that the decision granting a final injunction is pending appeal. Conversely, a decision denying the applicant-plaintiff's right to a final injunction, although appealed, renders moot and academic any objection to the prior dissolution of a writ of preliminary injunction. The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for non-compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised the technical objection of noncompliance with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which provides that "(I)n petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to, and not a motion to dismiss, the petition xxx (italics supplied)". Secondly, the issue was raised one month after petitioner had filed her answer/comment and after private respondent had replied thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within the time for but before filing the answer to the complaint or pleading asserting a claim. She therefore could no longer submit a motion to dismiss nor raise defenses and objections not included in the answer/comment she had earlier tendered. Thirdly, substantial justice and equity require this Court not to revive a dissolved writ of injunction in favor of a party without any legal right thereto merely on a technical infirmity. The granting of an injunctive writ based on a technical ground rather than compliance with the requisites for the issuance of the same is contrary to the primary objective of legal procedure which is to serve as a means to dispense justice to the deserving party. The petitioner likewise contends that the appellate court unduly delayed the resolution of her motion for reconsideration. But we find that petitioner contributed to this delay when she filed successive contentious motions in the same proceeding, the last of which was on October 27, 1993, necessitating counter-manifestations from private respondents with the last one being filed on November 9, 1993. Nonetheless, it is well-settled that non-observance of the period for deciding cases or their incidents does not render such judgments ineffective or void.17 With respect to the purported damages she suffered due to the alleged delay in resolving her motion for reconsideration, we find that the said issue has likewise been rendered moot and academic by our ruling that she has no right over the trademark and, consequently, to the issuance of a writ of preliminary injunction.1wphi1.nt

Finally, we rule that the Court of Appeals correctly denied the petitioner's several motions for contempt of court. There is nothing contemptuous about the advertisements complained of which, as regards the proceedings in CA-G.R. SP No. 27803 merely announced in plain and straightforward language the promulgation of the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule 39 of the Revised Rules of Civil Procedure, the said decision nullifying the injunctive writ was immediately executory. WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED. With costs against the petitioner. SO ORDERED. Bellosillo, Mendoza, Quisumbing, and Buena, JJ., concur.

Footnote

Penned by Associate Justice Ricardo P. Galvez, and concurred in by Associate Justices Manuel M. Herrera and Asaali S. Isnani, Ninth Division; Rollo, pp. 36-40. 2 Penned by Judge Abraham P. Vera; CA Rollo, pp. 12-18. 3 CA Rollo, pp. 12-17. 4 CA Rollo, p. 18. 5 Rollo, p. 39. 6 Rollo, pp. 38-39. 7 Rollo, pp. 19, 241. 8 Rollo, pp. 42-43. 9 Rollo, p. 21. 10 Section 4, Rule 58, Revised Rules of Civil Procedure. 11 Sy v. Court of Appeals, 313 SCRA 328 (1999). 12 Section 121.1, Republic Act No. 8293. 13 Section 121.3, Republic Act. No. 8293. 14 Section 172, Republic Act No. 8293. 15 Section 21, Republic Act No. 8293. 16 278 SCRA 498, 506 quoting Solid Homes, Inc. v. LA Vista, G.R. No. 71150 dated April 20, 1988 (unpublished). 17 De Roma v. Court of Appeals, 152 SCRA 205, 209 (1987).

[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.) [2] Inc. (P & D) assails the May 22, 2001 decision[1] 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) (a) to pay plaintiff the following damages: actual damages P16,600,000.00, representing profits derived by defendants as a result of infringement of plaintiffs copyright from 1991 to 1992 - P1,000.000.00

(b) (c) (d)

moral damages

exemplary damages - P1,000,000.00 attorneys fees plus 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; to deliver, under oath, to the National Library, all filler-posters using the trademark Poster Ads, for destruction; and to permanently refrain from infringing the copyright on plaintiffs light boxes and its trademark Poster Ads. - P1,000,000.00

(e)

(3)

(4)

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 tradename shall be prima facie evidence of the validity of the registration, the registrants ownership of the mark or tradename, 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 defendantsappellants 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 DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit.[5] Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following errors for the Courts consideration: A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI; THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL & DEANS TRADEMARK POSTER ADS WAS COMMITTED BY RESPONDENTS SM AND NEMI; 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. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEYS FEES AND COSTS OF SUIT.[6]

B.

C.

D.

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: xxxxxx xxx

(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps; xxxxxx xxx

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, and on terms and conditions specified in the statute.[7] Accordingly, it can cover only the works falling within the statutory enumeration or description.[8] P & D secured its copyright under the classification class O work. This being so, 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 pictorial illustrations. It could not have possibly stretched out to include the underlying light box. The strict application[9] 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 an engineering or marketing invention.[10] Obviously, there appeared to be some confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and trademarks. In the leading [11] case of Kho vs. Court of 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 [12] Systems, Inc. vs. 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 invention.[13] 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 technologies into the public domain through disclosure.[14] Ideas, once disclosed to the public without the protection of a valid patent, are subject to appropriation without significant restraint.[15] On one side of the coin is the public which will benefit from new ideas; on the other are the inventors who must be protected. As held in Bauer & Cie vs. ODonnel,[16] The act secured to the inventor the exclusive right to make use, and vend the thing patented, and consequently to prevent others from exercising like privileges without the consent of the patentee. It was passed for the purpose of encouraging useful invention and promoting new and useful inventions by the protection and stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the exclusive privileges granted the benefit of such inventions and improvements. The law attempts to strike an ideal balance between the two interests: (The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and disclosure of new useful and non-obvious advances in technology and design, in return for the exclusive right to practice the invention for a number of years. The inventor may keep his invention secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon the expiration of that period, the knowledge of the invention inures to the people, who are thus enabled to practice it and profit by its use.[17] The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention; second, it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to ensure that ideas in the public domain remain there for the free use of the public.[18] It is only after an exhaustive examination by the patent office that a patent is issued. Such an 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 technological advance in art.[19] There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a person is claiming the creation of a work. The law confers the copyright from the moment of creation[20] 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 copyrightregistration with the National Library without undergoing the rigor of defending the patentability of its invention before the IPO and the public the petitioner would be protected for 50 years. This situation could not have been the intention of the law. In the oft-cited case of Baker vs. Selden[21], 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. x x x 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 specified were stationeries such as letterheads, envelopes, calling cards and newsletters.[22] Petitioner admitted it did not commercially engage in or market these goods. On the contrary, it dealt in electrically operated backlit advertising units and the sale of advertising spaces thereon, which, however, were not at all specified in the trademark certificate. Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate Court,[23] where we, invoking Section 20 of the old Trademark Law, ruled that the certificate of registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations specified in the certificate x x x. One who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others for products which are of a differentdescription.[24] Faberge, Inc. was correct and was in fact recently reiterated [25] in Canon Kabushiki Kaisha vs. 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 no registration.[26] 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 product in the mind of the purchasing public), be entitled to protection against unfair competition.[27] In this case, there was no evidence that P & 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 company, honestly speaking.[28] This crucial admission by its own expert witness that Poster Ads could not be associated with P & D showed that, in the mind of the public, the goods and services carrying the trademark Poster Ads could not be distinguished from the goods and services of other entities. This fact also prevented the application of the doctrine of secondary meaning. Poster Ads was generic and incapable of being used as a trademark because it was used in the field of poster advertising, the very business engaged in by petitioner. Secondary meaning means that a word or phrase originally incapable of exclusive appropriation with reference to an article in the market (because it is geographically or otherwise descriptive) might nevertheless have been used for so long and so exclusively by one producer with reference to his article that, in the trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his property.[29] The admission by 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.

[1]

Penned by Associate Justice Salvador J. Valdez, Jr. and concurred in by Associate Justices Wenceslao L. Agnir and Juan Q. Enriquez Jr. Penned by Judge Napoleon E. Inoturan. [3] Seventeenth Division; CA G.R. 55303. [4] Records, pp. 620-621. [5] Rollo, pp. 17-19, 21-22, 23-24, 26. [6] Rollo, p. 34. [7] 18 C.J.S. 161. [8] Joaquin vs. Drilon, 302 SCRA 225 [1999]. [9] Ibid. [10] Pp. 11-13, TSN, February 3, 1993. [11] G.R. No. 115758, March 19, 2002. [12] 286 SCRA 13 [1998]. [13] Id., at p. 21, citing Anchor Hocking Glass Corp. vs. White Cap Co., 47 F. Supp. A 451, and Bauer & Cie vs. ODonnel, 229 US 1. [14] Bonito Boats, Inc. vs. Thunder Craft Boats, Inc., 489 US 141 [1989]. [15] Id., at p. 156. [16] Ibid., at p. 10. [17] Bonito Boats, Inc. vs. Thunder Craft Boats, Inc., ibid., p. 150, citing U.S. vs. Dubilier Condenser Corp., 289 U.S. 178. [18] Aronson vs. Quick Point Pencil Co., 440 U.S. 257, 262 [1979], citing Kewanee Oil Co. vs. Bicron Corp., 416 U.S. 470 [1994], cited Amador, patents, p. 496. [19] Sears Roebuck vs. Stiffel, 376 US 225, 229 [1964]. [20] Section 2, PD 49 (The Intellectual Property Decree). [21] 101 US 102-105 [1879]. [22] Exhibit B, Original Records, p. 63. [23] 215 SCRA 316 [1992]. [24] Id., at p. 326. [25] 336 SCRA 266 [2000]. [26] Ogura vs. Chua, 59 Phil. 471. [27] Sapalo, The Law on Trademark Infringement and Unfair Competition, 2000 ed., p. 185. [28] Decision, p. 16, citing TSN, December 3, 1992, pp. 19-20. [29] Sapalo, at p. 92.
[2]

THIRD DIVISION

IN-N-OUT BURGER, INC, Petitioner,

G.R. No. 179127 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. AND/OR Promulgated:

- versus -

SEHWANI, INCORPORATED BENITAS FRITES, INC., Respondents.

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[1] dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision[2] dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 1005-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition. Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the

Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. [3] Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.[4] On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for IN-N-OUT and IN-N-OUT Burger & Arrow Design. Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark IN N OUT (the inside of the letter O formed like a star).[5] By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated. Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) 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 respondentSehwahi, 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.[11] To counter petitioners 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-N-Out Burger and Arrow Design was an internationally well-known mark. Given these circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and mark IN-N-OUT in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark IN N OUT in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon 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. of the IPO Director for Legal Affairs reads:

The dispositive part of the Decision

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-NOUT and IN-N-OUT BURGER LOGO on its goods and in its business. With regards the mark Double-Double, considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown by evidence, Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently cease and desist from using the mark DoubleDouble. NO COSTS. [14]

Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents Motion for Reconsideration[15] and petitioners Motion for Partial Reconsideration[16] were denied by the IPO Director for Legal Affairs in Resolution No. 2004-18[17] dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,[18]respectively. Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the case at bar. G.R. No. 171053 On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal. Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 142004-00004 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 title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.[19] This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,[20] finding that herein respondents failed to file their Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008. G.R. No. 179127 Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005. During the pendency of 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 records purposes.[22]

Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed asCA-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 Philippinesand, 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. 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 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 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; 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 make the injunction permanent.

(b)

(c)

(ii)

(iii)

(iv)

[Respondents] also pray for other reliefs, as may deemed just or equitable.[24] On 18 July 2006, the Court of Appeals promulgated a Decision[25] 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 2003Decision 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 isREVERSED 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 docketed as IPV No. 10-2001-00004 are hereby DISMISSED.[26] The Court of Appeals, in a Resolution dated 31 July 2007,[27] denied petitioners Motion for Reconsideration of its aforementioned Decision. Hence, the present Petition, where petitioner raises the following issues: I WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS; II WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

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

As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its 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 of Villaraza andAngangco 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: Subscribed and sworn to me this 20th day of August 2007 in Irving California. Rachel A. Blake (Sgd.) Notary Public[30]

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. 2103 and Landingin v. Republic of the Philippines.[31] Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty. 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 juratshould 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 the Angangco and Villaraza law office, only requires a jurat.[34] 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 res judicata. Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner. In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals. True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional.[42] Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances. The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances. The Jurisdiction of the IPO

The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision: Section 163. Jurisdiction of Court.All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws.

The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation. The Court disagrees with the Court of Appeals. Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus: Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall have the following functions: 10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents; 10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings. (b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties: (i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order; (ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following: (1) An assurance to comply with the provisions of the intellectual property law violated; (2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation (3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce; and (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) (x) The assessment of damages; Censure; and Other analogous penalties or sanctions.

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

Unquestionably, 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 beappealable 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 dated 15 October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,[44] ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the IN-N-OUT trademarks vis--visrespondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same.[45] Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner. The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown.[46] In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair competition in this case, viz: The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter O Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [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-NOUT 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, California in the United States of America since 1948. Thus it has the exclusive right to use the tradenems In-N-Out Burger in the Philippines and the respondents are unlawfully using and appropriating the same. The Office cannot give credence to the [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] even indicate representing IN-N-OUT. These acts cannot be considered acts in good faith. [47]

Administrative proceedings are governed by the substantial evidence rule. A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.[48] As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition. With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner: Section 156. Actions, and Damages and Injunction for Infringement.156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant

actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party.

In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by applying the reasonable percentage of 30% to the respondents gross sales, and then doubling the amount thereof on account of respondents actual intent to mislead the public or defraud the petitioner,[49] thus, arriving at the amount of actual damages of P212,574.28. Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action.[50] While there is no hard and fast rule in determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered.[51] Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded. In accordance with Article 2208(1) of the Civil Code, 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, isREVERSED. 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.

M I N I T A V . C H I C O - N AZ AR I O Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO Associate Justice Chairperson

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

ANTONIO EDUARDO B. NACHURA Associate Justice

RUBEN T. REYES

Associate Justice

ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Third Division

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice

[1]

[2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30]

Penned by Associate Justice Magdangal M. de Leon with Associate Justices Godardo A. Jacinto and Marina L. Buzon, concurring. Rollo, pp. 51-74. Penned by IPO Director General Adrian S. Cristobal, Jr. Rollo, pp. 116-131. Rollo, p. 139. Id. at 166. Id. at 144-145. Id. at 140-144. Id. at 148-158. Id. at 53. Id. at 15. Id. at 19-20. Id. at 430. Id. at 166-174. Id. at 178-195. Id. at 195. Id. at 697-704 Id. at 705-722. Id. at 619. Id. at 727-731. Id. at 619. Sehwani, Incorporated v. In-N-Out Burger, Inc., 536 SCRA 225. Rollo, pp. 120-130. Id. at 130-131. Id. at 75-108. Id. at 106-107. Id. at 51-73. Id. at 73. Id. at 363-364. Id. at 981. Sehwani, Incorporated v. In-N-Out Burger, Inc., supra note 20. This Court notes that Section 8202 of the Government Code of the State of California provides that: 8202(a) When executing a jurat, a notary shall administer an oath or affirmation to the affiant and shall determine, from satisfactory evidence as described in Section 1185 of the Civil Code, that the affiant is the person executing the document. The affiant shall sign the document in the presence of the notary.

[31] [32]

[33] [34] [35] [36] [37]

[38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49]

[50]

[51] [52]

(b) To any affidavit subscribed and sworn to before a notary, these shall be attached a jurat in the following form: State of California County of ____________ Subscribed and sworn to (or affirmed) before me on this ___ day of ______, 20__, by ________________, proved to me on the basis of satisfactory evidence to be the person(s) who appeared before me. Seal__________________ Signature______________ G.R. No. 164948, 27 June 2006, 493 SCRA 415. Rule 8, Section 2 and Rule 3, Section 11 of the 2004 Rules on Notarial Practice state that: SEC. 2. Contents of the Concluding Part of the Notarial Certificate. - The notarial certificate shall include the following: (a) the name of the notary public as exactly indicated in the commission; (b) the serial number of the commission of the notary public; (c) the words "Notary Public" and the province or city where the notary public is commissioned, the expiration date of the commission, the office address of the notary public; and (d) the roll of attorney's number, the professional tax receipt number and the place and date of issuance thereof, and the IBP membership number. SEC. 11. Jurisdiction and Term. - A person commissioned as notary public may perform notarial acts in any place within the territorial jurisdiction of the commissioning court for a period of two (2) years commencing the first day of January of the year in which the commissioning is made, unless earlier revoked or the notary public has resigned under these Rules and the Rules of Court. See Azuela v. Court of Appeals, G.R. No. 122880, 12 April 2006, 487 SCRA 119, 143. Agpalo, LEGAL FORMS (2006), pp. 71-72. LDP Marketing, Inc v. Monter, G.R. No. 159653, 25 January 2006, 480 SCRA 137, 141. Pajuyo v. Court of Appeals, G.R. No. 146364, 3 June 2004, 430 SCRA 492, 509. Torres v. Specialized Packaging Development Corporation, G.R. No. 149634, 6 July 2004, 433 SCRA 455, 463-464. MSF Tire and Rubber, Inc. v. Court of Appeals, 370 Phil. 824, 832 (1999). La Campana Development Corporation v. See, G.R. No. 149195, 26 June 2006, 492 SCRA 584, 588-589. Sehwani, Incorporated v. In-N-Out Burger, Inc., supra note 20 at 232-233. Rollo, p. 83. See Ateneo de Naga University v. Manalo, G.R. No. 160455, 9 May 2005, 458 SCRA 325, 336-337. Aguilar, THE INTELLECTUAL PROPERTY CODE (1st ed., 2004), pp. 7-9. Supra note 20. Oropeza Marketing Corporation v. Allied Banking Corporation, 441 Phil. 551, 564 (2002). McDonalds Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993,18 August 2004, 437 SCRA 10, 37. Rollo, pp. 121-124. Office of the Ombudsman v. Santos, G.R. No. 166116, 31 March 2006, 486 SCRA 463, 470. Section 156.3 of the Intellectual Property Code states that: 156.3 In cases where actual intent to mislead the public or defraud the complainant is shown, in the discretion of the court, the damages may be doubled. Lamis v. Ong, G.R. No. 148923, 11 August 2005, 466 SCRA 510, 519-520 and Cebu Country Club, Inc. v. Elizagaque, G.R. No. 160273, 18 January 2008, 542 SCRA 65, 75-76. Del Rosario v. Court of Appeals, 334 Phil. 812, 827-829 (1997). Pilipinas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., G.R. No. 159831, 14 October 2005, 473 SCRA 151, 175.

Republic of the Philippines Supreme Court

Manila SECOND DIVISION PHIL INC., Petitioner, PHARMAWEALTH, G.R. No. 167715 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: PFIZER, INC. and PFIZER (PHIL.) INC., Respondents. November 17, 2010

- versus -

x --------------------------------------------------x

DECISION PERALTA, J.: Before the Court is a petition for review on certiorari seeking to annul and set aside the Resolutions dated [2] January 18, 2005[1] and April 11, 2005 by the Court of Appeals (CA) in CA-G.R. SP No. 82734. The instant case arose from a Complaint[3] for patent infringement filed against petitioner Phil Pharmawealth, Inc. by respondent companies, Pfizer, Inc. and Pfizer (Phil.), Inc., with the Bureau of Legal Affairs of the Intellectual Property Office (BLA-IPO). The Complaint alleged as follows: xxxx 6. Pfizer is the registered owner of Philippine Letters Patent No. 21116 (the Patent) which was issued by this Honorable Office on July 16, 1987. The patent is valid until July 16, 2004. The claims of this Patent are directed to a method of increasing the effectiveness of a beta-lactam antibiotic in a mammalian subject, which comprises co-administering to said subject a beta-lactam antibiotic effectiveness increasing amount of a compound of the formula IA. The scope of the claims of the Patent extends to a combination of penicillin such as ampicillin sodium and beta-lactam antibiotic like sulbactam sodium. 7. Patent No. 21116 thus covers ampicillin sodium/sulbactam sodium (hereafter Sulbactam Ampicillin). Ampicillin sodium is a specific example of the broad beta-lactam antibiotic disclosed and claimed in the Patent. It is the compound which efficacy is being enhanced by coadministering the same with sulbactam sodium. Sulbactam sodium, on the other hand, is a specific compound of the formula IA disclosed and claimed in the Patent. 8. Pfizer is marketing Sulbactam Ampicillin under the brand name Unasyn. Pfizer's Unasyn products, which come in oral and IV formulas, are covered by Certificates of Product Registration (CPR) issued by the Bureau of Food and Drugs (BFAD) under the name of complainants. The sole and exclusive distributor of Unasyn products in the Philippines is Zuellig Pharma Corporation, pursuant to a Distribution Services Agreement it executed with Pfizer Phils. on January 23, 2001.

