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G.R. No. 190065 August 16, 2010

DERMALINE, INC., Petitioner,

vs.

MYRA PHARMACEUTICALS, INC. Respondent.

D E C I S I O N

NACHURA, J.:

This is a petition for review on certiorari1 seeking to reverse and set aside

the Decision dated August 7, 20092 and the Resolution dated October 28,

20093 of the Court of Appeals (CA) in CA-G.R. SP No. 108627.

The antecedent facts and proceedings

On October 21, 2006, petitioner Dermaline, Inc. (Dermaline) filed before the

Intellectual Property Office (IPO) an application for registration of the

trademark "DERMALINE DERMALINE, INC." (Application No. 4-2006011536).

The application was published for Opposition in the IPO E-Gazette on March

9, 2007.

On May 8, 2007, respondent Myra Pharmaceuticals, Inc. (Myra) filed a

Verified Opposition4 alleging that the trademark sought to be registered by

Dermaline so resembles its trademark "DERMALIN" and will likely cause

confusion, mistake and deception to the purchasing public. Myra said that

the registration of Dermalines trademark will violate Section 1235 of

Republic Act (R.A.) No. 8293 (Intellectual Property Code of the Philippines).

It further alleged that Dermalines use and registration of its appliedtrademark will diminish the distinctiveness and dilute the goodwill of Myras

"DERMALIN," registered with the IPO way back July 8, 1986, renewed for

ten (10) years on July 8, 2006. Myra has been extensively using "DERMALIN"

commercially since October 31, 1977, and said mark is still valid and

subsisting.

Myra claimed that, despite Dermalines attempt to differentiate its applied

mark, the dominant feature is the term "DERMALINE," which is practically

identical with its own "DERMALIN," more particularly that the first eight (8)

letters of the marks are identical, and that notwithstanding the additionalletter "E" by Dermaline, the pronunciation for both marks are identical.

Further, both marks have three (3) syllables each, with each syllable

identical in sound and appearance, even if the last syllable of "DERMALINE"

consisted of four (4) letters while "DERMALIN" consisted only of three (3).

Myra also pointed out that Dermaline applied for the same mark

"DERMALINE" on June 3, 2003 and was already refused registration by the

IPO. By filing this new application for registration, Dermaline appears to

have engaged in a fishing expedition for the approval of its mark. Myraargued that its intellectual property right over its trademark is protected

under Section 1476 of R.A. No. 8293.

Myra asserted that the mark "DERMALINE DERMALINE, INC." is aurally

similar to its own mark such that the registration and use of Dermalines

applied mark will enable it to obtain benefit from Myras reputation,

goodwill and advertising and will lead the public into believing that

Dermaline is, in any way, connected to Myra. Myra added that even if the

subject application was under Classification 447 for various skin treatments,

it could still be connected to the "DERMALIN" mark under Classification 58

for pharmaceutical products, since ultimately these goods are very closely

related.

In its Verified Answer,9 Dermaline countered that a simple comparison of

the trademark "DERMALINE DERMALINE, INC." vis--vis Myras "DERMALIN"

trademark would show that they have entirely different features and

distinctive presentation, thus it cannot result in confusion, mistake or

deception on the part of the purchasing public. Dermaline contended that,

in determining if the subject trademarks are confusingly similar, a

comparison of the words is not the only determinant, but their entirety

must be considered in relation to the goods to which they are attached,including the other features appearing in both labels. It claimed that there

were glaring and striking dissimilarities between the two trademarks, such

that its trademark "DERMALINE DERMALINE, INC." speaks for itself (Res ipsa

loquitur). Dermaline further argued that there could not be any relation

between its trademark for health and beauty services from Myras

trademark classified under medicinal goods against skin disorders.

The parties failed to settle amicably. Consequently, the preliminary

conference was terminated and they were directed to file their respective

position papers.10

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On April 10, 2008, the IPO-Bureau of Legal Affairs rendered Decision No.

2008-7011 sustaining Myras opposition pursuant to Section 123.1(d) of R.A.

No. 8293. It disposed

WHEREFORE, the Verified Opposition is, as it is, hereby SUSTAINED.

Consequently, Application Serial No. 4-2006-011536 for the mark

DERMALINE, DERMALINE, INC. Stylized Wordmark for Dermaline, Inc.

under class 44 covering the aforementioned goods filed on 21 October2006, is as it is hereby, REJECTED.

Let the file wrapper of DERMALINE, DERMALINE, INC. Stylized Wordmark

subject matter of this case be forwarded to the Bureau of Trademarks (BOT)

for appropriate action in accordance with this Decision.

SO ORDERED.12

Aggrieved, Dermaline filed a motion for reconsideration, but it was denied

under Resolution No. 2009-12(D)13 dated January 16, 2009.

Expectedly, Dermaline appealed to the Office of the Director General of the

IPO. However, in an Order14 dated April 17, 2009, the appeal was dismissed

for being filed out of time.

Undaunted, Dermaline appealed to the CA, but it affirmed and upheld the

Order dated April 17, 2009 and the rejection of Dermalines application for

registration of trademark. The CA likewise denied Dermalines motion for

reconsideration; hence, this petition raising the issue of whether the CA

erred in upholding the IPOs rejection of Dermalines application for

registration of trademark.

The petition is without merit.

A trademark is any distinctive word, name, symbol, emblem, sign, or device,

or any combination thereof, adopted and used by a manufacturer or

merchant on his goods to identify and distinguish them from those

manufactured, sold, or dealt by others.15 Inarguably, it is an intellectual

property deserving protection by law. In trademark controversies, each case

must be scrutinized according to its peculiar circumstances, such that

jurisprudential precedents should only be made to apply if they arespecifically in point.16

As Myra correctly posits, as a registered trademark owner, it has the right

under Section 147 of R.A. No. 8293 to prevent third parties from using a

trademark, or similar signs or containers for goods or services, without its

consent, identical or similar to its registered trademark, where such use

would result in a likelihood of confusion.

In determining likelihood of confusion, case law has developed two (2) tests,the Dominancy Test and the Holistic or Totality Test.

The Dominancy Test focuses on the similarity of the prevalent features of

the competing trademarks that might cause confusion or deception.17 It is

applied when the trademark sought to be registered contains the main,

essential and dominant features of the earlier registered trademark, and

confusion or deception is likely to result. Duplication or imitation is not even

required; neither is it necessary that the label of the applied mark for

registration should suggest an effort to imitate. The important issue is

whether the use of the marks involved would likely cause confusion or

mistake in the mind of or deceive the ordinary purchaser, or one who is

accustomed to buy, and therefore to some extent familiar with, the goods in

question.18 Given greater consideration are the aural and visual

impressions created by the marks in the public mind, giving little weight to

factors like prices, quality, sales outlets, and market segments.19 The test of

dominancy is now explicitly incorporated into law in Section 155.1 of R.A.

No. 8293 which provides

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

imitation of a registered mark or the same container or a dominant feature

thereof in connection with the sale, offering for sale, distribution,advertising of any goods or services including other preparatory steps

necessary to carry out the sale of any goods or services on or in connection

with which such use is likely to cause confusion, or to cause mistake, or to

deceive; (emphasis supplied)

On the other hand, the Holistic Test entails a consideration of the entirety of

the marks as applied to the products, including labels and packaging, in

determining confusing similarity. The scrutinizing eye of the observer must

focus not only on the predominant words but also on the other features

appearing in both labels so that a conclusion may be drawn as to whetherone is confusingly similar to the other.20

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Relative to the question on confusion of marks and trade names,

jurisprudence has noted two (2) types of confusion, viz: (1) confusion of

goods (product confusion), where the ordinarily prudent purchaser would

be induced to purchase one product in the belief that he was purchasing the

other; and (2) confusion of business (source or origin confusion), where,

although the goods of the parties are different, the product, the mark of

which registration is applied for by one party, is such as might reasonably beassumed to originate with the registrant of an earlier product, and the

public would then be deceived either into that belief or into the belief that

there is some connection between the two parties, though inexistent.21

In rejecting the application of Dermaline for the registration of its mark

"DERMALINE DERMALINE, INC.," the IPO applied the Dominancy Test. It

declared that both confusion of goods and service and confusion of business

or of origin were apparent in both trademarks. It also noted that, per

Bureau Decision No. 2007-179 dated December 4, 2007, it already sustained

the opposition of Myra involving the trademark "DERMALINE" of Dermaline

under Classification 5. The IPO also upheld Myras right under Section 138 of

R.A. No. 8293, which provides that a certification of registration of a mark is

prima facie evidence of the validity of the registration, the registrants

ownership of the mark, and of the registrants exclusive right to use the

same in connection with the goods and those that are related thereto

specified in the certificate.

