Mighty Corporation vs. E. & J.

Gallo Winery

G.R. No. 154342. July 14, 2004.*

MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC.,

petitioners, vs. E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC.,
respondents.

Remedial Law; Appeals; As a general rule, a petition for review on

certiorari under Rule 45 must raise only “questions of law.”—As a general
rule, a petition for review on certiorari under Rule 45 must raise only “questions of
law” 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), 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.

Intellectual Property; Trademarks; Unfair Competition; The law on unfair

competition is broader and more inclusive than the law on trademark
infringement; Conduct constitutes unfair competition if the effect is to
pass off on the public the goods of one man as the goods of another.—
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
competitor’s 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.

Same; Same; Same; Distinction Between Trademark Infringement and

Unfair Competition.—In Del Monte Corporation vs. Court of Appeals, 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.

Same; Same; Same; Elements of Trademark Infringement under Article 6

of the Paris Convention.—Under Article 6 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 translation liable to
create confusion, (b) of a mark considered by the competent authority of the
country of registration or use to be well-known in 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.

Same; Same; Same; Section 20 of the Trademark Law considers the

trademark registration certificate as prima facie evidence of the validity of
the registration, the registrant’s ownership and exclusive right to use the
trademark in connection with the goods, business or services as classified
by the Director of Patents and as specified in the certificate; In the
adjudication of trademark rights between contending parties, equitable
principles of laches, estoppel, and acquiescence may be considered and
applied.— Section 20 of the Trademark Law considers the trademark registration
certificate as prima facie evidence of the validity of the registration, the registrant’s
ownership and exclusive right to use the trademark in connection with the goods,
business or services as classified by the Director of Patents and as specified in the
certificate, subject to the conditions and limitations stated therein. Sections 2 and 2-
A of the Trademark Law emphasize the importance of the trademark’s 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.

Same; Same; Same; Elements of Trademark Infringement Under the

Trademark Law.—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.
Same; Same; Same; In case of domestic legal disputes on any conflicting
provisions between the Paris Convention and the Trademark Law the latter
will prevail.—In summary, the Paris Convention protects wellknown 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.

Same; Same; Same; 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; Proof of all the
elements of trademark infringement is a condition precedent to any
finding of liability.—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 registrant’s express or implied
consent to another’s use of its trademark or a colorable imitation thereof. This is
why acquiescence, estoppel or laches may defeat the registrant’s otherwise valid
cause of action. Hence, proof of all the elements of trademark infringement is a
condition precedent to any finding of liability.

Same; Same; Same; Actual use in commerce in the Philippines is an

essential prerequisite for the acquisition of ownership over a trademark.—
In Emerald Garment Manufacturing Corporation vs. Court of Appeals, we reiterated
our rulings in Pagasa Industrial Corporation vs. Court of Appeals, Converse Rubber
Corporation vs. Universal Rubber Products, Inc., Sterling Products International, Inc.
vs. Farbenfabriken Bayer Aktiengesellschaft, Kabushi Kaisha Isetan vs. Intermediate
Appellate Court, and Philip Morris vs. Court of Appeals, giving utmost importance to
the actual commercial use of a trademark in the Philippines prior to its registration,
notwithstanding the provisions of the Paris Convention: x x x x x x x x x 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 x x

Same; Same; Same; By strict application of Section 20 of the Trademark

Law, Gallo Winery’s exclusive right to use the GALLO trademark should be
limited to wines, the only product indicated in its registration certificates.
—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. Thus, by strict application of Section 20 of the Trademark
Law, Gallo Winery’s 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.

Same; Same; Same; There are two types of confusion in trademark

infringement, confusion of goods and confusion of business;
Circumstances to Determine the Likelihood of Confusion.—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 defendant’s goods are then bought as
the plaintiff’s and its poor quality reflects badly on the plaintiff’s reputation. The
other is “confusion of business” wherein the goods of the parties are different but
the defendant’s 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.
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
registrant’s express or implied consent and other fair and equitable considerations.

Same; Same; Same; Two Tests in Determining Similarity and Likelihood of

Confusion in Trademark Resemblance.—Jurisprudence has developed two tests
in determining similarity and likelihood of confusion in trademark resemblance: (a)
the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals and other
cases, and (b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of
Appeals and its preceding cases.

Same; Same; Same; Same; Concept of “Related Goods.”—Thus, apart from

the strict application of Section 20 of the Trademark Law and Article 6 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.” 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.

Same; Same; Same; Same; Factors to be Considered in Resolving Whether

Goods are Related.—In resolving whether goods are related, 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, (d) the nature and cost
of the articles, (e) the descriptive properties, physical attributes or essential
characteristics with reference to their form, composition, texture or quality, (f) the
purpose of the goods, (g) whether the article is bought for immediate consumption,
that is, day-to-day household items, (h) the fields of manufacture, (i) the conditions
under which the article is usually purchased and (j) the channels of trade through
which the goods flow, how they are distributed, marketed, displayed and sold.

Same; Same; Same; Same; 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.—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.

PETITION for review on certiorari of the decision and resolution of the Court of
Appeals and decision of the trial court.

The facts are stated in the opinion of the Court.

Hector L. Hofileña and Miguelito V. Ocampo for petitioners.

Sycip, Salazar, Hernandez and Gatmaitan for respondents.

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 Winery’s exclusive

wine importer and distributor in the Philippines since 1991, selling these products in
its own name and for its own account.

Gallo Winery’s 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. 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.

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.

The Bureau of Internal Revenue (BIR) approved Tobacco Industries’ use of GALLO
100’s 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 manufacturer’s sworn statement as basis for BIR’s
collection of specific tax on GALLO cigarettes.

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.

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. On July 17, 1985, the National Library issued Certificate of
Copyright Registration No. 5834 for La Campana’s lifetime copyright claim over
GALLO cigarette labels.

Subsequently, La Campana authorized Mighty Corporation to manufacture and sell

cigarettes bearing the GALLO trademark. BIR approved Mighty Corporation’s use of
GALLO 100’s cigarette brand, under licensing agreement with Tobacco Industries, on
May 18, 1988, and GALLO SPECIAL MENTHOL 100’s cigarette brand on April 3, 1989.

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.

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 circa 1974 within the then U.S.
military facilities only. By 1979, they had expanded their Philippine market through
authorized distributors and independent outlets.

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 trade name 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 Property (Paris Convention) and RA 166 (Trademark
Law), specifically, Sections 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 trade name in connection with the sale, offering for sale,
or advertising of any goods, business or services on or in connection with which
such use is likely to cause confusion or mistake or to deceive purchasers or others
as to the source or origin of such goods or services, or identity of such business; or
reproduce, counterfeit, copy or colorably imitate any such mark or trade name and
apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used
upon or in connection with such goods, business or services, shall be liable to a civil
action by the registrant for any or all of the remedies herein provided.
SEC. 23. Actions, and damages and injunction for infringement.—Any person
entitled to the exclusive use of a registered mark or trade name may recover
damages in a civil action from any person who infringes his rights, and the measure
of the damages suffered shall be either the reasonable profit which the complaining
party would have made, had the defendant not infringed his said rights, or the profit
which the defendant actually made out of the infringement, or in the event such
measure of damages cannot be readily ascertained with reasonable certainty, then
the court may award as damages a reasonable percentage based upon the amount
of gross sales of the defendant of the value of the services in connection with which
the mark or trade name was used in the infringement of the rights of the
complaining party. In cases where actual intent to mislead the public or to defraud
the complaining party shall be shown, in the discretion of the court, the damages
may be doubled.

The complaining party, upon proper showing, may also be granted injunction.

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 trade name is employed,
has a property right in the goodwill of the said goods, business or services so
identified, which will be protected in the same manner as other property rights.
Such a person shall have the remedies provided in section twenty-three, Chapter V
hereof.

Any person who shall employ deception or any other means contrary to good faith
by which he shall pass off the goods manufactured by him or in which he deals, or
his business, or services for those of the one having competition and false
designation of origin) and 37 (for trade name

_______________

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.

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 trade names, or the repression of unfair competition to which the
Philippines may be a party, shall be entitled to the benefits and subject to the
provisions of this Act to the extent and under the conditions essential to give effect
to any such convention and treaties so long as the Philippines shall continue to be a
party thereto, except as provided in the following paragraphs of this section.

No registration of a mark or trade name in the Philippines by a person described in

the preceding paragraph of this section shall be granted until such mark or trade
name has been registered in the country of origin of the applicant, unless the
applicant alleges use in commerce.

For the purposes of this section, the country of origin of the applicant is the country
in which he has bona fide and effective industrial or commercial establishment, or if
he has 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 trade name under the provisions of this
Act filed by a person described in the first paragraph of this section who has
previously duly filed an application for registration of the same mark or trade name
in one of the countries described in said paragraph shall be accorded the same
force and effect as would be accorded to the same application if filed in the
Philippines on the same date on which the application was first filed in such foreign
country: Provided, That—

(a) The application in the Philippines is filed within six months from the date on
which the 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; trademark to ride on Gallo Winery’s
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 Winery’s 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 moral
damages, and at least P500,000 as attorney’s fees and litigation expenses.

_______________
(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 trade
name 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.

Trade names of persons described in the first paragraph of this section shall be
protected without the obligation of filing or registration whether or not they form
parts of marks.

Any person designated in the first paragraph of this section as entitled to the
benefits and subject to the provisions of this Act shall be entitled to effective
protection against unfair competition, and the remedies provided herein for
infringement of marks and trade names shall be available so far as they may be
appropriate in repressing acts of unfair competition.

Citizens or residents of the Philippines shall have the same benefits as are granted
by this section to persons described in the first paragraph

In their answer, petitioners alleged, among other affirmative defenses, that:

petitioner’s GALLO cigarettes and Gallo Winery’s wines were totally unrelated
products; Gallo Winery’s 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 Winery’s high-priced
luxury wines which cost between P98 to P242.50; the target market of Gallo
Winery’s 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 manufacturer’s name clearly indicated as MIGHTY
CORPORATION while, in the case of Gallo Winery’s 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,
respondent’s prayer for the issuance of a writ of preliminary injunction,25 holding
that respondent’s 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.

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.”

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 RTC’s denial
of the application for issuance of a writ of preliminary injunction against petitioners.

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
& J’s 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) attorney’s fees and expenses of litigation in the amount of PHP1,130,068.91;

(iv) the cost of suit.

“SO ORDERED.”

On June 24, 1999, the Makati RTC granted respondent’s motion for partial
reconsideration and increased the award 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
petitioner’s 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.

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 CA’S FACTUAL FINDINGS

As a general rule, a petition for review on certiorari under Rule 45 must raise only
“questions of law” 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), 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.

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:

(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 Section 22 of Republic Act No. 166, Section 155 of the IP
Code, Article 6bis 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 violated the
provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but also
Article 6bis of the Paris Convention.39 (Emphasis and italics 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, amendments or repeals. 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
competitor’s 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.

In Del Monte Corporation vs. Court of Appeals, 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 Winery’s 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 wellknown 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 create confusion therewith.” There is no time limit for
seeking the prohibition of the use of marks used in bad faith.

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 translation liable to create confusion,

(b) of a mark considered by the competent authority of the country of registration

or use48 to be well-known in 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
trade name 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 trade name and apply such reproduction,
counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used upon or in connection with such
goods, business or services.”49 Trademark registration and actual use are material
to the complaining party’s cause of action.

Corollary to this, Section 20 of the Trademark Law50 considers the trademark

registration certificate as prima facie evidence of the validity of the registration, the
registrant’s ownership and exclusive right to use the trademark in connection with
the goods, business or services as classified by the Director of 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
trademark’s 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.

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.

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 registrant’s express or implied consent to another’s use of its
trademark or a colorable imitation thereof. This is why acquiescence, estoppel or
laches may defeat the registrant’s 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. 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 manufacturer’s 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.

In Emerald Garment Manufacturing Corporation vs. Court of Appeals, we reiterated

our rulings in Pagasa Industrial Corporation vs. Court of Appeals, Converse Rubber
Corporation vs. Universal Rubber Products, Inc., Sterling Products International, Inc.
vs. Farbenfabriken Bayer Aktiengesellschaft, Kabushi Kaisha Isetan vs. Intermediate
Appellate Court, and Philip Morris vs. Court of Appeals, giving utmost importance to
the actual 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 2A of the
Philippine Trademark Law (R.A. No. 166) x x x

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 that actual 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 facie evidence. 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.

Thus, by strict application of Section 20 of the Trademark Law, Gallo Winery’s

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:

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 in Philippine
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.

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 defendant’s goods are
then bought as the plaintiff’s and its poor quality reflects badly on the plaintiff’s
reputation. The other is “confusion of business” wherein the goods of the parties are
different but the defendant’s 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.

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
registrant’s 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 Mining’s 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 Director’s registration of the same trademark CAMIA for Ng Sam’s ham
under Class 47, despite Philippine Refining Company’s 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 Hickok’s petition to cancel private respondent’s HICKOK
trademark registration for its Marikina shoes as against petitioner’s 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 Office’s registration of the trademark SHELL used in the cigarettes
manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell
Company’s 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 ESSO’s
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

(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72
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
Kaisha’s 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” which has been defined as “such similarity in form, content,
words, sound, meaning, special arrangement or general appearance of the
trademark or trade name 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.”

Jurisprudence has developed two tests in determining similarity and likelihood of

confusion in trademark resemblance:

(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals and other
cases, and

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals78
and its preceding cases.

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.

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.
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.

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 rooster’s 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.

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).

Also, as admitted by respondents themselves, 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 Winery’s 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 Winery’s wines are printed the words “VINTED AND
BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA.”

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 Winery’s 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 noncompeting interests as well.

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.” 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.

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. 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. 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.

In resolving whether goods are related, 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

(d) the nature and cost of the articles

(e) the descriptive properties, physical attributes or essential characteristics with

reference to their form, composition, texture or quality

(f) the purpose of the goods

(g) whether the article is bought for immediate consumption,100 that is, day-to-day
household items

(h) the fields of manufacture

(i) the conditions under which the article is usually purchased and

(j) the channels of trade through which the goods flow, how they are distributed,
marketed, displayed and sold.

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.

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. The “purchaser” is not the
“completely unwary consumer” but is the “ordinarily intelligent buyer” considering
the type of product involved. 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.”

Hence, in the adjudication of trademark infringement, we give due regard to the

goods’ usual purchaser’s character, attitude, habits, age, training and education.

Applying these legal precepts to the present case, petitioner’s 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.
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.

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.

In this regard, we adopted the Director of Patents’ finding in Philippine Refining Co.,
Inc. vs. Ng Sam and the Director of Patents:

In his decision, the Director of Patents enumerated the factors that set respondent’s
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. Opposer’s
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-à-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-high-income earners while GALLO cigarettes appeal
only to simple folks like farmers, fishermen, laborers and other low-income
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.

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 local
sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis
Oriental, Pangasinan, Bohol, and Cebu. On the other hand, GALLO wines are
imported, distributed and sold in the Philippines through Gallo Winery’s 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.

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.:

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), aff’d, 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 plaintiff’s 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 defendant’s use
of the mark “BLACK LABEL” for cigarettes because it was likely to cause confusion
with the plaintiff’s wellknown 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 plaintiff’s 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 in John 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 (defendant’s adoption of ‘Dunhill’ mark was not innocent). However,
in Schenley, 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 name ‘Bailey’s’ 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 world’s 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 circumstances which 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 element under 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 Winery’s 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.A.’s 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.”

Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs.
Court of Appeals and NSR Rubber Corporation,123 “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 trade name 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
trade name 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 trade
name ‘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.

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 man’s goods or business as that of
another constitutes unfair competition. Actual or probable deception and confusion
on the part of customers by reason of defendant’s 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.

Petition granted, assailed decisions and resolution reversed and set aside.
Complaint dismissed.

Note.—The likelihood of confusion of goods or business is a relative concept, to be

determined only according to the particular, and sometimes peculiar, circumstances
of each case. (Canon Kabushiki Kaisha vs. Court of Appeals, 336 SCRA 266 [2000])
Mighty Corporation vs. E. & J. Gallo Winery, 434 SCRA 473, G.R. No. 154342 July 14,
2004

Distilleria Washington, Inc. vs. La Tondeña Distillers, Inc.

G.R. No. 120961. October 2, 1997.*

DISTILLERIA WASHINGTON, INC. OR WASHINGTON DISTILLERY, INC.,

petitioner, vs. LA TONDEÑA DISTILLERS, INC. and THE HONORABLE COURT
OF APPEALS, respondents.
Trademarks and Trade Names; Republic Act No. 623; It is implicit that
Sections 2 and 3 of R.A. 623 apply only when the “registered
manufacturer, bottler, or seller” retain ownership of the bottles, and when
the bottles have been “transferred by way of sale,” Section 5 applies,
thereby precluding the institution of any action under Sections 2 and 3.—A
careful reading of Sections 2, 3 and 5 of R.A. 623 would lead to the conclusion that
they contemplate situations separate and distinct from each other. Section 2
prohibits any person from using, selling or otherwise disposing of registered
containers without the written consent of the registrant. Such rights belong
exclusively to the registrant. Under Section 3, mere possession of such registered
containers without the written consent of the registrant is prima facie presumed
unlawful. It appears—and this is the critical point—that Sections 2 and 3 apply only
when the “filling” up of the bottle or the “use” of the bottle is “without the written
permission” of the “registered manufacturer, bottler, or seller,” who has registered
the marks of “ownership” of the bottles. It is thus implicit that Sections 2 and 3
apply only when the “registered manufacturer, bottler, or seller” retain ownership of
the bottles. Upon the other hand, when the bottles have been “transferred by way
of sale,” Section 5 applies, thereby precluding the institution of any action “under
this Act,” meaning to say, any action under Sections 2 and 3.

Same; Same; Ownership; The transferee of the marked bottles transferred

by way of sale is allowed to enjoy all the rights of an owner in regard to
such bottles.—The general rule on ownership, therefore, must apply and petitioner
be allowed to enjoy all the rights of an owner in regard the bottles in question, to
wit: the jus utendi or the right to receive from the thing what it produces; the jus
abutendi or the right to consume the thing by its use; the jus disponendi or the
power of the owner to alienate, encumber, transform and even destroy the thing
owned; and the jus vindicandi or the right to exclude from the possession of the
thing owned any other person to whom the owner has not transmitted such thing.
What is proscribed is the use of the bottles in infringement of another’s trademark
or incorporeal rights.

Same; Same; Where the marked bottles are transferred by way of sale, the
registered owner relinquishes all its proprietary rights over the bottles in
favor of the person who obtains them in due course.—Since the Court has
found that the bottles have been transferred by way of sale, then La Tondeña has
relinquished all its proprietary rights over the bottles in favor of Distilleria
Washington who has obtained them in due course. Now as owner, it can exercise all
attributes of ownership over the bottles. This is the import of the decision that La
Tondeña had transferred ownership over its marked bottles or containers when it
sold its gin products to the public. While others may argue that Section 5 is
applicable only to the immediate transferee of the marked bottles or container, this
matter is best discussed where the applicability of Sec. 5, R.A. 623 is squarely
raised. It must be recalled, however, that this is a case of replevin, not a violation of
the “trademark protection of the registrant” under R.A. 623 or of the Trademark
Law.

Same; Same; Monopolies; To disallow a small distiller the use of recycled

bottles would necessarily deprive it a share of the market which a big and
established distillery seeks to monopolize—in the country’s march toward
economic development and independence, it is essential that a balance
protecting small industries and large scale businesses be maintained.—It
may not be amiss to state that La Tondeña is a big and established distillery which
already has captured a big share of the gin market, estimated to be 90%. Distilleria
Washington, on the other hand, together with other small distillers-around 40 in
number—concedes that it cannot fight this giant but only asks a share of the
market. It cannot afford to manufacture its own bottles and just have to rely on
recycled bottles to sell its products. To disallow the use of these recycled products
would necessarily deprive it a share of the market which La Tondeña seeks to
monopolize. We recognize the role of large industry in the growth of our nascent
economy. However, small industries likewise play a vital role in economic growth,
playing a significant part in the success of such tiger economies as Korea, Taiwan
and Thailand. Industries, big and small, should adopt symbiotic relationship, not the
animosity of Goliath and David. Our holding today merely recognizes that in the
country’s march toward economic development and independence, it is essential
that a balance protecting small industries and large scale businesses be maintained.

MOTION for reconsideration of a decision of the Supreme Court.

The facts are stated in the resolution of the Court.

Estelito P. Mendoza and Orlando A. Santiago for petitioner.

Cesar P. Borje and Heinrich V. Garena for private respondent.

RESOLUTION

KAPUNAN, J.:
On October 17, 1996, this Court rendered a decision in the above-entitled case, the
dispositive portion of which reads, as follows:

WHEREFORE, the decision of the appellate court is MODIFIED by ordering LTDI to

pay petitioner just compensation for the seized bottles. Instead, however, of
remanding the case to the Court of Appeals to receive evidence on, and thereafter
resolve, the assessment thereof, this Court accepts and accordingly adopts the
quantification of P18,157.00 made by the trial court. No costs.

With the denial of the motion for reconsideration, petitioner sought a second
reconsideration with leave of court of our decision raising new issues, to wit:

1.01.d. The Supreme Court, in its Decision of October 17, 1996, modified the
decision of the Court of Appeals. It held that ownership of the bottles had passed to
the consumer, ultimately, to Washington Distillery, Inc., thereby upholding the
finding of the Regional Trial Court and reversing the ruling of the Court of Appeals;
nonetheless, while ruling that the ownership over the bottles had passed to
Washington Distillery, Inc., it held that Washington Distillery, Inc. may not use the
bottles because of the ‘trademark protection to the registrant’ (La Tondeña
Distillers, Inc.). Instead of directing the return of the bottles to Washington Distillery,
Inc., the Court ordered La Tondeña Distillers, Inc. to pay Washington Distillery, Inc.
the amount of P18,157.00.

2.00. The decision of the Supreme Court itself therefore raises new issues. As owner
of the bottles, should not Washington Distillery, Inc. be given possession of the
bottles? Would its use of the bottles violate the ‘trademark protection of the
registrant,’ La Tondeña Distillers, Inc. afforded by R.A. No. 623, as amended?

3.00. The ‘Motion for Reconsideration’ of the petitioner Washington Distillery, Inc. is
addressed to these new issues. They have not been previously addressed by the
parties. They could not have been previously passed upon. It could hardly be said
that ‘no substantial argument,’ not previously raised, is made in the ‘Motion for
Reconsideration’ to warrant a modification of the Court’s decision.

On May 21, 1997, the Court resolved to set for hearing the motion for
reconsideration on May 28, 1997 for its judicious disposition. Thereafter, the parties
as required by the Court filed their simultaneous memoranda “to expound and lay
particular emphasis on the provision of Section 5 of R.A. 623 which proscribes the
filing of an action against any person to whom registered manufacturer, bottler or
seller has transferred by way of sale, any of the containers.” The parties complied.

A reexamination of the arguments raised by petitioner in its Second Motion for

Reconsideration filed on February 13, 1997, in the hearing on May 28, 1997 and in
the subsequent memorandum filed thereafter, convinces us the merits of its
position.

To recall, La Tondeña Distillers, Inc. (La Tondeña, for short) filed before the Regional
Trial Court for the recovery, under its claim of ownership, of possession or replevin
against Distilleria Washington, Inc. or Washington Distillery, Inc. (Distilleria
Washington) of 18,157 empty “350 c.c. white flint bottles” bearing the blown-in
marks of “La Tondeña, Inc.” and “Ginebra San Miguel,” averring that Distilleria
Washington was using the bottles for its own “Gin Seven” products without the
consent of Distilleria Washington in violation of Republic Act 623.

The trial court in its decision dismissed the complaint, upholding Distilleria
Washington’s contention that a purchaser of liquor pays only a single price for the
liquor and the bottle and is not required to return the bottle at any time.