9. Sometime in January and February 2003, complainants came to know that respondent [herein petitioner] submitted bids for the supply of Sulbactam Ampicillin to several hospitals without the consent of complainants and in violation of the complainants' intellectual property rights. x x x xxxx 10. Complainants thus wrote the above hospitals and demanded that the latter immediately cease and desist from accepting bids for the supply [of] Sulbactam Ampicillin or awarding the same to entities other than complainants. Complainants, in the same letters sent through undersigned counsel, also demanded that respondent immediately withdraw its bids to supply Sulbactam Ampicillin. 11. In gross and evident bad faith, respondent and the hospitals named in paragraph 9 hereof, willfully ignored complainants' just, plain and valid demands, refused to comply therewith and continued to infringe the Patent, all to the damage and prejudice of complainants. As registered owner of the Patent, Pfizer is entitled to protection under Section 76 of the IP Code. x x x x[4] Respondents prayed for permanent injunction, damages and the forfeiture and impounding of the alleged infringing products. They also asked for the issuance of a temporary restraining order and a preliminary injunction that would prevent herein petitioner, its agents, representatives and assigns, from importing, distributing, selling or offering the subject product for sale to any entity in the Philippines. In an Order[5] dated July 15, 2003 the BLA-IPO issued a preliminary injunction which was effective for ninety days from petitioner's receipt of the said Order. Prior to the expiration of the ninety-day period, respondents filed a Motion for Extension of Writ of Preliminary [7] Injunction[6] which, however, was denied by the BLA-IPO in an Order dated October 15, 2003. Respondents filed a Motion for Reconsideration but the same was also denied by the BLA-IPO in a Resolution[8] dated January 23, 2004. Respondents then filed a special civil action for certiorari with the CA assailing the October 15, 2003 and January 23, 2004 Resolutions of the BLA-IPO. Respondents also prayed for the issuance of a preliminary mandatory injunction for the reinstatement and extension of the writ of preliminary injunction issued by the BLA-IPO. While the case was pending before the CA, respondents filed a Complaint[9] with the Regional Trial Court (RTC) of Makati City for infringement and unfair competition with damages against herein petitioner. In said case, respondents prayed for the issuance of a temporary restraining order and preliminary injunction to prevent herein petitioner from importing, distributing, selling or offering for sale sulbactam ampicillin products to any entity in the Philippines. Respondents asked the trial court that, after trial, judgment be rendered awarding damages in their favor and making the injunction permanent. On August 24, 2004, the RTC of Makati City issued an Order[10] directing the issuance of a temporary restraining order conditioned upon respondents' filing of a bond. In a subsequent Order[11] dated April 6, 2005, the same RTC directed the issuance of a writ of preliminary injunction prohibiting and restraining [petitioner], its agents, representatives and assigns from importing, distributing or selling Sulbactam Ampicillin products to any entity in the Philippines. Meanwhile, on November 16, 2004, petitioner filed a Motion to Dismiss[12] the petition filed with the CA on the ground of forum shopping, contending that the case filed with the RTC has the same objective as the petition filed with the CA, which is to obtain an injunction prohibiting petitioner from importing, distributing and selling Sulbactam Ampicillin products. On January 18, 2005, the CA issued its questioned Resolution[13] approving the bond posted by respondents pursuant to the Resolution issued by the appellate court on March 23, 2004 which directed the issuance of a temporary restraining order conditioned upon the filing of a bond. On even date, the CA issued a temporary restraining order[14] which prohibited petitioner from importing, distributing, selling or offering for sale Sulbactam Ampicillin products to any hospital or to any other entity in the Philippines, or from infringing Pfizer Inc.'s Philippine Patent No. 21116 and impounding all the sales invoices and other documents evidencing sales by [petitioner] of Sulbactam Ampicillin products.

On February 7, 2005, petitioner again filed a Motion to Dismiss[15] the case for being moot and academic, contending that respondents' patent had already lapsed. In the same manner, petitioner also moved for the reconsideration of the temporary restraining order issued by the CA on the same basis that the patent right sought to be protected has been extinguished due to the lapse of the patent license and on the ground that the CA has no jurisdiction to review the order of the BLA-IPO as said jurisdiction is vested by law in the Office of the Director General of the IPO. On April 11, 2005, the CA rendered its presently assailed Resolution denying the Motion to Dismiss, dated November 16, 2004, and the motion for reconsideration, as well as Motion to Dismiss, both dated February 7, 2005. Hence, the present petition raising the following issues: a) Can an injunctive relief be issued based on an action of patent infringement when the patent allegedly infringed has already lapsed? b) What tribunal has jurisdiction to review the decisions of the Director of Legal Affairs of the Intellectual Property Office? c) Is there forum shopping when a party files two actions with two seemingly different causes of action and yet pray for the same relief?[16]

In the first issue raised, petitioner argues that respondents' exclusive right to monopolize the subject matter of the patent exists only within the term of the patent. Petitioner claims that since respondents' patent expired on July 16, 2004, the latter no longer possess any right of monopoly and, as such, there is no more basis for the issuance of a restraining order or injunction against petitioner insofar as the disputed patent is concerned. The Court agrees. Section 37 of Republic Act No. (RA) 165,[17] which was the governing law at the time of the issuance of respondents' patent, provides: Section 37. Rights of patentees. A patentee shall have the exclusive right to make, use and sell the patented machine, article or product, and to use the patented process for the purpose of industry or commerce, throughout the territory of the Philippines for the term of the patent; and such making, using, or selling by any person without the authorization of the patentee constitutes infringement of the patent.[18]

It is clear from the above-quoted provision of law that the exclusive right of a patentee to make, use and sell a patented product, article or process exists only during the term of the patent. In the instant case, Philippine Letters Patent No. 21116, which was the basis of respondents in filing their complaint with the BLA-IPO, was issued on July 16, 1987. This fact was admitted by respondents themselves in their complaint. They also admitted that the validity of the said patent is until July 16, 2004, which is in conformity with Section 21 of RA 165, providing that the term of a patent shall be seventeen (17) years from the date of issuance thereof. Section 4, Rule 129 of the Rules of Court provides that an admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof and that the admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. In the present case, there is no dispute as to respondents' admission that the term of their patent expired on July 16, 2004. Neither is there evidence to show that their admission was made through palpable mistake. Hence, contrary to the pronouncement of the CA, there is no longer any need to present evidence on the issue of expiration of respondents' patent. On the basis of the foregoing, the Court agrees with petitioner that after July 16, 2004, respondents no longer possess the exclusive right to make, use and sell the articles or products covered by Philippine Letters Patent No. 21116. Section 3, Rule 58, of the Rules of Court lays down the requirements for the issuance of a writ of preliminary injunction, viz: (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 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, or agency or a person is doing, threatening, or 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 or proceeding, and tending to render the judgment ineffectual.

In this connection, pertinent portions of Section 5, Rule 58 of the same Rules provide that if the matter is of extreme urgency and the applicant will suffer grave injustice and irreparable injury, a temporary restraining order may be issued ex parte. From the foregoing, it can be inferred that two requisites must exist to warrant the issuance of an injunctive relief, namely: (1) the existence of a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity for the writ to prevent serious damage.[19] In the instant case, it is clear that when the CA issued its January 18, 2005 Resolution approving the bond filed by respondents, the latter no longer had a right that must be protected, considering that Philippine Letters Patent No. 21116 which was issued to them already expired on July 16, 2004. Hence, the issuance by the CA of a temporary restraining order in favor of the respondents is not proper. In fact, the CA should have granted petitioner's motion to dismiss the petition for certiorari filed before it as the only issue raised therein is the propriety of extending the writ of preliminary injunction issued by the BLA-IPO. Since the patent which was the basis for issuing the injunction, was no longer valid, any issue as to the propriety of extending the life of the injunction was already rendered moot and academic. As to the second issue raised, the Court, is not persuaded by petitioner's argument that, pursuant to the doctrine of primary jurisdiction, the Director General of the IPO and not the CA has jurisdiction to review the questioned Orders of the Director of the BLA-IPO. It is true that under Section 7(b) of RA 8293, otherwise known as the Intellectual Property Code of the Philippines, which is the presently prevailing law, the Director General of the IPO exercises exclusive appellate jurisdiction over all decisions rendered by the Director of the BLA-IPO. However, what is being questioned before the CA is not a decision, but an interlocutory order of the BLA-IPO denying respondents' motion to extend the life of the preliminary injunction issued in their favor. RA 8293 is silent with respect to any remedy available to litigants who intend to question an interlocutory order issued by the BLA-IPO. Moreover, Section 1(c), Rule 14 of the Rules and Regulations on Administrative Complaints for Violation of Laws Involving Intellectual Property Rights simply provides that interlocutory orders shall not be appealable. The said Rules and Regulations do not prescribe a procedure within the administrative machinery to be followed in assailing orders issued by the BLA-IPO pending final resolution of a case filed with them. Hence, in the absence of such a remedy, the provisions of the Rules of Court shall apply in a suppletory manner, as provided under Section 3, Rule 1 of the same Rules and Regulations. Hence, in the present case, respondents correctly resorted to the filing of a special civil action for certiorari with the CA to question the assailed Orders of the BLA-IPO, as they cannot appeal therefrom and they have no other plain, speedy and adequate remedy in the ordinary course of law. [21] This is consistent with Sections 1[20] and 4, Rule 65 of the Rules of Court, as amended. In the first place, respondents' act of filing their complaint originally with the BLA-IPO is already in consonance with the doctrine of primary jurisdiction. This Court has held that:

[i]n cases involving specialized disputes, the practice has been to refer the same to an administrative agency of special competence in observance of the doctrine of primary jurisdiction. The Court has ratiocinated that it cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some

question arising in the proceeding before the court. It applies where the claim is originally cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the administrative body for its view.[22]

Based on the foregoing, the Court finds that respondents' initial filing of their complaint with the BLA-IPO, instead of the regular courts, is in keeping with the doctrine of primary jurisdiction owing to the fact that the determination of the basic issue of whether petitioner violated respondents' patent rights requires the exercise by the IPO of sound administrative discretion which is based on the agency's special competence, knowledge and experience. However, the propriety of extending the life of the writ of preliminary injunction issued by the BLA-IPO in the exercise of its quasi-judicial power is no longer a matter that falls within the jurisdiction of the said administrative agency, particularly that of its Director General. The resolution of this issue which was raised before the CA does not demand the exercise by the IPO of sound administrative discretion requiring special knowledge, experience and services in determining technical and intricate matters of fact. It is settled that one of the exceptions to the doctrine of primary jurisdiction is where the question involved is purely legal and will ultimately have to be decided by the courts of justice.[23] This is the case with respect to the issue raised in the petition filed with the CA.

Moreover, as discussed earlier, RA 8293 and its implementing rules and regulations do not provide for a procedural remedy to question interlocutory orders issued by the BLA-IPO. In this regard, it bears to reiterate that the judicial power of the courts, as provided for under the Constitution, includes the authority of the courts to determine in an appropriate action the validity of the acts of the political departments.[24] Judicial power also 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.[25] Hence, the CA, and not the IPO Director General, has jurisdiction to determine whether the BLA-IPO committed grave abuse of discretion in denying respondents' motion to extend the effectivity of the writ of preliminary injunction which the said office earlier issued. Lastly, petitioner avers that respondents are guilty of forum shopping for having filed separate actions before the IPO and the RTC praying for the same relief. The Court agrees. Forum shopping is defined as the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another (and possibly favorable) opinion in another forum (other than by appeal or the special civil action of certiorari), or the institution of two (2) or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition.[26] The elements of forum shopping are: (a) identity of parties, or at least such parties that represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; (c) identity of the two preceding particulars, 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.[27] There is no question as to the identity of parties in the complaints filed with the IPO and the RTC. Respondents argue that they cannot be held guilty of forum shopping because their complaints are based on different causes of action as shown by the fact that the said complaints are founded on violations of different patents. The Court is not persuaded. Section 2, Rule 2 of the Rules of Court defines a cause of action as the act or omission by which a party violates a right of another. In the instant case, respondents' cause of action in their complaint filed with the IPO is the alleged act of petitioner in importing, distributing, selling or offering for sale Sulbactam Ampicillin products, acts that are supposedly violative of respondents' right to the exclusive sale of the said products which are covered by the latter's patent. However, a careful reading of the complaint filed with the RTC of Makati City would show that respondents have the same cause of action as in their complaint filed with the IPO. They claim that they have the exclusive right to make, use and sell Sulbactam Ampicillin products and that petitioner violated this right. Thus, it does not matter that the patents upon which the complaints were based are different. The fact remains that in both complaints the rights violated and the acts violative of such rights are identical.

In fact, respondents seek substantially the same reliefs in their separate complaints with the IPO and the RTC for the purpose of accomplishing the same objective. It is settled by this Court in several cases that the filing by a party of two apparently different actions but with the same objective constitutes forum shopping.[28] The Court discussed this species of forum shopping as follows: Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was filed by the buyer (herein private respondent and his predecessors-ininterest) against the seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint in the Second Case seeks to declare such purported sale involving the same real property as unenforceable as against the Bank, which is the petitioner herein. In other words, in the Second Case, the majority stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do in the original case in the trial court. In brief, the objective or the relief being sought, though worded differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the property to respondent.[29] In Danville Maritime, Inc. v. Commission on Audit,[30] the Court ruled as follows: In the attempt to make the two actions appear to be different, petitioner impleaded different respondents therein PNOC in the case before the lower court and the COA in the case before this Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to comply with the paragraph 1 of the memorandum of agreement and damages. One can see that although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in both actions is the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn the letter directive of the COA of October 10, 1988 disapproving the sale.[31]

In the instant case, the prayer of respondents in their complaint filed with the IPO is as follows: A. Immediately upon the filing of this action, issue an ex parte order (a) temporarily restraining respondent, its agents, representatives and assigns from importing, distributing, selling or offering for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of this Complaint or to any other entity in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No. 21116; and (b) impounding all the sales invoices and other documents evidencing sales by respondent of Sulbactam Ampicillin products. B. After hearing, issue a writ of preliminary injunction enjoining respondent, its agents, representatives and assigns from importing, distributing, selling or offering for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of the Complaint or to any other entity in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No. 21116; and C. After trial, render judgment:
(i) declaring that respondent has infringed Pfizer Inc.'s Philippine Patent No. 21116 and that respondent has no right whatsoever over complainant's patent; ordering respondent to pay complainants the following (a) (b) litigation (d) (d) at least P1,000,000.00 as actual damages; P700,000.00 as attorney's fees and expenses; P1,000,000.00 as exemplary damages; and costs of this suit. amounts:

(ii)

(iii) ordering the condemnation, seizure or forfeiture of respondent's infringing goods or products, wherever they may be found, including the materials and implements used in the commission of infringement, to be disposed of in such manner as may be deemed appropriate by this Honorable Office; and

(iv)

making the injunction permanent.

[32]

In an almost identical manner, respondents prayed for the following in their complaint filed with the RTC: (a) Immediately upon the filing of this action, issue an ex parte (1) its from offering ampicillin private the infringing (2) temporarily restraining Pharmawealth, agents, representatives and assigns importing, distributing, selling or for sale infringing sulbactam products to various government and hospitals or to any other entity in Philippines, or from otherwise Pfizer Inc.'s Philippine Patent No. 26810. impounding all the sales invoices and other documents evidencing sales by pharmawealth of sulbactam ampicillin products; and disposing of the infringing goods outside the channels of commerce. order:

(3) (b)

After hearing, issue a writ of preliminary injunction: (1) enjoining Pharmawealth, its agents, representatives and assigns from importing, distributing, selling or offering for sale infringing sulbactam ampicillin products to various government hospitals or to any other entity in the Philippines, or from otherwise infringing Patent No. 26810; impounding all the sales invoices and other documents evidencing sales Pharmawealth of sulbactam ampicillin products; and disposing of the infringing goods outside the channels of commerce.

(2) by (3) (c)

After trial, render judgment: (1) finding Pharmawealth to have infringed Patent No. 26810 and declaring Pharmawealth to have no right whatsoever over plaintiff's patent; (2) ordering Pharmawealth to pay plaintiffs the (i) (ii) following amounts:

at least P3,000,000.00 as actual damages; P500,000.00 as attorney'sfees and P1,000,000.00 as litigation P3,000,000.00 as exemplary damages; and costs of this suit.

expenses; (iii) (iv) (3)

ordering the condemnation, seizure or forfeiture of Pharmawealth's infringing goods or products, wherever they may be found, including the materials and implements used in the commission of infringement, to be disposed of in such manner as may be deemed appropriate by this Honorable Court; and making the injunction permanent.
[33]

(4)

It is clear from the foregoing that the ultimate objective which respondents seek to achieve in their separate complaints filed with the RTC and the IPO, is to ask for damages for the alleged violation of their right to exclusively sell Sulbactam Ampicillin products and to permanently prevent or prohibit petitioner from selling said products to any entity. Owing to the substantial identity of parties, reliefs and issues in the IPO and RTC cases, a decision in one case will necessarily amount to res judicata in the other action. It bears to reiterate that what is truly important to consider in determining whether forum shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issue.[34] Thus, the Court agrees with petitioner that respondents are indeed guilty of forum shopping. Jurisprudence holds that if the forum shopping is not considered willful and deliberate, the subsequent case shall be dismissed without prejudice, on the ground of either litis pendentiaor res judicata.[35] However, if the forum

shopping is willful and deliberate, both (or all, if there are more than two) actions shall be dismissed with prejudice.[36] In the present case, the Court finds that respondents did not deliberately violate the rule on non-forum shopping. Respondents may not be totally blamed for erroneously believing that they can file separate actions simply on the basis of different patents. Moreover, in the suit filed with the RTC of Makati City, respondents were candid enough to inform the trial court of the pendency of the complaint filed with the BLA-IPO as well as the petition for certiorari filed with the CA. On these bases, only Civil Case No. 04-754 should be dismissed on the ground of litis pendentia. WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of the Court of Appeals, dated January 18, 2005 and April 11, 2005, in CA-G.R. No. 82734, areREVERSED and SET ASIDE. The petition for certiorari filed with the Court of Appeals is DISMISSED for being moot and academic. Civil Case No. 04-754, filed with the Regional Trial Court of Makati City, Branch 138, is likewise DISMISSED on the ground of litis pendentia. SO ORDERED.
DIOSDADO M. PERALTA Associate Justice WE CONCUR:

ANTONIO T. CARPIO Associate Justice Chairperson

ANTONIO EDUARDO B. NACHURA Associate Justice

ROBERTO A. ABAD Associate Justice JOSE CATRAL MENDOZA Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Second Division, Chairperson

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA Chief Justice Penned by Associate Justice Arcangelita M. Romilla-Lontok, with Associate Justices Rodrigo V. Cosico and Danilo B. Pine, concurring; rollo, pp. 121-122.
[2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [1]

Id. at 144-148. Rollo, pp. 62-73. Id. at 64-66. Annex E to Petition, rollo, pp. 74-75. CA rollo, pp. 154-157. Annex F to Petition, rollo, pp. 76-77. CA rollo, pp. 32-33. Annex I to Petition, rollo, pp. 105-116. Records, Vol. 1, p. 382. Annex J to Petition, rollo, pp. 117-119. CA rollo, pp. 379-388. Annex K to Petition, rollo, pp. 121-122. Annex K-1 to Petition, rollo, pp. 123-124. CA rollo, pp. 428-435.

[16] [17]

Rollo, pp. 11-12. An Act Creating a Patent Office, Prescribing its Powers and Duties, Regulating the Issuance of Patents and Appropriating Funds Therefor. [18] Emphasis supplied. [19] Angeles City v. Angeles City Electric Corporation, G.R. No. 166134, June 29, 2010. [20] Sec. 1. Petition for certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of its or his jurisdiction, and there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law , a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require. The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46. (Emphasis supplied) [21] Sec. 4. When and where petition filed. The petition may be filed not later than sixty (60) days from notice of the judgment, order of resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60)-day period shall be counted from notice of denial of said motion. If it relates to the acts or omissions of a lower court or of a corporation, board or officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals. In election cases involving an act or omission of a municipal or a regional trial court, the petition shall be filed exclusively with the Commission on Elections, in aid of its appellate jurisdiction. (Emphasis supplied.) [22] Fabia v. Court of Appeals, 437 Phil. 389, 402-403 (2002). [23] Geraldine Gaw Guy and Grace Cheu v. Alvin Agustin T. Ignacio, G.R. Nos. 167824 and 168622, July 2, 2010; Republic v. Lacap, G.R. No. 158253, March 2, 2007, 517 SCRA 255, 266. [24] Smart Communications, Inc. (SMART) v. National Telecommunications Commission (NTC), 456 Phil. 145, 159 (2003). [25] Id. [26] Pulido v. Abu, G.R. No. 170924, July 4, 2007, 526 SCRA 483, 497; Clark Development Corporation v. Mondragon Leisure and Resorts Corporation, G.R. No. 150986, March 2, 2007, 517 SCRA 203, 213. [27] Pentacapital Investment Corporation v. Makilito Mahinay, G.R. No. 171736 and Pentacapital Corporation v. Makilito Mahinay, G.R. No. 181482, July 5, 2010; GD Express Worldwide N.V. v. Court of Appeals (Fourth Division), G.R. No. 136978, May 8, 2009, 587 SCRA 333, 346-347. [28] City of Naga v. Asuncion, G.R. No. 174042, July 9, 2008, 557 SCRA 528, 541; Clark Development Corporation v. Mondragon Leisure and Resorts Corporation, G.R. No. 150986, supra note 24, at 214; Riesenbeck v. Maceren, Jr., G.R. No. 158608, January 27, 2006, 480 SCRA 362, 380; First Philippine International Bank v. Court of Appeals, 322 Phil. 280 (1996); Danville Maritime Inc. v. Commission on Audit, G.R. Nos. 85285 & 87150, July 28, 1989, 175 SCRA701. [29] First Philippine International Bank v. Court of Appeals, supra, at 307-308. (Emphasis supplied.) [30] Supra note 28. [31] Id. at 716-717. [32] Rollo, pp. 70-71. [33] Id. at 112-113. [34] Luis K. Lokin, Jr. v. Commission on Elections, et al., G.R. Nos. 179431-32 and Luis K. Lokin, Jr. v. Commission on Elections, G.R. No. 180443, June 22, 2010. [35] Chua v. Metropolitan Bank and Trust Company, G.R. No. 182311, August 19, 2009, 596 SCRA 524, 541; Air Materiel Wing Savings and Loan Association, Inc. v. Manay, G.R. No. 175338, April 29, 2008, 552 SCRA 643, 654. [36] Id.

/Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 154342 July 14, 2004

MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC., petitioner, vs. E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.