We agree with the findings of the IPO. As correctly applied by the IPO in this

case, while there are no set rules that can be deduced as what constitutes a

dominant feature with respect to trademarks applied for registration;

usually, what are taken into account are signs, color, design, peculiar shapeor name, or some special, easily remembered earmarks of the brand that

readily attracts and catches the attention of the ordinary consumer.22

Dermalines insistence that its applied trademark "DERMALINE DERMALINE,

INC." had differences "too striking to be mistaken" from Myras

"DERMALIN" cannot, therefore, be sustained. While it is true that the two

marks are presented differently Dermalines mark is written with the first

"DERMALINE" in script going diagonally upwards from left to right, with an

upper case "D" followed by the rest of the letters in lower case, and the

portion "DERMALINE, INC." is written in upper case letters, below andsmaller than the long-hand portion; while Myras mark "DERMALIN" is

written in an upright font, with a capital "D" and followed by lower case

letters the likelihood of confusion is still apparent. This is because they are

almost spelled in the same way, except for Dermalines mark which ends

with the letter "E," and they are pronounced practically in the same manner

in three (3) syllables, with the ending letter "E" in Dermalines mark

pronounced silently. Thus, when an ordinary purchaser, for example, hears

an advertisement of Dermalines applied trademark over the radio, chances

are he will associate it with Myras registered mark.

Further, Dermalines stance that its product belongs to a separate and

different classification from Myras products with the registered trademark

does not eradicate the possibility of mistake on the part of the purchasing

public to associate the former with the latter, especially considering that

both classifications pertain to treatments for the skin.1avvphi1

Indeed, the registered trademark owner may use its mark on the same or

similar products, in different segments of the market, and at different price

levels depending on variations of the products for specific segments of the

market. The Court is cognizant that the registered trademark owner enjoys

protection in product and market areas that are the normal potential

expansion of his business. Thus, we have held

Modern law recognizes that the protection to which the owner of a

trademark is entitled is not limited to guarding his goods or business from

actual market competition with identical or similar products of the parties,

but extends to all cases in which the use by a junior appropriator of a trade-

mark or trade-name is likely to lead to a confusion of source, as where

prospective purchasers would be misled into thinking that the complaining

party has extended his business into the field (see 148 ALR 56 et seq; 53 AmJur. 576) or is in any way connected with the activities of the infringer; or

when it forestalls the normal potential expansion of his business (v. 148 ALR

77, 84; 52 Am. Jur. 576, 577).23 (Emphasis supplied)

Thus, the public may mistakenly think that Dermaline is connected to or

associated with Myra, such that, considering the current proliferation of

health and beauty products in the market, the purchasers would likely be

misled that Myra has already expanded its business through Dermaline from

merely carrying pharmaceutical topical applications for the skin to health

and beauty services.

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Verily, when one applies for the registration of a trademark or label which is

almost the same or that very closely resembles one already used and

registered by another, the application should be rejected and dismissed

outright, even without any opposition on the part of the owner and user of

a previously registered label or trademark. This is intended not only to avoid

confusion on the part of the public, but also to protect an already used and

registered trademark and an established goodwill.24

Besides, the issue on protection of intellectual property, such as

trademarks, is factual in nature. The findings of the IPO, upheld on appeal

by the same office, and further sustained by the CA, bear great weight and

deserves respect from this Court. Moreover, the decision of the IPO had

already attained finality when Dermaline failed to timely file its appeal with

the IPO Office of the Director General.

WHEREFORE, the petition is DENIED. The Decision dated August 7, 2009 and

the Resolution dated October 28, 2009 of the Court of Appeals in CA-G.R. SP

No. 108627 are AFFIRMED. Costs against petitioner.

SO ORDERED.

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G.R. No. 139983 March 26, 2008

MANUEL P. SAMSON, Petitioner,

vs.

COURT OF APPEALS and WILFRO LUMINLUN, Respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review of the Decision1 dated 6 September 1999 of the

Court of Appeals in CA-G.R. CV No. 31904 reversing the Decision2 dated 15

May 1990 and the Order dated 7 December 1990 of the Regional Trial

Court, Branch 160, Pasig City in Civil Case No. 58052.

The Antecedent Facts

On 26 February 1982, petitioner Manuel P. Samson (Samson) applied for the

registration of the "OTTO" trademark with the Philippine Patent Office on

belts, bags, t-shirts, blouses, briefs, pants, jackets, jeans, and bra. On 21

January 1983, respondent Wilfro Luminlun (Luminlun) likewise filed for the

registration of the "OTTO" trademark on jeans, sportswear, skirts, and

socks.

On 29 December 1983, Samson executed the following document3 granting

Luminlun the authority to use the "OTTO" trademark for jeans only:

AUTHORITY TO USE TRADEMARK

KNOW ALL MEN BY THESE PRESENTS:

I, MANUEL P. SAMSON, Filipino, of legal age and a resident of Doa Betang

Subdivision, Santolan, Metro Manila, am the registered owner of the

trademark OTTO for bags, shoes, sandals and slippers under Registration

Certificate No. 29840 issued on September 29, 1981, and the applicant in

Application hearing Serial No. 47626 for the same trademark OTTO filed on

February 26, 1982 for belts, bags, t-shirts, blouses, briefs, pants, jackets,

jeans and bras, which application was duly approved for publication in the

Official Gazette last November 18, 1982;

That for valuable consideration, I hereby grant unto WILFRO P. LUMINLUN,

Filipino, of legal age and with business address at No. 959 Soler Street,

Binondo, Manila, a non-transferable, non-assignable, non-exclusive right

and license to use said trademark OTTO for jeans only. This authority shall

remain valid and existing for as long as I remain the owner of the trademarkOTTO unless said WILFRO P. LUMINLUN should do or cause to be done any

act which in any way prejudice or discredit the trademark OTTO not only in

connection with its use for jeans but as well as for other products

enumerated in my registration certificates/application documents.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 29th day

of December, 1983.

SGD. MANUEL P. SAMSON

On 19 March 1984, the Philippine Patent Office issued to Samson a

Certificate of Registration for the mark "OTTO" in the principal register for

use on belts, bags, t-shirts, blouses, briefs, pants, jackets, jeans, and bra.

In a letter4 dated 29 March 1989, Samson, through counsel, informed

Luminlun that he was revoking the latters authority to use the trademark

"OTTO." Samson advised Luminlun to "cease and desist from further

manufacturing and distributing OTTO jeans" otherwise he would confiscate

jeans using the unauthorized "OTTO" trademark. Samson likewise

demanded the payment of royalties, thus:

Dear Mr. Luminlun:

On behalf of my client, Mr. Manuel P. Samson, this is to demand that you

CEASE and DESIST from further manufacturing and distributing OTTO jeans

effective as of receipt of this notice considering that my aforesaid client had

already revoked the authority granted to you for the use of the trademark

OTTO in jeans. A copy of the Revocation of Authority To Use Trademark

filed in the Patent Office on March 21, 1989 is attached.

Further, you have to account for the sale of OTTO jeans beginning January1984 up to March 1989 as we will get a percentage thereof for the royalty

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due to my client of not less than P5,000,000.00 for your use of said

trademark for more than five (5) years.

Kindly give us the name and address of your sales outlet in order that they

maybe properly appraised (sic) of this development.

Should you fail to heed this advice, we will be constrained to file an action

for damages and we will pray for issuance of injunction against you and forthe confiscation and removal of jeans with the use of an unauthorized

trademark OTTO.

I trust for your compliance within five (5) days from receipt hereof to

obviate being embroiled in a costly and cumbersome litigation.

Very truly yours,

SGD. NELSON Y. NG

Samson also filed with the Philippine Patent Office a Revocation of

Authority to Use Trademark.5

As a result, Luminlun filed a complaint before the Regional Trial Court, Pasig

City questioning the validity of Samsons revocation of his authority to use

the "OTTO" trademark. Luminlun likewise prayed that he be compensated

for the loss of sales he suffered since the sales outlets refused to accept his

deliveries for fear that the goods would be confiscated and removed from

their stores.

On 10 April 1989, the trial court issued an Order restraining Samson from"proceeding and carrying out the confiscation and the removal of jeans with

trademark OTTO pending hearing on the petition for preliminary

injunction." On 19 April 1989, Samson filed an "Opposition to Motion for

Issuance of preliminary injunction and/or Motion to Lift Restraining Order."

After presentation of evidence and submission of memoranda by both

parties, on 28 April 1989, the trial court issued an Order granting Luminluns

prayer for preliminary injunction.

On 9 May 1989, Samson filed his Answer. Samson raised, among others, thedefenses that: (1) Luminlun failed to pay royalties for the use of the

trademark; and (2) Luminlun violated the terms and conditions of the

Authority to Use Trademark when he used the "OTTO" trademark for other

products.