The Court of Appeals reversed the trial court’s decision, ruling that under Republic
Act 623, the use of marked bottles by any person other than the manufacturer,
bottler or seller, without the latter’s written consent, is unlawful. It emphasized that
the marks of La Tondeña’s ownership stamped or blown-in to the bottles are
sufficient notice to the public that the bottles are La Tondeña’s property; hence,
Distilleria Washington cannot be considered a purchaser in good faith.

While our decision of October 17, 1996 affirmed with modification the Court of
Appeals’ decision, we at least implicitly acknowledged that there was a valid
transfer of the bottles to Distilleria Washington, except that its possession of the
bottles without the written consent of La Tondeña gives rise to a prima facie
presumption of illegal use under R.A. 623.

In seeking reconsideration of the decision of this Court, petitioner advances, among

others, the following arguments:

(1) If, as the Court found in its decision of October 17, 1996, Distilleria Washington
had acquired ownership of the bottles, La Tondeña’s suit for replevin, where the sole
issue is possession, should be denied.

(2) Since the right of ownership over the bottles gives rise, according to the Court’s
own language, to its own elements of jus posidendi, jus utendi, jus fruendi, jus
disponendi, and jus abutendi, along with the applicable jus lex, to allow La Tondeña
to keep the bottles is to deny Distilleria Washington, the very attributes or elements
of its ownership.

(3) There is no showing—and it cannot be assumed—that if Distilleria Washington

would have possession of the bottles, it will exercise the other attributes of
ownership, along with the applicable jus lex, over the “marks of ownership stamped
or marked” on the bottles.
(4) The provision in Sec. 3 of Republic Act 623 to the effect that the use by any
person other than the registered manufacturer, bottler or seller without the written
permission of the latter of any such bottle, etc. shall give rise to a prima facie
presumption that such use or possession is unlawful, does not arise in the instant
case because the Court has itself found Section 5 of the same law
applicable.Additionally, petitioner argues with persuasion the following points in its
memorandum.

(5) It is absurd to hold the buyer such as Distilleria Washington, liable for the
possession and use of its own bottles without the written consent of La Tondeña who
is no longer the owner thereof and for which it has received payment in full.

(6) To hold the buyer liable under Sections 2 and 3 would grant La Tondeña the
extraordinary right not only of possession and use of the bottles which it has sold
and no longer owns, but also to sell said bottles ad infinitum, thus enriching itself
unjustly.

(7) It is manifestly unjust and unconscionable that millions of buyers of Ginebra San
Miguel, who pay not only for the gin but also for the bottles containing it should run
the risk of criminal prosecution by the mere fact of possession of the empty bottles
after consuming the liquor.

Distilleria Washington’s motion raises the novel issue that if, as we ruled in our
decision of October 17, 1996, petitioner became the owner over the bottles seized
from it by replevin, then it has the right to their possession and use as attributes of
ownership, unless their use violates the trademark or incorporeal rights accorded
private respondent by R.A. 623 which has not really been established in this case.
As pointed out in our decision,

“Parenthetically, petitioner is not here being charged with violation of Sec. 2 of R.A.
623 or the Trademark Law. The instant case is one for replevin (manual delivery)
where the claimant must be able to show convincingly that he is either the owner or
clearly entitled to the possession of the object sought to be recovered. Replevin is a
possessory action. The gist of which focuses on the right of possession that in turn,
is dependent on a legal basis that, not infrequently, looks to the ownership of the
object sought to be replevied.”

Since replevin as a possessory action is dependent upon ownership, it is relevant to

ask: Did La Tondeña Distillers, Inc. transfer ownership of its marked bottles or
containers when it sold its products in the market? Were the marked bottles or
containers part of the products sold to the public?

In our decision sought to be reconsidered, we categorically answered the question

in the affirmative in this wise:
R.A. No. 623 does not disallow the sale or transfer of ownership of the marked
bottles or containers. In fact, the contrary is implicit in the law thus:

SEC. 5. x x x.

SEC. 6. x x x

Scarcely disputed are certain and specific industry practices in the sale of gin. The
manufacturer sells the product in marked containers, through dealers, to the public
in supermarkets, grocery shops, retail stores and other sales outlets. The buyer
takes the item; he is neither required to return the bottle nor required to make a
deposit to assure its return to the seller. He could return the bottle and get a refund.
A number of bottles at times find their way to commercial users. It cannot be
gainsaid that ownership of the containers does pass on the consumer albeit subject
to the statutory limitations on the use of the registered containers and to the
trademark rights of the registrant. The statement in Section 5 of R.A. 623 to the
effect that the ‘sale of beverage contained the said containers shall not include the
sale of the containers unless specifically so provided’ is not a rule of proscription. It
is a rule of construction that, in keeping with the spirit and intent of the law,
establishes at best a presumption (of non-conveyance of the container) and which
by no means can be taken to be either interdictive or conclusive in character. Upon
the other hand, LTDI’s sales invoice, stipulating that the ‘sale does not include the
bottles with the blown-in marks of ownership of La Tondeña Distillers,’ cannot affect
those who are not privies thereto.

In plain terms, therefore, La Tondeña not only sold its gin products but also the
marked bottles or containers, as well. And when these products were transferred by
way of sale, then ownership over the bottles and all its attributes (jus utendi, jus
abutendi, jus fruendi, jus disponendi) passed to the buyer. It necessarily follows that
the transferee has the right to possession of the bottles unless he uses them in
violation of the original owner’s registered or incorporeal rights.

After practically saying that La Tondeña has surrendered ownership and

consequently, possession of the marked bottles or container, it is incongruous and,
certainly, it does not seem fair and just to still allow La Tondeña, citing the prima
facie presumption of illegal use under Sec. 3 of R.A. 623, to retain possession of the
seized bottles by simply requiring payment of just compensation to petitioner.

The pertinent provisions of R.A. 623 are as follows:

SEC. 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler, or seller (italics supplied) who has successfully registered the
marks of ownership in accordance with the provisions of the next preceding section,
to fill such bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators,
or other similar containers so marked or stamped, for the purpose of sale, or to sell,
dispose of, buy or traffic in, or wantonly destroy the same, whether filled or not to
use the same for drinking vessels or glasses or drain pipes, foundation pipers, for
any other purpose than that registered by the manufacturer, bottler or seller.

Any violation of this section shall be punished by a fine of not more than one
thousand pesos or imprisonment of not more than one year or both.

SEC. 3. The use by any person other than the registered manufacturer, bottler or
seller, without written permission of the latter (italics supplied) of any such bottle,
cask, barrel, keg, box, steel cylinders, tanks, flask, accumulators, or other similar
containers, or the possession thereof without written permission of the
manufacturer, by any junk dealer or dealer in casks, barrels, keg, boxes, steel
cylinders, tanks, flask, accumulators or other similar containers, the same being
duly marked or stamped and registered as herein provided, shall give rise to a
prima facie presumption that such use or possession is unlawful.

xxx

SEC. 5. No action shall be brought under this Act (italics supplied) against any
person to whom the registered manufacturer, bottler or seller, has transferred by
way of sale, (italics supplied) any of the containers herein referred to, but the sale of
the beverage contained in the said containers shall not include the sale of the
containers unless specifically so provided.

In resolving that petitioner is the owner of the bottles, this Court applied Section 5
of R.A. 623; and in withholding possession of the bottles from the petitioner and in
concluding that use or possession thereof without the written permission of the
registered owner would constitute prima facie presumption of illegal use, this Court
invoked Sections 2 and 3 of the same law.

A careful reading of Sections 2, 3 and 5 of R.A. 623 would lead to the conclusion
that they contemplate situations separate and distinct from each other. Section 2
prohibits any person from using, selling or otherwise disposing of registered
containers without the written consent of the registrant. Such rights belong
exclusively to the registrant. Under Section 3, mere possession of such registered
containers without the written consent of the registrant is prima facie presumed
unlawful.

It appears—and this is the critical point—that Sections 2 and 3 apply only when the
“filling” up of the bottle or the “use” of the bottle is “without the written permission”
of the “registered manufacturer, bottler, or seller,” who has registered the marks of
“ownership” of the bottles. It is thus implicit that Sections 2 and 3 apply only when
the “registered manufacturer, bottler, or seller” retain ownership of the bottles.

Upon the other hand, when the bottles have been “transferred by way of sale,”
Section 5 applies, thereby precluding the institution of any action “under this Act,”
meaning to say, any action under Sections 2 and 3.

The general rule on ownership, therefore, must apply and petitioner be allowed to
enjoy all the rights of an owner in regard the bottles in question, to wit: the jus
utendi or the right to receive from the thing what it produces; the jus abutendi or
the right to consume the thing by its use; the jus disponendi or the power of the
owner to alienate, encumber, transform and even destroy the thing owned; and the
jus vindicandi or the right to exclude from the possession of the thing owned any
other person to whom the owner has not transmitted such thing. What is proscribed
is the use of the bottles in infringement of another’s trademark or incorporeal
rights.

Since the Court has found that the bottles have been transferred by way of sale,
then La Tondeña has relinquished all its proprietary rights over the bottles in favor
of Distilleria Washington who has obtained them in due course. Now as owner, it can
exercise all attributes of ownership over the bottles. This is the import of the
decision that La Tondeña had transferred ownership over its marked bottles or
containers when it sold its gin products to the public. While others may argue that
Section 5 is applicable only to the immediate transferee of the marked bottles or
container, this matter is best discussed where the applicability of Sec. 5, R.A. 623 is
squarely raised. It must be recalled, however, that this is a case of replevin, not a
violation of the “trademark protection of the registrant” under R.A. 623 or of the
Trademark Law.

A query may be posed: Would use of the bottles constitute a violation of the
incorporeal rights of La Tondeña Distillers, Inc. over its “marks of ownership”
embossed on the bottles?

While apparently relevant, it would be improper and premature for this Court to rule
on the point because:

First, violation of the “marks of ownership” of La Tondeña Distillers, Inc., on the

bottles has not been put in issue, the parties did not have the opportunity to
ventilate their respective positions on the matter. Thus, a ruling would be violative
of due process.
Second, the question calls for a factual investigation which this Court has generally
not taken upon itself to undertake because it is not a trier of facts; and

Third, disregarding the above, the facts before this Court do not provide a sufficient
basis for a fair and intelligent resolution of the question.

Moreover, our decision added that “the Court sees no other insistence to keep the
bottles, except for such continued use.” This, to our mind, is rather speculative at
this point; something which was never touched upon in the proceedings below.

We cannot also be oblivious of the fact that if La Tondeña’s thesis that every
possession of the bottles without the requisite written consent is illegal, thousands
upon thousands of buyers of Ginebra San Miguel would be exposed to criminal
prosecution by the mere fact of possession of the empty bottles after consuming
the content.

One last point. It may not be amiss to state that La Tondeña is a big and established
distillery which already has captured a big share of the gin market, estimated to be
90%. Distilleria Washington, on the other hand, together with other small distillers-
around 40 in number—concedes that it cannot fight this giant but only asks a share
of the market. It cannot afford to manufacture its own bottles and just have to rely
on recycled bottles to sell its products. To disallow the use of these recycled
products would necessarily deprive it a share of the market which La Tondeña seeks
to monopolize.

We recognize the role of large industry in the growth of our nascent economy.
However, small industries likewise play a vital role in economic growth, playing a
significant part in the success of such tiger economies as Korea, Taiwan and
Thailand. Industries, big and small, should adopt symbiotic relationship, not the
animosity of Goliath and David. Our holding today merely recognizes that in the
country’s march toward economic development and independence, it is essential
that a balance protecting small industries and large scale businesses be maintained.

IN VIEW OF THE FOREGOING, the Court RESOLVED to RECONSIDER its Decision

promulgated on October 17, 1996 and render another judgment REVERSING in toto
the Decision of the Court of Appeals promulgated on January 11, 1995 and its
Resolution of June 23, 1995. The decision of the Regional Trial Court of December 3,
1991 is REINSTATED.

SO ORDERED.

Bellosillo and Hermosisima, Jr., JJ., concur.

Davide, Jr., J., No part, as I was not a Member of the Division when this case was
deliberated upon.
 Vitug, J., Pls. see Dissenting Opinion (upholding the Court’s decision of 17 Oct.
’96).

G.R. No. 154491. November 14, 2008.*

COCA-COLA BOTTLERS, PHILS., INC. (CCBPI), Naga Plant, petitioner, vs.

QUINTIN J. GOMEZ, a.k.a. “KIT” GOMEZ and DANILO E. GALICIA, a.k.a.
“DANNY GALICIA,” respondents.
Searches and Seizures; Search Warrants; Probable Cause; A search
warrant may be issued only if there is probable cause in connection with a
specific offense alleged in an application based on the personal knowledge
of the applicant and his or her witnesses, a substantive requirement in the
issuance of a search warrant.—The issuance of a search warrant against a
personal property is governed by Rule 126 of the Revised Rules of Court whose
relevant sections state: x x x To paraphrase this rule, a search warrant may be
issued only if there is probable cause in connection with a specific offense alleged in
an application based on the personal knowledge of the applicant and his or her
witnesses. This is the substantive requirement in the issuance of a search warrant.
Procedurally, the determination of probable cause is a personal task of the judge
before whom the application for search warrant is filed, as he has to examine under
oath or affirmation the applicant and his or her witnesses in the form of “searching
questions and answers” in writing and under oath. The warrant, if issued, must
particularly describe the place to be searched and the things to be seized.

Same; Same; Same; Words and Phrases; Probable cause, as a condition for
the issuance of a search warrant, is such reasons supported by facts and
circumstances as will warrant a cautious man in the belief that his action
and the means taken in prosecuting it are legally just and proper.—
Jurisprudence teaches us that probable cause, as a condition for the issuance of a
search warrant, is such reasons supported by facts and circumstances as will
warrant a cautious man in the belief that his action and the means taken in
prosecuting it are legally just and proper. Probable cause requires facts and
circumstances that would lead a reasonably prudent man to believe that an offense
has been committed and the objects sought in connection with that offense are in
the place to be searched. Implicit in this statement is the recognition that an
underlying offense must, in the first place, exist. In other words, the acts alleged,
taken together, must constitute an offense and that these acts are imputable to an
offender in relation with whom a search warrant is applied for.

Unfair Competition; Intellectual Property Code (IP Code, Republic Act No.
8293); Words and Phrases; “Unfair competition,” previously defined in
Philippine jurisprudence in relation with R.A. No. 166 and Articles 188 and
189 of the Revised Penal Code, is now covered by Section 168 of the
Intellectual Property Code as this Code has expressly repealed R.A. No.
165 and R.A. No. 166, and Articles 188 and 189 of the Revised Penal Code;
The law does not cover every unfair act committed in the course of
business—it covers only acts characterized by “deception or any other
means contrary to good faith” in the passing off of goods and services as
those of another who has established goodwill in relation with these
goods or services, or any other act calculated to produce the same result.
—“Unfair competition,” previously defined in Philippine jurisprudence in relation
with R.A. No. 166 and Articles 188 and 189 of the Revised Penal Code, is now
covered by Section 168 of the IP Code as this Code has expressly repealed R.A. No.
165 and R.A. No. 166, and Articles 188 and 189 of the Revised Penal Code. Articles
168.1 and 168.2, as quoted above, provide the concept and general rule on the
definition of unfair competition. The law does not thereby cover every unfair act
committed in the course of business; it covers only acts characterized by “deception
or any other means contrary to good faith” in the passing off of goods and services
as those of another who has established goodwill in relation with these goods or
services, or any other act calculated to produce the same result.

Same; Same; Same; Unfair competition has been defined as the passing
off (or palming off) or attempting to pass off upon the public the goods or
business of one person as the goods or business of another with the end
and probable effect of deceiving the public; Under Section 168 of the
Intellectual Property Code, deception, passing off and fraud upon the
public are still the key elements that must be present for unfair
competition to exist.—What unfair competition is, is further particularized under
Section 168.3 when it provides specifics of what unfair competition is “without in
any way limiting the scope of protection against unfair competition.” Part of these
particulars is provided under Section 168.3(c) which provides the general “catch-all”
phrase that the petitioner cites. Under this phrase, a person shall be guilty of unfair
competition “who shall commit any other act contrary to good faith of a nature
calculated to discredit the goods, business or services of another.” From
jurisprudence, unfair competition has been defined as the passing off (or palming
off) or attempting to pass off upon the public the goods or business of one person
as the goods or business of another with the end and probable effect of deceiving
the public. It formulated the “true test” of unfair competition: whether the acts of
defendant are such as are calculated to deceive the ordinary buyer making his
purchases under the ordinary conditions which prevail in the particular trade to
which the controversy relates. One of the essential requisites in an action to restrain
unfair competition is proof of fraud; the intent to deceive must be shown before the
right to recover can exist. The advent of the IP Code has not significantly changed
these rulings as they are fully in accord with what Section 168 of the Code in its
entirety provides. Deception, passing off and fraud upon the public are still the key
elements that must be present for unfair competition to exist.

Same; Same; Hoarding; The critical question is not the intrinsic unfairness
of the act of hoarding—what is critical for purposes of Section 168.3 (c) is
to determine if the hoarding, as charged, “is of a nature calculated to
discredit the goods, business or services” of another.—The act alleged to
violate the petitioner’s rights under Section 168.3 (c) is hoarding which we gather to
be the collection of the petitioner’s empty bottles so that they can be withdrawn
from circulation and thus impede the circulation of the petitioner’s bottled products.
This, according to the petitioner, is an act contrary to good faith—a conclusion that,
if true, is indeed an unfair act on the part of the respondents. The critical question,
however, is not the intrinsic unfairness of the act of hoarding; what is critical for
purposes of Section 168.3 (c) is to determine if the hoarding, as charged, “is of a
nature calculated to discredit the goods, business or services” of the petitioner. We
hold that it is not. Hoarding as defined by the petitioner is not even an act within
the contemplation of the IP Code.

Same; Same; Same; Given the Intellectual Property Code’s specific focus,
a first test that should be made when a question arises on whether a
matter is covered by the Code is to ask if it refers to an intellectual
property right as defined in the Code, and a second test, if a disputed
matter does not expressly refer to an intellectual property right as defined
above, is whether it falls under the general “unfair competition” concept
and definition under Sections 168.1 and 168.2 of the Code.—Given the IP
Code’s specific focus, a first test that should be made when a question arises on
whether a matter is covered by the Code is to ask if it refers to an intellectual
property as defined in the Code. If it does not, then coverage by the Code may be
negated. A second test, if a disputed matter does not expressly refer to an
intellectual property right as defined above, is whether it falls under the general
“unfair competition” concept and definition under Sections 168.1 and 168.2 of the
Code. The question then is whether there is “deception” or any other similar act in
“passing off” of goods or services to be those of another who enjoys established
goodwill.

Same; Same; Same; Statutory Construction; Noscitur a Sociis; Words and

Phrases; Under the principle of “noscitur a sociis,” when a particular word
or phrase is ambiguous in itself or is equally susceptible of various
meanings, its correct construction may be made clear and specific by
considering the company of words in which it is found or with which it is
associated.—Separately from these tests is the application of the principles of
statutory construction giving particular attention, not so much to the focus of the IP
Code generally, but to the terms of Section 168 in particular. Under the principle of
“noscitur a sociis,” when a particular word or phrase is ambiguous in itself or is
equally susceptible of various meanings, its correct construction may be made clear
and specific by considering the company of words in which it is found or with which
it is associated.

Same; Same; Same; “Hoarding” of a competitor’s products does not fall

within the coverage of the Intellectual Property Code and of Section 168 in
particular—it does not relate to any patent, trademark, trade name or
service mark that the respondents have invaded, intruded into or used
without proper authority from the petitioner, nor are the respondents
alleged to have fraudulently passed off their products or services as those
of the petitioner.—We conclude that the “hoarding”—as defined and charged by
the petitioner—does not fall within the coverage of the IP Code and of Section 168
in particular. It does not relate to any patent, trademark, trade name or service
mark that the respondents have invaded, intruded into or used without proper
authority from the petitioner. Nor are the respondents alleged to be fraudulently
“passing off” their products or services as those of the petitioner. The respondents
are not also alleged to be undertaking any representation or misrepresentation that
would confuse or tend to confuse the goods of the petitioner with those of the
respondents, or vice versa. What in fact the petitioner alleges is an act foreign to
the Code, to the concepts it embodies and to the acts it regulates; as alleged,
hoarding inflicts unfairness by seeking to limit the opposition’s sales by depriving it
of the bottles it can use for these sales.

Same; Same; Same; R.A. No. 623; Hoarding for purposes of destruction is
closer to what another law—R.A. No. 623—covers.—In this light, hoarding for
purposes of destruction is closer to what another law—R.A. No. 623—covers, to wit:
SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling or
selling of soda water, mineral or aerated waters, cider, milk, cream, or other lawful
beverages in bottles, boxes, casks, kegs, or barrels, and other similar containers,
with their names or the names of their principals or products, or other marks of
ownership stamped or marked thereon, may register with the Philippine Patent
Office a description of the names or are used by them, under the same conditions,
rules, and regulations, made applicable by law or regulation to the issuance of
trademarks. SECTION 2. It shall be unlawful for any person, without the written
consent of the manufacturer, bottler or seller who has successfully registered the
marks of ownership in accordance with the provisions of the next preceding section,
to fill such bottles, boxes, kegs, barrels, or other similar containers so marked or
stamped, for the purpose of sale, or to sell, dispose of, buy, or traffic in, or wantonly
destroy the same, whether filled or not, or to use the same for drinking vessels or
glasses or for any other purpose than that registered by the manufacturer, bottler
or seller. Any violation of this section shall be punished by a fine or not more than
one hundred pesos or imprisonment of not more than thirty days or both.

Same; Same; Same; Same; What is certain is that the Intellectual Property
Code has not expressly repealed R.A. No. 623.—As its coverage is defined
under Section 1, the Act appears to be a measure that may overlap or be affected
by the provisions of Part II of the IP Code on “The Law on Trademarks, Service Marks
and Trade Names.” What is certain is that the IP Code has not expressly repealed
this Act. The Act appears, too, to have specific reference to a special type of
registrants—the manufacturers, bottlers or sellers of soda water, mineral or aerated
waters, cider, milk, cream, or other lawful beverages in bottles, boxes, casks, kegs,
or barrels, and other similar containers—who are given special protection with
respect to the containers they use. In this sense, it is in fact a law of specific
coverage and application, compared with the general terms and application of the
IP Code. Thus, under its Section 2, it speaks specifically of unlawful use of
containers and even of the unlawfulness of their wanton destruction—a matter that
escapes the IP Code’s generalities unless linked with the concepts of “deception”
and “passing off” as discussed above.

Searches and Seizures; Search Warrants; Where there is no crime to speak

of, a search warrant does not even begin to fulfill the stringent
requirements for its issuance and is defective on its face.—Where, as in this
case, the imputed acts do not violate the cited offense, the ruling of this Court
penned by Mr. Justice Bellosillo is particularly instructive: In the issuance of search
warrants, the Rules of Court requires a finding of probable cause in connection with
one specific offense to be determined personally by the judge after examination of
the complainant and the witnesses he may produce, and particularly describing the
place to be searched and the things to be seized. Hence, since there is no crime to
speak of, the search warrant does not even begin to fulfill these stringent
requirements and is therefore defective on its face. The nullity of the warrant
renders moot and academic the other issues raised in petitioners’ Motion to Quash
and Motion for Reconsideration. Since the assailed search warrant is null and void,
all property seized by virtue thereof should be returned to petitioners in accordance
with established jurisprudence.

PETITION for review on certiorari of a decision of the Regional Trial Court of Naga
City, Br. 21.

The facts are stated in the opinion of the Court.

Rosales & Associates Law Office for respondents.

BRION, J.:

Is the hoarding of a competitor’s product containers punishable as unfair

competition under the Intellectual Property Code (IP Code, Republic Act No. 8293)
that would entitle the aggrieved party to a search warrant against the hoarder? This
is the issue we grapple with in this petition for review on certiorari involving two
rival multinational softdrink giants; petitioner Coca-Cola Bottlers, Phils., Inc. (Coca-
Cola) accuses Pepsi Cola Products Phils., Inc. (Pepsi), represented by the
respondents, of hoarding empty Coke bottles in bad faith to discredit its business
and to sabotage its operation in Bicolandia.