DECISION CORONA, J.:

In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and La Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a) the November 15, 2001 decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming the November 26, 1998 decision,2 as modified by the June 24, 1999 order,3 of the Regional Trial Court of Makati City, Branch 57 (Makati RTC) in Civil Case No. 93-850, which held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition, and which ordered them to pay damages to respondents E. & J. Gallo Winery (Gallo Winery) and The Andresons Group, Inc. (Andresons); (b) the July 11, 2002 CA resolution denying their motion for reconsideration4 and (c) the aforesaid Makati RTC decision itself. I. The Factual Background Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but organized and existing under the laws of the State of California, United States of America (U.S.), where all its wineries are located. Gallo Winery produces different kinds of wines and brandy products and sells them in many countries under different registered trademarks, including the GALLO and ERNEST & JULIO GALLO wine trademarks. Respondent domestic corporation, Andresons, has been Gallo Winerys exclusive wine importer and distributor in the Philippines since 1991, selling these products in its own name and for its own account.5 Gallo Winerys GALLO wine trademark was registered in the principal register of the Philippine Patent Office (now Intellectual Property Office) on November 16, 1971 under Certificate of Registration No. 17021 which was renewed on November 16, 1991 for another 20 years.6 Gallo Winery also applied for registration of its ERNEST & JULIO GALLO wine trademark on October 11, 1990 under Application Serial No. 901011-00073599-PN but the records do not disclose if it was ever approved by the Director of Patents.7 On the other hand, petitioners Mighty Corporation and La Campana and their sister company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in the cultivation, manufacture, distribution and sale of tobacco products for which they have been using the GALLO cigarette trademark since 1973. 8 The Bureau of Internal Revenue (BIR) approved Tobacco Industries use of GALLO 100s cigarette mark on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976, both for the manufacture and sale of its cigarette products. In 1976, Tobacco Industries filed its manufacturers sworn statement as basis for BIRs collection of specific tax on GALLO cigarettes.9 On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the registration of the GALLO cigarette trademark in the principal register of the then Philippine Patent Office.10 In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana which, on July 16, 1985, applied for trademark registration in the Philippine Patent Office.11 On July 17, 1985, the National Library issued Certificate of Copyright Registration No. 5834 for La Campanas lifetime copyright claim over GALLO cigarette labels.12 Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes bearing the GALLO trademark.13 BIR approved Mighty Corporations use of GALLO 100s cigarette brand, under licensing agreement with Tobacco Industries, on May 18, 1988, and GALLO SPECIAL MENTHOL 100s cigarette brand on April 3, 1989.14 Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973, initially by Tobacco Industries, then by La Campana and finally by Mighty Corporation.15 On the other hand, although the GALLO wine trademark was registered in the Philippines in 1971, respondents claim that they first introduced and sold the GALLO and ERNEST & JULIO GALLO wines in the Philippines circa1974 within the then U.S. military facilities only. By 1979, they had expanded their Philippine market through authorized distributors and independent outlets.16 Respondents claim that they first learned about the existence of GALLO cigarettes in the latter part of 1992 when an Andresons employee saw such cigarettes on display with GALLO wines in a Davao supermarket wine cellar section.17 Forthwith, respondents sent a demand letter to petitioners asking them to stop using the GALLO trademark, to no avail.

II. The Legal Dispute On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark and tradename infringement and unfair competition, with a prayer for damages and preliminary injunction. Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of Industrial 19 Property (Paris Convention)18 and RA 166 (Trademark Law), specifically, Sections 22 and 23 (for trademark 21 20 infringement), 29 and 30 (for unfair competition and false designation of origin) and 37 (for tradename infringement).22 They claimed that petitioners adopted the GALLO trademark to ride on Gallo Winerys GALLO and ERNEST & JULIO GALLO trademarks established reputation and popularity, thus causing confusion, deception and mistake on the part of the purchasing public who had always associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winerys wines. Respondents prayed for the issuance of a writ of preliminary injunction and ex parte restraining order, plus P2 million as actual and compensatory damages, at least P500,000 as exemplary and 23 moral damages, and at least P500,000 as attorneys fees and litigation expenses. In their answer, petitioners alleged, among other affirmative defenses, that: petitioners GALLO cigarettes and Gallo Winerys wines were totally unrelated products; Gallo Winerys GALLO trademark registration certificate covered wines only, not cigarettes; GALLO cigarettes and GALLO wines were sold through different channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO menthols, were low-cost items compared to Gallo Winerys high-priced luxury wines which cost between P98 to P242.50; the target market of Gallo Winerys wines was the middle or high-income bracket with at least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen, laborers and other low-income workers; the dominant feature of the GALLO cigarette mark was the rooster device with the manufacturers name clearly indicated as MIGHTY CORPORATION while, in the case of Gallo Winerys wines, it was the full names of the founders-owners ERNEST & JULIO GALLO or just their surname GALLO; by their inaction and conduct, respondents were guilty of laches and estoppel; and petitioners acted with honesty, justice and good faith in the exercise of their right to manufacture and sell GALLO cigarettes. In an order dated April 21, 1993,24 the Makati RTC denied, for lack of merit, respondents prayer for the issuance of a writ of preliminary injunction,25 holding that respondents GALLO trademark registration certificate covered wines only, that respondents wines and petitioners cigarettes were not related goods and respondents failed to prove material damage or great irreparable injury as required by Section 5, Rule 58 of the Rules of Court.26 On August 19, 1993, the Makati RTC denied, for lack of merit, respondents motion for reconsideration. The court reiterated that respondents wines and petitioners cigarettes were not related goods since the likelihood of deception and confusion on the part of the consuming public was very remote. The trial court emphasized that it could not rely on foreign rulings cited by respondents "because the[se] cases were decided by foreign courts on the basis of unknown facts peculiar to each case or upon factual surroundings which may exist only within their jurisdiction. Moreover, there [was] no showing that [these cases had] been tested or found applicable in our jurisdiction."27 On February 20, 1995, the CA likewise dismissed respondents petition for review on certiorari, docketed as CA-G.R. No. 32626, thereby affirming the Makati RTCs denial of the application for issuance of a writ of preliminary injunction against petitioners.28 After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners liable for, and permanently enjoined them from, committing trademark infringement and unfair competition with respect to the GALLO trademark: WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the defendant (sic), to wit: a. permanently restraining and enjoining defendants, their distributors, trade outlets, and all persons acting for them or under their instructions, from (i) using E & Js registered trademark GALLO or any other reproduction, counterfeit, copy or colorable imitation of said trademark, either singly or in conjunction with other words, designs or emblems and other acts of similar nature, and (ii) committing other acts of unfair competition against plaintiffs by manufacturing and selling their cigarettes in the domestic or export markets under the GALLO trademark. b. ordering defendants to pay plaintiffs

(i) actual and compensatory damages for the injury and prejudice and impairment of plaintiffs business and goodwill as a result of the acts and conduct pleaded as basis for this suit, in an amount equal to 10% of FOURTEEN MILLION TWO HUNDRED THIRTY FIVE THOUSAND PESOS (PHP14,235,000.00) from the filing of the complaint until fully paid; (ii) exemplary damages in the amount of PHP100,000.00; (iii) attorneys fees and expenses of litigation in the amount of PHP1,130,068.91; (iv) the cost of suit. SO ORDERED."29 On June 24, 1999, the Makati RTC granted respondents motion for partial reconsideration and increased the award 30 of actual and compensatory damages to 10% of P199,290,000 or P19,929,000. On appeal, the CA affirmed the Makati RTC decision and subsequently denied petitioners motion for reconsideration. III. The Issues Petitioners now seek relief from this Court contending that the CA did not follow prevailing laws and jurisprudence when it held that: [a] RA 8293 (Intellectual Property Code of the Philippines [IP Code]) was applicable in this case; [b] GALLO cigarettes and GALLO wines were identical, similar or related goods for the reason alone that they were purportedly forms of vice; [c] both goods passed through the same channels of trade and [d] petitioners were liable for trademark infringement, unfair competition and damages.31 Respondents, on the other hand, assert that this petition which invokes Rule 45 does not involve pure questions of law, and hence, must be dismissed outright. IV. Discussion THE EXCEPTIONAL CIRCUMSTANCES IN THIS CASE OBLIGE THE COURT TO REVIEW THE CAS FACTUAL FINDINGS As a general rule, a petition for review on certiorari under Rule 45 must raise only "questions of law"32 (that is, the doubt pertains to the application and interpretation of law to a certain set of facts) and not "questions of fact" (where the doubt concerns the truth or falsehood of alleged facts),33 otherwise, the petition will be denied. We are not a trier of facts and the Court of Appeals factual findings are generally conclusive upon us.34 This case involves questions of fact which are directly related and intertwined with questions of law. The resolution of the factual issues concerning the goods similarity, identity, relation, channels of trade, and acts of trademark infringement and unfair competition is greatly dependent on the interpretation of applicable laws. The controversy here is not simply the identity or similarity of both parties trademarks but whether or not infringement or unfair competition was committed, a conclusion based on statutory interpretation. Furthermore, one or more of the following exceptional circumstances oblige us to review the evidence on record:35 (1) the conclusion is grounded entirely on speculation, surmises, and conjectures; (2) the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3) there is grave abuse of discretion;

(4) the judgment is based on a misapprehension of facts; (5) 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) the findings are without citation of specific evidence on which they are based; (7) 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 (8) the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted [by the evidence] on record.36 In this light, after thoroughly examining the evidence on record, weighing, analyzing and balancing all factors to determine whether trademark infringement and/or unfair competition has been committed, we conclude that both the Court of Appeals and the trial court veered away from the law and well-settled jurisprudence. Thus, we give due course to the petition. THE TRADEMARK LAW AND THE PARIS CONVENTION ARE THE APPLICABLE LAWS, NOT THE INTELLECTUAL PROPERTY CODE We note that respondents sued petitioners on March 12, 1993 for trademark infringement and unfair competition committed during the effectivity of the Paris Convention and the Trademark Law. Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only under the aforesaid governing laws but also under the IP Code which took effect only on January 1, 1998,37 or about five years after the filing of the complaint: Defendants unauthorized use of the GALLO trademark constitutes trademark infringement pursuant to bis Section 22 of Republic Act No. 166, Section 155 of the IP Code, Article 6 of the Paris Convention, and Article 16 (1) of the TRIPS Agreement as it causes confusion, deception and mistake on the part of the purchasing public.38 (Emphasis and underscoring supplied) The CA apparently did not notice the error and affirmed the Makati RTC decision: In the light of its finding that appellants use of the GALLO trademark on its cigarettes is likely to create confusion with the GALLO trademark on wines previously registered and used in the Philippines by appellee E & J Gallo Winery, the trial court thus did not err in holding that appellants acts not only violatedthe bis provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but also Article 6 of the 39 Paris Convention. (Emphasis and underscoring supplied) We therefore hold that the courts a quo erred in retroactively applying the IP Code in this case. It is a fundamental principle that the validity and obligatory force of a law proceed from the fact that it has first been promulgated. A law that is not yet effective cannot be considered as conclusively known by the populace. To make a law binding even before it takes effect may lead to the arbitrary exercise of the legislative power.40 Nova constitutio futuris formam imponere debet non praeteritis. A new state of the law ought to affect the future, not the past. Any doubt must generally be resolved against the retroactive operation of laws, whether these are original enactments, 42 amendments or repeals.41 There are only a few instances when laws may be given retroactive effect, none of which is present in this case. The IP Code, repealing the Trademark Law,43 was approved on June 6, 1997. Section 241 thereof expressly decreed that it was to take effect only on January 1, 1998, without any provision for retroactive application. Thus, the Makati RTC and the CA should have limited the consideration of the present case within the parameters of the Trademark Law and the Paris Convention, the laws in force at the time of the filing of the complaint.

DISTINCTIONS BETWEEN TRADEMARK INFRINGEMENT AND UNFAIR COMPETITION Although the laws on trademark infringement and unfair competition have a common conception at their root, that is, a person shall not be permitted to misrepresent his goods or his business as the goods or business of another, the law on unfair competition is broader and more inclusive than the law on trademark infringement. The latter is more limited but it recognizes a more exclusive right derived from the trademark adoption and registration by the person whose goods or business is first associated with it. The law on trademarks is thus a specialized subject distinct from the law on unfair competition, although the two subjects are entwined with each other and are dealt with together in the Trademark Law (now, both are covered by the IP Code). Hence, even if one fails to establish his exclusive property right to a trademark, he may still obtain relief on the ground of his competitors unfairness or fraud. Conduct constitutes unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. It is not necessary that any particular means should be used to this end.44 In Del Monte Corporation vs. Court of Appeals,45 we distinguished trademark infringement from unfair competition: (1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another. (2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair competition fraudulent intent is essential. (3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. Pertinent Provisions on Trademark Infringement under the Paris Convention and the Trademark Law Article 6bis of the Paris Convention,46 an international agreement binding on the Philippines and the United States (Gallo Winerys country of domicile and origin) prohibits "the [registration] or use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the [Paris] Convention and used for identical or similar goods. [This rule also applies] when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to createconfusion therewith." There is no time limit for seeking the prohibition of the use of marks used in bad faith.47 Thus, under Article 6bis of the Paris Convention, the following are the elements of trademark infringement: (a) registration or use by another person of a trademark which is a reproduction, imitation or translationliable to create confusion, (b) of a mark considered by the competent authority of the country of registration or use48 to be well-knownin that country and is already the mark of a person entitled to the benefits of the Paris Convention, and (c) such trademark is used for identical or similar goods. On the other hand, Section 22 of the Trademark Law holds a person liable for infringement when, among others, he "uses 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 or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services."49 Trademark registration and actual use are material to the complaining partys cause of action. Corollary to this, Section 20 of the Trademark Law50 considers the trademark registration certificate as prima facieevidence of the validity of the registration, the registrants ownership and exclusive right to use the trademark in

connection with the goods, business or services as classified by the Director of Patents51 and as specified in the certificate, subject to the conditions and limitations stated therein. Sections 2 and 2-A52 of the Trademark Law emphasize the importance of the trademarks actual use in commerce in the Philippines prior to its registration. In the adjudication of trademark rights between contending parties, equitable principles of laches, estoppel, and acquiescence may be considered and applied.53 Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following constitute the elements of trademark infringement: (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. In summary, the Paris Convention protects well-known trademarks only (to be determined by domestic authorities), while the Trademark Law protects all trademarks, whether well-known or not, provided that they have been registered and are in actual commercial use in the Philippines. Following universal acquiescence and comity, in case of domestic legal disputes on any conflicting provisions between the Paris Convention (which is an international agreement) and the Trademark law (which is a municipal law) the latter will prevail.54 Under both the Paris Convention and the Trademark Law, the protection of a registered trademark is limited only to goods identical or similar to those in respect of which such trademark is registered and only when there is likelihood of confusion. Under both laws, the time element in commencing infringement cases is material in ascertaining the registrants express or implied consent to anothers use of its trademark or a colorable imitation thereof. This is why acquiescence, estoppel or laches may defeat the registrants otherwise valid cause of action. Hence, proof of all the elements of trademark infringement is a condition precedent to any finding of liability. THE ACTUAL COMMERCIAL USE IN THE PHILIPPINES OF GALLO CIGARETTE TRADEMARK PRECEDED THAT OF GALLO WINE TRADEMARK. By respondents own judicial admission, the GALLO wine trademark was registered in the Philippines in November 1971 but the wine itself was first marketed and sold in the country only in 1974 and only within the former U.S. military facilities, and outside thereof, only in 1979. To prove commercial use of the GALLO wine trademark in the Philippines, respondents presented sales invoice no. 29991 dated July 9, 1981 addressed to Conrad Company Inc., Makati, Philippines and sales invoice no. 85926 dated March 22, 1996 addressed to Andresons Global, Inc., Quezon City, Philippines. Both invoices were for the sale and shipment of GALLO wines to the Philippines during that period.55 Nothing at all, however, was presented to evidence the alleged sales of GALLO wines in the Philippines in 1974 or, for that matter, prior to July 9, 1981. On the other hand, by testimonial evidence supported by the BIR authorization letters, forms and manufacturers sworn statement, it appears that petitioners and its predecessor-in-interest, Tobacco Industries, have indeed been using and selling GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.56 In Emerald Garment Manufacturing Corporation vs. Court of Appeals,57 we reiterated our rulings in Pagasa Industrial 59 Corporation vs. Court of Appeals,58 Converse Rubber Corporation vs. Universal Rubber Products, Inc., Sterling 60 Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft, Kabushi Kaisha Isetan vs. Intermediate

62 Appellate Court,61 and Philip Morris vs. Court of Appeals, giving utmost importance to theactual commercial use of a trademark in the Philippines prior to its registration, notwithstanding the provisions of the Paris Convention:

xxx xxx xxx In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) x xx xxx xxx xxx The provisions of the 1965 Paris Convention for the Protection of Industrial Property relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]): xxx xxx xxx Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx xxx xxx In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using the trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx xxx xxx Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEE RIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969 to 1973. However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]; Reiterated in Kabushi Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]) we declared: xxx xxx xxx A rule widely accepted and firmly entrenched because it has come down through the years is thatactual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx xxx xxx

The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facieevidence. It is not conclusive but can and may be rebutted by controverting evidence. xxx xxx xxx In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals.After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark "LEE" which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its "LEE" mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines (Rollo, p. 177) based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original Records, p. 52) Similarly, we give little weight to the numerous vouchers representing various advertising expenses in the Philippines for "LEE" products. It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May 1981. (Exhibit E) On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its "STYLISTIC MR. LEE" trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. (Exhibit 1-e to 1-o) Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982]) and Converse Rubber Corp. v. Universal Rubber Products, Inc., (147 SCRA 154 [1987]), respectively, are instructive: The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value." The evidence for respondent must be clear, definite and free from inconsistencies. "Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by law. Respondent did not expect income from such "samples." There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. xxx xxx xxx For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for infringement must necessarily fail. (Emphasis supplied.) In view of the foregoing jurisprudence and respondents judicial admission that the actual commercial use of the GALLO wine trademark was subsequent to its registration in 1971 and to Tobacco Industries commercial use of the GALLO cigarette trademark in 1973, we rule that, on this account, respondents never enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of Tobacco Industries and its successors-in-interest, herein petitioners, either under the Trademark Law or the Paris Convention. Respondents GALLO trademark registration is limited to wines only We also note that the GALLO trademark registration certificates in the Philippines and in other countries expressly state that they cover wines only, without any evidence or indication that registrant Gallo Winery expanded or intended to expand its business to cigarettes.63 Thus, by strict application of Section 20 of the Trademark Law, Gallo Winerys exclusive right to use the GALLO trademark should be limited to wines, the only product indicated in its registration certificates. This strict statutory

limitation on the exclusive right to use trademarks was amply clarified in our ruling in Faberge, Inc. vs. Intermediate Appellate Court:64 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. Inasmuch as petitioner has not ventured in the production of briefs, an item which is not listed in its certificate of registration, petitioner cannot 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 inPhilippine Refining Co., Inc. vs. Ng Sam (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 others for products which are of a 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 Newspapers 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).

NO LIKELIHOOD OF CONFUSION, MISTAKE OR DECEIT AS TO THE IDENTITY OR SOURCE OF PETITIONERS AND RESPONDENTS GOODS OR BUSINESS A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or deceit as to the identity, source or origin of the goods or identity of the business as a consequence of using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly according to the particular (and sometimes peculiar) circumstances of each case. Thus, in trademark cases, more than in other kinds of litigation, precedents must be studied in the light of each particular case. 65 There are two types of confusion in trademark infringement. The first is "confusion of goods" when an otherwise prudent purchaser is induced to purchase one product in the belief that he is purchasing another, in which case defendants goods are then bought as the plaintiffs and its poor quality reflects badly on the plaintiffs reputation. The other is "confusion of business" wherein the goods of the parties are different but the defendants product can reasonably (though mistakenly) be assumed to originate from the plaintiff, thus deceiving the public into believing that there is some connection between the plaintiff and defendant which, in fact, does not exist.66 In determining the likelihood of confusion, the Court must consider: [a] the resemblance between the trademarks; [b] the similarity of the goods to which the trademarks are attached; [c] the likely effect on the purchaser and [d] the registrants express or implied consent and other fair and equitable considerations. Petitioners and respondents both use "GALLO" in the labels of their respective cigarette and wine products. But, as held in the following cases, the use of an identical mark does not, by itself, lead to a legal conclusion that there is trademark infringement: (a) in Acoje Mining Co., Inc. vs. Director of Patent,67 we ordered the approval of Acoje Minings application for registration of the trademark LOTUS for its soy sauce even though Philippine Refining Company had prior registration and use of such identical mark for its edible oil which, like soy sauce, also belonged to Class 47; (b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,68 we upheld the Patent Directors registration of the same trademark CAMIA for Ng Sams ham under Class 47, despite Philippine Refining Companys prior trademark registration and actual use of such mark on its lard, butter, cooking oil (all of which belonged to Class 47), abrasive detergents, polishing materials and soaps; (c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,69 we dismissed Hickoks petition to cancel private respondents HICKOK trademark registration for its Marikina shoes as against petitioners earlier registration of the same trademark for handkerchiefs, briefs, belts and wallets; (d) in Shell Company of the Philippines vs. Court of Appeals,70 in a minute resolution, we dismissed the petition for review for lack of merit and affirmed the Patent Offices registration of the trademark SHELL used in the cigarettes manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell Companys opposition as the prior registrant of the same trademark for its gasoline and other petroleum products; (e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSOs complaint for trademark infringement against United Cigarette Corporation and allowed the latter to use the trademark ESSO for its cigarettes, the same trademark used by ESSO for its petroleum products, and
72 (f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation, we affirmed the rulings of the Patent Office and the CA that NSR Rubber Corporation could use the trademark CANON for its sandals (Class 25) despite Canon Kabushiki Kaishas prior registration and use of the same trademark for its paints, chemical products, toner and dyestuff (Class 2).