The Ruling of the Trial Court

In its Decision dated 15 May 1990, the trial court dismissed Luminluns

complaint. The dispositive portion of the decision reads:

WHEREFORE, foregoing considered, the complaint is ordered DISMISSED.

With costs against plaintiff.

The writ of preliminary injunction earlier issued by the Court is set aside and

recalled.

On the counterclaim, plaintiff is ordered to pay defendant attorneys fees of

P25,000.00.

SO ORDERED.6

The trial court ruled that Samson was justified in revoking the authority of

Luminlun to use the trademark. The trial court found that Luminluns acts of

manufacturing and selling products bearing the trademark "OTTO LTD." like

skirts, shorts, pants, jeans, as as well as products with the trademark

"OTTO" like belts, buttons, and bags, clearly violated the authority granted

by Samson to use the "OTTO" trademark for jeans only. The trial court,

however, ruled that Samson failed to prove that he was entitled to royalties.

Upon motion for reconsideration of both parties, the trial court in an Orderdated 7 December 19907 affirmed its decision with the modification of an

award of moral damages of P20,000 in favor of Samson.

The Ruling of the Court of Appeals

On appeal, the Court of Appeals reversed the ruling of the trial court. The

appellate court found that Samson revoked the authority on the sole

ground that Luminlun failed to pay royalties. According to the appellate

court, Samson could not validly revoke the authority based on this ground

since he failed to prove that royalties were due him. The appellate courtfurther ruled that Luminlun suffered losses as a result of the revocation and

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thus awarded damages. The dispositive portion of the Court of Appeals

decision reads:

WHEREFORE, judgment is hereby rendered setting aside the decision

appealed from and a new one issue making the injunction permanent and

ordering appellee to pay appellant the following sums of money:

a) actual and compensatory damages in the amount of P2,257,872.20.

b) attorneys fees in the amount of P50,000.00.

Costs against appellee.

SO ORDERED.8

The Issues

Thus, in this petition, Samson raises the following assignment of errors:9

(a) The Court of Appeals erred in concluding that the revocation of the

Authority to Use Trademark made by Samson was unjustified;

(b) The Court of Appeals erred in awarding actual or compensatory damages

of P2,257,872.20 in spite of the total absence of evidence to show that

Luminlun sustained such damages as a consequence of the revocation of

the Authority to Use Trademark;

(c) The Court of Appeals erred in awarding attorneys fees of P50,000 in

spite of the absence of any legal ground for such award; and

d) The Court of Appeals erred in not sustaining the trial courts award of

moral damages and attorneys fees in favor of Samson.

The Courts Ruling

The resolution of this case hinges on whether Samson was justified in

revoking Luminluns authority to use the "OTTO" trademark.

We rule in the affirmative.

In finding for respondent Luminlun, the appellate court rationalized:

x x x In appellees Opposition to Motion for Issuance of Preliminary

Injunction and/or Motion to Lift Restraining Order dated April 18, 1989 (p.

37, Records), it is clearly stated that he revoked the Authority to Use

Trademark on the sole ground that appellant failed to pay royalty tax, thus:

"x x x. When plaintiff unjustly and illegally failed, refused and neglected andstill fails, refuse, and neglects to pay royalty tax, defendant revoked the

grant of authority and the same was filed with the Patent Office on March

21, 1989, a copy of which was served on plaintiff and received by him

contained in a letter dated March 29, 1989. (at page 3 of Opposition)

x x x x x x x x x

"It is defendant who is entitled to the issuance of injunction to restrain

plantiff from further manufacturing and distributing OTTO jeans after

plaintiffs authority had been revoked for failure to comply with his

obligation to pay royalty tax due to defendant."

As correctly pointed out by appellant, the issue that appellee had been

allegedly affected and his products allegedly discredited by appellants use

of the trademark OTTO and OTTO Ltd. was but a belated attempt on the

part of the appellee to justify his illegal act of revoking the Authority to Use

Trademark issued to the appellant. It was only after realizing the weakness

of his sole ground for revoking the authority that he raised said issue.

It is evident that when appellee executed the Revocation of Authority to

Use Trademark on March 28, 1989 he was not concerned with appellantsuse of the trademark OTTO Ltd. on appellants product and the trademark

OTTO on belts and buttons because there was no prejudice on his part.

Otherwise, he could have mentioned the same in the Revocation and in the

demand letter dated March 29, 1989 of his counsel, Atty Nelson Y. Ng.10

(Emphasis supplied)

We disagree with the appellate courts ruling.

The authority granted to Luminlun to use the "OTTO" trademark was limited

for use on jeans only. Under the agreement, Samson could revoke theauthority if Luminlun "should do or cause to be done any act which would in

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any way prejudice or discredit the trademark OTTO not only in connection

with its use for jeans but as well as for other products" enumerated in

Samsons registration certificates.

As correctly found by the trial court, Luminlun manufactured "OTTO" belts,

buttons, and bags as well as "OTTO LTD." clothing in violation of the terms

and conditions of the authority which affected Samson and discredited his

products, thus:

On the second issue, the Court finds that defendant has been affected and

his products discredited by plaintiffs use of trademark "OTTO" and OTTO

LTD." on other products, aside from jeans. Plaintiff admitted manufacturing

and selling products bearing the trademark "OTTO LTD." like skirts, shorts,

pants, jeans; also plaintiff manufactures and sells products with the

trademark "OTTO", like belts, buttons and bags. (Exh. "3"; also pp. 67, 68,

69, 91, rec.) The authority given to plaintiff was a non-transferable, non-

assignable, non-exclusive right and license to use said trademark "OTTO" for

jeans only x x x". (Underlining supplied) Clearly, plaintiff failed to comply

with the terms and conditions enumerated in the agreement. Plaintiff had

the option to use the trademark "OTTO" but he had done acts constituting

bad faith, necessarily discrediting the interest of defendant on his products

which were duly registered with the Philippine Patent Office, such as: Exh.

"6," photograph of over all with trademark "OTTO"; Exh. "7", issue of

Panorama Magazine; Exh. "7-A", trousers with "OTTO LTD.", Exh. "8", t-shirt

with brand "OTTO [LTD.]"; Exh. "14", pants bearing "OTTO [LTD.]", Exh. "14-

A" & Exh. "14-B"; belt and pant with "OTTO LTD." & "OTTO"; Exh. "15" Cash

invoice, pants "OTTO"; Exh. "17"- .", jeans classic with trademark "OTTO".

Defendant therefore was justified when he served notice of revocation ofthe authority of plaintiff to use the trademark.11 (Emphasis supplied)

Under the circumstances and in accordance with the terms and conditions

of the Authority to Use Trademark, we find that Samson was justified in

revoking Luminluns authority to use the "OTTO" trademark.

However, the appellate court chose to ignore Luminluns glaring violation of

the terms and conditions of the Authority. The appellate court instead

resorted to hair-splitting and ruled that Samson could not justify the

revocation since he did not raise this ground in his "Opposition to Motion

for Issuance of Preliminary Injunction and/or Motion to Lift Restraining

Order."

We find such reasoning flawed.

The records reveal that Samson, in his Answer, raised, among others, the

affirmative defense that he had the right to revoke the Authority to Use

Trademark because Luminlun manufactured other "OTTO" products asidefrom jeans:

Defendant had every right and prerogative to revoke the authority granted

to plaintiff on the use of the trademark for "OTTO" for jeans only when

plaintiff failed to pay a single centavo of royalty and had likewise violated

the grant of authority by illegally manufacturing and distributing aside from

jeans, other products like jackets, skirts, shirts, blouses and shorts which are

not covered by the grant of authority granted to him.12 (Emphasis supplied)

We find that Samson seasonably raised this defense and we do not see any

basis for the apellate courts ruling that Samson could not invoke this

ground.

The appellate court further makes issue of the fact that Samson did not

mention in both the Revocation of Authority to Use Trademark and his

demand letter dated 29 March 1989 that Luminluns manufacture of other

"OTTO" products such as belts and buttons was prejudicial to him and was

the cause for the revocation.

We note that the Revocation of Authority simply mentioned that "it was

Luminluns failure to comply with his undertaking when the authority wasexecuted as the reason for the revocation." The fact that Samson did not

indicate the specific reason for the revocation is of no moment and should

not be taken against him.lavvphil Thus, we find no basis for the appellate

courts conclusion that when Samson executed the Revocation of Authority

he was not concerned with Luminluns use of the "OTTO" trademark on

other products because there was no prejudice on his part. Samson was

affected and his products discredited by Luminluns unauthorized

manufacture of other "OTTO" products. Thus, in its Order resolving the

Motions for Reconsideration filed by the parties, the trial court stated:

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x x x it is not denied defendant was given the authority by the Patent Office

and has been the registered owner of the trademark "OTTO" under principal

register no. 33064 and 29840 and supplemental register 7390 and 4166. The

license was issued to the defendant for the protection of his rights as a

registered owner of the trademark in order to identify the lawful user. It

was intended to protect the public to be deceived of the use of the

products.