Background

The facts, as culled from the records, are summarized below.

On July 2, 2001, Coca-Cola applied for a search warrant against Pepsi for hoarding
Coke empty bottles in Pepsi’s yard in Concepcion Grande, Naga City, an act
allegedly penalized as unfair competition under the IP Code. Coca-Cola claimed that
the bottles must be confiscated to preclude their illegal use, destruction or
concealment by the respondents.1 In support of the application, Coca-Cola
submitted the sworn statements of three witnesses: Naga plant representative Arnel
John Ponce said he was informed that one of their plant security guards had gained
access into the Pepsi compound and had seen empty Coke bottles; acting plant
security officer Ylano A. Regaspi said he investigated reports that Pepsi was
hoarding large quantities of Coke bottles by requesting their security guard to enter
the Pepsi plant and he was informed by the security guard that Pepsi hoarded
several Coke bottles; security guard Edwin Lirio stated that he entered Pepsi’s yard
on July 2, 2001 at 4 p.m. and saw empty Coke bottles inside Pepsi shells or cases.

Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo of Naga City, after
taking the joint deposition of the witnesses, issued Search Warrant No. 2001-013 to
seize 2,500 Litro and 3,000 eight and 12 ounces empty Coke bottles at Pepsi’s Naga
yard for violation of Section 168.3 (c) of the IP Code.4 The local police seized and
brought to the MTC’s custody 2,464 Litro and 4,036 eight and 12 ounces empty
Coke bottles, 205 Pepsi shells for Litro, and 168 Pepsi shells for smaller (eight and
12 ounces) empty Coke bottles, and later filed with the Office of the City Prosecutor
of Naga a complaint against two Pepsi officers for violation of Section 168.3 (c) in
relation to Section 170 of the IP Code.5 The named respondents, also the
respondents in this petition, were Pepsi regional sales manager Danilo E. Galicia
(Galicia) and its Naga general manager Quintin J. Gomez, Jr. (Gomez).

In their counter-affidavits, Galicia and Gomez claimed that the bottles came from
various Pepsi retailers and wholesalers who included them in their return to make
up for shortages of empty Pepsi bottles; they had no way of ascertaining
beforehand the return of empty Coke bottles as they simply received what had been
delivered; the presence of the bottles in their yard was not intentional nor
deliberate; Ponce and Regaspi’s statements are hearsay as they had no personal
knowledge of the alleged crime; there is no mention in the IP Code of the crime of
possession of empty bottles; and that the ambiguity of the law, which has a penal
nature, must be construed strictly against the State and liberally in their favor. Pepsi
security guards Eduardo E. Miral and Rene Acebuche executed a joint affidavit
stating that per their logbook, Lirio did not visit or enter the plant premises in the
afternoon of July 2, 2001.

The respondents also filed motions for the return of their shells and to quash the
search warrant. They contended that no probable cause existed to justify the
issuance of the search warrant; the facts charged do not constitute an offense; and
their Naga plant was in urgent need of the shells.
Coca-Cola opposed the motions as the shells were part of the evidence of the crime,
arguing that Pepsi used the shells in hoarding the bottles. It insisted that the
issuance of warrant was based on probable cause for unfair competition under the
IP Code, and that the respondents violated R.A. 623, the law regulating the use of
stamped or marked bottles, boxes, and other similar containers.

The MTC Rulings

On September 19, 2001, the MTC issued the first assailed order6 denying the twin
motions. It explained there was an exhaustive examination of the applicant and its
witnesses through searching questions and that the Pepsi shells are prima facie
evidence that the bottles were placed there by the respondents.

In their motion for reconsideration, the respondents argued for the quashal of the
warrant as the MTC did not conduct a probing and exhaustive examination; the
applicant and its witnesses had no personal knowledge of facts surrounding the
hoarding; the court failed to order the return of the “borrowed” shells; there was no
crime involved; the warrant was issued based on hearsay evidence; and the seizure
of the shells was illegal because they were not included in the warrant.

On November 14, 2001, the MTC denied the motion for reconsideration in the
second assailed order,7 explaining that the issue of whether there was unfair
competition can only be resolved during trial.

The respondents responded by filing a petition for certiorari under Rule 65 of the
Revised Rules of Court before the Regional Trial Court (RTC) of Naga City on the
ground that the subject search warrant was issued without probable cause and that
the empty shells were neither mentioned in the warrant nor the objects of the
perceived crime.

The RTC Rulings

On May 8, 2002, the RTC voided the warrant for lack of probable cause and the non-
commission of the crime of unfair competition, even as it implied that other laws
may have been violated by the respondents. The RTC, though, found no grave
abuse of discretion on the part of the issuing MTC judge.8 Thus,

“Accordingly, as prayed for, Search Warrant No. 2001-02 issued by the Honorable
Judge Julian C. Ocampo III on July 2, 2001 is ANNULLED and SET ASIDE. The Orders
issued by the Pairing Judge of Br. 1, MTCC of Naga City dated September 19, 2001
and November 14, 2001 are also declared VOID and SET ASIDE. The City Prosecutor
of Naga City and SPO1 Ernesto Paredes are directed to return to the Petitioner the
properties seized by virtue of Search Warrant No. 2001-02. No costs.
SO ORDERED.”9

In a motion for reconsideration, which the RTC denied on July 12, 2002, the
petitioner stressed that the decision of the RTC was contradictory because it
absolved Judge Ocampo of grave abuse of discretion in issuing the search warrant,
but at the same time nullified the issued warrant. The MTC should have dismissed
the petition when it found out that Judge Ocampo did not commit any grave abuse
of discretion.

Bypassing the Court of Appeals, the petitioner asks us through this petition for
review on certiorari under Rule 45 of the Rules of Court to reverse the decision of
the RTC. Essentially, the petition raises questions against the RTC’s nullification of
the warrant when it found no grave abuse of discretion committed by the issuing
judge.

The Petition and the Parties’ Positions

In its petition, the petitioner insists the RTC should have dismissed the respondents’
petition for certiorari because it found no grave abuse of discretion by the MTC in
issuing the search warrant. The petitioner further argues that the IP Code was
enacted into law to remedy various forms of unfair competition accompanying
globalization as well as to replace the inutile provision of unfair competition under
Article 189 of the Revised Penal Code. Section 168.3(c) of the IP Code does not limit
the scope of protection on the particular acts enumerated as it expands the
meaning of unfair competition to include “other acts contrary to good faith of a
nature calculated to discredit the goods, business or services of another.” The
inherent element of unfair competition is fraud or deceit, and that hoarding of large
quantities of a competitor’s empty bottles is necessarily characterized by bad faith.
It claims that its Bicol bottling operation was prejudiced by the respondents’
hoarding and destruction of its empty bottles.

The petitioner also argues that the quashal of the search warrant was improper
because it complied with all the essential requisites of a valid warrant. The empty
bottles were concealed in Pepsi shells to prevent discovery while they were
systematically being destroyed to hamper the petitioner’s bottling operation and to
undermine the capability of its bottling operations in Bicol.

The respondents counter-argue that although Judge Ocampo conducted his own
examination, he gravely erred and abused his discretion when he ignored the rule
on the need of sufficient evidence to establish probable cause; satisfactory and
convincing evidence is essential to hold them guilty of unfair competition; the
hoarding of empty Coke bottles did not cause actual or probable deception and
confusion on the part of the general public; the alleged criminal acts do not show
conduct aimed at deceiving the public; there was no attempt to use the empty
bottles or pass them off as the respondents’ goods.

The respondents also argue that the IP Code does not criminalize bottle hoarding, as
the acts penalized must always involve fraud and deceit. The hoarding does not
make them liable for unfair competition as there was no deception or fraud on the
end-users.

The Issue

Based on the parties’ positions, the basic issue submitted to us for resolution is
whether the Naga MTC was correct in issuing Search Warrant No. 2001-01 for the
seizure of the empty Coke bottles from Pepsi’s yard for probable violation of Section
168.3 (c) of the IP Code. This basic issue involves two sub-issues, namely, the
substantive issue of whether the application for search warrant effectively charged
an offense, i.e., a violation of Section 168.3 (c) of the IP Code; and the procedural
issue of whether the MTC observed the procedures required by the Rules of Court in
the issuance of search warrants.

Our Ruling

We resolve to deny the petition for lack of merit.

We clarify at the outset that while we agree with the RTC decision, our agreement is
more in the result than in the reasons that supported it. The decision is correct in
nullifying the search warrant because it was issued on an invalid substantive basis—
the acts imputed on the respondents do not violate Section 168.3 (c) of the IP Code.
For this reason, we deny the present petition.

The issuance of a search warrant10 against a personal property11 is governed by

Rule 126 of the Revised Rules of Court whose relevant sections state:

“Section 4. Requisites for issuing search warrant.—A search warrant shall not issue
except upon probable cause in connection with one specific offense to be
determined personally by the judge after examination under oath or affirmation of
the complainant and the witnesses he may produce, and particularly describing the
place to be searched and the things to be seized which may be anywhere in the
Philippines.

Section 5. Examination of complainant; record.—The judge must, before issuing

the warrant, personally examine in the form of searching questions and answers, in
writing and under oath, the complainant and the witnesses he may produce on facts
personally known to them and attach to the record their sworn statements together
with the affidavits submitted.

Section 6. Issuance and form of search warrant.—If the judge is satisfied of the

existence of facts upon which the application is based or that there is probable
cause to believe that they exist, he shall issue the warrant, which must be
substantially in the form prescribed by these Rules.” [Emphasis supplied]

To paraphrase this rule, a search warrant may be issued only if there is probable
cause in connection with a specific offense alleged in an application based on the
personal knowledge of the applicant and his or her witnesses. This is the
substantive requirement in the issuance of a search warrant. Procedurally, the
determination of probable cause is a personal task of the judge before whom the
application for search warrant is filed, as he has to examine under oath or
affirmation the applicant and his or her witnesses in the form of “searching
questions and answers” in writing and under oath. The warrant, if issued, must
particularly describe the place to be searched and the things to be seized.

We paraphrase these requirements to stress that they have substantive and

procedural aspects. Apparently, the RTC recognized this dual nature of the
requirements and, hence, treated them separately; it approved of the way the MTC
handled the procedural aspects of the issuance of the search warrant but found its
action on the substantive aspect wanting. It therefore resolved to nullify the
warrant, without however expressly declaring that the MTC gravely abused its
discretion when it issued the warrant applied for. The RTC’s error, however, is in the
form rather than the substance of the decision as the nullification of the issued
warrant for the reason the RTC gave was equivalent to the declaration that grave
abuse of discretion was committed. In fact, we so rule as the discussions below will
show.

Jurisprudence teaches us that probable cause, as a condition for the issuance of a

search warrant, is such reasons supported by facts and circumstances as will
warrant a cautious man in the belief that his action and the means taken in
prosecuting it are legally just and proper. Probable cause requires facts and
circumstances that would lead a reasonably prudent man to believe that an offense
has been committed and the objects sought in connection with that offense are in
the place to be searched.12 Implicit in this statement is the recognition that an
underlying offense must, in the first place, exist. In other words, the acts alleged,
taken together, must constitute an offense and that these acts are imputable to an
offender in relation with whom a search warrant is applied for.

In the context of the present case, the question is whether the act charged—alleged
to be hoarding of empty Coke bottles—constitutes an offense under Section 168.3
(c) of the IP Code. Section 168 in its entirety states:
“SECTION 168. Unfair Competition, Rights, Regulation and Remedies.—

168.1. 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 registered mark 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.

168.2. Any person who shall employ deception or any other means contrary to
good faith by which he shall pass off the goods manufactured by him or in which he
deals, or his business, or services for those of the one having established such
goodwill, or who shall commit any acts calculated to produce said result, shall be
guilty of unfair competition, and shall be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection
against unfair competition, the following shall be deemed guilty of unfair
competition:

(a) Any person, who is selling his goods and gives them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in
the wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
influence purchasers to believe that the goods offered are those of a manufacturer
or dealer, other than the actual manufacturer or dealer, or who otherwise clothes
the goods with such appearance as shall deceive the public and defraud another of
his legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of
another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to discredit
the goods, business or services of another.

168.4. The remedies provided by Sections 156, 157 and 161 shall apply mutatis
mutandis. (Sec. 29, R.A. No. 166a)
The petitioner theorizes that the above section does not limit the scope of
protection on the particular acts enumerated as it expands the meaning of unfair
competition to include “other acts contrary to good faith of a nature calculated to
discredit the goods, business or services of another.” Allegedly, the respondents’
hoarding of Coca Cola empty bottles is one such act.

We do not agree with the petitioner’s expansive interpretation of Section 168.3 (c).

“Unfair competition,” previously defined in Philippine jurisprudence in relation with

R.A. No. 166 and Articles 188 and 189 of the Revised Penal Code, is now covered by
Section 168 of the IP Code as this Code has expressly repealed R.A. No. 165 and
R.A. No. 166, and Articles 188 and 189 of the Revised Penal Code.

Articles 168.1 and 168.2, as quoted above, provide the concept and general rule on
the definition of unfair competition. The law does not thereby cover every unfair act
committed in the course of business; it covers only acts characterized by “deception
or any other means contrary to good faith” in the passing off of goods and services
as those of another who has established goodwill in relation with these goods or
services, or any other act calculated to produce the same result.

What unfair competition is, is further particularized under Section 168.3 when it
provides specifics of what unfair competition is “without in any way limiting the
scope of protection against unfair competition.” Part of these particulars is provided
under Section 168.3(c) which provides the general “catch-all” phrase that the
petitioner cites. Under this phrase, a person shall be guilty of unfair competition
“who shall commit any other act contrary to good faith of a nature calculated to
discredit the goods, business or services of another.”

From jurisprudence, unfair competition has been defined as the passing off (or
palming off) or attempting to pass off upon the public the goods or business of one
person as the goods or business of another with the end and probable effect of
deceiving the public. It formulated the “true test” of unfair competition: whether the
acts of defendant are such as are calculated to deceive the ordinary buyer making
his purchases under the ordinary conditions which prevail in the particular trade to
which the controversy relates. One of the essential requisites in an action to restrain
unfair competition is proof of fraud; the intent to deceive must be shown before the
right to recover can exist. The advent of the IP Code has not significantly changed
these rulings as they are fully in accord with what Section 168 of the Code in its
entirety provides. Deception, passing off and fraud upon the public are still the key
elements that must be present for unfair competition to exist.

The act alleged to violate the petitioner’s rights under Section 168.3 (c) is hoarding
which we gather to be the collection of the petitioner’s empty bottles so that they
can be withdrawn from circulation and thus impede the circulation of the
petitioner’s bottled products. This, according to the petitioner, is an act contrary to
good faith—a conclusion that, if true, is indeed an unfair act on the part of the
respondents. The critical question, however, is not the intrinsic unfairness of the act
of hoarding; what is critical for purposes of Section 168.3 (c) is to determine if the
hoarding, as charged, “is of a nature calculated to discredit the goods, business or
services” of the petitioner.

We hold that it is not. Hoarding as defined by the petitioner is not even an act within
the contemplation of the IP Code.

The petitioner’s cited basis is a provision of the IP Code, a set of rules that refer to a
very specific subject—intellectual property. Aside from the IP Code’s actual
substantive contents (which relate specifically to patents, licensing, trademarks,
trade names, service marks, copyrights, and the protection and infringement of the
intellectual properties that these protective measures embody), the coverage and
intent of the Code is expressly reflected in its “Declaration of State Policy” which
states:

“Section 2. Declaration of State Policy.—The State recognizes that an effective

intellectual and industrial property system is vital to the development of domestic
and creative activity, facilitates transfer of technology, attracts foreign investments,
and ensures market access for our products. It shall protect and secure the
exclusive rights of scientists, inventors, artists and other gifted citizens to their
intellectual property and creations, particularly when beneficial to the people, for
such periods as provided in this Act.

The use of intellectual property bears a social function. To this end, the State shall
promote the diffusion of knowledge and information for the promotion of national
development and progress and the common good.

It is also the policy of the State to streamline administrative procedures of

registering patents, trademarks and copyright, to liberalize the registration on the
transfer of technology, and to enhance the enforcement of intellectual property
rights in the Philippines.” (n)

“Intellectual property rights” have furthermore been defined under Section 4 of the
Code to consist of: a) Copyright and Related Rights; b) Trademarks and Service
Marks; c) Geographic Indications; d) Industrial Designs; e) Patents; f) Layout-
Designs (Topographies) of Integrated Circuits; and g) Protection of Undisclosed
Information.

Given the IP Code’s specific focus, a first test that should be made when a question
arises on whether a matter is covered by the Code is to ask if it refers to an
intellectual property as defined in the Code. If it does not, then coverage by the
Code may be negated.

A second test, if a disputed matter does not expressly refer to an intellectual

property right as defined above, is whether it falls under the general “unfair
competition” concept and definition under Sections 168.1 and 168.2 of the Code.
The question then is whether there is “deception” or any other similar act in
“passing off” of goods or services to be those of another who enjoys established
goodwill.

Separately from these tests is the application of the principles of statutory

construction giving particular attention, not so much to the focus of the IP Code
generally, but to the terms of Section 168 in particular. Under the principle of
“noscitur a sociis,” when a particular word or phrase is ambiguous in itself or is
equally susceptible of various meanings, its correct construction may be made clear
and specific by considering the company of words in which it is found or with which
it is associated.

As basis for this interpretative analysis, we note that Section 168.1 speaks of a
person who has earned goodwill with respect to his goods and services and who is
entitled to protection under the Code, with or without a registered mark. Section
168.2, as previously discussed, refers to the general definition of unfair competition.
Section 168.3, on the other hand, refers to the specific instances of unfair
competition, with Section 168.1 referring to the sale of goods given the appearance
of the goods of another; Section 168.2, to the inducement of belief that his or her
goods or services are that of another who has earned goodwill; while the disputed
Section 168.3 being a “catch all” clause whose coverage the parties now dispute.

Under all the above approaches, we conclude that the “hoarding”—as defined and
charged by the petitioner—does not fall within the coverage of the IP Code and of
Section 168 in particular. It does not relate to any patent, trademark, trade name or
service mark that the respondents have invaded, intruded into or used without
proper authority from the petitioner. Nor are the respondents alleged to be
fraudulently “passing off” their products or services as those of the petitioner. The
respondents are not also alleged to be undertaking any representation or
misrepresentation that would confuse or tend to confuse the goods of the petitioner
with those of the respondents, or vice versa. What in fact the petitioner alleges is an
act foreign to the Code, to the concepts it embodies and to the acts it regulates; as
alleged, hoarding inflicts unfairness by seeking to limit the opposition’s sales by
depriving it of the bottles it can use for these sales.

In this light, hoarding for purposes of destruction is closer to what another law—R.A.
No. 623—covers, to wit:

“SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling

or selling of soda water, mineral or aerated waters, cider, milk, cream, or other
lawful beverages in bottles, boxes, casks, kegs, or barrels, and other similar
containers, with their names or the names of their principals or products, or other
marks of ownership stamped or marked thereon, may register with the Philippine
Patent Office a description of the names or are used by them, under the same
conditions, rules, and regulations, made applicable by law or regulation to the
issuance of trademarks.

SECTION 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler or seller who has successfully registered the marks of
ownership in accordance with the provisions of the next preceding section, to fill
such bottles, boxes, kegs, barrels, or other similar containers so marked or stamped,
for the purpose of sale, or to sell, dispose of, buy, or traffic in, or wantonly destroy
the same, whether filled or not, or to use the same for drinking vessels or glasses or
for any other purpose than that registered by the manufacturer, bottler or seller.
Any violation of this section shall be punished by a fine or not more than one
hundred pesos or imprisonment of not more than thirty days or both.”

As its coverage is defined under Section 1, the Act appears to be a measure that
may overlap or be affected by the provisions of Part II of the IP Code on “The Law on
Trademarks, Service Marks and Trade Names.” What is certain is that the IP Code
has not expressly repealed this Act. The Act appears, too, to have specific reference
to a special type of registrants—the manufacturers, bottlers or sellers of soda water,
mineral or aerated waters, cider, milk, cream, or other lawful beverages in bottles,
boxes, casks, kegs, or barrels, and other similar containers—who are given special
protection with respect to the containers they use. In this sense, it is in fact a law of
specific coverage and application, compared with the general terms and application
of the IP Code. Thus, under its Section 2, it speaks specifically of unlawful use of
containers and even of the unlawfulness of their wanton destruction—a matter that
escapes the IP Code’s generalities unless linked with the concepts of “deception”
and “passing off” as discussed above.

Unfortunately, the Act is not the law in issue in the present case and one that the
parties did not consider at all in the search warrant application. The petitioner in
fact could not have cited it in its search warrant application since the “one specific
offense” that the law allows and which the petitioner used was Section 168.3 (c). If
it serves any purpose at all in our discussions, it is to show that the underlying
factual situation of the present case is in fact covered by another law, not by the IP
Code that the petitioner cites. Viewed in this light, the lack of probable cause to
support the disputed search warrant at once becomes apparent.

Where, as in this case, the imputed acts do not violate the cited offense, the ruling
of this Court penned by Mr. Justice Bellosillo is particularly instructive:

“In the issuance of search warrants, the Rules of Court requires a finding of probable
cause in connection with one specific offense to be determined personally by the
judge after examination of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the things to be seized. Hence,
since there is no crime to speak of, the search warrant does not even begin to fulfill
these stringent requirements and is therefore defective on its face. The nullity of the
warrant renders moot and academic the other issues raised in petitioners’ Motion to
Quash and Motion for Reconsideration. Since the assailed search warrant is null and
void, all property seized by virtue thereof should be returned to petitioners in
accordance with established jurisprudence.”

Based on the foregoing, we conclude that the RTC correctly ruled that the
petitioner’s search warrant should properly be quashed for the petitioner’s failure to
show that the acts imputed to the respondents do not violate the cited offense.
There could not have been any probable cause to support the issuance of a search
warrant because no crime in the first place was effectively charged. This conclusion
renders unnecessary any further discussion on whether the search warrant
application properly alleged that the imputed act of holding Coke empties was in
fact a “hoarding” in bad faith aimed to prejudice the petitioner’s operations, or
whether the MTC duly complied with the procedural requirements for the issuance
of a search warrant under Rule 126 of the Rules of Court.

WHEREFORE, we hereby DENY the petition for lack of merit. Accordingly, we confirm
that Search Warrant No. 2001-01, issued by the Municipal Trial Court, Branch 1,
Naga City, is NULL and VOID. Costs against the petitioner.

Del Monte Corporation vs. Court of Appeals

G.R. No. 78325. January 25, 1990.*

DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION,

petitioners, vs. COURT OF APPEALS and SUNSHINE SAUCE
MANUFACTURING INDUSTRIES, respondents.

Unfair Competition; Tradenames and Trademarks; Distinctions between

unfair competition and infringement of trademark.—To arrive at a proper
resolution of this case, it is important to bear in mind the following distinctions
between infringement of trademark and unfair competition: (1) Infringement of
trademark is the unauthorized use of a trademark, whereas unfair competition is
the passing off of one’s goods as those of another. (2) In infringement of trademark
fraudulent intent is unnecessary, whereas in unfair competition fraudulent intent is
essential. (3) In infringement of trademark the prior registration of the trademark is
a prerequisite to the action, whereas in unfair competition registration is not
necessary.

Same; Same; Side-by-side comparison not final test of similarity because

average buyers do not make minute scrutiny of label details.—It has been
correctly held that side-by-side comparison is not the final test of similarity. Such
comparison requires a careful scrutiny to determine in what points the labels of the
products differ, as was done by the trial judge. The ordinary buyer does not usually
make such scrutiny nor does he usually have the time to do so. The average
shopper is usually in a hurry and does not inspect every product on the shelf as if he
were browsing in a library. Where the housewife has to return home as soon as
possible to her baby or the working woman has to make quick purchases during her
off hours, she is apt to be confused by similar labels even if they do have minute
differences. The male shopper is worse as he usually does not bother about such
distinctions.