Whether a trademark causes confusion and is likely to deceive the public hinges on "colorable imitation"73 which has been defined as "such similarity in form, content, words, sound, meaning, special arrangement or general appearance of the trademark or tradename in their overall presentation or in their essential and substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article."74

Jurisprudence has developed two tests in determining similarity and likelihood of confusion in trademark resemblance:75 (a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals76 and other cases,
77

and

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals78 and its preceding cases.79 The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception, and thus infringement. If the competing trademark contains the main, essential or dominant features of another, and confusion or deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or deceive purchasers.80 On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in resolving confusing similarity. Comparison of words is not the only determining factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other.81 In comparing the resemblance or colorable imitation of marks, various factors have been considered, such as the dominant color, style, size, form, meaning of letters, words, designs and emblems used, the likelihood of deception of the mark or name's tendency to confuse82 and the commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties.83 Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO cigarette trademark is the device of a large rooster facing left, outlined in black against a gold background. The roosters color is either green or red green for GALLO menthols and red for GALLO filters. Directly below the large rooster device is the word GALLO. The rooster device is given prominence in the GALLO cigarette packs in terms of size and location on the labels.84 The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no relation at all to the product but was chosen merely as a trademark due to the fondness for fighting cocks of the son of petitioners president. Furthermore, petitioners adopted GALLO, the Spanish word for rooster, as a cigarette trademark to appeal to one of their target markets, the sabungeros (cockfight aficionados).85 Also, as admitted by respondents themselves,86 on the side of the GALLO cigarette packs are the words "MADE BY MIGHTY CORPORATION," thus clearly informing the public as to the identity of the manufacturer of the cigarettes. On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of them, the labels are embellished with sketches of buildings and trees, vineyards or a bunch of grapes while in a few, one or two small roosters facing right or facing each other (atop the EJG crest, surrounded by leaves or ribbons), with additional designs in green, red and yellow colors, appear as minor features thereof.87 Directly below or above these sketches is the entire printed name of the founder-owners, "ERNEST & JULIO GALLO" or just their surname "GALLO,"88 which appears in different fonts, sizes, styles and labels, unlike petitioners uniform casque-font bold-lettered GALLO mark. Moreover, on the labels of Gallo Winerys wines are printed the words "VINTED AND BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA."89 The many different features like color schemes, art works and other markings of both products drown out the similarity between them the use of the word GALLO a family surname for the Gallo Winerys wines and a Spanish word for rooster for petitioners cigarettes. WINES AND CIGARETTES ARE NOT IDENTICAL, SIMILAR, COMPETING OR RELATED GOODS

Confusion of goods is evident where the litigants are actually in competition; but confusion of business may arise between non-competing interests as well.90 Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6bis of the Paris Convention which proscribe trademark infringement not only of goods specified in the certificate of registration but also of identical or similar goods, we have also uniformly recognized and applied the modern concept of "related goods."91 Simply stated, when goods are so related that the public may be, or is actually, deceived and misled that they come from the same maker or manufacturer, trademark infringement occurs.92 Non-competing goods may be those which, though they are not in actual competition, are so related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the use of similar marks.93 They may also be those which, being entirely unrelated, cannot be assumed to have a common source; hence, there is no confusion of business, even though similar marks are used.94 Thus, there is no trademark infringement if the public does not expect the plaintiff to make or sell the same class of goods as those made or sold by the defendant.95 In resolving whether goods are related,96 several factors come into play: (a) the business (and its location) to which the goods belong (b) the class of product to which the goods belong (c) the product's quality, quantity, or size, including the nature of the package, wrapper or container 97 (d) the nature and cost of the articles98 (e) the descriptive properties, physical attributes or essential characteristics with reference to their form, composition, texture or quality (f) the purpose of the goods99 (g) whether the article is bought for immediate consumption,100 that is, day-to-day household items (h) the fields of manufacture102 (i) the conditions under which the article is usually purchased103 and (j) the channels of trade through which the goods flow,104 how they are distributed, marketed, displayed and sold.
105 101

The wisdom of this approach is its recognition that each trademark infringement case presents its own unique set of facts. No single factor is preeminent, nor can the presence or absence of one determine, without analysis of the others, the outcome of an infringement suit. Rather, the court is required to sift the evidence relevant to each of the criteria. This requires that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.106 It is a weighing and balancing process. With reference to this ultimate question, and from a balancing of the determinations reached on all of the factors, a conclusion is reached whether the parties have a right to the relief sought.107 A very important circumstance though is whether there exists a likelihood that an appreciable number of ordinarily prudent purchasers will be misled, or simply confused, as to the source of the goods in question.108 The "purchaser" is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.109 He is "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase."110

Hence, in the adjudication of trademark infringement, we give due regard to the goods usual purchasers character, attitude, habits, age, training and education. 111 Applying these legal precepts to the present case, petitioners use of the GALLO cigarette trademark is not likely to cause confusion or mistake, or to deceive the "ordinarily intelligent buyer" of either wines or cigarettes or both as to the identity of the goods, their source and origin, or identity of the business of petitioners and respondents. Obviously, wines and cigarettes are not identical or competing products. Neither do they belong to the same class of goods. Respondents GALLO wines belong to Class 33 under Rule 84[a] Chapter III, Part II of the Rules of Practice in Trademark Cases while petitioners GALLO cigarettes fall under Class 34. We are mindful that product classification alone cannot serve as the decisive factor in the resolution of whether or not wines and cigarettes are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. But the mere fact that one person has adopted and used a particular trademark for his goods does not prevent the adoption and use of the same trademark by others on articles of a different description. 112 Both the Makati RTC and the CA held that wines and cigarettes are related products because: (1) "they are related forms of vice, harmful when taken in excess, and used for pleasure and relaxation" and (2) "they are grouped or classified in the same section of supermarkets and groceries." We find these premises patently insufficient and too arbitrary to support the legal conclusion that wines and cigarettes are related products within the contemplation of the Trademark Law and the Paris Convention. First, anything - not only wines and cigarettes can be used for pleasure and relaxation and can be harmful when taken in excess. Indeed, it would be a grave abuse of discretion to treat wines and cigarettes as similar or related products likely to cause confusion just because they are pleasure-giving, relaxing or potentially harmful. Such reasoning makes no sense. Second, it is common knowledge that supermarkets sell an infinite variety of wholly unrelated products and the goods here involved, wines and cigarettes, have nothing whatsoever in common with respect to their essential characteristics, quality, quantity, size, including the nature of their packages, wrappers or containers.113 Accordingly, the U.S. patent office and courts have consistently held that the mere fact that goods are sold in one store under the same roof does not automatically mean that buyers are likely to be confused as to the goods respective sources, connections or sponsorships. The fact that different products are available in the same store is an insufficient standard, in and of itself, to warrant a finding of likelihood of confusion.114 In this regard, we adopted the Director of Patents finding in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents:115 In his decision, the Director of Patents enumerated the factors that set respondents products apart from the goods of petitioner. He opined and we quote: "I have taken into account such factors as probable purchaser attitude and habits, marketing activities, retail outlets, and commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties, I believe that ham on one hand, and lard, butter, oil, and soap on the other are products that would not move in the same manner through the same channels of trade. They pertain to unrelated fields of manufacture, might be distributed and marketed under dissimilar conditions, and are displayed separately even though they frequently may be sold through the same retail food establishments.Opposers products are ordinary day-to-day household items whereas ham is not necessarily so. Thus, the goods of the parties are not of a character which purchasers would likely attribute to a common origin. The observations and conclusion of the Director of Patents are correct. The particular goods of the parties are so unrelated that consumers, would not, in any probability mistake one as the source of origin of the product of the other. (Emphasis supplied).

The same is true in the present case. Wines and cigarettes are non-competing and are totally unrelated products not likely to cause confusion vis--vis the goods or the business of the petitioners and respondents. Wines are bottled and consumed by drinking while cigarettes are packed in cartons or packages and smoked. There is a whale of a difference between their descriptive properties, physical attributes or essential characteristics like form, composition, texture and quality. GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are patronized by middle-to-highincome earners while GALLO cigarettes appeal only to simple folks like farmers, fishermen, laborers and other lowincome workers.116 Indeed, the big price difference of these two products is an important factor in proving that they are in fact unrelated and that they travel in different channels of trade. There is a distinct price segmentation based on vastly different social classes of purchasers.117 GALLO cigarettes and GALLO wines are not sold through the same channels of trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass off their goods as imported or emanating from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through ambulant and sidewalk vendors, small localsarisari stores and grocery stores in Philippine rural areas, mainly in Misamis Oriental, Pangasinan, Bohol, and Cebu.118 On the other hand, GALLO wines are imported, distributed and sold in the Philippines through Gallo Winerys exclusive contracts with a domestic entity, which is currently Andresons. By respondents own testimonial evidence, GALLO wines are sold in hotels, expensive bars and restaurants, and high-end grocery stores and supermarkets, not through sari-sari stores or ambulant vendors.119 Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs. Philip Morris, Inc.120 to support its finding that GALLO wines and GALLO cigarettes are related goods. The courts a quo should have taken into consideration the subsequent case of IDV North America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, Inc.:121 IDV correctly acknowledges, however, that there is no per se rule that the use of the same mark on alcohol and tobacco products always will result in a likelihood of confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), affd,222 F. 2d 460 (5th Cir. 1955), wherein the court enjoined the use of the mark "JOHNNIE WALKER" on cigars because the fame of the plaintiffs mark for scotch whiskey and because the plaintiff advertised its scotch whiskey on, or in connection with tobacco products. The court, in John Walker & Sons, placed great significance on the finding that the infringers use was a deliberate attempt to capitalize on the senior marks fame. Id. At 256. IDV also relies on Carling Brewing Co. v. Philip Morris, Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the defendants use of the mark "BLACK LABEL" for cigarettes because it was likely to cause confusion with the plaintiffs well-known mark "BLACK LABEL" for beer. xxx xxx xxx Those decisions, however, must be considered in perspective of the principle that tobacco products and alcohol products should be considered related only in cases involving special circumstances. Schenley Distillers, Inc. v. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special circumstances has been found to exist where there is a finding of unfair competition or where a famous or well-known mark is involved and there is a demonstrated intent to capitalize on that mark. For example, in John Walker & Sons, the court was persuaded to find a relationship between products, and hence a likelihood of confusion, because of the plaintiffs long use and extensive advertising of its mark and placed great emphasis on the fact that the defendant used the trademark Johnnie Walker with full knowledge of its fame and reputation and with the intention of taking advantage thereof. John Walker & Sons, 124 F. Supp. At 256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the decision inJohn Walker & Sons was merely the law on the particular case based upon its own peculiar facts); see also Alfred Dunhill, 350 F. Supp. At 1363 (defendants adoption of Dunhill mark was not innocent). However, inSchenley, the court noted that the relation between tobacco and whiskey products is significant where a widely known arbitrary mark has long been used for diversified products emanating from a single source and a newcomer seeks to use the same mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court looked at the industry practice and the facts of the case in order to determine the nature and extent of the relationship between the mark on the tobacco product and the mark on the alcohol product. The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in conjunction with tobacco or tobacco accessory products and that IDV has no intent to do so. And, unlike the defendant

in Dunhill, S & M Brands does not market bar accessories, or liqueur related products, with its cigarettes. The advertising and promotional materials presented a trial in this action demonstrate a complete lack of affiliation between the tobacco and liqueur products bearing the marks here at issue. xxx xxx xxx Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family nameBaileys as the mark for its cigarettes, to capitalize upon the fame of the BAILEYS mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be discussed below, and as found in Mckesson & Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so intimately associated in the public mind that they cannot under any circumstances be sold under the same mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308. Taken as a whole, the evidence here demonstrates the absence of the special circumstances in which courts have found a relationship between tobacco and alcohol products sufficient to tip the similarity of goods analysis in favor of the protected mark and against the allegedly infringing mark. It is true that BAILEYS liqueur, the worlds best selling liqueur and the second best selling in the United States, is a well-known product. That fact alone, however, is insufficient to invoke the special circumstances connection here where so much other evidence and so many other factors disprove a likelihood of confusion. The similarity of products analysis, therefore, augers against finding that there is a likelihood of confusion. (Emphasis supplied). In short, tobacco and alcohol products may be considered related only in cases involving special circumstanceswhich exist only if a famous mark is involved and there is a demonstrated intent to capitalize on it. Both of these are absent in the present case. THE GALLO WINE TRADEMARK IS NOT A WELL-KNOWN MARK IN THE CONTEXT OF THE PARIS CONVENTION IN THIS CASE SINCE WINES AND CIGARETTES ARE NOT IDENTICAL OR SIMILAR GOODS First, the records bear out that most of the trademark registrations took place in the late 1980s and the 1990s, that is, after Tobacco Industries use of the GALLO cigarette trademark in 1973 and petitioners use of the same mark in 1984. GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods, a requisite elementunder both the Trademark Law and the Paris Convention. Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines. Respondents do not dispute the documentary evidence that aside from Gallo Winerys GALLO trademark registration, the Bureau of Patents, Trademarks and Technology Transfer also issued on September 4, 1992 Certificate of Registration No. 53356 under the Principal Register approving Productos Alimenticios Gallo, S.As April 19, 1990 application for GALLO trademark registration and use for its "noodles, prepared food or canned noodles, ready or canned sauces for noodles, semolina, wheat flour and bread crumbs, pastry, confectionery, ice cream, honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar, species and ice."122 Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber 123 Corporation, "GALLO" cannot be considered a "well-known" mark within the contemplation and protection of the Paris Convention in this case since wines and cigarettes are not identical or similar goods: We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT: "Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local entity.

In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held that: 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. This office is not unmindful that in (sic) the Treaty of Paris for the Protection of Intellectual Property regarding well-known marks and possible application thereof in this case. Petitioner, as this office sees it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in this country at the time the then application of NSR Rubber was filed. However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the Director of Patents, a set of guidelines in the implementation of Article 6bis of the Treaty of Paris. These conditions are: a) the mark must be internationally 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. Bogsch, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985) From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third requirement of the said memorandum that is the mark must be for use in the same or similar kinds of goods. The Petitioner is using the mark "CANON" for products belonging to class 2 (paints, chemical products) while the Respondent is using the same mark for sandals (class 25). Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark should fail." (Emphasis supplied.) Consent of the Registrant and Other air, Just and Equitable Considerations Each trademark infringement case presents a unique problem which must be answered by weighing the conflicting interests of the litigants.124 Respondents claim that GALLO wines and GALLO cigarettes flow through the same channels of trade, that is, retail trade. If respondents assertion is true, then both goods co-existed peacefully for a considerable period of time. It took respondents almost 20 years to know about the existence of GALLO cigarettes and sue petitioners for trademark infringement. Given, on one hand, the long period of time that petitioners were engaged in the manufacture, marketing, distribution and sale of GALLO cigarettes and, on the other, respondents delay in enforcing their rights (not to mention implied consent, acquiescence or negligence) we hold that equity, justice and fairness require us to rule in favor of petitioners. The scales of conscience and reason tip far more readily in favor of petitioners than respondents. Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they intended to capitalize on respondents goodwill in adopting the GALLO mark for their cigarettes which are totally unrelated to respondents GALLO wines. Thus, we rule out trademark infringement on the part of petitioners.

PETITIONERS ARE ALSO NOT LIABLE FOR UNFAIR COMPETITION Under Section 29 of the Trademark Law, any person who employs deception or any other means contrary to good faith by which he passes off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who commits any acts calculated to produce said result, is guilty of unfair competition. It includes the following acts: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any 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; (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. The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one mans goods or business as that of another constitutes unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendants practices must always appear.125 On this score, we find that petitioners never attempted to pass off their cigarettes as those of respondents. There is no evidence of bad faith or fraud imputable to petitioners in using their GALLO cigarette mark. All told, after applying all the tests provided by the governing laws as well as those recognized by jurisprudence, we conclude that petitioners are not liable for trademark infringement, unfair competition or damages. WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED. The questioned decision and resolution of the Court of Appeals in CA-G.R. CV No. 65175 and the November 26, 1998 decision and the June 24, 1999 order of the Regional Trial Court of Makati, Branch 57 in Civil Case No. 93-850 are hereby REVERSED and SET ASIDE and the complaint against petitioners DISMISSED. Costs against respondents. SO ORDERED. Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur. Carpio-Morales, J., no part..

Footnotes

Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conchita Carpio Morales (now Associate Justice of the Supreme Court) and Sergio L. Pestano of the Ninth Division. 2 Penned by Acting Presiding Judge Bonifacio Sanz Maceda. 3 Penned by Judge Reinato O. Quilala. 4 Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conchita Carpio Morales (now Associate Justice of the Supreme Court) and Sergio L. Pestano of the former Ninth Division. 5 Complaint, Exhibits "D" to "D-1," Records, pp. 1-2; TSN, June 9, 1997, Records, pp. 951-956. 6 Exhibits "B" to "B-6," Records, pp. 80-86. 7 Records, pp. 29-31. 8 Answer, Records, pp. 255 and 264-266; TSN, April 13, 1993, Records, pp. 767, 780-796; TSN, October 27, 1997, Records, pp. 993-1000. 9 Exhibits 9 to 12, Records, pp. 89-95, 267-268; TSN, October 27, 1997, Records, pp. 1005-1007. 10 Records, pp. 255-256, 269 and 271. 11 Records, pp. 256, 270. 12 Exhibit 15, Records, pp. 104, 256, 272.

13 14 15

Records, p. 256. Exhibits 13 and 14, Records, pp. 96-98. TSN, April 13, 1993, Records, pp. 780-796; TSN, December 14, 1993, Records, pp. 420-422; TSN, October 27, 1997, Records, pp. 993-1000. 16 Complaint, Exhibit "D-2," Records, pp. 3, 110 and 328. 17 Exhibit "A," Complainants Memorandum, Records, p. 127; TSN, December 14, 1993, Records, pp. 326, 432-433. 18 CONVENTION OF PARIS FOR THE PROTECTION OF INDUSTRIAL PROPERTY of 20th March, 1883 revised at Brussels on 14th December, 1900, at Washington on 2nd June, 1911, at the Hague on 6th November, 1925, at London st on 2nd June, 1934, and at Lisbon on 31 October, 1958 xxxxxxxxx bis Article 6 (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith. 19 Republic Act No. 166 is entitled "An Act To Provide For The Registration And Protection Of Trademarks, Trade Names And Servicemarks, Defining Unfair Competition And False Marking And Providing Remedies Against The Same, And For Other Purposes". 20 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 or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. SEC. 23. Actions, and damages and injunction for infringement. Any person entitled to the exclusive use of a registered mark or tradename may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or tradename was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing, may also be granted injunction. 21 SEC. 29. Unfair competition, rights and remedies. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a mark or tradename is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. Such a person shall have the remedies provided in section twenty-three, Chapter V hereof. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would 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. Chapter VII False Designation of Origin and False Description SEC. 30. False designation of origin and false description forbidden. Any person who shall affix, apply, annex or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely

to describe or represent the same, and shall cause such goods or services to enter into commerce, and any person who shall with knowledge of the falsity of such designation of origin or description or representation cause or procure the same to enter into commerce, shall be liable to a civil action for damages and injunction provided in section twenty-three, Chapter V hereof, by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation. 22 Chapter XI Provisions in Reference to Foreign Industrial Property SEC. 37. Rights of foreign registrants. Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or tradenames, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. No registration of a mark or tradename in the Philippines by a person described in the preceding paragraph of this section shall be granted until such mark or tradename has been registered in the country of origin of the applicant, unless the applicant alleges use in commerce. For the purposes of this section, the country of origin of the applicant is the country in which he hasbona fide and effective industrial or commercial establishment, or if he has no such an establishment in the country in which he is domiciled, or if he has not a domicile in any of the countries described in the first paragraph of this section, the country of which he is a national. An application for registration of a mark or tradename under the provisions of this Act filed by a person described in the first paragraph of this section who has previously duly filed an application for registration of the same mark or tradename in one of the countries described in said paragraph shall be accorded the same force and effect as would be accorded to the same application if filed in the Philippines on the same date on which the application was first filed in such foreign country: Provided,That (a) The application in the Philippines is filed within six months from the date on which the application was first filed in the foreign country; and within three months from the date of filing or within such time as the Director shall in his discretion grant, the applicant shall furnish a certified copy of the application for or registration in the country of origin of the applicant, together with a translation thereof into English, if not in the English language; (b) The application conforms as nearly as practicable to the requirements of this Act, but use in commerce need not be alleged; (c) The rights acquired by third parties before the date of the filing of the first application in the foreign country shall in no way be affected by a registration obtained on an application filed under this paragraph; (d) Nothing in this paragraph shall entitle the owner of a registration granted under this section to sue for acts committed prior to the date on which his mark or tradename was registered in this country unless the registration is based on use in commerce; and (e) A mark duly registered in the country of origin of the foreign applicant may be registered on the principal register if eligible, otherwise, on the supplemental register herein provided. The application thereof shall be accompanied by a certified copy of the application for or registration in the country of origin of the applicant. (As added by R.A. No. 638.) The registration of a mark under the provisions of this section shall be independent of the registration in the country of origin and the duration, validity or transfer in the Philippines of such registration shall be governed by the provisions of this Act. Tradenames of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form parts of marks. Any person designated in the first paragraph of this section as entitled to the benefits and subject to the provisions of this Act shall be entitled to effective protection against unfair competition, and the remedies provided herein for infringement of marks and tradenames shall be available so far as they may be appropriate in repressing acts of unfair competition. Citizens or residents of the Philippines shall have the same benefits as are granted by this section to persons described in the first paragraph hereof. 23 Complaint, Exhibits "D-1" to "D-9," Record, pp. 1-10. 24 Penned by Judge Francisco X. Velez. 25 Records, pp. 159-160. 26 Sec. 5. Preliminary injunction not granted without notice; issuance of restraining order. No preliminary injunction shall be granted without notice to the defendant. If it shall appear from the facts shown by affidavits or by the verified complaint that great or irreparable injury would result to the applicant before the matter can be heard on notice, the judge to whom the application for preliminary injunction was made, may issue a restraining order to be effective only for a period of twenty days from the date of its issuance. Within the said twenty-day period, the judge must cause an order to be served on the defendant, requiring him to show cause, at a specified time and place, why the injunction should not be granted, and determine within the same period whether or not the preliminary injunction shall be granted, and shall accordingly issue the corresponding order. In the event that the application for preliminary injunction is denied, the restraining order is deemed automatically vacated. Nothing herein contained shall be construed to impair, affect or modify in any way any rights granted by, or rules pertaining to injunctions contained in, existing agrarian, labor or social legislation. (As amended by B.P. Blg. 224, approved April 16, 1982). 27 Penned by Judge Velez; Records, pp. 302-304. 28 Penned by Associate Justice Ramon Mabutas, Jr. and concurred in by Associate Justices Nathanael P. De Pano, Jr. and Artemon D. Luna of the Special First Division; Records, pp. 449-465. 29 Penned by Judge Maceda; Records, pp. 651-652. 30 Penned by Judge Quilala; Records, pp. 727-728. 31 Petition; Rollo, pp. 18-19.