On the issue of the violation of the conditions involving the claim of royalty,

the Court said that defendant has been affected and his products

discredited by the plaintiffs use of trademark "OTTO" and "OTTO LTD," on

other products. Plaintiff had admitted manufacturing and selling products

with the same trademark on skirts, shorts, pants and jeans. Bad faith was

evident from the acts of plaintiff. The authority of plaintiff to use the

trademark "OTTO" for jeans was revoked for violation of the terms of the

agreement.13 (Emphasis supplied)

Considering that Samson was justified in revoking the authority of Luminlun

to use the "OTTO" trademark, it necessarily follows that the damages

awarded by the appellate court in favor of Luminlun have no basis.

WHEREFORE, we GRANT the Petition. We SET ASIDE the assailed Decision

and Resolution of the Court of Appeals and REINSTATE the 15 May 1990

Decision and the 7 December 1990 Order of the Regional Trial Court, Branch

160, Pasig City.

SO ORDERED.

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G.R. No. 161051 July 23, 2009

COMPANIA GENERAL DE TABACOS DE FILIPINAS and LA FLOR DE LA

ISABELA, INC., Petitioners,

vs.

HON. VIRGILIO A. SEVANDAL, as Director and DTI Adjudication Officer,

ATTY. RUBEN S. EXTRAMADURA, as Hearing Officer - Office of the Legal

Affairs, Department of Trade and Industry, TABAQUERIA DE FILIPINAS,INC., and GABRIEL RIPOLL, JR., Respondents.

D E C I S I O N

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the

June 16, 2003 Decision1 and December 1, 2003 Resolution2 of the Court of

Appeals (CA) in CA-G.R. SP No. 42881. The CA denied petitioners Petition

for Certiorari (With Urgent Application for Temporary Restraining Order

and/or Writ of Preliminary Injunction) and their motion for reconsideration.

The Facts

Petitioner Compania General de Tabacos de Filipinas, also known as

"Tabacalera," is a foreign corporation organized and existing under the laws

of Spain. It is the owner of 24 trademarks registered with the Bureau of

Patents, Trademarks and Technology Transfer (BPTTT) of the Department of

Trade and Industry (DTI). Tabacalera authorized petitioner La Flor de laIsabela, Inc. to manufacture and sell cigars and cigarettes using the

Tabacalera trademarks.

Respondent Gabriel Ripoll, Jr. was an employee of petitioners for 28 years

and was the General Manager before he retired sometime in 1993.3 In the

same year, Ripoll organized Tabaqueria de Filipinas, Inc. (Tabaqueria), a

domestic corporation also engaged in the manufacture of tobacco products

like cigars.4 Ripoll is the managing director of Tabaqueria.

On October 1, 1993, petitioners filed a Letter-Complaint5 with the Securities

and Exchange Commission praying for the cancellation of the corporate

name of Tabaqueria on the following ground:

Tabaqueria, being engaged in the same business as Tabacalera, cannot be

allowed to continue using "tabaqueria" which will confuse and deceive the

public into believing that Tabaqueria is operated and managed by, and part

of, Tabacalera and that its business is approved, sponsored by, and affiliatedwith, Tabacalera.

Thereafter, petitioners also filed with the Department of Justice (DOJ)-Task

Force on Anti-Intellectual Property Piracy a criminal complaint against Ripoll

for Infringement of Trademark and Unfair Competition for violation of

Articles 188 and 189 of the Revised Penal Code. The case was docketed as

I.S. No. 94C-07941, entitled Compania General de Tabacos de Filipinas & La

Flor de la Isabela, Inc. (Attys. Ferdinand S. Fider and Ma. Dolores T. Syquia v.

Gabriel Ripoll, Jr. (Tabaqueria de Filipinas, Inc.).

On February 8, 1994, petitioners filed with the DTI a Complaint dated

February 4, 19946 for Unfair Competition, docketed as Administrative Case

No. 94-19 and entitled Compania General de Tabacos de Filipinas and La

Flor de la Isabela, Inc. v. Tabaqueria de Filipinas, Inc. and Gabriel Ripoll, Jr.

Petitioners alleged in the Complaint that Tabaqueria deliberately sought to

adopt/simulate the Tabacalera trademarks to confuse the public into

believing that the Tabaqueria cigars are the same or are somehow

connected with the Tabacalera products.7

In the Complaint petitioners sought, among others, the issuance of a"preliminary order requiring respondents to refrain from manufacturing,

distributing and/or selling the Tabaqueria products."8

In their Answer dated April 9, 1994, Tabaqueria and Ripoll opposed the

issuance of injunctive relief pending investigation on the ground that

petitioners allegation of unfair competition is unproved and

unsubstantiated. They alleged that petitioners failed to establish the

following elements required for the issuance of an injunctive writ:

The party applying for preliminary injunction must show (a) The invasion ofthe right sought to be protected is material and substantial; (b) The right of

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complainant is clear and unmistakable; and (c) There is an urgent and

paramount necessity for the writ to prevent serious damage. (Director of

Forest Administration vs. Fernandez, 192 SCRA 121 [1990]; Phil. Virginia

Tobacco Administration vs. De los Angeles, 164 SCRA 543 [1988])9

Meanwhile, on September 1, 1994, the DOJ issued a Resolution10 in I.S. No.

94C-07941, the dispositive portion of which reads:

Accordingly, it is hereby recommended that the complaint for unfair

competition and/or infringement of trademark be dismissed against

respondent Gabriel Ripoll Jr. for insufficiency of evidence.

Petitioners moved reconsideration of the above resolution, but their motion

was denied in a Letter dated October 18, 1994.11 Later, the Secretary of

Justice reversed the Resolution dated September 1, 1994. Upon

reconsideration, the Secretary, however, issued a Letter dated February 5,

199712 reaffirming the Resolution dated September 1, 1994.

On March 24, 1995, petitioners filed a Motion to Issue Cease and Desist

Order13 with the DTI, praying for the issuance of an order: (1) directing

private respondents to immediately cease and desist from manufacturing,

distributing, and selling cigar products bearing the marks and design of

petitioners; (2) for the immediate seizure of all cigar products of private

respondents bearing the marks and design of petitioners; and (3) for the

immediate closure of private respondents establishment involved in the

production of those products.

In response, private respondents filed an Opposition to Complainants

Motion to Issue Cease and Desist Order, with Motion to Dismiss Complaintdated March 30, 1995.14 Private respondents anchored their motion to

dismiss on the ground of forum shopping due to petitioners filing of prior

cases of infringement and unfair competition with the DOJ. As to the

Motion to Issue Cease and Desist Order, private respondents claimed that

such motion was premature considering that the alleged evidence for the

issuance of the order was just then marked. Moreover, they alleged that the

acts that petitioners sought to be restrained would not cause irreparable

injury to them.

Subsequently, the DTI issued a Temporary Restraining Order dated

September 18, 199515 with a validity period of 20 days from receipt by

private respondents.

In an Order dated April 30, 1996, the Office of Legal Affairs of the DTI ruled

that there was no similarity in the general appearance of the products of

the parties and that consumers would not be misled. In the same order, the

DTI partially granted petitioners prayer for the issuance of a writ ofpreliminary injunction. The pertinent portions of the DTI Order state:

DETERMINATION OF SIMILARITY IN GENERAL APPEARANCE AND

LIKELIHOOD OF CONFUSION; PRODUCT COMPARISON; USUAL PURCHASER

x x x [L]et us now determine if there is similarity in general appearance

between Tabacalera products and Respondents products, such that it will

likely mislead, confuse or deceive the usual purchasers of cigars into buying

Respondents products thinking that what they are buying are the

Tabacalera products they intended to buy.

The competing products should be viewed in their totality. But certain

features, have to be excluded first. That is what the Supreme Court did in

determining similarity between SAN MIGUEL PALE PILSEN (of San Miguel

Corporation) and BEER PALE PILSEN (of Asia Brewery, Inc.) in the case of

Asia Brewery, Inc. vs. C.A. and San Miguel Corp. (G.R. No. 103543, prom.

July 5, 1993). In said case, the Supreme Court found that the two competing

beer products have certain features in common. Therefore, the two

competing products are similar as far as those features are concerned. But

the Supreme Court excluded said features. Apparently the Court wanted to

distinguish between "similarity as a matter of fact" and "similarity as amatter of law", the latter having a limited scope considering the many

exclusions that have to be made. Hereunder are the said features and the

reasons cited by the Supreme Court for their exclusion:

COMMON FEATURES REASONS FOR EXCLUSION

1. The container is steinie bottle.

It is a standard type of bottle and therefore lacks exclusivity. It is of

functional or common use. It is universally used.

