LIP Session 8 Cases

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[G.R. Nos. 63796-97. May 21, 1984.]

LA CHEMISE LACOSTE, S. A., petitioner , vs. HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAMHEMANDAS, respondents .

[G.R. No. 65659. May 21, 1984.]

GOBINDRAM HEMANDAS SUJANANI, petitioner , vs. HON. ROBERTO V. ONGPIN, in his capacity asMinister of Trade and Industry, and HON. CESAR SAN DIEGO, in his capacity as Director ofPatents, respondents .

Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.

Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.

SYLLABUS

1. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; FOREIGN CORPORATION ACTING

THROUGH A MIDDLEMAN TRANSACTING IN OWN NAME DEEMED NOT "DOING BUSINESS" IN THE

PHILIPPINES; CASE AT BAR. — In the present case, the petitioner is a foreign corporation. The marketing of its

products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation. The latter is

an independent entity which buys and then markets not only products of the petitioner but also many other

products bearing equally well-known and established trademarks and tradenames. In other words, Rustan is not

a mere agent or conduit of the petitioner. Applying Rule I Section 1 (g) of the rules and regulations promulgated

by the Board of Investments pursuant to its rule-making power under Presidential Decree No. 1789, otherwise

known as the Omnibus Investment Code, to the facts of this case, we find and conclude that the petitioner is not

doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its own

name and/or its own account and not in the name or for the account of the petitioner.

2. REMEDIAL LAW; ACTIONS; PARTIES TO AN ACTION; CAPACITY TO SUE; FOREIGN CORPORATION NOT

DOING BUSINESS IN THE PHILIPPINES NEEDS NO LICENSE TO SUE BEFORE PHILIPPINE COURTS FOR

INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION. — As early as 1927, this Court was, and it still is,

of the view that a foreign corporation not doing business in the Philippines needs no license to sue beforePhilippine courts for infringement of trademark and unfair competition (Western Equipment and Supply Co. vs .

Reyes, 51 Phil. 115). In East Board Navigation Ltd. v . Ysmael and Co., Inc. (102 Phil. 1), we recognized a right

of foreign corporation to sue on isolated transactions. In General Garments Corp. v . Director of Patents, (41

SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not licensed to do and not

doing business in the Philippines, to file a petition for cancellation of a trademark before the Patent Office.

3. ID.; CRIMINAL PROCEDURE; PROSECUTION OF CRIMINAL CASES IS IN THE NAME OF THE STATE, NOT

FOREIGN CORPORATION WHICH FILES COMPLAINT. — More important is the nature of the case which led to

this petition. What preceded this petition for certiorari was a letter-complaint filed before the NBI charging

Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows

after the completion of the preliminary investigation being conducted by the Special Prosecutor the information

shall be in the name of the People of the Philippines and no longer the petitioner which is only an aggrieved

party since a criminal offense is essentially an act against the State. It is the latter which is principally the injured

party although there is a private right violated. Petitioner's capacity to sue would become, therefore, of not

much significance in the main case. We cannot allow a possible violator of our criminal statutes to escape

prosecution upon a far-fetched contention that the aggrieved party or victim of a crime has no standing to sue.

4. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; RIGHT TO SUE IN PHILIPPINE COURTS;

ACCORDED BY PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY TO WHICH

PHILIPPINES AND FRANCE ARE PARTIES. — In upholding the right of the petitioner to maintain the present suit

before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover



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recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of Industrial

Property to which the Philippines and France are parties. We are simply interpreting and enforcing a solemn

international commitment of the Philippines embodied in a multilateral treaty to which we are a party and which

we entered into because it is in our national interest to do so.

5. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH WARRANTS; PROBABLE CAUSE, ESSENTIAL TO ISSUANCE.

— As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no

uncertain terms the determination of probable cause by the judge after examination under oath or affirmation of

the complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3).

6. ID.; ID.; ID.; PROBABLE CAUSE, DEFINED. — Probable cause has traditionally meant such facts and

circumstances antecedent to the issuance of the warrant that are in themselves sufficient to induce a cautious

man to rely upon them and act in pursuance thereof (People vs . Sy Juco, 64 Phil. 667). This concept of probable

cause was amplified and modified by our ruling in Stonehill v . Diokno, 20 SCRA 383, that probable cause

"presupposes the introduction of competent proof that the party against whom it is sought has performed

particular acts, or committed specific commission, violating a given provision of our criminal laws."

7. ID.; ID.; ID.; DETERMINATION OF PROBABLE CAUSE, NO FIXED RULE. — The question of whether or not a

probable cause exists is one which must be decided in the light of the conditions obtaining in given situations

(Central Bank v . Morfe, 20 SCRA 507). We agree that there is no general formula or fixed rule for the

determination of the existence of probable cause since, as we have recognized in Luna v . Plaza, 26 SCRA 310,the existence depends to a large degree upon the finding or opinion of the judge conducting the examination.

However, the findings of the judge should not disregard the facts before him nor run counter to the clear

dictates of reason. More so it is plain that our country's abide to by international commitments is at stake.

8. ID.; ID.; ID.; ID.; MOTION TO QUASH WARRANT; GRANT THEREOF IN CASE AT BAR CONSTITUTES GRAVE

ABUSE OF DISCRETION. — The respondent court, therefore, complied with the constitutional and statutory

requirements the issuance of a valid search warrant. At that point in time, it was fully convinced that there

existed probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent court

executed a complete turnabout and declared that there was no probable cause to justify its earlier issuance of

the warrants. True, the lower court should be given the opportunity to correct its errors, if there be any, but the

rectification must, as earlier stated be based on sound and valid grounds. In this case, there was no compelling justification for the about face. The allegation that vital facts were deliberately suppressed or concealed by

petitioner should have been assessed more carefully because the object of the quashal was the return of items

already seized and easily examined by the court. The items were alleged to be fake and quite obviously would

be needed as evidence in the criminal prosecution. Moreover, an application for search warrant is heard ex-

parte . It is neither a trial nor a part of the trial. Action on these applications must be expedited for time is of the

essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and

the witnesses. The allegation of Hemandas that the applicant withheld information from the respondent court

was clearly no basis to order the return of the seized items.

9. MERCANTILE LAW; PATENTS OFFICE; CERTIFICATE OF REGISTRATION IN THE SUPPLEMENTAL REGISTER;

NOT A PRIMA FACIE EVIDENCE OF REGISTRANT'S RIGHT. — A certificate of registration in the Supplemental

Register is not a prima facie evidence of the validity of registration, of the registrant's exclusive right to use thesame in connection with the goods, business, or services specified in the certificate. Such a certificate of

registration can not be filed, with effect, with the Bureau of Customs in order to exclude from the Philippines,

foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil.

Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, Vol. 2, pp. 513-515).

10. ID.; ID.; ID.; PURPOSE. — Registration in the Supplemental Register, therefore, serves as notice that the

registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be

entered in the Principal Register, all who deal with it should be on guard that there are certain defects, some

obstacles which the user must still overcome before he can claim legal ownership of the mark or ask the courts



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to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with

nothing more than a registration in the Supplemental Register to posture before courts of justice as if the

registration is in the Principal Register.

11. REMEDIAL LAW; CRIMINAL ACTION; PROSECUTION OF CIVIL ACTION; PREJUDICIAL QUESTION; CASE AT

BAR, NOT A CASE OF. — The case which suspends a criminal prosecution under Section 5, Rule 111 of the

Revised Rules of Court on prejudicial questions must be a civil case which is determinative of the innocence or,

subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent Office

is an administrative proceeding and not a civil case. The decision of the Patent Office cannot be finallydeterminative of the private respondent's innocence of the charges against him (Flordelis v . Castillo, 58 SCRA

301).

12. MERCANTILE LAW; LAW ON TRADEMARKS AND TRADENAMES; PURPOSE OF LAW PROTECTING

TRADEMARKS. — The purpose of the law protecting a trademark can not be overemphasized. They are to point

out distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been

instrumental in bringing into a market a superior article of merchandise, the fruit of his industry and skill, and to

prevent fraud and imposition (Etepha v . Director of Patents, 16 SCRA 495). The legislature has enacted laws to

regulate the use of trademarks and provide for the protection thereof. Modem trade and commerce demands

that depredations on legitimate trademarks of non-nationals including those who have not shown priorregistration thereof should not be countenanced. The law against such depredations is not only for the

protection of the owner of the trademark but also, and more importantly, for the protection of purchasers from

confusion, mistake, or deception as to the goods they are buying (Asari Yoko Co., Ltd. v . Kee Boc, 1 SCRA 1).

13. ID.; ID.; LAW THEREOF BASED ON THE PRINCIPLE OF BUSINESS INTEGRITY AND COMMON JUSTICE. —

The law on trademarks and tradenames is based on the principle of business integrity and common justice. This

law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims

to foster, and not to hamper, competition no one, especially a trader, is justified in damaging or jeopardizing

another's business by fraud, deceit, trickery or unfair methods of any sort. This necessarily precludes the trading

by one dealer upon the good name and reputation built by another (Baltimore v . Moses, 182 Md 229, 34 A(2d)

338).14. ID.; ID.; ID.; CASE AT BAR. — The records show that the goodwill and reputation of the petitioner's

products bearing the trademark LACOSTE date back even before 1964 when LACOSTE clothing apparels were

first marketed in the Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple

reason that he was the first registrant in the Supplemental Register of a trademark used in international

commerce and not belonging to him is to render nugatory the very essence of the law on trademarks and

tradenames.

D E C I S I O N

GUTIERREZ, JR., J p:

It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among themanufacturing and trading centers of the world as a haven for intellectual pirates imitating and illegally profiting

from trademarks and tradenames which have established themselves in international or foreign trade. LLjur

Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A., a well

known European manufacturer of clothings and sporting apparels sold in the international market and bearing

the trademarks "LACOSTE", "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the

word "LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null and

void, the order of Judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial

Region, granting the motion to quash the search warrants previously issued by him and ordering the return of

the seized items. LLphil



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The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the

laws of France and not doing business in the Philippines. It is undeniable from the records that it is the actual

owner of the abovementioned trademarks used on clothings and other goods specifically sporting apparels sold

in many parts of the world and which have been marketed in the Philippines since 1964. The main basis of the

private respondent's case is its claim of alleged prior registration.

In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR

stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the

Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company. Two yearslater, it applied for the registration of the same trademark under the Principal Register. The Patent Office

eventually issued an order dated March 3, 1977 which states that:

xxx xxx xxx

". . . Considering that the mark was already registered in the Supplemental Register in favor of herein applicant,

the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is now being contested

in a Petition for Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner of the mark

until after the registration is declared cancelled."

Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the

trademark "CHEMISE LACOSTE & DEVICE".

On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device"

(Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241). The former was approved for

publication while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the

petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both

cases have now been considered by this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659).

On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint

alleging therein the acts of unfair competition being committed by Hemandas and requesting their assistance in

his apprehension and prosecution. The NBI conducted an investigation and subsequently filed with the

respondent court two applications for the issuance of search warrants which would authorize the search of the

premises used and occupied by the Lacoste Sports Center and Games and Garments both owned and operatedby Hemandas.

The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised

Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses

that there are good and sufficient reasons to believe that Gobindram Hemandas . . . has in his control and

possession in his premises the . . . properties subject of the offense." (Rollo, pp. 67 and 69) The NBI agents

executed the two search warrants and as a result of the search found and seized various goods and articles

described in the warrants.

Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different

from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any

criminal or civil action on the same subject matter and between the same parties would be premature.

The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited

no valid ground for the quashal of the search warrants and that the grounds alleged in the motion were

absolutely without merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized

were instrument of a crime and necessary for the resolution of the case on preliminary investigation and that the

release of the said goods would be fatal to the case of the People should prosecution follow in court. LLjur

The respondent court was, however, convinced that there was no probable cause to justify the issuance of the

search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and



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the NBI agents or officers in custody of the seized items were ordered to return the same to Hemandas (Rollo,

p. 25).

The petitioner anchors the present petition on the following issues:

"Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction,

"(i) in reversing the finding of probable cause which he himself had made in issuing the search warrants, upon

allegations which are matters of defense and as such can be raised and resolved only upon trial on the merits;

and

"(ii) in finding that the issuance of the search warrants is premature in the face of the fact that (a) Lacoste's

registration of the subject trademarks is still pending with the Patent Office with opposition from Hemandas; and

(b) the subject trademarks had been earlier registered by Hemandas in his name in the Supplemental Register of

the Philippine Patent Office?