32 33

Rule 45, Section 2. Ramos vs. Pepsi-Cola Bottling Co. of the P.I., 19 SCRA 289, 292 [1967]; Medina vs. Asistio, Jr., 191 SCRA 218, 223 [1990]; Caia vs. People, 213 SCRA 309, 313 [1992]. 34 Moomba Mining Exploration Company vs. Court of Appeals, 317 SCRA 338 [1999]. 35 Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420 [1990]. 36 Asia Brewery, Inc. vs. Court of Appeals, 224 SCRA 437, 443 [1993]; Philippine Nut Industry Inc. vs. Standard Brands, Inc., 224 SCRA 437, 443 [1993]; Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 [1989] citing Mendoza vs. Court of Appeals, 156 SCRA 597 [1987]; Manlapaz vs. Court of Appeals, 147 SCRA 238 [1987]; Sacay vs. Sandiganbayan, 142 SCRA 593, 609 [1986]; Guita vs. Court of Appeals, 139 SCRA 576 [1985]; Casanayan vs. Court of Appeals, 198 SCRA 333, 336 [1991]; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [1988] citing Tolentino vs. De Jesus, 56 SCRA 167 [1974]; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734 [1980]; Manero vs. Court of Appeals, 102 SCRA 817 [1981]; and Moran, Jr. vs. Court of Appeals, 133 SCRA 88 [1984]. 37 Sec. 241, Intellectual Property Code of the Philippines. 38 Rollo, p. 191. 39 Rollo, p. 71. 40 Tolentino, Civil Code Of The Philippines Commentaries and Jurisprudence, Volume I, p. 19; See Articles 2 to 4 of the Civil Code of the Philippines. 41 Ibid. 42 Laws may be given retroactive effect only if they are: (a) procedural statutes which prescribe rules and forms of procedures of enforcing rights or obtaining redress for their invasion (Subido vs. Sandiganbayan, 266 SCRA 379 [1997]; Primicias vs. Ocampo, 93 Phil. 446 [1953]; Bustos vs. Lucero, 81 Phil. 640 [1948]; Lopez vs. Gloria, 40 Phil. 26 [1919]; People vs. Sumilang, 77 Phil. 764 [1946]) (b) remedial or curative statutes which cure errors and irregularities and validate judicial or administrative proceedings, acts of public officers, or private deeds and contracts that otherwise would not produce their intended consequences due to some statutory disability or failure to comply with technical rules (Government vs. Municipality of Binalonan, 32 Phil. 634 [1915]; Subido vs. Sandiganbayan, supra; Del Castillo vs. Securities and Exchange Commission, 96 Phil. 119 [1954]; Santos vs. Duata, 14 SCRA 1041 [1965]; Development Bank of the Philippines vs. Court of Appeals, 96 SCRA 342 [1980]; Alunan III vs. Mirasol, 276 SCRA 501 [1997]) (c) laws interpreting others (d) laws creating new rights (Bona vs. Briones, 38 Phil. 276 [1918]; Intestate Estate of Bustamante vs. Cayas, 98 Phil. 107 [1955]) (e) penal statutes insofar as they favor the accused who is not a habitual criminal (Article 22, Revised Penal Code) or (f) by express provision of the law, (Art. 4, Civil Code of the Philippines; Alba Vda. De Raz vs. Court of Appeals, 314 SCRA 36 [1999]), except in cases of ex post facto laws (U.S. vs. Diaz Conde, 42 Phil. 766 [1922]; U.S. vs. Gomez, 12 Phil. 279 [1908]) or impairment of obligation of contract. (Asiatic Petroleum vs. Llanes, 49 Phil. 466 [1926]). 43 Sec. 239, Intellectual Property Code of the Philippines. 44 E. Spinner & Co. vs. Neuss Hesslein Corporation, 54 Phil. 225, 231-232 [1930]. 45 181 SCRA 410, 415 [1990]. 46 The Paris Convention is a compact among various member countries to accord in their own countries to citizens of the other contracting parties trademarks and other rights comparable to those accorded their own citizens by their domestic laws. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its citizen. (Emerald Garden Manufacturing Corp. vs. Court of Appeals, 251 SCRA 600 [1995]). 47 See footnote 18 for full text. 48 "conditions for the filing and registration of trademarks shall be determined in each country of the Union by its domestic 1 law." (Art. 6 , Paris Convention). 49 See footnote 20 for full text. 50 SEC 20. Certificate of registration prima facie evidence of validity. A certificate of registration of a mark or tradename shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or tradename, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. 51 SEC. 6. Classification of goods and services. The Director shall establish a classification of goods and services, for the convenience of the Patent Office administration, but not to limit or extend the applicants rights. The applicant may register his mark or tradename in one application for any or all of the goods or services included in one class, upon or in connection with which he is actually using the mark or tradename. The Director may issue a single certificate for one mark or tradename registered in a plurality of classes upon payment of a fee equaling the sum of the fees for each registration in each class. 52 SEC. 2. What are registrable. Trademarks, tradenames, and servicemarks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trademarks, tradenames, or servicemarks 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. 865). SEC. 2-A. Ownership of trademarks, tradenames and servicemarks; how acquired. Anyone who lawfully produces or deals in merchandise of any kind or 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 servicemark not so appropriated by another, to distinguish his merchandise, business or

service from the merchandise, business or service of others. The ownership or possession of a trademark, tradename, servicemark heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As amended by R.A. 638). 53 SEC. 9-A. Equitable principles to govern proceedings. In opposition proceedings and in all other inter partes proceedings in the Patent Office under this Act, equitable principles of laches, estoppel, and acquiescence where applicable, may be considered and applied. (As added by R.A. No. 638).
54 55 56

Philip Morris, Inc. vs. Court of Appeals, 224 SCRA 576 [1993]. Exhibits "Q" to "R-2," Records, pp. 2075-2078. Exhibits "9" to "14," Records, pp. 90-98. 57 251 SCRA 600, 619 [1995]. 58 118 SCRA 526 [1982]. 59 147 SCRA 154 [1987]. 60 27 SCRA 1214 [1969]. 61 203 SCRA 583 [1991]. 62 224 SCRA 576 [1993]. 63 TSN, April 13, 1993, Records, p. 783; TSN, June 9, 1997, Records, p. 959. 64 215 SCRA 316, 325 [1992]. 65 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336, 341 [1982]. 66 Sterling Products, International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214, 1227 [1969] citing 2 Callman, Unfair Competition and Trademarks, 1945 ed., p. 1006. 67 38 SCRA 480 [1971]. 68 115 SCRA 472 [1982]. 69 116 SCRA 388 [1982]. 70 G.R. No. L-49145, May 21, 1979. 71 116 SCRA 336 [1982]. 72 336 SCRA 266 [2000]. 73 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]. 74 Ruben Agpalo, Trademark Law and Practice in the Philippines [1990], p.41. 75 Ibid. 76 224 SCRA 437 [1993]. 77 Co Tiong vs. Director of Patents, 95 Phil. 1 [1954]; Lim Hoa vs. Director of Patents, 100 Phil. 214 [1956]; American Wire & Cable Co. vs. Director of Patents, 31 SCRA 544 [1970]; Phil. Nut Industry, Inc. vs. Standard Brands, Inc., 65 SCRA 575 [1975]; Converse Rubber Corp. vs. Universal Rubber Products, Inc., 147 SCRA 154 [1987]. 78 181 SCRA 410 [1990]. 79 Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd., 7 SCRA 771 [1963]; Bristol Myers Co. vs. Director of Patents, 17 SCRA 128 [1966]; Fruit of the Loom, Inc. vs. Court of Appeals, 133 SCRA 405 [1984]. 80 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]. 81 Ibid. 82 Ibid. 83 Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982]. 84 Exhibits "1" to "4"; Records 2095-2097. 85 TSN, October 27, 1997, Records, pp. 995-1000. 86 Reply, Records, p. 293. 87 Exhibits "N to Q". 88 TSN, December 14, 1993, Records, pp. 414, 421 and 442. 89 Exhibits "1" to "4." 90 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336,341 [1982]. 91 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982]; Arce vs. Selecta, 1 SCRA 253 [1961]; Chua Che vs. Phil. Patents Office, 13 SCRA 67 [1965]; Ang vs. Teodoro, 74 Phil. 50 [1942]; Khe vs. Lever Bros. Co., 49 O.G. 3891 [1941]; Ang Si Heng & Dee vs. Wellington Dept. Store, 92 Phil. 448 [1953]; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480 [1971]. 92 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982]. 93 Ibid. 94 Ibid. 95 I CALLMAN 1121 cited in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982]. 96 It has been held that where the products are different, the prior owners chance of success is a function of many variables, such as the: (a) strength of his mark (b) degree of similarity between the two marks (c) reciprocal of defendants good faith in adopting its own mark (d) quality of defendants product (e) proximity of the products (f) likelihood that the prior owner will bridge the gap (g) actual confusion, and (h) sophistication of the buyers. (Polaroid Corp. vs. Polaroid Elecs. Corp., 287 F. 2d 492, 495 (2d Cir.), cert. denied, 368 U.S. 820, 82 s. Ct. 36, 7 L. Ed. 2d 25 [1961]). 97 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]; Del Monte Corporation, vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery, Inc. vs. Court of Appeals, 224 SCRA 437 [1993]. 98 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]. 99 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982]. 100 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]. 101 Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].

102 103 104

Ibid. Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]. Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982]. 105 Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982]. 106 Thompson Medical Co. vs. Pfizer, Inc. 753 F. 2d 208, 225 USPQ 124 (2d Cir.) 1985. 107 Kiki Undies Corp. vs. Promenade Hosiery Mills, Inc., 411 F. 2d 1097, 1099 (2d Cir. 1969), cert. denied, 396 U.S. 1094, 90 S. Ct. 707, 24 L. Ed. 698 [1970]; Lever Bros. Co. vs. American Bakeries Co., 693 F. 2d 251, C.A. N.Y., November 3, 1982. 108 Mushroom Makers, Inc. vs. R.G. Barry Corp., 580 F. 2d 44, 47 (2d Cir. 1978), cert. denied, 439 U.S. 1116, 99 s. Ct. 1022, 59 L. Ed. 2d 75 [1979]. 109 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]. 110 Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190 [1921]. 111 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]; Del Monte Corporation, et al. vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery, Inc. vs. Court of Appeals, et al., 224 SCRA 437 [1993]; Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982]. 112 Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 115 SCRA 472 [1982]. 113 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995]; Del Monte Corporation, vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery, Inc. vs. Court of Appeals, 224 SCRA 437 [1993]. th 114 California Fruit Growers Exchange vs. Sunkist Baking Co., 166 F. 2d 971, 76 U.S.P.Q. 85 (7 Cir. 1947); Hot Shot th Quality Products, Inc. vs. Sifers Chemicals, Inc. 452 F.2d 1080, 172 U.S.P.Q. 350 (10 Cir. 1971); Federated Foods, Inc. vs. Ft. Howard Paper Co., 544 F.2d 1098, 192 U.S.P.Q. 24; Faultless Starch Co. vs. Sales Producers Associates, Inc., 530 F. 2d 1400, 189 U.S.P.Q. (C.C.P.A. 1976); Lever Bros. Co. vs. American Bakeries Co., 693 F. 2d 251, 216 U.S.P.Q. 177 (2d Cir. 1982); Nestle Co. vs. Nash-Finch Co., 4 U.S.P.Q. 2d 1085 (T.T.A.B.). 115 115 SCRA 472, 478 [1982]. 116 Answer, Records, p. 258; TSN, December 14, 1993, Records, p. 420; TSN, June 9, 1997, Records, p. 958; TSN, September 8, 1997, Records, p. 965-967. 117 Emerald Manufacturing, 251 SCRA 600 [1995]; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480 [1981]; Field Enterprises Educational Corp. vs. Grosset & Dunlap, Inc. 256 F. Supp. 382, 150 U.S.P.Q. 517 (S.D.N.Y. 1966); Haviland & Co. vs. Johann Haviland China Corp., 269 F. Supp. 928, 154 U.S.P.Q. 287 (S.D.N.Y. 1967); Estee Lauder, nd Inc. vs. The Gap, Inc., 108 F. 3d. 1503, 42 U.S.P.Q. 2d 1228(2 Cir. 1997). 118 Answer, Records, p. 257; TSN, April 13, 1993, Records, pp. 783; TSN, December 14, 1993, Records, p. 420; TSN, September 8, 1997, Records, pp. 966, 971-972. 119 TSN, June 9, 1997, Record, pp. 952-958; TSN, December 14, 1993, Records, p. 432. 120 297 F. Supp. 1330, 160 USPQ 303. 121 26 F. Supp. 2d 815 (E.D. Va. 1998). 122 Exhibit 18, Records, pp. 107-108. 123 366 SCRA 266 [2000]. 124 52 Am. Jur. 577. 125 Shell Co. of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd., 120 Phil. 434, 439 [1964].

[G.R. No. 114508. November 19, 1999]

PRIBHDAS J. MIRPURI, petitioner, vs. COURT CORPORATION, respondents.

OF

APPEALS,

DIRECTOR

OF

PATENTS

and

the

BARBIZON

DECISION PUNO, J.:

The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the Philippines bound itself to honor and enforce in this country. As to whether or not the treaty affords protection to a foreign corporation against a Philippine applicant for the registration of a similar trademark is the principal issue in this case. On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri, filed an application with the Bureau of Patents for the registration of the trademark "Barbizon" for use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and selling these products under the firm name "L & BM Commercial" since March 3, 1970. Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A., opposed the application. It claimed that: "The mark BARBIZON of respondent-applicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned. That opposer will be damaged by the registration of the mark BARBIZON and its business reputation and goodwill will suffer great and irreparable injury. That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark used and owned by opposer, constitutes an unlawful appropriation of a mark previously used in the Philippines and not abandoned and therefore a statutory [1] violation of Section 4 (d) of Republic Act No. 166, as amended." This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties submitted the case for decision. On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application, thus: "WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010 for the registration of the trademark BARBIZON, of respondent Lolita R. Escobar, is given due course. IT IS SO ORDERED."
[2]

This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of registration for the [3] trademark "Barbizon." The trademark was "for use in "brassieres and lady's underwear garments like panties." Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under his firm name then, the "Bonito Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon" products. In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration. On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own application for registration of Escobar's trademark. Escobar later assigned her application to herein petitioner and this application was opposed by private respondent. The case was docketed as Inter Partes Case No. 2049 (IPC No. 2049). In its opposition, private respondent alleged that: "(a) The Opposer has adopted the trademark BARBIZON (word), sometime in June 1933 and has then used it on various kinds of wearing apparel. On August 14, 1934, Opposer obtained from the United States Patent Office a more recent registration of the said mark under Certificate of Registration No. 316,161. On March 1, 1949, Opposer obtained from the United States Patent Office a more recent registration for the said trademark under Certificate of Registration No. 507,214, a copy of which is herewith attached as Annex `A.' Said Certificate of Registration covers the following goods-- wearing apparel: robes, pajamas, lingerie, nightgowns and slips; (b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee design and used the said mark in various kinds of wearing apparel. On March 15, 1977, Opposer secured from the United States Patent Office a registration of the said mark under Certificate of Registration No. 1,061,277, a copy of which is herein enclosed as Annex `B.' The said Certificate of Registration covers the following goods: robes, pajamas, lingerie, nightgowns and slips; (c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a Representation of a Woman and thereafter used the said trademark on various kinds of wearing apparel. Opposer obtained from the United States Patent Office registration of the said mark on April 5, 1983 under Certificate of Registration No. 1,233,666 for the following goods: wearing apparel: robes, pajamas, nightgowns and lingerie. A copy of the said certificate of registration is herewith enclosed as Annex `C.' (d) All the above registrations are subsisting and in force and Opposer has not abandoned the use of the said trademarks. In fact, Opposer, through a wholly-owned Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing the goods

covered by said registrations and selling them to various countries, thereby earning valuable foreign exchange for the country. As a result of respondent-applicant's misappropriation of Opposer's BARBIZON trademark, Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the damage and prejudice of Opposer and its wholly-owned subsidiary. (e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries, including the Philippines, for at least 40 years and has enjoyed international reputation and good will for their quality. To protect its registrations in countries where the goods covered by the registrations are being sold, Opposer has procured the registration of the trademark BARBIZON in the following countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece, Guatemala, Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South Africa, Zambia, Egypt, and Iran, among others; (f) To enhance its international reputation for quality goods and to further promote goodwill over its name, marks and products, Opposer has extensively advertised its products, trademarks and name in various publications which are circulated in the United States and many countries around the world, including the Philippines; (g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R. Escobar under Registration No. 21920, issued on September 11, 1974, in violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent applicant acquired by assignment the `rights' to the said mark previously registered by Lolita Escobar, hence respondent-applicant's title is vitiated by the same fraud and criminal act. Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita Escobar or herein respondent-applicant, to seasonably file the statutory affidavit of use. By applying for a re-registration of the mark BARBIZON subject of this opposition, respondent-applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar. (h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and Representation of a Woman trademarks qualify as well-known trademarks entitled to protection under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further amplified by the Memorandum of the Minister of Trade to the Honorable Director of Patents dated October 25, [4] 1983 [sic], Executive Order No. 913 dated October 7, 1963 and the Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated October 25, 1983. (i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON trademark and constitutes the dominant part of Opposer's two other marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a Woman. The continued use by respondent-applicant of Opposer's trademark BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial and criminal piracy and if allowed registration will violate not only the Trademark Law but also Article 189 of the [5] Revised Penal Code and the commitment of the Philippines to an international treaty." Replying to private respondent's opposition, petitioner raised the defense of res judicata. On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International." Petitioner registered the name with the Department of Trade and Industry (DTI) for which a certificate of registration was issued in 1987. Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of petitioner's business name. On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and declared private respondent the owner and prior user of the business name "Barbizon International." Thus: "WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior user of the business name "BARBIZON INTERNATIONAL" under Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the name of [6] respondent, is [sic] hereby ordered revoked and cancelled. x x x." Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18, 1992, the Director rendered a decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's application for registration, to wit: "WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED BARRED by res judicata and is hereby DISMISSED. Accordingly, Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE. SO ORDERED."
[7]

Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686 was not barred by judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau of Patents for further proceedings, viz: "WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby remanded to the Bureau of Patents for further proceedings, in accordance with this [8] pronouncement. No costs."