2. The color of the bottle is amber.

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It is a functional feature. Its function is to prevent the transmission of light

into the said bottle and thus protect the beer inside the bottle.

3. The phrase "pale pilsen" is carried in their trademark.

This phrase is a generic one even if respective included in their trademarks.

4. The bottle has a capacity of 320 ML and is printed on the label.

It is a metrication and standardization requirement of the defunct MetricSystem Board (now a function of the Bureau of Product Standards, DTI).

5. The color of the words and design on the label is white.

It is the most economical to use on the label and easiest to bake in the

furnace. Hence, a functional feature.

6. Rectangular shape of the label.

It is the usual configuration of labels.

7. The bottle's shape is round with a neck.

It is commonly and universally used.

In the same case of Supreme Court stated the following, citing Callman,

Unfair Competition, Trademarks and Monopolies:

"Protection against imitation should be properly confined to non-functional

features. Even if purely functional elements are slavishly copied, the

resemblance will not support an action for unfair competition, and the first

user cannot claim secondary meaning protection. Nor can the first user

predicate his claim in reliance of any such unpatented functional feature,

even at large expenditure of money."

Following the Supreme Courts way of determining similarity, OLA will

exclude the features which arise from industry practices of cigar

manufacturers worldwide, features commonly used by cigar manufacturers,

standard features, functional features, features arising from labeling rights

and obligations, and generic words and phrases. All of these features have

been listed and/or discussed above. Now this needs clarification. When we

say that we are excluding the logo because it is a functional and universal

feature, what we mean to say is that, the fact that both products bear a

logo (and therefore they are similar in that respect), will be excluded; butthe design, words, drawings of the respective logo of the contending parties

will be considered. This clarification is also true for the other excluded

features.

Before we view the products in their totality, we will first compare the

products as to their respective details. The competing products of the

Parties consist of around thirty-two (32) wooden boxes. We note the

following glaring differences/distinctions:

1. As to the logo engraved on the top and/or back of the cover of the box:

TABACALERAS:

Tabacalera uses two variants of their logo, one for the ordinary plywood

boxes and another for the narra boxes. The logo on the ordinary plywood

box is as follows:

There are word/phrases thereon, namely:

1st line the brand "TABACALERA" (in big letters);

2nd line the representation "THE FINEST CIGARS SINCE 1881";

3rd line the representation "HAND MADE 100% TOBACCO";

4th line the address "MANILA, PHILIPPINES";

5th line the code "A-4-2".

Between the 2nd line and 3rd line is inscribed the crest and coat of arms of

Tabacalera which consists of a shield placed vertically, and divided into 4

parts with inscriptions/drawings in each part. Within the center of the shield

is an oval vertically placed with drawings in it. The crest consists of the

uppermost part of a watchtower used in ancient times in watching for

enemies coming.

As regards the logo on the narra boxes, it is oblong or egg-shaped, in two

parallel lines interrupted at its sides with semi-oblong two parallel lines and

inscripted within such latter parallel lines on the left side is "100% TABACO"and on the right side "HECHO A MANO". On the lower portion between the

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oblong lines are the words "COMPANIA GENERAL DE TABACOS DE FILIPINAS

MANILA, PHILIPPINES, A-4-2". Within the center of the smaller oblong is

inscribed the crest and coat (described already above). At each side of the

crest/coat are tobacco leaves tied together. On top of the crest is the

corporate name "LA FLOR DE LA ISABELA" and this makes the logo confusing

because it does not explain the respective role of the two firms mentioned

in the logo, such as which one is the manufacturer, the distributor, the

licensor, licensee, and trademarks owner.

RESPONDENTS:

A bar curved into a U-shape. It is flanked at the bottom and on its sides with

tobacco leaves curved into a "U" also and joined together as in a "laurel".

Engraved at the center of said bar is the coat consists of a "shield", on top of

which is the crest consists of a princes crown with a cross on top. The

"shield" is divided at its center by a line drawn horizontally with small circles

marked at intervals. At the upper portion of said dividing line is a rooster

(adopted by Mr. Ripoll from the coat of arms of his clan Exh. "48") and the

lower portion contains three tobacco leaves (representing Mr. Ripolls 3

sons) joined into one. Encircling the crest and coat is the corporate name

"TABAQUERIA DE FILIPINAS, INC." as well as the brand "FLOR DE MANILA".

Immediately below the leaves shaped as in a "laurel" is the phrase "HECHO

A MANO 100% TOBACO".

2. As to the brand of the product:

TABACALERAS:

The brand "TABACALERA" is printed in big white Roman letters with blackshadows on a red rectangular background, and the latter is set over a gold

and red rectangular background with a design which appears to be an

inverted letter "Z" leaning to the right side, and said "Z" is used repeatedly

forming a "chain" that surrounds the said red background. Said "Z" also fills

the left and right sides of the label. The same brand and markings appear on

three sides of the box. The back side bears the Government Warning that

cigar smoking is dangerous to health.

The brand "FLOR DE MANILA" is not used on Tabacaleras products except

on a cardboard pack of cigars, which is just slightly bigger than a pack of 100mm cigarettes. (Exh. "DD").

RESPONDENTS:

The brand "FLOR DE MANILA" is printed in red letters with black shadows on

a white rectangular background, and the latter is set over a gold rectangular

background filled with a red design that looks like the letter "P" with its

head touching the ground. These brand and markings appear on two sides

of the box. The other two sides are occupied by the seal of guaranty and bythe said Government Warning.

Both Complainants and Respondents have no trademark registration yet of

the brand "Flor de Manila".

3. As to markings on edges of ordinary plywood box:

TABACALERAS:

The phrase "FLOR FINA" is printed in red Roman letters over a white

rectangular background, and the latter is set over a red background with 2

parallel gold lines and the above-mentioned "Z" design in gold used

repeatedly forming a straight chain. A tiny company logo colored blue and

yellow is marked at intervals.

RESPONDENTS:

The phrase "TABACO FINO" is printed in red letters with strokes that

resemble those in Chinese letters, on a white rectangular background, and

the latter is set over a gold background with red designs that look like

ornate letters "X" and "J". A tiny company logo is marked at intervals.

4. As to "seal of guaranty":

TABACALERAS:

Colored green and white; with the phrase "REPUBLIC OF THE PHILIPPINES"

in big letters and the phrase "sello de garantia de la Flor de la Isabela, Inc.";

pasted horizontally at the middle of the left portion of the cigar box if

viewed from its top.

RESPONDENTS:

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Colored gold and red; with the phrase in big letters "sello de garantia";

bears in big print the company logo; pasted vertically at the middle of the

left portion of the cigar box if viewed from its top.

5. As to predominant colors:

TABACALERAS:

Red, gold, and green, in that order. Has blue and yellow.

RESPONDENTS:

Gold and red, in that order. No green, blue and yellow.

6. Other differences/distinctions

Tabacalera products have the following features:

a. The corporate name "LA FLOR DE LA ISABELA" (engraved on the narra

wood boxes; also printed on the seal of guaranty).

b. The brand "TABACALERA" surrounded by said "Z" design.

c. The representation "THE FINEST CIGARS SINCE 1881".

d. The address "MANILA, PHILIPPINES".

e. The code "A-4-2".

f. The phrase "REPUBLIC OF THE PHILIPPINES" in the seal of guaranty. Below

said phrase is a mountain which resembles the mountain printed in the old

Philippine money. This appears to be a misrepresentation that the

Philippine government is a co-guarantor in the seal of guaranty. This seal of

guaranty was possibly copied from the seal of guaranty of Cuban-made

boxes of cigars. But in Cuba, the government really guarantees the cigars

made in Cuba because cigars are one of the main exports of that country. In

the Philippines, the government does not guaranty cigars made in the

Philippines.

g. The phrase "FLOR FINA" with the said "Z" design.

These seven (7) features are NOT found in Respondents products.

One of the rules in adjudicating unfair competition cases was laid down by

the Supreme Court in the case of Del Monte Corp. vs. C.A. et al. (181 SCRA

410) as follows:

We note that 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

condition under which it is usually purchased. Among those, 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 after deliberate, comparative and analytical investigation.

But mass products, low priced articles as in wide use, and the matters of

everyday purchase requiring frequent replacement are bought by the causal

consumer without great care.

Certainly, not everybody buys cigars. Very few people buy cigars for they

are expensive, have health implications, and its smoke annoys non-smokers.

It is really not the "sari-sari" store variety. OLA takes judicial notice that

even big department stores and malls do not ordinarily sell cigars. The usual

purchasers of cigars are older people not necessarily an elder orprofessional, besides those cigar aficionados and cigar lovers, who are able

and willing to pay and are capable of discerning the products they buy.

Definitely the "impulse buyers" (those who make a very quick decision (e.g.,

6 seconds) to buy a certain product) are not the usual purchasers of cigars.