Respondent, on the other hand, centers his arguments on the following issues:

I

THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.

II

THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF

JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.

Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation

failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is

the petitioner not doing business in the Philippines but it also is not licensed to do business in the Philippines. He

also cites the case of Leviton Industries v. Salvador (114 SCRA 420) to support his contention. The Leviton case,

however, involved a complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides:

"Sec. 21-A. Any foreign corporation or juristic person to which a mark or tradename has been registered or

assigned under this Act may bring an action hereunder for infringement, for unfair competition, or falsedesignation of origin and false description, whether or not it has been licensed to do business in the Philippines

under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the Corporation Law, at

the time it brings the complaint; Provided , That the country of which the said foreign corporation or juristic

person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate

or juristic persons of the Philippines."

We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the

State of New York, United States of America, to merely allege that it is a foreign corporation. It averred in

Paragraph 2 of its complaint that its action was being filed under the provisions of Section 21-A of Republic Act

No. 166, as amended. Compliance with the requirements imposed by the abovecited provision was necessarybecause Section 21-A of Republic Act No. 166 having explicitly laid down certain conditions in a specific proviso,

the same must be expressly averred before a successful prosecution may ensue, It is therefore, necessary for

the foreign corporation to comply with these requirements or aver why it should be exempted from them, if such

was the case. The foreign corporation may have the right to sue before Philippine courts, but our rules on

pleadings require that the qualifying circumstances necessary for the assertion of such right should first be

affirmatively pleaded.

In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code.

The Leviton case is not applicable.



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Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the

petitioner was doing business in the Philippines but was not licensed to do so. To support this argument, he

states that the applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman; (72 Phil. 524) where

Mentholatum Co. Inc., a foreign corporation and Philippine-American Drug Co., the former's exclusive

distributing agent in the Philippines filed a complaint for infringement of trademark and unfair competition

against the Mangalimans. Cdpr

The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar.

Philippine-American Drug Co., Inc., was admittedly selling products of its principal, Mentholatum Co., Inc., in thelatter's name or for the latter's account. Thus, this Court held that "whatever transactions the Philippine-

American Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the

Mentholatum Co., Inc., being a foreign corporation doing business in the Philippines without the license required

by Section 68 of the Corporation Law, it may not prosecute this action for violation of trademark and unfair

competition."

In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The

marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial

Corporation. The latter is an independent entity which buys and then markets not only products of the petitioner

but also many other products bearing equally well-known and established trademarks and tradenames. In other

words, Rustan is not a mere agent or conduit of the petitioner.The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power

under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that

the petitioner is not doing business in the Philippines. Rule I, Sec 1 (g) of said rules and regulations defines

"doing business" as one which includes, inter alia :

"(1) . . . A foreign firm which does business through middlemen acting on their own names, such as indentors,

commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such

indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the

Philippines.

"(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or

distributor has an independent status, i.e., it transacts business in its name and for its account, and not in thename or for the account of a principal. Thus, where a foreign firm is represented by a person or local company

which does not act in its name but in the name of the foreign firm, the latter is doing business in the

Philippines."

xxx xxx xxx

Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing

business in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and

or its own account and not in the name or for the account of the petitioner.

But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material

facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit againstrespondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not

doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark

and unfair competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 115), this Court held that

a foreign corporation which has never done any business in the Philippines and which is unlicensed and

unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of

its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to

restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as

the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign



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corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the

same goods as those of the foreign corporation.

We further held:

xxx xxx xxx

". . . That company is not here seeking to enforce any legal or control rights arising from, or growing out of, any

business which it has transacted in the Philippine Islands. The sole purpose of the action:

"'Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or

goodwill have, through the natural development of its trade, established themselves. And it contends that its

rights to the use of its corporate and trade name:

"'Is a property right, a right in rem, which it may assert and protect against all the world, in any of the courts of

the world — even in jurisdictions where it does not transact business — just the same as it may protect its

tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition

and TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and Unfair Competition and

cases cited.' That point is sustained by the authorities, and is well stated in Hanover Star Mining Co. v. Allen and

Wheeler Co. (208 Fed., 513), in which the syllabus says:

"'Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorialboundaries of municipalities or states or nations, but extends to every market where the trader's goods have

become known and identified by the use of the mark.'"

Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our

jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the

Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil.

1), we recognized a right of foreign corporation to sue on isolated transactions. In General Garments Corp. v.

Director of Patents (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not

licensed to do and not doing business in the Philippines, to file a petition for cancellation of a trademark before

the Patent Office. prcd

More important is the nature of the case which led to this petition. What preceded this petition for certiorari wasa letter-complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of

the Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being

conducted by the Special Prosecutor the information shall be in the name of the People of the Philippines and no

longer the petitioner which is only an aggrieved party since a criminal offense is essentially an act against the

State. It is the latter which is principally the injured party although there is a private right violated. Petitioner's

capacity to sue would become, therefore, of not much significance in the main case. We cannot allow a possible

violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or

victim of a crime has no standing to sue.

In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or

infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of

foreign states under the Paris Convention for the Protection of Industrial Property to which the Philippines and

France are parties. We are simply interpreting and enforcing a solemn international commitment of the

Philippines embodied in a multilateral treaty to which we are a party and which we entered into because it is in

our national interest to do so.

The Paris Convention provides in part that:

ARTICLE 1

"(1) The countries to which the present Convention applies constitute themselves into a Union for the protection

of industrial property.



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"(2) The protection of industrial property is concerned with patents, utility models, industrial designs, trademarks

service marks trade names, and indications of source or appellations of origin and the repression of unfair

competition.

xxx xxx xxx

ARTICLE 2

"(2) Nationals of each of the countries of the Union shall, as regards the protection of industrial property, enjoy

in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter

grant, to nationals, without prejudice to the rights specially provided by the present Convention. Consequently,

they shall have the same protection as the latter, and the same legal remedy against any infringement of their

rights, provided they observe the conditions and formalities imposed upon nationals.

xxx xxx xxx

ARTICLE 6bis

"(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request

of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which

constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the

competent authority of the country of registration or use to be well-known in that country as being already the

mark of a person entitled to the benefits of the present Convention and used for identical or similar goods.

These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such

well-known mark or an imitation liable to create confusion therewith.

xxx xxx xxx

ARTICLE 8

"A trade name shall be protected in all the countries of the Union without the obligation of filing or registration,

whether or not it forms part of a trademark.

xxx xxx xxx

ARTICLE 10bis

"(1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective

protection against unfair competition.

xxx xxx xxx

ARTICLE 10ter

"(1) The countries of the Union undertake to assure to nationals of the other countries of the Union appropriate

legal remedies to repress effectively all the acts referred to in Articles 9, 10 and 10bis.

"(2) They undertake, further, to provide measures to permit syndicates and associations which represent the

industrialists, producers or traders concerned and the existence of which is not contrary to the laws of their

countries, to take action in the Courts or before the administrative authorities, with a view to the repression of

the acts referred to in Articles 9,10 and 10bis, in so far as the law of the country in which protection is claimed

allows such action by the syndicates and associations of that country.

xxx xxx xxx

ARTICLE 17



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"Every country party to this Convention undertakes to adopt, in accordance with its constitution, the measures

necessary to ensure the application of this Convention.

"It is understood that at the time an instrument of ratification or accession is deposited on behalf of a country;

such country will be in a position under its domestic law to give effect to the provisions of this Convention." (61

O.G. 8010).

xxx xxx xxx

In Vanity Fair Mills, Inc. v. T. Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion

to comment on the extraterritorial application of the Paris Convention. It said that:

"[11] The International Convention is essentially a compact between the various member countries to accord in

their own countries to citizens of the other contracting parties trademark and other rights comparable to those

accorded their own citizens by their domestic law. The underlying principle is that foreign nationals should be

given the same treatment in each of the member countries as that country makes available to its own citizens.

In addition, the Convention sought to create uniformity in certain respects by obligating each member nation 'to

assure to nationals of countries of the Union an effective protection against unfair competition.'

"[12] The Convention is not premised upon the idea that the trademark and related laws of each member

nation shall be given extra-territorial application, but on exactly the converse principle that each nation's law

shall have only territorial application. Thus a foreign national of a member nation using his trademark in

commerce in the United States is accorded extensive protection here against infringement and other types of

unfair competition by virtue of United States membership in the Convention. But that protection has its source

in, and is subject to the limitations of, American law, not the law of the foreign national's own country." . . .

By the same token, the petitioner should be given the same treatment in the Philippines as we make available to

our own citizens. We are obligated to assure to nationals of "countries of the Union" an effective protection

against unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms.

Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum addressed to the

Director of the Patents Office directing the latter —

xxx xxx xxx

". . . reject all pending applications for Philippine registration of signature and other world famous trademarks by

applicants other than its original owners or users.

"The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache,

Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy,

Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

"It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked

to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the

trademarks' foreign or local owners or original users."

The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with allnations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte

which expires once he leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation to

be enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the

parties founded on the generally accepted principle of international law of pacta sunt servanda which has been

adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of

Patents of his legal duty to obey both law and treaty. It must also be obeyed.

Hemandas further contends that the respondent court did not commit grave abuse of discretion in issuing the

questioned order of April 22, 1983.



10

A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals the fact that

they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during

the trial on the merits of the case. For instance, on the basis of the facts before the Judge, we fail to understand

how he could treat a bare allegation that the respondent's trademark is different from the petitioner's trademark

as a sufficient basis to grant the motion to quash. We will treat the issue of prejudicial question later. Granting

that respondent Hemandas was only trying to show the absence of probable cause, we, nonetheless, hold the

arguments to be untenable. cdll

As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no uncertainterms the determination of probable cause by the judge after examination under oath or affirmation of the

complainant and the witnesses he may produce (Constitution, Art IV, Sec. 3). Probable cause has traditionally

meant such facts and circumstances antecedent to the issuance of the warrant that are in themselves sufficient

to induce a cautious man to rely upon them and act in pursuance thereof (People v. Sy Juco, 64 Phil. 667).

This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno , (20 SCRA 383)

that probable cause "presupposes the introduction of competent proof that the party against whom it is sought

has performed particular acts, or committed specific omissions, violating a given provision of our criminal laws."

The question of whether or not probable cause exists is one which must be decided in the light of the conditions

obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there is no general formula or

fixed rule for the determination of the existence of probable cause since, as we have recognized in Luna v.Plaza (26 SCRA 310), the existence depends to a large degree upon the finding or opinion of the judge

conducting the examination. However, the findings of the judge should not disregard the facts before him nor

run counter to the clear dictates of reason, More so it is plain that our country's ability to abide by international

commitments is at stake.

The records show that the NBI agents at the hearing of the application for the warrants before respondent court

presented three witnesses under oath, sworn statements, and various exhibits in the form of clothing apparels

manufactured by Hemandas but carrying the trademark Lacoste. The respondent court personally interrogated

Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by means of searching questions. After hearing the

testimonies and examining the documentary evidence, the respondent court was convinced that there were

good and sufficient reasons for the issuance of the warrant. And it then issued the warrant. cdrepThe respondent court, therefore, complied with the constitutional and statutory requirements for the issuance of

a valid search warrant. At that point in time, it was fully convinced that there existed probable cause. But after

hearing the motion to quash and the oppositions thereto, the respondent court executed a complete turnabout

and declared that there was no probable cause to justify its earlier issuance of the warrants.

True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification

must, as earlier stated be based on sound and valid grounds. In this case, there was no compelling justification

for the about face. The allegation that vital facts were deliberately suppressed or concealed by the petitioner

should have been assessed more carefully because the object of the quashal was the return of items already

seized and easily examined by the court. The items were alleged to be fake and quite obviously would be

needed as evidence in the criminal prosecution. Moreover, an application for a search warrant is heard ex parte .It is neither a trial nor a part of the trial. Action on these applications must be expedited for time is of the

essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and

the witnesses. The allegation of Hemandas that the applicant withheld information from the respondent court

was clearly no basis to order the return of the seized items. cdrep

Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of registration

of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such registration is only in the

Supplemental Register.



11

A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration,

of the registrant's exclusive right to use the same in connection with the goods, business, or services specified in

the certificate. Such a certificate of registration cannot be filed, with effect, with the Bureau of Customs in order

to exclude from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised

Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2,

pp. 513-515).

Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental register in

addition to the principal register but specifically directs that:

xxx xxx xxx

"The certificates of registration for marks and trade names registered on the supplemental register shall be

conspicuously different from certificates issued for marks and trade names registered on the principal register."

xxx xxx xxx

The reason is explained by a leading commentator on Philippine Commercial Laws:

"'The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima

facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3) registrant's

exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after its issuance.Neither may it be the subject of interference proceedings. Registration on the supplemental register is not

constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration of

marks which are not registrable on the principal register because of some defects (conversely, defects which

make a mark unregistrable on the principal register, yet do not bar them from the supplemental register.)'

(Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec.

No. 254 of Director of Patents, Apr. 30, 1963;"

Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has

appropriated the trademark. By the very fact that the trademark cannot as yet be entered in the Principal

Register, all who deal with it should be on guard that there are certain defects, some obstacles which the user

must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of

an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration

in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register.

The reliance of the private respondent on the last sentence of the Patent office action on application Serial No.

30954 that "registrant is presumed to be the owner of the mark until after the registration is declared cancelled"

is, therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to

the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in

Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the

petitioner and the respondent, it is devoid of factual basis. And even in cases where presumption and precept

may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim

Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his

competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La Yebana Co. v.Chua Seco & Co., 14 Phil. 534). Cdpr

By the same token, the argument that the application was premature in view of the pending case before the

Patent Office is likewise without legal basis.

The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the nature of a

prejudicial question which must first be definitely resolved.

Section 5 of Rule 111 of the Rules of Court provides that:



12

"A petition for the suspension of the criminal action based upon the pendency of a pre-judicial question in a civil

case, may only be presented by any party before or during the trial of the criminal action."

The case which suspends the criminal prosecution must be a civil case which is determinative of the innocence

or, subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent

Office is an administrative proceeding and not a civil case. The decision of the Patent Office cannot be finally

determinative of the private respondent's innocence of the charges against him.

In Flordelis v. Castillo (58 SCRA 301), we held that:

"As clearly delineated in the aforecited provisions of the new Civil Code and the Rules of Court, and as uniformly

applied in numerous decisions of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83

Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil. 482

(1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178; Zapante v. Montesa, 4 SCRA

510; Jimenez v. Averia, 22 SCRA 1380.) In Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial

question was held inapplicable because no criminal case but merely an administrative case and a civil suit were

involved. The Court, however, held that, in view of the peculiar circumstances of that case, the respondents' suit

for damages in the lower court was premature as it was filed during the pendency of an administrative case

against the respondents before the POLCOM. 'The possibility cannot be overlooked,' said the Court, 'that the

POLCOM may hand down a decision adverse to the respondents, in which case the damage suit will become

unfounded and baseless for wanting in cause of action.') the doctrine of pre-judicial question comes into playgenerally in a situation where a civil action and a criminal action both pend and there exists in the former an

issue which must be preemptively resolved before the criminal action may proceed, because howsoever the

issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the

accused in the criminal case."

In the present case, no civil action pends nor has any been instituted. What was pending was an administrative

case before the Patent Office.

Even assuming that there could be an administrative proceeding with exceptional or special circumstances which

render a criminal prosecution premature pending the promulgation of the administrative decision, no such

peculiar circumstances are present in this case.

Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed by the

Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356,

June 17, 1983).

The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was involved in

the appellate court's decision. The Minister as the "implementing authority" under Article 6bis of the Paris

Convention for the protection of Industrial Property instructed the Director of Patents to reject applications for

Philippine registration of signature and other world famous trademarks by applicants other than its original

owners or users. The brand "Lacoste" was specifically cited together with Jordache, Gloria Vanderbilt, Sasson,

Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey

Beene, Lanvin, and Ted Lapidus. The Director of Patents was likewise ordered to require Philippine registrants of

such trademarks to surrender their certificates of registration. Compliance by the Director of Patents waschallenged. LLpr

The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with

approval sustained the power of the Minister of Trade to issue the implementing memorandum and, after going

over the evidence in the records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste

S.A. the owner of the disputed trademark and crocodile or alligator device. The Intermediate Appellate Court

speaking through Mr. Justice Vicente V. Mendoza stated:



13

"In the case at bar, the Minister of Trade, as 'the competent authority of the country of registration,' has found

that among other well-known trademarks 'Lacoste' is the subject of conflicting claims. For this reason,

applications for its registration must be rejected or refused, pursuant to the treaty obligation of the Philippines.

"Apart from this finding, the annexes to the opposition, which La Chemise Lacoste S.A. filed in the Patent Office,

show that it is the owner of the trademark 'Lacoste' and the device consisting of a representation of a crocodile

or alligator by the prior adoption and use of such mark and device on clothing, sports apparel and the like. La

Chemise Lacoste S.A. obtained registration of these mark and device and was in fact issued renewal certificates

by the French National Industrial Property Office.

xxx xxx xxx

"Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is based not only on

the undisputed fact of ownership of the trademark by the appellee but on a prior determination by the Minister

of Trade, as the competent authority under the Paris Convention, that the trademark and device sought to be

registered by the appellant are well-known marks which the Philippines, as party to the Convention, is bound to

protect in favor of its owners. It would be to exalt form over substance to say that under the circumstances, due

process requires that a hearing should be held before the application is acted upon.

"The appellant cites section 9 of Republic Act No. 166, which requires notice and hearing whenever an

opposition to the registration of a trademark is made. This provision does not apply, however, to situations

covered by the Paris Convention, where the appropriate authorities have determined that a well-known

trademark is already that of another person. In such cases, the countries signatories to the Convention are

obliged to refuse or to cancel the registration of the mark by any other person or authority. In this case, it is not

disputed that the trademark Lacoste is such a well-known mark that a hearing, such as that provided in Republic

Act No. 166, would be superfluous."

The issue of due process was raised and fully discussed in the appellate court's decision. The court ruled that

due process was not violated.

In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.

We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence

to sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the

crocodile or alligator device, and the composite mark of LACOSTE and the representation of the crocodile or

alligator. Any pretensions of the private respondent that he is the owner are absolutely without basis. Any

further ventilation of the issue of ownership before the Patent Office will be a superfluity and a dilatory tactic.

The issue of whether or not the trademark used by the private respondent is different from the petitioner's

trademark is a matter of defense and will be better resolved in the criminal proceedings before a court of justice

instead of raising it as a preliminary matter in an administrative proceeding.

The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the

origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringinginto market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and

imposition (Etepha v. Director of Patents, 16 SCRA 495).

The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof.

Modern trade and commerce demands that depredations on legitimate trade marks of non-nationals including

those who have not shown prior registration thereof should not be countenanced. The law against such

depredations is not only for the protection of the owner of the trademark but also, and more importantly, for the

protection of purchasers from confusion, mistake, or deception as to the goods they are buying. (Asari Yoko Co.,

Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. Director of Patents, 41 SCRA 50). cdphil



14

The law on trademarks and tradenames is based on the principle of business integrity and common justice. This

law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims

to foster, and not to hamper, competition, no one, especially a trader, is justified in damaging or jeopardizing

another's business by fraud, deceipt, trickery or unfair methods of any sort. This necessarily precludes the

trading by one dealer upon the good name and reputation built up by another (Baltimore v. Moses, 182 Md 229,

34 A (2d) 338).

The records show that the goodwill and reputation of the petitioner's products bearing the trademark LACOSTE

date back even before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allowHemandas to continue using the trademark Lacoste for the simple reason that he was the first registrant in the

Supplemental Register of a trademark used in international commerce and not belonging to him is to render

nugatory the very essence of the law on trademarks and tradenames.

We now proceed to the consideration of the petition in Gobindram Hemandas Sujanani v. Hon. Roberto V.

Ongpin, et al. (G.R. No. 65659).

Actually, three other petitions involving the same trademark and device have been filed with this Court.

In Hemandas & Co. v. Intermediate Appellate Court et al. (G.R. No. 63504), the petitioner asked for the

following relief:

"IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the respondent Court of

January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the same respondent Court of June

30, 1983 be declared to be the law on the matter: (b) that the Director of Patents be directed to issue the

corresponding registration certificate in the Principal Register; and (c) granting upon the petitioner such other

legal and equitable remedies as are justified by the premises."

On December 5, 1983, we issued the following resolution:

"Considering the allegations contained, issues raised and the arguments adduced in the petition for review, the

respondent's comment thereon, and petitioner's reply to said comment, the Court Resolved to DENY the petition

for lack of merit.

"The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in this Court ofG.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and Gobindram Hemandas'

which was given due course on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled 'Gobindram

Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for lack of merit on September

12, 1983. Both petitions involve the same dispute over the use of the trademark 'Chemise Lacoste'."

The second case of Gobindram Hemandas v. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the

following:

"I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:

"1. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao Granados from further

proceedings in the unfair competition charges pending with the Ministry of Justice filed against petitioner;

"2. Enjoining and restraining respondents Company and its attorneys-in-fact from causing undue publication in

newspapers of general circulation on their unwarranted claim that petitioner's products are FAKE pending

proceedings hereof; and

"3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further threatening

letters to petitioner's customers unjustly stating that petitioner's products they are dealing in are FAKE and

threatening them with confiscation and seizure thereof.

"II. On the main petition, judgment be rendered:



15

"1. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping, and restraining

respondents from further committing the acts complained of;

"2. Awarding and granting the issuance of the Writ of Mandamus, ordering and compelling respondents National

Bureau of Investigation, its aforenamed agents, and State Prosecutor Estanislao Granados to immediately

comply with the Order of the Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila, dated

April 22, 1983, which directs the immediate return of the seized items under Search Warrants Nos. 83-128 and

83-129;

"3. Making permanent any writ of injunction that may have been previously issued by this Honorable Court in the

petition at bar; and

"4. Awarding such other and further relief as may be just and equitable in the premises."

As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for

reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the

denial to be final.

Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.

In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the

enforcement of the following memorandum of respondent Minister Roberto Ongpin:

"MEMORANDUM:

FOR: THE DIRECTOR OF PATENTS

Philippine Patent Office

"Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule making and adjudicatory

powers of the Minister of Trade and Industry and provides inter alia, that 'such rule-making and adjudicatory

powers should be revitalized in order that the Minister of Trade and Industry can . . . apply more swift and

effective solutions and remedies to old and new problems . . . such as the infringement of internationally-known

tradenames and trademarks . . .' and in view of the decision of the Intermediate Appellate Court in the case of

LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983] which affirms the

validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our

obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the

Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect

compliance with our obligations under said convention in general, and, more specifically, to honor our

commitment under Section 6 bis thereof, as follows:

"1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to

a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent

Office procedures in inter partes and ex parte cases, according to any of the following criteria or any

combination thereof:

"(a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-

known in the Philippines such that permission for its use by other than its original owner will constitute a

reproduction, imitation, translation or other infringement;

"(b) that the trademark is used in commerce internationally, supported by proof that goods bearing the

trademark are sold on an international scale, advertisements, the establishment of factories, sales offices,

distributorships, and the like, in different countries, including volume or other measure of international trade and

commerce;



16

"(c) that the trademark is duly registered in the industrial property office(s) of another country or countries,

taking into consideration the dates of such registration;

"(d) that the trademark has been long established and obtained goodwill and general international consumer

recognition as belonging to one owner or source;

"(e) that the trademark actually belongs to a party claiming ownership and has the right to registration under

the provisions of the aforestated PARIS CONVENTION.

"2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs,

emblems, insignia or other similar devices used for identification and recognition by consumers.

"3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which

constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who

is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL

PROPERTY.

"4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against

the registration of trademarks entitled to protection of Section 6 bis of said PARIS CONVENTION as outlined

above, by remanding applications filed by one not entitled to such protection for final disallowance by the

Examination Division.

"5. All pending applications for Philippine registration of signature and other world famous trademarks filed by

applicants other than their original owners or users shall be rejected forthwith. Where such applicants have

already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they

shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate

cancellation proceedings.

"6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide without delay

the following cases pending before your Office:

"1. INTER PARTES CASE NO. 1689 — Petition filed by La Chemise Lacoste, S.A. for the cancellation of Certificate

of Registration No. SR-2225 issued to Gobindram Hemandas, assignee of Hemandas and Company;

"2. INTER PARTES CASE NO. 1658 — Opposition filed by Games and Garments Co. against the registration of

the trademark Lacoste sought by La Chemise Lacoste, S.A.;

"3. INTER PARTES CASE NO. 1786 — Opposition filed by La Chemise Lacoste, S.A. against the registration of

trademark Crocodile Device and Skiva sought by one Wilson Chua.'"

Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without

merit and accordingly deny it due course.

In complying with the order to decide without delay the cases specified in the memorandum, the Director of

Patents shall limit himself to the ascertainment of facts in issues not resolved by this decision and apply the law

as expounded by this Court to those facts.

One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to

stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our

country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino

consuming public and in the case of exportations, our image abroad. No less than the President, in

issuing Executive Order No. 913 dated October 7, 1983 to strengthen the powers of the Minister of Trade and

Industry for the protection of consumers, stated that, among other acts, the dumping of substandard, imitated,

hazardous, and cheap goods, the infringement of internationally known tradenames and trademarks, and the

unfair trade practices of business firms has reached such proportions as to constitute economic sabotage. We

buy a kitchen appliance, a household tool, perfume, face powder, other toilet articles, watches, brandy or



17

whisky, and items of clothing like jeans, T-shirts, neckties, etc. — the list is quite lengthy — and pay good

money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter

frustration and helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever

looking counterfeit, of the quality product. Judges all over the country are well advised to remember that court

processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual

pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and

administrative implementation of solemn commitments pursuant to international conventions and treaties. LLphil

WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of therespondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29,

1983 is made PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit, Our

Temporary Restraining Order dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately.

SO ORDERED.

||| (La Chemise Lacoste, S.A. v. Fernandez, G.R. Nos. 63796-97, 65659, [May 21, 1984])

[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 .

Bito, Misa & Lozada for petitioners.

Reynaldo F. Singson for private respondent.

D E C I S I O N

CRUZ, J p:

The petitioners are questioning the decision of the respondent court upholding the dismissal by the trial court of

their complaint against the private respondent for infringement of trademark and unfair competition. cCESTA

Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not

engaged in business in the Philippines. Both the Philippines and the United States are signatories to the

Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages

which their own nationals enjoy for the repression of acts of infringement and unfair competition.

Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of

the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the

Philippines various agricultural products, including catsup, under the Del Monte trademark and logo. cdll

On October 27, 1965, Del Monte authorized Philpack to register with the 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. On November 20, 1972, Del Monte also obtained two

registration certificates for its trademark "DEL MONTE" and its logo.

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. This logo was registered in the Supplemental Register on

September 20, 1983. 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



18

respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of

a writ of preliminary injunction.

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.

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.

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 arecontained, 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



19

(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:



20

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. 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. As observed in several cases, the general

impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the

attention such purchasers usually give in buying that class of goods is the touchstone.

It has been held that in making purchases, the consumer must depend upon his recollection of the appearance

of the product which he intends to purchase. The buyer having in mind the mark/label of the respondent must

rely upon his memory of the petitioner's mark. Unlike the judge who has ample time to minutely examine the

labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. LexLib

A number of courts have held that to determine whether a trademark has been infringed, we must consider the

mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not

usually to any part of it. The court therefore should be guided by its first impression, for a buyer acts quickly

and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to

analyze carefully the respective features of the mark.

It has also been held that it is not the function of the court in cases of infringement and unfair competition to

educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that

marks need not be identical. A confusing similarity will justify the intervention of equity. The judge must also be

aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only

colorable changes. Well has it been said that the most successful form of copying is to employ enough points of

similarity to confuse the public with enough points of difference to confuse the courts.

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



21

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.

At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable

imitation of the Del Monte trademark. The predominant colors used in the Del Monte label are green and red-

orange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the

print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates

that of a tomato. EaIDAT

As previously stated, the person who infringes a trade mark does not normally copy out but only makes

colorable changes, employing enough points of similarity to confuse the public with enough points of differences

to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product,

he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product

from the others. When as in this case, Sunshine chose, without a reasonable explanation, to use the same colors

and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is

that it was done deliberately to deceive.

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 thefield from which he can select a desirable trademark to indicate the origin of his product is obviously a large

one.

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 , 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.



22

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 , 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, theregistrant'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 similareffort.

(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. Cdpr

The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not

presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides:

Sec. 23. Actions and damages and injunction for infringement . — Any person entitled to the exclusive use of a

registered mark or trade name may recover damages in a civil action from any person who infringes his rights,and the measure of the damages suffered shall be either the reasonable profit which the complaining party

would have made, had the defendant not infringed his said rights or the profit which the defendant actually

made out of the infringement, or in the event such measure of damages cannot be readily ascertained with

reasonable certainty the court may award as damages reasonable percentage based upon the amount of gross

sales of the defendant or the value of the services in connection with which the mark or trade name was used in

the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to

defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.

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



23

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. LLpr

SO ORDERED.

||| (Del Monte Corp. v. Court of Appeals, G.R. No. 78325, [January 25, 1990], 260 PHIL 435-448)

[G.R. No. 103543. July 5, 1993.]

ASIA BREWERY, INC. petitioner , vs. THE HON. COURT OF APPEALS and SAN MIGUELCORPORATION, respondents .

Abad Santos & Associates and Sycip, Salazar, Hernandez and Gatmaitan for petitioner.

Roco, Bunag, Kapunan Law Office for private respondent.

SYLLABUS

1. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF COURT OF APPEALS CONCLUSIVE AND BINDING ON

SUPREME COURT; EXCEPTIONS; CASE AT BAR. — As a general rule, the findings of the Court of Appeals upon

factual questions are conclusive and ought not to be disturbed by us. However, there are exceptions to this

general rule, and they are: (1) When the conclusion is grounded entirely on speculation, surmises and

conjectures; (2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken,

absurd and impossible; (3) Where there is grave abuse of discretion; (4) When the judgment is based on a

misapprehension of facts; (5) When the appellate court, in making its findings, went beyond the issues of the

case, and the same are contrary to the admissions of both the appellant and the appellee; (6) When the findings

of said court are contrary to those of the trial court; (7) When the findings are without citation of specific

evidence on which they are based; (8) When the facts set forth in the petition as well as in the petitioner's mainand reply briefs are not disputed by the respondents; and (9) When the findings of facts of the Court of Appeals

are premised on the absence of evidence and are contradicted on record. (Reynolds Philippine

Corporation vs. Court of Appeals, 169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156 SCRA 597;

Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs. Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139

SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing

Corp. vs. IAC, 166 SCRA 458 [citing Tolentino vs . De Jesus, 56 SCRA 167; Carolina Industries, Inc. vs. CMS

Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102 SCRA 817; and Moran, Jr. vs. Ca, 133 SCRA 88].)

Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings

based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.) Where findings of the



24

Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on

record. (Cruz vs. CA, 129 SCRA 222, 227.) The present case is one of the exceptions because there is no

concurrence between the trial court and the Court of Appeals on the lone factual issue of whether ABI, by

manufacturing and selling its BEER PALE PILSEN in amber colored steinie bottles of 320 ml. capacity with a white

painted rectangular label has committed trademark infringement and unfair competition against SMC.

2. COMMERCIAL LAW; TRADEMARK LAW (REPUBLIC ACT NO. 166); INFRINGEMENT; DEFINED; NATURE

THEREOF. — Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil.

100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutesinfringement: Sec. 22. Infringement, what constitutes . — Any person who shall use, without the consent of the

registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in

connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection

with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or

origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate

any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels,

signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with

such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies

herein provided. This definition implies that only registered trade marks, trade names and service marks are

protected against infringement or unauthorized use by another or others. The use of someone else's registered

trademark, trade name or service mark is unauthorized, hence, actionable, if it is done "without the consent ofthe registrant."

3. ID.; ID.; HOW QUESTION OF INFRINGEMENT OF TRADEMARK DETERMINED; QUESTION AT ISSUE IN CASES

OF INFRINGEMENT. — Infringement is determined by the "test of dominancy" rather than by differences or

variations in the details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of

Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus:

"It has been consistently held that the question of infringement of a trademark is to be determined by the test of

dominancy . Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark

contains the main or essential or dominant features of another, and confusion and deception is likely to result,

infringement takes place. Duplication or imitation is not necessary; not it is necessary that the infringing label

should suggest an effort to imitate. [C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495,

citing Eagle While Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of

trademarks is whether the use of the marks involvedwould be likely to cause confusion or mistakes in the mind

of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . .)"

In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272, 275), the test was similarity or "resemblance between

the two (trademarks) such as would be likely to cause the one mark to be mistaken for the other. . . . [But] this

is not such similitude as amounts to identity." In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA 575,

the court was more specific: the test is "similarity in the dominant features of the trademarks."

4. ID.; ID.; ID.; ID.; CASE AT BAR. — The dominant feature of SMC's trademark is the name of the product:

SAN MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the beginning and end of the

letters "S" and "M" on an amber background across the upper portion of the rectangular design. On the other

hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with the word "Beer" written inlarge amber letters, larger than any of the letters found in the SMC label. The trial court perceptively observed

that the word "BEER" does not appear in SMC's trademark, just as the words "SAM MIGUEL" do not appear in

ABI's trademark. Hence, there is absolutely no similarity in the dominant features of both trademarks. Neither in

sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar to SAN MIGUEL PALE

PILSEN. No one who purchases BEER PALE PILSEN can possibly be deceived that it is SAN MIGUEL PALE

PILSEN. No evidence whatsoever was presented by SMC proving otherwise.

5. ID.; ID.; GENERIC OR DESCRIPTIVE AND PRIMARILY GEOGRAPHICALLY DESCRIPTIVE WORDS NON-

REGISTRABLE AND NOT APPROPRIABLE; REASON THEREFOR; CASE AT BAR. — The fact that the words pale

pilsen are part of ABI's trademark does not constitute an infringement of SMC's trademark: SAN MIGUEL PALE



25

PILSEN, for "pale pilsen" are generic words descriptive of the color ("pale"), of a type of beer ("pilsen"), which is

a light bohemian beer with a strong hops flavor that originated in the City of Pilsen in Czechoslovakia and

became famous in the Middle Ages. (Webster's Third New International Dictionary of the English Language,

Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam Co.,) 1976, page 1716.) "Pilsen"

is a "primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166, as inserted by Sec. 2

of R.A. No. 638) hence, non-registerable and not appropriable by any beer manufacturer. The Trademark Law

provides: "Sec. 4 . . . The owner of trade-mark, trade-name or service-mark used to distinguished his goods,

business or services from the goods, business or services of others shall have the right to register the same [onthe principal register], unless it: . . . "(e) Consists of a mark or trade-name which, when applied to or used in

connection with the goods, business or services of the applicant is merely descriptive or deceptively

misdescriptive of them, or when applied to or used in connection with the goods, business or services of the

applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a

surname." The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part of

its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as "evaporated

milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be appropriated by any single

manufacturer of these food products, for no other reason than that he was the first to use them in his registered

trademark. In Masso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer

in shoes cannot register "Leather Shoes" as his trademark because that would be merely descriptive and it would

be unjust to deprive other dealers in leather shoes of the right to use the same words with reference to their

merchandise. No one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai

Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]).

6. ID.; ID.; UNFAIR COMPETITION; DEFINED. — Unfair competition is the employment of deception or any

other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which

he deals, or his business, or services, for those of another who has already established goodwill for his similar

goods, business or services, or any acts calculated to produce the same result. (Sec. 29, Republic Act No. 166,

as amended.)

7. ID.; ID.; ID.; TEST TO DETERMINE EXISTENCE THEREOF. — The universal test question is whether the public

is likely to be deceived. Nothing less than conduct tending to pass off one man's goods or business as that ofanother will constitute unfair competition. Actual or probable deception and confusion on the part of the

customers by reason of defendant's practices must always appear." (Shell Co. of the Philippines, Ltd. vs. Insular

Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.) . . . In Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 196-197,

where two competing tea products were both labelled as Formosan tea, both sold in 5-ounce packages made of

ordinary wrapping paper of conventional color, both with labels containing designs drawn in green ink and

Chinese characters written in red ink, one label showing a double-decked jar in the center, the other, a flower

pot, this court found that the resemblances between the designs were not sufficient to mislead the ordinary

intelligent buyer, hence, there was no unfair competition. The Court held: ". . . In order that there may be

deception of the buying public in the sense necessary to constitute unfair competition, it is necessary to suppose

a public accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of

fraudulent simulation is to be found in the likelihood of the deception of persons in some measure acquaintedwith an established design and desirous of purchasing the commodity with which that design has been

associated. The test is not found in the deception, or possibility of the deception, of the person who knows

nothing about the design which has been counterfeited, and who must be indifferent as between that and the

other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinarily

intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase."