In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its decision. Hence, this recourse. Before us, petitioner raises the following issues: "1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF, CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF PATENTS IS CONCERNED; 2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE PRINCIPLE OF RES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION NO. 53920 ON NOVEMBER 16, 1992; 3. WHETHER OR NOT THE REQUISITE THAT A 'JUDGMENT ON THE MERITS' REQUIRED A 'HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE EVIDENCE' AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF 'JUDGMENT ON THE MERITS' AS ONE OF THE REQUISITES TO CONSTITUTE RES JUDICATA; 4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM NAME 'BARBIZON INTERNATIONAL' AND WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049 HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A. 166) WHICH IS WITHIN THE [10] ORIGINAL AND EXCLUSIVE JURISDICTION OF THE DIRECTOR OF PATENTS." Before ruling on the issues of the case, there is need for a brief background on the function and historical development of trademarks and trademark law. A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those [11] manufactured, sold or dealt in by others." This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of [12] the Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods." In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and [13] sale of an inferior and different article as his product. Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; [14] and (3) they advertise the articles they symbolize. Symbols have been used to identify the ownership or origin of articles for several centuries. As early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their [16] flanks. Archaeological discoveries of ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features which are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices [17] for the settlement of accounts between an entrepreneur and his workmen. In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's [18] marks, tanner's marks, watermarks on paper, etc. Every guild had its own mark and every master belonging to it had a special mark of his own. The marks were not trademarks but police marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into an area where the guild had a monopoly, as well as to aid in tracing defective [19] work or poor craftsmanship to the artisan. For a similar reason, merchants also used merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon recovery after shipwreck or [20] piracy. With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue [21] monopoly but to give the customer an index or guarantee of quality. It was in the late 18th century when the industrial revolution gave rise to mass production and distribution of consumer goods that the mark became an important instrumentality of trade and [22] commerce. By this time, trademarks did not merely identify the goods; they also indicated the goods to be of satisfactory quality, [23] and thereby stimulated further purchases by the consuming public. Eventually, they came to symbolize the goodwill and business [24] reputation of the owner of the product and became a property right protected by law. The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as another's, from getting another's business or [25] injuring his reputation by unfair means, and, from defrauding the public." Subsequently, England and the United States enacted [26] national legislation on trademarks as part of the law regulating unfair trade. It became the right of the trademark owner to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon [27] the public.
[15]

[9]

Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire [28] for further satisfaction. In other words, the mark actually sells the goods. The mark has become the "silent salesman," the conduit through which direct contact between the trademark owner and the consumer is assured. It has invaded popular culture in ways [29] never anticipated that it has become a more convincing selling point than even the quality of the article to which it refers. In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones [30] where the marked article has been fixed in the public mind through advertising. Whether in the print, broadcast or electronic [31] communications medium, particularly on the Internet, advertising has paved the way for growth and expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the whole world into one vast marketplace. This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon" products have been sold in the Philippines since 1970. Petitioner developed this market by working long hours and spending considerable sums of money on advertisements and promotion of the trademark and its products. Now, almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a conquering hero," usurps the trademark and invades petitioner's [32] market. Justice and fairness dictate that private respondent be prevented from appropriating what is not its own. Legally, at the [33] same time, private respondent is barred from questioning petitioner's ownership of the trademark because of res judicata. Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by [34] judgment. In res judicata, the judgment in the first action is considered conclusive as to every matter offered and received therein, as to any other admissible matter which might have been offered for that purpose, and all other matters that could have been [35] adjudged therein. Res judicata is an absolute bar to a subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second actions, identity of [36] parties, of subject matter and of causes of action. The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim that all the four elements of res judicata have been complied with: that the judgment in IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over the subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of a hearing was immaterial because substantial issues were raised by the parties and passed upon by the Director of [37] Patents. The decision in IPC No. 686 reads as follows: "x x x. Neither party took testimony nor adduced documentary evidence. They submitted the case for decision based on the pleadings which, together with the pertinent records, have all been carefully considered. Accordingly, the only issue for my disposition is whether or not the herein opposer would probably be damaged by the registration of the trademark BARBIZON sought by the respondent-applicant on the ground that it so resembles the trademark BARBIZON allegedly used and owned by the former to be `likely to cause confusion, mistake or to deceive purchasers.' On record, there can be no doubt that respondent-applicant's sought-to-be-registered trademark BARBIZON is similar, in fact obviously identical, to opposer's alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable but very negligible difference lies in their respective appearances or manner of presentation. Respondent-applicant's trademark is in bold letters (set against a black background), while that of the opposer is offered in stylish script letters. It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in the Philippines prior to the date of application for the registration of the identical mark BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified notice of opposition is devoid of such material information. In fact, a reading of the text of said verified opposition reveals an apparent, if not deliberate, omission of the date (or year) when opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2, Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the identical mark by the herein respondentapplicant, since the opposer attempted neither to substantiate its claim of use in local commerce with any proof or evidence. Instead, the opposer submitted the case for decision based merely on the pleadings. On the other hand, respondent-applicant asserted in her amended application for registration that she first used the trademark BARBIZON for brassiere (or 'brasseire') and ladies underwear garments and panties as early as March 3, 1970. Be that as it may, there being no testimony taken as to said date of first use, respondent-applicant will be limited to the filing date, June 15, 1970, of her application as the date of first use (Rule 173, Rules of Practice in Trademark Cases). From the foregoing, I conclude that the opposer has not made out a case of probable damage by the registration of the respondentapplicant's mark BARBIZON. WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010, for the registration [38] of the trademark BARBIZON of respondent Lolita R. Escobar, is given due course."

The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that it was not. A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of [39] formal, technical or dilatory objections. It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual hearing or arguments on the facts of the [40] case. In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was conducted, both parties filed their respective pleadings and were given opportunity to present evidence. They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on the issue of prior use, which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld. The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686 and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the same parties and the same subject matter, and have identical causes of action. Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner herein is the assignee of Escobar while private respondent is the same American corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private respondent counter-argues, however, that the two cases do not have identical causes of action. New causes of action were allegedly introduced in IPC No. 2049, such as the prior use and registration of the trademark in the United States and other countries worldwide, prior use in the Philippines, and the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private respondent also cited protection of the trademark under the Convention of Paris for the Protection of Industrial Property, specifically Article 6bis thereof, and the implementation of Article 6bis by two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents, as well as Executive Order (E.O.) No. 913. The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, [41] trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition. The Convention is essentially a compact among various countries which, as members of the Union, have pledged to accord to citizens of the other member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws for [42] an effective protection against unfair competition. In short, foreign nationals are to be given the same treatment in each of the [43] member countries as that country makes available to its own citizens. Nationals of the various member nations are thus assured [44] of a certain minimum of international protection of their industrial property. The Convention was first signed by eleven countries in Paris on March 20, 1883. It underwent several revisions-- at [46] Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, and at Stockholm in 1967. Both the Philippines and the United States of America, herein private respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the Philippines, through its Senate, concurred on May 10, [48] [47] 1965. The Philippines' adhesion became effective on September 27, 1965, and from this date, the country obligated itself to [49] honor and enforce the provisions of the Convention. In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the Paris Convention which reads as follows: "Article 6bis (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad
[45]

faith."

[50]

This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods. Article 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. It is a self-executing provision and [52] does not require legislative enactment to give it effect in the member country. It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its ratification according to the [53] public law of each state and the order for its execution.
[51]

The essential requirement under Article 6bis is that the trademark to be protected must be "well-known" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts [54] of the country in question if the issue comes before a court. Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued a Memorandum to the Director of Patents. The Minister ordered the Director that: "Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than its original owners or users. The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus. It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users. You are also required to submit to the undersigned a progress report on the matter. For immediate compliance."
[55]

Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the Director of Patents, viz: "Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that `such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can x x x apply more swift and effective solutions and remedies to old and new problems x x x such as infringement of internationally-known tradenames and trademarks x x x' and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP NO. 13359 (17) June [56] 1983] which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations [57] under said Convention in general, and, more specifically, to honor our commitment under Section 6bis thereof, as follows: 1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the date of such registration; (d) that the trademark has long been established and obtained goodwill and international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers. 3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6 bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division. 5. All pending applications for Philippine registration of signature and other world-famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings. x x x."
[58]

In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several internationally-known trademarks and ordered the Director of Patents to require Philippine registrants of such marks to surrender their certificates of registration. In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of Patents to observe in determining whether a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to [59] problems in trade and industry. Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case of La Chemise [60] Lacoste, S.A. v. Fernandez. This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister [61] of Trade and Industry was the "competent authority" to determine whether a trademark is well-known in this country. The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris Convention. Article 6bis was already in effect five years before the first case was instituted. Private respondent, however, did not cite the protection of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention and the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin Memorandum were invoked by private respondent. The Solicitor General argues that the issue of whether the protection of Article 6bis of the Convention and the two Memoranda [62] is barred by res judicata has already been answered in Wolverine Worldwide, Inc. v. Court of Appeals. In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a petition for cancellation of the registration certificate of private respondent, a Filipino citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the registrant of the internationally-known trademark in the United States and other countries, and cited protection under the Paris Convention and the Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the same trademark against respondent's predecessor-in-interest. The Patent Office dismissed the petitions, ordered the cancellation of registration of petitioner's trademark, and gave due course to respondent's application for registration. This decision was sustained by the Court of Appeals, which [63] decision was not elevated to us and became final and executory. Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said Memorandum and E.O. did not grant a new cause of action because it did "not amend the Trademark Law," x x x "nor did it indicate a new policy with respect to the registration in the Philippines of world-famous [64] trademarks." This conclusion was based on the finding that Wolverine's two previous petitions and subsequent petition dealt with [65] the same issue of ownership of the trademark. In other words, since the first and second cases involved the same issue of ownership, then the first case was a bar to the second case. In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private respondent's opposition therein was merely anchored on: (a) "confusing similarity" of its trademark with that of Escobar's; (b) that the registration of Escobar's similar trademark will cause damage to private respondent's business reputation and goodwill; and (c) that Escobar's use of the trademark amounts to an unlawful appropriation of a mark previously used in the Philippines which act is penalized under Section 4 (d) of the Trademark Law. In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows:

(a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as robes, pajamas, lingerie, nightgowns and slips; (b) that the trademark "BARBIZON" was registered with the United States Patent Office in 1934 and 1949; and that variations of the same trademark, i.e., "BARBIZON" with Bee design and "BARBIZON" with the representation of a woman were also registered with the U.S. Patent Office in 1961 and 1976; (c) that these marks have been in use in the Philippines and in many countries all over the world for over forty years. "Barbizon" products have been advertised in international publications and the marks registered in 36 countries worldwide; (d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud; and this fraudulent registration was cancelled in 1979, stripping Escobar of whatsoever right she had to the said mark; (e) Private respondent's trademark is entitled to protection as a well-known mark under Article 6bis of the Paris Convention, Executive Order No. 913, and the two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents; (f) Escobar's trademark is identical to private respondent's and its use on the same class of goods as the latter's amounts to a violation of the Trademark Law and Article 189 of the Revised Penal Code. IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries, and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word and symbol [66] "Barbizon," as the first and registered user of the mark attached to its products which have been sold and advertised worldwide for a considerable number of years prior to petitioner's first application for registration of her trademark in the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res judicata does not apply to rights, claims or demands, although growing out of the same subject matter, which constitute separate or [67] distinct causes of action and were not put in issue in the former action. Respondent corporation also introduced in the second case a fact that did not exist at the time the first case was filed and terminated. The cancellation of petitioner's certificate of registration for failure to file the affidavit of use arose only after IPC No. 686. It did not and could not have occurred in the first case, and this gave respondent another cause to oppose the second application. Res judicata extends only to facts and conditions as they existed at the time judgment was rendered and to the legal [68] rights and relations of the parties fixed by the facts so determined. When new facts or conditions intervene before the second suit, furnishing a new basis for the claims and defenses of the parties, the issues are no longer the same, and the former judgment [69] cannot be pleaded as a bar to the subsequent action. It is also noted that the oppositions in the first and second cases are based on different laws. The opposition in IPC No. 686 [70] was based on specific provisions of the Trademark Law, i.e., Section 4 (d) on confusing similarity of trademarks and Section [71] 8 on the requisite damage to file an opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6bis thereof, E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. This [72] opposition also invoked Article 189 of the Revised Penal Code which is a statute totally different from the Trademark Law. Causes of action which are distinct and independent from each other, although arising out of the same contract, transaction, or state of facts, [73] may be sued on separately, recovery on one being no bar to subsequent actions on others. The mere fact that the same relief is sought in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the two [74] actions are based on different statutes. Res judicata therefore does not apply to the instant case and respondent Court of Appeals did not err in so ruling. Intellectual and industrial property rights cases are not simple property cases. Trademarks deal with the psychological [75] function of symbols and the effect of these symbols on the public at large. Trademarks play a significant role in communication, commerce and trade, and serve valuable and interrelated business functions, both nationally and internationally. For this reason, all agreements concerning industrial property, like those on trademarks and tradenames, are intimately connected with economic [76] development. Industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. They speed up transfer of technology and industrialization, and thereby bring about social and [77] economic progress. These advantages have been acknowledged by the Philippine government itself. The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our [79] [78] products." The Intellectual Property Code took effect on January 1, 1998 and by its express provision, repealed the Trademark [82] [81] [80] Law, the Patent Law, Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, and the Decree on [83] Compulsory Reprinting of Foreign Textbooks. The Code was enacted to strengthen the intellectual and industrial property system [84] in the Philippines as mandated by the country's accession to the Agreement Establishing the World Trade Organization (WTO). The WTO is a common institutional framework for the conduct of trade relations among its members in matters related to the [85] multilateral and plurilateral trade agreements annexed to the WTO Agreement. The WTO framework ensures a "single undertaking approach" to the administration and operation of all agreements and arrangements attached to the WTO Agreement. Among those annexed is the Agreement on Trade-Related Aspects of Intellectual Property Rights or [86] TRIPs. Members to this Agreement "desire to reduce distortions and impediments to international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to

enforce intellectual property rights do not themselves become barriers to legitimate trade." To fulfill these objectives, the members [87] have agreed to adhere to minimum standards of protection set by several Conventions. These Conventions are: the Berne Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations, the Treaty on Intellectual Property in Respect [88] of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm on July 14, 1967. A major proportion of international trade depends on the protection of intellectual property rights. Since the late 1970's, the unauthorized counterfeiting of industrial property and trademarked products has had a considerable adverse impact on domestic [90] and international trade revenues. The TRIPs Agreement seeks to grant adequate protection of intellectual property rights by creating a favorable economic environment to encourage the inflow of foreign investments, and strengthening the multi-lateral [91] trading system to bring about economic, cultural and technological independence. The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has revolutionized international business and economic relations [92] among states, and has propelled the world towards trade liberalization and economic globalization. Protectionism and isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a new era of global economic cooperation, [93] reflecting the widespread desire to operate in a fairer and more open multilateral trading system." Conformably, the State must reaffirm its commitment to the global community and take part in evolving a new international economic order at the dawn of the new millenium. IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 28415 are affirmed. SO ORDERED. Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur.
[89]

[1] [2] [3] [4]

Decision No. 804 dated June 18, 1974 of the Director of Patents, Rollo, p. 36. Rollo, p. 38. Certificate of Registration No. 21920, Annex "E" to Memorandum of Petitioner, Rollo, p. 211.

The Memorandum of the Minister of Trade to the Honorable Director of Patents should have been dated 20 November 1980-Memorandum of the Private Respondent, p. 11, Rollo, p. 227.
[5] [6] [7] [8]

Comment of the Solicitor General, pp. 5-8, Rollo, pp. 116-119. CA Decision, p. 4, Rollo, p. 27. Id.

CA Decision, p. 31. The decision was penned by Justice Fidel Purisima, now a member of this Court, and concurred in by Justices Jesus M. Elbinias and Angelina S. Gutierrez.
[9] [10] [11] [12] [13]

Rollo, pp. 34-35. Petitioner, pp. 5-6, Rollo, pp. 11-12. Sec. 38, par. 2, R.A. 166. Sec. 121.1, Part III, R.A. 8293.

Gabriel v. Perez, 55 SCRA 406, 417 [1974] citing 52 Am Jur, p. 508; Etepha v. Director of Patents, 16 SCRA 495, 497 [1966]; see also Phil. Refining Co., Inc. v. Ng Sam, 115 SCRA 472, 476-477 [1982]; also cited in Agpalo, Trademark Law and Practice in the Philippines, p. 5 [1990].
[14]

Dissenting Opinion of Justice Florentino Feliciano in Philip Morris, Inc. v. Court of Appeals, 224 SCRA 576, 624 [1993]; see William Jay Gross, The Territorial Scope of Trademark Rights, Univ. of Miami Law Review, vol 44:1075 [March 1990]; see also Rudolf Callmann, The Law of Unfair Competition and Trademarks, vol. 2, pp. 804-814 [1945].
[15] [16]

Harry D. Nims, The Law of Unfair Competition and Trademarks, 4th ed., pub. by Baker, Voorhis & Co., Inc., vol. 1, p. 509 [1947].

Frank H. Foster and Robert L. Shook, Patents, Copyrights, and Trademarks, pub. by John Wiley & Sons, Inc., 2d ed. p. 19 [1993].1
[17]

Stephen P. Ladas, Patents, Trademarks, and Related Rights, National and International Protection (Harvard University Press), vol. 1, pp. 3-4 [1975].
[18] [19]

Foster and Shook, supra, at 20.

Id., at 20-21; Ladas, supra, vol. 1, at 4-5; see Frank I. Schechter, The Rational Basis of Trademark Protection, 40 Harvard Law Review, 813, 814 [1927]; Callmann, supra, vol. 2, p. 807; see also Richard Wincor and Irving Mandell, Copyright, Patents and Trademarks: The Protection of Intellectual and Industrial Property, at 72 [1980].
[20]

Foster and Shook, supra, at 20; Schechter, supra, at 814.

[21] [22] [23] [24] [25] [26] [27] [28]

Callmann, supra, vol. 2, at 808. Foster and Shook, supra, at 22-23; Nims, supra, at 511. Callmann, supra, vol. 2, at 809-910. Foster and Shook, supra, at 21-22. Justice Holmes in Chadwick v. Covell, 151 Man 190, 23 NE 1068, 1069 [1890]; also cited in Nims, supra, at 37. Ladas, supra, vol. 1, at 8. See also Dissenting Opinion of Justice Feliciano in Philip Morris, supra, at 624-625.

Schechter, supra. Trademarks have become products in their own right, valued as status symbols and indicators of the preferences and aspirations of those who use them - Alex Kozinski, Trademarks Unplugged, New York University Law Review, vol. 68: 960, 965-966 [Oct. 1993].
[29]

Kozinski, supra, at 965-966; Callmann, supra, vol. 2, at 881-812 [1945], citing Schechter, The Historical Foundations of the Law Relating to Trademarks [1925], Note 15, p. 64.
[30] [31]

Gross, supra, at 1099-1100; see also Dissenting opinion of Justice Feliciano in Philip Morris, supra, at 625-626.

The Internet is a decentralized computer network linked together through routers and communications protocols that enable anyone connected to it to communicate with others likewise connected, regardless of physical location. Users of the Internet have a wide variety of communication methods available to them and a tremendous wealth of information that they may access. The growing popularity of the Net has been driven in large part by the World Wide Web, i.e., a system that facilitates use of the Net by sorting through the great mass of information available on it. Advertising on the Net and cybershopping are turning the Internet into a commercial marketplace.-- Maureen O'Rourke, Fencing Cyberspace: Drawing Borders in a Virtual World, Minnesota Law Review, vol. 82: 609-611, 615-618 [Feb. 1998].
[32] [33] [34] [35]

Petition, pp. 9-10, Rollo, pp. 15-16. Id. 46 Am Jur 2d, "Judgments," Sec. 394 [1969 ed.].

Section 49 (b), Rule 39 of the Revised Rules of Court-- now Section 47 (b), Rule 39 of the 1997 Rules of Civil Procedure; Gabuya v. Layug, 250 SCRA 218, 221 [1995]; Vda. de Cruzo v. Carriaga, Jr., 174 SCRA 330, 338 [1989].
[36]

De Knecht v. Court of Appeals, 290 SCRA 223, 237-238 [1998]; De Ramos v. Court of Appeals, 213 SCRA 207, 214-215 [1992]; American Inter-Fashion Corp. v. Office of the President, 197 SCRA 409, 417 [1991]; Wolverine Worldwide, Inc. v. Court of Appeals, 169 SCRA 627, 630 [1989].
[37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47]

Petition, pp. 8-10, Rollo, pp. 14-16; Comment of the Solicitor General, pp. 15-19, Rollo, pp. 126-130. Rollo, pp. 37-38. Mendiola v. Court of Appeals, 258 SCRA 492, 500 [1996]. Mendiola v. Court of Appeals, supra, at 500-501; Nabus v. Court of Appeals, 193 SCRA 732, 740 [1991] citing 50 C.J.S. 51-53. Article 1, Paris Convention, 61 O.G. 8010 [1965]. R. Agpalo, Trademark Law and Practice in the Philippines, p. 200 [1990]. Agpalo, supra, at 200-201. Rudolf Callmann, The Law of Unfair Competition and Trade-Marks, vol. 2, p. 1723 [1945]. Belgium, Brazil, France, Guatemala, Italy, the Netherlands, Portugal, Salvador, Serbia, Spain and Switzerland. 61 O.G. 8011.

Note 18, Dissenting Opinion of Justice Florentino Feliciano in Philip Morris, Inc. v. Court of Appeals, 224 SCRA 599, 615 [1993]. The President of the Philippines signed the instrument of adherence on July 21, 1965-- Agpalo, supra, at 201.
[48]

Id; see also Note 9, Smith Kline & French Laboratories, Ltd. v. Court of Appeals, 276 SCRA 224, 236 [1997]; Converse Rubber Corp. v. Universal Rubber Products, 147 SCRA 154, 165 [1987].
[49] [50]

La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373, 389 [1984].

As revised under the Lisbon Act of 1958. At the time the Philippines ratified the Paris Convention in 1965, the last revision was the Lisbon Act. At present, the latest revision is the Stockholm Act passed on July 14, 1967 and amended on October 2, 1979. The Philippines acceded to the Stockholm Act on March 25, 1980 but only with respect to Articles 13-30. The Stockholm Act took effect in the Philippines on July 16, 1980, except as to its Articles 1-12-- Esteban B. Bautista, The TRIPS Agreement and the Philippines' Existing Treaty Obligations on Intellectual Property, The World Bulletin, pub. by the Institute of International and Legal Studies, UP Law Center, vol. 12:50 [Jan-June 1996]; Intellectual Property in the Phil., A Compilation of Phil. Laws and International Documents Pertaining to Intellectual Property, ed. by Aniano L. Luzung, pub. by Rex Bookstore, p. 416 [1995]. With the Philippines' adhesion to

the WTO and the TRIPS Agreement in 1995, however, the country obligated itself to comply with Articles 1-12 and 19 of the Paris Convention-- Article 2(1), TRIPs Agreement.
[51]

Stephen P. Ladas, Patents, Trademarks, and Related Rights, National and International Protection, pub. by the Harvard University Press, vol. 2, at 1251-1252 [1975].
[52]

The Paris Convention has 3 classes of provisions: (1) provisions obligating members of the Union to create and maintain certain national law or regulations; (2) provisions merely referring to the national law of each country and making it applicable or permitting each country to pass such legislation as it may choose; and (3) provisions establishing common legislation for all members of the Union and obligating them to grant to persons entitled to the benefits of the Convention the rights and advantages specified in such provisions, notwithstanding anything in their national law to the contrary-- Ladas, supra, at 209; see also Callman, supra, vol. 2, at 1723-1724. Provisions under the third class are self-executing and Article 6bis is one of them-- Ladas, supra, vol. 1, at 209.
[53] [54] [55] [56]

Ladas, supra, vol.1, p. 233. Ladas, supra, vol. 2, pp. 1252-1254. Also quoted in La Chemise Lacoste, S.A. v. Fernandez, supra, at 389-390.

