G.R. No. 120961 October 17, 1996 DISTILLERIA WASHINGTON, INC. or WASHINGTON DISTILLERY, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS and LA TONDEÑA DISTILLERS, INC., respondents. FACTS : La Tondeña Distillers , Inc. (LTDI) filed a case against Distilleria Washington for thes eizure of 18,157 empty bottles bearing the blown-in marks of La Tondeña Inc. and Ginebra San Miguel. Said bottles were being used by Washington for its own products without the consent of LTDI. LTDI asserted that as the owner of the bottles they were entitled for the protection extended by RA no. 623 (An Act to regulate the use of duly stamped or marked bottles, boxes, kegs, barrels and other similar containers). Washington countered that RA no. 623 should not apply to alcoholic beverages and the ownership of the bottles were lawfully transferred to the buyer upon the sale of the gin and the containers at a single price. The trial court rendered a decision favoring Washington and ordered LTDI for the return of the seized bottles. LTDI appealed the decision to the Court of Appeals. The appellate court reversed the court a quo and ruled against Washington. ISSUE : Whether or not ownership of the empty bottles was transferred to Washington? HELD : The fact of the matter is that R.A. 623, as amended, in affording trademark protection to the registrant, has additionally expressed a prima facie presumption of illegal use by a possessor whenever such use or possession is without the written permission of the registered manufacturer, a provision that is neither arbitrary nor without appropriate rationale. The above-quoted provisions grant

protection to a qualified manufacturer who successfully registered with the Philippine Patent Office its duly stamped or marked bottles, boxes, casks and other similar containers. The mere use of registered bottles or containers without the written consent of the manufacturer is prohibited, the only exceptions being when they are used as containers for "sisi," "bagoong," "patis" and similar native products. It is to be pointed out that a trademark refers to a word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a merchant to identify, and distinguish from others, his goods of commerce. It is basically an intellectual creation that is susceptible to ownership and, consistently therewith, gives rise to its own elements of jus posidendi, jus utendi, jus fruendi, jus disponendi and jus abutendi, along with the applicable jus lex, comprising that ownership. The incorporeal right, however, is distinct from the property in the material object subject to it. Ownership in one does not necessarily vest ownership in the other. Thus, the transfer or assignment of the intellectual property will not necessarily constitute a conveyance of the thing it covers, nor would a conveyance of the latter imply the transfer or assignment of the intellectual right. Ang v. Teodoro [74 Phil 50 (1942)]

The function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. "Ang Tibay," as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before the petitioner adopted it as a trade-mark in her own business. "Ang Tibay" shoes and slippers are, by

association, known throughout the Philippines as products of the "Ang Tibay" factory owned and operated by the respondent. Even if "Ang Tibay," therefore, were not capable of exclusive appropriation as a trade-mark, the application of the doctrine of secondary meaning could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. ETEPHA, A.G., petitioner, vs. DIRECTOR OF PATENTS and WESTMONT PHARMACEUTICALS, INC., respondents . (G.R. No. L-20635, March 31, 1966) FACTS: Respondent Westmont Pharmaceuticals, Inc., a New York corporation, sought registration of trademark "Atussin" placed on its "medicinal preparation of expectorant antihistaminic,

bronchodilator sedative, ascorbic acid (Vitamin C) used in the treatment of cough". The trademark is used exclusively in the Philippines since January 21, 1959. Petitioner, Etepha, A. G., a Liechtenstin (principality) corporation, objected claiming that it will be damaged because Atussin is so confusedly similar to its Pertussin used on a preparation for the treatment of coughs, that the buying public will be misled into believing that Westmont's product is that of petitioner's which allegedly enjoys goodwill. The Director of Patents ruled that the trademark ATUSSIN may be registered even though PERTUSSIN had been previously registered from the same office, hence, this appeal. ISSUE: Whether or not ATUSSIN may be registered? HELD: We are to be guided by the rule that the validity of a cause for infringement is predicated upon colorable imitation. The phrase "colorable imitation" denotes such a "close or ingenious imitation as to be calculated to deceive ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser, giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other. A practical approach to the problem of similarity or dissimilarity is to go into the whole of the two trademarks pictured in their manner of display. Inspection should be

undertaken from the viewpoint of a prospective buyer. Confusion is likely between trademarks, however, only if their over-all presentations in any of the particulars of sound, appearance, or meaning are such as would lead the purchasing public into believing that the products to which the marks are applied emanated from the same source. We concede the possibility that buyers might be able to obtain Pertussin or Attusin without prescription. When this happens, then the buyer must be one thoroughly familiar with what he intends to get, else he would not have the temerity to ask for a medicine specifically needed to cure a given ailment. In which case, the more improbable it will be to palm off one for the other. For a person who purchases with open eyes is hardly the man to be deceived. For the reasons given, the appealed decision of the respondent Director of Patents giving due course to the application for the registration of trademark ATTUSIN is hereby affirmed. Cost against petitioner. So ordered. PRIBHDAS  J.  MIRPURI  vs.  COURT  OF  APPEALS,  DIRECTOR  OF  PATENTS  and  the  BARBIZON  CORPORATION  

Petitioner's  claims:  "Barbizon"  products  have  been  sold  in  the  Philippines  since  1970.  Petitioner  developed  this  market  by  working  long  hours  and  spending  considerable  

sums  of  money  on  advertisements  and  promotion  of  the  trademark  and  its  products.  Almost  30  years  later,  private  respondent,  a  foreign  corporation  usurps  the  trademark  and  invades  petitioner's  market.  Justice  and  fairness  dictate  that  private  respondent  be  prevented  from  appropriating  what  is  not  its  own.  Legally,  at  the  same  time,  private  respondent  is  barred  from  questioning  petitioner's  ownership  of  the  trademark  because  of  res  judicata  in  view  of  IPC  No.  686.  

Respondent's  claims:  The  Opposer's  goods  bearing  the  trademark  BARBIZON  have  been  used  in  many  countries,  including  the  Philippines,  for  at  least  40  years  and  has  enjoyed  international  reputation  and  good  will  for  their  quality.  Their  trademarks  qualify  as  well-­‐known  trademarks  entitled  to  protection  under  Article  6bis  of  the  Convention  of  Paris  for  the  Protection  of  Industrial  Property  

Issues:  

1.  Whether  IPC  No.  2049  is  barred  on  the  ground  of  res  judicata  

2.  Whether  a  treaty  affords  protection  to  a  foreign  corporation  against  a  Philippine  applicant  for  the  registration  of  a  similar  trademark.  

 

Ruling:    

1. IPC No. 2049 raised the issue of ownership of the trademark and the international recognition and reputation of the trademark for over 40 years here and abroad, different from the issues of confusing similarity and damage in IPC No. 686. There was also a new cause of action arising from the cancellation of petitioner's certificate of registration for failure to file the affidavit of use. Also, the first and second cases are based on different laws, one on Trademark Law and the other on the Paris Convention, E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. Thus, res judicata does not apply to the instant case.

The   WTO   is   a   common   institutional   framework   for   the  conduct   of   trade   relations   among   its  members   in  matters  related   to   the   multilateral   and   plurilateral   trade  agreements  annexed  to  the  WTO  Agreement,  one  of  which  is   the  Agreement   on   Trade-­‐Related  Aspects   of   Intellectual  Property  Rights  or  TRIPs.  Members  to  this  Agreement  have  agreed   to   adhere   to  minimum   standards   of   protection   set  by  several  Conventions,  including  the  Paris  Convention.  The  Philippines   and   the   US   have   acceded   to   the   WTO  Agreement.   Conformably,   the   State   must   reaffirm   its  commitment   to   the   global   community   and   take   part   in  evolving  a  new  international  economic  order  at  the  dawn  of  

the  new  millenium.  The  petition  is  denied.    Unno Commercial Enterprises, Inc. v. General Milling Corporation [205 Phil 707 (1983)]

When the applicant is not the owner of the trademark being applied for, he has no right to apply for the registration of the same. Under the Trademark Law only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. A local importer, however, may make application for the registration of a foreign trademark, trade name or other mark of ownership.

The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other mark of ownership, unless such importer is actually the owner thereof in the country from which the goods are imported. Thus this Court, has on several occasions ruled that where the applicant's alleged ownership is not shown in any notarial document and the applicant appears to be merely an importer or distributor of the merchandise covered by said trademark, its application cannot be granted. Kabushi  Kaisha  Isetan  vs.  lAC   GR  75420,  15  November  1991;  Second  Division,  Gutierrez  Jr.,  (J)    

Facts:   Kabushi   Kaisha   Isetan   is   a   Japanese   corporation,   and  owner   of   the   trademark   “Isetan”   and   the   “Young   leave   design”.  Isetann   Department   Store,   on   the   other   hand,   is   a   domestic  corporation,   and   owner   fo   the   trademark   “Isetann”   and   “flover  design.”   In   1980,   Kabushi   Kaisha   Isetan   field   petitions   for   the  cancellation  of  the  supplemental  registration  of  Isetann  with  the  Philippine   Patent   Office.   It   also   filed   for   the   cancellation   of   the  mark   Isetan   from   the   corporate   name   of   Isetann   Department  Store   with   the   SEC.   Both   the   SEC   and   the   Director   of   Patents,  eventually,   ruled   against   Kabushi   Kaisha   Isetan.   It   appealed   to  the   intermediate  Appellate  Court,  which  denied   the  petition   for  being  filed  out  of  time.    Issue:  Whether   Kabushi   Kaisha   Isetan   has   the   right   to   seek   for  the  cancellation  of  the  word  “Isetan”  from  the  corporate  name  of  Isetann  Department  Store.    Held:  No.  A  Fundamental  principle  in  Trademark  Law  is  that  the  actual  use  in  commerce  in  the  Philippines  is  a  pre-­‐requisite  to  the  acquisition   of   ownership   over   a   trademark   or   a   tradename.  Kabushi  Kaisha   Isetan  has  never   conducted  any  business   in   the  Philippines.  It  has  never  promoted  its  trademark  or  tradename  in  the   Philippines.   It   has   absolutely   no   business   goodwill   in   the  Philippines.   It   is  unknown   to  Filipinos  except   the  very   few  who  may  have  noticed   it  while   traveling   abroad.   It   has   never  paid   a  single   centavo   of   tax   to   the   Philippine   Government.   Under   the  law,   it   has  no   right   to   the   remedy   it   seeks.   Isetann  Department  Store  is  entitled  to  use  its  trademark  in  the  Philippines.   G.R. No. 91332 July 16, 1993

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC REUNIES, S.A., petitioners vs. THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents.

Quasha, Asperilla, Ancheta, Peña & Nolasco Law Office for petitioners.

Teresita Gandionco-Oledan for private respondent.

MELO, J.:

In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc., and Fabriques of Tabac Reunies, S.A., are ascribing whimsical exercise of the faculty conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of Court when respondent Court of Appeals lifted the writ of preliminary injunction it earlier had issued against Fortune Tobacco Corporation, herein private respondent, from

manufacturing and selling "MARK" cigarettes in the local market.

Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and "LARK", also for cigarettes, must be protected against unauthorized appropriation, petitioners twice solicited the ancillary writ in the course the main suit for infringement but the court of origin was unpersuaded.

Before we proceed to the generative facts of the case at bar, it must be emphasized that resolution of the issue on the propriety of lifting the writ of preliminary injunction should not be construed as a prejudgment of the suit below. Aware of the fact that the discussion we are about to enter into involves a mere interlocutory order, a discourse on the aspect infringement must thus be avoided. With these caveat, we shall now shift our attention to the events which spawned the controversy.

As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized under

the laws of the State of Virginia, United States of America, and does business at 100 Park Avenue, New York, New York, United States of America. The two other plaintiff foreign corporations, which are wholly-owned subsidiaries of Philip Morris, Inc., are similarly not doing business in the Philippines but are suing on an isolated transaction. As registered owners "MARK VII", "MARK TEN", and "LARK" per certificates of registration issued by the Philippine Patent Office on April 26, 1973, May 28, 1964, and March 25, 1964, plaintiffs-petitioners asserted that defendant Fortune Tobacco Corporation has no right to manufacture and sell cigarettes bearing the allegedly identical or confusingly similar trademark "MARK" in contravention of Section 22 of the Trademark Law, and should, therefore, be precluded during the pendency of the case from performing the acts complained of via a preliminary injunction (p. 75, Court of Appeals Rollo in AC-G.R. SP No. 13132).

For its part, Fortune Tobacco Corporation

admitted petitioners' certificates of registration with the Philippine Patent Office subject to the affirmative and special defense on misjoinder of party plaintiffs. Private respondent alleged further that it has been authorized by the Bureau of Internal Revenue to manufacture and sell cigarettes bearing the trademark "MARK", and that "MARK" is a common word which cannot be exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No. 13132). On March 28, 1983, petitioners' prayer for preliminary injunction was denied by the Presiding Judge of Branch 166 of the Regional Trial Court of the National Capital Judicial Region stationed at Pasig, premised upon the following propositions:

Plaintiffs admit in paragraph 2 of the complaint that ". . . they are not doing business in the Philippines and are suing on an isolated transaction . . .". This simply means that they are not engaged in the sale, manufacture, importation, expor[t]ation and advertisement of their cigarette products in the Philippines. With this admission, defendant asks: ". . . how could

defendant's "MARK" cigarettes cause the former "irreparable damage" within the territorial limits of the Philippines?" Plaintiffs maintain that since their trademarks are entitled to protection by treaty obligation under Article 2 of the Paris Convention of which the Philippines is a member and ratified by Resolution No. 69 of the Senate of the Philippines and as such, have the force and effect of law under Section 12, Article XVII of our Constitution and since this is an action for a violation or infringement of a trademark or trade name by defendant, such mere allegation is sufficient even in the absence of proof to support it. To the mind of the Court, precisely, this is the issue in the main case to determine whether or not there has been an invasion of plaintiffs' right of property to such trademark or trade name. This claim of plaintiffs is disputed by defendant in paragraphs 6 and 7 of the Answer; hence, this cannot be made a basis for the issuance of a writ of preliminary injunction.

There is no dispute that the First Plaintiff is the registered owner of trademar[k] "MARK VII" with

Certificate of Registration No. 18723, dated April 26,1973 while the Second Plaintiff is likewise the registered owner of trademark "MARK TEN" under Certificate of Registration No. 11147, dated May 28, 1963 and the Third Plaintiff is a registrant of trademark "LARK" as shown by Certificate of Registration No. 10953 dated March 23, 1964, in addition to a pending application for registration of trademark "MARK VII" filed on November 21, 1980 under Application Serial No. 43243, all in the Philippine Patent Office. In same the manner, defendant has a pending application for registration of the trademark "LARK" cigarettes with the Philippine Patent Office under Application Serial No. 44008. Defendant contends that since plaintiffs are "not doing business in the Philippines" coupled the fact that the Director of Patents has not denied their pending application for registration of its trademark "MARK", the grant of a writ of preliminary injunction is premature. Plaintiffs contend that this act(s) of defendant is but a subterfuge to give semblance of good faith intended to deceive the public and patronizers

into buying the products and create the impression that defendant's goods are identical with or come from the same source as plaintiffs' products or that the defendant is a licensee of plaintiffs when in truth and in fact the former is not. But the fact remains that with its pending application, defendant has embarked in the manufacturing, selling, distributing and advertising of "MARK" cigarettes. The question of good faith or bad faith on the part of defendant are matters which are evidentiary in character which have to be proven during the hearing on the merits; hence, until and unless the Director of Patents has denied defendant's application, the Court is of the opinion and so holds that issuance a writ of preliminary injunction would not lie.

There is no question that defendant has been authorized by the Bureau of Internal Revenue to manufacture cigarettes bearing the trademark "MARK" (Letter of Ruben B. Ancheta, Acting Commissioner addressed to Fortune Tobacco Corporation dated April 3, 1981, marked as Annex "A", defendant's "OPPOSITION, etc."

dated September 24, 1982). However, this authority is qualified . . . that the said brands have been accepted and registered by the Patent Office not later than six (6) months after you have been manufacturing the cigarettes and placed the same in the market." However, this grant ". . . does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your indicated trademarks/brands". As aforestated, the registration of defendant's application is still pending in the Philippine Patent Office.

It has been repeatedly held in this jurisdiction as well as in the United States that the right or title of the applicant for injunction remedy must be clear and free from doubt. Because of the disastrous and painful effects of an injunction, Courts should be extremely careful, cautious and conscionable in the exercise of its discretion consistent with justice, equity and fair play.

There is no power the exercise of which is more

delicate which requires greater caution, deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than the issuing of an injunction; it is the strong arm of equity that never ought to be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. The right must be clear, the injury impending or threatened, so as to be averted only by the protecting preventive process of injunction. (Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.)

Courts of equity constantly decline to lay down any rule which injunction shall be granted or withheld. There is wisdom in this course, for it is impossible to foresee all exigencies of society which may require their aid to protect rights and restrain wrongs. (Merced M. Go v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.)

It is the strong arm of the court; and to render its operation begin and useful, it must be exercised with great discretion, and when necessary

requires it. (Attorney-General v. Utica Inc. Co., P. John Ch. (N.Y.) 371.)

Having taken a panoramic view of the position[s] of both parties as viewed from their pleadings, the picture reduced to its minimum size would be this: At the crossroads are the two (2) contending parties, plaintiffs vigorously asserting the rights granted by law, treaty and jurisprudence to restrain defendant in its activities of manufacturing, selling, distributing and advertising its "MARK" cigarettes and now comes defendant who countered and refused to be restrained claiming that it has been authorized temporarily by the Bureau of Internal Revenue under certain conditions to do so as aforestated coupled by its pending application for registration of trademark "MARK" in the Philippine Patent Office. This circumstance in itself has created a dispute between the parties which to the mind of the Court does not warrant the issuance of a writ of preliminary injunction.

It is well-settled principle that courts of equity will

refuse an application for the injunctive remedy where the principle of law on which the right to preliminary injunction rests is disputed and will admit of doubt, without a decision of the court of law establishing such principle although satisfied as to what is a correct conclusion of law upon the facts. The fact, however, that there is no such dispute or conflict does not in itself constitute a justifiable ground for the court to refuse an application for the injunctive relief. (Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg. 94.)

Hence, the status quo existing between the parties prior to the filing of this case should be maintained. For after all, an injunction, without reference to the parties, should be violent, vicious nor even vindictive. (pp. 338-341, Rollo in G.R. No. 91332.)

In the process of denying petitioners' subsequent motion for reconsideration of the order denying issuance of the requested writ, the court of origin took cognizance of the certification executed on

January 30, 1984 by the Philippine Patent Office attesting to the fact that private respondent's application for registration is still pending appropriate action. Apart from this communication, what prompted the trial court judge to entertain the idea of prematurity and untimeliness of petitioners' application for a writ of preliminary injunction was the letter from the Bureau of Internal Revenue date February 2, 1984 which reads:

MRS. TERESITA GANDIONGCO OLEDAN Legal Counsel Fortune Tobacco Corporation

Madam:

In connection with your letter dated January 25, 1984, reiterating your query as to whether your label approval automatically expires or becomes null and void after six (6) months if the brand is not accepted and by the patent office, please be informed that no provision in the Tax Code or revenue regulation that requires an applicant to comply with the aforementioned condition order

that his label approved will remain valid and existing.

Based on the document you presented, it shows that registration of this particular label still pending resolution by the Patent Office. These being so , you may therefore continue with the production said brand of cigarette until this Office is officially notified that the question of ownership of "MARK" brand is finally resolved.

Very truly yours,

TEODORO D. PAREÑO Chief, Manufactured Tobacco Tax Division TAN-P6531-D2830-A-6

(p. 348, Rollo.)

It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark Division of the then Philippine Patent Office that Fortune's application for its trademark is still pending before said office (p. 311, Rollo).

Petitioners thereafter cited supervening events

which supposedly transpired since March 28, 1983, when the trial court first declined issuing a writ of preliminary injunction, that could alter the results of the case in that Fortune's application had been rejected, nay, barred by the Philippine Patent Office, and that the application had been forfeited by abandonment, but the trial court nonetheless denied the second motion for issuance of the injunctive writ on April 22, 1987, thus:

For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants have fallen far short of the legal requisites that would justify the grant of the writ of preliminary injunction prayed for. For one, they did not even bother to establish by competent evidence that the products supposedly affected adversely by defendant's trademark now subject of an application for registration with the Philippine Patents Office, are in actual use in the Philippines. For another, they concentrated their fire on the alleged abandonment and forfeiture by defendant of said application for registration.

The Court cannot help but take note of the fact that in their complaint plaintiffs included a prayer for issuance preliminary injunction. The petition was duly heard, and thereafter matter was assiduously discussed lengthily and resolved against plaintiffs in a 15-page Order issued by the undersigned's predecessor on March 28, 1983. Plaintiffs' motion for reconsideration was denied in another well-argued 8 page Order issued on April 5, 1984,, and the matter was made to rest.

However, on the strength of supposed changes in the material facts of this case, plaintiffs came up with the present motion citing therein the said changes which are: that defendant's application had been rejected and barred by the Philippine Patents Office, and that said application has been deemed abandoned and forfeited. But defendant has refiled the same.

Plaintiffs' arguments in support of the present motion appear to be a mere rehash of their stand in the first above-mentioned petition which has

already been ruled upon adversely against them. Granting that the alleged changes in the material facts are sufficient grounds for a motion seeking a favorable grant of what has already been denied, this motion just the same cannot prosper.

In the first place there is no proof whatsoever that any of plaintiffs' products which they seek to protect from any adverse effect of the trademark applied for by defendant, is in actual use and available for commercial purposes anywhere in the Philippines. Secondly as shown by plaintiffs' own evidence furnished by no less than the chief of Trademarks Division of the Philippine Patent Office, Atty. Enrique Madarang, the abandonment of an application is of no moment, for the same can always be refiled. He said there is no specific provision in the rules prohibiting such refiling (TSN, November 21, 1986, pp. 60 & 64, Raviera). In fact, according to Madarang, the refiled application of defendant is now pending before the Patents Office. Hence, it appears that the motion has no leg to stand on. (pp. 350-351, Rollo in G. R. No. 91332.)

Confronted with this rebuff, petitioners filed a previous petition for certiorari before the Court, docketed as G.R. No. 78141, but the petition was referred to the Court of Appeals.

The Court of Appeals initially issued a resolution which set aside the court of origin's order dated April 22, 1987, and granted the issuance of a writ of preliminary injunction enjoining Fortune, its agents, employees, and representatives, from manufacturing, selling, and advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the First Division of the Court of Appeals in CA-G.R. SP No. 13132, remarked:

There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII", "MARK TEN", and "LARK".(Annexes B, C and D, petition). As found and reiterated by the Philippine Patent Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is "confusingly similar" to the trademarks of petitioners, hence registration was barred

under Sec. 4 (d) of Rep. Act. No. 166, as amended (pp. 106, 139, SCA rollo). In a third official communication dated April 8, 1986, the trademark application of private respondent for the "MARK" under Serial No. 44008 filed on February 13, 1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases." (p. 107, CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material facts which occurred after March 28, 1983", are not also questioned by respondents.

Pitted against the petitioners' documentary evidence, respondents pointed to (1) the letter dated January 30, 1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting Commissioner of Internal Revenue, temporarily granting the request of private respondent for a permit to manufacture two (2) new brands of cigarettes one of which is brand "MARK" filter-type blend,

and (2) the certification dated September 26, 1986 of Cesar G. Sandico, Director of Patents (p. 138, CA rollo) issued upon the written request of private respondents' counsel dated September 17, 1986 attesting that the records of his office would show that the "trademark MARK" for cigarettes is now the subject of a pending application under Serial No. 59872 filed on September 16, 1986.