8. ID.; ID.; PROTECTION AGAINST IMITATION PROPERLY LIMITED TO NONFUNCTIONAL FEATURES; CASE AT

BAR. — The petitioner's contention that bottle size, shape and color may not be the exclusive property of any

one beer manufacturer is well taken. SMC's being the first to use the steinie bottle does not give SMC a vested

right to use it to the exclusion of everyone else. Being of functional or common use, and not the exclusive



26

invention of any one, it is available to all who might need to use it within the industry. Nobody can acquire any

exclusive right to market articles supplying simple human needs in containers or wrappers of the general form,

size and character commonly and immediately used in marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42

Phil. 190, 194-195.) . . . ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie

bottle which has a fat bulging neck to differentiate it from SMC's bottle. The amber color is a functional feature

of the beer bottle. As pointed out by ABI, all bottled beer produced in the Philippines is contained and sold in

amber-colored bottles because amber is the most effective color in preventing transmission of light and provides

the maximum protection to beer. As was ruled in California Crushed Fruit Corporation vs. Taylor B. and CandyCo., 38 F2d 885, a merchant cannot be enjoined from using a type or color of bottle where the same has the

useful purpose of protecting the contents from the deleterious effects of light rays. Moreover, no one may have

a monopoly of any color. Not only beer, but most medicines, whether in liquid or tablet form, are sold in amber-

colored bottles. That the ABI bottle has a 320 ml. capacity is not due to a desire to imitate SMC's bottle but

because that bottle capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December

1979, of the Department of Trade, Metric System Board. With regard to the white label of both beer bottles, ABI

explained that it used the color white for its label because white presents the strongest contrast to the amber

color of ABI's bottle; it is also the most economical to use on labels, and the easiest to "bake" in the furnace. No

one can have a monopoly of the color amber for bottles, nor of white for labels, nor of the rectangular shape

which is the usual configuration of labels. Needless to say, the shape of the bottle and of the label is

unimportant. What is all important is the name of the product written on the label of the bottle for that is how

one beer may be distinguished from the others.

9. ID.; ID.; TRADEMARK ALLEGEDLY INFRINGED CONSIDERED AS A WHOLE AND NOT AS DISSECTED;

DOCTRINE ENUNCIATED IN DEL MONTE CORPORATION vs.COURT OF APPEALS AND SUNSHINE SAUCE

MANUFACTURING INDUSTRIES, 181 SCRA 410, 419, NOT APPLICABLE TO CASE AT BAR. — Our decision in this

case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals and Sunshine Sauce

Manufacturing Industries," 181 SCRA 410, 419, that: ". . . to determine whether a trademark has been infringed,

we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the

marks as a totality, not usually to any part of it." That ruling may not apply to all kinds of products. The Court

itself cautioned that in resolving cases of infringement and unfair competition, the courts should "take into

consideration several factors which would affect is conclusion, to wit: the age, training and education of the

usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption andalso the conditions under which it is usually purchased." (181 SCRA 410, 418-419). The Del Monte case

involved catsup , a common household item which is bought off the store shelves by housewives and house help

who, if they are illiterate and cannot identify the product by name or brand, would very likely identify it by mere

recollection of its appearance. Since the competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del

Monte bottles for its catsup (despite the warning embossed on the bottles: "Del Monte Corporation. Not to be

refilled.") but also used labels which were "a colorable imitation" of Del Monte's label, we held that there was

infringement of Del Monte's trademark and unfair competition by Sunshine. Our ruling in Del Monte would not

apply to beer which is not usually picked up from a store shelf but ordered by brand by the beer drinker himself

from the storekeeper or waiter in a pub or restaurant.

CRUZ, J., dissenting:

1. COMMERCIAL LAW; TRADEMARK LAW (REPUBLIC ACT NO. 166); INFRINGEMENT; TOUCHSTONE IN

DETERMINATION OF EXISTENCE THEREOF; TO DETERMINE WHETHER TRADEMARK HAS BEEN INFRINGED,

THE MARK IS CONSIDERED AS A WHOLE AND NOT AS DISSECTED. — The question is not whether the two

articles are distinguishable by their labels when set side by side but whether the general confusion made by the

article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in

his confounding it with the original. As observed in several cases, the general impression of the ordinary

purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers

usually give in buying that class of goods, is the touchstone. It has been held that in making purchases, the

consumer must depend upon his recollection of the appearance of the product which he intends to purchase.



27

The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark.

Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the

ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether

a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is

deceived, it is attributable to the marks as a totality, not usually to any part of it. The court therefore should be

guided by its first impression, for a buyer acts quickly and is governed by a casual glance, the value of which

may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark.

D E C I S I O N

GRIÑO-AQUINO, J p:

On September 15, 1988, San Miguel Corporation (SMC) filed a complaint against Asia Brewery Inc. (ABI) for

infringement of trademark and unfair competition on account of the latter's BEER PALE PILSEN or BEER NA BEER

product which has been competing with SMC's SAN MIGUEL PALE PILSEN for a share of the local beer market.

(San Miguel Corporation vs. Asia Brewery Inc., Civ. Case No. 56390, RTC Branch 166, Pasig, Metro Manila.)

On August 27, 1990, a decision was rendered by the trial Court, presided over by Judge Jesus O. Bersamira,

dismissing SMC's complaint because ABI "has not committed trademark infringement or unfair competition

against" SMC (p. 189, Rollo). prcd

SMC appealed to the Court of Appeals (C.A.-G.R. CV No. 28104). On September 30, 1991, the Court of Appeals

(Sixth Division composed of Justice Jose C. Campos, Jr., chairman and ponente , and Justices Venancio D.

Aldecoa Jr. and Filemon H. Mendoza, as members) reversed the trial court. The dispositive part of the decision

reads as follows:

"In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the

matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair

competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the

plaintiff and against the defendant as follows:

"(1) The defendant Asia Brewery Inc. its officers, agents, servants and employees are hereby permanently

enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or

supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels

substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that

purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that

purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief

that the beer is the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer

of the defendant as and for the beer of the plaintiff-complainant.

"(2) The defendant Asia Brewery Inc. is hereby ordered to render an accounting and pay the San Miguel

Corporation double any and all the payments derived by defendant from operations of its business and sale of

goods bearing the mark 'Beer Pale Pilsen' estimated at approximately Five Million Pesos (P5,000,000.00); to

recall all its products bearing the mark 'Beer Pale Pilsen' from its retailers and deliver these as well as all labels,

signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates,

molds, materials and other means of making the same to the Court authorized to execute this judgment for

destruction.

"(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral

damages and Half a Million Pesos (P5,000,000.00) by way of exemplary damages.

"(4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs

of this suit." (p. 90, Rollo.)



28

Upon a motion for reconsideration filed by ABI, the above dispositive part of the decision, was modified by the

separate opinions of the Special Sixth Division so that it should read thus:

In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the

matter, We find the defendant Asia Brewery IncorporatedGUILTY of infringement of trademark and unfair

competition . The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the

plaintiff and against the defendant as follows:

(1) The defendant Asia Brewery Inc., its officers, agents, servants and employees are hereby permanentlyenjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or

supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels

substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that

purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that

purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief

that the beer is the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer

of the defendant as and for the beer of the plaintiff-complainant.

(2) The defendant Asia Brewery Inc. is hereby ordered to recall all its products bearing the mark Beer Pale

Pilsen from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and

advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same

to the Court authorized to execute this judgment for destruction.

(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral

damages and Half a Million Pesos (P500,000.00) by way of exemplary damages.

(4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs

of this suit.

In due time, ABI appealed to this Court by a petition for certiorari under Rule 45 of the Rules of Court. The lone

issue in this appeal is whether ABI infringes SMC's trademark: San Miguel Pale Pilsen with Rectangular Hops and

Malt Design , and thereby commits unfair competition against the latter. It is a factual issue (Phil. Nut Industry

Inc. v. Standard Brands Inc., 65 SCRA 575) and as a general rule, the findings of the Court of Appeals upon

factual questions are conclusive and ought not to be disturbed by us. However, there are exceptions to thisgeneral rule, and they are:

(1) When the conclusion is grounded entirely on speculation, surmises and conjectures;

(2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and

impossible;

(3) Where there is grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the appellate court, in making its findings, went beyond the issues of the case, and the same are

contrary to the admissions of both the appellant and the appellee;

(6) When the findings of said court are contrary to those of the trial court;

(7) When the findings are without citation of specific evidence on which they are based;

(8) When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by

the respondents; and

(9) When the findings of facts of the Court of Appeals are premised on the absence of evidence and are

contradicted on record. (Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 citing,

Mendoza vs. Court of Appeals, 156 SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs.



29

Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139 SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA

333, 336; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [citing Tolentino vs. De Jesus, 56

SCRA 167; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102 SCRA 817;

and Moran, Jr. vs. CA, 133 SCRA 88].)

Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings

based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.) Where findings of the

Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on

record. (Cruz vs. CA, 129 SCRA 222, 227.)

The present case is one of the exceptions because there is no concurrence between the trial court and the Court

of Appeals on the lone factual issue of whether ABI, by manufacturing and selling its BEER PALE PILSEN in

amber colored steinie bottles of 320 ml. capacity with a white painted rectangular label has committed

trademark infringement and unfair competition against SMC.

Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil. 100, 106). Sec.

22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes infringement:

Sec. 22. Infringement, what constitutes . — Any person who shall use, without the consent of the registrant, any


the sale, offering for sale, or advertising of any goods, business or services on or in connection with which suchuse 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,



provided. (Emphasis supplied.)

This definition implies that only registered trade marks, trade names and service marks are protected against

infringement or unauthorized use by another or others. The use of someone else's registered trademark, trade

name or service mark is unauthorized, hence, actionable, if it is done "without the consent of the registrant."

(Ibid .)

The registered trademark of SMC for its pale pilsen beer is:

"San Miguel Pale Pilsen With Rectangular Hops and Malt Design . (Philippine Bureau of Patents, Trademarks and

Technology Transfer Trademark Certificate of Registration No. 36103, dated 23 Oct. 1986." (p. 174, Rollo.)

As described by the trial court in its decision (Page 177, Rollo):

". . . a rectangular design [is] bordered by what appears to be minute grains arranged in rows of three in which

there appear in each corner hop designs . At the top is a phrase written in small print 'Reg. Phil. Pat. Off.' and at

the bottom 'Net Contents: 320 Ml.' The dominant feature is the phrase 'San Miguel ' written horizontally at the

upper portion. Below are the words 'Pale Pilsen' written diagonally across the middle of the rectangular design.

In between is a coat of arms and the phrase 'Expertly Brewed.' The 'S' in 'San' and the 'M' of 'Miguel,' 'P' of 'Pale'

and 'Pilsen' are written in Gothic letters with fine strokes of serifs, the kind that first appeared in the 1780s in

England and used for printing German as distinguished from Roman and Italic. Below 'Pale Pilsen' is the

statement 'And Bottled by' (first line, 'San Miguel Brewery' (second line), and 'Philippines' (third line)." (p. 177,

Rollo; Italics supplied.)

On the other hand, ABI's trademark, as described by the trial court, consists of:

". . . a rectangular design bordered by what appear to be buds of flowers with leaves . The dominant feature is

'Beer' written across the upper portion of the rectangular design. The phrase 'Pale Pilsen' appears immediately

below in smaller block letters. To the left is a hop design and to the right, written in small prints, is the phrase



30

'Net Contents 320 ml.' immediately below 'Pale Pilsen' is the statement written in three lines 'Especially brewed

and bottled by' (first line), 'Asia Brewery Incorporated' (second line), and 'Philippines' (third line)." (p. 177, Rollo;

Italics supplied.)

Does ABI's BEER PALE PILSEN label or "design" infringe upon SMC's SAN MIGUEL PALE PILSEN WITH

RECTANGULAR MALT AND HOPS DESIGN? The answer is "No."

Infringement is determined by the "test of dominancy" rather than by differences or variations in the details of

one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4(1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus:

"It has been consistently held that the question of infringement of a trademark is to be determined by the test of

dominancy . Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark

contains the main or essential or dominant features of another, and confusion and deception is likely to result,

infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label

should suggest an effort to imitate. [C. Neilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495,

citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of

trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind

of the public or deceive purchasers . (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . .)"

(Emphasis supplied.)

In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272, 275), the test was similarity or "resemblance between

the two (trademarks) such as would be likely to cause the one mark to be mistaken for the other . . . [But] this

is not such similitude as amounts to identity."