Same; Same; Sunshine Tomato catsup label is a colorable imitation of the

Del Monte trademark due to prominent similarities in general design
although there are some differences.—We also note that the respondent court
failed to take into consideration several factors which should have affected its
conclusion, to wit: age, training and education of the usual purchaser, the nature
and cost of the article, whether the article is bought for immediate consumption and
also the conditions under which it is usually purchased. Among these, what
essentially determines the attitude of the purchaser, specifically his inclination to be
cautious, is the cost of the goods. To be sure, a person who buys a box of candies
will not exercise as much care as one who buys an expensive watch. As a general
rule, an ordinary buyer does not exercise as much prudence in buying an article for
which he pays a few centavos as he does in purchasing a more valuable thing.
Expensive and valuable items are normally bought only after deliberate,
comparative and analytical investigation. But mass products, low priced articles in
wide use, and matters of everyday purchase requiring frequent replacement are
bought by the casual consumer without great care. In this latter category is catsup.

Same; Same; Same.—At that, even if the labels were analyzed together it is not
difficult to see that the Sunshine label is a colorable imitation of the Del Monte
trademark. The predominant colors used in the Del Monte label are green and red-
orange, the same with Sunshine. The word “catsup” in both bottles is printed in
white and the style of the print/letter is the same. Although the logo of Sunshine is
not a tomato, the figure nevertheless approximates that of a tomato.

Tradenames and Trademarks; No exclusive right of use can be claimed if

bottle design registered only in Supplemental Register.—It can be inferred
from the foregoing that although Del Monte has actual use of the bottle’s
configuration, the petitioners cannot claim exclusive use thereof because it has not
been registered in the Principal Register.

Same; Sunshine Sauce Manufacturing Industries guilty of bad faith in

using Del Monte catsup bottles despite warning; Same constitutes unfair
competition.—However, we find that Sunshine, despite the many choices
available to it and notwithstanding that the caution “Del Monte Corporation, Not to
be Refilled” was embossed on the bottle, still opted to use the petitioners’ bottle to
market a product which Philpack also produces. This clearly shows the private
respondent’s bad faith and its intention to capitalize on the latter’s reputation and
goodwill and pass off its own products as that of Del Monte.

Same; Same; Same.—As Sunshine’s label is an infringement of the Del Monte’s

trademark, law and equity call for the cancellation of the private respondent’s
registration and withdrawal of all its products bearing the questioned label from the
market. With regard to the use of Del Monte’s bottle, the same constitutes unfair
competition; hence, the respondent should be permanently enjoined from the use of
such bottles.

Same; Damages; Evidence; Proof of damages necessary in unfair

competition and trademark infringement; If no proof is submitted,
aggrieved party entitled to nominal damages of P1,000.00.—The court must
rule, however, that the damage prayed for cannot be granted because the
petitioner has not presented evidence to prove the amount thereof. x x x
Accordingly, the Court can only award to the petitioners, as it hereby does award,
nominal damages in the amount of P1,000.00.

PETITION to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Bito, Misa & Lozada for petitioners.

Reynaldo F. Singson for private respondent.

CRUZ, J.:

The petitioners are questioning the decision of the respondent court upholding the
dismissal by the trial court of their complaint against the private respondent for
infringement of trademark and unfair competition.
Petitioner Del Monte Corporation is a foreign company organized under the laws of
the United States and not engaged in business in the Philippines. Both the
Philippines and the United States are signatories to the Convention of Paris of
September 27, 1965, which grants to the nationals of the parties rights and
advantages which their own nationals enjoy for the repression of acts of
infringement and unfair competition.

Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly

organized under the laws of the Philippines. On April 11, 1969, Del Monte granted
Philpack the right to manufacture, distribute and sell in the Philippines various
agricultural products, including catsup, under the Del Monte trademark and logo.

On October 27, 1965, Del Monte authorized Philpack to register with the Philippine
Patent Office the Del Monte catsup bottle configuration, for which it was granted
Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office
under the Supplemental Register.1 On November 20, 1972, Del Monte also obtained
two registration certificates for its trademark “DEL MONTE” and its logo.2

Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of

Registration by the Bureau of Domestic Trade on April 17, 1980, to engage in the
manufacture, packing, distribution and sale of various kinds of sauce, identified by
the logo Sunshine Fruit Catsup.3 This logo was registered in the Supplemental
Register on September 20, 1983.4 The product itself was contained in various kinds
of bottles, including the Del Monte bottle, which the private respondent bought from
the junk shops for recycling.

Having received reports that the private respondent was using its exclusively
designed bottles and a logo confusingly similar to Del Monte’s, Philpack warned it to
desist from doing so on pain of legal action. Thereafter, claiming that the demand
had been ignored, Philpack and Del Monte filed a complaint against the private
respondent for infringement of trademark and unfair competition, with a prayer for
damages and the issuance of a writ of preliminary injunction.5

In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle
and that its logo was substantially different from the Del Monte logo and would not
confuse the buying public to the detriment of the petitioners.6

After trial, the Regional Trial Court of Makati dismissed the complaint. It held that
there were substantial differences between the logos or trademarks of the parties;
that the defendant had ceased using the petitioners’ bottles; and that in any case
the defendant became the owner of the said bottles upon its purchase thereof from
the junk yards. Furthermore, the complainants had failed to establish the
defendant’s malice or bad faith, which was an essential element of infringement of
trademark or unfair competition.7
This decision was affirmed in toto by the respondent court, which is now faulted in
this petition for certiorari under Rule 45 of the Rules of Court.

Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part
as follows:

Sec. 22. Infringement, what constitutes.—Any person who shall use, without the
consent of the registrant, any reproduction, counterfeit, copy or colorable imitation
of any registered mark or trade-name in connection with the sale, offering for sale,
or advertising of any goods, business or services on or in connection with which
such use is likely to cause confusion or mistake or to deceive purchasers or others
as to the source or origin of such goods or services or identity of such business; or
reproduce, counterfeit, copy or colorably imitate any such mark or trade name and
apply such reproduction, counterfeit copy or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used
upon or in connection with such goods, business or services, shall be liable to a civil
action by the registrant for any or all of the remedies herein provided.

Sec. 29 of the same law states as follows:

Sec. 29. Unfair competition, rights and remedies.—A person who has identified in
the mind of the public the goods he manufactures or deals in, his business or
services from those of others, whether or not a mark or trade-name is employed,
has a property right in the goodwill of the said goods, business or services so
identified, which will be protected in the same manner as other property rights.
Such a person shall have the remedies provided in section twenty-three, Chapter V
hereof.

Any person who shall employ deception or any other means contrary to good faith
by which he shall pass off the goods manufactured by him or in which he deals, or
his business, or services for those of the one having established such goodwill, or
who shall commit any acts calculated to produce said result, shall be guilty of unfair
competition, and shall be subject to an action therefor.

In particular, and without in any way limiting the scope of unfair competition, the
following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in
the wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would likely influence
purchasers to believe that the goods offered are those of a manufacturer or dealer
other than the actual manufacturer or dealer, or who otherwise clothes the goods
with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose;

(b) 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.

To arrive at a proper resolution of this case, it is important to bear in mind the

following distinctions between infringement of trademark and unfair competition.

(1) Infringement of trademark is the unauthorized use of a trademark, whereas

unfair competition is the passing off of one’s goods as those of another.

(2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair

competition fraudulent intent is essential.

(3) In infringement of trademark the prior registration of the trademark is a

prerequisite to the action, whereas in unfair competition registration is not
necessary.

In the challenged decision, the respondent court cited the following test laid down
by this Court in a number of cases:

In determining whether two trademarks are confusingly similar, the two marks in
their entirety as they appear in the respective labels must be considered in relation
to the goods to which they are attached; the discerning eye of the observer must
focus not only on the predominant words but also on the other features appearing
on both labels.

and applying the same, held that there was no colorable imitation of the petitioners’
trademark and logo by the private respondent. The respondent court agreed with
the findings of the trial court that:

In order to resolve the said issue, the Court now attempts to make a comparison of
the two products, to wit:

1. As to the shape of label or make:

 Del Monte: Semi-rectangular, with a crown or tomato shape design on top of the
rectangle.

Sunshine: Regular rectangle.

2. As to brand printed on label:

Del Monte: Tomato catsup mark.

Sunshine: Fruit catsup.

3. As to the words or lettering on label or mark:

Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C.,
Philippines.

Sunshine: Sunshine fruit catsup is clearly indicated “made in the Philippines by

Sunshine Sauce Manufacturing Industries” No. 1 Del Monte Avenue, Malabon, Metro
Manila.

4. As to color of logo:

Del Monte: Combination of yellow and dark red, with words “Del Monte Quality”
in white.

Sunshine: White, light green and light red, with words “Sunshine Brand” in
yellow.

5. As to shape of logo:

Del Monte: In the shape of a tomato.

Sunshine: Entirely different in shape.

6. As to label below the cap:

Del Monte: Seal covering the cap down to the neck of the bottle, with picture of
tomatoes with words “made from real tomatoes.”

Sunshine: There is a label below the cap which says “Sunshine Brand.”

7. As to the color of the products:

Del Monte: Darker red.

Sunshine: Lighter than Del Monte.

While the Court does recognize these distinctions, it does not agree with the
conclusion that there was no infringement or unfair competition. It seems to us that
the lower courts have been so preoccupied with the details that they have not seen
the total picture.

It has been correctly held that side-by-side comparison is not the final test of
similarity.10 Such comparison requires a careful scrutiny to determine in what
points the labels of the products differ, as was done by the trial judge. The ordinary
buyer does not usually make such scrutiny nor does he usually have the time to do
so. The average shopper is usually in a hurry and does not inspect every product on
the shelf as if he were browsing in a library. Where the housewife has to return
home as soon as possible to her baby or the working woman has to make quick
purchases during her off hours, she is apt to be confused by similar labels even if
they do have minute differences. The male shopper is worse as he usually does not
bother about such distinctions.

The question is not whether the two articles are distinguishable by their label when
set side by side but whether the general confusion made by the article upon the eye
of the casual purchaser who is unsuspicious and off his guard, is such as to likely
result in his confounding it with the original.11 As observed in several cases, the
general impression of the ordinary purchaser, buying under the normally prevalent
conditions in trade and giving the attention such purchasers usually give in buying
that class of goods is the touchstone.12

It has been held that in making purchases, the consumer must depend upon his
recollection of the appearance of the product which he intends to purchase.13 The
buyer having in mind the mark/label of the respondent must rely upon his memory
of the petitioner’s mark.14 Unlike the judge who has ample time to minutely
examine the labels in question in the comfort of his sala, the ordinary shopper does
not enjoy the same opportunity.

A number of courts have held that to determine whether a trademark has been
infringed, we must consider the mark as a whole and not as dissected. If the buyer
is deceived, it is attributable to the marks as a totality, not usually to any part of
it.15 The court therefore should be guided by its first impression,16 for a buyer acts
quickly and is governed by a casual glance, the value of which may be dissipated as
soon as the court assumes to analyze carefully the respective features of the
mark.17

It has also been held that it is not the function of the court in cases of infringement
and unfair competition to educate purchasers but rather to take their carelessness
for granted, and to be ever conscious of the fact that marks need not be identical. A
confusing similarity will justify the intervention of equity.18 The judge must also be
aware of the fact that usually a defendant in cases of infringement does not
normally copy but makes only colorable changes.19 Well has it been said that the
most successful form of copying is to employ enough points of similarity to confuse
the public with enough points of difference to confuse the courts.20

We also note that the respondent court failed to take into consideration several
factors which should have affected its conclusion, to wit: age, training and
education of the usual purchaser, the nature and cost of the article, whether the
article is bought for immediate consumption and also the conditions under which it
is usually purchased.21 Among these, what essentially determines the attitude of
the purchaser, specifically his inclination to be cautious, is the cost of the goods. To
be sure, a person who buys a box of candies will not exercise as much care as one
who buys an expensive watch. As a general rule, an ordinary buyer does not
exercise as much prudence in buying an article for which he pays a few centavos as
he does in purchasing a more valuable thing.22 Expensive and valuable items are
normally bought only after deliberate, comparative and analytical investigation. But
mass products, low priced articles in wide use, and matters of everyday purchase
requiring frequent replacement are bought by the casual consumer without great
care.23 In this latter category is catsup.

At that, even if the labels were analyzed together it is not difficult to see that the
Sunshine label is a colorable imitation of the Del Monte trademark. The predominant
colors used in the Del Monte label are green and red-orange, the same with
Sunshine. The word “catsup” in both bottles is printed in white and the style of the
print/letter is the same. Although the logo of Sunshine is not a tomato, the figure
nevertheless approximates that of a tomato.

As previously stated, the person who infringes a trade mark does not normally copy
out but only makes colorable changes, employing enough points of similarity to
confuse the public with enough points of differences to confuse the courts. What is
undeniable is the fact that when a manufacturer prepares to package his product,
he has before him a boundless choice of words, phrases, colors and symbols
sufficient to distinguish his product from the others. When as in this case, Sunshine
chose, without a reasonable explanation, to use the same colors and letters as
those used by Del Monte though the field of its selection was so broad, the
inevitable conclusion is that it wa done deliberately to deceive.24

It has been aptly observed that the ultimate ratio in cases of grave doubt is the rule
that as between a newcomer who by the confusion has nothing to lose and
everything to gain and one who by honest dealing has already achieved favor with
the public, any doubt should be resolved against the newcomer inasmuch as the
field from which he can select a desirable trademark to indicate the origin of his
product is obviously a large one.25

Coming now to the second issue, we find that the private respondent is not guilty of
infringement for having used the Del Monte bottle. The reason is that the
configuration of the said bottle was merely registered in the Supplemental Register.
In the case of Lorenzana v. Macagba,26 we declared that:

(1) Registration in the Principal Register gives rise to a presumption of the validity of
the registration, the registrant’s ownership of the mark and his right to the exclusive
use thereof. There is no such presumption in the registration in the Supplemental
Register.

(2) Registration in the Principal Register is limited to the actual owner of the
trademark and proceedings therein on the issue of ownership which may be
contested through opposition or interference proceedings or, after registration, in a
petition for cancellation.

Registration in the Principal Register is constructive notice of the registrant’s claim

of ownership, while registration in the Supplemental Register is merely proof of
actual use of the trademark and notice that the registrant has used or appropriated
it. It is not subject to opposition although it may be cancelled after the issuance.
Corollarily, registration in the Principal Register is a basis for an action for
infringement while registration in the Supplemental Register is not.

(3) In applications for registration in the Principal Register, publication of the

application is necessary. This is not so in applications for registrations in the
Supplemental Register.

It can be inferred from the foregoing that although Del Monte has actual use of the
bottle’s configuration, the petitioners cannot claim exclusive use thereof because it
has not been registered in the Principal Register. However, we find that Sunshine,
despite the many choices available to it and notwithstanding that the caution “Del
Monte Corporation, Not to be Refilled” was embossed on the bottle, still opted to
use the petitioners’ bottle to market a product which Philpack also produces. This
clearly shows the private respondent’s bad faith and its intention to capitalize on
the latter’s reputation and goodwill and pass off its own product as that of Del
Monte.

The Court observes that the reasons given by the respondent court in resolving the
case in favor of Sunshine are untenable. First, it declared that the registration of the
Sunshine label belied the company’s malicious intent to imitate petitioner’s product.
Second, it held that the Sunshine label was not improper because the Bureau of
Patent presumably considered other trademarks before approving it. Third, it cited
the case of Shell Co. v. Insular Petroleum,27 where this Court declared that selling
oil in containers of another with markings erased, without intent to deceive, was not
unfair competition.
Regarding the fact of registration, it is to be noted that the Sunshine label was
registered not in the Principal Register but only in the Supplemental Register where
the presumption of the validity of the trademark, the registrant’s ownership of the
mark and his right to its exclusive use are all absent.

Anent the assumption that the Bureau of Patent had considered other existing
patents, it is reiterated that since registration was only in the Supplemental
Register, this did not vest the registrant with the exclusive right to use the label nor
did it give rise to the presumption of the validity of the registration.

On the argument that no unfair competition was committed, the Shell Case is not on
all fours with the case at bar because:

(1) In Shell, the absence of intent to deceive was supported by the fact that the
respondent therein, before marketing its product, totally obliterated and erased the
brands/mark of the different companies stenciled on the containers thereof, except
for a single isolated transaction. The respondent in the present case made no
similar effort.

(2) In Shell, what was involved was a single isolated transaction. Of the many drums
used, there was only one container where the Shell label was not erased, while in
the case at hand, the respondent admitted that it made use of several Del Monte
bottles and without obliterating the embossed warning.

(3) In Shell, the product of respondent was sold to dealers, not to ultimate
consumers. As a general rule, dealers are well acquainted with the manufacturer
from whom they make their purchases and since they are more experienced, they
cannot be so easily deceived like the inexperienced public. There may well be
similarities and imitations which deceive all, but generally the interests of the
dealers are not regarded with the same solicitude as are the interests of the
ordinary consumer. For it is the form in which the wares come to the final buyer that
is of significance.

As Sunshine’s label is an infringement of the Del Monte’s trademark, law and equity
call for the cancellation of the private respondent’s registration and withdrawal of all
its products bearing the questioned label from the market. With regard to the use of
Del Monte’s bottle, the same constitutes unfair competition; hence, the respondent
should be permanently enjoined from the use of such bottles.

The court must rule, however, that the damage prayed for cannot be granted
because the petitioner has not presented evidence to prove the amount thereof.
Section 23 of R.A. No. 166 provides:

Sec. 23. Actions and damages and injunction for infringement.—Any person entitled
to the exclusive use of a registered mark or trade name may recover damages in a
civil action from any person who infringes his rights, and the measure of the
damages suffered shall be either the reasonable profit which the complaining party
would have made, had the defendant not infringed his said rights or the profit which
the defendant actually made out of the infringement, or in the event such measure
of damages cannot be readily ascertained with reasonable certainty the court may
award as damages reasonable percentage based upon the amount of gross sales of
the defendant or the value of the services in connection with which the mark or
trade name was used in the infringement of the rights of the complaining party. In
cases where actual intent to mislead the public or to defraud the complaining party
shall be shown, in the discretion of the court, the damages may be doubled.

The complaining party, upon proper showing may also be granted injunction.

Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of
the Civil Code, which provides:

Art. 2222. The court may award nominal damages in every obligation arising from
any source enumerated in Art. 1157, or in every case where any property right has
been invaded.

Accordingly, the Court can only award to the petitioners, as it hereby does award,
nominal damages in the amount of P1,000.00.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated
December 24, 1986 and the Resolution dated April 27, 1987, are REVERSED and
SET ASIDE and a new judgment is hereby rendered:

(1) Canceling the private respondent’s Certificate of Registration No. SR-6310 and
permanently enjoining the private respondent from using a label similar to that of
the petitioners.

(2) Prohibiting the private respondent from using the empty bottles of the
petitioners as containers for its own products.

(3) Ordering the private respondent to pay the petitioners nominal damages in the
amount of P1,000.00, and the costs of the suit.

SO ORDERED.

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Petition granted. Decision annulled and set aside.

Note.—Common geometrical shapes such as diamonds, are ordinarily not regarded
as indicia of origin of goods unless they have acquired a secondary meaning.
(Victoria Milling Co., Inc. vs. Ong Su, 79 SCRA 207.

McDonald’s Corporation vs. L.C. Big Mak Burger, Inc.

G.R. No. 143993. August 18, 2004.*

MCDONALD’S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC.,

petitioners, vs. L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY,
RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and
GRACE HUERTO, respondents.
Remedial Law; Appeals; A party intending to appeal from a judgment of
the Court of Appeals may file with the Supreme Court a petition for review
under Section 1 of Rule 45 raising only questions of law; Question of Law
and Question of Fact Distinguished.—A party intending to appeal from a
judgment of the Court of Appeals may file with this Court a petition for review under
Section 1 of Rule 45 raising only questions of law. A question of law exists when the
doubt or difference arises on what the law is on a certain state of facts. There is a
question of fact when the doubt or difference arises on the truth or falsity of the
alleged facts.

Trademarks and Trade Names; Infringement; Elements to Establish

Trademark Infringement.—To establish trademark infringement, the following
elements must be shown: (1) the validity of plaintiff’s mark; (2) the plaintiff’s
ownership of the mark; and (3) the use of the mark or its colorable imitation by the
alleged infringer results in “likelihood of confusion.” Of these, it is the element of
likelihood of confusion that is the gravamen of trademark infringement.

Same; Same; A mark is valid if it is “distinctive” and thus not barred from
registration under Section 4 of RA 166; Once registered, not only the
mark’s validity but also the registrant’s ownership of the mark is prima
facie presumed.—A mark is valid if it is “distinctive” and thus not barred from
registration under Section 4 of RA 166. However, once registered, not only the
mark’s validity but also the registrant’s ownership of the mark is prima facie
presumed.

Same; Same; A mark which is not registered in the Principal Register and
thus not distinctive has no real protection.—The Court also finds that
petitioners have duly established McDonald’s exclusive ownership of the “Big Mac”
mark. Although Topacio and the Isaiyas Group registered the “Big Mac” mark ahead
of McDonald’s, Topacio, as petitioners disclosed, had already assigned his rights to
McDonald’s. The Isaiyas Group, on the other hand, registered its trademark only in
the Supplemental Register. A mark which is not registered in the Principal Register,
and thus not distinctive, has no real protection. Indeed, we have held that
registration in the Supplemental Register is not even a prima facie evidence of the
validity of the registrant’s exclusive right to use the mark on the goods specified in
the certificate.

Same; Same; Confusion of Goods and Confusion of Business Distinguished.

—Section 22 covers two types of confusion arising from the use of similar or
colorable imitation marks, namely, confusion of goods (product confusion) and
confusion of business (source or origin confusion). In Sterling Products International,
Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., the Court
distinguished these two types of confusion, thus: [Rudolf] Callman notes two types
of confusion. The first is the confusion of goods “in which event the ordinarily
prudent purchaser would be induced to purchase one product in the belief that he
was purchasing the other.” x x x The other is the confusion of business: “Here
though the goods of the parties are different, the defendant’s product is such as
might reasonably be assumed to originate with the plaintiff, and the public would
then be deceived either into that belief or into the belief that there is some
connection between the plaintiff and defendant which, in fact, does not exist.”

Same; Same; Two Tests in Determining Likelihood of Confusion, the

Dominancy Test and the Holistic Test.—In determining likelihood of confusion,
jurisprudence has developed two tests, the dominancy test and the holistic test. The
dominancy test focuses on the similarity of the prevalent features of the competing
trademarks that might cause confusion. In contrast, the holistic test requires the
court to consider the entirety of the marks as applied to the products, including the
labels and packaging, in determining confusing similarity.

Same; Same; Court rejected the holistic test in Societe Des Produits Nestlé
S.A. vs. Court of Appeals.—In the 2001 case of Societe Des Produits Nestlé, S.A.
v. Court of Appeals, the Court explicitly rejected the holistic test in this wise: [T]he
totality or holistic test is contrary to the elementary postulate of the law on
trademarks and unfair competition that confusing similarity is to be determined on
the basis of visual, aural, connotative comparisons and overall impressions
engendered by the marks in controversy as they are encountered in the realities of
the marketplace.

Same; Same; While proof of actual confusion is the best evidence of

infringement its absence is inconsequential.—Petitioners’ failure to present
proof of actual confusion does not negate their claim of trademark infringement. As
noted in American Wire & Cable Co. v. Director of Patents, Section 22 requires the
less stringent standard of “likelihood of confusion” only. While proof of actual
confusion is the best evidence of infringement, its absence is inconsequential.

Same; Unfair Competition; Essential Elements of Unfair Competition.—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.