"The ordinary purchasers must be thought of as having, and credited with,

at least a modicum of intelligence to be able to see the obvious differences

between the two trademarks in question." (Fruit of the Loom, Inc. vs. C.A.,

133 SCRA 405). From this Supreme Court decision we can say that if the

buyer can see the obvious differences between two trademarks, there is

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more reason for him to see the obvious differences of the whole of the two

products themselves even if sold at a glance.

Viewing briefly the competing products in their totality, the two are readily

distinguished by their respective brand as appearing in the box:

"TABACALERA" is the brand of the Tabacalera products while "FLOR DE

MANILA" is the brand of Respondents products. In fact, per Certification of

BIR dated March 15, 1994, "Flor de Manila" is the brand registered by theRespondents with said bureau (Annex "B", Answer). The Complainants

allege in the Complaint (Par. 1.12) that Respondents are using the word

"TABAQUERIA" as the brand of their products. This allegation is belied by an

inspection of the boxes of Respondents none of them shows that the word

"TABAQUERIA" was detached from the firm name "TABAQUERIA DE

FILIPINAS, INC." and used separately as a brand. Also readily distinguishing

the two products are their respective distinctive logo: Tabacaleras logo is

quite big and ornate while Respondents logo is quite small and simple.

Their respective seal of guaranty are also conspicuous. Tabacaleras seal of

guaranty is colored green and white and pasted horizontally while that of

Respondents is colored gold and red and pasted vertically. The other glaring

differences between the two, which we have listed above, are revealed at

once upon a brief look at the competing products.

Confusion becomes more remote when we consider the usual buyers of

cigars. We have already discussed that above. They know their brand and

they will not be confused by the various words, marks, and designs on the

products. This is specially true for purchasers who have been using

Tabacalera products for a long time (Tabacalera products have been

available since 1881 [per logo of Tabacalera] or 1917 [per Complaint]), and

therefore know very well their favorite brand.

If they switch to Respondents products, it is not because they are deceived

and confused but because they find Respondents products to their taste.

We should also consider that cigars are expensive. Hereunder are sample

prices of Respondents products (Exhs. "EEE" and "III"):

a. Chest Coronas Largas 25 - P/ 619.75

b. Corona 50 - 739.75

c. Corona Largas 50 - 959.75d. Corona Humidor De Luxe 50 - 1,749.75

Tabacalera products are priced higher. The point we are driving at is that

with these high prices (which are like prices of writs watches, electric fans,

tape recorders, and other electrical/electronic appliances), the usual

purchasers will be cautious in buying and he will give the product he is

buying that examination that corresponds to the amount of money that he

will part with.

Therefore, there is definitely no similarity in the general appearance of thecompeting products and hence there is no likelihood that purchasers will be

*misled+, deceived and confused into buying Respondents products thinking

that they are buying the Tabacalera products that they intended to buy.

Complainants allege in their Complaint that they have been using the

trademark (brand) "FLOR DE MANILA" for their products since 1992.

However, Complainants presented only a pack of cigars made by La Flor de

la Isabela, Inc., with the brand "Flor de Manila", colored white and gray, and

the size is just slightly bigger than a pack of 100 mm. cigarettes. (Exh. "DD").

Buyers cannot possibly make the mistake of buying Respondents wooden

boxes of cigars thinking that what they are buying is this carton pack of

cigars of La Flor de la Isabela, Inc.

x x x x

In view of all the foregoing, the injunction prayed for cannot be granted in

toto but only partially, i.e., with respect to the barrel type of container, the

existence of which has to be explained and justified further by Respondents,

and certain features in the packaging which are confusingly similar to the

containers/packaging of Complainants products x x x.16 (Emphasis

supplied.)

The DTI disposed of the complaint this way:

WHEREFORE:

1. Respondents are hereby enjoined and restrained from further

manufacturing and using the wooden barrel type of container as container

for their cigars (typified by Exh. "DDD-1"). However, current stocks thereof,

which are in their finished product state, now in possession of

Respondents distributors or retailers may be sold/disposed of in the

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ordinary course of business, but those still in the possession of Respondents

shall be transferred to the box containers.

2. In connection with the label used on the sides of the boxes (which contain

the dominant colors gold and red), Respondents are ordered to:

a. change either the gold or the red with another color (not blue); or

b. maintain the said gold and red color combination but add another

dominant color (not blue). This injunction no. 2 covers only products yet to

be manufactured and not products which are already in the possession of

Respondents distributors/retailers. This injunction is for the purpose only of

making said label of Respondents very distinct.

3. In connection with the narra wood boxes, Respondents are ordered to

make distinctive and conspicuous etchings/engravings on the top and/or

sides of the said bozes. The etchings/engravings thereon (which are

stripe/s) shall be transferred to other exterior parts of the boxes or done

away with. This injunction no. 3 covers only products yet to be

manufactured and not products which are already in their finished-product

state and already in the possession of Respondents distributors/retailers.

This injunction is for the purpose only of making said narra wood boxes of

Respondents very distinct, hence, the present boxes can no longer be used

by Respondents unless the above-stated changes thereon, as herein

ordered, are complied with.

x x x x

SO ORDERED.17

On June 10, 1996, petitioners filed a Motion for Reconsideration dated June

4, 199618 of the above Order contending that: (1) the DTI erroneously

passed upon the entire merits of the case where the only pending issue for

resolution is the issuance of a preliminary injunction; (2) the findings of facts

of the Order are not in accordance with the evidence presented by the

parties; and (3) the DTI misapplied the law and jurisprudence applicable on

the issues in the instant case.1awph!1 The Motion was denied by the DTI in

an Order dated December 10, 1996.19

Thus, on December 26, 1996, petitioners filed a Petition for Certiorari (With

Urgent Application for Temporary Restraining Order and/or Writ of

Preliminary Injunction) dated December 19, 199620 with the CA. Petitioners

raised substantially the same issues as in their Motion for Reconsideration

dated June 4, 1996. The case was docketed as CA-G.R. SP No. 42881 entitled

Compania General de Tabacos de Filipinas and La Flor de la Isabela, Inc. v.

Hon. Virgilio A. Sevandal, as Director and DTI Adjudication Officer, Atty.

Ruben S. Extramadura,as Hearing Officer Office of the Legal Affairs,Department of Trade and Industry, Tabaqueria De Filipinas, Inc. and Gabriel

Ripoll, Jr.

The CA, thus, issued the assailed decision dated June 16, 2003 wherein it

determined the issues as:

1) Whether or not the Order dated April 30, 1996 disposed of the merits of

the case; and

2) Whether or not public respondent committed grave abuse of discretion

in refusing to grant petitioners prayer for injunctive relief.21

The CA ruled that the findings of the DTI were premature having passed

upon the main issues of the case when the pending incident was only a

motion for preliminary injunction. The CA added that the evidence

necessary in such a hearing was a mere sampling, not being conclusive of

the principal action itself. Thus, the CA ruled that the DTI had prejudged the

case and that its findings were premature, to wit:

By holding thus, public respondent OLA-DTI had pre-judged the main case.

In fact, there was practically nothing left for the Hearing Officer to tryexcept for private respondents claim for attorneys fees.

x x x x

We therefore rule that public respondent OLA-DTIs finding was

premature.22 (Emphasis supplied)

As to the second issue, the CA ruled that the dismissal of the infringement

of trademarks and unfair competition case against respondent Ripoll, Jr.,

renders petitioners right to an injunctive relief doubtful. Thus, the issuance

of an injunction in that case would not be proper. The CA further ruled that

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petitioners failed to show that there was an urgent and paramount

necessity for the issuance of the writ having failed to substantiate their

claim that the abrupt drop in the sales of their products was the direct

result of the acts of respondents.23

Thus, the CA denied the petition.24

The petitioners then filed a Motion for Reconsideration dated July 4, 200325to the above decision. This motion was denied for lack of merit in the

assailed resolution.

Hence, we have this petition.

The Courts Ruling

This petition must be denied.

The Issues

I.

The Court of Appeals gravely erred in not declaring the Orders of Public

Respondent dated 30 April 1996 and 10 December 1996 as completely null

and void for having been rendered with Grave Abuse of Discretion

amounting to Lack [or] Excess of Jurisdiction.

II.

The Court of Appeals gravely erred in not ruling that the invasion of/to

petitioners rights are substantial and material.

III.

The Court of Appeals gravely erred in ruling that the petitioners right to the

exclusive use of the Tabacalera Trademarks and Design was not shown to be

clear and unmistakable.

IV.

The Court of Appeals gravely erred in ruling that there is no urgent and

paramount necessity for the issuance of a writ of injunction.26

The Orders of the DTI were not rendered in grave abuse

of discretion amounting to lack of or in excess of jurisdiction

Petitioners argue that because the CA ruled that the DTI had prejudged the

main case, the Decision of the DTI was, therefore, issued in grave abuse ofdiscretion amounting to lack of or in excess of jurisdiction. Thus, petitioners

conclude that the DTI Orders dated April 30, 1996 and December 10, 1996

must be considered as null and void.27

There is no merit in such contention.