In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA 575, the court was more specific: the test is

"similarity in the dominant features of the trademarks."

What are the dominant features of the competing trademarks before us?

There is hardly any dispute that the dominant feature of SMC's trademark is the name of the product: SAN

MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the beginning and end of the letters"S" and "M" on an amber background across the upper portion of the rectangular design.

On the other hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with the word

"Beer" written in large amber letters, larger than any of the letters found in the SMC label.

The trial court perceptively observed that the word "BEER" does not appear in SMC's trademark, just as the

words "SAN MIGUEL" do not appear in ABI's trademark. Hence, there is absolutely no similarity in the dominant

features of both trademarks.

Neither in sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar to SAN

MIGUEL PALE PILSEN. No one who purchases BEER PALE PILSEN can possibly be deceived that it is SAN

MIGUEL PALE PILSEN. No evidence whatsoever was presented by SMC proving otherwise.

Besides the dissimilarity in their names, the following other dissimilarities in the trade dress or appearance of the

competing products abound:

(1) The SAN MIGUEL PALE PILSEN bottle has a slender tapered neck.

The BEER PALE PILSEN bottle has a fat, bulging neck.

(2) The words "pale pilsen" on SMC's label are printed in bold and laced letters along a diagonal band, whereas

the words "pale pilsen" on ABI's bottle are half the size and printed in slender block letters on a

straight horizontal band. (See Exhibit "8-a".)



31

(3) The names of the manufacturers are prominently printed on their respective bottles.

SAN MIGUEL PALE PILSEN is "Bottled by the San Miguel Brewery, Philippines," whereas BEER PALE PILSEN is

"Especially brewed and bottled by Asia Brewery Incorporated, Philippines."

(4) On the back of ABI's bottle is printed in big, bold letters, under a row of flower buds and leaves, its

copyrighted slogan:

"BEER NA BEER!"

Whereas SMC's bottle carries no slogan.

(5) The back of the SAN MIGUEL PALE PILSEN bottle carries the SMC logo, whereas the BEER PALE PILSEN

bottle has no logo.

(6) The SAN MIGUEL PALE PILSEN bottle cap is stamped with a coat of arms and the words "San Miguel Brewery

Philippines" encircling the same.

The BEER PALE PILSEN bottle cap is stamped with the name "BEER" in the center, surrounded by the words

"Asia Brewery Incorporated Philippines."

(7) Finally, there is a substantial price difference between BEER PALE PILSEN (currently at P4.25 per bottle) and

SAN MIGUEL PALE PILSEN (currently at P7.00 per bottle). One who pays only P4.25 for a bottle of beer cannotexpect to receive San Miguel Pale Pilsen from the storekeeper or bartender.

The fact that the words pale pilsen are part of ABI's trademark does not constitute an infringement of SMC's

trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are generic words descriptive of the color ("pale"), of a

type of beer ("pilsen"), which is a light bohemian beer with a strong hops flavor that originated in the City of

Pilsen in Czechoslovakia and became famous in the Middle Ages. (Webster's Third New International Dictionary

of the English Language, Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam

Co., c) 1976, page 1716.) "Pilsen" is a "primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic

Act No. 166, as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable and not appropriable by any beer

manufacturer. The Trademark Law provides:

"Sec. 4. . . . The owner of trade-mark, trade-name or service-mark used to distinguish his goods, business orservices from the goods, business or services of others shall have the right to register the same [on the principal

register], unless it:

xxx xxx xxx

"(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or

services of the applicant is merely descriptive or deceptively misdescriptive of them , or when applied to or used

in connection with the goods, business or services of the applicant is primarily geographically descriptive or

deceptively misdescriptive of them, or is primarily merely a surname." (Emphasis supplied.)

The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part of its

registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as "evaporated milk,""tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be appropriated by any single

manufacturer of these food products, for no other reason than that he was the first to use them in his registered

trademark. In Masso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer

in shoes cannot register "Leather Shoes" as his trademark because that would be merely descriptive and it would

be unjust to deprive other dealers in leather shoes of the right to use the same words with reference to their

merchandise. No one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai

Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]):

"A word or a combination of words which is merely descriptive of an article of trade, or of its composition,

characteristics, or qualities, cannot be appropriated and protected as a trademark to the exclusion of its use by



32

others . . . inasmuch as all persons have an equal right to produce and vend similar articles, they also have the

right to describe them properly and to use any appropriate language or words for that purpose, and no person

can appropriate to himself exclusively any word or expression, properly descriptive of the article, its qualities,

ingredients or characteristics , and thus limit other persons in the use of language appropriate to the description

of their manufactures, the right to the use of such language being common to all . This rule excluding descriptive

terms has also been held to apply to trade-names. As to whether words employed fall within this prohibition, it is

said that the true test is not whether they are exhaustively descriptive of the article designated, but whether in

themselves, and as they are commonly used by those who understand their meaning, they are reasonablyindicative and descriptive of the thing intended. If they are thus descriptive, and not arbitrary, they cannot be

appropriated from general use and become the exclusive property of anyone. (52 Am. Jur. 542-543.)

". . . Others may use the same or similar descriptive word in connection with their own wares, provided they

take proper steps to prevent the public being deceived. (Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E.

[2d] 598.)

". . . A descriptive word may be admittedly distinctive, especially if the user is the first creator of the article. It

will, however, be denied protection, not because it lacks distinctiveness, but rather because others are equally

entitled to its use. (2 Callman, Unfair Competition and Trademarks, pp. 869-870.)" (Emphasis supplied.)

The circumstance that the manufacturer of BEER PALE PILSEN, Asia Brewery Incorporated, has printed its name

all over the bottle of its beer product: on the label, on the back of the bottle, as well as on the bottle cap,disproves SMC's charge that ABI dishonestly and fraudulently intends to palm off its BEER PALE PILSEN as SMC's

product. In view of the visible differences between the two products, the Court believes it is quite unlikely that a

customer of average intelligence would mistake a bottle of BEER PALE PILSEN for SAN MIGUEL PALE PILSEN.

The fact that BEER PALE PILSEN like SAN MIGUEL PALE PILSEN is bottled in amber-colored steinie bottles of 320

ml. capacity and is also advertised in print, broadcast, and television media, does not necessarily constitute

unfair competition.

Unfair competition is the employment of deception or any other means contrary to good faith by which a person

shall pass off the goods manufactured by him or in which he deals, or his business, or services, for those of

another who has already established goodwill for his similar goods, business or services, or any acts calculated

to produce the same result. (Sec. 29, Republic Act No. 166, as amended.) The law further enumerates the morecommon ways of committing unfair competition, thus:

"Sec. 29. . . .

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

guilty of unfair competition:

"(a) Any person, who in selling his goods shall give them the general appearance of goods of another

manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are

contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to

influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the

actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive thepublic 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


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."



33

In this case, the question to be determined is whether ABI is using a name or mark for its beer that has

previously come to designate SMC's beer, or whether ABI is passing off its BEER PALE PILSEN as SMC's SAN

MIGUEL PALE PILSEN.

". . . The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending

to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable

deception and confusion on the part of the customers by reason of defendant's practices must always appear."(Shell Co. of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.)

The use by ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN bottle, is not

unlawful. As pointed out by ABI's counsel, SMC did not invent but merely borrowed the steinie bottle from

abroad and it claims neither patent nor trademark protection for that bottle shape and design. (See rollo, page

55.) The Cerveza Especial and the Efes Pale Pilsen use the "steinie" bottle. (See Exhibits 57-D, 57-E.) The trial

court found no infringement of SMC's bottle —

"The court agrees with defendant that there is no infringement of plaintiff's bottle, firstly, because according to

plaintiff's witness Deogracias Villadolid, it is a standard type of bottle called steinie, and to witness Jose Antonio

Garcia, it is not a San Miguel Corporation design but a design originally developed in the United States by the

Glass Container Manufacturer's Institute and therefore lacks exclusivity. Secondly, the shape was neverregistered as a trademark. Exhibit 'C' is not a registration of a beer bottle design required under Rep. Act

165 but the registration of the name and other marks of ownership stamped on containers as required by Rep.

Act 623. Thirdly, the neck of defendant's bottle is much larger and has a distinct bulge in its uppermost part." (p.

186, Rollo.)

The petitioner's contention that bottle size, shape and color may not be the exclusive property of any one beer

manufacturer is well taken. SMC's being the first to use the steinie bottle does not give SMC a vested right to

use it to the exclusion of everyone else. Being of functional or common use, and not the exclusive invention of

any one, it is available to all who might need to use it within the industry. Nobody can acquire any exclusive

right to market articles supplying simple human needs in containers or wrappers of the general form, size and

character commonly and immediately used in marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190,

194-195.)

". . . protection against imitation should be properly confined to nonfunctional features. Even if purely functional

elements are slavishly copied, the resemblance will not support an action for unfair competition, and the first

user cannot claim secondary meaning protection. Nor can the first user predicate his claim to protection on the

argument that his business was established in reliance on any such unpatented nonfunctional feature, even 'at

large expenditure of money.' (Callman Unfair Competition, Trademarks and Monopolies, Sec. 19.33 [4th Ed.].)"

(Petition for Review, p. 28.)

ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat

bulging neck to differentiate it from SMC's bottle. The amber color is a functional feature of the beer bottle. As

pointed out by ABI, all bottled beer produced in the Philippines is contained and sold in amber-colored bottles

because amber is the most effective color in preventing transmission of light and provides the maximumprotection to beer. As was ruled in California Crushed Fruit Corporation vs. Taylor B. and Candy Co., 38 F2d 885,

a merchant cannot be enjoined from using a type or color of bottle where the same has the useful purpose of

protecting the contents from the deleterious effects of light rays. Moreover, no one may have a monopoly of any

color. Not only beer, but most medicines, whether in liquid or tablet form, are sold in amber-colored bottles.

That the ABI bottle has a 320 ml. capacity is not due to a desire to imitate SMC's bottle but because that bottle

capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December 1979, of the

Department of Trade, Metric System Board.



34

With regard to the white label of both beer bottles, ABI explained that it used the color white for its label

because white presents the strongest contrast to the amber color of ABI's bottle; it is also the most economical

to use on labels, and the easiest to "bake" in the furnace (p. 16, TSN of September 20, 1988). No one can have

a monopoly of the color amber for bottles, nor of white for labels, nor of the rectangular shape which is the

usual configuration of labels. Needless to say, the shape of the bottle and of the label is unimportant. What is all

important is the name of the product written on the label of the bottle for that is how one beer may be

distinguished from the others. prLL

In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where two competing tea products were both labelled asFormosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of conventional color, both with

labels containing designs drawn in green ink and Chinese characters written in red ink, one label showing a

double-decked jar in the center, the other, a flower pot, this court found that the resemblances between the

designs were not sufficient to mislead the ordinary intelligent buyer, hence, there was no unfair competition. The

Court held:

". . . In order that there may be deception of the buying public in the sense necessary to constitute unfair

competition, it is necessary to suppose a public accustomed to buy, and therefore to some extent familiar with,

the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of

persons in some measure acquainted with an established design and desirous of purchasing the commodity with

which that design has been associated. The test is not found in the deception, or possibility of the deception, ofthe person who knows nothing about the design which has been counterfeited, and who must be indifferent as

between that and the other. The simulation, in order to be objectionable, must be such as appears likely to

mislead the ordinarily intelligent buyer who has a need to supply and is familiar with the article that he seeks to

purchase."

The main thrust of SMC's complaint is not infringement of its trademark, but unfair competition arising from the

allegedly "confusing similarity" in the general appearance or trade dress of ABI's BEER PALE PILSEN beside

SMC's SAN MIGUEL PALE PILSEN (p. 209, Rollo).

SMC claims that the "trade dress" of BEER PALE PILSEN is "confusingly similar" to its SAN MIGUEL PALE PILSEN

because both are bottled in 320 ml. steinie type, amber-colored bottles with white rectangular labels.

However, when as in this case, the names of the competing products are clearly different and their respectivesources are prominently printed on the label and on other parts of the bottle, mere similarity in the shape and

size of the container and label, does not constitute unfair competition. The steinie bottle is a standard bottle for

beer and is universally used. SMC did not invent it nor patent it. The fact that SMC's bottle is registered

under R.A. No. 623 (as amended by RA 5700, An Act to Regulate the Use of Duly Stamped or Marked Bottles,

Boxes, Casks, Kegs, Barrels and Other Similar Containers) simply prohibits manufacturers of other foodstuffs

from the unauthorized use of SMC's bottles by refilling these with their products. It was not uncommon then for

products such as patis (fish sauce) and toyo (soy sauce) to be sold in recycled SAN MIGUEL PALE PILSEN

bottles. Registration of SMC's beer bottles did not give SMC a patent on the steinie or on bottles of similar size,

shape or color.