Same; Same; Trademark infringement is a form of unfair competition;

Trademark infringement constitutes unfair competition when there is not
merely likelihood of confusion but also actual or probable deception on
the public because of the general appearance of the goods.—Unfair
competition is broader than trademark infringement and includes passing off goods
with or without trademark infringement. Trademark infringement is a form of unfair
competition.Trademark infringement constitutes unfair competition when there is
not merely likelihood of confusion, but also actual or probable deception on the
public because of the general appearance of the goods. There can be trademark
infringement without unfair competition as when the infringer discloses on the
labels containing the mark that he manufactures the goods, thus preventing the
public from being deceived that the goods originate from the trademark owner.

Same; Same; Passing off (or palming off) takes place where the defendant,
by imitative devices on the general appearance of the goods, misleads
prospective purchasers into buying his merchandise under the impression
that they are buying that of his competitors.—Passing off (or palming off)
takes place where the defendant, by imitative devices on the general appearance of
the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors.Thus, the defendant gives
his goods the general appearance of the goods of his competitor with the intention
of deceiving the public that the goods are those of his competitor.

PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.

The facts are stated in the opinion of the Court.

Abello, Concepcion, Regala and Cruz for petitioners.

Vicente M. Joyas for respondents.

CARPIO, J.:

The Case

This is a petition for review1 of the Decision dated 26 November 1999 of the Court
of Appeals2 finding respondent L.C. Big Mak Burger, Inc. not liable for trademark
infringement and unfair competition and ordering petitioners to pay respondents
P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying
reconsideration. The Court of Appeals’ Decision reversed the 5 September 1994
Decision3 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C.
Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

The Facts

Petitioner McDonald’s Corporation (“McDonald’s”) is a corporation organized under

the laws of Delaware, United States. McDonald’s operates, by itself or through its
franchisees, a global chain of fast-food restaurants. McDonald’s4 owns a family of
marks5 including the “Big Mac” mark for its “double-decker hamburger sandwich.”6
McDonald’s registered this trademark with the United States Trademark Registry on
16 October 1979.7 Based on this Home Registration, McDonald’s applied for the
registration of the same mark in the Principal Register of the then Philippine Bureau
of Patents, Trademarks and Technology (“PBPTT”), now the Intellectual Property
Office (“IPO”). Pending approval of its application, McDonald’s introduced its “Big
Mac” hamburger sandwiches in the Philippine market in September 1981. On 18 July
1985, the PBPTT allowed registration of the “Big Mac” mark in the Principal Register
based on its Home Registration in the United States.

Like its other marks, McDonald’s displays the “Big Mac” mark in items8 and
paraphernalia9 in its restaurants, and in its outdoor and indoor signages. From 1982
to 1990, McDonald’s spent P10.5 million in advertisement for “Big Mac” hamburger
sandwiches alone.

Petitioner McGeorge Food Industries (“petitioner McGeorge”), a domestic

corporation, is McDonald’s Philippine franchisee.

Respondent L.C. Big Mak Burger, Inc. (“respondent corporation”) is a domestic

corporation which operates fast-food outlets and snack vans in Metro Manila and
nearby provinces. Respondent corporation’s menu includes hamburger sandwiches
and other food items. Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy, William B.
Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto (“private respondents”) are
the incorporators, stockholders and directors of respondent corporation.

On 21 October 1988, respondent corporation applied with the PBPTT for the
registration of the “Big Mak” mark for its hamburger sandwiches. McDonald’s
opposed respondent corporation’s application on the ground that “Big Mak” was a
colorable imitation of its registered “Big Mac” mark for the same food products.
McDonald’s also informed respondent Francis Dy (“respondent Dy”), the chairman of
the Board of Directors of respondent corporation, of its exclusive right to the “Big
Mac” mark and requested him to desist from using the “Big Mac” mark or any
similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued
respondents in the Regional Trial Court of Makati, Branch 137 (“RTC”), for trademark
infringement and unfair competition. In its Order of 11 July 1990, the RTC issued a
temporary restraining order (“TRO”) against respondents enjoining them from using
the “Big Mak” mark in the operation of their business in the National Capital Region.
On 16 August 1990, the RTC issued a writ of preliminary injunction replacing the
TRO.

In their Answer, respondents admitted that they have been using the name “Big
Mak Burger” for their fast-food business. Respondents claimed, however, that
McDonald’s does not have an exclusive right to the “Big Mac” mark or to any other
similar mark. Respondents point out that the Isaiyas Group of Corporations (“Isaiyas
Group”) registered the same mark for hamburger sandwiches with the PBPTT on 31
March 1979. One Rodolfo Topacio (“Topacio”) similarly registered the same mark on
24 June 1983, prior to McDonald’s registration on 18 July 1985. Alternatively,
respondents claimed that they are not liable for trademark infringement or for
unfair competition, as the “Big Mak” mark they sought to register does not
constitute a colorable imitation of the “Big Mac” mark. Respondents asserted that
they did not fraudulently pass off their hamburger sandwiches as those of
petitioners’ Big Mac hamburgers.17 Respondents sought damages in their
counterclaim.

In their Reply, petitioners denied respondents’ claim that McDonald’s is not the
exclusive owner of the “Big Mac” mark. Petitioners asserted that while the Isaiyas
Group and Topacio did register the “Big Mac” mark ahead of McDonald’s, the Isaiyas
Group did so only in the Supplemental Register of the PBPTT and such registration
does not provide any protection. McDonald’s disclosed that it had acquired Topacio’s
rights to his registration in a Deed of Assignment dated 18 May 1981.

The Trial Court’s Ruling

On 5 September 1994, the RTC rendered judgment (“RTC Decision”) finding

respondent corporation liable for trademark infringement and unfair competition.
However, the RTC dismissed the complaint against private respondents and the
counterclaim against petitioners for lack of merit and insufficiency of evidence. The
RTC held:

Undeniably, the mark “B[ig] M[ac]” is a registered trademark for plaintiff

McDonald’s, and as such, it is entitled [to] protection against infringement.

xxxx
There exist some distinctions between the names “B[ig] M[ac]” and “B[ig] M[ak]” as
appearing in the respective signages, wrappers and containers of the food products
of the parties. But infringement goes beyond the physical features of the questioned
name and the original name. There are still other factors to be considered.

xxxx

Significantly, the contending parties are both in the business of fast-food chains and
restaurants. An average person who is hungry and wants to eat a hamburger
sandwich may not be discriminating enough to look for a McDonald’s restaurant and
buy a “B[ig] M[ac]” hamburger. Once he sees a stall selling hamburger sandwich, in
all likelihood, he will dip into his pocket and order a “B[ig] M[ak]” hamburger
sandwich. Plaintiff McDonald’s fast-food chain has attained wide popularity and
acceptance by the consuming public so much so that its air-conditioned food outlets
and restaurants will perhaps not be mistaken by many to be the same as defendant
corporation’s mobile snack vans located along busy streets or highways. But the
thing is that what is being sold by both contending parties is a food item—a
hamburger sandwich which is for immediate consumption, so that a buyer may
easily be confused or deceived into thinking that the “B[ig] M[ak]” hamburger
sandwich he bought is a food-product of plaintiff McDonald’s, or a subsidiary or
allied outlet thereof. Surely, defendant corporation has its own secret ingredients to
make its hamburger sandwiches as palatable and as tasty as the other brands in the
market, considering the keen competition among mushrooming hamburger stands
and multinational fast-food chains and restaurants. Hence, the trademark “B[ig]
M[ac]” has been infringed by defendant corporation when it used the name “B[ig]
M[ak]” in its signages, wrappers, and containers in connection with its food
business. x x x x

Did the same acts of defendants in using the name “B[ig] M[ak]” as a trademark or
tradename in their signages, or in causing the name “B[ig] M[ak]” to be printed on
the wrappers and containers of their food products also constitute an act of unfair
competition under Section 29 of the Trademark Law?

The answer is in the affirmative. x x x x

The x x x provision of the law concerning unfair competition is broader and more
inclusive than the law concerning the infringement of trademark, which is of more
limited range, but within its narrower range recognizes a more exclusive right
derived by the adoption and registration of the trademark by the person whose
goods or services are first associated therewith. x x x Notwithstanding the
distinction between an action for trademark infringement and an action for unfair
competition, however, the law extends substantially the same relief to the injured
party for both cases. (See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off
on the public the goods of one man as the goods of another. The choice of “B[ig]
M[ak]” as tradename by defendant corporation is not merely for sentimental
reasons but was clearly made to take advantage of the reputation, popularity and
the established goodwill of plaintiff McDonald’s. For, as stated in Section 29, a
person is guilty of unfair competition who in selling his goods shall give them the
general appearance, of goods of another manufacturer or dealer, either as to the
goods themselves or in the wrapping of the packages in which they are contained,
or the devices or words thereon, or in any other feature of their appearance, which
would likely influence purchasers to believe that the goods offered are those of a
manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs
have established their valid cause of action against the defendants for trademark
infringement and unfair competition and for damages.19

The dispositive portion of the RTC Decision provides:

“WHEREFORE, judgment is rendered in favor of plaintiffs McDonald’s Corporation

and McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc.,
as follows:

1. The writ of preliminary injunction issued in this case on [16 August 1990] is made
permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in
the amount of P400,000.00, exemplary damages in the amount of P100,000.00, and
attorney’s fees and expenses of litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam
B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-
claims, are dismissed for lack of merit as well as for insufficiency of evidence.”20

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment (“Court of Appeals’
Decision”) reversing the RTC Decision and ordering McDonald’s to pay respondents
P1,600,000 as actual and compensatory damages and P300,000 as moral damages.
The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the
use of defendants-appellants of its corporate name—the whole “L.C. B[ig] M[ak]
B[urger], I[nc].” which appears on their food packages, signages and
advertisements is an infringement of their trademark “B[ig] M[ac]” which they use
to identify [their] double decker sandwich, sold in a Styrofoam box packaging
material with the McDonald’s logo of umbrella “M” stamped thereon, together with
the printed mark in red bl[o]ck capital letters, the words being separated by a single
space. Specifically, plaintiffs-appellees argue that defendants-appellants’ use of
their corporate name is a colorable imitation of their trademark “Big Mac”.

xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation
exists. As the definition dictates, it is not sufficient that a similarity exists in both
names, but that more importantly, the over-all presentation, or in their essential,
substantive and distinctive parts is such as would likely MISLEAD or CONFUSE
persons in the ordinary course of purchasing the genuine article. A careful
comparison of the way the trademark “B[ig] M[ac]” is being used by plaintiffs-
appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants,
would readily reveal that no confusion could take place, or that the ordinary
purchasers would be misled by it. As pointed out by defendants-appellants, the
plaintiffs-appellees’ trademark is used to designate only one product, a double
decker sandwich sold in a Styrofoam box with the “McDonalds” logo. On the other
hand, what the defendants-appellants corporation is using is not a trademark for its
food product but a business or corporate name. They use the business name “L.C.
Big Mak Burger, Inc.” in their restaurant business which serves diversified food
items such as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish
burger and hamburger. Secondly, defendants-appellants’ corporate or business
name appearing in the food packages and signages are written in silhouette red-
orange letters with the “b” and “m” in upper case letters. Above the words “Big
Mak” are the upper case letter “L.C.” Below the words “Big Mak” are the words
“Burger, Inc.” spelled out in upper case letters. Furthermore, said corporate or
business name appearing in such food packages and signages is always
accompanied by the company mascot, a young chubby boy named Maky who wears
a red T-shirt with the upper case “m” appearing therein and a blue lower garment.
Finally, the defendants-appellants’ food packages are made of plastic material.
xxxx

x x x [I]t is readily apparent to the naked eye that there appears a vast difference in
the appearance of the product and the manner that the tradename “Big Mak” is
being used and presented to the public. As earlier noted, there are glaring
dissimilarities between plaintiffs-appellees’ trademark and defendants-appellants’
corporate name. Plaintiffs-appellees’ product carrying the trademark “B[ig] M[ac]” is
a double decker sandwich (depicted in the tray mat containing photographs of the
various food products xxx sold in a Styrofoam box with the “McDonald’s” logo and
trademark in red, bl[o]ck capital letters printed thereon x x x at a price which is
more expensive than the defendants-appellants’ comparable food products. In order
to buy a “Big Mac,” a customer needs to visit an air-conditioned “McDonald’s”
restaurant usually located in a nearby commercial center, advertised and identified
by its logo—the umbrella “M,” and its mascot—“Ronald McDonald.” A typical
McDonald’s restaurant boasts of a playground for kids, a second floor to
accommodate additional customers, a drive-thru to allow customers with cars to
make orders without alighting from their vehicles, the interiors of the building are
well-lighted, distinctly decorated and painted with pastel colors x x x. In buying a
“B[ig] M[ac]”, it is necessary to specify it by its trademark. Thus, a customer needs
to look for a “McDonald’s” and enter it first before he can find a hamburger
sandwich which carry the mark “Big Mac.” On the other hand, defendants-
appellants sell their goods through snack vans x x x x

Anent the allegation that defendants-appellants are guilty of unfair competition, we

likewise find the same untenable.

Unfair competition is defined as “the employment of deception or any other means

contrary to good faith by which a person shall pass off the goods manufactured by
him or in which he deals, or his business, or service, for those of another who has
already established good will for his similar good, business or services, or any acts
calculated to produce the same result” (Sec. 29, Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must necessarily follow that there was
malice and that the entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees

that defendants-appellants deliberately tried to pass off the goods manufactured by
them for those of plaintiffs-appellees. The mere suspected similarity in the sound of
the defendants-appellants’ corporate name with the plaintiffs-appellees’ trademark
is not sufficient evidence to conclude unfair competition. Defendants-appellants
explained that the name “M[ak]” in their corporate name was derived from both the
first names of the mother and father of defendant Francis Dy, whose names are
Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to
prove bad faith on the part of defendants-appellants. It is a settled rule that the law
always presumes good faith such that any person who seeks to be awarded
damages due to acts of another has the burden of proving that the latter acted in
bad faith or with ill motive.

Petitioners sought reconsideration of the Court of Appeals’ Decision but the

appellate court denied their motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS’ CORPORATE

NAME “L.C. BIG MAK BURGER, INC.” IS NOT A COLORABLE IMITATION OF THE
MCDONALD’S TRADEMARK “BIG MAC”, SUCH COLORABLE IMITATION BEING AN
ELEMENT OF TRADEMARK INFRINGEMENT.

A. Respondents use the words “Big Mak” as trademark for their products and not
merely as their business or corporate name.

B. As a trademark, respondents’ “Big Mak” is undeniably and unquestionably similar

to petitioners’ “Big Mac” trademark based on the dominancy test and the idem
sonans test resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT

SIMILARITY BETWEEN THE MARK “BIG MAK” AND THE WORD MARK “BIG MAC” AS AN
INDICATION OF RESPONDENTS’ INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES
OF ESTABLISHING UNFAIR COMPETITION.

Petitioners pray that we set aside the Court of Appeals’ Decision and reinstate the
RTC Decision.

In their Comment to the petition, respondents question the propriety of this petition
as it allegedly raises only questions of fact. On the merits, respondents contend that
the Court of Appeals committed no reversible error in finding them not liable for
trademark infringement and unfair competition and in ordering petitioners to pay
damages.

The Issues
The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a
petition for review under Rule 45.

2. On the merits, (a) whether respondents used the words “Big Mak” not only as
part of the corporate name “L.C. Big Mak Burger, Inc.” but also as a trademark for
their hamburger products, and (b) whether respondent corporation is liable for
trademark infringement and unfair competition.23

The Court’s Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with
this Court a petition for review under Section 1 of Rule 45 (“Section 1”)24 raising
only questions of law. A question of law exists when the doubt or difference arises
on what the law is on a certain state of facts. There is a question of fact when the
doubt or difference arises on the truth or falsity of the alleged facts.

Here, petitioners raise questions of fact and law in assailing the Court of Appeals’
findings on respondent corporation’s non-liability for trademark infringement and
unfair competition. Ordinarily, the Court can deny due course to such a petition. In
view, however, of the contradictory findings of fact of the RTC and Court of Appeals,
the Court opts to accept the petition, this being one of the recognized exceptions to
Section 1.26 We took a similar course of action in Asia Brewery, Inc. v. Court of
Appeals 27 which also involved a suit for trademark infringement and unfair
competition in which the trial court and the Court of Appeals arrived at conflicting
findings.

On the Manner Respondents Used “Big Mak” in their Business

Petitioners contend that the Court of Appeals erred in ruling that the corporate
name “L.C. Big Mak Burger, Inc.” appears in the packaging for respondents’
hamburger products and not the words “Big Mak” only.

The contention has merit.

The evidence presented during the hearings on petitioners’ motion for the issuance
of a writ of preliminary injunction shows that the plastic wrappings and plastic bags
used by respondents for their hamburger sandwiches bore the words “Big Mak.” The
other descriptive words “burger” and “100% pure beef” were set in smaller type,
along with the locations of branches.28 Respondents’ cash invoices simply refer to
their hamburger sandwiches as “Big Mak.”29 It is respondents’ snack vans that
carry the words “L.C. Big Mak Burger, Inc.”30

It was only during the trial that respondents presented in evidence the plastic
wrappers and bags for their hamburger sandwiches relied on by the Court of
Appeals.31 Respondents’ plastic wrappers and bags were identical with those
petitioners presented during the hearings for the injunctive writ except that the
letters “L.C.” and the words “Burger, Inc.” in respondents’ evidence were added
above and below the words “Big Mak,” respectively. Since petitioners’ complaint
was based on facts existing before and during the hearings on the injunctive writ,
the facts established during those hearings are the proper factual bases for the
disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 (“Section 22”) of Republic Act No. 166, as amended (“RA 166”), the law
applicable to this case,32 defines trademark infringement as follows:

Infringement, what constitutes.—Any person who [1] shall use, without the consent
of the registrant, any reproduction, counterfeit, copy or colorable imitation of any
registered mark or trade-name in connection with the sale, offering for sale, or
advertising of any goods, business or services on or in connection with which such
use is likely to cause confusion or mistake or to deceive purchasers or others as to
the source or origin of such goods or services, or identity of such business; or [2]
reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and
apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used
upon or in connection with such goods, business or services, shall be liable to a civil
action by the registrant for any or all of the remedies herein provided.33

Petitioners base their cause of action under the first part of Section22, i.e.
respondents allegedly used, without petitioners’ consent, acolorable imitation of the
“Big Mac” mark in advertising and selling respondents’ hamburger sandwiches. This
likely caused confusion in the mind of the purchasing public on the source of the
hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the
validity of plaintiff’s mark; (2) the plaintiff’s ownership of the mark; and (3) the use
of the mark or its colorable imitation by the alleged infringer results in “likelihood of
confusion.”34 Of these, it is the element of likelihood of confusion that is the
gravamen of trademark infringement.35
On the Validity of the “Big Mac” Mark and McDonald’s Ownership of such Mark

A mark is valid if it is “distinctive” and thus not barred from registration under
Section 436 of RA 166 (“Section 4”). However, once registered, not only the mark’s
validity but also the registrant’s ownership of the mark is prima facie presumed.37

Respondents contend that of the two words in the “Big Mac” mark, it is only the
word “Mac” that is valid because the word “Big” is generic and descriptive
(proscribed under Section 4[e]), and thus “incapable of exclusive appropriation.”38

The contention has no merit. The “Big Mac” mark, which should be treated in its
entirety and not dissected word for word,39 is neither generic nor descriptive.
Generic marks are commonly used as the name or description of a kind of goods,40
such as “Lite” for beer41 or “Chocolate Fudge” for chocolate soda drink.42
Descriptive marks, on the other hand, convey the characteristics, functions,
qualities or ingredients of a product to one who has never seen it or does not know
it exists,43 such as “Arthriticare” for arthritis medication.44 On the contrary, “Big
Mac” falls under the class of fanciful or arbitrary marks as it bears no logical relation
to the actual characteristics of the product it represents.45 As such, it is highly
distinctive and thus valid. Significantly, the trademark “Little Debbie” for snack
cakes was found arbitrary or fanciful.46

The Court also finds that petitioners have duly established McDonald’s exclusive
ownership of the “Big Mac” mark. Although Topacio and the Isaiyas Group registered
the “Big Mac” mark ahead of McDonald’s, Topacio, as petitioners disclosed, had
already assigned his rights to McDonald’s. The Isaiyas Group, on the other hand,
registered its trademark only in the Supplemental Register. A mark which is not
registered in the Principal Register, and thus not distinctive, has no real
protection.47 Indeed, we have held that registration in the Supplemental Register is
not even a prima facie evidence of the validity of the registrant’s exclusive right to
use the mark on the goods specified in the certificate.48

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable
imitation marks, namely, confusion of goods (product confusion) and confusion of
business (source or origin confusion). In Sterling Products International,
Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,49 the Court
distinguished these two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the confusion of goods “in
which event the ordinarily prudent purchaser would be induced to purchase one
product in the belief that he was purchasing the other.” x x x The other is the
confusion of business: “Here though the goods of the parties are different, the
defendant’s product is such as might reasonably be assumed to originate with the
plaintiff, and the public would then be deceived either into that belief or into the
belief that there is some connection between the plaintiff and defendant which, in
fact, does not exist.”

Under Act No. 666,50 the first trademark law, infringement was limited to confusion
of goods only, when the infringing mark is used on “goods of a similar kind.”51
Thus, no relief was afforded to the party whose registered mark or its colorable
imitation is used on different although related goods. To remedy this situation,
Congress enacted RA 166 on 20 June 1947. In defining trademark infringement,
Section 22 of RA 166 deleted the requirement in question and expanded its scope to
include such use of the mark or its colorable imitation that is likely to result in
confusion on “the source or origin of such goods or services, or identity of such
business.”52 Thus, while there is confusion of goods when the products are
competing, confusion of business exists when the products are non-competing but
related enough to produce confusion of affiliation.53

On Whether Confusion of Goods and Confusion of Business are Applicable

Petitioners claim that respondents’ use of the “Big Mak” mark on respondents’
hamburgers results in confusion of goods, particularly with respect to petitioners’
hamburgers labeled “Big Mac.” Thus, petitioners alleged in their complaint:

1.15. Defendants have unduly prejudiced and clearly infringed upon the property
rights of plaintiffs in the McDonald’s Marks, particularly the mark “B[ig] M[ac].”
Defendants’ unauthorized acts are likely, and calculated, to confuse, mislead or
deceive the public into believing that the products and services offered by
defendant Big Mak Burger, and the business it is engaged in, are approved and
sponsored by, or affiliated with, plaintiffs.54 (Emphasis supplied)

Since respondents used the “Big Mak” mark on the same goods, i.e. hamburger
sandwiches, that petitioners’ “Big Mac” mark is used, trademark infringement
through confusion of goods is a proper issue in this case.

Petitioners also claim that respondents’ use of the “Big Mak” mark in the sale of
hamburgers, the same business that petitioners are engaged in, results in confusion
of business. Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent of plaintiff McDonald’s nor
its licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs’
exclusive right to use and/or appropriate the McDonald’s marks, defendant Big Mak
Burger acting through individual defendants, has been operating “Big Mak Burger”,
a fast food restaurant business dealing in the sale of hamburger and cheeseburger
sandwiches, french fries and other food products, and has caused to be printed on
the wrapper of defendant’s food products and incorporated in its signages the name
“Big Mak Burger,” which is confusingly similar to and/or is a colorable imitation of
the plaintiff McDonald’s mark “B[ig] M[ac]”, x x x. Defendant Big Mak Burger has
thus unjustly created the impression that its business is approved and sponsored
by, or affiliated with, plaintiffs. x x x x

2.2 As a consequence of the acts committed by defendants, which unduly prejudice

and infringe upon the property rights of plaintiffs McDonald’s and McGeorge as the
real owner and rightful proprietor, and the licensee/franchisee, respectively, of the
McDonald’s marks, and which are likely to have caused confusion or deceived the
public as to the true source, sponsorship or affiliation of defendants’ food products
and restaurant business, plaintiffs have suffered and continue to suffer actual
damages in the form of injury to their business reputation and goodwill, and of the
dilution of the distinctive quality of the McDonald’s marks, in particular, the mark
“B[ig] M[ac].”55 (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the
same food product that petitioners sell using the “Big Mac” mark. Thus, trademark
infringement through confusion of business is also a proper issue in this case.