This CA decision, penned by then CA Justice Vicente V. Mendoza, now a member of this Court, was the same decision affirmed by the Supreme Court in La Chemise Lacoste v. Fernandez, G.R. Nos. L-63796-97 and L-65659, 129 SCRA 373 [1984].
[57] [58] [59]

Should have been "Article" 6bis. Also quoted in La Chemise Lacoste, S.A. v. Fernandez, supra, at 401-403.

E.O. No. 913 is entitled "Strengthening the Rule-Making and Adjudicatory Powers of the Minister of Trade and Industry in Order to Further Protect Consumers."
[60] [61]

129 SCRA 373 [1984].

Id. at 396; see also Ignacio S. Sapalo, Background Reading Material on the Intellectual Property System of the Philippines, revised ed., pub. by World Intellectual Property Office (WIPO), p. 76 [1994]. I. Sapalo was the Director of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT), Department of Trade and Industry (DTI) from 1987 to 1996.
[62] [63] [64] [65] [66]

169 SCRA 627 [1989]. Id. at 631. Id. at 633. Id. at 634.

Private respondent presented evidence before the Director of Patents showing that the word "Barbizon" was derived from the name of a village in France. In this village, a mid-19th century school of French painting developed an art style depicting landscape and rural genre subjects from a direct observation of nature, with much attention to the expression of light and atmosphere. "Barbizon" was appropriated as a trademark in 1933 by Garfinkle and Ritter, private respondent's predecessor, to identify its goods with the same soft and warm atmosphere depicted in the barbizon style of painting-- Exhibits "B" and "I," see Petition for Review, Court of Appeals Rollo, p. 3.
[67]

Caina v. Court of Appeals, 239 SCRA 252, 264 [1994] citing Lord v. Garland, 168 P. 2d 5 [1946]; see also Martinez v. Court of Appeals, 139 SCRA 558, 564 [1985].
[68] [69]

Caina v. Court of Appeals, supra, at 263 [1994]; see also Guevara v. Benito, 247 SCRA 570, 573 [1995].

Id., citing Lord v. Garland, 168 P. 2d [1946]; Rhodes v. Van Steenberg, 225 F. Supp. 113 [1963]; Cowan v. Gulf City Fisheries, Inc., 381 So. 2d 158 [1980]; see also 46 Am Jur 2d, "Judgments," Secs. 443, 444 [1969 ed.]
[70]

Section 4 (d), R.A. 166 reads:

"Sec. 4. Registration of trademarks, tradenames and servicemarks on the principal register.-- There is hereby established a register of trademarks, tradenames and servicemarks which shall be known as the principal register. The owner of a trademark, tradename or servicemark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx (d) Consists of or comprises a mark or tradename which so resembles a mark or tradename registered in the Philippines or a mark or tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; x x x."
[71]

Section 8, R.A. 166 reads:

"Sec. 8. Opposition.-- Any person who believes that he would be damaged by the registration of a mark or tradename may, upon payment of the required fee and within thirty days after the publication under the first paragraph of section 7 hereof, file with the Director an opposition to the application. x x x."
[72]

The Paris Convention became part of the Trademark Law only by reference in Section 37 of the latter. Of and by itself, the Paris Convention is a separate legal covenant.

[73]

Nabus v. Court of Appeals, 193 SCRA 732, 743, 746 [1991]; see also 50 C.J.S. "Judgments, Sec. 674-- also cited in Nabus, at 743.
[74] [75]

Nabus, supra, at 743; see also 50 C.J.S. "Judgments," Secs. 649, 655-- also cited in Nabus.

Mishawaka R. & W. Mfg. Co. v. S. S. Kresge Co., 86 L ed 1381, 316 U.S. 203, 205 [1942]; see also Gordon V. Smith, Trademark Valuation, pub. by John Wiley & Sons, Inc., pp. 38-39 [1997].
[76] [77] [78] [79] [80] [81] [82] [83] [84]

Ladas, supra, vol. 1, at 13. Id. Section 2, R.A. 8293, the Intellectual Property Code of 1998. Section 239, R.A. No. 8293. R.A. No. 166. R.A. No. 165. Presidential Decree (P.D.) No. 49. P.D. No. 285.

Emma C. Francisco, The Policy of Intellectual Property Protection in the Philippines, The World Bulletin, pub. by the UP Law Center, vol. 12:1 [Jan-June 1996]-- Ms. Francisco was the Director of the BPTTT in 1996.
[85]

Michael Blakeney, Trade Related Aspects of Intellectual Property Rights: A Concise Guide to the TRIPs Agreement, pub. by Sweet & Maxwell Ltd, at 37 [1996]; The WTO was created at the Uruguay Round of multilateral trade negotiations sponsored by the General Agreement on Tariffs and Trade (GATT) in 1994. The GATT was established in 1947 to promote a multilateral trading system among countries through non-discriminatory trade liberalization, and through fair and effective rules and disciplines. The GATT was composed of 120 contracting parties and observers that account for about 90% of the world trade. It, however, dealt with trade in tangible goods alone. As successor of the GATT, the WTO also covers trade in services, intellectual property rights and provides for an effective mechanism for dispute settlement-- Growth Opportunities Into the 21st Century, A Question and Answer Primer Prepared by the Bureau of International Trade Relations, Department of Trade and Industry, pp. 1, 37 [1994], hereinafter referred to as DTI-BITR Primer ; see News of the Uruguay Round of Multilateral Trade Negotiations, issued by the Information and Media Relations division of the GATT, Geneva, p. 5 [5 April 1994]; see also Tanada v. Angara, 272 SCRA 18 [1997].
[86]

The TRIPS Agreement is said to be the most comprehensive multilateral agreement on intellectual property. It addresses not only and more explicitly the primary regimes of intellectual property, viz., patent including the protection of new varieties of plants, trademarks including service marks, and copyright and its related rights; but also the non-traditional categories of geographical indications including appellations of origin, industrial design, lay-out design of integrated circuits, and undisclosed information including trade secrets. It also establishes standards of protection and rules of enforcement and provides for the uniform applicability of the WTO dispute settlement mechanism to resolve disputes among member states. -- Anita S. Regalado, WTO Dispute Settlement Procedure: Its Impact on Copyright Protection, The Court Systems Journal, vol. 3: 67, 78 [March 1998].
[87]

Ma. Rowena R. Gonzales, Optimizing Rome in TRIPs: Finding the Appian Way, World Bulletin, pub. by the UP Law Center, vol. 12: 13, 18 [Jan.-June 1996].
[88] [89] [90]

TRIPS Agreement, Article 1, par. 3. As acknowledged in the Uruguay Round of the GATT-- DTI-BITR Primer, supra, at p. 34.

Id.; Blakeney, supra, at 1; Investors abandoned or postponed their investments in countries that did not afford protection from intellectual piracy (DTI-BITR Primer, supra, at 34); Worse, inadequate intellectual protection in certain countries gave rise to trade retaliation unilaterally imposed by rich trading partners--DTI-BITR Primer, supra, at 36; Blakeney, supra, at 4-6. The United States, in the 1984 amendment to Section 301 of the Trade Act of 1974, and later, Special 301 of the Omnibus Trade and Competitiveness Act of 1988, authorized the U.S. Trade Representative (USTR) to identify priority foreign countries which deny adequate protection of intellectual property rights to U.S. traders. Those countries were placed on a watchlist, with a view to fast-track investigation, followed by trade retaliation in the form of increased duties and import restrictions. Trade restrictions were imposed on Korea and Brazil in 1985, Brazil again in 1988 and India in 1992 --Blakeney, supra, at 4-6. By these acts, any trading partner of the U.S. became vulnerable to unilateral pressure-- The GATT, the Uruguay Round and the Philippines, Speech of J. Antonio Buencamino, Director, Bureau of International Trade Relations, DTI, p. 4.
[91]

Speech of J. Antonio Buencamino, Director, DTI-BITR, supra, at 4-5; DTI-BITR Primer, supra, at 34-36.

[92] [93]

Tanada v. Angara, 272 SCRA 18, 28 [1997]. Blakeney, supra, at 36-37-- citing The Marrakesh Declaration of 15 April 1995, par. 2.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 121267 October 23, 2001

SMITH KLINE & FRENCH LABORATORIES, LTD. plaintiff-appellee, vs. COURT OF APPEALS and DANLEX RESEARCH LABORATORIES, INC., defendant-appellant. KAPUNAN, J.: This petition for review on certiorari assails the Decision dated January 27, 1995 of the Court of Appeals in CA-G.R. SP No. 1 33770 which affirmed the decision of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a compulsory license to private respondent Danlex Research Laboratories for the use of the pharmaceutical product Cimetidine. Likewise assailed is the July 25, 1995 Resolution of the Court of Appeals denying the motion for reconsideration filed by petitioner Smith Kline and French Laboratories, Ltd. Petitioner is the assignee of Letters Patent No. 12207 covering the pharmaceutical product Cimetidine, which relates to derivatives of heterocyclicthio or lower alkoxy or amino lower alkyl thiourea, ureas or guanadines. Said patent was issued by the BPTTT to 2 Graham John Durant, John Collin Emmett and Robin Genellin on November 29, 1978. On August 21, 1989, private respondent filed with the BPTTT a petition for compulsory license to manufacture and produce its own 3 brand of medicines using Cimetidine. Private respondent invoked Section 34 (1) (e) of Republic Act No. 165, (the Patent Law) the law then governing patents, which states that an application for the grant of a compulsory license under a particular patent may be filed with the BPTTT at any time after the lapse of two (2) years from the date of grant of such patent, if the patented invention or article relates to food or medicine, or manufactured substances which can be used as food or medicine, or is necessary for public 4 health or public safety. The petition for compulsory license stated that Cimetidine is useful as an antihistamine and in the treatment 5 of ulcers, and that private respondent is capable of using the patented product in the manufacture of a useful product. Petitioner opposed the petition for compulsory license, arguing that the private respondent had no cause of action and failed to allege how it intended to work the patented product. Petitioner further stated that its manufacture, use and sales of Cimetidine satisfied the needs of the Philippine market, hence, there was no need to grant a compulsory license to private respondent to manufacture, use and sell the same. Finally, petitioner also claimed that the grant of a compulsory license to private 6 respondent would not promote public safety and that the latter was only motivated by pecuniary gain. After both parties were heard, the BPTTT rendered a decision directing the issuance of a compulsory license to private respondent to use, manufacture and sell in the Philippines its own brand of pharmaceutical products containing Cimetidine and ordered the 7 payment by private respondent to petitioner of royalties at the rate of 2.5% of net sales in Philippine currency. Petitioner thereafter filed with the Court of Appeals a petition for review of the decision of the BPTTT, raising the following arguments: (1) the BPTTT's decision is violative of the Paris Convention for the Protection of Industrial Property; (2) said decision is an invalid exercise of police power; (3) the rate of royalties payable to petitioner as fixed by the BPTTT was rendered without factual basis and amounts to an expropriation of private property without just compensation; (4) the petition for compulsory license should 8 have been dismissed by the BPTTT for failure to prove the jurisdictional requirement of publication. On January 27, 1995, the Court of Appeals promulgated its Decision, the dispositive portion of which states: WHEREFORE, the petition is DENIED, and the decision of the Bureau of Patents, Trademarks and Technology Transfer is hereby AFFIRMED, with costs against the Petitioner. SO ORDERED.
9

In affirming the decision of the BPTTT, the appellate court held that the grant of a compulsory license to private respondent for the manufacture and use of Cimetidine is in accord with the Patent Law since the patented product is medicinal in nature, and therefore 10 necessary for the promotion of public health and safety. It explained further that the provisions of the Patent Law permitting the grant of a compulsory license are intended not only to give a chance to others to supply the public with the quantity of the patented 11 article but especially to prevent the building up of patent monopolies. Neither did the appellate court find the royalty rate of 2.5% of net sales fixed by the BPTTT unreasonable, considering that what was granted under the compulsory license is only the right to manufacture Cimetidine, without any technical assistance from petitioner, and royalty rates identical to that fixed by the BPTTT have 12 been prescribed for the grant of compulsory license in a good number of patent cases. The Court of Appeals also ruled that contrary to petitioner's claim, private respondent complied with the requirement of publication under the Patent Law and had 13 submitted proof of such compliance.

Not satisfied with the appellate court's decision, petitioner filed a motion for reconsideration thereof as well as a motion for the issuance of a temporary restraining order against private respondent's sister company, Montreal Pharmaceutical, Inc. to refrain from 14 marketing a product similar to Cimetidine, but both motions were denied by the Court of Appeals in its Resolution of July 25, 1995. Petitioner thus filed the present petition on September 15, 1995, with the following assignment of errors: I. The respondent Court erred in upholding the validity of the decision of public respondent BPTTT which is an arbitrary exercise of police power and is violative of international law. II. The respondent Court erred in holding that compulsory licensing will not create a confusion that the patented product is the brainchild of private respondent Danlex and not of petitioner. III.Assuming that the grant of compulsory license is in order, the respondent Court still erred in holding that the BPTTT decision fixing the royalty at 2.5% of the net wholesale price in peso does not amount to expropriation of private property without just compensation. IV.The respondent Court erred in finding that the jurisdictional requirement of publication in a newspaper of general 15 circulation for three (3) consecutive weeks has been complied with by private respondent Danlex. While petitioner concedes that the State in the exercise of police power may regulate the manufacture and use of medicines through the enactment and implementation of pertinent laws, it states that such exercise is valid only if the means employed are reasonably 16 necessary for the accomplishment of the purpose and if not unduly oppressive. According to petitioner, the grant of a compulsory license to private respondent is an invalid exercise of police power since it was not shown that there is an overwhelming public necessity for such grant, considering that petitioner is able to provide an adequate supply of i to satisfy the needs of the Philippine market. Petitioner also claims that the grant of a compulsory license to private respondent unjustly deprives it of a reasonable return 17 on its investment. It argues further that the provisions of the Patent Law on compulsory licensing contravene the Convention of 18 Paris for the Protection of Industrial Property (Paris Convention), which allegedly permits the granting of a compulsory license over 19 a patented product only to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent, or on the ground of failure to work or insufficient working of the patented product, within four years from the date of filing of the patent 20 application or three years from the date of grant of the patent, whichever expires last. Petitioner opines that the inclusion of grounds for the grant of a compulsory license in Section 34 of the Patent Law other than those provided under the Paris Convention 21 constitutes a violation of the Philippines' obligation to adhere to the provisions of said treaty. It is also contended by petitioner that the grant of a compulsory license to private respondent will allow the latter to liberally manufacture and sell medicinal products containing Cimetidine without even extending to petitioner due recognition for pioneering 22 the development and worldwide acceptance of said invention, and will unreasonably dilute petitioner's right over the patent. Petitioner likewise asseverates that the rate of royalty fixed by the BPTTT at 2.5% of net sales is grossly inadequate, taking into consideration its huge investments of money, time and other resources in the research and development, as well as marketing of Cimetidine. It is further alleged that such rate has no factual basis since the appellate court and the BPTTT relied solely on 23 analogous cases and did not explain how such rate was arrived at. Lastly, petitioner claims that the appellate court erred in ruling that private respondent had complied with the requirement of publication of the notice of the filing of the petition for compulsory license because private respondent failed to formally offer in evidence copies of the notice of filing of the petition and notice of the date of hearing thereof as published and the affidavits of 24 publication thereof. Thus, it says, the BPTTT did not properly acquire jurisdiction over the petition for compulsory license. In its Comment to the Petition, private respondent adopted the reasoning of the Court of Appeals in the assailed decision and 25 prayed that the petition be denied for lack of merit. The petition has no merit. The Court of Appeals did not err in affirming the validity of the grant by the BPTTT of a compulsory license to private respondent for the use, manufacture and sale of Cimetidine. The said grant is in accord with Section 34 of the Patent Law which provides: Grounds for Compulsory Licensing. (1) Any person may apply to the Director for the grant of a license under a particular patent at any time after the expiration of two years from the date of the grant of the patent, under any of the following circumstances: (a) If the patented invention is not being worked within the Philippines on a commercial scale, although capable of being so worked, without satisfactory reason; (b) If the demand of the patented article in the Philippines is not being met to an adequate extent and on reasonable terms;

(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable terms, or by reason of the conditions attached by the patentee to licensee or to the purchase, lease or use of the patented article or working of the patented process or machine for production, the establishment of any new trade or industry in the Philippines is prevented, or the trade or industry therein is unduly restrained; (d) If the working of the invention within the country is being prevented or hindered by the importation of the patented article; (e) If the patented invention or article relates to food or medicine or manufactured substances which can be used as food or medicine, or is necessary for public health or public safety. (2) In any of the above cases, a compulsory license shall be granted to the petitioner provided that he has proved his capability to work the patented product or to make use of the patented product in the manufacture of a useful product, or to employ the patented process. (3) The term "worked" or "working" as used in this section means the manufacture and sale of the patented article, of patented machine, or the application of the patented process for production, in or by means of a definite and substantial establishment or organization in the Philippines and on a scale which is reasonable and adequate under the circumstances. Importation shall not constitute "working". (Emphasis supplied.) The grant of the compulsory license satisfies the requirements of the foregoing provision. More than ten years have passed since the patent for Cimetidine was issued to petitioner and its predecessors-in-interest, and the compulsory license applied for by private respondent is for the use, manufacture and sale of a medicinal product. Furthermore, both the appellate court and the BPTTT found that private respondent had the capability to workCimetidine or to make use thereof in the manufacture of a useful product. Petitioner's contention that Section 34 of the Patent Law contravenes the Paris Convention because the former provides for grounds for the grant of a compulsory license in addition to those found in the latter, is likewise incorrect. Article 5, Section A(2) of the Paris Convention states: Each country of the union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, 26 failure to work. This issue has already been resolved by this Court in the case of Smith Kline & French Laboratories, Ltd. vs. Court of 27 Appeals, where petitioner herein questioned the BPTTT's grant of a compulsory license to Doctors Pharmaceuticals, Inc. also for the manufacture, use and sale of Cimetidine. We found no inconsistency between Section 34 and the Paris Convention and held that: It is thus clear that Section A(2) of Article 5 [of the Paris Convention] unequivocally and explicitly respects the right of member countries to adopt legislative measures to provide for the grant of compulsory licenses to prevent abuses which might result from the exercise of the exclusive rights conferred by the patent. An example provided of possible abuses is "failure to work;" however, as such, is merely supplied by way of an example, it is plain that the treaty does not preclude the inclusion of other forms of categories of abuses. Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in the grant of a compulsory license was not only to afford others an opportunity to provide the public with the quantity of the patented product, but also to prevent the growth of monopolies [Congressional Record, House of Representatives, 12 May 957, 998]. Certainly, the growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw, and which our Congress likewise wished to prevent in enacting R.A. No. 28 165. (Emphasis supplied.) Neither does the Court agree with petitioner that the grant of the compulsory license to private respondent was erroneous because the same would lead the public to think that the Cimetidine is the invention of private respondent and not of petitioner. Such fears are unfounded since, as the appellate court pointed out in the assailed decision, by the grant of the compulsory license, private 29 respondent as licensee explicitly acknowledges that petitioner is the source of the patented product Cimetidine. Even assuming arguendo that such confusion may indeed occur, the disadvantage is far outweighed by the benefits resulting from the grant of the compulsory license, such as an increased supply of pharmaceutical products containing Cimetidine, and the consequent 30 reduction in the prices thereof. There is likewise no basis for the allegation that the grant of a compulsory license to private respondent results in the deprivation of petitioner's property without just compensation. It must be pointed out that as owner of Letters Patent No. 12207, petitioner had already enjoyed exclusive rights to manufacture, use and sell Cimetidine for at least two years from its grant in November, 1978. Even if other entities like private respondent are subsequently allowed to manufacture, use and sell the patented invention by virtue of a compulsory license, petitioner as owner of the patent would still receive remuneration for the use of such product in the form of royalties.