Private respondent's documentary evidence provides the reasons neutralizing or weakening their probative values. The penultimate paragraph of Commissioner Diaz' letter of authority reads:

Please be informed further that the authority herein granted does not give you protection against any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your above-named brands/trademark.

while Director Sandico's certification contained similar conditions as follows:

This Certification, however, does not give protection as against any person or entity whose right may be prejudiced by infringement or unfair competition in relation to the aforesaid trademark nor the right to register if contrary to the provisions of the Trademark Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in Trademark Cases.

The temporary permit to manufacture under the trademark "MARK" for cigarettes and the acceptance of the second application filed by private respondent in the height of their dispute in the main case were evidently made subject to the outcome of the said main case or Civil Case No. 47374 of the respondent Court. Thus, the Court has not missed to note the absence of a mention in the Sandico letter of September 26, 1986 of any reference to the pendency of the instant action filed on August 18, 1982. We believe and hold that petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the purposes stated in their complaint and subsequent motions for the

issuance of the prohibitory writ. (Buayan Cattle Co. vs. Quintillan, 125 SCRA 276)

The requisites for the granting of preliminary injunction are the existence of the right protected and the facts against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. vs. Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances of the case commanding an act which the Court regards as essential to justice and restraining an act it deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the Court except on a clear case of abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA 636). Petitioners'

right of exclusivity to their registered trademarks being clear and beyond question, the respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse discretion. If the lower court does not grant preliminary injunction, the appellate court may grant the same. (Service Specialists, Inc. vs. Sheriff of Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.)

After private respondent Fortune's motion for reconsideration was rejected, a motion to dissolve the disputed writ of preliminary injunction with offer to post a counterbond was submitted which was favorably acted upon by the Court of Appeals, premised on the filing of a sufficient counterbond to answer for whatever perjuicio petitioners may suffer as a result thereof, to wit:

The private respondent seeks to dissolve the preliminary injunction previously granted by this Court with an offer to file a counterbond. It was pointed out in its supplemental motion that lots of

workers employed will be laid off as a consequence of the injunction and that the government will stand to lose the amount of specific taxes being paid by the private respondent. The specific taxes being paid is the sum total of P120,120, 295.98 from January to July 1989.

The petitioners argued in their comment that the damages caused by the infringement of their trademark as well as the goodwill it generates are incapable of pecuniary estimation and monetary evaluation and not even the counterbond could adequately compensate for the damages it will incur as a result of the dissolution of the bond. In addition, the petitioner further argued that doing business in the Philippines is not relevant as the injunction pertains to an infringement of a trademark right.

After a thorough re-examination of the issues involved and the arguments advanced by both parties in the offer to file a counterbond and the opposition thereto, WE believe that there are

sound and cogent reasons for US to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the dissolution of the preliminary injunction.

The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark in question and the filing of the counterbond will amply answer for such damages.

While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted, nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons to lift the preliminary injunction, the motion to file a counterbond is granted. (pp. 53-

54, Rollo in G.R. No. 91332.)

Petitioners, in turn, filed their own motion for re-examination geared towards reimposition of the writ of preliminary injunction but to no avail (p. 55, Rollo in G.R. No. 91332).

Hence, the instant petition casting three aspersions that respondent court gravely abused its discretion tantamount to excess of jurisdiction when:

I. . . . it required, contrary to law and jurisprudence, that in order that petitioners may suffer irreparable injury due to the lifting of the injunction, petitioners should be using actually their registered trademarks in commerce in the Philippines;

II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court; and

III. . . . after having found that the trial court had committed grave abuse of discretion and exceeded its jurisdiction for having refused to

issue the writ of injunction to restrain private respondent's acts that are contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and authorized the private respondent to continue performing the very same acts that it had considered contrary to equity and good conscience, thereby ignoring not only the mandates of the Trademark Law, the international commitments of the Philippines, the judicial admission of private respondent that it will have no more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to register it, and the admonitions of the Supreme Court. (pp. 24-25, Petition; pp. 25-26, Rollo.)

To sustain a successful prosecution of their suit for infringement, petitioners, as foreign corporations not engaged in local commerce, rely on section 21-A of the Trademark Law reading as follows:

Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been

registered or assigned under this act may bring an action hereunder for infringement, for unfair competition, or false designation 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 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. (As inserted by Sec. 7 of Republic Act No. 638.)

to drive home the point that they are not precluded from initiating a cause of action in the Philippines on account of the principal perception that another entity is pirating their symbol without any lawful authority to do so. Judging from a perusal of the aforequoted Section 21-A, the conclusion reached by petitioners is certainly correct for the proposition in support thereof is embedded in the Philippine legal jurisprudence.

Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50 [1971]) by then Justice (later Chief Justice) Makalintal that:

Parenthetically, it may be stated that the ruling in the Mentholatum case was subsequently derogated when Congress, purposely to "counteract the effects" of said case, enacted Republic Act No. 638, inserting Section 21-A in the Trademark Law, which allows a foreign corporation or juristic person to bring an action in Philippine courts for infringement of a mark or tradename, for unfair competition, or false designation 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 complaint."

Petitioner argues that Section 21-A militates against respondent's capacity to maintain a suit for cancellation, since it requires, before a foreign

corporation may bring an action, that its trademark or tradename has been registered under the Trademark Law. The argument misses the essential point in the said provision, which is that the foreign corporation is allowed thereunder to sue "whether or not it has been licensed to do business in the Philippines" pursuant to the Corporation Law (precisely to counteract the effects of the decision in the Mentholatum case). (at p. 57.)

However, on May, 21, 1984, Section 21-A, the provision under consideration, was qualified by this Court in La Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign corporation not doing business in the Philippines may have the right to sue before Philippine Courts, but existing adjective axioms require that qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a

foreign corporation suing under Section 21-A to simply allege its alien origin. Rather, it must additionally allege its personality to sue. Relative to this condition precedent, it may be observed that petitioners were not remiss in averring their personality to lodge a complaint for infringement (p. 75, Rollo in AC-G.R. SP No. 13132) especially so when they asserted that the main action for infringement is anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).

Another point which petitioners considered to be of significant interest, and which they desire to impress upon us is the protection they enjoy under the Paris Convention of 1965 to which the Philippines is a signatory. Yet, insofar as this discourse is concerned, there is no necessity to treat the matter with an extensive response because adherence of the Philippines to the 1965 international covenant due to pact sunt

servanda had been acknowledged in La Chemise (supra at page 390).

Given these confluence of existing laws amidst the cases involving trademarks, there can be no disagreement to the guiding principle in commercial law that foreign corporations not engaged in business in the Philippines may maintain a cause of action for infringement primarily because of Section 21-A of the Trademark Law when the legal standing to sue is alleged, which petitioners have done in the case at hand.

In assailing the justification arrived at by respondent court when it recalled the writ of preliminary injunction, petitioners are of the impression that actual use of their trademarks in Philippine commercial dealings is not an indispensable element under Article 2 of the Paris Convention in that:

(2) . . . . no condition as to the possession of a domicile or establishment in the country where protection is claimed may be required of persons

entitled to the benefits of the Union for the enjoyment of any industrial property of any industrial property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)

Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of the Trademark Law which speak loudly, about necessity of actual commercial use of the trademark in the local forum:

Sec. 2. What are registrable. — Trademarks, tradenames and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trademarks, tradenames, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed; And provided, further, That the country of which

the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended by R.A. No. 865).

Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a tradename, or a service mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, tradename, service mark, heretofore or hereafter appropriated, as in this section provided, shall be

recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As amended by R.A. No. 638). (Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203 SCRA 583 [1991], at pp. 589-590; emphasis supplied.)

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public

International Law, Fourth ed., 1974, p. 16).

The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez, Jr., in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]), have been construed in this manner:

A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a tradename.

xxx xxx xxx

These provisions have been interpreted in Sterling Products International, Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way:

A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark.

xxx xxx xxx

. . . Adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. . . .

In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce.

We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]):

3. The Trademark law is very clear. It requires actual commercial use of the mark prior to its

registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value". The evidence for respondent must be clear, definite and free from inconsistencies. (Sy Ching v. Gaw Lui, 44 SCRA 148-149) "Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by the law. Respondent did not expect income from such "samples". There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied)

The records show that the petitioner has never conducted any business in the Philippines. It has never promoted its tradename or trademark in the Philippines. It is unknown to Filipino except the very few who may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine government. Under the law, it has no right to the remedy it seeks. (at pp. 589-591.)

In other words, petitioners may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign

corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

Going back to the first assigned error, we can not help but notice the manner the ascription was framed which carries with it the implied but unwarranted assumption of the existence of petitioners' right to relief. It must be emphasized that this aspect of exclusive dominion to the trademarks, together with the corollary allegation of irreparable injury, has yet to be established by petitioners by the requisite quantum of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of preliminary injunction is due to judicial deference to the lower courts, involved as there is mere interlocutory order (Villarosa vs. Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a remedial measure which is but ancillary to the main action for infringement still pending factual determination before the court of origin. It is virtually needless to stress the obvious reality

that critical facts in an infringement case are not before us more so when even Justice Feliciano's opinion observes that "the evidence is scanty" and that petitioners "have yet to submit copies or photographs of their registered marks as used in cigarettes" while private respondent has not, for its part, "submitted the actual labels or packaging materials used in selling its "Mark" cigarettes." Petitioners therefore, may not be permitted to presume a given state of facts on their so called right to the trademarks which could be subjected to irreparable injury and in the process, suggest the fact of infringement. Such a ploy would practically place the cart ahead of the horse. To our mind, what appears to be the insurmountable barrier to petitioners' portrayal of whimsical exercise of discretion by the Court of Appeals is the well-taken remark of said court that:

The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with the trademark

in question and the filing of the counterbond will amply answer for such damages. (p. 54. Rollo in G.R. No. 91332.)

More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No. 91332) as well as in the very petition filed with this Court (p. 2, Rollo in G.R. No. 91332) indicating that they are not doing business in the Philippines, for these frank representations are inconsistent and incongruent with any pretense of a right which can breached (Article 1431, New Civil Code; Section 4, Rule 129; Section 3, Rule 58, Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show that there exists a right to be protected and that the facts against which injunction is directed are violative of said right (Searth Commodities Corporation vs. Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that albeit petitioners are holders of certificate of registration in the Philippines of their symbols as admitted by private respondent, the fact of exclusive ownership cannot be made to rest

solely on these documents since dominion over trademarks is not acquired by the mere fact of registration alone and does not perfect a trademark right (Unno Commercial Enterprises, Inc. vs. General Milling Corporation, 120 SCRA 804 [1983]).

Even if we disregard the candid statements of petitioners anent the absence of business activity here and rely on the remaining statements of the complaint below, still, when these averments are juxtaposed with the denials and propositions of the answer submitted by private respondent, the supposed right of petitioners to the symbol have thereby been controverted. This is not to say, however, that the manner the complaint was traversed by the answer is sufficient to tilt the scales of justice in favor of private respondent. Far from it. What we are simply conveying is another basic tenet in remedial law that before injunctive relief may properly issue, complainant's right or title must be undisputed and demonstrated on the strength of one's own title to such a degree as to unquestionably

exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence, inasmuch as the possibility of irreparable damage, without prior proof of transgression of an actual existing right, is no ground for injunction being mere damnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971]; Francisco, Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p. 82).

On the economic repercussion of this case, we are extremely bothered by the thought of having to participate in throwing into the streets Filipino workers engaged in the manufacture and sale of private respondent's "MARK" cigarettes who might be retrenched and forced to join the ranks of the many unemployed and unproductive as a result of the issuance of a simple writ of preliminary injunction and this, during the pendency of the case before the trial court, not to mention the diminution of tax revenues represented to be close to a quarter million pesos annually. On the other hand, if the status

quo is maintained, there will be no damage that would be suffered by petitioners inasmuch as they are not doing business in the Philippines.

With reference to the second and third issues raised by petitioners on the lifting of the writ of preliminary injunction, it cannot be gainsaid that respondent court acted well within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court:

Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. — The injunction may be refused or, if granted ex parte, may be dissolved, upon the insufficiency of the complaint as shown by the complaint itself, with or without notice to the adverse party. It may also be refused or dissolved on other grounds upon affidavits on the part of the defendants which may be opposed by the plaintiff also by affidavits. It may further be refused or, if granted, may be dissolved, if it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof, as the case

may be, would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may suffer by the refusal or the dissolution of the injunction. If it appears that the extent of the preliminary injunction granted is too great, it must be modified.

Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on the following instances:

(1) If there is insufficiency of the complaint as shown by the allegations therein. Refusal or dissolution may be granted in this case with or without notice to the adverse party.

(2) If it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or continuance thereof would cause great damage to the defendant, while the plaintiff can be fully compensated for such damages as he

may suffer. The defendant, in this case, must file a bond in an amount fixed by the judge conditioned that he will pay all damages which plaintiff may suffer by the refusal or the dissolution of the injunction.

(3) On the other grounds upon affidavits on the part of the defendant which may be opposed by the plaintiff also affidavits.

Modification of the injunction may also be ordered by the court if it appears that the extent of the preliminary injunction granted is too great. (3 Martin, Rules of Court, 1986 ed., p. 99; Francisco, supra, at p. 268.)

In view of the explicit representation of petitioners in the complaint that they are not engaged in business in the Philippines, it inevitably follows that no conceivable damage can be suffered by them not to mention the foremost consideration heretofore discussed on the absence of their "right" to be protected. At any rate, and assuming in gratia argumenti that respondent court erroneously lifted the writ it

previously issued, the same may be cured by appeal and not in the form of a petition for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of the rule that a writ of preliminary injunction is an interlocutory order which is always under the control of the court before final judgment, petitioners' criticism must fall flat on the ground, so to speak, more so when extinction of the previously issued writ can even be made without previous notice to the adverse party and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of Court, 1970 ed., p. 81).

WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of Appeals dated September 14, 1989 and November 29, 1989 are hereby AFFIRMED.

SO ORDERED.

Bidin, J., concurs.

Davide, Jr., concurs in the result.

Romero, J. took no part. G.R. No. 158589 June 27, 2006

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., and FABRIQUES DE TABAC REUNIES, S.A., (now known as PHILIP MORRIS PRODUCTS S.A.), Petitioners, vs. FORTUNE TOBACCO CORPORATION, Respondent.

D E C I S I O N

GARCIA, J.:

Via this petition for review under Rule 45 of the Rules of Court, herein petitioners Philip Morris, Inc., Benson & Hedges (Canada) Inc., and Fabriques de Tabac Reunies, S.A. (now Philip Morris Products S.A.) seek the reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 66619, to wit:

1. Decision dated January 21, 20031 affirming an

earlier decision of the Regional Trial Court of Pasig City, Branch 166, in its Civil Case No. 47374, which dismissed the complaint for trademark infringement and damages thereat commenced by the petitioners against respondent Fortune Tobacco Corporation; and

2. Resolution dated May 30, 20032 denying petitioners’ motion for reconsideration.

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United States of America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the Philippine Patents Office (PPO), the registered owner of the trademark "MARK VII" for cigarettes. Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the registered owner of the trademark "MARK TEN" for cigarettes as evidenced by PPO Certificate of Registration No. 11147. And as can be seen in Trademark Certificate of Registration No. 19053, another subsidiary of Philip Morris, Inc., the Swiss company Fabriques de Tabac

Reunies, S.A., is the assignee of the trademark "LARK," which was originally registered in 1964 by Ligget and Myers Tobacco Company. On the other hand, respondent Fortune Tobacco Corporation, a company organized in the Philippines, manufactures and sells cigarettes using the trademark "MARK."

The legal dispute between the parties started when the herein petitioners, on the claim that an infringement of their respective trademarks had been committed, filed, on August 18, 1982, a Complaint for Infringement of Trademark and Damages against respondent Fortune Tobacco Corporation, docketed as Civil Case No. 47374 of the Regional Trial Court of Pasig, Branch 166.

The decision under review summarized what happened next, as follows:

In the Complaint xxx with prayer for the issuance of a preliminary injunction, [petitioners] alleged that they are foreign corporations not doing business in the Philippines and are suing on an isolated transaction. xxx they averred that the

countries in which they are domiciled grant xxx to corporate or juristic persons of the Philippines the privilege to bring action for infringement, xxx without need of a license to do business in those countries. [Petitioners] likewise manifested [being registered owners of the trademark "MARK VII" and "MARK TEN" for cigarettes as evidenced by the corresponding certificates of registration and an applicant for the registration of the trademark "LARK MILDS"]. xxx. [Petitioners] claimed that they have registered the aforementioned trademarks in their respective countries of origin and that, by virtue of the long and extensive usage of the same, these trademarks have already gained international fame and acceptance. Imputing bad faith on the part of the [respondent], petitioners claimed that the [respondent], without any previous consent from any of the [petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar trademark "MARK" xxx Accordingly, they argued that [respondent’s] use of the trademark "MARK" in its cigarette products have caused and is likely to cause confusion or

mistake, or would deceive purchasers and the public in general into buying these products under the impression and mistaken belief that they are buying [petitioners’] products.

Invoking the provisions of the Paris Convention for the Protection of Industrial and Intellectual Property (Paris Convention, for brevity), to which the Philippines is a signatory xxx, [petitioners] pointed out that upon the request of an interested party, a country of the Union may prohibit the use of a trademark which constitutes a reproduction, imitation, or translation of a mark already belonging to a person entitled to the benefits of the said Convention. They likewise argued that, in accordance with Section 21-A in relation to Section 23 of Republic Act 166, as amended, they are entitled to relief in the form of damages xxx [and] the issuance of a writ of preliminary injunction which should be made permanent to enjoin perpetually the [respondent] from violating [petitioners’] right to the exclusive use of their aforementioned trademarks.

[Respondent] filed its Answer xxx denying [petitioners’] material allegations and xxx averred [among other things] xxx that "MARK" is a common word, which cannot particularly identify a product to be the product of the [petitioners] xxx

xxx xxx xxx. lawphil.net Meanwhile, after the [respondent] filed its Opposition (Records, Vo. I, p. 26), the matter of the [petitioners’] prayer for the issuance of a writ of preliminary injunction was negatively resolved by the court in an Order xxx dated March 28, 1973. [The incidental issue of the propriety of an injunction would eventually be elevated to the CA and would finally be resolved by the Supreme Court in its Decision dated July 16, 1993 in G.R. No. 91332]. xxx. xxx xxx xxx After the termination of the trial on the merits xxx trial court rendered its Decision xxx dated November 3, 1999 dismissing the complaint and counterclaim after making a finding that the

[respondent] did not commit trademark infringement against the [petitioners]. Resolving first the issue of whether or not [petitioners] have capacity to institute the instant action, the trial court opined that [petitioners’] failure to present evidence to support their allegation that their respective countries indeed grant Philippine corporations reciprocal or similar privileges by law xxx justifies the dismissal of the complaint xxx. It added that the testimonies of [petitioners’] witnesses xxx essentially declared that [petitioners] are in fact doing business in the Philippines, but [petitioners] failed to establish that they are doing so in accordance with the legal requirement of first securing a license. Hence, the court declared that [petitioners] are barred from maintaining any action in Philippine courts pursuant to Section 133 of the Corporation Code.

The issue of whether or not there was infringement of the [petitioners’] trademarks by the [respondent] was likewise answered xxx in the negative. It expounded that "in order for a

name, symbol or device to constitute a trademark, it must, either by itself or by association, point distinctly to the origin or ownership of the article to which it is applied and be of such nature as to permit an exclusive appropriation by one person". Applying such principle to the instant case, the trial court was of the opinion that the words "MARK", "TEN", "LARK" and the Roman Numerals "VII", either alone or in combination of each other do not by themselves or by association point distinctly to the origin or ownership of the cigarettes to which they refer, such that the buying public could not be deceived into believing that [respondent’s] "MARK" cigarettes originated either from the USA, Canada, or Switzerland.

Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial court stated that the general rule is that an infringement exists if the resemblance is so close that it deceives or is likely to deceive a customer exercising ordinary caution in his dealings and induces him to purchase the goods of one

manufacturer in the belief that they are those of another. xxx. The trial court ruled that the [petitioners] failed to pass these tests as it neither presented witnesses or purchasers attesting that they have bought [respondent’s] product believing that they bought [petitioners’] "MARK VII", "MARK TEN" or "LARK", and have also failed to introduce in evidence a specific magazine or periodical circulated locally, which promotes and popularizes their products in the Philippines. It, moreover, elucidated that the words consisting of the trademarks allegedly infringed by [respondent] failed to show that they have acquired a secondary meaning as to identify them as [petitioners’] products. Hence, the court ruled that the [petitioners] cannot avail themselves of the doctrine of secondary meaning.

As to the issue of damages, the trial court deemed it just not to award any to either party stating that, since the [petitioners] filed the action in the belief that they were aggrieved by what they perceived to be an infringement of their

trademark, no wrongful act or omission can be attributed to them. xxx.3 (Words in brackets supplied)

Maintaining to have the standing to sue in the local forum and that respondent has committed trademark infringement, petitioners went on appeal to the CA whereat their appellate recourse was docketed as CA-G.R. CV No. 66619.

Eventually, the CA, in its Decision dated January 21, 2003, while ruling for petitioners on the matter of their legal capacity to sue in this country for trademark infringement, nevertheless affirmed the trial court’s decision on the underlying issue of respondent’s liability for infringement as it found that:

xxx the appellants’ [petitioners’] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not qualify as well-known marks entitled to protection even without the benefit of actual use in the local market and that the similarities in the trademarks

in question are insufficient as to cause deception or confusion tantamount to infringement. Consequently, as regards the third issue, there is likewise no basis for the award of damages prayed for by the appellants herein.4 (Word in bracket supplied)

With their motion for reconsideration having been denied by the CA in its equally challenged Resolution of May 30, 2003, petitioners are now with this Court via this petition for review essentially raising the following issues: (1) whether or not petitioners, as Philippine registrants of trademarks, are entitled to enforce trademark rights in this country; and (2) whether or not respondent has committed trademark infringement against petitioners by its use of the mark "MARK" for its cigarettes, hence liable for damages.

In its Comment,5 respondent, aside from asserting the correctness of the CA’s finding on its liability for trademark infringement and damages, also puts in issue the propriety of the

petition as it allegedly raises questions of fact.

The petition is bereft of merit.

Dealing first with the procedural matter interposed by respondent, we find that the petition raises both questions of fact and law contrary to the prescription against raising factual questions in a petition for review on certiorari filed before the Court. A question of law exists when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth or falsity of alleged facts.6

Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of facts.7 Unless the factual findings of the appellate court are mistaken, absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin,8 we will not disturb them.

It is petitioners’ posture, however, that their contentions should

be treated as purely legal since they are assailing erroneous conclusions deduced from a set of undisputed facts.

Concededly, when the facts are undisputed, the question of whether or not the conclusion drawn therefrom by the CA is correct is one of law.9 But, even if we consider and accept as pure questions of law the issues raised in this petition, still, the Court is not inclined to disturb the conclusions reached by the appellate court, the established rule being that all doubts shall be resolved in favor of the correctness of such conclusions.10

Be that as it may, we shall deal with the issues tendered and determine whether the CA ruled in accordance with law and established jurisprudence in arriving at its assailed decision.

A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those

manufactured, sold, or dealt in by others.11 Inarguably, a trademark deserves protection. For, as Mr. Justice Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:12

The protection of trademarks is the law’s recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe what he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same - to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.

It is thus understandable for petitioners to invoke in this recourse their entitlement to enforce trademark rights in this country, specifically, the right to sue for trademark infringement in Philippine courts and be accorded protection against unauthorized use of their Philippine-registered trademarks.