Respondents assert that their “Big Mak” hamburgers cater mainly to the low-income
group while petitioners’ “Big Mac” hamburgers cater to the middle and upper
income groups. Even if this is true, the likelihood of confusion of business remains,
since the low-income group might be led to believe that the “Big Mak” hamburgers
are the low-end hamburgers marketed by petitioners. After all, petitioners have the
exclusive right to use the “Big Mac” mark. On the other hand, respondents would
benefit by associating their low-end hamburgers, through the use of the “Big Mak”
mark, with petitioners’ high-end “Big Mac” hamburgers, leading to likelihood of
confusion in the identity of business.

Respondents further claim that petitioners use the “Big Mac” mark only on
petitioners’ double-decker hamburgers, while respondents use the “Big Mak” mark
on hamburgers and other products like siopao, noodles and pizza. Respondents also
point out that petitioners sell their Big Mac double-deckers in a styrofoam box with
the “McDonald’s” logo and trademark in red, block letters at a price more expensive
than the hamburgers of respondents. In contrast, respondents sell their Big Mak
hamburgers in plastic wrappers and plastic bags. Respondents further point out that
petitioners’ restaurants are air-conditioned buildings with drive-thru service,
compared to respondents’ mobile vans.

These and other factors respondents cite cannot negate the undisputed fact that
respondents use their “Big Mak” mark on hamburgers, the same food product that
petitioners’ sell with the use of their registered mark “Big Mac.” Whether a
hamburger is single, double or triple-decker, and whether wrapped in plastic or
styrofoam, it remains the same hamburger food product. Even respondents’ use of
the “Big Mak” mark on non-hamburger food products cannot excuse their
infringement of petitioners’ registered mark, otherwise registered marks will lose
their protection under the law.

The registered trademark owner may use his mark on the same or similar products,
in different segments of the market, and at different price levels depending on
variations of the products for specific segments of the market. The Court has
recognized that the registered trademark owner enjoys protection in product and
market areas that are the normal potential expansion of his business. Thus, the
Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is
entitled is not limited to guarding his goods or business from actual market
competition with identical or similar products of the parties, but extends to all cases
in which the use by a junior appropriator of a trade-mark or trade-name is likely to
lead to a confusion of source, as where prospective purchasers would be misled into
thinking that the complaining party has extended his business into the field (see
148 ALR 56 et seq.; 53 Am Jur. 576) or is in any way connected with the activities of
the infringer; or when it forestalls the normal potential expansion of his business (v.
148 ALR, 77, 84; 52 Am. Jur. 576, 577).56 (Emphasis supplied)

On Whether Respondents’ Use of the “Big Mak” Mark Results in Likelihood of

Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the

dominancy test and the holistic test.57 The dominancy test focuses on the similarity
of the prevalent features of the competing trademarks that might cause confusion.
In contrast, the holistic test requires the court to consider the entirety of the marks
as applied to the products, including the labels and packaging, in determining
confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could
arise in the use of respondents’ “Big Mak” mark on hamburgers, relied on the
holistic test. Thus, the Court of Appeals ruled that “it is not sufficient that a
similarity exists in both name(s), but that more importantly, the overall
presentation, or in their essential, substantive and distinctive parts is such as would
likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the
genuine article.” The holistic test considers the two marks in their entirety, as they
appear on the goods with their labels and packaging. It is not enough to consider
their words and compare the spelling and pronunciation of the words.58

Respondents now vigorously argue that the Court of Appeals’ application of the
holistic test to this case is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test.
The dominancy test considers the dominant features in the competing marks in
determining whether they are confusingly similar. Under the dominancy test, courts
give greater weight to the similarity of the appearance of the product arising from
the adoption of the dominant features of the registered mark, disregarding minor
differences.59 Courts will consider more the aural and visual impressions created by
the marks in the public mind, giving little weight to factors like prices, quality, sales
outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,60 the Court ruled:

x x x It has been consistently held that the question of infringement of a trademark

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

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 Phil.
Nut Industry, Inc. v. Standard Brands Inc.,62 Converse Rubber Corporation v.
Universal Rubber Products, Inc.,63 and Asia Brewery, Inc. v. Court of Appeals.64 In
the 2001 case of Societe Des Produits Nestlé, S.A. v. Court of Appeals,65 the Court
explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on
trademarks and unfair competition that confusing similarity is to be determined on
the basis of visual, aural, connotative comparisons and overall impressions
engendered by the marks in controversy as they are encountered in the realities of
the marketplace. (Emphasis supplied)
The test of dominancy is now explicitly incorporated into law in Section 155.1 of the
Intellectual Property Code which defines infringement as the “colorable imitation of
a registered mark x x x or a dominant feature thereof.”

Applying the dominancy test, the Court finds that respondents’ use of the “Big Mak”
mark results in likelihood of confusion. First, “Big Mak” sounds exactly the same as
“Big Mac.” Second, the first word in “Big Mak” is exactly the same as the first word
in “Big Mac.” Third, the first two letters in “Mak” are the same as the first two
letters in “Mac.” Fourth, the last letter in “Mak” while a “k” sounds the same as “c”
when the word “Mak” is pronounced. Fifth, in Filipino, the letter “k” replaces “c” in
spelling, thus “Caloocan” is spelled “Kalookan.”

In short, aurally the two marks are the same, with the first word of both marks
phonetically the same, and the second word of both marks also phonetically the
same. Visually, the two marks have both two words and six letters, with the first
word of both marks having the same letters and the second word having the same
first two letters. In spelling, considering the Filipino language, even the last letters
of both marks are the same.

Clearly, respondents have adopted in “Big Mak” not only the dominant but also
almost all the features of “Big Mac.” Applied to the same food product of
hamburgers, the two marks will likely result in confusion in the public mind.

The Court has taken into account the aural effects of the words and letters
contained in the marks in determining the issue of confusing similarity. Thus, in
Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al.,66 the Court held:

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

Certainly, “Big Mac” and “Big Mak” for hamburgers create even greater confusion,
not only aurally but also visually.
Indeed, a person cannot distinguish “Big Mac” from “Big Mak” by their sound. When
one hears a “Big Mac” or “Big Mak” hamburger advertisement over the radio, one
would not know whether the “Mac” or “Mak” ends with a “c” or a “k.”

Petitioners’ aggressive promotion of the “Big Mac” mark, as borne by their

advertisement expenses, has built goodwill and reputation for such mark making it
one of the easily recognizable marks in the market today. This increases the
likelihood that consumers will mistakenly associate petitioners’ hamburgers and
business with those of respondents.’

Respondents’ inability to explain sufficiently how and why they came to choose “Big
Mak” for their hamburger sandwiches indicates their intent to imitate petitioners’
“Big Mac” mark. Contrary to the Court of Appeals’ finding, respondents’ claim that
their “Big Mak” mark was inspired by the first names of respondent Dy’s mother
(Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more
creative choice for a corporate name by using the names of his parents, especially
since he was allegedly driven by sentimental reasons. For one, he could have put
his father’s name ahead of his mother’s, as is usually done in this patriarchal
society, and derived letters from said names in that order. Or, he could have taken
an equal number of letters (i.e., two) from each name, as is the more usual thing
done. Surely, the more plausible reason behind Respondents’ choice of the word
“M[ak],” especially when taken in conjunction with the word “B[ig],” was their intent
to take advantage of Petitioners’ x x x “B[ig] M[ac]” trademark, with their alleged
sentiment-focused “explanation” merely thought of as a convenient, albeit
unavailing, excuse or defense for such an unfair choice of name.67

Absent proof that respondents’ adoption of the “Big Mak” mark was due to honest
mistake or was fortuitous,68 the inescapable conclusion is that respondents
adopted the “Big Mak” mark to “ride on the coattails” of the more established “Big
Mac” mark.69 This saves respondents much of the expense in advertising to create
market recognition of their mark and hamburgers.70

Thus, we hold that confusion is likely to result in the public mind. We sustain
petitioners’ claim of trademark infringement.

On the Lack of Proof of Actual Confusion

Petitioners’ failure to present proof of actual confusion does not negate their claim
of trademark infringement. As noted in American Wire & Cable Co. v. Director of
Patents,71 Section 22 requires the less stringent standard of “likelihood of
confusion” only. While proof of actual confusion is the best evidence of infringement,
its absence is inconsequential.72
On the Issue of Unfair Competition

Section 29 (“Section 29”)73 of RA 166 defines unfair competition, thus:

xxxx

Any person who will employ deception or any other means contrary to good faith by
which he shall pass off the goods manufactured by him or in which he deals, or his
business, or services for those of the one having established such goodwill, or who
shall commit any acts calculated to produce said result, shall be guilty of unfair
competition, and shall be subject to an action therefor.

In particular, and without in any way limiting the scope of unfair competition, the
following shall be deemed guilty of unfair competition:

(a)Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in
the wrapping of the packages in which they are contained, or the devices or words
thereon, or in any feature of their appearance, which would be likely to influence
purchasers to believe that the goods offered are those of a manufacturer or dealer,
other than the actual manufacturer or dealer, or who otherwise clothes the goods
with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of
another who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to discredit
the goods, business or services of another. (Emphasis supplied)

The essential elements of an action for unfair competition are (1) confusing
similarity in the general appearance of the goods, and (2) intent to deceive the
public and defraud a competitor.74 The confusing similarity may or may not result
from similarity in the marks, but may result from other external factors in the
packaging or presentation of the goods. The intent to deceive and defraud may be
inferred from the similarity of the appearance of the goods as offered for sale to the
public.75 Actual fraudulent intent need not be shown.76

Unfair competition is broader than trademark infringement and includes passing off
goods with or without trademark infringement. Trademark infringement is a form of
unfair competition.77 Trademark infringement constitutes unfair competition when
there is not merely likelihood of confusion, but also actual or probable deception on
the public because of the general appearance of the goods. There can be trademark
infringement without unfair competition as when the infringer discloses on the
labels containing the mark that he manufactures the goods, thus preventing the
public from being deceived that the goods originate from the trademark owner.78

To support their claim of unfair competition, petitioners allege that respondents

fraudulently passed off their hamburgers as “Big Mac” hamburgers. Petitioners add
that respondents’ fraudulent intent can be inferred from the similarity of the marks
in question.79

Passing off (or palming off) takes place where the defendant, by imitative devices
on the general appearance of the goods, misleads prospective purchasers into
buying his merchandise under the impression that they are buying that of his
competitors.80 Thus, the defendant gives his goods the general appearance of the
goods of his competitor with the intention of deceiving the public that the goods are
those of his competitor.

The RTC described the respective marks and the goods of petitioners and
respondents in this wise:

The mark “B[ig] M[ac]” is used by plaintiff McDonald’s to identify its double decker
hamburger sandwich. The packaging material is a styrofoam box with the
McDonald’s logo and trademark in red with block capital letters printed on it. All
letters of the “B[ig] M[ac]” mark are also in red and block capital letters. On the
other hand, defendants’ “B[ig] M[ak]” script print is in orange with only the letter
“B” and “M” being capitalized and the packaging material is plastic wrapper. x x x x
Further, plaintiffs’ logo and mascot are the umbrella “M” and “Ronald McDonald’s,”
respectively, compared to the mascot of defendant Corporation which is a chubby
boy called “Macky” displayed or printed between the words “Big” and “Mak.”81
(Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their
hamburgers the general appearance of petitioners’ “Big Mac” hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in
the words that give respondents’ “Big Mak” hamburgers the general appearance of
petitioners’ “Big Mac” hamburgers. Section 29(a) expressly provides that the
similarity in the general appearance of the goods may be in the “devices or words”
used on the wrappings. Respondents have applied on their plastic wrappers and
bags almost the same words that petitioners use on their styrofoam box. What
attracts the attention of the buying public are the words “Big Mak” which are almost
the same, aurally and visually, as the words “Big Mac.” The dissimilarities in the
material and other devices are insignificant compared to the glaring similarity in the
words used in the wrappings.

Section 29(a) also provides that the defendant gives “his goods the general
appearance of goods of another manufacturer.” Respondents’ goods are
hamburgers which are also the goods of petitioners. If respondents sold egg
sandwiches only instead of hamburger sandwiches, their use of the “Big Mak” mark
would not give their goods the general appearance of petitioners’ “Big Mac”
hamburgers. In such case, there is only trademark infringement but no unfair
competition. However, since respondents chose to apply the “Big Mak” mark on
hamburgers, just like petitioner’s use of the “Big Mac” mark on hamburgers,
respondents have obviously clothed their goods with the general appearance of
petitioners’ goods.

Moreover, there is no notice to the public that the “Big Mak” hamburgers are
products of “L.C. Big Mak Burger, Inc.” Respondents introduced during the trial
plastic wrappers and bags with the words “L.C. Big Mak Burger, Inc.” to inform the
public of the name of the seller of the hamburgers. However, petitioners introduced
during the injunctive hearings plastic wrappers and bags with the “Big Mak” mark
without the name “L.C. Big Mak Burger, Inc.” Respondents’ belated presentation of
plastic wrappers and bags bearing the name of “L.C. Big Mak Burger, Inc.” as the
seller of the hamburgers is an after-thought designed to exculpate them from their
unfair business conduct. As earlier stated, we cannot consider respondents’
evidence since petitioners’ complaint was based on facts existing before and during
the injunctive hearings.

Thus, there is actually no notice to the public that the “Big Mak” hamburgers are
products of “L.C. Big Mak Burger, Inc.” and not those of petitioners who have the
exclusive right to the “Big Mac” mark. This clearly shows respondents’ intent to
deceive the public. Had respondents’ placed a notice on their plastic wrappers and
bags that the hamburgers are sold by “L.C. Big Mak Burger, Inc.,” then they could
validly claim that they did not intend to deceive the public. In such case, there is
only trademark infringement but no unfair competition.82 Respondents, however,
did not give such notice. We hold that as found by the RTC, respondent corporation
is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 2383 (“Section 23”) in relation to Section 29 of RA 166, a plaintiff

who successfully maintains trademark infringement and unfair competition claims is
entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the
injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September
1994) and in ordering the payment of P400,000 actual damages in favor of
petitioners. The injunctive writ is indispensable to prevent further acts of
infringement by respondent corporation. Also, the amount of actual damages is a
reasonable percentage (11.9%) of respondent corporation’s gross sales for three
(1988-1989 and 1991) of the six years (1984-1990) respondents have used the “Big
Mak” mark.84

The RTC also did not err in awarding exemplary damages by way of correction for
the public good85 in view of the finding of unfair competition where intent to
deceive the public is essential. The award of attorney’s fees and expenses of
litigation is also in order.86

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26
November 1999 of the Court of Appeals and its Resolution dated 11 July 2000 and
REINSTATE the Decision dated 5 September 1994 of the Regional Trial Court of
Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for
trademark infringement and unfair competition.

SO ORDERED.

Davide, Jr. (C.J., Chairman), Quisumbing, Ynares-Santiago and Azcuna, JJ., concur.

Petition granted, judgment and resolution set aside. That of the trial court
reinstated.

Note.—The likelihood of confusion of goods or business is a relative concept, to be

determined only according to the particular, and sometimes peculiar, circumstances
of each case. (Canon Kabushiki Kaisha vs. Court of Appeals, 336 SCRA 266 [2000])
McDonald’s Corporation vs. L.C. Big Mak Burger, Inc., 437 SCRA 10, G.R. No. 143993
August 18, 2004
 G.R. No. 194062. June 17, 2013.*

REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY,

ORLANDO REYES, FERRER SUAZO and ALVIN U. TY, petitioners, vs. PETRON
CORPORATION, PILIPINAS SHELL PETROLEUM CORPORATION, and SHELL
INTERNATIONAL PETROLEUM COMPANY LIMITED, respondents.

Remedial Law; Civil Procedure; Motion for Reconsideration; The general

rule is that a motion for reconsideration is a condition sine qua non before
a certiorari petition may lie, its purpose being to grant an opportunity for
the court a quo to correct any error attributed to it by re-examination of
the legal and factual circumstances of the case; Exceptions.―The general
rule is that a motion for reconsideration is a condition sine qua non before a
certiorari petition may lie, its purpose being to grant an opportunity for the court a
quo to correct any error attributed to it by re-examination of the legal and factual
circumstances of the case. However, this rule is not absolute as jurisprudence has
laid down several recognized exceptions permitting a resort to the special civil
action for certiorari without first filing a motion for reconsideration, viz.: (a) Where
the order is a patent nullity, as where the court a quo has no jurisdiction; (b) Where
the questions raised in the certiorari proceedings have been duly raised and passed
upon by the lower court, or are the same as those raised and passed upon in the
lower court. (c) Where there is an urgent necessity for the resolution of the question
and any further delay would prejudice the interests of the Government or of the
petitioner or the subject matter of the petition is perishable; (d) Where, under the
circumstances, a motion for reconsideration would be useless; (e) Where petitioner
was deprived of due process and there is extreme urgency for relief; (f) Where, in a
criminal case, relief from an order of arrest is urgent and the granting of such relief
by the trial court is improbable; (g) Where the proceedings in the lower court are a
nullity for lack of due process; (h) Where the proceeding was ex parte or in which
the petitioner had no opportunity to object; and, (i) Where the issue raised is one
purely of law or public interest is involved.

Intellectual Properties; Trademark Infringement; The mere unauthorized

use of a container bearing a registered trademark in connection with the
sale, distribution or advertising of goods or services which is likely to
cause confusion, mistake or deception among the buyers or consumers
can be considered as trademark infringement.―The Court in a very similar
case, made it categorically clear that the mere unauthorized use of a container
bearing a registered trademark in connection with the sale, distribution or
advertising of goods or services which is likely to cause confusion, mistake or
deception among the buyers or consumers can be considered as trademark
infringement. Here, petitioners have actually committed trademark infringement
when they refilled, without the respondents’ consent, the LPG containers bearing
the registered marks of the respondents. As noted by respondents, petitioners’ acts
will inevitably confuse the consuming public, since they have no way of knowing
that the gas contained in the LPG tanks bearing respondents’ marks is in reality not
the latter’s LPG product after the same had been illegally refilled. The public will
then be led to believe that petitioners are authorized refillers and distributors of
respondents’ LPG products, considering that they are accepting empty containers of
respondents and refilling them for resale.

Same; Unfair Competition; Words and Phrases; Unfair competition has

been defined as the passing off (or palming off) or attempting to pass off
upon the public of the goods or business of one person as the goods or
business of another with the end and probable effect of deceiving the
public.―From jurisprudence, unfair competition has been defined as the passing off
(or palming off) or attempting to pass off upon the public of the goods or business
of one person as the goods or business of another with the end and probable effect
of deceiving the public. Passing off (or palming off) takes place where the
defendant, by imitative devices on the general appearance of the goods, misleads
prospective purchasers into buying his merchandise under the impression that they
are buying that of his competitors. Thus, the defendant gives his goods the general
appearance of the goods of his competitor with the intention of deceiving the public
that the goods are those of his competitor. In the present case, respondents
pertinently observed that by refilling and selling LPG cylinders bearing their
registered marks, petitioners are selling goods by giving them the general
appearance of goods of another manufacturer. What’s more, the CA correctly
pointed out that there is a showing that the consumers may be misled into believing
that the LPGs contained in the cylinders bearing the marks “GASUL” and
“SHELLANE” are those goods or products of the petitioners when, in fact, they are
not. Obviously, the mere use of those LPG cylinders bearing the trademarks
“GASUL” and “SHELLANE” will give the LPGs sold by REGASCO the general
appearance of the products of the petitioners.

Same; Corporation Law; The existence of the corporate entity does not
shield from prosecution the corporate agent who knowingly and
intentionally caused the corporation to commit a crime. Thus, petitioners
cannot hide behind the cloak of the separate corporate personality of the
corporation to escape criminal liability.―This Court finds that there is sufficient
evidence to warrant the prosecution of petitioners for trademark infringement and
unfair competition, considering that petitioner Republic Gas Corporation, being a
corporation, possesses a personality separate and distinct from the person of its
officers, directors and stockholders. Petitioners, being corporate officers and/or
directors, through whose act, default or omission the corporation commits a crime,
may themselves be individually held answerable for the crime. Veritably, the CA
appropriately pointed out that petitioners, being in direct control and supervision in
the management and conduct of the affairs of the corporation, must have known or
are aware that the corporation is engaged in the act of refilling LPG cylinders
bearing the marks of the respondents without authority or consent from the latter
which, under the circumstances, could probably constitute the crimes of trademark
infringement and unfair competition. The existence of the corporate entity does not
shield from prosecution the corporate agent who knowingly and intentionally caused
the corporation to commit a crime. Thus, petitioners cannot hide behind the cloak of
the separate corporate personality of the corporation to escape criminal liability. A
corporate officer cannot protect himself behind a corporation where he is the actual,
present and efficient actor.

PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.

The facts are stated in the opinion of the Court.

Julie Ann Christy A. Padilla for petitioners.

Villaraza Cruz Marcelo & Angangco for respondents.

PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of
Court filed by petitioners seeking the reversal of the Decision1 dated July 2, 2010,
and Resolution2 dated October 11, 2010 of the Court of Appeals (CA) in CA-G.R. SP
No. 106385.

Stripped of non-essentials, the facts of the case, as summarized by the CA, are as
follows:

Petitioners Petron Corporation (“Petron” for brevity) and Pilipinas Shell Petroleum
Corporation (“Shell” for brevity) are two of the largest bulk suppliers and producers
of LPG in the Philippines. Petron is the registered owner in the Philippines of the
trademarks GASUL and GASUL cylinders used for its LGP products. It is the sole
entity in the Philippines authorized to allow refillers and distributors to refill, use,
sell, and distribute GASUL LPG containers, products and its trademarks. Pilipinas
Shell, on the other hand, is the authorized user in the Philippines of the tradename,
trademarks, symbols or designs of its principal, Shell International Petroleum
Company Limited, including the marks SHELLANE and SHELL device in connection
with the production, sale and distribution of SHELLANE LPGs. It is the only
corporation in the Philippines authorized to allow refillers and distributors to refill,
use, sell and distribute SHELLANE LGP containers and products. Private
respondents, on the other hand, are the directors and officers of Republic Gas
Corporation (“REGASCO” for brevity), an entity duly licensed to engage in, conduct
and carry on, the business of refilling, buying, selling, distributing and marketing at
wholesale and retail of Liquefied Petroleum Gas (“LPG”).

LPG Dealers Associations, such as the Shellane Dealers Association, Inc., Petron
Gasul Dealers Association, Inc. and Totalgaz Dealers Association, received reports
that certain entities were engaged in the unauthorized refilling, sale and distribution
of LPG cylinders bearing the registered tradenames and trademarks of the
petitioners. As a consequence, on February 5, 2004, Genesis Adarlo (hereinafter
referred to as Adarlo), on behalf of the aforementioned dealers associations, filed a
letter-complaint in the National Bureau of Investigation (“NBI”) regarding the
alleged illegal trading of petroleum products and/or underdelivery or underfilling in
the sale of LPG products.

Acting on the said letter-complaint, NBI Senior Agent Marvin E. De Jemil (hereinafter
referred to as “De Jemil”) was assigned to verify and confirm the allegations
contained in the letter-complaint. An investigation was thereafter conducted,
particularly within the areas of Caloocan, Malabon, Novaliches and Valenzuela,
which showed that several persons and/or establishments, including REGASCO,
were suspected of having violated provisions of Batas Pambansa Blg. 33 (B.P. 33).
The surveillance revealed that REGASCO LPG Refilling Plant in Malabon was
engaged in the refilling and sale of LPG cylinders bearing the registered marks of
the petitioners without authority from the latter. Based on its General Information
Sheet filed in the Securities and Exchange Commission, REGASCO’s members of its
Board of Directors are: (1) Arnel U. Ty – President, (2) Marie Antoinette Ty –
Treasurer, (3) Orlando Reyes – Corporate Secretary, (4) Ferrer Suazo and (5) Alvin Ty
(hereinafter referred to collectively as private respondents).