Anent the perceived inadequacy of the royalty awarded to petitioner, the Court of Appeals correctly held that the rate of 2.5% of net wholesale price fixed by the Director of the BPTTT is in accord with the Patent Law. Said law provides: Sec. 35. Grant of License.(1) If the Director finds that a case for the grant of a license under Section 34 hereof has been made out, he shall, within one hundred eighty days from the date the petition was filed, order the grant of an appropriate license. The order shall state the terms and conditions of the license which he himself must fix in default of an agreement on the matter manifested or submitted by the parties during the hearing. xxx Section 35-B. Terms and Conditions of Compulsory License. (1) A compulsory license shall be non-exclusive, but this shall be without prejudice to the licensee's right to oppose an application for such a new license. (2) The terms and conditions of a compulsory license, fixed in accordance with Section 35, may contain obligations and restrictions both for the licensee and for the registered owner of the patent. (3) A compulsory license shall only be granted subject to the payment of adequate royalties commensurate with the extent to which the invention is worked. However, royalty payments shall not exceed five percent (5%) of the net wholesale price (as defined in Section 33-A) of the products manufactured under the license. If the product, substance, or process subject of the compulsory license is involved in an industrial project approved by the Board of Investments, the royalty payable to the patentee or patentees shall not exceed three percent (3%) of the net wholesale price (as defined in Section 33-A) of the patented commodity/and or commodity manufactured under the patented process; the same rate of royalty shall be paid whenever two or more patents are involved; which royalty shall be distributed to the patentees in rates proportional to the extent of commercial use by the licensee giving preferential values to the holder of the oldest subsisting product patent. xxx Under the aforequoted provisions, in the absence of any agreement between the parties with respect to a compulsory license, the Director of the BPTTT may fix the terms thereof, including the rate of the royalty payable to the licensor. The law explicitly provides that the rate of royalty shall not exceed five percent (5%) of the net wholesale price. The Court agrees with the appellate court's ruling that the rate of royalty payments fixed by the Director of the BPTTT is reasonable. 31 The appellate court, citing Price vs. United Laboratories, ruled as such, considering that the compulsory license awarded to private respondent consists only of the bare right to use the patented invention in the manufacture of another product, without any technical 32 assistance from the licensor. Furthermore, this Court had earlier noted in the Price case that identical royalty rates have been 33 prescribed by the Director of the BPTTT in numerous patent cases. There was thus no error on the part of the Court of Appeals in affirming the royalty rate fixed by the Director of the BPTTT, since it was not shown that the latter erred or abused his discretion in prescribing said rate. The rule is that factual findings of administrative bodies, which are considered as experts in their respective fields, are accorded not only respect but even finality if the same are 34 supported by substantial evidence. Finally, as to the alleged lack of jurisdiction of the BPTTT over the petition filed by private respondent for failure to comply with the publication requirement under Section 35-F of R.A. No. 165, the Court holds that petitioner is estopped from questioning the same since it did not raise the issue of lack of jurisdiction at the earliest possible opportunity, i.e., during the hearings before the 35 BPTTT. The Court notes that petitioner raised this contention for the first time when it appealed the case to the appellate court. WHEREFORE, the petition is hereby DENIED for lack of merit and the Decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

Footnotes
1

Smith Kline and French Laboratories, Ltd., Petitioner, vs. Hon. Director of the Bureau of Patents, Trademarks and Technology Transfer, and Danlex Research Laboratories, Inc., Respondents. 2 See Decision of the Court of Appeals dated January 27, 1995, Rollo, pp. 32-33. 3 The Patent Law (1947), as amended. Chapter VIII thereof on Licensing was amended by Presidential Decree No. 1263 in 1977, by including two types of licensing: voluntary licensing and compulsory licensing.

4 5 6

Section 34 (1) (e), R.A. No. 165, as amended, infra. Decision of the Court of Appeals, Rollo, p. 33. Ibid. 7 Id., at 34. 8 Id., at 34-35. 9 Id., at 41. 10 Id., at 36. 11 Id., at 37. 12 Id., at 39-40. 13 Id., at 40. 14 Resolution of the Court of Appeals, Id., at 43. 15 Petition, Id., at 13. 16 Id., at 15-16. 17 Id., at 17. 18 61 O.G. 8011. 19 Article 5, Section A (2), Paris Convention for the Protection of Industrial Property, infra. 20 Article 5, Section A, (4), Paris Convention for the Protection of Industrial Property reads as follows: (4) A compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application or three years from the date of grant of the patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons. Such compulsory license shall be non-exclusive and shall not be transferable, even in the form of the grant of a sublicense, except with that part of the enterprise or goodwill which exploits such license. 21 Petition, Rollo, pp. 17-18. 22 Id., at 20. 23 Id., at 21-22. 24 Id., at 24-28. 25 Comment to Petition for Review on Certiorari, Id., at 60-66. 26 61 O.G. 8011, 8016 (1965). 27 276 SCRA 224 (1997). 28 Id., at 237. 29 Decision of the Court of Appeals, Rollo, p. 38. 30 See Parke Davis & Co. vs. Doctors' Pharmaceuticals, Inc., 14 SCRA 1053, 1061 (1965). 31 166 SCRA 133, 137-138 (1988). 32 Decision of the Court of Appeals, Rollo, p. 39. 33 In Price vs. United Laboratories, supra, at 138, this Court noted: Furthermore, as pointed out in respondent's comment on the petition, identical terms and conditions had been prescribed for the grant of compulsory license in a good number of patent cases (United Laboratories, Inc. vs. Boehringer Ingelheim, GMBH, IPC 929, July 27, 1981; United Laboratories, Inc. vs. Bristol-Myers Company, IPC 1179, Aug. 20, 1981; United Laboratories, Inc. vs. Squibb & Sons, Inc., IPC 1349, Sept. 30, 1981; United Laboratories, Inc. vs. Helmut Weber, et al., IPC 949, Dec. 13, 1982; Oceanic Pharmacal, Inc., vs. Gruppo Lepetit S.A., IPC 1549, Dec. 21, 1982; United Laboratories, Inc. vs. Boehringer Ingelheim, IPC 1185, June 8, 1983; United Laboratories, Inc. vs. Pfizer Corp., IPC 1184, June 10, 1983; Doctors Pharmaceuticals, Inc. vs. Maggi, et al., July 11, 1983; Drugmaker's Laboratories vs. Herningen, et al., IPC 1679, September 22, 1983; Superior Pharmacraft, Inc. vs. Maggi, et al., IPC 1759, January 10, 1984; United Laboratories, Inc. vs. Van Gelder, et al., IPC 1927, June 29, 1984; Drugmaker's Laboratories, Inc. vs. Janssen Pharmaceutical N.V., IPC 1555, August 27, 1984; United Laboratories, Inc. vs. Graham John Durant, et al., IPC 1731, August 14, 1987; United Laboratories, Inc. vs. Albert Anthony Carr, IPC 1906, August 31, 1987). 34 Golden Thread Knitting Industries, Inc. vs. National Labor Relations Commission, 304 SCRA 568, 576 (1999). 35 Smith Kline & French Laboratories, Ltd.. vs. Court of Appeals, supra, at 241-242.

THIRD DIVISION [G. R. No. 126627. August 14, 2003] SMITH KLINE BECKMAN CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and TRYCO PHARMA CORPORATION,respondents. DECISION CARPIO-MORALES, J.: Smith Kline Beckman Corporation (petitioner), a corporation existing by virtue of the laws of the state of Pennsylvania, United States of America (U.S.) and licensed to do business in the Philippines, filed on October 8, 1976, as assignee, before the Philippine Patent Office (now Bureau of Patents, Trademarks and Technology Transfer) an application for patent over an invention entitled Methods and Compositions for Producing Biphasic Parasiticide Activity Using Methyl 5 Propylthio-2-Benzimidazole Carbamate. The application bore Serial No. 18989. On September 24, 1981, Letters Patent No. 14561 for the aforesaid invention was issued to petitioner for a term of seventeen (17) years. The letters patent provides in its claims that the patented invention consisted of a new compound named methyl 5 propylthio-2-benzimidazole carbamate and the methods or compositions utilizing the compound as an active ingredient in fighting infections caused by gastrointestinal parasites and lungworms in animals such as swine, sheep, cattle, goats, horses, and even pet animals. Tryco Pharma Corporation (private respondent) is a domestic corporation that manufactures, distributes and sells veterinary products including Impregon, a drug that has Albendazole for its active ingredient and is claimed to be effective against gastrointestinal roundworms, lungworms, tapeworms and fluke infestation in carabaos, cattle and goats. Petitioner sued private respondent for infringement of patent and unfair competition before the Caloocan City Regional Trial [3] Court (RTC). It claimed that its patent covers or includes the substance Albendazole such that private respondent, by manufacturing, selling, using, and causing to be sold and used the drug Impregon without its authorization, infringed Claims 2, 3, 4, [4] 7, 8 and 9 of Letters Patent No. 14561 as well as committed unfair competition under Article 189, paragraph 1 of the Revised Penal Code and Section 29 of Republic Act No. 166 (The Trademark Law) for advertising and selling as its own the drug Impregon [5] although the same contained petitioners patented Albendazole. On motion of petitioner, Branch 125 of the Caloocan RTC issued a temporary restraining order against private respondent [6] enjoining it from committing acts of patent infringement and unfair competition. A writ of preliminary injunction was subsequently [7] issued. Private respondent in its Answer averred that Letters Patent No. 14561 does not cover the substance Albendazole for nowhere in it does that word appear; that even if the patent were to include Albendazole, such substance is unpatentable; that the Bureau of Food and Drugs allowed it to manufacture and market Impregon with Albendazole as its known ingredient; that there is no proof that it passed off in any way its veterinary products as those of petitioner; that Letters Patent No. 14561 is null and void, the application for the issuance thereof having been filed beyond the one year period from the filing of an application abroad for the same invention covered thereby, in violation of Section 15 of Republic Act No. 165 (The Patent Law); and that petitioner is not the registered patent holder. Private respondent lodged a Counterclaim against petitioner for such amount of actual damages as may be proven; P1,000,000.00 in moral damages; P300,000.00 in exemplary damages; and P150,000.00 in attorneys fees. Finding for private respondent, the trial court rendered a Decision dated July 23, 1991, the dispositive portion of which reads: WHEREFORE, in view of the foregoing, plaintiffs complaint should be, as it is hereby, DISMISSED. The Writ of injunction issued in connection with the case is hereby ordered DISSOLVED. The Letters Patent No. 14561 issued by the then Philippine Patents Office is hereby declared null and void for being in violation of Sections 7, 9 and 15 of the Patents Law. Pursuant to Sec. 46 of the Patents Law, the Director of Bureau of Patents is hereby directed to cancel Letters Patent No. 14561 issued to the plaintiff and to publish such cancellation in the Official Gazette. Defendant Tryco Pharmaceutical Corporation is hereby awarded P330,000.00 actual damages and P100,000.00 attorneys fees as prayed for in its counterclaim but said amount awarded to defendant is subject to the lien on correct payment of filing fees. SO ORDERED. (Underscoring supplied)
[9] [8] [2] [1]

On appeal, the Court of Appeals, by Decision of April 21, 1995, upheld the trial courts finding that private respondent was not liable for any infringement of the patent of petitioner in light of the latters failure to show that Albendazole is the same as the compound subject of Letters Patent No. 14561. Noting petitioners admission of the issuance by the U.S. of a patent for Albendazole in the name of Smith Kline and French Laboratories which was petitioners former corporate name, the appellate court considered the U.S. patent as implying that Albendazole is different from methyl 5 propylthio-2-benzimidazole carbamate. It likewise found that private respondent was not guilty of deceiving the public by misrepresenting that Impregon is its product. The appellate court, however, declared that Letters Patent No. 14561 was not void as it sustained petitioners explanation that Patent Application Serial No. 18989 which was filed on October 8, 1976 was a divisional application of Patent Application Serial No. 17280 filed on June 17, 1975 with the Philippine Patent Office, well within one year from petitioners filing on June 19, 1974 of its Foreign Application Priority Data No. 480,646 in the U.S. covering the same compound subject of Patent Application Serial No. 17280. Applying Section 17 of the Patent Law, the Court of Appeals thus ruled that Patent Application Serial No. 18989 was deemed filed on June 17, 1995 or still within one year from the filing of a patent application abroad in compliance with the one-year rule under Section 15 of the Patent Law. And it rejected the submission that the compound in Letters Patent No. 14561 was not patentable, citing the jurisprudentially established presumption that the Patent Offices determination of patentability is correct. Finally, it ruled that petitioner established itself to be the one and the same assignee of the patent notwithstanding changes in its corporate name. Thus the appellate court disposed: WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that the orders for the nullification of Letters Patent No. 14561 and for its cancellation are deleted therefrom. SO ORDERED. Petitioners motion for reconsideration of the Court of Appeals decision having been denied [12] on certiorari was filed, assigning as errors the following:
[11]

[10]

the present petition for review

I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT ALBENDAZOLE, THE ACTIVE INGREDIENT IN TRYCOS IMPREGON DRUG, IS INCLUDED IN PETITIONERS LETTERS PATENT NO. 14561, AND THAT CONSEQUENTLY TRYCO IS ANSWERABLE FOR PATENT INFRINGEMENT. II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING TO PRIVATE RESPONDENT TRYCO PHARMA CORPORATION P330,000.00 ACTUAL DAMAGES AND P100,000.00 ATTORNEYS FEES. Petitioner argues that under the doctrine of equivalents for determining patent infringement, Albendazole, the active ingredient it alleges was appropriated by private respondent for its drug Impregon, is substantially the same as methyl 5 propylthio-2benzimidazole carbamate covered by its patent since both of them are meant to combat worm or parasite infestation in animals. It cites the unrebutted testimony of its witness Dr. Godofredo C. Orinion (Dr. Orinion) that the chemical formula in Letters Patent No. 14561 refers to the compound Albendazole. Petitioner adds that the two substances substantially do the same function in substantially the same way to achieve the same results, thereby making them truly identical. Petitioner thus submits that the appellate court should have gone beyond the literal wordings used in Letters Patent No. 14561, beyond merely applying the literal infringement test, for in spite of the fact that the word Albendazole does not appear in petitioners letters patent, it has ably shown by evidence its sameness with methyl 5 propylthio-2-benzimidazole carbamate. Petitioner likewise points out that its application with the Philippine Patent Office on account of which it was granted Letters Patent No. 14561 was merely a divisional application of a prior application in the U. S. which granted a patent for Albendazole. Hence, petitioner concludes that both methyl 5 propylthio-2-benzimidazole carbamate and the U.S.-patented Albendazole are dependent on each other and mutually contribute to produce a single result, thereby making Albendazole as much a part of Letters Patent No. 14561 as the other substance is. Petitioner concedes in its Sur-Rejoinder that although methyl 5 propylthio-2-benzimidazole carbamate is not identical with Albendazole, the former is an improvement or improved version of the latter thereby making both substances still substantially the same. With respect to the award of actual damages in favor of private respondent in the amount of P330,000.00 representing lost profits, petitioner assails the same as highly speculative and conjectural, hence, without basis. It assails too the award of P100,000.00 in attorneys fees as not falling under any of the instances enumerated by law where recovery of attorneys fees is allowed. In its Comment, private respondent contends that application of the doctrine of equivalents would not alter the outcome of the case, Albendazole and methyl 5 propylthio-2-benzimidazole carbamate being two different compounds with different chemical and physical properties. It stresses that the existence of a separate U.S. patent for Albendazole indicates that the same and the compound in Letters Patent No. 14561 are different from each other; and that since it was on account of a divisional application that the patent for methyl 5 propylthio-2-benzimidazole carbamate was issued, then, by definition of a divisional application, such a compound is just one of several independent inventions alongside Albendazole under petitioners original patent application. As has repeatedly been held, only questions of law may be raised in a petition for review on certiorari before this Court. Unless the factual findings of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with [15] grave abuse of discretion, or contrary to the findings culled by the court of origin, this Court does not review them. From an examination of the evidence on record, this Court finds nothing infirm in the appellate courts conclusions with respect to the principal issue of whether private respondent committed patent infringement to the prejudice of petitioner.
[14] [13]

The burden of proof to substantiate a charge for patent infringement rests on the plaintiff. In the case at bar, petitioners evidence consists primarily of its Letters Patent No. 14561, and the testimony of Dr. Orinion, its general manager in the Philippines for its Animal Health Products Division, by which it sought to show that its patent for the compound methyl 5 propylthio-2benzimidazole carbamate also covers the substance Albendazole. From a reading of the 9 claims of Letters Patent No. 14561 in relation to the other portions thereof, no mention is made of the compound Albendazole. All that the claims disclose are: the covered invention, that is, the compound methyl 5 propylthio-2benzimidazole carbamate; the compounds being anthelmintic but nontoxic for animals or its ability to destroy parasites without harming the host animals; and the patented methods, compositions or preparations involving the compound to maximize its efficacy against certain kinds of parasites infecting specified animals. When the language of its claims is clear and distinct, the patentee is bound thereby and may not claim anything beyond [17] them. And so are the courts bound which may not add to or detract from the claims matters not expressed or necessarily implied, nor may they enlarge the patent beyond the scope of that which the inventor claimed and the patent office allowed, even if the [18] patentee may have been entitled to something more than the words it had chosen would include. It bears stressing that the mere absence of the word Albendazole in Letters Patent No. 14561 is not determinative of Albendazoles non-inclusion in the claims of the patent. While Albendazole is admittedly a chemical compound that exists by a name different from that covered in petitioners letters patent, the language of Letter Patent No. 14561 fails to yield anything at all regarding Albendazole. And no extrinsic evidence had been adduced to prove that Albendazole inheres in petitioners patent in spite of its omission therefrom or that the meaning of the claims of the patent embraces the same. While petitioner concedes that the mere literal wordings of its patent cannot establish private respondents infringement, it urges this Court to apply the doctrine of equivalents. The doctrine of equivalents provides that an infringement also takes place when a device appropriates a prior invention by incorporating its innovative concept and, although with some modification and change, performs substantially the same function in [19] substantially the same way to achieve substantially the same result. Yet again, a scrutiny of petitioners evidence fails to convince this Court of the substantial sameness of petitioners patented compound and Albendazole. While both compounds have the effect of neutralizing parasites in animals, identity of result does not amount to infringement of patent unless Albendazole operates in substantially the same way or by substantially the same means as the patented compound, even though it performs the same [20] function and achieves the same result. In other words, the principle or mode of operation must be the same or substantially the [21] same. The doctrine of equivalents thus requires satisfaction of the function-means-and-result test, the patentee having the burden to [22] show that all three components of such equivalency test are met. As stated early on, petitioners evidence fails to explain how Albendazole is in every essential detail identical to methyl 5 propylthio-2-benzimidazole carbamate. Apart from the fact that Albendazole is an anthelmintic agent like methyl 5 propylthio-2benzimidazole carbamate, nothing more is asserted and accordingly substantiated regarding the method or means by which Albendazole weeds out parasites in animals, thus giving no information on whether that method is substantially the same as the manner by which petitioners compound works. The testimony of Dr. Orinion lends no support to petitioners cause, he not having been presented or qualified as an expert witness who has the knowledge or expertise on the matter of chemical compounds. As for the concept of divisional applications proffered by petitioner, it comes into play when two or more inventions are [23] claimed in a single application but are of such a nature that a single patent may not be issued for them. The applicant thus is required to divide, that is, to limit the claims to whichever invention he may elect, whereas those inventions not elected may be [24] made the subject of separate applications which are called divisional applications. What this only means is that petitioners methyl 5 propylthio-2-benzimidazole carbamate is an invention distinct from the other inventions claimed in the original application divided out, Albendazole being one of those other inventions. Otherwise, methyl 5 propylthio-2-benzimidazole carbamate would not have been the subject of a divisional application if a single patent could have been issued for it as well as Albendazole. The foregoing discussions notwithstanding, this Court does not sustain the award of actual damages and attorneys fees in favor of private respondent. The claimed actual damages ofP330,000.00 representing lost profits or revenues incurred by private respondent as a result of the issuance of the injunction against it, computed at the rate of 30% of its alleged P100,000.00 monthly [25] gross sales for eleven months, were supported by the testimonies of private respondents President and Executive Vice-President that the average monthly sale of Impregon wasP100,000.00 and that sales plummeted to zero after the issuance of the [26] injunction. While indemnification for actual or compensatory damages covers not only the loss suffered (damnum emergens) but also profits which the obligee failed to obtain (lucrum cessans or ganacias frustradas), it is necessary to prove the actual amount of damages with a reasonable degree of certainty based on competent proof and on the best evidence obtainable by the injured [27] party. The testimonies of private respondents officers are not the competent proof or best evidence obtainable to establish its right to actual or compensatory damages for such damages also require presentation of documentary evidence to substantiate a [28] claim therefor. In the same vein, this Court does not sustain the grant by the appellate court of attorneys fees to private respondent anchored on Article 2208 (2) of the Civil Code, private respondent having been allegedly forced to litigate as a result of petitioners suit. Even if a claimant is compelled to litigate with third persons or to incur expenses to protect its rights, still attorneys fees may not be awarded where no sufficient showing of bad faith could be reflected in a partys persistence in a case other than an [29] erroneous conviction of the righteousness of his cause. There exists no evidence on record indicating that petitioner was moved by malice in suing private respondent. This Court, however, grants private respondent temperate or moderate damages in the amount of P20,000.00 which it finds reasonable under the circumstances, it having suffered some pecuniary loss the amount of which cannot, from the nature of the [30] case, be established with certainty.

[16]

WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION. The award of actual or compensatory damages and attorneys fees to private respondent, Tryco Pharma Corporation, is DELETED; instead, it is hereby awarded the amount of P20,000.00 as temperate or moderate damages. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Corona, JJ., concur.

[1] [2] [3]

Records, Exhibit A at 320-342. Id. at 340-341. Records at 1. [4] Id. at 2-3. [5] Id. at 4. [6] Id. at 34. [7] Id. at 250. [8] Records at 35-40. [9] Records at 454-462. [10] Court of Appeals Rollo at 97-107. [11] Supreme Court Rollo at 47-51. [12] Id. at 8-33. [13] Supreme Court Rollo at 119-122. [14] Supreme Court Rollo at 66-84. [15] Ramirez v. Court of Appeals, 294 SCRA 512 [1998]. [16] Vargas v. F. M. Yaptico & Co., 40 Phil. 195 [1919]. [17] 69 C.J.S. 684. [18] 69 C.J.S. 684 685. [19] Godines v. Court of Appeals, 226 SCRA 338 [1993]. [20] 60 Am Jur 2d 631-632. [21] 69 C. J. S. 860. [22] Malta v. Schulmerich Carillons, Inc., 13 U.S.P.Q. 2d 1900 [1989]. [23] 69 C.J.S. 455. [24] Ibid. [25] TSN, March 30, 1990, pp. 15-16. [26] TSN, May 11, 1990, pp. 3-5. [27] Integrated Packaging Corporation v. Court of Appeals, 333 SCRA 170 [2000]. [28] Producers Bank of the Philippines vs. Court of Appeals, 365 SCRA 326 [2001]. [29] ABS-CBN Broadcasting Corporation v. Court of Appeals, 301 SCRA 572 [1999]. [30] Civil Code, art. 2224.