In support of their contention respecting their right of action, petitioners assert that, as corporate nationals of member-countries of the Paris Union, they can sue before Philippine courts for infringement of trademarks, or for unfair competition, without need of obtaining registration or a license to do business in the Philippines, and without necessity of actually doing business in the Philippines. To petitioners, these grievance right and mechanism are accorded not only by Section 21-A of Republic Act (R.A.) No. 166, as amended, or the Trademark Law, but also by Article 2 of the Paris Convention for the Protection of Industrial Property, otherwise known as the Paris Convention.

In any event, petitioners point out that there is actual use of their trademarks in the Philippines as evidenced by the certificates of registration of their trademarks. The marks "MARK TEN" and "LARK" were registered on the basis of actual use in accordance with Sections 2-A13 and 5(a)14 of R.A. No. 166, as amended, providing for a 2-month pre-registration use in local commerce and trade while the registration of "MARK VII" was on the basis of registration in the foreign country of origin pursuant to Section 37 of the same law wherein it is explicitly provided that prior use in commerce need not be alleged.15

Besides, petitioners argue that their not doing business in the Philippines, if that be the case, does not mean that cigarettes bearing their trademarks are not available and sold locally. Citing Converse Rubber Corporation v. Universal Rubber Products, Inc.,16 petitioners state that such availability and sale may be effected through the acts of importers and distributors.

Finally, petitioners would press on their

entitlement to protection even in the absence of actual use of trademarks in the country in view of the Philippines’ adherence to the Trade Related Aspects of Intellectual Property Rights or the TRIPS Agreement and the enactment of R.A. No. 8293, or the Intellectual Property Code (hereinafter the "IP Code"), both of which provide that the fame of a trademark may be acquired through promotion or advertising with no explicit requirement of actual use in local trade or commerce.

Before discussing petitioners’ claimed entitlement to enforce trademark rights in the Philippines, it must be emphasized that their standing to sue in Philippine courts had been recognized, and rightly so, by the CA. It ought to be pointed out, however, that the appellate court qualified its holding with a statement, following G.R. No. 91332, entitled Philip Morris, Inc., et al. v. The Court of Appeals and Fortune Tobacco Corporation,17 that such right to sue does not necessarily mean protection of their registered marks in the absence of actual use in the

Philippines.

Thus clarified, what petitioners now harp about is their entitlement to protection on the strength of registration of their trademarks in the Philippines.

As we ruled in G.R. No. 91332,18 supra, so it must be here.

Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages denied non-registrants or ordinary users, like respondent. But while petitioners enjoy the statutory presumptions arising from such registration,19 i.e., as to the validity of the registration, ownership and the exclusive right to use the registered marks, they may not successfully sue on the basis alone of their respective certificates of registration of trademarks. For, petitioners are still foreign corporations. As such, they ought, as a condition to availment of the rights and privileges vis-à-vis their trademarks in this country, to show proof that, on top of Philippine registration, their country grants substantially similar rights and

privileges to Filipino citizens pursuant to Section 21-A20 of R.A. No. 166.

In Leviton Industries v. Salvador,21 the Court further held that the aforementioned reciprocity requirement is a condition sine qua non to filing a suit by a foreign corporation which, unless alleged in the complaint, would justify dismissal thereof, a mere allegation that the suit is being pursued under Section 21-A of R.A. No. 166 not being sufficient. In a subsequent case,22 however, the Court held that where the complainant is a national of a Paris Convention- adhering country, its allegation that it is suing under said Section 21-A would suffice, because the reciprocal agreement between the two countries is embodied and supplied by the Paris Convention which, being considered part of Philippine municipal laws, can be taken judicial notice of in infringement suits.23

As well, the fact that their respective home countries, namely, the United States, Switzerland and Canada, are, together with the Philippines,

members of the Paris Union does not automatically entitle petitioners to the protection of their trademarks in this country absent actual use of the marks in local commerce and trade.

True, the Philippines’ adherence to the Paris Convention24 effectively obligates the country to honor and enforce its provisions25 as regards the protection of industrial property of foreign nationals in this country. However, any protection accorded has to be made subject to the limitations of Philippine laws.26 Hence, despite Article 2 of the Paris Convention which substantially provides that (1) nationals of member-countries shall have in this country rights specially provided by the Convention as are consistent with Philippine laws, and enjoy the privileges that Philippine laws now grant or may hereafter grant to its nationals, and (2) while no domicile requirement in the country where protection is claimed shall be required of persons entitled to the benefits of the Union for the enjoyment of any industrial property rights,27 foreign nationals must still observe and comply

with the conditions imposed by Philippine law on its nationals.

Considering that R.A. No. 166, as amended, specifically Sections 228 and 2-A29 thereof, mandates actual use of the marks and/or emblems in local commerce and trade before they may be registered and ownership thereof acquired, the petitioners cannot, therefore, dispense with the element of actual use. Their being nationals of member-countries of the Paris Union does not alter the legal situation.

In Emerald Garment Mfg. Corporation v. Court of Appeals,30 the Court reiterated its rulings in Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft,31 Kabushi Kaisha Isetan v. Intermediate Appellate Court,32 and Philip Morris v. Court of Appeals and Fortune Tobacco Corporation33 on the importance of actual commercial use of a trademark in the Philippines notwithstanding the Paris Convention:

The provisions of the 1965 Paris Convention …

relied upon by private respondent and Sec. 21-A of the Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc., et. al. vs. Court of Appeals:

xxx xxx xxx Following universal acquiescence and comity, our municipal law on trademarks regarding the requirements of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal. Xxx. Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of International Law are given a standing equal, not superior, to national legislative enactments.

xxx xxx xxx In other words, (a foreign corporation) may have the capacity to sue for infringement … but the question of whether they have an exclusive right

over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as to the actual use of such trademark in local commerce. As it were, registration does not confer upon the registrant an absolute right to the registered mark. The certificate of registration merely constitutes prima facie evidence that the registrant is the owner of the registered mark. Evidence of non-usage of

the mark rebuts the presumption of trademark ownership,34 as what happened here when petitioners no less admitted not doing business in this country.35

Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto convey an absolute right or exclusive ownership thereof. To borrow from Shangri-La International Hotel Management, Ltd. v. Development Group of Companies, Inc.36 trademark is a creation of use and, therefore, actual use is a pre-requisite to exclusive ownership; registration is only an administrative confirmation of the existence of the right of ownership of the mark, but does not perfect such right; actual use thereof is the perfecting ingredient.37

Petitioners’ reliance on Converse Rubber Corporation38 is quite misplaced, that case being cast in a different factual milieu. There, we ruled that a foreign owner of a Philippine trademark, albeit not licensed to do, and not so engaged in, business in the Philippines, may actually earn

reputation or goodwill for its goods in the country. But unlike in the instant case, evidence of actual sales of Converse rubber shoes, such as sales invoices, receipts and the testimony of a legitimate trader, was presented in Converse.

This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the infringement complaint herein having been filed in August 1982 and tried under the aegis of R.A. No. 166, as amended. The IP Code, however, took effect only on January 1, 1998 without a provision as to its retroactivity.39 In the same vein, the TRIPS Agreement was inexistent when the suit for infringement was filed, the Philippines having adhered thereto only on December 16, 1994.

With the foregoing perspective, it may be stated right off that the registration of a trademark unaccompanied by actual use thereof in the country accords the registrant only the standing to sue for infringement in Philippine courts. Entitlement to protection of such trademark in the country is entirely a different matter.

This brings us to the principal issue of infringement.

Section 22 of R.A. No. 166, as amended, defines what constitutes trademark infringement, as follows:

Sec. 22. Infringement, what constitutes. – Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy of color ably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business, or

services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.

Petitioners would insist on their thesis of infringement since respondent’s mark "MARK" for cigarettes is confusingly or deceptively similar with their duly registered "MARK VII," "MARK TEN" and "LARK" marks likewise for cigarettes. To them, the word "MARK" would likely cause confusion in the trade, or deceive purchasers, particularly as to the source or origin of respondent’s cigarettes.

The "likelihood of confusion" is the gravamen of trademark infringement.40 But likelihood of confusion is a relative concept, the particular, and sometimes peculiar, circumstances of each case being determinative of its existence. Thus, in trademark infringement cases, more than in other kinds of litigation, precedents must be evaluated in the light of each particular case.41

In determining similarity and likelihood of confusion, jurisprudence has developed two

tests: the dominancy test and the holistic test.42 The dominancy test43 sets sight on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constitutes infringement. Under this norm, the question at issue turns on whether the use of the marks involved would be likely to cause confusion or mistake in the mind of the public or deceive purchasers.44

In contrast, the holistic test45 entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.

Upon consideration of the foregoing in the light of the peculiarity of this case, we rule against the likelihood of confusion resulting in infringement arising from the respondent’s use of the trademark "MARK" for its particular cigarette product.

For one, as rightly concluded by the CA after comparing the trademarks involved in their entirety as they appear on the products,46 the

striking dissimilarities are significant enough to warn any purchaser that one is different from the other. Indeed, although the perceived offending word "MARK" is itself prominent in petitioners’ trademarks "MARK VII" and "MARK TEN," the entire marking system should be considered as a whole and not dissected, because a discerning eye would focus not only on the predominant word but also on the other features appearing in the labels. Only then would such discerning observer draw his conclusion whether one mark would be confusingly similar to the other and whether or not sufficient differences existed between the marks.47

This said, the CA then, in finding that respondent’s goods cannot be mistaken as any of the three cigarette brands of the petitioners, correctly relied on the holistic test.

But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that a trademark serves as a tool to point out distinctly the origin or ownership of the goods to

which it is affixed,48 the likelihood of confusion tantamount to infringement appears to be farfetched. The reason for the origin and/or ownership angle is that unless the words or devices do so point out the origin or ownership, the person who first adopted them cannot be injured by any appropriation or imitation of them by others, nor can the public be deceived.49

Since the word "MARK," be it alone or in combination with the word "TEN" and the Roman numeral "VII," does not point to the origin or ownership of the cigarettes to which they apply, the local buying public could not possibly be confused or deceived that respondent’s "MARK" is the product of petitioners and/or originated from the U.S.A., Canada or Switzerland. And lest it be overlooked, no actual commercial use of petitioners’ marks in local commerce was proven. There can thus be no occasion for the public in this country, unfamiliar in the first place with petitioners’ marks, to be confused.

For another, a comparison of the trademarks as

they appear on the goods is just one of the appreciable circumstances in determining likelihood of confusion. Del Monte Corp. v. CA50 dealt with another, where we instructed to give due regard to the "ordinary purchaser," thus:

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

When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary customer" but to the "ordinarily intelligent buyer" considering the type of product involved.51

It cannot be over-emphasized that the products

involved are addicting cigarettes purchased mainly by those who are already predisposed to a certain brand. Accordingly, the ordinary buyer thereof would be all too familiar with his brand and discriminating as well. We, thus, concur with the CA when it held, citing a definition found in Dy Buncio v. Tan Tiao Bok,52 that the "ordinary purchaser" in this case means "one accustomed to buy, and therefore to some extent familiar with, the goods in question."

Pressing on with their contention respecting the commission of trademark infringement, petitioners finally point to Section 22 of R.A. No. 166, as amended. As argued, actual use of trademarks in local commerce is, under said section, not a requisite before an aggrieved trademark owner can restrain the use of his trademark upon goods manufactured or dealt in by another, it being sufficient that he had registered the trademark or trade-name with the IP Office. In fine, petitioners submit that respondent is liable for infringement, having manufactured and sold cigarettes with the

trademark "MARK" which, as it were, are identical and/or confusingly similar with their duly registered trademarks "MARK VII," "MARK TEN" and "LARK".

This Court is not persuaded.

In Mighty Corporation v. E & J Gallo Winery,53 the Court held that the following constitute the elements of trademark infringement in accordance not only with Section 22 of R.A. No. 166, as amended, but also Sections 2, 2-A, 9-A54 and 20 thereof:

(a) a trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office,

(b) is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is

reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers,

(c) the trademark is used for identical or similar goods, and

(d) such act is done without the consent of the trademark registrant or assignee.lawphil.net

As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN" and "LARK" for cigarettes in the Philippines, prior actual commercial use thereof had not been proven. In fact, petitioners’ judicial admission of not doing business in this country effectively belies any pretension to the contrary.

Likewise, we note that petitioners even failed to

support their claim that their respective marks are well-known and/or have acquired goodwill in the Philippines so as to be entitled to protection even without actual use in this country in accordance with Article 6bis55 of the Paris Convention. As correctly found by the CA, affirming that of the trial court:

xxx the records are bereft of evidence to establish that the appellants’ [petitioners’] products are indeed well-known in the Philippines, either through actual sale of the product or through different forms of advertising. This finding is supported by the fact that appellants admit in their Complaint that they are not doing business in the Philippines, hence, admitting that their products are not being sold in the local market. We likewise see no cogent reason to disturb the trial court’s finding that the appellants failed to establish that their products are widely known by local purchasers as "(n)o specific magazine or periodical published in the Philippines, or in other countries but circulated locally" have been presented by the appellants

during trial. The appellants also were not able to show the length of time or the extent of the promotion or advertisement made to popularize their products in the Philippines.56

Last, but not least, we must reiterate that the issue of trademark infringement is factual, with both the trial and appellate courts having peremptorily found allegations of infringement on the part of respondent to be without basis. As we said time and time again, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court.57

For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks prior to respondent’s use of its mark and for petitioners’ failure to demonstrate confusing similarity between said trademarks, the dismissal of their basic complaint for infringement and the concomitant plea for damages must be affirmed. The law, the surrounding circumstances and the equities of the situation call for this disposition.

WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed decision and resolution of the Court of Appeals are AFFIRMED.

Costs against the petitioners.

SO ORDERED. G.R. No. 159938 January 22, 2007

SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT, LTD., SHANGRI-LA PROPERTIES, INC., MAKATI SHANGRI-LA HOTEL & RESORT, INC., AND KUOK PHILIPPINES PROPERTIES, INC., Petitioners, vs. DEVELOPERS GROUP OF COMPANIES, INC., Respondent.

R E S O L U T I O N

GARCIA, J.:

Before the Court is this Motion for Reconsideration filed by respondent Developers Group of Companies, Inc. (DGCI) praying for the

reversal of this Court's Decision1 of March 31, 2006, the dispositive portion of which reads:

WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals dated May 15, 2003 and September 15, 2003, respectively, and the Decision of the Regional Trial Court of Quezon City dated March 8, 1996 are hereby SET ASIDE. Accordingly, the complaint for infringement in Civil Case No. Q-91-8476 is ordered DISMISSED.

In its motion, respondent-movant DGCI raises the following grounds:

1. The certification of non-forum shopping submitted by petitioners is insufficient;

2. The word "Shangri-La" and "S" logo were adopted and used by the Kuok Group as part of their corporate names and the names of their hotels;

3. Petitioners' claim of legal and beneficial

ownership of mark and logo is baseless and unwarranted;

4. Change of theory from owner to one who may be damaged as entitled to relief is not allowable;

5. Finding of registration in patent offices in different countries around the world is inaccurate;

6. DGCI's registration of the "Shangri-La" mark and the "S" logo is valid because there was at least two months’ use thereof prior to application;

7. Section 2-A of R.A. No. 166 requires the actual commercial use of trademarks in the Philippines pursuant to the principle of territoriality applicable to trademarks. Hence, petitioners' use of subject marks outside of Philippine territory did not confer on them any ownership rights thereto under Philippine laws;

8. The Regional Trial Court and the Court of Appeals' failure to find any bad faith on the part of DGCI is conclusive on the Supreme Court;

9. DGCI's use of the subject marks in the Philippines is entitled to protection under the territoriality principle of trademarks.2

The bulk of the aforementioned grounds is a mere rehash of movant’s previous arguments. While DGCI is correct in stating that a motion for reconsideration, by its very nature, may tend to dwell on issues already resolved in the decision sought to be reconsidered and that this should not be an obstacle for a reconsideration,3 the hard reality is that movant has failed to raise matters substantially plausible or compellingly persuasive to warrant the desired course of action.

Considering that the grounds presently raised have been sufficiently considered, if not squarely addressed, in the subject Decision, it behooves movant to convince the Court that certain findings or conclusions in the Decision are contrary to law. As it is, however, the instant motion does not raise any new or substantial legitimate ground or reason to justify the

reconsideration sought.1avvphi1.net

Movant DGCI would make capital on the alleged danger the subject Decision might wreak upon Philippine trademark law, claiming that the decision in question would render nugatory the protection intended by the trademark law to all Philippine trademark registrants. This assertion is a baseless and sweeping statement. The interpretation of Republic Act No. 166 in the Decision does not in any way diminish the protection afforded to valid trademark registrations made under said law. It was glaringly obvious, however, from the testimony of movant’s own witness that DGCI’s registration of the subject mark and logo was void due to the existence of bad faith and the absence of the requisite 2-month prior use. Despite movant's melodramatic imputation of an abandonment of the territoriality principle, the Decision actually upholds the principle but found that respondent DGCI was not entitled to protection thereunder due to the double infirmity which attended its registration of the subject mark and logo.

Anent DGCI's assertion of a change of theory on the part of the petitioners, suffice it to say that the latter have never budged from seeking relief as rightful, legal and/or beneficial owners of the mark and logo in dispute. The Decision ruled favorably on the veracity of the petitioners' claim:

xxx It would be a great injustice to adjudge the petitioners guilty of infringing a mark when they are actually the originator and creator thereof.

Nor can the petitioners' separate personalities from their mother corporation be an obstacle in the enforcement of their rights as part of the Kuok Group of Companies and as official repository, manager and operator of the subject mark and logo. Besides, R.A. No. 166 did not require the party seeking relief to be the owner of the mark but "any person who believes that he is or will be damaged by the registration of a mark or trade name."4 [Emphasis supplied]

Clearly, from the word "Besides" used in the context of the aforequoted paragraph, all that the Decision says is that even if petitioners were not

the owners, they would still have a right of action under the law. There was never an attempt on their part at an eleventh-hour change of theory, as movant DGCI wishes to portray.

WHEREFORE, the instant motion for reconsideration is DENIED for lack of merit.

SO ORDERED.

COMPANIA GENERAL DE TABACOS DE FILIPINAS v. ALHAMBRA CIGAR &

, 249 U.S. 72 (1919) 249 U.S. 72

COMPANIA GENERAL DE TABACOS DE FILIPINAS v. ALHAMBRA CIGAR &

CIGARETTE MFG. CO. No. 180. Submitted Jan. 22, 1919. Decided March 3, 1919.

[249 U.S. 72, 73] Mr. F. C. Fisher, of Manila, P. I., for appellant.

Mr. H. W. Van Dyke, of Washington, D. C., for appellee.

Mr. Justice DAY delivered the opinion of the Court.

Suit was brought by the appellant, a corporation organized under the laws of Spain, in the Court of First Instance of Manila. The complainant set up: That for more than 27 years it had been engaged in the business of manufacturing cigars and cigarettes in the Philippine Islands. That its factory is known as 'La Flor de la Isabela,' which name is used upon the packages and containers of the products manufactured by complainant and on the advertising matter in its cigar and cigarette business. That on April 5, 1887, the kingdom of Spain as the sovereign authority in the Philippine Islands issued to it, under laws then in force, a certificate of registration and ownership of certain trade-marks and trade-names and label designs therein described and enumerated, including the trade-name 'La Flor de la [249 U.S. 72, 74] Isabela,' conferring the right upon the complainant to all the benefits appurtenant thereto, including the right to prosecute for infringement. That the trade-name has been in continuous use solely by the complainant from the issuance of the Spanish certificate of registration and ownership to

the time of bringing suit, except for the acts of the appellee. That by reason of the long-continued use of the phrase 'La Flor de la Isabela' to designate its factory and its products the said phrase and sundry abbreviations thereof, when applied to the manufactures of tobacco as a distinguishing brand or name, had come to have a secondary meaning designating and denoting that they are the products of its factory. In common parlance the name 'La Flor de la Islabela' is abbreviated to 'Isabelas' when applied to cigars or cigarettes. That on or about the 1st of June, 1914, the defendant, now appellee, a corporation organized under the laws of the Philippine Islands, engaged in the manufacture and sale of cigars and cigarettes in Manila and elsewhere in the Philippine Islands, unlawfully misappropriated to its own use and benefit the word 'Isabelas' in its secondary meaning as a distinguishing brand or name of its tobacco products. That the unlawful use of the name 'Isabelas' as the distinguishing brand or name of the products of the defendant is calculated to deceive the public into the belief that the goods of the defendant so designated and branded are the goods manufactured by the complainant, and that the use thereof by the defendant will cause it irreparable injury. An

injunction was prayed against the defendant, and an accounting sought.

The Court of First Instance found in favor of the complainant because of its exclusive ownership of the Spanish trade-mark, and in favor of the defendant on the question of unfair competition. Upon appeal to the Supreme Court of the Philippine Islands, that court found in favor of the defendant upon both issues, and directed a reversal of the [249 U.S. 72, 75] judgment below. 33 Phil. Rep. 485. Appeal to this court was sought and allowed upon the ground that the judgment of the Supreme Court was in an action which involved the Paris Treaty of 1898 between the United States and Spain, because it is therein provided that the property rights of private establishments or associations having legal capacity to acquire and possess property, and especially the rights of property secured by copyrights and patents acquired by Spaniards in the Philippine Islands at the time of the ratification of the treaty, shall not be impaired, but shall continue to be respected.

This appeal was perfected before the Act of September 6, 1916, 39 Stat. 726, c. 448, and is controlled by section 248 of the Judicial Code ( Act

March 3, 1911, c. 231, 36 Stat. 1158), which provided that this court should have jurisdiction to review, revise, reverse, modify or affirm the final judgments and decrees of the Supreme Court of the Philippine Islands in all actions, cases, causes, and proceedings in which the Constitution, or any statute, treaty, title, right, or privilege of the United States is involved.

The contention is that the provisions of this treaty were involved in the decision of the Supreme Court thereby authorizing this appeal.

By the treaty of Paris of 1898 (30 Stat. 1758) Spain ceded to the United States the archipelago known as the Philippine Islands. In article 8 of the treaty it is provided that the relinquishment or cession, as the case may be, '... cannot in any respect impair the property rights which by law belong to the peaceful possession of property of all kinds, of provinces, municipalities, public or private establishments, ecclesiastical or civic bodies, or any other associations having legal capacity to acquire and possess property in the aforesaid territories renounced or ceded, or of private individuals, of whatsoever nationality such individuals may be.' Article 13 provides that 'the rights of property

secured by copyrights and patents acquired [249 U.S. 72, 76] by Spaniards in the Island of Cuba, and in Porto Rico, the Philippines and other ceded territories at the time of the exchange of the ratifications of this treaty, shall continue to be respected.' Treaties in Force, 1904, pp. 722, 725, 726.

It is the evident purpose of these provisions in view of the cession of territory made by Spain to the United States, to preserve private rights of property, and to provide that the change of sovereignty should work no impairment of such rights.