De Jemil, with other NBI operatives, then conducted a test-buy operation on

February 19, 2004 with the former and a confidential asset going undercover. They
brought with them four (4) empty LPG cylinders bearing the trademarks of
SHELLANE and GASUL and included the same with the purchase of J&S, a
REGASCO’s regular customer. Inside REGASCO’s refilling plant, they witnessed that
REGASCO’s employees carried the empty LPG cylinders to a refilling station and
refilled the LPG empty cylinders. Money was then given as payment for the refilling
of the J&S’s empty cylinders which included the four LPG cylinders brought in by De
Jemil and his companion. Cash Invoice No. 191391 dated February 19, 2004 was
issued as evidence for the consideration paid.

After leaving the premises of REGASCO LPG Refilling Plant in Malabon, De Jemil and
the other NBI operatives proceeded to the NBI headquarters for the proper marking
of the LPG cylinders. The LPG cylinders refilled by REGASCO were likewise found
later to be underrefilled.

Thus, on March 5, 2004, De Jemil applied for the issuance of search warrants in the
Regional Trial Court, Branch 24, in the City of Manila against the private respondents
and/or occupants of REGASCO LPG Refilling Plant located at Asucena Street, Longos,
Malabon, Metro Manila for alleged violation of Section 2 (c), in relation to Section 4,
of B.P. 33, as amended by PD 1865. In his sworn affidavit attached to the
applications for search warrants, Agent De Jemil alleged as follows:

“x x x.

“4. Respondent’s REGASCO LPG Refilling Plant-Malabon is not one of those entities

authorized to refill LPG cylinders bearing the marks of PSPC, Petron and Total
Philippines Corporation. A Certification dated February 6, 2004 confirming such fact,
together with its supporting documents, are attached as Annex “E” hereof.

6. For several days in the month of February 2004, the other NBI operatives and I
conducted surveillance and investigation on respondents’ REGASCO LPG refilling
Plant-Malabon. Our surveillance and investigation revealed that respondents’
REGASCO LPG Refilling Plant-Malabon is engaged in the refilling and sale of LPG
cylinders bearing the marks of Shell International, PSPC and Petron.
x x x.

8. The confidential asset and I, together with the other operatives of [the] NBI, put
together a test-buy operation. On February 19, 2004, I, together with the
confidential asset, went undercover and executed our test-buy operation. Both the
confidential assets and I brought with us four (4) empty LPG cylinders branded as
Shellane and Gasul. x x x in order to have a successful test buy, we decided to
“ride-on” our purchases with the purchase of Gasul and Shellane LPG by J & S, one
of REGASCO’s regular customers.

9. We proceeded to the location of respondents’ REGASCO LPG Refilling Plant-

Malabon and asked from an employee of REGASCO inside the refilling plant for refill
of the empty LPG cylinders that we have brought along, together with the LPG
cylinders brought by J & S. The REGASCO employee, with some assistance from
other employees, carried the empty LPG cylinders to a refilling station and we
witnessed the actual refilling of our empty LPG cylinders.

10. Since the REGASCO employees were under the impression that we were
together with

J & S, they made the necessary refilling of our empty LPG cylinders alongside the
LPG cylinders brought by J & S. When we requested for a receipt, the REGASCO
employees naturally counted our LPG cylinders together with the LPG cylinders
brought by J & S for refilling. Hence, the amount stated in Cash Invoice No. 191391
dated February 19, 2004, equivalent to Sixteen Thousand Two Hundred Eighty-Six
and 40/100 (Php16,286.40), necessarily included the amount for the refilling of our
four (4) empty LPG cylinders. x x x.

11. After we accomplished the purchase of the illegally refilled LPG cylinders from
respondents’ REGASCO LPG Refilling Plant-Malabon, we left its premises bringing
with us the said LPG cylinders. Immediately, we proceeded to our headquarters and
made the proper markings of the illegally refilled LPG cylinders purchased from
respondents’ REGASCO LPG Refilling Plant-Malabon by indicating therein where and
when they were purchased. Since REGASCO is not an authorized refiller, the four (4)
LPG cylinders illegally refilled by respondents’ REGASCO LPG Refilling Plant-
Malabon, were without any seals, and when [weighed], were under refilled.
Photographs of the LPG cylinders illegally refilled from respondents’ REGASCO LPG
Refilling Plant-Malabon are attached as Annex “G” hereof. x x x.”
After conducting a personal examination under oath of Agent De Jemil and his
witness, Joel Cruz, and upon reviewing their sworn affidavits and other attached
documents, Judge Antonio M. Eugenio, Presiding Judge of the RTC, Branch 24, in the
City of Manila found probable cause and correspondingly issued Search Warrants
Nos. 04-5049 and 04-5050.

Upon the issuance of the said search warrants, Special Investigator Edgardo C.
Kawada and other NBI operatives immediately proceeded to the REGASCO LPG
Refilling Station in Malabon and served the search warrants on the private
respondents. After searching the premises of REGASCO, they were able to seize
several empty and filled Shellane and Gasul cylinders as well as other allied
paraphernalia.

Subsequently, on January 28, 2005, the NBI lodged a complaint in the Department
of Justice against the private respondents for alleged violations of Sections 155 and
168 of Republic Act (RA) No. 8293, otherwise known as the Intellectual Property
Code of the Philippines.

On January 15, 2006, Assistant City Prosecutor Armando C. Velasco recommended

the dismissal of the complaint. The prosecutor found that there was no proof
introduced by the petitioners that would show that private respondent REGASCO
was engaged in selling petitioner’s products or that it imitated and reproduced the
registered trademarks of the petitioners. He further held that he saw no deception
on the part of REGASCO in the conduct of its business of refilling and marketing
LPG. The Resolution issued by Assistant City Prosecutor Velasco reads as follows in
its dispositive portion:

“WHEREFORE, foregoing considered, the undersigned finds the evidence against the
respondents to be insufficient to form a well-founded belief that they have probably
committed violations of Republic Act No. 9293. The DISMISSAL of this case is hereby
respectfully recommended for insufficiency of evidence.”

On appeal, the Secretary of the Department of Justice affirmed the prosecutor’s

dismissal of the complaint in a Resolution dated September 18, 2008, reasoning
therein that:

“x x x, the empty Shellane and Gasul LPG cylinders were brought by the NBI agent
specifically for refilling. Refilling the same empty cylinders is by no means an
offense in itself ― it being the legitimate business of Regasco to engage in the
refilling and marketing of liquefied petroleum gas. In other words, the empty
cylinders were merely filled by the employees of Regasco because they were
brought precisely for that purpose. They did not pass off the goods as those of
complainants’ as no other act was done other than to refill them in the normal
course of its business.

“In some instances, the empty cylinders were merely swapped by customers for
those which are already filled. In this case, the end-users know fully well that the
contents of their cylinders are not those produced by complainants. And the reason
is quite simple ― it is an independent refilling station.

“At any rate, it is settled doctrine that a corporation has a personality separate and
distinct from its stockholders as in the case of herein respondents. To sustain the
present allegations, the acts complained of must be shown to have been committed
by respondents in their individual capacity by clear and convincing evidence. There
being none, the complaint must necessarily fail. As it were, some of the respondents
are even gainfully employed in other business pursuits. x x x.”3

Dispensing with the filing of a motion for reconsideration, respondents sought

recourse to the CA through a petition for certiorari.

In a Decision dated July 2, 2010, the CA granted respondents’ certiorari petition. The
fallo states:

WHEREFORE, in view of the foregoing premises, the petition filed in this case is
hereby GRANTED. The assailed Resolution dated September 18, 2008 of the
Department of Justice in I.S. No. 2005-055 is hereby REVERSED and SET ASIDE.

SO ORDERED.4

Petitioners then filed a motion for reconsideration. However, the same was denied
by the CA in a Resolution dated October 11, 2010.

Accordingly, petitioners filed the instant Petition for Review on Certiorari raising the
following issues for our resolution:

Whether the Petition for Certiorari filed by RESPONDENTS should have been denied
outright.
Whether sufficient evidence was presented to prove that the crimes of Trademark
Infringement and Unfair Competition as defined and penalized in Section 155 and
Section 168 in relation to Section 170 of Republic Act No. 8293 (The Intellectual
Property Code of the Philippines) had been committed.

Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable for the
offense charged.5

Let us discuss the issues in seriatim.

Anent the first issue, the general rule is that a motion for reconsideration is a
condition sine qua non before a certiorari petition may lie, its purpose being to grant
an opportunity for the court a quo to correct any error attributed to it by re-
examination of the legal and factual circumstances of the case.6

However, this rule is not absolute as jurisprudence has laid down several recognized
exceptions permitting a resort to the special civil action for certiorari without first
filing a motion for reconsideration, viz.:

(a) Where the order is a patent nullity, as where the court a quo has no
jurisdiction;

(b) Where the questions raised in the certiorari proceedings have been duly raised
and passed upon by the lower court, or are the same as those raised and passed
upon in the lower court;

(c) Where there is an urgent necessity for the resolution of the question and any
further delay would prejudice the interests of the Government or of the petitioner or
the subject matter of the petition is perishable;

(d) Where, under the circumstances, a motion for reconsideration would be

useless;

(e) Where petitioner was deprived of due process and there is extreme urgency for
relief;

(f) Where, in a criminal case, relief from an order of arrest is urgent and the
granting of such relief by the trial court is improbable;

(g) Where the proceedings in the lower court are a nullity for lack of due process;
(h) Where the proceeding was ex parte or in which the petitioner had no
opportunity to object; and,

(i) Where the issue raised is one purely of law or public interest is involved.7

In the present case, the filing of a motion for reconsideration may already be
dispensed with considering that the questions raised in this petition are the same as
those that have already been squarely argued and passed upon by the Secretary of
Justice in her assailed resolution.

Apropos the second and third issues, the same may be simplified to one core issue:
whether probable cause exists to hold petitioners liable for the crimes of trademark
infringement and unfair competition as defined and penalized under Sections 155
and 168, in relation to Section 170 of Republic Act (R.A.) No. 8293.

Section 155 of R.A. No. 8293 identifies the acts constituting trademark infringement
as follows:

Section 155. Remedies; Infringement.―Any person who shall, without the consent

of the owner of the registered mark:

155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation

of a registered mark of the same container or a dominant feature thereof in
connection with the sale, offering for sale, distribution, advertising of any goods or
services including other preparatory steps necessary to carry out the sale of any
goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2 Reproduce, counterfeit, copy or colorably imitate a registered mark or a

dominant feature thereof and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used in commerce upon or in connection with the
sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or
to deceive, shall be liable in a civil action for infringement by the registrant for the
remedies hereinafter set forth: Provided, That the infringement takes place at the
moment any of the acts stated in Subsection 155.1 or this subsection are
committed regardless of whether there is actual sale of goods or services using the
infringing material.8

From the foregoing provision, the Court in a very similar case, made it categorically
clear that the mere unauthorized use of a container bearing a registered trademark
in connection with the sale, distribution or advertising of goods or services which is
likely to cause confusion, mistake or deception among the buyers or consumers can
be considered as trademark infringement.9

Here, petitioners have actually committed trademark infringement when they

refilled, without the respondents’ consent, the LPG containers bearing the registered
marks of the respondents. As noted by respondents, petitioners’ acts will inevitably
confuse the consuming public, since they have no way of knowing that the gas
contained in the LPG tanks bearing respondents’ marks is in reality not the latter’s
LPG product after the same had been illegally refilled. The public will then be led to
believe that petitioners are authorized refillers and distributors of respondents’ LPG
products, considering that they are accepting empty containers of respondents and
refilling them for resale.

As to the charge of unfair competition, Section 168.3, in relation to Section 170, of

R.A. No. 8293 describes the acts constituting unfair competition as follows:

Section 168. Unfair Competition, Rights, Regulations and Remedies. x x x.

168.3 In particular, and without in any way limiting the scope of protection against
unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in
the wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
influence purchasers to believe that the goods offered are those of a manufacturer
or dealer, other than the actual manufacturer or dealer, or who otherwise clothes
the goods with such appearance as shall deceive the public and defraud another of
his legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose;

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, Section 168 and Subsection
169.1.
From jurisprudence, unfair competition has been defined as the passing off (or
palming off) or attempting to pass off upon the public of the goods or business of
one person as the goods or business of another with the end and probable effect of
deceiving the public.10

assing off (or palming off) takes place where the defendant, by imitative devices on
the general appearance of the goods, misleads prospective purchasers into buying
his merchandise under the impression that they are buying that of his competitors.
Thus, the defendant gives his goods the general appearance of the goods of his
competitor with the intention of deceiving the public that the goods are those of his
competitor.11

In the present case, respondents pertinently observed that by refilling and selling
LPG cylinders bearing their registered marks, petitioners are selling goods by giving
them the general appearance of goods of another manufacturer.

What’s more, the CA correctly pointed out that there is a showing that the
consumers may be misled into believing that the LPGs contained in the cylinders
bearing the marks “GASUL” and “SHELLANE” are those goods or products of the
petitioners when, in fact, they are not. Obviously, the mere use of those LPG
cylinders bearing the trademarks “GASUL” and “SHELLANE” will give the LPGs sold
by REGASCO the general appearance of the products of the petitioners.

In sum, this Court finds that there is sufficient evidence to warrant the prosecution
of petitioners for trademark infringement and unfair competition, considering that
petitioner Republic Gas Corporation, being a corporation, possesses a personality
separate and distinct from the person of its officers, directors and stockholders.12
Petitioners, being corporate officers and/or directors, through whose act, default or
omission the corporation commits a crime, may themselves be individually held
answerable for the crime.13 Veritably, the CA appropriately pointed out that
petitioners, being in direct control and supervision in the management and conduct
of the affairs of the corporation, must have known or are aware that the corporation
is engaged in the act of refilling LPG cylinders bearing the marks of the respondents
without authority or consent from the latter which, under the circumstances, could
probably constitute the crimes of trademark infringement and unfair competition.
The existence of the corporate entity does not shield from prosecution the corporate
agent who knowingly and intentionally caused the corporation to commit a crime.
Thus, petitioners cannot hide behind the cloak of the separate corporate personality
of the corporation to escape criminal liability. A corporate officer cannot protect
himself behind a corporation where he is the actual, present and efficient actor.14

WHEREFORE, premises considered, the petition is hereby DENIED and the Decision
dated July 2, 2010 and Resolution dated October 11, 2010 of the Court of Appeals in
CA-G.R. SP No. 106385 are AFFIRMED.
SO ORDERED.

Velasco, Jr. (Chairperson), Abad, Mendoza and Leonen, JJ., concur.

Petition denied, judgment and resolution affirmed.

Notes.―To establish trademark infringement, the following elements must be

proven: (1) the validity of plaintiff’s mark; (2) the plaintiff’s ownership of the mark;
and (3) the use of the mark or its colorable imitation by the alleged infringer results
in “likelihood of confusion.” (Superior Commercial Enterprises, Inc. vs. Kunnan
Enterprises Ltd., 618 SCRA 531 [2010])

The corporate personality may be disregarded, and the individuals composing the
corporation will be treated as individuals, if the corporate entity is being used as a
cloak or cover for fraud or illegality; as a justification for a wrong; as an alter ego,
an adjunct, or a business conduit for the sole benefit of the stockholders. (Halley vs.
Printwell, Inc., 649 SCRA 116 [2011])

Levi Strauss (Phils.), Inc. vs. Vogue Traders Clothing Company

G.R. No. 132993. June 29, 2005.*

LEVI STRAUSS (PHILS.), INC., petitioner, vs. VOGUE TRADERS CLOTHING

COMPANY, respondent.

Trademarks and Trade Names; Infringement; Actions; A certificate of

registration gives rise to a presumption of its validity and the right to the
exclusive use of the trademarks.—Petitioner is a holder of Certificate of
Registration No. 1379-A for its Levi’s trademarks. The registration gives rise to a
presumption of its validity and the right to the exclusive use of the same. As set
forth in Section 17 of Republic Act (R.A.) No. 166 or “The Trademark Law,” an entity
having a duly registered trademark can file a suit against another entity for the
protection of its right.

Same; Same; Same; While an administrative cancellation of a registered

trademark, on any of the grounds under Section 17 of R.A. No. 166, is
within the ambit of the BPTTT, an action for infringement or any other
incidental remedy sought is within the jurisdiction of the ordinary courts.
—In Conrad and Company, Inc. v. Court of Appeals, as reiterated in the case of
Shangri-La International Hotel Management Ltd. v. Court of Appeals, the Court
clarified that while an administrative cancellation of a registered trademark, on any
of the grounds under Section 17 of R.A. No. 166, is within the ambit of the BPTTT, an
action for infringement or any other incidental remedy sought is within the
jurisdiction of the ordinary courts.

Same; Same; Same; The rights accorded to an owner of a registered

trademark expanded with the passage of Republic Act No. 8293.—The
passage of Republic Act No. 8293, otherwise known as the “Intellectual Property
Code of the Philippines,” expanded the rights accorded to an owner of a registered
trademark.

Same; Same; Same; The remedy of an owner of a registered mark to

institute an action for infringement or damages provided in Sections 155
(2), 156 and 163 of the law.—Sections 155 (2), 156, and 163 of the said law
further provide for the remedy of an owner of a registered mark to institute an
action for infringement or damages against a person or entity that may reproduce,
counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to
labels, signs, prints, packages, wrappers, receptacles or advertisements intended to
be used in commerce upon or in connection with the sale, offering for sale,
distribution, or advertising of goods or services on or in connection with which such
use is likely to cause confusion, or to cause mistake, or to deceive.

Same; Same; Same; An action for infringement or unfair competition,

including the available remedies of injunction and damages, in the regular
courts can proceed independently or simultaneously with an action for the
administrative cancellation of a registered trademark in the BPTTT.—It
bears stressing that an action for infringement or unfair competition, including the
available remedies of injunction and damages, in the regular courts can proceed
independently or simultaneously with an action for the administrative cancellation
of a registered trademark in the BPTTT. As applied to the present case, petitioner’s
prior filing of two inter partes cases against the respondent before the BPTTT for the
cancellation of the latter’s trademark registrations, namely, “LIVE’S” and “LIVE’S
Label Mark,” does not preclude petitioner’s right (as a defendant) to include in its
answer (to respondent’s complaint for damages in Civil Case No. No. 96-76944) a
counterclaim for infringement with a prayer for the issuance of a writ of preliminary
injunction.

Remedial Law; Actions; Forum Shopping; The requirement of certification

against forum shopping under the Rules is to be executed by the
petitioner, or in the case of a corporation, its duly authorized director or
officer, but not petitioner’s counsel whose professional services have been
engaged to handle the subject case.—The requirement of certification against
forum shopping under the Rules is to be executed by the petitioner, or in the case of
a corporation, its duly authorized director or officer, but not petitioner’s counsel
whose professional services have been engaged to handle the subject case. The
reason is that it is the petitioner who has personal knowledge whether there are
cases of similar nature pending with the other courts, tribunals, or agencies. Thus,
in the present case, the Court of Appeals should have outrightly dismissed the
petition for certiorari filed by the respondent (as therein petitioner in the appeals
court) due to the defective certification of non-forum shopping. The certification
made by Atty. Soriano, counsel for the respondent, who is not one of its duly
authorized directors or officers, is defective. Even if Atty. Soriano was the “in-house
counsel,” the fact remains that no board resolution, or even a Secretary’s Certificate
containing the board resolution, was submitted to show that he was indeed
authorized to file the said petition in the Court of Appeals.

Same; Same; Injunction; A writ of preliminary injunction would become a

prejudgment of a case only when it grants the main prayer in the
complaint or responsive pleading, so much so that there is nothing left for
the trial court to try except merely incidental matters.—Indeed, a writ of
preliminary injunction is generally based solely on initial and incomplete evidence
adduced by the applicant (herein petitioner). The evidence submitted during the
hearing of the incident is not conclusive, for only a “sampling” is needed to give the
trial court an idea of the justification for its issuance pending the decision of the
case on the merits. As such, the findings of fact and opinion of a court when issuing
the writ of preliminary injunction are interlocutory in nature. Moreover, the sole
object of a preliminary injunction is to preserve the status quo until the merits of the
case can be heard. Since Section 4 of Rule 58 of the Rules of Civil Procedure gives
the trial courts sufficient discretion to evaluate the conflicting claims in an
application for a provisional writ which often involves a factual determination, the
appellate courts generally will not interfere in the absence of manifest abuse of
such discretion. A writ of preliminary injunction would become a prejudgment of a
case only when it grants the main prayer in the complaint or responsive pleading,
so much so that there is nothing left for the trial court to try except merely
incidental matters. Such fact does not obtain in the present case.

PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.

The facts are stated in the opinion of the Court.

Gilbert T. Reyes for petitioner.

Danilo Soriano for respondent.

AZCUNA, J.:

This is a petition for review on certiorari seeking to annul the decision1 of the Court
of Appeals, dated August 13, 1997, which annulled and set aside the orders,2 dated
December 10, 1996 and April 11, 1997, issued by the Regional Trial Court of Manila,
Branch 1 and which directed the trial court to desist from proceeding with the said
case until the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) has
finally resolved Inter Partes Cases Nos. 4216 and 4217, and the resolution of the
Court of Appeals, dated March 5, 1998, denying petitioner’s motion for
reconsideration.

The factual antecedents are as follows:

In 1972, per “Trademark, Technical Data, and Technical Assistance Agreement,”3

Levi Strauss & Co., the principal based in Delaware, United States of America,
granted petitioner Levi Strauss (Phils.) a non-exclusive license to use LEVI’S
trademark, design, and name in the manufacturing, marketing, distribution, and
sale of its clothing and other goods.4 The licensing agreement was renewed several
times, the recent one being under Certificate of Registration No. 1379-A.5 Levi
Strauss & Co. obtained certificates of registration from the BPTTT for the following
trademarks: “LEVI’S”6; “501”7; “Two Horse Design”8; “Two Horse Label”9; “Two
Horse Patch”10; “Two Horse Label with Patterned Arcuate Design”11;

“Arcuate Design”12; and the composite trademarks,13 namely, “Arcuate,” “Tab,”

and “Two Horse Patch.”

Petitioner discovered the existence of some trademark registrations belonging to

respondent which, in its view, were confusingly similar to its trademarks. Thus, it
instituted two cases before the BPTTT for the cancellation of respondent’s
trademark registrations, to wit: Inter Partes Case No. 4216, a petition for
cancellation of Certificate of Registration No. 53918 (for “LIVE’S”) and Inter Partes
Case No. 4217, a petition for cancellation of Certificate of Registration No. 8868 (for
“LIVE’S” Label Mark).

Petitioner then applied for the issuance of a search warrant on the premises of
respondent Vogue Traders Clothing Company, owned by one Tony Lim, with the
Regional Trial Court of Manila, Branch 3. On December 12, 1995, said trial court
issued Search Warrant No. 95-75714 and Search Warrant No. 95-75815 based on its
finding of probable cause that the respondent had violated Article 189 of the
Revised Penal Code16 in manufacturing, selling, and incorporating designs or marks
in its jeans which were confusingly similar to petitioner’s “LEVI’s jeans.” These
search warrants commanded the seizure of certain goods bearing copies or
imitations of the trademarks which belonged to petitioner.17 On December 13,
1995, the search warrants were enforced and several goods belonging to
respondent were seized.18 Meanwhile, it appears that criminal charges were filed
against Tony Lim of respondent company in the Department of Justice,19 but the
same were eventually dismissed and the search warrants were quashed.