In First Womens Credit Corporation v. Perez,28 we defined grave abuse of

discretion as:

By grave abuse of discretion is meant such capricious and whimsical

exercise of judgment which is equivalent to an excess or lack of jurisdiction.The abuse of discretion must be so patent and gross as to amount to an

evasion of a positive duty or a virtual refusal to perform a duty enjoined by

law or to act at all in contemplation of law, as where the power is exercised

in an arbitrary and despotic manner by reason of passion or hostility.

We further clarified such principle later in Buan v. Matugas:29

There is grave abuse of discretion only when there is a capricious and

whimsical exercise of judgment as is equivalent to lack of jurisdiction, such

as where the power is exercised in an arbitrary and despotic manner byreason of passion and personal hostility, and it must be so patent or gross as

to constitute an evasion of a positive duty or a virtual refusal to perform the

duty or to act at all in contemplation of law. Not every error in the

proceedings, or every erroneous conclusion of law or fact, is grave abuse of

discretion. (Emphasis supplied)1avvphi1

Petitioners must prove that the elements above-mentioned were present in

the rendering of the questioned Orders of the DTI in order to establish grave

abuse of discretion. The mere fact that the CA ruled that the DTI prejudged

the main case filed before it does not by itself establish grave abuse of

discretion.

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Moreover, there is no grave abuse of discretion in the instant case because

the DTI merely tried to justify the issuance of the writ of preliminary

injunction. Sometimes a discussion in passing of the issues to be resolved on

the merits is necessary in order to deny or grant an application for the writ.

This cannot, however, be considered as a whimsical or capricious exercise of

discretion.

The next three issues shall be discussed simultaneously for being

interrelated.

Petitioners failed to establish that

they are entitled to a writ of preliminary injunction

Section 3 of Rule 58 provides for the grounds for the issuance of a

preliminary injunction:

Sec. 3. Grounds for issuance of preliminary injunction. - A preliminary

injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or

part of such relief consists in restraining the commission or continuance of

the act or acts complained of, or in requiring the performance of an act or

acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts

complained of during the litigation would probably work injustice to the

applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is

attempting to do, or is procuring or suffering to be done, some act or acts

probably in violation of the rights of the applicant respecting the subject of

the action or proceeding, and tending to render the judgment ineffectual.

Thus, the Court has repeatedly held that, in order that an injunctive relief

may be issued, the applicant must show that: "(1) the right of the

complainant is clear and unmistakable; (2) the invasion of the right sought

to be protected is material and substantial; and (3) there is an urgent and

paramount necessity for the writ to prevent serious damage."30

In establishing the above elements, it bears pointing out that the Court used

the term "and" in enumerating the said elements. In Mapa v. Arroyo,31 this

Court defined the term "and" as follows:

In the present case, the employment of the word "and" between "facilities,

improvements, infrastructures" and "other forms of development," far from

supporting petitioners theory, enervates it instead since it is basic in legal

hermeneutics that "and" is not meant to separate words but is aconjunction used to denote a joinder or union.

While in Republic v. David,32 we applied the above definition with regard an

enumeration of conditions or requisites in this wise:

The conditions that were allegedly violated by respondent are contained in

paragraph 10 of the Deed of Conditional Sale, as follows:

"10. The Contract shall further [provide] the following terms and conditions:

x x x x

(c) The VENDEE, and his heirs and/or successors, shall actually occupy and

be in possession of the PROPERTY at all times"

x x x x

The use of the conjunctive and in subparagraph (c) is not by any chance a

surplusage. Neither is it meant to be without any legal signification. Its use is

confirmatory of the restrictive intent that the houses provided by petitioner

should be for the exclusive use and benefit of the SSS employee-beneficiary.

It is easily discernible, therefore, that both "actual occupancy" and

"possession at all times" -- not just one or the other -- were imposed as

conditions upon respondent. The word and -- whether it is used to connect

words, phrases or full sentences -- must be accepted in its common and

usual meaning as "binding together and as relating to one another." And

implies a conjunction, joinder or union. (Emphasis supplied)

In the instant case, the import of the use of the term "and" means that all of

the elements mentioned above must concur in order that an injunctive writ

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may be issued. The absence of even one of the elements would be fatal in

petitioners application for the writ.

In finding that the third element was absent, that there is no urgent and

paramount necessity for the writ to prevent serious damage to petitioners,

the CA ruled that:

Second, petitioners have failed to show that there is an urgent andparamount necessity for the issuance of writ of injunction to prevent

serious damage. In Olalia vs. Hizon (196 SCRA 665, 672), the Supreme Court

held:

"While, to reiterate, the evidence to be submitted at the hearing on the

motion for preliminary injunction need not be conclusive and complete, we

find that the private respondent has not shown, at least tentatively, that she

has been irrepairably injured during the five month period the petitioner

was operating under the trade name of Pampangas Pride. On this ground

alone, we find that the preliminary injunction should not have been issued

by the trial court. It bears repeating that as a preliminary injunction isintended to prevent irreparable injury to the plaintiff, that possibility should

be clearly established, if only provisionally, to justify the restraint of the act

complained against. No such injury has been shown by the private

respondent. Consequently, we must conclude that the issuance of the

preliminary injunction in this case, being utterly without basis, was tainted

with grave abuse of discretion that we can correct on certiorari."

In the case at bench, petitioner failed to substantiate their claim that the

abrupt drop in sales was the result of the acts complained of against private

respondent.33 (Emphasis supplied.)

Petitioners claim that as a result of private respondents "fraudulent and

malicious entry into the market, Petitioners sales dropped by twenty-five

[percent] (25%)."34

Petitioners further aver that the writ of preliminary injunction is necessary

as the general appearance of private respondents products is confusingly

similar to that of petitioners products. Pet itioners claim that this has

resulted in a marked drop in their sales. Thus, petitioners argue that unless

private respondents use similar marks, packaging, and labeling as that of

petitioners products, they will continue to suffer damages.35

Petitioners postulations are bereft of merit.

Petitioners failed to present one iota of evidence in support of their

allegations. They failed to present evidence that indeed their sales dropped

by an alleged 25% and that such losses resulted from the alleged

infringement by private respondents. Without presenting evidence to prove

their allegations, petitioners arguments cannot be given any merit. Thus,we ruled in Olalia v. Hizon:36

A preliminary injunction is an order granted at any stage of an action prior

to final judgment, requiring a person to refrain from a particular act. As the

term itself suggest, it is merely temporary, subject to the final disposition of

the principal action. The justification for the preliminary injunction is

urgency. It is based on evidence tending to show that the action complained

of must be stayed lest the movant suffer irreparable injury or the final

judgment granting him relief sought become ineffectual. Necessarily, that

evidence need only be a "sampling," as it were, and intended merely to give

the court an idea of the justification for the preliminary injunction pendingthe decision of the case on the merits. The evidence submitted at the

hearing on the motion for the preliminary injunction is not conclusive of the

principal action, which has yet to be decided.

Due to the absence of the third requisite for the issuance of a preliminary

injunction, petitioners application for the injunctive writ must already fail;

the absence or presence of the other requisites need no longer be

discussed.

Such denial is grounded on the oft-repeated principle enunciated in Vera v.Arca,37 where this Court held that:

As far back as March 23, 1909, more than 60 years ago, this Court, in the

leading case of Devesa v. Arbes, made the categorical pronouncement that

the issuance of an injunction is addressed to the sound discretion of the

Court, the exercise of which is controlled not so much by the then

applicable sections of the Code of Civil Procedure, now the Rules of Court,

but by the accepted doctrines, one of which is that it should not be granted

while the rights between the parties are undetermined except in

extraordinary cases where material and irreparable injury will be done. For

it is an action in equity appropriate only when there can be no

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compensation in damages for the injury thus sustained and where no

adequate remedy in law exists. Such a holding reflected the prevailing

American doctrine that there is no power "the exercise of which is more

delicate, which requires greater caution, deliberation and sound discretion

or more dangerous in a doubtful case," being "the strong arm of equity, that

never ought to be extended," except where the injury is great and

irreparable.

While in Olalia,38 we reiterated the above ruling, as follows:

It has been consistently held that there is no power the exercise of which is

more delicate, which requires greater caution, deliberation and sound

discretion, or more dangerous in a doubtful case, than the issuance of an

injunction. It is the strong arm of equity that should never be extended

unless to cases of great injury, where courts of law cannot afford an

adequate or commensurate remedy in damages.

Every court should remember that an injunction is a limitation upon the

freedom of action of the defendant and should not be granted lightly orprecipitately. It should be granted only when the court is fully satisfied that

the law permits it and the emergency demands it.