The Philippine Act of 1902, carried into the section of the Judicial Code which we have quoted, intended to give this court jurisdiction in cases involving rights secured by the treaty of 1898 and other treaties of the United States. A good illustration of a case of this character is found in Vilas v. Manila, 220 U.S. 345 , 31 Sup. Ct. 416, where certain claims were made against the city of Manila, which it was contended survived, notwithstanding the cession to the United States. A writ of error was sued out to a judgment of the Supreme Court of the Philippine Islands denying relief because of its holding that the municipality of Manila after the treaty was a totally different

corporate entity and in nowise liable for debts created under the Spanish sovereignty. Exception was taken to the jurisdiction, but this court held that the case involved the treaty of 1898, as the question was made to turn in the court below upon the consequence of the change of sovereignty and the reincorporation of the city after the substituted sovereignty. Mr. Justice Lurton, who delivered the opinion of the court, said:

• 'This disposes of the question of the jurisdiction of this court grounded upon the absence from the petition of the plaintiffs of any distinct claim under the treaty of Paris, since under section 10 of the Philippine Organic Act of July 1, 1902, this court is given jurisdiction to review any final decree or judgment of the Supreme Court of the Philippine Islands where any treaty of the [249 U.S. 72, 77] United States 'is involved.' That treaty was necessarily 'involved,' since neither the court below nor this court can determine the continuity of the municipality nor the liability of the city as it now exists for the obligations of the old city, without considering the effect of the change of sovereignty resulting from that treaty. See

Reavis v. Fianza, 215 U.S. 16 , 22 [30 Sup. Ct. 1].'

In this case no such question is presented. The decision involved no consideration of treaty rights, nor were the same discussed in the judgment in the court below. The Philippine Supreme Court in determining the issues, held that the name 'Isabela,' which appellees were charged with using, was a geographical and descriptive term and incapable of registration as a trade-mark either under the Philippine Act No. 666 (Pub. Laws 1902-1903), or the law as it existed under the Spanish regime; that the Spanish trade-name as registered consisted of the words 'La Flor de la Isabela' and the trademark of a shield with certain devices thereon. That the action was not for the infringement of the trade-name 'La Flor de la Isabela,' but was for the violation of the trade-name 'Isabela.' And that unfair competition was not shown.

Certainly the treaty, in providing that property rights of this class should be respected, did not intend to prevent the consideration by the courts of the nature and extent of the rights granted, or prohibit the application of laws for the enforcement and regulation of such property rights when not in

derogation thereof. Philippine Act 666, 14, Comp. of the Acts of the Philippine Com. 68, itself provides that certificates issued under the Spanish-sovereignty, unannulled under the royal decree of 1888, shall be conclusive evidence of the exclusive right of ownership of such trademarks or trade-names.

Reliance is had by appellant, to sustain the jurisdiction, on the decision of this court in Ubeda v. Zialcita, 226 U.S. 452 , 33 Sup. Ct. 165. There suit was brought upon a trade-mark registered [249 U.S. 72, 78] under the Spanish regime. The record shows that the appeal was allowed upon two grounds: (1) That the amount involved exceeded $25,000; (2) alleged violation of treaty rights in the decision that the trade-mark being itself an imitation of earlier trade-marks prevented an injunction in favor of its owner. As to the treaty claim this court said ( 226 U.S. 454 , 33 Sup. Ct. 166 [57 L. Ed. 296]):

• 'In such a case [the wrongful appropriation of an earlier mark] the Philippine Act denies the plaintiff's right to recover. Act No. 666, 9. See section 12, and No. 744, 4. ... It is said that to apply the rule there laid down would be giving

a retrospective effect to section 9 as against the alleged Spanish grant of December 16, 1898, to the plaintiff, contrary to the general principles of interpretation and to article 13 of the Treaty of Paris, of April 11, 1899, providing that the rights of property secured by copyrights and patents shall continue to be respected. But the treaty, if applicable, cannot be supposed ... to contravene the principle of section 9, which only codifies common morality and fairness. The section is not retrospective in any sense, for it introduces no new rule.'

Certainly, this was far from holding that a right of appeal existed because a right secured by the treaty was involved.

The present case was decided upon grounds entirely compatible with continued respect for the trade-mark and trade-name rights granted by the Spanish sovereignty. It results that in the sense of the statute, giving a right to review in this court, no treaty of the United States was involved in the decree which it is sought to reverse.

The appeal must be

Dismissed. G.R.  No.  L-­48226                  December  14,  1942  ANA  L.  ANG,  petitioner,    vs.  TORIBIO  TEODORO,  respondent.  Cirilo  Lim  for  petitioner.  Marcial  P.  Lichauco  and  Manuel  M.  Mejia  for  respondent.    OZAETA,  J.:  Petitioner   has   appealed   to   this   Court   by   certiorari   to   reverse   the  judgment   of   the   Court   of   Appeals   reversing   that   of   the   Court   of   First  Instance  of  Manila  and  directing  the  Director  of  Commerce  to  cancel  the  registration   of   the   trade-­‐mark   "Ang  Tibay"   in   favor   of   said   petitioner,  and   perpetually   enjoining   the   latter   from   using   said   trade-­‐mark   on  goods  manufactured  and  sold  by  her.  Respondent  Toribio  Teodoro,  at  first  in  partnership  with  Juan  Katindig  and  later  as  sole  proprietor,  has  continuously  used  "Ang  Tibay,"  both  as  a   trade-­‐mark   and   as   a   trade-­‐name,   in   the   manufacture   and   sale   of  slippers,  shoes,  and  indoor  baseballs  since  1910.  He  formally  registered  it  as  trade-­‐mark  on  September  29,  1915,  and  as  trade-­‐name  on  January  3,   1933.   The   growth   of   his   business   is   a   thrilling   epic   of   Filipino  industry   and   business   capacity.   Starting   in   an   obscure   shop   in   1910  with  a  modest  capital  of  P210  but  with  tireless  industry  and  unlimited  perseverance,   Toribio   Teodoro,   then   an   unknown   young  man  making  slippers   with   his   own   hands   but   now   a   prominent   business  magnate  and   manufacturer   with   a   large   factory   operated   with   modern  machinery  by  a  great  number  of  employees,  has  steadily  grown  with  his  business  to  which  he  has  dedicated  the  best  years  of  his  life  and  which  he  has  expanded  to  such  proportions  that  his  gross  sales  from  1918  to  1938   aggregated   P8,787,025.65.   His   sales   in   1937   amounted   to  P1,299,343.10   and   in   1938,   P1,133,165.77.   His   expenses   for  advertisement  from  1919  to  1938  aggregated  P210,641.56.  

Petitioner   (defendant   below)   registered   the   same   trade-­‐mark   "Ang  Tibay"  for  pants  and  shirts  on  April  11,  1932,  and  established  a  factory  for   the  manufacture  of   said  articles   in   the  year  1937.   In   the   following  year   (1938)   her   gross   sales   amounted   to   P422,682.09.   Neither   the  decision  of   the   trial  court  nor   that  of   the  Court  of  Appeals  shows  how  much  petitioner  has  spent  or  advertisement.  But  respondent  in  his  brief  says   that   petitioner   "was   unable   to   prove   that   she   had   spent   a   single  centavo  advertising  "Ang  Tibay"  shirts  and  pants  prior  to  1938.  In  that  year   she   advertised   the   factory   which   she   had   just   built   and   it   was  when   this   was   brought   to   the   attention   of   the   appellee   that   he  consulted  his  attorneys  and  eventually  brought  the  present  suit."  The  trial  court  (Judge  Quirico  Abeto)  presiding  absolved  the  defendant  from  the  complaint,  with  costs  against  the  plaintiff,  on  the  grounds  that  the   two   trademarks  are  dissimilar  and  are  used  on  different  and  non-­‐competing   goods;   that   there   had   been   no   exclusive   use   of   the   trade-­‐mark  by  the  plaintiff;  and  that  there  had  been  no  fraud  in  the  use  of  the  said  trade-­‐mark  by  the  defendant  because  the  goods  on  which  it  is  used  are  essentially  different  from  those  of  the  plaintiff.  The  second  division  of   the   Court   of   Appeals,   composed   of   Justices  Bengson,   Padilla,   Lopez  Vito,  Tuason,  and  Alex  Reyes,  with   Justice  Padilla  as  ponente,   reversed  that  judgment,  holding  that  by  uninterrupted  an  exclusive  use  since  191  in  the  manufacture  of  slippers  and  shoes,  respondent's  trade-­‐mark  has  acquired  a  secondary  meaning;  that  the  goods  or  articles  on  which  the  two  trade-­‐marks  are  used  are  similar  or  belong  to  the  same  class;  and  that   the  use  by  petitioner  of  said  trade-­‐mark  constitutes  a  violation  of  sections  3  and  7  of  Act  No.  666.  The  defendant  Director  of  Commerce  did  not  appeal  from  the  decision  of  the  Court  of  Appeals.  First.  Counsel  for  the  petitioner,  in  a  well-­‐written  brief,  makes  a  frontal  sledge-­‐hammer  attack  on  the  validity  of  respondent's  trade-­‐mark  "Ang  Tibay."   He   contends   that   the   phrase   "Ang   Tibay"   as   employed   by   the  respondent  on   the  articles  manufactured  by  him   is   a  descriptive   term  because,   "freely   translate   in   English,"   it   means   "strong,   durable,  lasting."  He  invokes  section  2  of  Act  No.  666,  which  provides  that  words  

or  devices  which  related  only  to  the  name,  quality,  or  description  of  the  merchandise   cannot   be   the   subject   of   a   trade-­‐mark.   He   cites   among  others   the   case   of  Baxter   vs.   Zuazua   (5   Phil.,   16),   which   involved   the  trade-­‐mark  "Agua  de  Kananga"  used  on  toilet  water,  and  in  which  this  Court  held  that  the  word  "Kananga,"  which  is  the  name  of  a  well-­‐known  Philippine  tree  or  its  flower,  could  not  be  appropriated  as  a  trade-­‐mark  any  more   than   could   the  words   "sugar,"   "tobacco,"  or   "coffee."  On   the  other  hand,  counsel  for  the  respondent,  in  an  equally  well-­‐prepared  and  exhaustive   brief,   contend   that   the   words   "Ang   Tibay"   are   not  descriptive   but   merely   suggestive   and   may   properly   be   regarded   as  fanciful  or  arbitrary   in   the   legal  sense.  The  cite  several  cases   in  which  similar   words   have   been   sustained   as   valid   trade-­‐marks,   such   as  "Holeproof"   for  hosiery,   1   "ideal   for   tooth  brushes,   2   and   "Fashionknit"  for  neckties  and  sweaters.  3  We   find   it   necessary   to   go   into   the   etymology   and   meaning   of   the  Tagalog  words  "Ang  Tibay"  to  determine  whether  they  are  a  descriptive  term,   i.e.,   whether   they   relate   to   the   quality   or   description   of   the  merchandise   to  which   respondent   has   applied   them   as   a   trade-­‐mark.  The  word  "ang"   is  a  definite  article  meaning  "the"   in  English.   It   is  also  used   as   an   adverb,   a   contraction   of   the  word   "anong"   (what   or   how).  For   instance,   instead  of  saying,   "Anong  ganda!"   ("How  beautiful!"),  we  ordinarily   say,   "Ang   ganda!"   Tibay   is   a   root   word   from   which   are  derived   the   verb  magpatibay   (to   strenghten;   the  nouns  pagkamatibay  (strength,   durability),   katibayan   (proof,   support,   strength),   katibay-­tibayan   (superior   strength);   and   the   adjectives   matibay   (strong,  durable,   lasting),   napakatibay   (very   strong),   kasintibay   or  magkasintibay   (as   strong   as,   or   of   equal   strength).   The   phrase   "Ang  Tibay"   is   an   exclamation   denoting   administration   of   strength   or  durability.  For  instance,  one  who  tries  hard  but  fails  to  break  an  object  exclaims,  "Ang  tibay!"  (How  strong!")  It  may  also  be  used  in  a  sentence  thus,   "Ang   tibay   ng   sapatos  mo!"   (How  durable   your   shoes   are!")   The  phrase   "ang   tibay"   is   never   used   adjectively   to   define   or   describe   an  object.  One  does  not   say,   "ang   tibay   sapatos"  or   "sapatos  ang   tibay"   is  

never  used  adjectively  to  define  or  describe  an  object.  One  does  not  say,  "ang  tibay  sapatos"  or  "sapatos  ang  tibay"  to  mean  "durable  shoes,"  but  "matibay  na  sapatos"  or  "sapatos  na  matibay."  From  all   of   this  we  deduce   that   "Ang  Tibay"   is   not   a  descriptive   term  within   the   meaning   of   the   Trade-­‐Mark   Law   but   rather   a   fanciful   or  coined   phrase   which   may   properly   and   legally   be   appropriated   as   a  trade-­‐mark  or  trade-­‐name.  In  this  connection  we  do  not  fail  to  note  that  when   the   petitioner   herself   took   the   trouble   and   expense   of   securing  the   registration   of   these   same  words   as   a   trademark   of   her   products  she   or   her   attorney   as   well   as   the   Director   of   Commerce   was  undoubtedly   convinced   that   said   words   (Ang   Tibay)   were   not   a  descriptive  term  and  hence  could  be  legally  used  and  validly  registered  as  a  trade-­‐mark.  It  seems  stultifying  and  puerile  for  her  now  to  contend  otherwise,   suggestive   of   the   story   of   sour   grapes.   Counsel   for   the  petitioner   says   that   the   function   of   a   trade-­‐mark   is   to   point  distinctively,  either  by  its  own  meaning  or  by  association,  to  the  origin  or  ownership  of  the  wares  to  which  it  is  applied.  That  is  correct,  and  we  find  that  "Ang  Tibay,"  as  used  by  the  respondent  to  designate  his  wares,  had   exactly   performed   that   function   for   twenty-­‐two   years   before   the  petitioner   adopted   it   as   a   trade-­‐mark   in  her   own  business.  Ang  Tibay  shoes   and   slippers   are,   by   association,   known   throughout   the  Philippines   as  products  of   the  Ang  Tibay   factory  owned  and  operated  by  the  respondent  Toribio  Teodoro.  Second.  In  her  second  assignment  of  error  petitioner  contends  that  the  Court   of   Appeals   erred   in   holding   that   the   words   "Ang   Tibay"   had  acquired   a   secondary   meaning.   In   view   of   the   conclusion   we   have  reached  upon   the   first   assignment  of   error,   it   is   unnecessary   to   apply  here  the  doctrine  of  "secondary  meaning"  in  trade-­‐mark  parlance.  This  doctrine   is   to   the   effect   that   a  word   or   phrase   originally   incapable   of  exclusive   appropriation   with   reference   to   an   article   of   the   market,  because   geographically   or   otherwise   descriptive,   might   nevertheless  have   been   used   so   long   and   so   exclusively   by   one   producer   with  reference   to   his   article   that,   in   that   trade   and   to   that   branch   of   the  

purchasing  public,  the  word  or  phrase  has  come  to  mean  that  the  article  was  his  product.  (G.  &  C.  Merriam  Co.  vs.  Salfield,  198  F.,  369,  373.)  We  have   said   that   the   phrase   "Ang   Tibay,"   being   neither   geographic   nor  descriptive,   was   originally   capable   of   exclusive   appropriation   as   a  trade-­‐mark.   But   were   it   not   so,   the   application   of   the   doctrine   of  secondary  meaning  made  by  the  Court  of  Appeals  could  nevertheless  be  fully   sustained   because,   in   any   event,   by   respondent's   long   and  exclusive   use   of   said   phrase   with   reference   to   his   products   and   his  business,   it   has   acquired   a   proprietary   connotation.   (Landers,   Frary,  and  Clark  vs.  Universal  Cooler  Corporation,  85  F.  [2d],  46.)  Third.   Petitioner's   third   assignment   of   error   is,   that   the   Court   of  Appeals   erred   in   holding   that   pants   and   shirts   are   goods   similar   to  shoes   and   slippers  within   the  meaning   of   sections   3   and   7   of   Act  No.  666.  She  also  contends  under  her  fourth  assignment  of  error  (which  we  deem  convenient   to  pass  upon   together  with   the   third)   that   there  can  neither   be   infringement   of   trade-­‐mark   under   section   3   nor   unfair  competition  under  section  7  through  her  use  of  the  words  "Ang  Tibay"  in   connection   with   pants   and   shirts,   because   those   articles   do   not  belong  to  the  same  class  of  merchandise  as  shoes  and  slippers.  The  question  raised  by  petitioner   involve  the  scope  and  application  of  sections   3,7,   11,   13,   and   20   of   the   Trade-­‐Mark   Law   (Act   No.   666.)  Section   3   provides   that   "any   person   entitled   to   the   exclusive   use   of   a  trade-­‐mark  to  designate  the  origin  or  ownership  of  goods  he  has  made  or  deals  in,  may  recover  damages  in  a  civil  actions  from  any  person  who  has   sold   goods   of   a   similar   kind,   bearing   such   trade-­‐mark   .   .   .   The  complaining  party   .   .   .  may  have  a  preliminary  injunction,   .   .   .  and  such  injunction   upon   final   hearing,   if   the   complainant's   property   in   the  trade-­‐mark   and   the   defendant's   violation   thereof   shall   be   fully  established,  shall  be  made  perpetual,  and  this  injunction  shall  be  part  of  the  judgment  for  damages  to  be  rendered  in  the  same  cause."  Section  7  provides  that  any  person  who,  in  selling  his  goods,  shall  give  them  the  general   appearance  of   the   goods  of   another   either   in   the  wrapping  of  the   packages,   or   in   the   devices   or   words   thereon,   or   in   any   other  

feature   of   their   appearance,   which   would   be   likely   to   influence  purchasers   to   believe   that   the   goods   offered   are   those   of   the  complainant,  shall  be  guilty  of  unfair  competition,  and  shall  be  liable  to  an   action   for   damages   and   to   an   injunction,   as   in   the   cases   of   trade-­‐mark   infringement   under   section   3.   Section   11   requires   the   applicant  for   registration   of   a   trade-­‐mark   to   state,   among   others,   "the   general  class   of   merchandise   to   which   the   trade-­‐mark   claimed   has   been  appropriated."  Section  13  provides  that  no  alleged  trade-­‐mark  or  trade  name  shall  be  registered  which  is  identical  with  a  registered  or  known  trade-­‐mark   owned   by   another   and   appropriate   to   the   same   class   of  merchandise,   or   which   to   nearly   resembles   another   person's   lawful  trade-­‐mark  or  trade-­‐name  as  to  be  likely  to  cause  confusion  or  mistake  in   the   mind   of   the   public,   or   to   deceive   purchasers.   And   section   20  authorizes  the  Director  of  Commerce  to  establish  classes  of  merchandise  for  the  purpose  of  the  registration  of  trade-­‐marks  and  to  determine  the  particular  description  of  articles  included  in  each  class;  it  also  provides  that  "an  application  for  registration  of  a  trade-­‐mark  shall  be  registered  only   for  one  class  of   articles  and  only   for   the  particular  description  of  articles  mentioned  in  said  application."  We   have   underlined   the   key   words   used   in   the   statute:   "goods   of   a  similar   kind,"   "general   class   of   merchandise,"   "same   class   of  merchandise,"  "classes  of  merchandise,"  and  "class  of  articles,"  because  it   is   upon   their   implications   that   the   result   of   the   case   hinges.   These  phrases,  which  refer   to   the  same  thing,  have  the  same  meaning  as   the  phrase   "merchandise   of   the   same   descriptive   properties"   used   in   the  statutes  and  jurisprudence  of  other  jurisdictions.  The  burden  of  petitioner's  argument   is   that  under   sections  11  and  20  the  registration  by  respondent  of  the  trade-­‐mark  "Ang  Tibay"  for  shoes  and   slippers   is   no   safe-­‐guard   against   its   being   used   by   petitioner   for  pants  and  shirts  because   the   latter  do  not  belong   to   the  same  class  of  merchandise  or  articles  as  the  former;  that  she  cannot  be  held  guilty  of  infringement  of  trade-­‐mark  under  section  3  because  respondent's  mark  is  not  a  valid  trade-­‐mark,  nor  has  it  acquired  a  secondary  meaning;  that  

pants   and   shirts   do   not   possess   the   same   descriptive   properties   as  shoes   and   slippers;   that   neither   can   she   be   held   guilty   of   unfair  competition  under  section  7  because  the  use  by  her  of   the  trade-­‐mark  "Ang  Tibay"  upon  pants  and  shirts   is  not   likely   to  mislead   the  general  public   as   to   their  origin  or  ownership;   and   that   there   is  now  showing  that  she  in  unfairly  or  fraudulently  using  that  mark  "Ang  Tibay"  against  the   respondent.   If   we  were   interpreting   the   statute   for   the   first   time  and   in   the   first  decade  of   the   twentieth  century,  when   it  was  enacted,  and   were   to   construe   it   strictly   and   literally,   we   might   uphold  petitioner's  contentions.  But  law  and  jurisprudence  must  keep  abreast  with  the  progress  of  mankind,  and  the  courts  must  breathe  life  into  the  statutes   if   they   are   to   serve   their   purpose.   Our   Trade-­‐mark   Law,  enacted   nearly   forty   years   ago,   has   grown   in   its   implications   and  practical  application,  like  a  constitution,  in  virtue  of  the  life  continually  breathed   into   it.   It   is   not   of   merely   local   application;   it   has   its  counterpart   in   other   jurisdictions   of   the   civilized   world   from   whose  jurisprudence   it   has   also   received   vitalizing   nourishment.  We   have   to  apply   this   law   as   it   has   grown   and   not   as   it   was   born.   Its   growth   or  development   abreast  with   that   of   sister   statutes   and   jurisprudence   in  other   jurisdictions   is   reflected   in   the   following   observation   of   a  well-­‐known  author:  

This   fundamental   change   in   attitude   first  manifested   itself   in  the   year   1915-­‐1917.   Until   about   then,   the   courts   had  proceeded  on  the  theory  that  the  same  trade-­‐mark,  used  on  un-­‐like   goods,   could   not   cause   confusion   in   trade   and   that,  therefore,   there   could   be   no   objection   to   the   use   and  registration   of   a   well-­‐known   mark   by   a   third   party   for   a  different   class   of   goods.   Since   1916   however,   a   growing  sentiment  began  to  arise  that  in  the  selection  of  a  famous  mark  by   a   third   party,   there  was   generally   the   hidden   intention   to  "have   a   free   ride"   on   the   trade-­‐mark   owner's   reputation   and  good   will.   (Derenberg,   Trade-­‐Mark   Protection   &   Unfair  Trading,  1936  edition,  p.  409.)  