Most containers are standardized because they are usually made by the same manufacturer. Milk, whether inpowdered or liquid form, is sold in uniform tin cans. The same can be said of the standard ketchup or vinegar

bottle with its familiar elongated neck. Many other grocery items such as coffee, mayonnaise, pickles and peanut

butter are sold in standard glass jars. The manufacturers of these foodstuffs have equal right to use these

standard tins, bottles and jars for their products. Only their respective labels distinguish them from each other.

Just as no milk producer may sue the others for unfair competition because they sell their milk in the same size

and shape of milk can which he uses, neither may SMC claim unfair competition arising from the fact that ABI's

BEER PALE PILSEN is sold, like SMC's SAN MIGUEL PALE PILSEN in amber steinie bottles. prcd

The record does not bear out SMC's apprehension that BEER PALE PILSEN is being passed off as SAN MIGUEL

PALE PILSEN. This is unlikely to happen for consumers or buyers of beer generally order their beer by brand. As



35

pointed out by ABI's counsel, in supermarkets and tiendas , beer is ordered by brand, and the customer

surrenders his empty replacement bottles or pays a deposit to guarantee the return of the empties. If his

empties are SAN MIGUEL PALE PILSEN, he will get SAN MIGUEL PALE PILSEN as replacement. In sari-sari

stores, beer is also ordered from the tindera by brand. The same is true in restaurants, pubs and beer gardens

— beer is ordered from the waiters by brand. (Op. cit. page 50.)

Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer market for the

past hundred years, those who have been drinking no other beer but SAN MIGUEL PALE PILSEN these many

years certainly know their beer too well to be deceived by a newcomer in the market. If they gravitate to ABI'scheaper beer, it will not be because they are confused or deceived, but because they find the competing product

to their taste.

Our decision in this case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals and Sunshine

Sauce Manufacturing Industries," 181 SCRA 410, 419, that:

". . . to determine whether a trademark has been infringed, we must consider the mark as a whole and not as

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

That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases of

infringement and unfair competition, the courts should "take into consideration several factors which would

affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the

article, whether the article is bought for immediate consumption and also the conditions under which it is usually

purchased" (181 SCRA 410, 418-419).

The Del Monte case involved catsup , a common household item which is bought off the store shelves by

housewives and house help who, if they are illiterate and cannot identify the product by name or brand, would

very likely identify it by mere recollection of its appearance. Since the competitor, Sunshine Sauce Mfg.

Industries, not only used recycled Del Monte bottles for its catsup (despite the warning embossed on the bottles:

"Del Monte Corporation. Not to be refilled.") but also used labels which were "a colorable imitation" of Del

Monte's label, we held that there was infringement of Del Monte's trademark and unfair competition by

Sunshine.

Our ruling in Del Monte would not apply to beer which is not usually picked up from a store shelf but ordered by

brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant.

Moreover, SMC's brand or trademark: "SAN MIGUEL PALE PILSEN" is not infringed by ABI's mark: "BEER NA

BEER" or "BEER PALE PILSEN." ABI makes its own bottle with a bulging neck to differentiate it from SMC's

bottle, and prints ABI's name in three (3) places on said bottle (front, back and bottle cap) to prove that it has

no intention to pass off its "BEER" as "SAN MIGUEL."

There is no confusing similarity between the competing beers for the name of one is "SAN MIGUEL" while the

competitor is plain "BEER" and the points of dissimilarity between the two outnumber their points of similarity.

Petition ABI has neither infringed SMC's trademark nor committed unfair competition with the latter's SANMIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes with the latter in the open

market, the competition is neither unfair nor fraudulent. Hence, we must deny SMC's prayer to suppress it.

WHEREFORE, finding the petition for review meritorious, the same is hereby granted. The decision and

resolution of the Court of Appeals in CA-G.R. CV No. 28104 are hereby set aside and that of the trial court is

REINSTATED and AFFIRMED. Costs against the private respondent.

SO ORDERED.

||| (Asia Brewery, Inc. v. Court of Appeals, G.R. No. 103543, [July 5, 1993])



36

[G.R. No. 143993. August 18, 2004.]

MCDONALD’S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners , vs . L.C. BIG MAKBURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO,

ARACELI AYCARDO, and GRACE HUERTO, respondents .

D E C I S I O N

CARPIO, J p:

The Case

This is a petition for review of the Decision dated 26 November 1999 of the Court of Appeals finding

respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and ordering

petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying

reconsideration. The Court of Appeals’ Decision reversed the 5 September 1994 Decision of the Regional Trial

Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and

unfair competition.

The Facts

Petitioner McDonald’s Corporation (“McDonald’s”) is a corporation organized under the laws of Delaware, United

States. McDonald’s operates, by itself or through its franchisees, a global chain of fast-food restaurants.

McDonald’s owns a family of marks including the “Big Mac” mark for its “double-decker hamburger

sandwich.” McDonald’s registered this trademark with the United States Trademark Registry on 16 October

1979. Based on this Home Registration, McDonald’s applied for the registration of the same mark in the

Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology (“PBPTT”), now the

Intellectual Property Office (“IPO”). Pending approval of its application, McDonald’s introduced its “Big Mac”

hamburger sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed

registration of the “Big Mac” mark in the Principal Register based on its Home Registration in the United States.

Like its other marks, McDonald’s displays the “Big Mac” mark in items and paraphernalia in its restaurants, and

in its outdoor and indoor signages. From 1982 to 1990, McDonald’s spent P10.5 million in advertisement for “Big

Mac” 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” markfor its hamburger sandwiches. McDonald’s opposed respondent corporation’s application on the ground that “Big

Mak” was a colorable imitation of its registered “Big Mac” mark for the same food products. McDonald’s also

informed respondent Francis Dy (“respondent Dy”), the chairman of the Board of Directors of respondent

corporation, of its exclusive right to the “Big Mac” mark and requested him to desist from using the “Big Mac”

mark or any similar mark. ADaSET

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional Trial

Court of Makati, Branch 137 (“RTC”), for trademark infringement and unfair competition. In its Order of 11 July

1990, the RTC issued a temporary restraining order (“TRO”) against respondents enjoining them from using the



37

“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 unfaircompetition, 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. 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.

xxx xxx xxx

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.

xxx xxx xxx

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 . . .



38

Did the same acts of defendants in using the name “B[ig] M[ak]” as a trademark or tradename in their signages,

or in causing the name “B[ig] M[ak]” to be printed on the wrappers and containers of their food products also

constitute an act of unfair competition under Section 29 of the Trademark Law?

The answer is in the affirmative . . .

The . . . provision of the law concerning unfair competition is broader and more inclusive than the law

concerning the infringement of trademark, which is of more limited range, but within its narrower range

recognizes a more exclusive right derived by the adoption and registration of the trademark by the person whosegoods or services are first associated therewith. . . . Notwithstanding the distinction between an action for

trademark infringement and an action for unfair competition, however, the law extends substantially the same

relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of

one man as the goods of another. The 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.

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonald’s Corporation and McGeorge Food Industries,

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

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

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

of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo,

Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed for lack of merit as well as for

insufficiency of evidence.

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 andP300,000 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”. DHACES



39

xxx xxx xxx

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.

xxx xxx xxx

. . . [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the

product and the manner that the tradename “Big Mak” is being used and presented to the public. As earlier

noted, there are glaring dissimilarities between plaintiffs-appellees’ trademark and defendants-appellants’

corporate name. Plaintiffs-appellees’ product carrying the trademark “B[ig] M[ac]” is a double decker sandwich

(depicted in the tray mat containing photographs of the various food products . . . sold in a Styrofoam box with

the “McDonald’s” logo and trademark in red, bl[o]ck capital letters printed thereon . . . at a price which is more

expensive than the defendants-appellants’ comparable food products. In order to buy a “Big Mac”, a customer

needs to visit an air-conditioned “McDonald’s” restaurant usually located in a nearby commercial center,

advertised and identified by its logo — the umbrella “M”, and its mascot — “Ronald McDonald”. A typicalMcDonald’s restaurant boasts of a playground for kids, a second floor to accommodate additional customers, a

drive-thru to allow customers with cars to make orders without alighting from their vehicles, the interiors of the

building are well-lighted, distinctly decorated and painted with pastel colors . . . . In buying a “B[ig] M[ac]”, it is

necessary to specify it by its trademark. Thus, a customer needs to look for a “McDonald’s” and enter it first

before he can find a hamburger sandwich which carry the mark “Big Mac”. On the other hand, defendants-

appellants sell their goods through snack vans . . .

Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same

untenable.

Unfair competition is defined as “the employment of deception or any other means contrary to good faith by

which a person shall pass off the goods manufactured by him or in which he deals, or his business, or service,for those of another who has already established good will for his similar good, business or services, or any acts

calculated to produce the same result” (Sec. 29, Rep. Act No. 166, as amended ).

To constitute unfair competition therefore it must necessarily follow that there was malice and that the entity

concerned was in bad faith.

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

deliberately tried to pass off the goods manufactured by them for those of plaintiffs-appellees. The mere

suspected similarity in the sound of the defendants-appellants’ corporate name with the plaintiffs-appellees’

trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the



40

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 theidem sonans test resulting inexorably in confusion on the part ofthe 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. ADEaHT

2. On the merits, (a) whether respondents used the words “Big Mak” not only as part of the corporate name

“L.C. Big Mak Burger, Inc.” but also as a trademark for their hamburger products, and (b) whether respondent

corporation is liable for trademark infringement and unfair competition.

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”) 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.



41

Here, petitioners raise questions of fact and law in assailing the Court of Appeals’ findings on respondent

corporation’s non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due

course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of

Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1. We took

a similar course of action in Asia Brewery, Inc. v. Court of Appeals which also involved a suit for trademark

infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting

findings.

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. Respondents’ cash invoices simply refer to their hamburger

sandwiches as “Big Mak.” It is respondents’ snack vans that carry the words “L.C. Big Mak Burger, Inc.”

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their

hamburger sandwiches relied on by the Court of Appeals. Respondents’ plastic wrappers and bags were identical

with those petitioners presented during the hearings for the injunctive writ except that the letters “L.C.” and the

words “Burger, Inc.” in respondents’ evidence were added above and below the words “Big Mak,” respectively.

Since petitioners’ complaint was based on facts existing before and during the hearings on the injunctive writ,

the facts established during those hearings are the proper factual bases for the disposition of the issues raised in

this petition.

On the Issue of Trademark Infringement

Section 22 (“Section 22) of Republic Act No. 166, as amended (“RA 166”), the law applicable to this

case, defines trademark infringement as follows:

Infringement, what constitutes . — Any person who [1] shall use, without the consent of the registrant, any


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,



provided.

Petitioners base their cause of action under the first part of Section 22, i .e . respondents allegedly used, without

petitioners’ consent, a colorable imitation of the “Big Mac” mark in advertising and selling respondents’

hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the source of the

hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff’s mark;

(2) the plaintiff’s ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged



42

infringer results in “likelihood of confusion.” Of these, it is the element of likelihood of confusion that is the

gravamen of trademark infringement.

On the Validity of the “Big Mac ”Mark

and McDonald’s Ownership of such Mark

A mark is valid if it is “distinctive” and thus not barred from registration under Section 4 of RA 166 (“Section 4”).

However, once registered, not only the mark’s validity but also the registrant’s ownership of the mark is prima

facie presumed.

Respondents contend that of the two words in the “Big Mac” mark, it is only the word “Mac” that is valid because

the word “Big” is generic and descriptive (proscribed under Section 4[e]), and thus “incapable of exclusive

appropriation.”

The contention has no merit. The “Big Mac” mark, which should be treated in its entirety and not dissected word

for word, is neither generic nor descriptive. Generic marks are commonly used as the name or description of

a kind of goods, such as “Lite” for beer or “Chocolate Fudge” for chocolate soda drink. Descriptive marks, on

the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never

seen it or does not know it exists, such as “Arthriticare” for arthritis medication. On the contrary, “Big Mac” falls

under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the

product it represents. As such, it is highly distinctive and thus valid. Significantly, the trademark “Little Debbie”for snack cakes was found arbitrary or fanciful.