We again ruled in Hernandez v. National Power Corporation:39

At times referred to as the "Strong Arm of Equity," we have consistently

ruled that there is no power the exercise of which is more delicate and

which calls for greater circumspection than the issuance of an injunction. It

should only be extended in cases of great injury where courts of law cannot

afford an adequate or commensurate remedy in damages; "in cases ofextreme urgency; where the right is very clear; where considerations of

relative inconvenience bear strongly in complainants favor; where there is a

willful and unlawful invasion of plaintiffs right against his protest and

remonstrance, the injury being a continuing one, and where the effect of

the mandatory injunction is rather to reestablish and maintain a preexisting

continuing relation between the parties, recently and arbitrarily interrupted

by the defendant, than to establish a new relation." (Emphasis supplied)

Clearly, it was incumbent upon the petitioners to support with evidence

their claim for the issuance of a preliminary injunction. They failed to do so.

Hence, the instant petition must fail.

WHEREFORE, the petition is hereby DENIED. The assailed June 16, 2003

Decision and December 1, 2003 Resolution of the CA in CA-G.R. SP No.

42881 are AFFIRMED. Costs against petitioners.

SO ORDERED.

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G.R. No. 184850 October 20, 2010

E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, Petitioners,

vs.

SHEN DAR ELECTRICITY AND MACHINERY CO., LTD., Respondent.

D E C I S I O N

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks to nullify and

reverse the February 21, 2008 Decision1 and the October 6, 2008

Resolution2 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 99356

entitled Shen Dar Electricity and Machinery Co., Ltd. v. E.Y. Industrial Sales,

Inc. and Engracio Yap.

The assailed decision reversed the Decision dated May 25, 20073 issued bythe Director General of the Intellectual Property Office (IPO) in Inter Partes

Case No. 14-2004-00084. The IPO Director General upheld Certificate of

Registration (COR) No. 4-1999-005393 issued by the IPO for the trademark

"VESPA" in favor of petitioner E.Y. Industrial Sales, Inc. (EYIS), but ordered

the cancellation of COR No. 4-1997-121492, also for the trademark "VESPA,"

issued in favor of respondent Shen Dar Electricity and Machinery Co., Ltd.

(Shen Dar). The Decision of the IPO Director General, in effect, affirmed the

Decision dated May 29, 20064 issued by the Director of the Bureau of Legal

Affairs (BLA) of the IPO.

The Facts

EYIS is a domestic corporation engaged in the production, distribution and

sale of air compressors and other industrial tools and equipment.5

Petitioner Engracio Yap is the Chairman of the Board of Directors of EYIS.6

Respondent Shen Dar is a Taiwan-based foreign corporation engaged in the

manufacture of air compressors.7

Both companies claimed to have the right to register the trademark

"VESPA" for air compressors.

From 1997 to 2004, EYIS imported air compressors from Shen Dar through

sales contracts. In the Sales Contract dated April 20, 2002,8 for example,

Shen Dar would supply EYIS in one (1) year with 24 to 30 units of 40-ft.

containers worth of air compressors identified in the Packing/Weight Lists

simply as SD-23, SD-29, SD-31, SD-32, SD-39, SD-67 and SD-68. In the

corresponding Bill of Ladings, the items were described merely as air

compressors.9 There is no documentary evidence to show that such air

compressors were marked "VESPA."

On June 9, 1997, Shen Dar filed Trademark Application Serial No. 4-1997-

121492 with the IPO for the mark "VESPA, Chinese Characters and Device"

for use on air compressors and welding machines.10

On July 28, 1999, EYIS filed Trademark Application Serial No. 4-1999-

005393, also for the mark "VESPA," for use on air compressors.11 On

January 18, 2004, the IPO issued COR No. 4-1999-005393 in favor of EYIS.12

Thereafter, on February 8, 2007, Shen Dar was also issued COR No. 4-1997-

121492.13

In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation

of EYIS COR with the BLA.14 In the Petition, Shen Dar primarily argued that

the issuance of the COR in favor of EYIS violated Section 123.1 paragraphs

(d), (e) and (f) of Republic Act No. (RA) 8293, otherwise known as the

Intellectual Property Code (IP Code), having first filed an application for the

mark. Shen Dar further alleged that EYIS was a mere distributor of air

compressors bearing the mark "VESPA" which it imported from Shen Dar.

Shen Dar also argued that it had prior and exclusive right to the use and

registration of the mark "VESPA" in the Philippines under the provisions ofthe Paris Convention.15

In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true

owners of the mark "VESPA" being the sole assembler and fabricator of air

compressors since the early 1990s. They further alleged that the air

compressors that Shen Dar allegedly supplied them bore the mark "SD" for

Shen Dar and not "VESPA." Moreover, EYIS argued that Shen Dar, not being

the owner of the mark, could not seek protection from the provisions of the

Paris Convention or the IP Code.16

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Thereafter, the Director of the BLA issued its Decision dated May 29, 2006 in

favor of EYIS and against Shen Dar, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition for Cancellation is, as it is

hereby, DENIED. Consequently, Certificate of Registration No. 4-1999-

[005393] for the mark "VESPA" granted in the name of E.Y. Industrial Sales,

Inc. on 9 January 2007 is hereby upheld.

Let the filewrapper of VESPA subject matter of this case be forwarded to the

Administrative, Financial and Human Resource Development Services

Bureau for issuance and appropriate action in accordance with this

DECISION and a copy thereof furnished to the Bureau of Trademarks for

information and update of its records.

SO ORDERED.17

Shen Dar appealed the decision of the BLA Director to the Director General

of the IPO. In the appeal, Shen Dar raised the following issues:

1. Whether the BLA Director erred in ruling that Shen Dar failed to present

evidence;

2. Whether the registration of EYIS application was proper considering that

Shen Dar was the first to file an application for the mark; and

3. Whether the BLA Director correctly ruled that EYIS is the true owner of

the mark.18

Later, the IPO Director General issued a Decision dated May 25, 2007upholding the COR issued in favor of EYIS while cancelling the COR of Shen

Dar, the dispositive portion of which reads:

WHEREFORE, premises considered, the appeal is DENIED. Certificate of

Registration No. 4-1999-005393 for the mark VESPA for air compressor

issued in favor of Appellee is hereby upheld. Consequently, Certificate of

Registration No. 4-1997-121492 for the mark VESPA, Chinese Characters &

Device for goods air compressor and spot welding machine issued in favor

of Appellant is hereby ordered cancelled.

Let a copy of this Decision as well as the records of this case be furnished

and returned to the Director of Bureau of Legal Affairs for appropriate

action. Further, let also the Directors of the Bureau of Trademarks, the

Administrative, Financial and Human Resources Development Services

Bureau, and the Documentation, Information and Technology Transfer

Bureau be furnished a copy of this Decision for information, guidance, and

records purposes.19

Shen Dar appealed the above decision of the IPO Director General to the CA

where Shen Dar raised the following issues:

1. Whether Shen Dar is guilty of forum shopping;

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

3. Whether Shen Dar presented evidence of actual use;

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

5. Whether the IPO Director General erred in cancelling Shen Dars COR No.

4-1997-121492 without a petition for cancellation; and

6. Whether Shen Dar sustained damages.20

In the assailed decision, the CA reversed the IPO Director General and ruled

in favor of Shen Dar. The dispositive portion states:

WHEREFORE, premises considered, the petition is GRANTED. Consequently,

the assailed decision of the Director General of the Intellectual PropertyOffice dated May 25, 2007 is hereby REVERSED and SET ASIDE. In lieu

thereof, a new one is entered: a) ordering the cancellation of Certificate of

Registration No. 4-1999-005393 issued on January 19, 2004 for the

trademark VESPA in favor of E.Y. Industrial Sales, Inc.; b) ordering the

restoration of the validity of Certificate of Registration No. 4-1997-121492

for the trademark VESPA in favor of Shen Dar Electricity and Machinery Co.,

Ltd. No pronouncement as to costs.

SO ORDERED.21

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In ruling for Shen Dar, the CA ruled that, despite the fact that Shen Dar did

not formally offer its evidence before the BLA, such evidence was properly

attached to the Petition for Cancellation. As such, Shen Dars evidence may

be properly considered. The CA also enunciated that the IPO failed to

properly apply the provisions of Sec. 123.1(d) of RA 8293, which prohibits

the registration of a trademark in favor of a party when there is an earlier

filed application for the same mark. The CA further ruled that Shen Dar

should be considered to have prior use of the mark based on the statements

made by the parties in their respective Declarations of Actual Use. The CA

added that EYIS is a mere importer of the air compressors with the mark

"VESPA" as may be gleaned from its receipts which indicated that EYIS is an

importer, wholesaler and retailer, and therefore, cannot be considered an

owner of the mark.22