In  the  present  state  of  development  of  the  law  on  Trade-­‐Marks,  Unfair  Competition,   and   Unfair   Trading,   the   test   employed   by   the   courts   to  determine   whether   noncompeting   goods   are   or   are   not   of   the   same  class   is   confusion   as   to   the   origin   of   the   goods   of   the   second   user.  Although   two   noncompeting   articles   may   be   classified   under   two  different   classes   by   the  Patent  Office   because   they   are   deemed  not   to  possess   the   same  descriptive   properties,   they  would,   nevertheless,   be  held  by   the  courts   to  belong   to   the  same  class   if   the  simultaneous  use  on   them  of   identical  or   closely   similar   trade-­‐marks  would  be   likely   to  cause   confusion   as   to   the   origin,   or   personal   source,   of   the   second  user's  goods.  They  would  be  considered  as  not   falling  under   the  same  class  only  if  they  are  so  dissimilar  or  so  foreign  to  each  other  as  to  make  it   unlikely   that   the   purchaser   would   think   the   first   user   made   the  second  user's  goods.  Such  construction  of  the  law  is  induced  by  cogent  reasons  of  equity  and  fair   dealing.   The   courts   have   come   to   realize   that   there   can   be   unfair  competition  or  unfair  trading  even  if  the  goods  are  non-­‐competing,  and  that  such  unfair  trading  can  cause  injury  or  damage  to  the  first  user  of  a  given   trade-­‐mark,   first,   by   prevention   of   the   natural   expansion   of   his  business  and,  second,  by  having  his  business  reputation  confused  with  and  put  at  the  mercy  of  the  second  user.  Then  noncompetitive  products  are  sold  under  the  same  mark,  the  gradual  whittling  away  or  dispersion  of  the  identity  and  hold  upon  the  public  mind  of  the  mark  created  by  its  first   user,   inevitably   results.   The   original   owner   is   entitled   to   the  preservation  of   the  valuable   link  between  him  and  the  public   that  has  been   created   by   his   ingenuity   and   the  merit   of   his  wares   or   services.  Experience   has   demonstrated   that   when   a   well-­‐known   trade-­‐mark   is  adopted  by  another  even  for  a  totally  different  class  of  goods,  it  is  done  to  get  the  benefit  of  the  reputation  and  advertisements  of  the  originator  of   said   mark,   to   convey   to   the   public   a   false   impression   of   some  supposed   connection   between   the   manufacturer   of   the   article   sold  under   the   original   mark   and   the   new   articles   being   tendered   to   the  public   under   the   same   or   similar   mark.   As   trade   has   developed   and  

commercial   changes   have   come   about,   the   law   of   unfair   competition  has   expanded   to   keep   pace   with   the   times   and   the   element   of   strict  competition  in  itself  has  ceased  to  be  the  determining  factor.  The  owner  of   a   trade-­‐mark   or   trade-­‐name   has   a   property   right   in   which   he   is  entitled   to  protection,   since   there   is  damage   to  him   from  confusion  of  reputation   or   goodwill   in   the   mind   of   the   public   as   well   as   from  confusion   of   goods.   The   modern   trend   is   to   give   emphasis   to   the  unfairness  of  the  acts  and  to  classify  and  treat  the  issue  as  a  fraud.  A   few   of   the   numerous   cases   in   which   the   foregoing   doctrines   have  been  laid  down  in  one  form  or  another  will  now  be  cited:  (1)  In  Teodoro  Kalaw  Ng  Khe  vs.  Level  Brothers  Company  (G.R.  No.  46817),  decided  by  this  Court  on  April  18,  1941,  the  respondent  company  (plaintiff  below)  was   granted   injunctive   relief   against   the   use   by   the   petitioner   of   the  trade-­‐mark   "Lux"   and   "Lifebuoy"   for   hair   pomade,   they   having   been  originally  used  by  the  respondent  for  soap;  The  Court  held  in  effect  that  although  said  articles  are  noncompetitive,  they  are  similar  or  belong  to  the  same  class.  (2)  In  Lincoln  Motor  Co.  vs.  Lincoln  Automobile  Co.  (44  F.  [2d],  812),  the  manufacturer  of  the  well-­‐known  Lincoln  automobile  was  granted   injunctive   relief   against   the   use   of   the   word   "Lincoln"   by  another  company  as  part  of  its  firm  name.  (3)  The  case  of  Aunt  Jemima  Mills  Co.   vs.  Rigney  &  Co.   (247  F.,  407),   involved   the   trade-­‐mark   "Aunt  Jemima,"  originally  used  on  flour,  which  the  defendant  attempted  to  use  on  syrup,  and  there  the  court  held  that  the  goods,  though  different,  are  so  related  as  to  fall  within  the  mischief  which  equity  should  prevent.  (4)  In  Tiffany  &  Co.,  vs.  Tiffany  Productions,  Inc.  (264  N.Y.S.,  459;  23  Trade-­‐mark   Reporter,   183),   the   plaintiff,   a   jewelry   concern,   was   granted  injunctive   relief   against   the   defendant,   a   manufacturer   of   motion  pictures,   from   using   the   name   "Tiffany."   Other   famous   cases   cited   on  the  margin,  wherein   the   courts   granted   injunctive   relief,   involved   the  following   trade-­‐marks   or   trade-­‐names:   "Kodak,"   for   cameras   and  photographic   supplies,   against   its   use   for   bicycles.   4   "Penslar,"   for  medicines  and  toilet  articles,  against   its  use   for  cigars;   5   "Rolls-­‐Royce,"  for  automobiles.  against   its  use  for  radio  tubes;  6  "Vogue,"  as  the  name  

of   a  magazine,   against   its   use   for  hats;   7   "Kotex,"   for   sanitary  napkins,  against  the  use  of  "Rotex"  for  vaginal  syringes;  8  "Sun-­‐Maid,"  for  raisins,  against   its  use   for   flour;   9   "Yale,"   for   locks  and  keys,  against   its  use   for  electric  flashlights;  10  and  "Waterman,"  for  fountain  pens,  against  its  use  for  razor  blades.  11lawphil.net  Against   this   array   of   famous   cases,   the   industry   of   counsel   for   the  petitioner  has  enabled  him  to  cite  on  this  point  only  the  following  cases:  (1)   Mohawk   Milk   Products   vs.   General   Distilleries   Corporation   (95   F.  [2d],  334),  wherein  the  court  held  that  gin  and  canned  milk  and  cream  do   not   belong   to   the   same   class;   (2)   Fawcett   Publications,   Inc.   vs.  Popular  Mechanics  Co.  (80  F.  [2d],  194),  wherein  the  court  held  that  the  words   "Popular   Mechanics"   used   as   the   title   of   a   magazine   and   duly  registered  as  a  trade-­‐mark  were  not  infringed  by  defendant's  use  of  the  words  "Modern  Mechanics  and  Inventions"  on  a  competitive  magazine,  because   the  word   "mechanics"   is  merely   a   descriptive   name;   and   (3)  Oxford  Book  Co.  vs.  College  Entrance  Book  Co.  (98  F.  [2d],  688),  wherein  the   plaintiff   unsuccessfully   attempted   to   enjoin   the   defendant   from  using  the  word  "Visualized"  in  connection  with  history  books,  the  court  holding   that   said   word   is   merely   descriptive.   These   cases   cites   and  relied  upon  by  petitioner  are  obviously  of  no  decisive  application  to  the  case  at  bar.  We   think   reasonable  men  may   not   disagree   that   shoes   and   shirts   are  not   as   unrelated   as   fountain   pens   and   razor   blades,   for   instance.   The  mere   relation   or   association   of   the   articles   is   not   controlling.   As  may  readily   be   noted   from  what  we   have   heretofore   said,   the   proprietary  connotation   that   a   trade-­‐mark  or   trade-­‐name  has   acquired   is   of  more  paramount  consideration.  The  Court  of  Appeals  found  in  this  case  that  by   uninterrupted   and   exclusive   use   since   1910   of   respondent's  registered   trade-­‐mark   on   slippers   and   shoes  manufactured   by   him,   it  has   come   to   indicate   the   origin   and   ownership   of   said   goods.   It   is  certainly   not   farfetched   to   surmise   that   the   selection   by   petitioner   of  the  same  trade-­‐mark  for  pants  and  shirts  was  motivated  by  a  desire  to  get  a  free  ride  on  the  reputation  and  selling  power  it  has  acquired  at  the  

hands  of  the  respondent.  As  observed  in  another  case,  12  the  field  from  which   a   person  may   select   a   trade-­‐mark   is   practically   unlimited,   and  hence   there   is   no   excuse   for   impinging   upon   or   even   closely  approaching   the   mark   of   a   business   rival.   In   the   unlimited   field   of  choice,   what   could   have   been   petitioner's   purpose   in   selecting   "Ang  Tibay"  if  not  for  its  fame?  Lastly,   in   her   fifth   assignment   of   error   petitioner   seems   to   make   a  frantic   effort   to   retain   the   use   of   the   mark   "Ang   Tibay."   Her   counsel  suggests   that   instead   of   enjoining   her   from   using   it,   she   may   be  required   to   state   in   her   labels   affixed   to   her   products   the   inscription:  "Not  manufactured  by  Toribio  Teodoro."  We  think  such  practice  would  be   unethical   and   unworthy   of   a   reputable   businessman.   To   the  suggestion   of   petitioner,   respondent   may   say,   not   without   justice  though   with   a   tinge   of   bitterness:   "Why   offer   a   perpetual   apology   or  explanation  as  to  the  origin  of  your  products  in  order  to  use  my  trade-­‐mark   instead  of   creating  one  of   your  own?"  On  our  part  may  we  add,  without   meaning   to   be   harsh,   that   a   self-­‐respecting   person   does   not  remain  in  the  shelter  of  another  but  builds  one  of  his  own.  The  judgment  of  the  Court  of  Appeals  is  affirmed,  with  costs  against  the  petitioner  in  the  three  instances.  So  ordered.  Yulo,  C.J.,  Moran,  Paras  and  Bocobo,  JJ.,  concur.      

G.R. No. L-48226 December 14, 1942 ANA L. ANG, petitioner,

vs. TORIBIO TEODORO, respondent.

Facts:

Petitioner has appealed to this Court by certiorari to reverse the judgment of the Court of Appeals reversing that of

the Court of First Instance of Manila and directing the Director of Commerce to cancel the registration of the trade-mark "Ang Tibay" in favor of said petitioner, and perpetually enjoining the latter from using said trade-mark on goods manufactured and sold by her.

Respondend Toribio Teodoro was a partner of Juan Katinding and later as sole proprietor has used the “Ang Tibay” as a trade-mark and as a trade-name in the manufacture and sale of slippers, shoes, and indoor baseballs since 1910. He registered it as trade-mark on September 29, 1915 and trade-name on January 3, 1933. From a modest capital of P210 but with tireless industry and unlimited perseverance the company grew that his gross sales from 1918 to 1938 aggregated to P8,787,02.65. Petitioner Ana Ang registered the same trade-mark “Ang Tibay” for pants and shirts on April 11, 1932, and established a factory for the manufacture of said articles in the year 1937. Her gross sales amounted to P422,682 a year later. Respondent said that petitioner was unable to prove that she had spent a single centavo in advertising “Ang Tibay” shirts and pants prior to 1938.

The trial court (Judge Quirico Abeto) presiding absolved the defendant from the complaint, with costs against the plaintiff, on the grounds that the two trademarks are dissimilar and are used on different and non-competing goods; that there had been no exclusive use of the trade-mark by the plaintiff; and that there had been no fraud in the use of the said trade-mark by the defendant because the goods on which it is

used are essentially different from those of the plaintiff. The second division of the Court of Appeals, composed of Justices Bengson, Padilla, Lopez Vito, Tuason, and Alex Reyes, with Justice Padilla as ponente, reversed that judgment, holding that by uninterrupted an exclusive use since 191 in the manufacture of slippers and shoes, respondent's trade-mark has acquired a secondary meaning; that the goods or articles on which the two trade-marks are used are similar or belong to the same class; and that the use by petitioner of said trade-mark constitutes a violation of sections 3 and 7 of Act No. 666. The defendant Director of Commerce did not appeal from the decision of the Court of Appeals. Issue: Whether or not the words “Ang Tibay” had acquired a secondary meaning. Ruling: In her second assignment of error petitioner contends that the Court of Appeals erred in holding that the words "Ang Tibay" had acquired a secondary meaning. In view of the conclusion we have reached upon the first assignment of error, it is unnecessary to apply here the doctrine of "secondary meaning" in trade-mark parlance. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article of the market, because geographically or otherwise descriptive, might

nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. & C. Merriam Co. vs. Salfield, 198 F., 369, 373.) We have said that the phrase "Ang Tibay," being neither geographic nor descriptive, was originally capable of exclusive appropriation as a trade-mark. But were it not so, the application of the doctrine of secondary meaning made by the Court of Appeals could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. (Landers, Frary, and Clark vs. Universal Cooler Corporation, 85 F. [2d], 46.)      Arce Sons v. Selecta Biscuit Co. [GR 14761, Jan 28 1961]

Although the word "SELECTA" may be an ordinary or common word in the sense that it may be used or employed by any one in promoting his business or enterprise, once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge or authenticity, it may acquire a secondary meaning as to be exclusively associated with its products and business. In this sense, its use by another may lead to confusion in trade and

cause damage to its business.

Petitioner used the word "SELECTA" as a trade-mark and as such the law gives it protection and guarantees its use to the exclusion of all others. It is in this sense that the law postulates that "The ownership or possession of a trade-mark, . . . shall be recognized and protected in the same manner and to the same extent, as are other property rights known to the law," thereby giving to any person entitled to the exclusive use of such trade-mark the right to recover damages in a civil action from any person who may have sold goods of similar kind bearing such trade-mark .  

Asia Brewery vs. CA FACTS: SMC filed a case against petitioner for infringement of trademark. It alleged that the bottles used by Asia Brewery were confusingly similar to those used by SMC in the packaging of its beer. The trial court held in favor of Asia Brewery but was reversed in the appellate court.

HELD: Using the holistic test, wherein all circumstances were given consideration, there was no infringement committed by petitioner. There are two tests

available for colorable imitation. One is the dominancy test. If the form, marks, contents, words of other special arrangement or general appearance of the two marks or devices are such as would likely mislead persons in the ordinary course of purchasing the genuine article, then the similarity is such as would entitle the opposer to equitable protection. Under the holistic test, on the other hand, the opposing trademarks are compared in their entirety to determine confusing similarity. Asia Brewery vs. CA (GR 103543, 5 July 1993) En Banc, Grino-Aquino (J): 7 concur, 2 took no part Facts: On 15 September 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. On 27 August 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. SMC appealed to the Court of Appeals (CA-GR CV 28104). On 30 September 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. It held the ABI was guilty of infringement

of trademark and unfair competition, and thus (1) permanently enjoining and restraining ABI, its officers, agents, servants and employees 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 SMC employed for that purpose, or substantially identical with or like the bottles and labels now employed by ABI 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 SMC or which will enable others to substitute, sell or palm off the said beer of ABI as and for the beer of SMC, (2) ordered ABI to render an accounting and pay the SMC double any and all the payments derived by the former from operations of its business and sale of goods bearing the mark ‘Beer Pale Pilsen’ estimated at approximately 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) ordered ABI to pay SMC the sum of P2,000,000.00 as moral damages and P500,000.00 by way of exemplary damages, and further ordered ABI to pay the SMC attorney’s fees in the amount of P250,000.00 plus costs of this suit. Upon a motion for reconsideration filed by ABI, the dispositive portion of the decision was modified by the separate opinions of the Special Sixth Division, deleting the order to account for all payments derived from operations of business and sale of goods bearing the

mark “Beer Pale Pilsen.” In due time, ABI appealed to the Supreme Court by a petition for certiorari under Rule 45 of the Rules of Court. The Supreme Court granted the petition for review, set aside the decision and resolution of the Court of Appeals, and reinstated and affirmed that of the trial court; with costs against SMC. 1. Main thrust of SMC’s complaint 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. 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. 2. Exceptions to conclusiveness of the factual findings of the Court of Appeals As a general rule, the findings of the Court of Appeals upon factual questions are conclusive and ought not to be disturbed by the Supreme Court. However, there are exceptions to this general rule, and they are: (1) When the conclusion is grounded entirely on speculation, surmises and conjectures; (2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3) Where there is grave abuse of discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee; (6) When the findings of said court are contrary to those of the

trial court; (7) When the findings are without citation of specific evidence on which they are based; (8) When the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondents; and (9) When the findings of facts of the Court of Appeals are premised on the absence of evidence and are contradicted on record. Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings based on the record. Where findings of the Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. 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. 3. Nature of Infringement of trademark; Definition under Section 22 of RA 166 Infringement of trademark is a form of unfair competition. Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes infringement: “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 of the registrant.” 4. Registered trademark of SMC for its pale pilsen beer 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.” It consists of a rectangular design 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).” 5. Registered trademark of ABI for its pale pilsen beer ABI’s trademark, as described, consists of “a rectangular design bordered by what appear to be buds of flowers with leaves. The dominant feature is ‘Beer’ written across the upper portion of the rectangular design. The phrase ‘Pale Pilsen’ appears immediately below in smaller block letters. To the left is a hop design and to the right, written in small prints, is the phrase ‘Net Contents 320 ml.’ immediately below ‘Pale Pilsen’ is the statement written in three lines ‘Especially brewed and bottled by’ (first line), ‘Asia Brewery Incorporated’ (second line), and ‘Philippines’ (third line).” 6. Test of dominancy in infringement; Co Tiong Sa vs. Director of Patents, reiterated in Lim Hoa vs. Director of Patents Infringement is determined by the “test of dominancy” rather than by differences or variations in the details of one trademark and of another. 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. 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. 7. Test of dominancy; Confusing resemblance of two trademarks 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.” 8. Dissimilarities of the two trademarks in present case a. Dominant features 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 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. b. Sound, spelling or appearance 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. c. Other dissimilarities of the two trademarks 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, while 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; (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, while the BEER PALE PILSEN bottle cap is stamped with the name “BEER” in the center, surrounded by the words “Asia Brewery Incorporated Philippines”; and (7) there is a substantial price difference between BEER PALE PILSEN (currently at P4.25 per bottle) and SAN MIGUEL PALE PILSEN (currently at P7.00 per bottle). One who pays only P4.25 for a bottle of beer cannot expect to receive San Miguel Pale Pilsen from the storekeeper or bartender. 9. Use of generic words “Pale” and “Pilsen” does not constitute infringement 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. “Pilsen” is a “primarily geographically descriptive word,” and is hence, non-registerable and not appropriable by any beer manufacturer. 10. Section 4 (e) of RA 166 Section 4 (e) of the Trademark Law provides that “the owner of trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same [on the principal register], unless it: xxx (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.” 11. “Pale Pilsen” merely descriptive words and cannot be exclusive appropriated as trademark; To whom descriptive or generic words belong 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. The

words are 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. 12. Rationale why descriptive words cannot be appropriated and protected as trademark; Use of descriptive words A word or a combination of words which is merely descriptive of an article of trade, or of its composition, characteristics, or qualities, cannot be appropriated and protected as a trademark to the exclusion of its use by others . . . inasmuch as all persons have an equal right to produce and vend similar articles, they also have the right to describe them properly and to use any appropriate language or words for that purpose, and no person can appropriate to himself exclusively any word or expression, properly descriptive of the article, its qualities, ingredients or characteristics, and thus limit other persons in the use of language appropriate to the description of their manufactures, the right to the use of such language being common to all. This rule excluding descriptive terms has also been held to apply to tradenames. As to whether words employed fall within this prohibition, it is said that the true test is not whether they are exhaustively descriptive of the article designated, but whether in themselves, and as they are commonly used by those who understand their meaning, they are reasonably indicative and descriptive of the thing intended. If they are thus descriptive, and not arbitrary, they cannot be appropriated from general use and become the exclusive property of anyone. 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. 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. 13. Evidence contradicting alleged intent of ABI to mislead consumers The circumstance that the manufacturer of BEER PALE PILSEN, ABI, 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, it is quite unlikely that a customer of average intelligence would mistake a bottle of BEER PALE PILSEN for SAN MIGUEL PALE PILSEN. 14. Unfair competition defined; Section 29, RA 166 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. 15. Common ways of committing unfair competition; Section 29, RA 166 Section 29 of RA 166 enumerates the more common ways of committing unfair competition, i.e. “In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of

goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.” 16. Test to determine unfair competition 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. 17. Use of steinie bottle not identical to competition’s is not unlawful The use by ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN bottle, is not unlawful. There is no

infringement of SMC’s bottle, firstly, because it is a standard type of bottle called steinie, and 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. (It must be noted that the steinie bottle is also used by the Cerveza Especial and the Efes Pale Pilsen.) Secondly, the shape was never registered as a trademark. SMC’s trademark registration is not a registration of a beer bottle design required under RA 165 but the registration of the name and other marks of ownership stamped on containers as required by RA 623. Thirdly, the neck of ABI’s bottle is much larger and has a distinct bulge in its uppermost part. In sum, thus. 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. 18. Bottle size, shape and color may not be the exclusive property of any one beer manufacturer 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. 19. Protection against imitation confined to nonfunctional features 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. 20. Amber bottle color a functional feature of the steinie bottle; SMC cannot claim monopoly for use The amber color is a functional feature of the beer bottle. 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. 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. 21. Bottle capacity prescribed by Metrication Circular of Department of Trade’s Metric System Board; SMC cannot claim monopoly for use 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. 22. White labels economical; SMC cannot claim monopoly for use 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. 23. Test of Fraudulent Simulation; Dy Buncio vs. Tan Tiao Bok In order that there may be deception of the buying public in the sense necessary to constitute unfair competition, it is necessary to suppose a public accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or possibility of the deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent as between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinarily intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase.” 24. Registration of bottle under RA 623 does not give registrant patent to the bottle 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 RA 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. 25. No action between users of standardized containers Most containers are standardized because they are usually made by the same manufacturer. Milk, whether in powdered or liquid form, is sold in uniform tin cans. The same can be said of the standard ketchup or vinegar bottle with its familiar elongated neck. Many other grocery items such as coffee, mayonnaise, pickles and peanut butter are sold in standard glass jars. The manufacturers of these foodstuffs have equal right to use these 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. 26. Beer ordered by brand; Beer Pale Pilsen not being passed off as San Miguel Pale Pilsen Consumers or buyers of beer generally order their beer by brand. 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. Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer market for the past hundred years, those who have been drinking no other beer but SAN MIGUEL PALE PILSEN these many years certainly know their beer too well to be deceived by a newcomer in the market. If they gravitate to ABI’s cheaper beer, it will not be because they are confused or deceived, but because they find the competing product to their taste. 27. Totality doctrine in Del Monte not diminished; Ruling may not apply to all kinds of products; Factors in resolving cases of infringement and unfair competition The decision in the present case will not diminish our ruling in “Del Monte Corporation vs. Court of Appeals and Sunshine Sauce Manufacturing Industries,” 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.” 28. Ruling in del Monte does not apply to beer The 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. 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. 29. ABI does not infringe upon SMC’s trademark nor does it commit unfair competition 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. ABI has neither infringed SMC’s trademark nor committed unfair competition with the latter’s SAN MIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes with the latter in the open market, the competition is neither unfair nor fraudulent.

Emerald Garment Manufacturing Corp. vs. CA (GR 100098, 29 December1995) First Division, Kapunan (J): 2 concur, 1 dissents Facts: HD Lee Co. Inc. , a foreign corporation organized under the laws of Delaware, U.S.A., obtained several registration certificates for its various trademarks “LEE,” “LEE RIDERS,” and “LEESURES” in both the supplemental and principal registers, as early as 1969 to 1973. On 18 September 1981, HD Lee filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for Cancellation of Registration SR 5054 (Supplemental Register) for the trademark “STYLISTIC MR. LEE” used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued on 27 October 1980 in the name of Emerald Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine laws. The petition was docketed as Inter Partes Case 1558. On 20 February 1984, Emerald Garments caused the publication of its application for registration of the trademark “STYLISTIC MR. LEE” in the Principal Register.” On 27 July 1984, HD Lee Co. filed a notice of opposition to Emerald Garment’s application for registration also on grounds that the latter’s trademark was confusingly similar to its “LEE” trademark. The case was docketed as Inter Partes Case 1860. On 21 June 1985, the Director of Patents consolidated Inter Partes Cases 1558 and 1860, and on 19 July 1988, the Director of Patents rendered a decision granting HD Lee Co.’s petition for cancellation and opposition to registration, holding that HD Lee Co. to be the prior registrant of the trademark “LEE” in the Philippines and that it had been using said mark in the Philippines.