Consequently, on February 1, 1996, respondent filed a complaint20 for damages in

the Regional Trial Court of Manila, Branch 50, against petitioner. The complaint
alleged that since January 1, 1988, respondent, through Antonio Sevilla, with
business address at 1082 Carmen Planas Street, Tondo, Manila, had been a lawful
assignee and authorized user of: (a) the trademark “LIVE’S” under Certificate of
Registration No. 53918 issued by the BPTTT, (b) the trademark “LIVE’S LABEL
MARK” under Certificate of Registration No. SR 8868 issued by the BPTTT, and (c)
the copyright registrations of “LIVE’S ORIGINAL JEANS,” its pocket design, and hand
tag; that the goods, articles, and effects seized from respondent’s establishment
were manufactured and used in its legitimate business of manufacturing and selling
of the duly registered trademark “LIVE’S” and “LIVE’S ORIGINAL JEANS”; and that
the trademarks of respondent did not have any deceptive resemblance with the
trademarks of petitioner. Respondent sought to recover the seized assorted sewing
materials, equipment, and finished products or the value thereof, in case the same
had been destroyed or impaired as a result of the seizure. Respondent also prayed
that, after due trial, judgment be rendered ordering the petitioner to pay
compensatory damages of P320,000 with an additional amount of damages of
P11,000 per day until the seized properties are restored; P2,000,000 as exemplary
damages; P100,000 for attorney’s fees with an additional amount of P100,000 in the
event of an appeal plus P1,500 per court appearance and the costs of the suit.

In its amended answer with counterclaim,21 petitioner countered that respondent’s

LIVE’S brand infringed upon its licensed brand name LEVI’S. It sought to cancel
respondent’s Copyright Registration No. I-3838 and enjoin the respondent from
further manufacturing, selling, offering for sale, and advertising the denim jeans or
slacks by using a design substantially, if not exactly similar to, or a colorable
imitation of the trademarks22 of petitioner.

Upon manifestation/motion23 by petitioner, the RTC of Manila, Branch 50 issued an

order dated May 9, 1996,24 forwarding the case to the Executive Judge (RTC of
Manila, Branch 23) for re-raffle among the courts designated as Special Courts to try
and decide cases involving violations of Intellectual Property Rights pursuant to
Administrative Order No. 113-95, dated October 2, 1995. On May 17, 1996, Branch
23 issued an order25 directing that the case be forwarded to Branch 1 (a
designated Special Court per said administrative order) for further proceedings.

On the scheduled hearing on December 4, 1996 in the RTC of Manila, Branch 1,

respondent (as therein plaintiff) failed to appear. Upon motion of petitioner, the trial
court declared respondent to have waived its right to present evidence to controvert
petitioner’s application for a writ of preliminary injunction.26

In an order dated December 10, 1996, the trial court found that the respondent
intended to appropriate, copy, and slavishly imitate the genuine appearance of
authentic LEVI’s jeans and pass off its LIVE’s jeans as genuine LEVI’s jeans. Thus,

“In opposing defendant’s application for preliminary in injunction, plaintiff alleges

that it has obtained Certificates of Registration for the trademarks “LIVE[’]S,”
“LIVE[’]S LABEL MARK,” [“]LIVE[’]S ORIGINAL JEANS[”] as well as the patch pocket
design and hand tag. It did not, however, present any evidence to support the
same.

In any event, plaintiff’s backpocket design is not copyrightable, as it is neither an

original work nor a novel design. Rather it is a copy or slavish imitation of LS &
Co./LSPI’s Arcuate trademark which was first used by LS & Co. worldwide in 1873
and the Philippines Registration of which is based on LS & Co.’s US Certificate of
Registration No. 404243, issued on November 16, 1943. Thus, no rights attendant to
a copyright can ever attach to plaintiff’s infringing backpocket design.

Also, it could not have been pure chance or coincidence that plaintiff’s LIVE’S jeans
use a trademark, symbol or design which is substantially, if not exactly similar to, or
a colorable imitation of LS & CO./LSPI trademarks, since there is a practically
limitless array of other marks, words, numbers, devices, symbols and designs which
plaintiff could have used on its products to identify and distinguish them from those
of defendant and other manufacturers. All told, from the mass of evidence adduced,
plaintiff’s intent to appropriate, copy, and slavishly imitate the genuine appearance
of authentic LEVI’s jeans and pass off its LIVE’s jeans as genuine LEVI’S jeans in
much too stark.

As above-discussed, through more than a century’s use and continuous substantial

promotions and advertising of the LEVI’s TRADEMARKS on its products—on jeans
and trousers in particular—LS & Co. has cultivated, gained and established an
invaluable goodwill in its name “LEVI’s STRAUSS & COMPANY” and in the products
which carry such name and the LEVI’s TRADEMARKS. Hence, unless plaintiff is
immediately enjoined from further manufacturing, selling, offering for sale and
advertising denims, jeans or slacks using a design substantially, if not exactly
similar to, or a colorable imitation of the LS & Co./LSPI trademarks, it will continue to
have a free ride on, and erode such invaluable goodwill and reputation by the mere
effortless expedient of imitating the overall visual impression of genuine LEVI’s
JEANS on its own designs, employing minute points of distinction sufficient to
muddle the overall conclusion which is actually generated, but do not dispel the
similitude between the trademarks. Well has been said that the most successful
form of copying is to employ enough points of similarity to confuse the public with
enough points of difference to confuse the court. [(]Del Monte Corporation vs. Court
of Appeals, 181 SCRA 418[)].

There is no question that the above-discussed circumstances call for the

intervention of equity to prevent further irreparable harm to defendant’s goodwill
and reputation. In consonance with Section 3 (a), (b) and (c), Rule 58 of the Rules,
defendant is thus entitled to the ancillary relief demanded either for a limited period
or perpetually.

Corollarily, defendant is hereby directed to execute a bond to the party enjoined to

the effect that defendant will pay to plaintiff all damages it may sustain by reason of
the injunction if the court should finally decide that defendant is not entitled
thereto.

WHEREFORE, upon the filing of a bond in the sum of FIVE HUNDRED THOUSAND
PESOS (P500,000.00), let a writ of preliminary injunction issue restraining plaintiff,
its officers, employees, agents, representatives, dealers, retailers or assigns from
manufacturing, distributing, selling, offering for sale, advertising or otherwise using
denims or jeans with a design which is substantially, if not exactly similar to
defendant’s trademarks.

Meanwhile, the hearing on the main cause of action is hereby set on February 5 and
12, 1997, both at 9:00 a.m.

SO ORDERED.”27

On motion for reconsideration, respondent prayed that the petitioner’s counterclaim

be dismissed and that the order dated December 10, 1996, be set aside. In an order
dated April 11, 1997, the trial court denied the motion, stating that:

“Considering:

(1) That the defendant’s application for injunctive relief was properly directed
against the real property in interest, the self-proclaimed lawful assignee and
authorized user of the subject trademarks, hence, the party who would be benefited
or injured by this court’s final decision on the application;
(2) That the acts which plaintiff was enjoined from doing are within the scope of the
reliefs demanded by defendant;

(3) That the institution of defendant’s counterclaim for infringement and damages
does not amount to forum shopping in that the elements of litis pendentia which
form the basis for a charge for forum-shopping are not all present in the instant
case;

(4) That the injunctive order sought to be reconsidered, by its very nature, is merely
provisional and does not dispose of the case on the merits. Hence, it would not
amount to a prejudgment considering that the defendant still has the burden of
proving during trial on the merits that it is entitled to protection and that confusion
does, in fact, or likely to exist, and, on the other hand, plaintiff would have its
opportunity to prove that confusion does not exist or is not likely to happen; and

(5) That the evidence on record justifies the injunctive relief granted by this court in
favor of defendant.

WHEREFORE, in view of all the foregoing, plaintiff’s motion for reconsideration and
supplemental motion for reconsideration are DENIED for lack of merit.

SO ORDERED.”28

Respondent took the matter to the Court of Appeals. On August 13, 1997, the Court
of Appeals rendered a decision in favor of the respondent, enjoining the trial court
from further proceeding with the case. The dispositive portion thereof reads:

“WHEREFORE, the petition is GRANTED. The assailed Orders dated December 10,
1996 and April 11, 1997 are annulled and set aside for having been issued with
grave abuse of discretion and in excess of jurisdiction. Respondent court is ordered
to desist from proceeding with Civil Case No. 96-76944, entitled “Vogue Traders
Clothing Company, Plaintiff, versus Levi Strauss (Phil.), Inc., Defendant.”, until the
Bureau of Patents, Trademarks and Technology Transfer has finally resolved Inter
Partes Cases Nos. 4216 and 4217.

No costs.

SO ORDERED.”29

After its motion for reconsideration was denied, petitioner filed the present petition
for review on certiorari, raising the following assignment of errors:
 I

THE COURT OF APPEALS COMMITTED CLEARLY REVERSIBLE ERROR IN HOLDING

THAT THE DOCTRINE OF PRIMARY JURISDICTION OPERATES TO SUSPEND ANY AND
ALL PROCEEDINGS IN CIVIL CASE NO. 96-76944, PARTICULARLY THE ABILITY OF THE
TRIAL COURT TO ISSUE PRELIMINARY INJUNCTIVE RELIEF, AND THAT THE TRIAL
COURT JUDGE THEREFORE COMMITTED ABUSE OF DISCRETION IN GRANTING SUCH
RELIEF.

II

THE COURT OF APPEALS ERRED IN FAILING TO HOLD THAT THE CERTIFICATION

AGAINST FORUM-SHOPPING ATTACHED BY RESPONDENT TO ITS PETITION FOR
CERTIORARI AND PROHIBITION IS FATALLY DEFECTIVE.

III

THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL COURT JUDGE
COMMITTED GRAVE ABUSE OF DISCRETION IN DECLARING RESPONDENT TO HAVE
WAIVED ITS RIGHT TO ADDUCE EVIDENCE TO COUNTER PETITIONER’S EVIDENCE IN
SUPPORT OF ITS APPLICATION FOR PRELIMINARY INJUNCTIVE RELIEF.

IV

THE COURT OF APPEALS ERRED IN HOLDING THAT THE PRELIMINARY INJUNCTIVE

ORDER ISSUED IN CIVIL CASE NO. 96-76944 PREJUDGES THE CASE.30

The petition has merit.

First. Petitioner points out that while the Court of Appeals categorically stated that it
did not commit forum shopping when it filed its counterclaim for infringement (to
the petitioner’s complaint for damages in the Regional Trial Court of Manila, Branch
1—Civil Case No. 96-76944) as the causes of action in the said civil case and the
two inter partes cases (Inter Partes Cases Nos. 4216 and 4217 pending before the
BPTTT) are different and do not involve the same subject matter and issues, it erred
in applying the “doctrine of primary jurisdiction.” The appeals court declared that
the trial court never had the authority to hear and grant petitioner’s prayer for
injunctive relief nor to proceed with the hearing of the case in view of the pendency
of the two inter partes cases.
Petitioner is a holder of Certificate of Registration No. 1379-A for its Levi’s
trademarks. The registration gives rise to a presumption of its validity and the right
to the exclusive use of the same. As set forth in Section 17 of Republic Act (R.A.) No.
166 or “The Trademark Law,” an entity having a duly registered trademark can file a
suit against another entity for the protection of its right:

Sec. 17. Grounds for cancellation.—Any person, who believes that he is or will be
damaged by the registration of a mark or tradename, may, upon the payment of the
prescribed fee, apply to cancel said registration upon any of the following grounds:

(a) That the registered mark or trade-name becomes the common descriptive name
of an article or substance on which the patent has expired;

(b) That it has been abandoned;

(c) That the registration was obtained fraudulently or contrary to the provisions of
section four, Chapter II hereof;

(d) That the registered mark or trade-name has been assigned, and is being used
by, or with the permission of, the assignee, so as to misrepresent the source of the
goods, business or services in connection with which the mark or tradename is
used; or

(e) That cancellation is authorized by other provisions of this Act.

Section 27 thereof states that the proper Regional Trial Court shall have jurisdiction
over the damage suits.

In Conrad and Company, Inc. v. Court of Appeals,31 as reiterated in the case of

Shangri-La International Hotel Management Ltd. v. Court of Appeals,32 the Court
clarified that while an administrative cancellation of a registered trademark, on any
of the grounds under Section 17 of R.A. No. 166, is within the ambit of the BPTTT, an
action for infringement or any other incidental remedy sought is within the
jurisdiction of the ordinary courts. Thus,

. . . It might be mentioned that while an application for the administrative

cancellation of a registered trademark on any of the grounds enumerated in Section
17 of Republic Act No. 166, as amended, otherwise known as the Trade-Mark Law,
falls under the exclusive cognizance of BPTTT (Sec. 19, Trade-Mark Law), an action,
however, for infringement or unfair competition, as well as the remedy of injunction
and relief for damages, is explicitly and unquestionably within the competence and
jurisdiction of ordinary courts.

...
Surely, an application with BPTTT for an administrative cancellation of a registered
trade mark cannot per se have the effect of restraining or preventing the courts
from the exercise of their lawfully conferred jurisdiction. A contrary rule would
unduly expand the doctrine of primary jurisdiction which, simply expressed, would
merely behoove regular courts, in controversies involving specialized disputes, to
defer to the findings or resolutions of administrative tribunals on certain technical
matters. This rule, evidently, did not escape the appellate court for it likewise
decreed that for “good cause shown, the lower court, in its sound discretion, may
suspend the action pending outcome of the cancellation proceedings” before BPTTT.
(Italics supplied.)

The passage of Republic Act No. 8293, otherwise known as the “Intellectual Property
Code of the Philippines,”33 expanded the rights accorded to an owner of a
registered trademark. Sections 151 (2), 156, and 161 thereof state:

Section 151.2. Notwithstanding the foregoing provisions, the court or the

administrative agency vested with jurisdiction to hear and adjudicate any action to
enforce the rights to a registered mark shall likewise exercise jurisdiction to
determine whether the registration of said mark may be cancelled in accordance
with this Act. The filing of a suit to enforce the registered mark with the proper court
or agency shall exclude any other court or agency from assuming jurisdiction over a
subsequently filed petition to cancel the same mark. On the other hand, the earlier
filing of petition to cancel the mark with the Bureau of Legal Affairs [formerly BPTTT]
shall not constitute a prejudicial question that must be resolved before an action to
enforce the rights to same registered mark may be decided. (Sec. 17, R.A. No. 166a)

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 (Sec. 23, first par., R.A. No.
166a).

156.2 On application of the complainant, the court may impound during the
pendency of the action, sales invoices and other documents evidencing sales. (n)

156.3. In cases where actual intent to mislead the public or to defraud the
complainant is shown, in the discretion of the court, the damages may be doubled.
(Sec. 23, first par., R.A. No. 166)
156.4 The complainant, upon proper showing, may also be granted injunction. (Sec.
23, second par., R.A. No. 166a)

Section 161. Authority to Determine Right to Registration.—In any action involving a

registered mark, the court may determine the right to registration, order the
cancellation of a registration, in whole or in part, and otherwise rectify the register
with respect to the registration of any party to the action in the exercise of this.
Judgment and orders shall be certified by the court to the Director, who shall make
appropriate entry upon the records of the Bureau, and shall be controlled thereby
(Sec. 25, R.A. No. 166a).

Sections 155 (2), 156, and 163 of the said law further provide for the remedy of an
owner of a registered mark to institute an action for infringement or damages
against a person or entity that may reproduce, counterfeit, copy or colorably imitate
a registered mark or a dominant feature thereof and apply such reproduction,
counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles

or advertisements intended to be used in commerce upon or in connection with the

sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or
to deceive.

Finally, Rule 8, Section 7 of the Regulations on Inter Partes Proceedings, provides:

Section 7. Effect of filing of a suit before the Bureau or with the proper court.—The
filing of a suit to enforce the registered mark with the proper court or Bureau shall
exclude any other court or agency from assuming jurisdiction over a subsequently
filed petition to cancel the same mark. On the other hand, the earlier filing of
petition to cancel the mark with the Bureau shall not constitute a prejudicial
question that must be resolved before an action to enforce the rights to same
registered mark may be decided. (Emphasis supplied)

It bears stressing that an action for infringement or unfair competition, including the
available remedies of injunction and damages, in the regular courts can proceed
independently or simultaneously with an action for the administrative cancellation
of a registered trademark in the BPTTT. As applied to the present case, petitioner’s
prior filing of two inter partes cases against the respondent before the BPTTT for the
cancellation of the latter’s trademark registrations, namely, “LIVE’S” and “LIVE’S
Label Mark,” does not preclude petitioner’s right (as a defendant) to include in its
answer (to respondent’s complaint for damages in Civil Case No. No. 96-76944) a
counterclaim for infringement with a prayer for the issuance of a writ of preliminary
injunction.

Second. As to the procedural matter, petitioner argues that the Court of Appeals
erred in giving due course to the respondent’s petition for certiorari even if it was
the latter’s counsel, Atty. Danilo A. Soriano, not one of its duly authorized officers,
who executed the certification of non-forum shopping.

Section 5, Rule 7 of the Rules of Civil Procedure incorporating Administrative

Circular Nos. 28-91 (effective January 1, 1992) and 04-94 (effective April 1, 1994)
states the requirement of a plaintiff or petitioner to include in his initiatory pleading
or petition a certification of non-forum shopping. Thus,

Sec. 5. Certification against forum shopping.—The plaintiff or principal party shall

certify under oath in the complaint or other initiatory pleading asserting a claim for
relief, or in a sworn certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any claim involving
the same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof;
and (c) if he should thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of
the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of the
party or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall constitute
direct contempt, as well as a cause for administrative sanctions.

In Digital Microwave Corp. v. CA,34 this Court gave the rationale for this rule,
namely, that the certification against forum shopping is required to be
accomplished by petitioner himself because only the petitioner himself has actual
knowledge of whether or not he has initiated similar actions or proceedings in
different courts or agencies. Even his counsel may be unaware of such fact as he
may only be aware of the action for which he has been retained. As to corporations,
the law requires that the certification could be made by its duly authorized director
or officer. The Court also stresses that the petitioner’s non-compliance and utter
disregard of the rules cannot be rationalized by invoking the policy of liberal
construction.

The requirement of certification against forum shopping under the Rules is to be

executed by the petitioner, or in the case of a corporation, its duly authorized
director or officer, but not petitioner’s counsel whose professional services have
been engaged to handle the subject case. The reason is that it is the petitioner who
has personal knowledge whether there are cases of similar nature pending with the
other courts, tribunals, or agencies. Thus, in the present case, the Court of Appeals
should have outrightly dismissed the petition for certiorari filed by the respondent
(as therein petitioner in the appeals court) due to the defective certification of non-
forum shopping. The certification made by Atty. Soriano, counsel for the respondent,
who is not one of its duly authorized directors or officers, is defective. Even if Atty.
Soriano was the “in-house counsel,” the fact remains that no board resolution, or
even a Secretary’s Certificate containing the board resolution, was submitted to
show that he was indeed authorized to file the said petition in the Court of Appeals.

Third. Petitioner avers that the Court of Appeals erred in finding that the respondent
was denied due process. It contends that the trial court had correctly ruled that
respondent was deemed to have waived its right to present evidence due to its non-
appearance at the scheduled hearing (to oppose the petitioner’s application for the
issuance of a writ of preliminary injunction) on December 4, 1996.

The records show that respondent, through its former counsel, Atty. Alfonso R. Yatco,
was present during the hearing on November 6, 1996 as reflected in the minutes of
the court proceedings that day. The counsels for both parties had been duly notified
in open court. The Branch Clerk of Court of RTC of Manila, Branch 1, Atty. Joselito C.
Frial, even made a notation in the minutes that respondent (as oppositor) shall be
given a period of 10 days to interpose its opposition to the petitioner’s prayer for
injunctive relief.35 The Order dated November 6, 1996 states:

“After witness Atty. Gilbert Raymond T. Reyes [witness for the petitioner] had
finished his testimony, the counsel for defendant [herein petitioner] moved for and
was allowed ten (10) days from today within which to file a written formal offer of
exhibits, copy furnish[ed] the counsel for plaintiff [herein respondent] who is
allowed a similar period of time from receipt thereof within which to file comment
and/or objection.

In the meantime, let the hearing be continued on December 4 & 11, 1996, both at
9:00 a.m. as previously scheduled.
The counsels are notified of this order in open court.

SO ORDERED.”36

However, on December 4, 1996, Atty. Yatco failed to appear without proferring any
valid reason which prompted the trial court to issue an order that respondent was
deemed to have waived its right to present evidence:

“On call for hearing, only the counsel for defendant [herein petitioner] appeared.
There was no appearance for plaintiff [herein respondent] although its counsel was
duly notified. In view thereof, upon motion of counsel for defendant, plaintiff is
considered to have waived its right to present evidence to controvert defendant’s
application for a writ of preliminary injunction, which, consequently, is hereby
deemed submitted for resolution.

The counsel for defendant is notified in open court. Furnish the counsel for plaintiff
with a copy hereof.

SO ORDERED.”37

Respondent explained to the trial court that its former counsel, Atty. Yatco, had
honestly thought that the December 4, 1996 hearing had been rescheduled to
December 11, 1996 per agreement with the petitioner’s counsel. This is not a
sufficient ground. It was correct for the trial court, upon motion of petitioner, to
consider the matter submitted for resolution on the basis of petitioner’s evidence.
Respondent cannot find solace in its lame excuse of honest mistake which was, in
fact, negligence and lack of vigilance.

Fourth. Petitioner claims that the assailed orders of the trial court, dated December
10, 1996 and April 11, 1997, did not prejudge the case. On the other hand,
respondent counters that the trial court’s order dated December 10, 1996
amounted to a prejudgment of the case, to wit: that its LIVE’s backpocket design
was not copyrightable because it was neither an original work nor a novel design;
that it was a copy or slavish imitation of petitioner’s LEVI’s Arcuate trademark; and
that no rights attendant to a copyright can ever attach to respondent’s backpocket
design.
The trial court granted petitioner’s prayer for the issuance of a writ of preliminary
injunction in its answer with counterclaim (to respondent’s complaint for damages).
The writ did not have the effect of prejudging or disposing of the merits of the case,
but merely enjoined the respondent’s acts of manufacturing, distributing, selling, or
offering for sale the jeans which had allegedly incorporated exact or colorable
imitations of the products belonging to petitioner. The Order dated April 11, 1997 of
the trial court denying the respondent’s motion for reconsideration categorically
stated that the said Order did not amount to a prejudgment of the case. Petitioner
has yet to establish during the trial that it is entitled to a permanent injunction by
reason of respondent’s confusingly similar LIVE’S products. Otherwise, the trial court
could declare that the LIVE’S trademark belonging to respondent was not
confusingly similar with the LEVI’s trademark of petitioner.

Indeed, a writ of preliminary injunction is generally based solely on initial and

incomplete evidence adduced by the applicant (herein petitioner). The evidence
submitted during the hearing of the incident is not conclusive, for only a “sampling”
is needed to give the trial court an idea of the justification for its issuance pending
the decision of the case on the merits. As such, the findings of fact and opinion of a
court when issuing the writ of preliminary injunction are interlocutory in nature.
Moreover, the sole object of a preliminary injunction is to preserve the status quo
until the merits of the case can be heard. Since Section 4 of Rule 58 of the Rules of
Civil Procedure gives the trial courts sufficient discretion to evaluate the conflicting
claims in an application for a provisional writ which often involves a factual
determination, the appellate courts generally will not interfere in the absence of
manifest abuse of such discretion.38 A writ of preliminary injunction would become
a prejudgment of a case only when it grants the main prayer in the complaint or
responsive pleading, so much so that there is nothing left for the trial court to try
except merely incidental matters.39 Such fact does not obtain in the present case.

WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals
dated August 13, 1997 and its Resolution dated March 5, 1998 are REVERSED and
SET ASIDE. The Regional Trial Court of Manila, Branch 1 is ORDERED to proceed with
the hearing of Civil Case No. 96-76944 with dispatch.

No costs.

SO ORDERED.

Davide, Jr. (C.J., Chairman), Quisumbing, Ynares-Santiago and Carpio, JJ., concur.
Petition granted, judgment and resolution reversed and set aside.

Note.—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. (Pearl and Dean [Phil.], Incorporated vs. Shoemart
Incorporated, 409 SCRA 231 [2003])