The Court also finds that petitioners have duly established McDonald’s exclusive ownership of the “Big Mac”

mark. Although Topacio and the Isaiyas Group registered the “Big Mac” mark ahead of McDonald’s, Topacio, as

petitioners disclosed, Topacio had already assigned his rights to McDonald’s. The Isaiyas Group, on the other

hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the Principal

Register, and thus not distinctive, has no real 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.

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 ., the Court distinguished

these two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the confusion of goods “in which event the ordinarily

prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other.” . .

. The other is the confusion of business: “Here though the goods of the parties are different, the defendant’s

product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be

deceived either into that belief or into the belief that there is some connection between the plaintiff and

defendant which, in fact, does not exist.”

Under Act No. 666, the first trademark law, infringement was limited to confusion of goods only, when the

infringing mark is used on “goods of a similar kind.” Thus, no relief was afforded to the party whose registered

mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress

enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the

requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is

likely to result in confusion on “the source or origin of such goods or services, or identity of such

business.” Thus, while there is confusion of goods when the products are competing, confusion of business

exists when the products are non-competing but related enough to produce confusion of affiliation.



43

On Whether Confusion of Goods and

Confusion of Business are Applicable

Petitioners claim that respondents’ use of the “Big Mak” mark on respondents’ hamburgers results in confusion

of goods, particularly with respect to petitioners’ hamburgers labeled “Big Mac.” Thus, petitioners alleged in their

complaint: IDTcHa

1.15. Defendants have unduly prejudiced and clearly infringed upon the 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 . (Emphasis supplied)

Since respondents used the “Big Mak” mark on the same goods, i.e. hamburger sandwiches, that petitioners’

“Big Mac” mark is used, trademark infringement through confusion of goods is a proper issue in this case.

Petitioners also claim that respondents’ use of the “Big Mak” mark in the sale of hamburgers, the same business

that petitioners are engaged in, results in confusion of business. Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent of plaintiff McDonald’s nor its licensee/franchisee,

plaintiff McGeorge, and in clear violation of plaintiffs’ exclusive right to use and/or appropriate the McDonald’s

marks, defendant Big Mak Burger acting through individual defendants, has been operating “Big Mak Burger”, a

fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches, french fries and

other food products, and has caused to be printed on the wrapper of defendant’s food products and

incorporated in its signages the name “Big Mak Burger”, which is confusingly similar to and/or is a colorable

imitation of the plaintiff McDonald’s mark “B[ig] M[ac]”, . . . Defendant Big Mak Burger has thus unjustly created

the impression that its business is approved and sponsored by, or affiliated with, plaintiffs . . .

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

property rights of plaintiffs McDonald’s and McGeorge as the real owner and rightful proprietor, and the

licensee/franchisee, respectively, of the McDonald’s marks, and which are likely to have caused confusion or

deceived the public as to the true source, sponsorship or affiliation of defendants’ food products and restaurant

business , plaintiffs have suffered and continue to suffer actual damages in the form of injury to their businessreputation and goodwill, and of the dilution of the distinctive quality of the McDonald’s marks, in particular, the

mark “B[ig] M[ac]”. (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same food product that

petitioners sell using the “Big Mac” mark. Thus, trademark infringement through confusion of business is also a

proper issue in this case.

Respondents assert that their “Big Mak” hamburgers cater mainly to the low-income group while petitioners’ “Big

Mac” hamburgers cater to the middle and upper income groups. Even if this is true, the likelihood of confusion of

business remains, since the low-income group might be led to believe that the “Big Mak” hamburgers are the

low-end hamburgers marketed by petitioners. After all, petitioners have the exclusive right to use the “Big Mac”

mark. On the other hand, respondents would benefit by associating their low-end hamburgers, through the use

of the “Big Mak” mark, with petitioners’ high-end “Big Mac” hamburgers, leading to likelihood of confusion in the

identity of business.

Respondents further claim that petitioners use the “Big Mac” mark only on petitioners’ double-decker

hamburgers, while respondents use the “Big Mak” mark on hamburgers and other products like siopao, noodles

and pizza. Respondents also point out that petitioners sell their Big Mac double-deckers in a styrofoam box with

the “McDonald’s” logo and trademark in red, block letters at a price more expensive than the hamburgers of

respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers and plastic bags.



44

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 hisbusiness (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). (Emphasis supplied)

On Whether Respondents’ Use of the “Big Mak”

Mark Results in Likelihood of Confusion

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

holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks

that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks

as applied to the products, including the labels and packaging, in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use of

respondents’ “Big Mak” mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals ruled that “itis 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.

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 theadoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider

more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like

prices, quality, sales outlets and market segments.

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

. . . It has been consistently held that the question of infringement of a trademark is to be determined by the

test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing

trademark contains the main or essential or dominant features of another, and confusion and deception is likely

to result, infringement takes place . Duplication or imitation is not necessary; nor is it necessary that the



45

infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co ., 191

F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of

infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or

mistakes in the mind of the public or deceive purchasers. ( Auburn Rubber Corporation vs. Honover Rubber Co .,

107 F. 2d 588; . . .) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents , Phil. Nut Industry, Inc. v. Standard

Brands Inc ., Converse Rubber Corporation v. Universal Rubber Products, Inc ., and Asia Brewery, Inc. v. Court

of Appeals . In the 2001 case of Societe Des Produits Nestlé, S.A. v. Court of Appeals , the Court explicitlyrejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair

competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons

and overall impressions engendered by the marks in controversy as they are encountered in the realities of the

marketplace. (Emphasis supplied)

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property

Code which defines infringement as the “colorable imitation of a registered mark . . . or a dominant

feature thereof.”

Applying the dominancy test, the Court f inds that respondents’ use of the “Big Mak” mark results in likelihood ofconfusion. 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 publicmind.

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 ., the Court held: aAHTDS

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair

Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that “SALONPAS” and “LIONPAS” are

confusingly similar in sound: “Gold Dust” and “Gold Drop”; “Jantzen” and “Jass-Sea”; “Silver Flash” and “Supper

Flash”; “Cascarete” and “Celborite”; “Celluloid” and “Cellonite”; “Chartreuse” and “Charseurs”; “Cutex” and

“Cuticlean”; “Hebe” and “Meje”; “Kotex” and “Femetex”; “Zuso” and “Hoo Hoo”. Leon Amdur, in his book “Trade-

Mark Law and Practice”, pp. 419–421, cities, as coming within the purview of the idem sonans rule, “Yusea” and “U-C- A”, “Steinway Pianos” and “Steinberg Pianos”, and “Seven-Up” and “Lemon-Up”. In Co Tiong vs. Director of

Patents , this Court unequivocally said that “Celdura” and “Cordura” are confusingly similar in sound; this Court

held in Sapolin Co. vs. Balmaceda , 67 Phil. 795 that the name “Lusolin” is an infringement of the trademark

“Sapolin”, as the sound of the two names is almost the same. (Emphasis supplied)

Certainly, “Big Mac” and “Big Mak” for hamburgers create even greater confusion, not only aurally but also

visually.



46

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’ . . . “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.

Absent proof that respondents’ adoption of the “Big Mak” mark was due to honest mistake or was

fortuitous, the inescapable conclusion is that respondents adopted the “Big Mak” mark to “ride on the coattails”

of the more established “Big Mac” mark. This saves respondents much of the expense in advertising to create

market recognition of their mark and hamburgers.

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

infringement.

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 , 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.

On the Issue of Unfair Competition

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

xxx xxx xxx

Any person who will employ deception or any other means contrary to good faith by which he shall pass off the

goods manufactured by him or in which he deals, or his business, or services for those of the one having



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




47

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






public; or


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. 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.

Unfair competition is broader than trademark infringement and includes passing off goods with or withouttrademark 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.

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.

Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance ofthe goods, misleads prospective purchasers into buying his merchandise under the impression that they are

buying that of his competitors. Thus, the defendant gives his goods the general appearance of the goods of his

competitor with the intention of deceiving the public that the goods are those of his competitor.

The 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 le tter “B” and “M” being capitalized and the

packaging material is plastic wrapper . . . Further, plaintiffs’ logo and mascot are the umbrella “M” and “Ronald

McDonald’s”, respectively, compared to the mascot of defendant Corporation which is a chubby boy called “Macky” displayed or printed between the words “Big” and “Mak.” (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



48

“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 onhamburgers, just like petitioner’s use of the “Big Mac” mark on hamburgers, respondents have obviously clothed

their goods with the general appearance of petitioners’ goods. ASTcEa

Moreover, there is no notice to the public that the “Big Mak” hamburgers are products of “L.C. Big Mak Burger,

Inc.” Respondents introduced during the trial plastic wrappers and bags with the words “L.C. Big Mak Burger,

Inc.” to inform the public of the name of the seller of the hamburgers. However, petitioners introduced during

the injunctive hearings plastic wrappers and bags with the “Big Mak” mark without the name “L.C. Big Mak

Burger, Inc.” Respondents’ belated presentation of plastic wrappers and bags bearing the name of “L.C. Big Mak

Burger, Inc.” as the seller of the hamburgers is an after-thought designed to exculpate them from their unfair

business conduct. As earlier stated, we cannot consider respondents’ evidence since petitioners’ complaint was

based on facts existing before and during the injunctive hearings.Thus, there is actually no notice to the public that the “Big Mak” hamburgers are products of “L.C. Big Mak

Burger, Inc.” and not those of petitioners who have the exclusive right to the “Big Mac” mark. This clearly shows

respondents’ intent to deceive the public. Had respondents’ placed a notice on their plastic wrappers and bags

that the hamburgers are sold by “L.C. Big Mak Burger, Inc.”, then they could validly claim that they did not

intend to deceive the public. In such case, there is only trademark infringement but no unfair

competition. 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 23 (“Section 23”) in relation to Section 29 of RA 166, a plaintiff who successfully maintains

trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here, the

RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September

1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is

indispensable to prevent further acts of infringement by respondent corporation. Also, the amount of actual

damages is a reasonable percentage (11.9%) of respondent corporation’s gross sales for three (1988–1989 and

1991) of the six years (1984 –1990) respondents have used the “Big Mak” mark.

The RTC also did not err in awarding exemplary damages by way of correction for the public good in view of the

finding of unfair competition where intent to deceive the public is essential. The award of attorney’s fees and

expenses of litigation is also in order.

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.

||| (Mcdonald's Corp. v. L.C. Big Mak Burger, Inc., G.R. No. 143993, [August 18, 2004], 480 PHIL 402-443)



49

[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 .

D E C I S I O N

BRION, J p:

Is the hoarding of a competitor's product containers punishable as unfair competition under the IntellectualProperty 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. IAaCST

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. 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. 2001-01 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. The local police seized andbrought 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. 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) . aEHTSc

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.



50

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 order denying the twin motions. It explained there

was an exhaustive examination of the applicant and its witnesses through searching questions and that the Pepsishells 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. ITScHa

On November 14, 2001, the MTC denied the motion for reconsideration in the second assailed order, 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. 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 Prosecutorof 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.

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. IEAaST

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



51

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 underminethe 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. CcAITa

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:

Section 4. Requisites for issuing search warrant . — A search warrant shall not issue except upon probablecause 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, personallyexamine in the form of searching questions and answers, in writing and under oath, thecomplainant 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.



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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. DHcSIT

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. 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. DcITHE

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:SEC. 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



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


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






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public; or


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. IHaECA

Articles 168.1 and 168.2, as quoted above, provide the concept and general rule on the definition of unfaircompetition. 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 topass 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. DcSTaC

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

Code.



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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 securetheexclusive 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) IndustrialDesigns; 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. THaAEC

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 earnedgoodwill; 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



55

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. cHDAIS

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

SEC. 1. Persons engaged or licensed to engage in the manufacture, bottling or selling of soda water, mineral or

aerated waters, cider, milk, cream, or other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other

similar containers, 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 areused by them, under the same conditions, rules, and regulations, made applicable by law or regulation to the

issuance of trademarks. ScCEIA

SEC. 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler or seller

who has successfully registered the marks of ownership in accordance with the provisions of the next preceding

section, to fill such bottles, boxes, kegs, barrels, 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 bythe 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 applicationsince 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 Codethat 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 thesestringent 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.

SO ORDERED.

||| (Coca-Cola Bottlers, Phils., Inc. v. Gomez, G.R. No. 154491, [November 14, 2008], 591 PHIL 642-662)

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