On 3 August 1988, Emerald Garments appealed to the Court of Appeals and on 8 August 1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that the same would cause it great and irreparable damage and injury. HD Lee submitted its opposition on 22 August 1988. On 23 September 1988, the BPTTT issued Resolution 88-33 granting Emerald Garments’ motion to stay execution subject to the following terms and conditions: (1) that under the resolution, Emerald Garments is authorized only to dispose of its current stock using the mark “STYLISTIC MR. LEE”; (2) that it is strictly prohibited from further production, regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock; and (3) that the relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals and, if the Emerald Garments’ appeal loses, all goods bearing the mark “STYLISTIC MR. LEE” shall be removed from the market, otherwise such goods shall be seized in accordance with the law. On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the Director of Patents dated 19 July 1988 in all respects. On 19 December 1990, Emerald Garments filed a motion for reconsideration of the decision of the Court of Appeals. On 17 May 1991, the Court of Appeals issued a resolution rejecting Emerald Garments’ motion for reconsideration. Hence, the petition for review on certiorari. The Supreme Court reversed and set aside the questioned decision and resolution. 1. Equitable principle of laches; Section 9-A, RA 166 The equitable principle of laches appears in Section 9-A (Equitable principles to govern proceedings) of RA 166, otherwise known as

the Law on Trade-marks, Trade-names and Unfair Competition, which provides that “In opposition proceedings and in all other inter partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and acquiescence, where applicable, may be considered and applied.” 2. Marks and tradenames in supplemental register Emerald Garment’s trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that “marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette.” The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by Emerald Garments of its assailed trademark but 27 October 1980, the date the certificate of registration SR 5054 was published in the Official Gazette and issued to Emerald Garments. It was only on the date of publication and issuance of the registration certificate that HD Lee Co. may be considered “officially” put on notice that petitioner has appropriated or is using said mark, which, after all, is the function and purpose of registration in the supplemental register. 3. HD Lee not in estoppel nor barred in laches The record is bereft of evidence that HD Lee was aware of Emerald Garment’s trademark before the date of said publication and issuance. Hence, when it instituted cancellation proceedings on 18 September 1981, less than a year had passed. It could hardly be then accused of inexcusable delay in filing its notice of opposition to Emerald Garment’s application for registration in the principal register since said application was published only on 20 February 1984. From the time of publication to the time of filing the opposition on 27 July 1984 barely 5 months had elapsed. To be

barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. 4. Section 22, RA 166; Infringement, what constitutes Section 22 (Infringement, what constitutes) of RA 166 (Trademark Law) provides that “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 imitable 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.” 5. No set rules can be deduced as to practical application of Section 22; Each case must be decided on its own merits Practical application, however, of Section 22 of the Trademark Law is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v. Court of Appeals, it was held that “but likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. It is unquestionably true

that, as stated in Coburn vs. Puritan Mills, Inc.: “In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case.” It has also been observed that “in determining whether a particular name or mark is a “colorable imitation” of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product’s quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product’s purchasers; location of the business; the likelihood of deception or the mark or name’s tendency to confuse; etc.” 6. Colorable imitation, an essential element of infringement; Nature The essential element of infringement is colorable imitation. This term has been defined as “such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other.” Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead

or confuse persons in the ordinary course of purchasing the genuine article. 7. Tests in determination of existence of colorable imitation In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals 30 and its proponent cases. 8. Test of dominancy The test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. 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. 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. 9. Holistic test The holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the

observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. 10. Jeans not ordinary household items; Casual buyer presumed to be more cautious and discriminating The products involved are various kinds of jeans. These are not ordinary household items like catsup, soy sauce or soap which are of minimal cost. Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. 11. Cost of goods determines attitudes of the purchaser; Del Monte Corporation vs. CA What essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. 12. Jeans, like beer, are bought by brand Like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is,

therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted. 13. “Ordinary purchaser” and “ordinary intelligent buyer” not “completely unwary consumer” More credit should be given to the “ordinary purchaser.” Cast in this particular controversy, the ordinary purchaser is not the “completely unwary consumer” but is the “ordinarily intelligent buyer” considering the type of product involved. 14. “Ordinary purchaser” defined, Test of Fraudulent Sumulation; Dy Buncio v. Tan Tiao Bok The “ordinary purchaser” was defined as one “accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase.” 15. Stylistic Mr. Lee not a variation of the Lee mark There is no cause for the apprehension that Emerald Garment’s products might be mistaken as “another variation or line of garments under HD Lee’s ‘LEE’ trademark”. As one would readily observe, HD Lee’s variation follows a standard format “LEERIDERS,” “LEESURES” and “LEELEENS.” It is; therefore,

improbable that the public would immediately and naturally conclude that Emerald Garment’s “STYLISTIC MR. LEE” is but another variation under HD Lee’s “LEE” mark. 16. Present trademarks in present case not confusingly similar Taking into account the factual circumstances of the case, the trademarks involved as a whole and rule that Emerald Garment’s “STYLISTIC MR. LEE” is not confusingly similar to HD Lee’s “LEE” trademark. Emerald Garment’s trademark is the whole “STYLISTIC MR. LEE.” Although on its label the word “LEE” is prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of variables that must be factored in. Taking into account these unique factors, the similarities in the trademarks in question are not sufficient as to likely cause deception and confusion tantamount to infringement. 17. Section 4 (e), RA 166; Registration of trade-marks, trade-names and service-marks on the principal register Chapter II-A (The Principal Register, Inserted by Sec. 2, RA 638), Section 4 (Registration of trade-marks, trade-names and service-marks on the principal register) provides that “there is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx (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.” 18. “Lee” primarily a surname; Personal name cannot be monopolized as trademark or tradename as against others “LEE” is primarily a surname. HD Lee cannot, therefore, acquire exclusive ownership over and singular use of said term. It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, “Wellington” is a surname, and its first user has no cause of action against the junior user of “Wellington” as it is incapable of exclusive appropriation. 19. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sections 2 and 2-A of the Philippine Trademark Law (RA 166). HD Lee failed to prove prior actual commercial use of its “LEE” trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. 20. Section 2, RA 166; Registration of Marks and Trade-names, What are registrable

Section 2 (What are registrable) provides that “trade-marks, trade-names, and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships, or associations domiciled in any foreign country may be registered in accordance with the provisions of this act: Provided, That said trade-marks, trade-names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And Provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. “ 21. Section 2-A, RA 166; Ownership of trade-marks, trade-names and service-marks; how acquired Section 2-A (Ownership of trade-marks, trade-names and service-marks; how acquired) provides that “anyone who lawfully produces or deals in merchandise of any kind or who engages in lawful business, or who renders any lawful service in commerce, by actual use hereof in manufacture or trade, in business and in the service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or services from others. The ownership or possession of trade-mark, trade-name, service-mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same

manner and to the same extent as are other property rights to the law.” 22. Doctrine of incorporation; Philip Morris Inc. vs. CA Following universal acquiescence and comity, Philippine municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement (e.g. 1965 Paris Convention for the Protection of Industrial Property) inasmuch as the apparent clash is being decided by a municipal tribunal. Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. 23. Lack of license to do business in the Philippines vis-à-vis actual use of trademark in commerce A foreign corporation may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for .infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to

protection due to absence of actual use of the emblem in the local market. 24. Registration does not perfect a trademark right; Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschatt Actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. Adoption alone of a trademark would not give exclusive right thereto. Such right “grows out of their actual use.” Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader’s right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. 25. Section 20 of the Trademark Law; Certificate of registration prima facie evidence of validity Section 20 of the Trademark Law provides that “a certificate of registration of a mark or tradename shall be a prima facie evidence of the validity of the registration, the registrant’s ownership of the mark or trade-name, and of the registrant’s exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein.”

26. Section 20, Trademark Law, construed The credibility placed on a certificate of registration of one’s trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. Moreover, Section 20 of the Trademark Law applies only to registrations in the principal register. Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of marks which are not registrable on the principal register due to some defects. 27. Determination of prior user of trademark; Finding of facts of Director of Patents conclusive upon the Supreme Court The determination as to who is the prior user of the trademark is a question of fact and it is this Court’s working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 28. Samples not equivalent to “use”; Pagasa Industrial Corp. v. Court of Appeals, and Converse Rubber Corp. v. Universal Rubber Products, Inc. The Trademark Law requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should

consist among others, of considerable sales since its first use. The evidence must be clear, definite and free from inconsistencies. “Samples” are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the “use” contemplated by law. Respondent did not expect income from such “samples.” There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. 29. Sales Invoices provide best proof for actual sales of products The sales invoices provide the best proof that there were actual sales of Emerald Garment’s product in the country and that there was actual use for a protracted period of petitioner’s trademark or part thereof through these sales. The Court gave little weight to the numerous vouchers representing various advertising expenses in the Philippines for “LEE” products, as these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with HD Lee Co. on 11 May 1981 (which do not prove whether “LEE” mark first reached the Philippines in the 1960’s through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines). On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its “STYLISTIC MR. LEE” trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. Emerald  Garment  v  CA  

GR  100098,  29  December  1995;  First  Division,  Kapunan  (J):     Facts:  HD  Lee  Co.   owns   the   trademarks   “Lee”,   “Lee  Riders”   and  “Lee  sures”  in  both  the  supplementary  and  principal  registers,  as  early  as  1969  to  1973.  In  1981,  it  filed  for  the  cancellation  for  the  registration  of   the   trademark  “stylistic  Mr.  Lee”,  applied/owned  by  Emerald  Garment  Manufacturing  Corp.   In  1988,   the  Director  of  Patents  ruled  in  favor  of  HD  Lee.  In  1990,  the  Court  of  Appeals  affirmed   the   decision   of   the   Director   of   Patents.   Hence,   the  petition  for  review  on  certiorari.    Issue:  Whether   the   trademark   “stylistic   Mr.   Lee”   is   confusingly  similar  to  HD  Lee’s  trademarks  to  warrant  its  cancellation  in  the  supplemental  Registry.    Held:  No.  Stylistic  Mr.  Lee  is  not  a  variation  of  the  Lee  mark.  HD  Lee’s   variation   follows   the   format   lee   riders,   “   leesure”,   and  “leeleens”  and   thus  does  not  allow   the  conclusion   that   “Stylistic  Mr.  Lee”  is  another  variation  under  HD  Lee’s  mark.  Although  on  stylistic   Mr.   Lee’s   label,   the   word   “lee”   is   prominent,   the  trademark   should  be   considered  as   a  whole   and  not  piecemeal.  Further,   “Lee”   is   a   surname.   Personal   names   nor   surnames  cannot  be  monopolized  as  trademarks  or  tradenames  as  against  others  of  the  same  name  or  surname.  Furthermore,  inasmuch  as  Emerald   Garment   has   shown   the   use   of   stylistic   Mr.   Lee   since  1975   through   sales   invoice   from   stores   and   retailers;   and   that  HD   Lee   was   not   able   for   transactions   period   to   1981;   the  Supreme   Court   allowed   the   use   of   stylistic  Mr.   Lee   by   Emerald  Garment.  

G.R. No. 78298 January 30, 1989

WOLVERINE WORLDWIDE, INC., petitioner, vs. HONORABLE COURT OF APPEALS and LOLITO P. CRUZ, respondents.

K. V. Faylona & Associates for petitioner.

Florencio Z. Sioson for private respondent Lolito P. Cruz.

SARMIENTO, J.:

The subject of this petition for review is the resolution of the Court of Appeals 1 granting the private respondents's motion for reconsideration and reviving the decision of the Director of Patents which ordered the dismissal, on the ground of res judicata, of Inter Partes Case No. 807 instituted by the petitioner herein.

On February 8, 1984, the petitioner, a foreign corporation organized and existing under the

laws of the United States, brought a petition before the Philippine Patent Office, docketed as Inter Partes Case No. 1807, for the cancellation of Certificate of Registration No. 24986-B of the trademark HUSH PUPPIES and DOG DEVICE issued to the private respondent, a Filipino citizen.

In support of its petition for cancellation, the petitioner alleged, inter alia, that it is the registrant of the internationally known trademark HUSH PUPPIES and the DEVICE of a Dog in the United States and in other countries which are members of the Paris Convention for the Protection of Industrial Property; that the goods sold by the private respondent, on the one hand, and by the petitioner, on the other hand, belong to the same class such that the private respondent's use of the same trademark in the Philippines (which is a member of said Paris Convention) in connection with the goods he sells constitutes an act of unfair competition, as denied in the Paris Convention.

Subsequently, the private respondent moved to dismiss the petition on the ground of res judicata, averring that in 1973, or more than ten years before this petition (Inter Partes Case No. 1807) was filed, the same petitioner filed two petitions for cancellation (Inter Partes Cases Nos. 700 and 701) and was a party to an interference proceeding (Inter Partes Case No. 709), all of which involved the trademark HUSH PUPPIES and DEVICE, before the Philippine Patent Office. The Director of Patents had ruled in all three inter parties cases in favor of Ramon Angeles, the private respondent's predecessor-in-interest, to wit:

WHEREFORE, for all the foregoing considerations,

1. The petitions seeking cancellation of Registration Nos. SR-1099 and SR-1526, respectively, are both denied and accordingly DISMISSED;

2. Respondent-Registrant/Junior Party-Applicant, Roman Angeles, is hereby adjudged as the prior

user and adopter of the trademark HUSH PUPPIES & DEVICE, under Appl. Serial No. 17174, and therefore, the same given due course; and

3. Registration No. 14969 of Dexter Sales Company, assignor to Wolverine Worldwide, Inc., covering the trademark HUSH PUPPIES & Representation of a Dogie Head, is hereby CANCELLED. 2

On June 29, 1979, the Court of Appeals affirmed tile above decision, finding the same to be in accordance with law and supported by substantial evidence. 3

In the present case, after both parties had submitted their respective memoranda, the Director of Patents rendered the questioned decision (in Inter Partes Case No. 1807), the dispositive portion of which states:

WHEREFORE, in view of the foregoing considerations this Office is constrained to hold that Respondent's Motion to Dismiss be, as it is hereby, GRANTED and that the subject Petition

for Cancellation be, as it is hereby DISMISSED.

Accordingly, Certificate of Registration No. 24986-B issued on May 3, 1983 to the herein Respondent-Registrant, Lolito P. Cruz, for the trademark "HUSH PUPPIES" for use on shoes is, as it is hereby, declared valid and subsisting for the duration of its term unless owner cancelled in accordance with law. 4

On appeal, the Court of Appeals at first set aside the Director's decision; 5 however, upon reconsideration the latter was revived. 6

The principal legal question raised in this petition for review is whether or not the present petition for cancellation (Inter Partes Case No. 1807) is barred by res judicata in the light of the final and executory decision in Inter Partes Cases Nos. 700 701, and 709.

We rule in the affirmative.

The Court has repeatedly held that for a judgment to be a bar to a subsequent case, the

following requisites must concur: (1) it must be a final judgment; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be Identity between the two cases, as to parties, — subject matter, and cause of action. 7

Contrary to the petitioner's assertion, the judgment in Inter Partes Cases Nos. 700, 701, and 709 had long since become final and executory. That Sec. 17 of Republic Act 166, also known as the Trademark Law, allows the cancellation of a registered trademark is not a valid premise for the petitioner's proposition that a decision granting registration of a trademark cannot be imbued with the character of absolute finality as is required in res judicata. A judgment or order is final, as to give it the authority of res judicata, if it can no longer be modified by the court issuing it or by any other court. 8 In the case at bar, the decision of the Court of Appeals affirming that of the Director of Patents, in the cancellation cases filed in 1973, was never

appealed to us. Consequently, when the period to appeal from the Court of Appeals to this Court lapsed, with no appeal having been perfected, the foregoing judgment denying cancellation of registration in the name of private respondent's predecessor-in-interest but ordering cancellation of registration in the name of the petitioner's predecessor-in-interest, became the settled law in the case. In the words of the Court of Appeals:

The subsequent failure of appellant-oppositor to elevate the decision of the Court of Appeals, which affirmed the ruling of the Director of Patents, to the Supreme Court, sounded the death knell of appellant-oppositor's instant case. Having become final and executory, the decision in Case No. 967 now bars the prosecution of the present action under the principle of res judicata. 9

It must be stressed anew that, generally, the fundamental principle of res judicata applies to all cases and proceedings in whatever form they may be. 10 We now expressly affirm that this principle applies, in the appropriate cases, to proceedings for cancellation of trademarks

before the Philippine Patent Office (now Bureau of Patents, Trademarks and Technology Transfer). In Ipekjan Merchandising Co., Inc. vs Court of Tax Appeals, we said:

To say that the doctrine applies exclusively to decisions rendered by what are usually understood as courts would be to unreasonably circumscribe the scope thereof. The more equitable attitude is to allow extension of the defense to decisions of bodies upon whom judicial powers have been conferred. 11

Undoubtedly, final decisions, orders, and resolutions, of the Director of Patents are clothed with a judicial character as they are, in fact, reviewable by the Court of Appeals and by us.

The subject judgment is undeniably on the merits of the case, rendered after both parties and actually submitted their evidence.

Between the earlier petitions and the present one there is substantial identity of parties, subject matter, and cause of action.

The petitioner in all of these cases is Wolverine Worldwide, Inc. The respondent-registrant in this case is the assignee of Randelson Agro-Industrial Development, Inc. (formerly known as Randelson Shoes, Inc.) which in turn, acquired its right from Ramon Angeles, the original respondents-registrant.

As regards the subject matter, all of these cases refer to the cancellation of registration of the trademark HUSH PUPPIES and DEVICE of a Dog.

Finally, there is identity of cause of action, which is the alleged wrongful or erroneous registration of the trademark.

It is argued, however, that res judicata does not apply in this particular instance because when the May 9, 1977 decision was handed down by the Director of Patents, Executive Order No. 913 dated October 7, 1983 and the resulting memorandum of Minister Roberto Ongpin dated October 25, 1983 had not yet been issued. (The validity of this memorandum was later upheld by

this Court in La Chemise Lacoste, S.A. vs. Fernandez and Sujanani vs. Ongpin). 12 The petitioner underscores the following specific directive contained in the abovementioned memorandum of Minister Ongpin for the Director of Patents:

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. 13

It is thus contended that despite the previous grant of registration to the private respondent, the present petition for cancellation could still be brought, and the same should be granted by the Director of Patents, pursuant to the abovequoted clause. Stated otherwise, the petitioner suggests that the petition is not barred by res judicata

because while the former petitions were filed under Republic Act 166, the present one was brought pursuant to the cited memorandum which expressly sanctions the cancellation of registration of a trademark granted even prior to the same memorandum.

In the first place, the subject memorandum never amended, nor was it meant to amend, the Trademark Law. It did not indicate a new policy with respect to the registration in the Philippines of world-famous trademarks. The protection against unfair competition, and other benefits, accorded to owners of internationally known marks, as mandated by the Paris Convention, is already guaranteed under the Trademark Law. 14 Thus, the subject memorandum, as well as Executive Order No. 913, merely reiterated the policy already existing at the time of its issuance. As accurately enunciated by the Court of Appeals:

Such being the case, appellant-oppositor could have properly ventilated the issue of whether or not it fell within the protective ambit of the Paris Convention in

the previous proceedings which culminated in the registration of the Hush Puppies trademark in appellee-movant's name, i.e., in Case No. 967 before the Philippine Patent Office. The Director of Patents in that case, after hearing both parties and thereafter, deciding that appellee-movant was entitled to the registration of the trademark in its name, must have concluded that appellant-oppositor had not established the fact that it was entitled to the application of the favorable provision; of the Paris Convention. 15

Furthermore, we agree with the conclusion of the Court of Appeals that the memorandum discussed here is subject to the doctrine of res judicata. The same memorandum has, in the words of the Court of Appeals:

... no room for application where the oppositor previously availed of the same remedy to contest and cancel the registration of subject trademark but did not prevail, against the same registrant regarding the same subject matter (the trademark in question) and for the same cause of action. This is the more so when, as in this present controversy, the certificate of registration, cancellation of which is sought anew,

was issued by the Patent office after due hearing in the prior appropriate inter partes case, pursuant to a decision of the Director of Patents which was affirmed on appeal by the Court of Appeals, and has become final and executory. 16

In the same light, the repeated filing of petitions for cancellation founded on substantially the same ground as provided in Sec. 17 of the Trademark Law, we rule, is not permissible. For to allow without any limitation whatsoever such a practice would be clearly violative of the time-honored doctrine of res judicata. The present petition for cancellation raises basically the same issue of ownership of the trademark HUSH PUPPIES, which issue was already discussed and settled in Inter Partes Cases Nos. 700, 701, and 709. As pointed out by the private respondent, the petitioner itself expressly recognized the issue of ownership when in the brief it filed in the Court of Appeals it included the following in the assignment of errors:

That the Philippine Patent Office erred in holding that respondent-appellee has established prior

use and adoption of the trademark HUSH PUPPIES and is the true and lawful owner thereof, instead of petitioner-appellant herein. (Emphasis supplied). 17

The aforesaid cases, involving as they were the registration of a trademark, necessarily litigated the issue of ownership of such trademark because ownership is, indeed, the basis of registration of a trademark. 18 Thus, Section 4 of R.A. 166 provides: ". . . The owner of a trademark, trade name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register. . . " Res judicata now bars the petitioner from reopening, by way of another petition for cancellation (the present Inter Partes Case No. 1807), the issue of ownership of the trademark HUSH PUPPIES. Otherwise, there will never be an end to litigation.

WHEREFORE, the petition for review is DENIED.

SO ORDERED. SUPERIOR COMMERCIAL ENTERPRISES, INC., vs. KUNNAN ENTERPRISES LTD. AND SPORTS CONCEPT & DISTRIBUTOR, INC., BRION, J.:

We review in this petition for review on certiorari[1] the (1) decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 60777 that reversed the ruling of the Regional Trial Court of Quezon City, Branch 85 (RTC),[3] and dismissed the petitioner Superior Commercial Enterprises, Inc.’s (SUPERIOR) complaint for trademark infringement and unfair competition (with prayer for preliminary injunction) against the respondents Kunnan Enterprises Ltd. (KUNNAN) and Sports Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA resolution[4] that denied SUPERIOR’s subsequent motion for reconsideration. The RTC decision that the CA reversed found the respondents liable for trademark infringement and unfair competition, and ordered them to pay SUPERIOR P2,000,000.00 in damages, P500,000.00 as attorney’s fees, and costs of the suit.

THE FACTUAL ANTECEDENTS

On February 23, 1993, SUPERIOR[5] filed a complaint for trademark infringement and unfair competition with preliminary injunction against KUNNAN[6] and SPORTS

CONCEPT[7] with the RTC, docketed as Civil Case No. Q-93014888.

In support of its complaint, SUPERIOR first claimed

to be the owner of the trademarks, trading styles, company names and business names[8] “KENNEX”,[9] “KENNEX & DEVICE”,[10] “PRO KENNEX”[11] and “PRO-KENNEX” (disputed trademarks).[12] Second, it also asserted its prior use of these trademarks, presenting as evidence of ownership the Principal and Supplemental Registrations of these trademarks in its name. Third, SUPERIOR also alleged that it extensively sold and advertised sporting goods and products covered by its trademark registrations. Finally, SUPERIOR presented as evidence of its ownership of the disputed trademarks the preambular clause of the Distributorship Agreement dated October 1, 1982 (Distributorship Agreement) it executed with KUNNAN, which states:

Whereas, KUNNAN intends to

acquire the ownership of KENNEX trademark registered by the [sic] Superior in the Philippines. Whereas, the [sic] Superior is desirous of having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines.” [Emphasis supplied.][13]

In its defense, KUNNAN disputed SUPERIOR’s claim of ownership and maintained that SUPERIOR – as mere distributor from October 6, 1982 until December 31, 1991 – fraudulently registered the trademarks in its name. KUNNAN alleged that it was incorporated in 1972, under the name KENNEX Sports Corporation for the purpose of manufacturing and selling sportswear and sports equipment; it commercially marketed its products in different countries, including the Philippines since 1972.[14] It created and first used “PRO KENNEX,” derived from its original corporate name, as a distinctive trademark for its products in 1976. KUNNAN also alleged that it registered the “PRO KENNEX” trademark not only in the Philippines but also in 31 other countries, and widely promoted the “KENNEX” and “PRO KENNEX” trademarks through worldwide advertisements in print media and sponsorships of known tennis players.

On October 1, 1982, after the expiration of its initial

distributorship agreement with another company,[15] KUNNAN appointed SUPERIOR as its exclusive distributor in the Philippines under a Distributorship Agreement whose pertinent provisions state:[16]

Whereas, KUNNAN intends to

acquire ownership of KENNEX trademark registered by the Superior in the Philippines. Whereas, the Superior is desirous of having been appointed [sic]

as the sole distributor by KUNNAN in the territory of the Philippines.

Now, therefore, the parties hereto agree as follows:

1. KUNNAN in accordance with this Agreement, will appoint the sole distributorship right to Superior in the Philippines, and this Agreement could be renewed with the consent of both parties upon the time of expiration.

2. The Superior, in accordance with this Agreement, shall assign the ownership of KENNEX trademark, under the registration of Patent Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of its ten (10) years contract of distributorship, and it is required that the ownership of the said trademark shall be genuine, complete as a whole and without any defects.

3. KUNNAN will guarantee to the Superior that no other third parties

will be permitted to supply the KENNEX PRODUCTS in the Philippines except only to the Superior. If KUNNAN violates this stipulation, the transfer of the KENNEX trademark shall be null and void.

4. If there is a necessity, the Superior will be appointed, for the protection of interest of both parties, as the agent in the Philippines with full power to exercise and granted the power of attorney, to pursue any case of Pirating, Infringement and Counterfeiting the [sic] KENNEX trade mark in the Philippine territory.

5. The Superior will be granted from [sic] KUNNAN’s approval before making and selling any KENNEX products made in the Philippines and the other countries, and if this is the situation, KUNNAN is entitled to have a royalty of 5%-8% of FOB as the right.

6. Without KUNNAN’s permission, the

Superior cannot procure other goods supply under KENNEX brand of which are not available to supply [sic] by KUNNAN. However, in connection with the sporting goods, it is permitted that the Superior can procure them under KENNEX brand of which are not available to be supplied by KUNNAN. [Emphasis supplied.]

Even though this Agreement clearly stated that

SUPERIOR was obligated to assign the ownership of the KENNEX trademark to KUNNAN, the latter claimed that the Certificate of Registration for the KENNEX trademark remained with SUPERIOR because Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIOR’s President and General Manager, misled KUNNAN’s officers into believing that KUNNAN was not qualified to hold the same due to the “many requirements set by the Philippine Patent Office” that KUNNAN could not meet.[17] KUNNAN further asserted that SUPERIOR deceived it into assigning its applications for registration of the “PRO KENNEX” trademark in favor of SUPERIOR, through an Assignment Agreement dated June 14, 1983 whose pertinent provisions state:[18]

1. In consideration of the distributorship relationship between

KUNNAN and Superior, KUNNAN, who is the seller in the distributorship relationship, agrees to assign the following trademark applications owned by itself in the Philippines to Superior who is the buyer in the distributorship relationship. Trademark Application Number Class PROKENNEX 49999 28 PROKENNEX 49998

25 PROKENNEX 49997 18

2. Superior shall acknowledge that KUNNAN is still the real and truthful owner of the abovementioned trademarks, and shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN. 3. Superior agrees that it will return back the abovementioned

trademarks to KUNNAN without hesitation at the request of KUNNAN at any time. KUNNAN agrees that the cost for the concerned assignment of the abovementioned trademarks shall be compensated by KUNNAN. 4. Superior agrees that the abovementioned trademarks when requested by KUNNAN shall be clean and without any incumbency.

5. Superior agrees that after the assignment of the abovementioned trademarks, it shall have no right to reassign or license the said trademarks to any other parties except KUNNAN. [Emphasis supplied]

Prior to and during the pendency of the

infringement and unfair competition case before the RTC, KUNNAN filed with the now defunct Bureau of Patents, Trademarks and Technology Transfer[19] separate Petitions for the Cancellation of Registration Trademark Nos. 41032, SR 6663, 40326, 39254, 4730 and 49998, docketed as Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813 and 3814, as well as Opposition to Application Serial

Nos. 84565 and 84566, docketed as Inter Partes Cases Nos. 4101 and 4102 (Consolidated Petitions for Cancellation) involving the KENNEX and PRO KENNEX trademarks.[20] In essence, KUNNAN filed the Petition for Cancellation and Opposition on the ground that SUPERIOR fraudulently registered and appropriated the disputed trademarks; as mere distributor and not as lawful owner, it obtained the registrations and assignments of the disputed trademarks in violation of the terms of the Distributorship Agreement and Sections 2-A and 17 of Republic Act No. 166, as amended.[21]

On December 3, 1991, upon the termination of its distributorship agreement with SUPERIOR, KUNNAN appointed SPORTS CONCEPT as its new distributor. Subsequently, KUNNAN also caused the publication of a Notice and Warning in the Manila Bulletin’s January 29, 1993 issue, stating that (1) it is the owner of the disputed trademarks; (2) it terminated its Distributorship Agreement with SUPERIOR; and (3) it appointed SPORTS CONCEPT as its exclusive distributor. This notice prompted SUPERIOR to file its Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction against KUNNAN.[22] The RTC Ruling On March 31, 1998, the RTC issued its decision[23] holding KUNNAN liable for trademark infringement and

unfair competition. The RTC also issued a writ of preliminary injunction enjoining KUNNAN and SPORTS CONCEPT from using the disputed trademarks.

The RTC found that SUPERIOR sufficiently proved

that it was the first user and owner of the disputed trademarks in the Philippines, based on the findings of the Director of Patents in Inter Partes Case No. 1709 and 1734 that SUPERIOR was “rightfully entitled to register the mark ‘KENNEX’ as user and owner thereof.” It also considered the “Whereas clause” of the Distributorship Agreement, which categorically stated that “KUNNAN intends to acquire ownership of [the] KENNEX trademark registered by SUPERIOR in the Philippines.” According to the RTC, this clause amounts to KUNNAN’s express recognition of SUPERIOR’s ownership of the KENNEX trademarks.[24]

KUNNAN and SPORTS CONCEPT appealed the RTC’s decision to the CA where the appeal was docketed as CA-G.R. CV No. 60777. KUNNAN maintained that SUPERIOR was merely its distributor and could not be the owner of the disputed trademarks. SUPERIOR, for its part, claimed ownership based on its prior use and numerous valid registrations. Intervening Developments: The IPO and CA Rulings

In the course of its appeal to the CA, KUNNAN filed on December 19, 2003 a Manifestation and Motion praying that the decision of the Bureau of Legal Affairs (BLA) of the Intellectual Property Office (IPO), dated October 30, 2003, in the Consolidated Petitions for Cancellation be made of record and be considered by the CA in resolving the case.[25] The BLA ruled in this decision –

In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and convincingly established its rights to the mark “PRO KENNEX”. It was proven that actual use by Respondent-Registrant is not in the concept of an owner but as a mere distributor (Exhibits “I”, “S” to “S-1”, “P” and “P-1” and “Q” and “Q-2”) and as enunciated in the case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50 SCRA 406, “a mere distributor of a product bearing a trademark, even if permitted to use said trademark has no right to and cannot register the said trademark.”

WHEREFORE, there being sufficient evidence to prove that the Petitioner-Opposer (KUNNAN) is the prior user and owner of the trademark “PRO-KENNEX”, the consolidated Petitions for

Cancellation and the Notices of Opposition are hereby GRANTED. Consequently, the trademark “PRO-KENNEX” bearing Registration Nos. 41032, 40326, 39254, 4730, 49998 for the mark PRO-KENNEX issued in favor of Superior Commercial Enterprises, Inc., herein Respondent-Registrant under the Principal Register and SR No. 6663 are hereby CANCELLED. Accordingly, trademark application Nos. 84565 and 84566, likewise for the registration of the mark PRO-KENNEX are hereby REJECTED. Let the file wrappers of PRO-KENNEX subject matter of these cases be forwarded to the Administrative Finance and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for information and update of its record.[26]

On February 4, 2005, KUNNAN again filed another

Manifestation requesting that the IPO Director General’s decision on appeal dated December 8, 2004, denying SUPERIOR’s appeal, be given weight in the disposition of

the case.[27] The dispositive portion of the decision reads:[28] WHEREFORE, premises

considered, there is no cogent reason to disturb Decision No. 2003-35 dated 30 October 2003 rendered by the Director of the Bureau of Legal Affairs. Accordingly, the instant appeal is DENIED and the appealed decision is hereby AFFIRMED.

We take judicial notice that SUPERIOR questioned the IPO Director General’s ruling before the Court of Appeals on a petition for review under Rule 43 of the Rules of Court, docketed as CA–G.R. SP No. 87928 (Registration Cancellation Case). On August 30, 2007, the CA rendered its decision dismissing SUPERIOR’s petition.[29] On December 3, 2007, the CA decision was declared final and executory and entry of judgment was accordingly made. Hence, SUPERIOR’s registration of the disputed trademarks now stands effectively cancelled. The CA Ruling

On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777, reversing and setting aside the RTC’s decision of March 31, 1998.[30] It dismissed SUPERIOR’s Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction on the ground that

SUPERIOR failed to establish by preponderance of evidence its claim of ownership over the KENNEX and PRO KENNEX trademarks. The CA found the Certificates of Principal and Supplemental Registrations and the “whereas clause” of the Distributorship Agreement insufficient to support SUPERIOR’s claim of ownership over the disputed trademarks. The CA stressed that SUPERIOR’s possession of the aforementioned Certificates of Principal Registration does not conclusively establish its ownership of the disputed trademarks as dominion over trademarks is not acquired by the fact of registration alone;[31] at best, registration merely raises a presumption of ownership that can be rebutted by contrary evidence.[32] The CA further emphasized that the Certificates of Supplemental Registration issued in SUPERIOR’s name do not even enjoy the presumption of ownership accorded to registration in the principal register; it does not amount to a prima facie evidence of the validity of registration or of the registrant’s exclusive right to use the trademarks in connection with the goods, business, or services specified in the certificate.[33]

In contrast with the failure of SUPERIOR’s evidence, the CA found that KUNNAN presented sufficient evidence to rebut SUPERIOR’s presumption of ownership over the trademarks. KUNNAN established that SUPERIOR, far from being the rightful owner of the disputed trademarks, was

merely KUNNAN’s exclusive distributor. This conclusion was based on three pieces of evidence that, to the CA, clearly established that SUPERIOR had no proprietary interest over the disputed trademarks.

First, the CA found that the Distributorship

Agreement, considered in its entirety, positively confirmed that SUPERIOR sought to be the KUNNAN’s exclusive distributor. The CA based this conclusion on the following provisions of the Distributorship Agreement:

(1) that SUPERIOR was “desirous of [being] appointed as the sole distributor by KUNNAN in the territory of the Philippines;” (2) that “KUNNAN will appoint the sole distributorship right to Superior in the Philippines;” and (3) that “no third parties will be permitted to supply KENNEX PRODUCTS in the Philippines except only to Superior.”

The CA thus emphasized that the RTC erred in

unduly relying on the first whereas clause, which states that “KUNNAN intends to acquire ownership of [the] KENNEX trademark registered by SUPERIOR in the Philippines”

without considering the entirety of the Distributorship Agreement indicating that SUPERIOR had been merely appointed by KUNNAN as its distributor.

Second, the CA also noted that SUPERIOR made the

express undertaking in the Assignment Agreement to “acknowledge that KUNNAN is still the real and truthful owner of the [PRO KENNEX] trademarks,” and that it “shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN.” To the CA, these provisions are clearly inconsistent with SUPERIOR’s claim of ownership of the disputed trademarks. The CA also observed that although the Assignment Agreement was a private document, its authenticity and due execution was proven by the similarity of Mr. Tan Bon Diong’s signature in the Distributorship Agreement and the Assignment Agreement.

Third, the CA also took note of SUPERIOR’s Letter

dated November 12, 1986 addressed to Brig. Gen. Jose Almonte, identifying itself as the “sole and exclusive licensee and distributor in the Philippines of all its KENNEX and PRO-KENNEX products.” Attached to the letter was an agreement with KUNNAN, identifying the latter as the “foreign manufacturer of all KENNEX products.” The CA concluded that in this letter, SUPERIOR acknowledged its status as a distributor in its dealings with KUNNAN, and even in its transactions with third persons.

Based on these reasons, the CA ruled that

SUPERIOR was a mere distributor and had no right to the registration of the disputed trademarks since the right to register a trademark is based on ownership. Citing Section 4 of Republic Act No. 166[34] and established jurisprudence,[35] the CA held that SUPERIOR – as an exclusive distributor – did not acquire any proprietary interest in the principal’s (KUNNAN’s) trademark.

The CA denied SUPERIOR’s motion for reconsideration for lack of merit in its Resolution dated October 4, 2005.

THE PETITION In the present petition, SUPERIOR raises the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS NOT THE TRUE AND RIGHTFUL OWNER OF THE TRADEMARKS “KENNEX” AND “PRO-KENNEX” IN THE PHILIPPINES

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS A MERE DISTRIBUTOR OF RESPONDENT KUNNAN IN THE PHILIPPINES

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT OF QUEZON CITY IN CIVIL CASE NO. Q-93-14888, LIFTING THE PRELIMINARY INJUNCTION ISSUED AGAINST RESPONDENTS KUNNAN AND SPORTS CONCEPT AND DISMISSING THE COMPLAINT FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION WITH PRELIMINARY INJUNCTION

THE COURT’S RULING

We do not find the petition meritorious. On the Issue of Trademark Infringement We first consider the effect of the final and executory decision in the Registration Cancellation Case on the present case. This decision - rendered after the CA decision for trademark infringement and unfair competition in CA-G.R. CV No. 60777 (root of the present case) - states:

As to whether respondent

Kunnan was able to overcome the presumption of ownership in favor of Superior, the former sufficiently established the fraudulent registration of the questioned trademarks by Superior. The Certificates of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal Register) for the KENNEX trademark were fraudulently obtained by petitioner Superior. Even before PROKENNEX products were imported by Superior into the Philippines, the same already enjoyed popularity in various countries and had been distributed worldwide, particularly among the sports and tennis enthusiasts since 1976. Riding on the said popularity, Superior caused the

registration thereof in the Philippines under its name when it knew fully well that it did not own nor did it manufacture the PROKENNEX products. Superior claimed ownership of the subject marks and failed to disclose in its application with the IPO that it was merely a distributor of KENNEX and PROKENNEX products in the Philippines. While Superior accepted the obligation to assign Certificates of Registration Nos. SR-4730 and 33487 to Kunnan in exchange for the appointment by the latter as its exclusive distributor, Superior however breached its obligation and failed to assign the same to Kunnan. In a letter dated 13 February 1987, Superior, through Mr. Tan Bon Diong, misrepresented to Kunnan that the latter cannot own trademarks in the Philippines. Thus, Kunnan was misled into assigning to Superior its (Kunnan’s) own application for the disputed trademarks. In the same assignment document, however. Superior was bound to ensure that the PROKENNEX trademarks under Registration Nos. 40326, 39254, and 49998

shall be returned to Kunnan clean and without any incumbency when requested by the latter. In fine, We see no error in the decision of the Director General of the IPO which affirmed the decision of the Director of the Bureau of Legal Affairs canceling the registration of the questioned marks in the name of petitioner Superior and denying its new application for registration, upon a finding that Superior is not the rightful owner of the subject marks. WHEREFORE, the foregoing considered, the petition is DISMISSED. The CA decided that the registration of the

“KENNEX” and “PRO KENNEX” trademarks should be cancelled because SUPERIOR was not the owner of, and could not in the first place have validly registered these trademarks. Thus, as of the finality of the CA decision on December 3, 2007, these trademark registrations were effectively cancelled and SUPERIOR was no longer the registrant of the disputed trademarks.

Section 22 of Republic Act No. 166, as amended

(“RA 166”),[36] the law applicable to this case, defines trademark infringement as follows:

Section 22. Infringement, what constitutes. — Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. [Emphasis supplied]

Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for infringement. Corollary to this, Section 19 of RA 166 provides that any right conferred upon

the registrant under the provisions of RA 166[37] terminates when the judgment or order of cancellation has become final, viz:

Section 19. Cancellation of registration. - If the Director finds that a case for cancellation has been made out he shall order the cancellation of the registration. The order shall not become effective until the period for appeal has elapsed, or if appeal is taken, until the judgment on appeal becomes final. When the order or judgment becomes final, any right conferred by such registration upon the registrant or any person in interest of record shall terminate. Notice of cancellation shall be published in the Official Gazette. [Emphasis supplied.] Thus, we have previously held that the cancellation

of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final.[38]

In the present case, by operation of law, specifically

Section 19 of RA 166, the trademark infringement aspect of SUPERIOR’s case has been rendered moot and academic in view of the finality of the decision in the Registration Cancellation Case. In short, SUPERIOR is left without any

cause of action for trademark infringement since the cancellation of registration of a trademark deprived it of protection from infringement from the moment judgment or order of cancellation became final. To be sure, in a trademark infringement, title to the trademark is indispensable to a valid cause of action and such title is shown by its certificate of registration.[39] With its certificates of registration over the disputed trademarks effectively cancelled with finality, SUPERIOR’s case for trademark infringement lost its legal basis and no longer presented a valid cause of action. Even assuming that SUPERIOR’s case for trademark infringement had not been rendered moot and academic, there can be no infringement committed by KUNNAN who was adjudged with finality to be the rightful owner of the disputed trademarks in the Registration Cancellation Case. Even prior to the cancellation of the registration of the disputed trademarks, SUPERIOR – as a mere distributor and not the owner – cannot assert any protection from trademark infringement as it had no right in the first place to the registration of the disputed trademarks. In fact, jurisprudence holds that in the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate before application for registration is filed.[40] Thus,

the CA in the Registration Cancellation Case correctly held:

As a mere distributor, petitioner Superior undoubtedly had no right to register the questioned mark in its name. Well-entrenched in our jurisdiction is the rule that the right to register a trademark should be based on ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply for the registration of the same. Under the Trademark Law, only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. An exclusive distributor does not acquire any proprietary interest in the principal’s trademark and cannot register it in his own name unless it is has been validly assigned to him.

In addition, we also note that the doctrine of res

judicata bars SUPERIOR’s present case for trademark infringement. The doctrine of res judicata embraces two (2) concepts: the first is "bar by prior judgment" under paragraph (b) of Rule 39, Section 47, and the second is "conclusiveness of judgment" under paragraph (c) thereof.

In the present case, the second concept –

conclusiveness of judgment – applies. Under the concept of res judicata by conclusiveness of judgment, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit.[41] Stated differently, facts and issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties, even if the latter suit may involve a different cause of action.[42] This second branch of the principle of res judicata bars the re-litigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action.[43]

Because the Registration Cancellation Case and the

present case involve the same parties, litigating with respect to and disputing the same trademarks, we are bound to examine how one case would affect the other. In the present case, even if the causes of action of the Registration Cancellation Case (the cancellation of trademark registration) differs from that of the present case (the improper or unauthorized use of trademarks), the final judgment in the Registration Cancellation Case is nevertheless conclusive on the particular facts and issues that are determinative of the present case.

To establish trademark infringement, the following

elements must be proven: (1) the validity of plaintiff’s mark;

(2) the plaintiff’s ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in “likelihood of confusion.”[44]

Based on these elements, we find it immediately

obvious that the second element – the plaintiff’s ownership of the mark – was what the Registration Cancellation Case decided with finality. On this element depended the validity of the registrations that, on their own, only gave rise to the presumption of, but was not conclusive on, the issue of ownership.[45]

In no uncertain terms, the appellate court in the

Registration Cancellation Case ruled that SUPERIOR was a mere distributor and could not have been the owner, and was thus an invalid registrant of the disputed trademarks. Significantly, these are the exact terms of the ruling the CA arrived at in the present petition now under our review. Thus, whether with one or the other, the ruling on the issue of ownership of the trademarks is the same. Given, however, the final and executory ruling in the Registration Cancellation Case on the issue of ownership that binds us and the parties, any further discussion and review of the issue of ownership – although the current CA ruling is legally correct and can stand on its own merits – becomes a pointless academic discussion.

On the Issue of Unfair Competition

Our review of the records shows that the neither the RTC nor the CA made any factual findings with respect to the issue of unfair competition. In its Complaint, SUPERIOR alleged that:[46]

17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises, Ltd., is intending to appoint the defendant Sports Concept and Distributors, Inc. as its alleged distributor for sportswear and sporting goods bearing the trademark “PRO-KENNEX.” For this reason, on January 20, 1993, the plaintiff, through counsel, wrote the defendant Sports Concept and Distributor’s Inc. advising said defendant that the trademark “PRO-KENNEX” was registered and owned by the plaintiff herein. 18. The above information was affirmed by an announcement made by the defendants in The Manila Bulletin issue of January 29, 1993, informing the public that defendant Kunnan Enterprises, Ltd. has appointed the defendant Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and sporting goods and equipment bearing the trademarks “KENNEX and “PRO-

KENNEX” which trademarks are owned by and registered in the name of plaintiff herein as alleged hereinabove.

x x x x

27. The acts of defendants, as previously complained herein, were designed to and are of the nature so as to create confusion with the commercial activities of plaintiff in the Philippines and is liable to mislead the public as to the nature and suitability for their purposes of plaintiff’s business and the defendant’s acts are likely to discredit the commercial activities and future growth of plaintiff’s business. From jurisprudence, unfair competition has been

defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition[47] are (1) confusing similarity in the general appearance of the goods; and (2) intent to deceive the public and defraud a competitor.[48]

Jurisprudence also formulated the following “true

test” of unfair competition: whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of 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, actual or probable must be shown before the right to recover can exist.[49]

In the present case, no evidence exists showing that

KUNNAN ever attempted to pass off the goods it sold (i.e. sportswear, sporting goods and equipment) as those of SUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to adduce any evidence to show that KUNNAN by the above-cited acts intended to deceive the public as to the identity of the goods sold or of the manufacturer of the goods sold. In McDonald’s Corporation v. L.C. Big Mak Burger, Inc.,[50] we held that there can be trademark infringement without unfair competition such 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. In this case, no issue of confusion arises because the same manufactured products are sold; only the ownership of the trademarks is at issue. Furthermore, KUNNAN’s January 29, 1993 notice by its terms prevents the public from being deceived that the goods originated from

SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer of the goods bearing the trademarks “KENNEX” and “PRO KENNEX.” This notice states in full:[51]

NOTICE AND WARNING

Kunnan Enterprises Ltd. is the

owner and first user of the internationally-renowned trademarks KENNEX and PRO KENNEX for sportswear and sporting goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks KENNEX and PRO KENNEX in the industrial property offices of at least 31 countries worldwide where KUNNAN Enterprises Ltd. has been selling its sportswear and sporting goods and equipment bearing the KENNEX and PRO KENNEX trademarks.

Kunnan Enterprises Ltd. further informs the public that it had terminated its Distributorship Agreement with Superior Commercial Enterprises, Inc. on December 31, 1991. As a result, Superior Commercial Enterprises, Inc. is no longer authorized to sell sportswear and

sporting goods and equipment manufactured by Kunnan Enterprises Ltd. and bearing the trademarks KENNEX and PRO KENNEX.

x x x x

In its place, KUNNAN has

appointed SPORTS CONCEPT AND DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO KENNEX. The public is advised to buy sporting goods and equipment bearing these trademarks only from SPORTS CONCEPT AND DISTRIBUTORS, INC. to ensure that the products they are buying are manufactured by Kunnan Enterprises Ltd. [Emphasis supplied.]

Finally, with the established ruling that KUNNAN is

the rightful owner of the trademarks of the goods that SUPERIOR asserts are being unfairly sold by KUNNAN under trademarks registered in SUPERIOR’s name, the latter is left with no effective right to make a claim. In other words, with the CA’s final ruling in the Registration Cancellation Case,

SUPERIOR’s case no longer presents a valid cause of action. For this reason, the unfair competition aspect of the SUPERIOR’s case likewise falls.

WHEREFORE, premises considered, we DENY Superior Commercial Enterprises, Inc.’s petition for review on certiorari for lack of merit. Cost against petitioner Superior Commercial Enterprises, Inc.

SO ORDERED. G.R. No. 179127 December 24, 2008

IN-N-OUT BURGER, INC., petitioner, vs. SEHWANI, INCORPORATED AND/OR BENITA’S FRITES, INC., respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1 dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision2 dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and

the IPO Director General do not have jurisdiction over cases involving unfair competition.

Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. 3

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.4

On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for "IN-N-OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark "IN N OUT (the inside of the letter "O" formed like a star)."5 By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated.

Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following

trademarks: (1) "IN-N-OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger Logo." These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use.6 Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioner’s products.7

Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark "IN-N-OUT" and to voluntarily cancel its trademark registration. In a letter-reply dated 23 October 2000, respondents refused to accede to petitioner’ demand, but expressed willingness to surrender the registration of respondent Sehwani, Incorporated of the "IN N OUT" trademark for a fair and reasonable consideration. 8

Petitioner was able to register the mark "Double Double" on 4 July 2002, based on their application filed on 2 June 1997.9 It alleged that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that respondent Benita’s receipts bore the phrase, "representing IN-N-OUT Burger."10 It should be noted that that although respondent Sehwahi, Incorporated registered a mark which appeared as

"IN N OUT (the inside of the letter "O" formed like a star)," respondents used the mark "IN-N-OUT."11

To counter petitioner’s complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted therein that they had been using the mark "IN N OUT" in the Philippines since 15 October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the mark "IN N OUT (the inside of the letter "O" formed like a star)." Upon approval of its application, a certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, "IN N OUT." Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark "IN N OUT," should be accorded the presumption of a valid registration of its mark with the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for the cancellation of a certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never operated in the Philippines.12

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,13 in favor of petitioner. According to said Decision, petitioner had the legal capacity to sue in the Philippines, since

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

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark "IN-N-OUT" (the inside of the letter "O" formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benita’s Frites are hereby

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

Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents’ Motion for Reconsideration15 and petitioner’s Motion for Partial Reconsideration16 were denied by the IPO Director for Legal Affairs in Resolution No. 2004-1817 dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,18 respectively.

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

G.R. No. 171053

On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal.

Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A MERE TECHNICALITY

THE BUREAU OF LEGAL AFFAIR’S (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENT’S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE.

Respondents thus prayed:

WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order the Office of the Director General of the Intellectual Property Office to reinstate and give due course to

[respondent]’s Appeal No. 14-2004-00004.

Other reliefs, just and equitable under the premises, are likewise prayed for.

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents’ Petition in CA-G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that respondents’ appeal before the IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal Affairs was likewise affirmed. On 10 November 2005, respondents moved for the reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration.

Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.19

This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,20 finding that herein respondents failed to file their Appeal Memorandum before the IPO Director General

within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008.

G.R. No. 179127

Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005.

During the pendency of petitioner’s appeal before the IPO Director General, the Court of Appeals already rendered on 21 October 2005 its Decision dismissing respondents’ Petition in CA-G.R. SP No. 88004.

In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioner’s appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite

respondents’ claims that they had been using the mark since 1982, they only started constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark "IN-N-OUT." Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter "O," a minor difference which still deceived purchasers. Respondents were not even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief over the respondents’ reasoning for the non-use of the star symbol. The IPO Director General also considered respondents’ use of petitioner’s registered mark "Double-Double" as a sign of bad faith and an intent to mislead the public. Thus, the IPO Director General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents’ acts of unfair competition, exemplary damages, and attorney’s fees.21 The fallo of the Decision reads:

WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED as follows:

[Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]:

1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28);

2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00);

3. Attorney’s fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00).

All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside the channels of commerce.

Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and Technology Transfer Bureau for their information and records purposes.22

Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the appellate court on the following grounds:

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO PAY DAMAGES AND ATTORNEY’S FEES TO RESPONDENTS

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIR’S DECISION (1) CANCELLING PETITIONER’S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS

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

At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer:

WHEREFORE, [respondents herein] respectfully pray that this Honorable Court:

(a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO Director General’s Decision dated 23

December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from this Honorable Court.

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

(c) after giving due course to this petition:

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

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

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

(iv) make the injunction permanent.

[Respondents] also pray for other reliefs, as may deemed just or equitable.24

On 18 July 2006, the Court of Appeals promulgated a Decision25 in CA-G.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the IPO Director General.

The Court of Appeals, in its Decision, initially addressed petitioner’s assertion that respondents had committed forum shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping, distinguishing between the respondents’ two Petitions. The subject of Respondents’ Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO Director General dismissing respondents’ appeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents’ Petition in CA-G.R. SP No. 92785 sought the review of the 23 December 2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and the awarding of actual and exemplary damages, as well as attorney’s fees, to petitioner.

The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks. Consequently, the IPO Director General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of these provisions of the Intellectual Property Code.

In the end, the Court of Appeals decreed:

WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondent’s claims in its Complaint docketed as IPV No. 10-2001-00004 are hereby DISMISSED.26

The Court of Appeals, in a Resolution dated 31 July 2007,27 denied petitioner’s Motion for Reconsideration of its aforementioned Decision.

Hence, the present Petition, where petitioner raises the following issues:

I

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;

II

WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

III

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

As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision29 in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director General’s dismissal of respondents’ appeal for being filed beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of respondent Sehwani, Incorporated and enjoining

respondents from using the disputed marks.

Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other.

Formal Defects of the Petition

Respondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition.

Respondents point out that the Secretary’s Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers of Villaraza and Angangco to represent it in the present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretary’s Certificate reads:

Subscribed and sworn to me this 20th day of August 2007 in Irving California.

Rachel A. Blake (Sgd.) Notary Public30

Respondents aver that the said Secretary’s Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state that: (1)

petitioner’s Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.31

Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty. Baranda’s Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of attorneys’ number and the IBP membership number; and (4) a statement that the Verification/Certification was notarized within the notary public’s territorial jurisdiction, as required under the 2004 Rules on Notarial Practice. 32

Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements enumerated therein refer to documents which require an acknowledgement, and not a mere jurat.

A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually declares to the notary that the executor of a document has attested to the notary that the same is his/her own free act

and deed.33 A Secretary’s Certificate, as that executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only requires a jurat.34

Even assuming that the Secretary’s Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. 35 The party itself need not sign the verification. A party’s representative, lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the verification.36 Atty. Barranda, as petitioner’s counsel, was in the position to verify the truth and correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such.

Moreover, the Court deems it proper not to focus on the supposed technical infirmities of Atty. Baranda’s Verification. It must be borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and non-compliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for compelling reasons.37 The vital issues raised in the instant Petition on the jurisdiction of the IPO Director for Legal Affairs

and the IPO Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due course and resolve the same on the merits.

This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their jurats or notarial certificates. Parties and their counsel should take care not to abuse the Court’s zeal to resolve cases on their merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in their proper form before presenting said documents before Philippine courts.

Forum Shopping

Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their earlier filing of the Petition in CA-G.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting to the Court of Appeals a patently false Certification of Non-forum Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004.

Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as

trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues.38

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under consideration.39

After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would at first seem that respondents are guilty of forum shopping.

There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that "[T]he Bureau of Legal Affair’s (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]’s certificate of registration for the mark ‘IN-N-OUT’ and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business are contrary to law and/or is (sic) not supported by evidence."40 The same ground was again invoked by

respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows: "The IPO Director General committed grave error in affirming the Bureau of Legal Affair’s (sic) Decision (1) canceling [herein respondent Sehwani, Incorporated]’s certificate of registration for the mark "IN-N-OUT," and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business."41 Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle of res judicata.

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

In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals.

True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional.42 Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances.

The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in

connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances.

The Jurisdiction of the IPO

The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision:

Section 163. Jurisdiction of Court.–All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws.

The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation.

The Court disagrees with the Court of Appeals.

Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus:

Section 10. The Bureau of Legal Affairs.–The Bureau of Legal Affairs shall have the following functions:

10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents;

10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings.

(b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties:

(i) The issuance of a cease and desist order which shall

specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order;

(ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following:

(1) An assurance to comply with the provisions of the intellectual property law violated;

(2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation

(3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce; and

(4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the Bureau of Legal Affairs.

The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to guarantee compliance of his undertaking.

(iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale, donation to distressed local governments or to charitable or relief

institutions, exportation, recycling into other goods, or any combination thereof, under such guidelines as he may provide;

(iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of the offense;

(v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each day of continuing violation;

(vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable which shall not exceed one (1) year;

(vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from the Office;

(viii) The assessment of damages;

(ix) Censure; and

(x) Other analogous penalties or sanctions.

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

Unquestionably, petitioner’s complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani, Incorporated, and damages for violation of petitioner’s intellectual property rights, falls within the jurisdiction of the IPO Director of Legal Affairs.

The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of the IPO Director of Legal Affairs, to wit:

Section 7. The Director General and Deputies Director General. 7.1 Fuctions.–The Director General shall exercise the following powers and functions:

x x x x

b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau

shall be appealable to the Secretary of Trade and Industry;

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts.

Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read:

Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action.–Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not

it is licensed to do business in the Philippines under existing laws.

x x x x

Section 170. Penalties.–Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section168, and Subsection169.1.

Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioner’s administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs.

Unfair Competition

The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark "IN-N-OUT" and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R. No. 171053,

Sehwani, Incorporated v. In-N-Out Burger,44 ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the "IN-N-OUT" trademarks vis-à-vis respondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same.45

Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner.

The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown.46

In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence

of unfair competition in this case, viz:

The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter "O" Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioner’s] registered mark Double-Double for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioner’s] IN-N-OUT Burger’s name and trademark IN-N-OUT with Arrow design.

There is no evidence that the [respondents] were authorized by the [petitioner] to use the latter’s marks in the business. [Respondents’] explanation that they are not using their own registered trademark due to the difficulty in printing the "star" does not justify the unauthorized use of the [petitioner’s] trademark instead.

Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as

packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x.

x x x x

[Respondents’] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit "GG," which shows the business establishment of [respondents] illustrates the imitation of [petitioner’s] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held:

"We also note that In-N-Out Burger is likewise, [petitioner’s] corporate name. It has used the "IN-N-OUT" Burger name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has the exclusive right to use the tradenems "In-N-Out" Burger in the Philippines and the respondents’ are unlawfully using and appropriating the same."

The Office cannot give credence to the [respondent’s] claim of good faith and that they have openly and continuously used the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason of

respondents’ practices must always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable.

In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not.

[Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants’] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] even indicate "representing IN-N-OUT." These acts cannot be considered acts in good faith. 47

Administrative proceedings are governed by the "substantial evidence rule." A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.48 As recounted by the IPO Director General in his

decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition.

With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner:

Section 156. Actions, and Damages and Injunction for Infringement.–156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party.

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

public or defraud the petitioner,49 thus, arriving at the amount of actual damages of P212,574.28.

Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action.50 While there is no hard and fast rule in determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered.51 Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded.

In accordance with Article 2208(1) of the Civil Code, attorney’s fees may likewise be awarded to petitioner since exemplary damages are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven years, despite the respondent’s failure to present countervailing evidence. Considering moreover the reputation of petitioner’s counsel, the actual attorney’s fees paid by petitioner would far exceed the amount that was awarded to it.52

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

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.

FACTS:

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.

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. The respondents also filed motions for the return of their shells and to quash the search warrant. 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 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 Pepsi shells are prima facie evidence that the bottles were placed there by the respondents. 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 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. ISSUE: 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. HELD: NO. 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. In the context of the present case, the question is whether the act charged - alleged to be hoarding of empty Coke bottles - constitutes an offense under Section 168.3 (c) of the IP Code. Section 168 in its entirety states:

SECTION 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. 168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. 168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to

believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.

168.4. The remedies provided by Sections 156, 157 and 161 shall apply mutatis mutandis. (Sec. 29,� R.A. No. 166a)

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. It formulated the "true test" of unfair competition: whether the acts of defendant are such as are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions which prevail in the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive must be shown before the right to recover can exist. The advent of the IP Code has not significantly

changed these rulings as they are fully in accord with what Section 168 of the Code in its entirety provides. Deception, passing off and fraud upon the public are still the key elements that must be present for unfair competition to exist. The act alleged to violate the petitioner's rights under Section 168.3 (c) is hoarding which we gather to be the collection of the petitioner's empty bottles so that they can be withdrawn from circulation and thus impede the circulation of the petitioner's bottled products. This, according to the petitioner, is an act contrary to good faith - a conclusion that, if true, is indeed an unfair act on the part of the respondents. The critical question, however, is not the intrinsic unfairness of the act of hoarding; what is critical for purposes of Section 168.3 (c) is to determine if the hoarding, as charged, "is of a nature calculated to discredit the goods, business or services" of the petitioner. We hold that it is not. Hoarding as defined by the petitioner is not even an act within the contemplation of the IP Code. Under all the above approaches, we conclude that the "hoarding" - as defined and charged by the petitioner - does not fall within the coverage of the IP Code and of Section 168 in particular. It does not relate to any patent, trademark, trade name or service mark that the respondents have invaded, intruded into or used without proper authority from the petitioner. Nor are the respondents alleged to be fraudulently "passing off" their products or services as those of the petitioner. The respondents are not also alleged to be undertaking any representation or misrepresentation that would confuse or tend to confuse the goods of the petitioner with those of the respondents, or vice versa. What in fact the petitioner alleges is an act foreign to the Code, to the concepts it embodies and to the acts it regulates; as alleged, hoarding inflicts unfairness by seeking to limit the

opposition's sales by depriving it of the bottles it can use for these sales. 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.

LA CHEMISE LACOSTE, S. A. vs. FERNANDEZ and GOBINDRAM HEMANDAS G.R. Nos. 63796-97. May 21, 1984

Facts:

•  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 years later, it applied for the registration of the same trademark under the Principal Register.

•  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

•  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.

•  Search warrants based on violation of Art. 189 of RPC were issued against Hemandas

•  Hemandas filed a motion to quash the search warrants and the same was granted by the respondent court

Ratio Decidendi:

• 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.  

• Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorial boundaries 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.

• The case filed by petitioner is a criminal case. Since the violation is against the State, petitioner's capacity to sue would become, therefore, of not much significance. 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.  

• 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, is 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.  

• 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.  

• 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  

• 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.

Issue of probable cause: •  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

•  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

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

based on sound and valid grounds. In this case, there was no compelling justification for the about face.

SupplementalRegistration

• 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)  

• 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:  

◦  

"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."

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

evidence of...  

o thevalidityofregistration;  o theregistrant'sownershipofthemark  o and the 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  

prejudicial question  

• 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.  

• 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.

•  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.

Provisions

RPC: Art. 189. Unfair competition, fraudulent registration of trade-mark, trade-name or service mark, fraudulent designation of origin, and false description. — The penalty provided in the next proceeding article shall be imposed upon:

1. Any person who, in unfair competition and for the purposes of deceiving or defrauding another of his legitimate trade or the public in general, shall sell his goods giving 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 device or words thereon or in any other features of their appearance which would be likely to induce the public to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer or shall give other persons a chance or opportunity to do the same with a like purpose.

2. Any person who shall affix, apply, annex or use in connection with any goods or services or any container or containers for goods a false designation of origin or any false description or representation and shall sell such goods or services.

3. Any person who by means of false or fraudulent representation or declarations orally or in writing or by other fraudulent means shall procure from the patent office or from any other office which may hereafter be established by law for the purposes the registration of a trade-name, trade-mark or service mark or of himself as the owner of such trade-name, trade-mark or service mark or an entry respecting a trade-name, trade-mark or service mark.

Section 21-A of Republic Act No. 166

"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 false designation 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."

Rule I, Sec 1 (g) Omnibus Investment Code(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 the name 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."

La  Chemise  Lacoste  vs.  Fernandez  

GR  63796-­‐97,  21  May  1984;  First  Division,  Gutierrez  Jr.  (J)  

Facts:  La  chemise  Lacoste  is  a  French  corporation  and  the  actual  owner   of   the   trademarks   “Lacoste,”   “Chemise   Lacoste,”  “Crocodile  Device”  and  a  composite  mark  consisting  of  the  word  “Lacoste”   and  a   representation  of   a   crocodile/alligator,   used  on  clothings   and   other   goods   sold   in  many   parts   of   the  world   and  which  has  been  marketed  in  the  Philippines  (notably  by  Rustans)  since   1964.   In   1975   and   1977,   Hemandas   Q.   Co.   was   issued  certificate   of   registration   for   the   trademark   “Chemise   Lacoste  and  Q  Crocodile  Device”  both   in  the  supplemental  and  Principal  Registry.   In   1980,   La   Chemise   Lacoste   SA   filed   for   the  registration  of   the   “Crocodile  device”   and   “Lacoste”.  Games   and  Garments   (Gobindram  Hemandas,   assignee   of   Hemandas   Q.Co.)  opposed  the  registration  of  “Lacoste.”  

In  1983,  La  Chemise  Lacoste  filed  with  the  NBI  a  letter-­‐complaint  alleging  acts  of  unfair  competition  committed  by  Hemandas  and  requesting  the  agency’s  assistance.  A  search  warrant  was  issued  by   the   trial   court.   Various   goods   and   articles  were   seized   upon  the   execution  of   the  warrants.  Hemandas   filed  motion   to  quash  the  warrants,  which  the  court  granted.  The  search  warrants  were  

recalled,   and   the   goods   ordered   to   be   returned.   La   Chemise  Lacoste  filed  a  petition  for  certiorari.  

Issue:   Whether   the   proceedings   before   the   patent   office   is   a  prejudicial  question  that  need  to  be  resolved  before  the  criminal  action  for  unfair  competition  may  be  pursued.  

Held:   No.   The   proceedings   pending   before   the   Patent   Office   do  not   partake   of   the   nature   of   a   prejudicial   question  which  must  first  be  definitely  resolved.  The  case  which  suspends  the  criminal  action  must  be  a  civil  case,  not  a  mere  administrative  case,  which  is   determinative   of   the   innocence   or   guilt   of   the   accused.   The  issue   whether   a   trademark   used   is   different   from   another’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.  

Inasmuch  as  the  goodwill  and  reputation  of  La  Chemise  Lacoste  products   date   back   even   before   1964,   Hemandas   cannot   be  allowed  to  continue  the  trademark  “Lacoste”  for  the  reason  that  he   was   the   first   registrant   in   the   Supplemental   Register   of   a  trademark   used   in   international   commerce.   Registration   in   the  Supplemental   Register   cannot   be   given   a   posture   as   if   the  registration  is  in  the  Principal  Register.  It  must  be  noted  that  one  may   be   declared   an   unfair   competitor   even   if   his   competing  trademark  is  registered.  La  Chemise  Lacoste   is  world  renowned  mark,  and  by  virtue  of   the  20  November  1980  Memorandum  of  the   Minister   of   Trade   to   the   director   of   patents   in   compliance  with   the   Paris   Convention   for   the   protection   of   industrial  

property,   effectively   cancels   the   registration   of   contrary  claimants  to  the  enumerated  marks,  which  include  “Lacoste.”  

Leviton Industries vs. Salvador (114 SCRA 420); does not apply in the present case The Leviton case involved a complaint for unfair competition under Section 21-A of Republic Act 166. It was not enough for Leviton, a foreign corporation organized and existing under the laws of the State of New York, USA, to merely allege that it is a foreign corporation. Compliance with the requirements imposed by the provision was necessary because Section 21-A of RA 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 Philippine 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. 2. Section 21-A of RA 166 Section 21-A provides that “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 false designation 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.” 3. Mentholatum Co. Inc. vs. Mangaliman likewise not applicable In 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. Therein, the Philippine-American Drug Co., Inc., was admittedly selling products of its principal, Mentholatum Co., Inc., in the latter’s name or for the latter’s account. Thus, it was 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, La Chemise Lacoste 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 La Chemise Lacoste 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 La Chemise Lacoste. Clearly, the Mentholatum case is distinct from and inapplicable to the case at bar. 4. “Doing business” defined; La Chemise Lacoste not doing business in the Philippines, Rustan a middleman Rule I, Sec 1 (g) of the rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree 1789 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 the name 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.” Applying the above provisions to the case, La Chemise Lacoste 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 La chemise Lacoste. 5. Foreign corporation not doing business in the Philippines needs no license to sue for infringement of trademark and unfair competition As early as 1927, it was held 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. In Western Equipment and Supply Co. v. Reyes (51 Phil. 115), it was held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business, 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 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. 6. Enforcement of rights on trademark, not legal or control rights arising from business, acknowledges no territorial boundaries 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.) ‘Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorial boundaries 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 Hanover Star Mining Co. v. Allen and Wheeler Co. [208 Fed., 513]). 6. Capacity to sue of a foreign corporation not doing business in the Philippines; Illustrative cases Philippine 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. 7. Possible violator of criminal statute cannot escape prosecution on the ground that the aggrieved party has no standing to sue; Criminal offense is an act against the State What preceded the 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 La Chemise Lacoste 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. La Chemise Lacoste’s capacity to sue would become, therefore, of not much significance in the main case. A possible violator of Philippine criminal statutes cannot be allowed

to escape prosecution upon a far-fetched contention that the aggrieved party or victim of a crime has no standing to sue. 8. Recognition of duties of the country as signatory of the Paris Convention for the Protection of Industrial Property In upholding the right of La Chemise Lacoste to maintain the present suit before Philippine courts for unfair competition or infringement of trademarks of a foreign corporation, the Court recognizing duties of the Philippines and the rights of foreign states under the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. The Court is 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 Philippine national interest to do so. 9. Article 1 (1, 2), Paris Convention Article 1 provides that “(1) The countries to which the present Convention applies constitute themselves into a Union for the protection of industrial property. (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” 10. Article 2 (2), Paris Convention Article 2 provides that “xxx (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” 11. Article 6bis (1), Paris Convention Article 6bis provides that “(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” 12. Article 8, Paris Convention Article 8 provides that “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” 13. Article 10bis (1), Paris Convention Article 10bis provides that “(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” 14. Article 10ter (1, 2), Paris Convention Article 10ter provides that “ (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” 15. Article 17, Paris Convention Article 17 provides that “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.” 16. Extraterritorial application of the Paris Convention; Vanity Mills Inc. vs. Eaton Co. (234 F. 2d 633) 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 trade- mark 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.” 17. Principle of comity to applied in present case Herein, La Chemise Lacoste should be given the same treatment in the Philippines as what is made available to its own citizens. The Philippines is 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. 18. Pacta Sunt Servanda; 20 November 1980 memorandum of the Ministry of Trade to the Director of the Patents Office not a personal policy Pursuant to the international obligation of the Philippines, on 20 November 1980, the Ministry of Trade issued a memorandum addressed to the Director of the Patents Office directing the latter to reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users. The conflicting claims over

internationally known trademarks involve such name brands as Lacoste, Jordache, 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 Philippine avowed adherence to a policy of cooperation and amity with all nations. It is not 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. The memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed. 19. Determination of probable cause mandatory for the issuance of a valid search warrant; Probable cause defined 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). 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). 20. Determination of probable cause; No general formula or fixed rule The 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). There is no general formula or fixed rule for the determination of the existence of probable cause since the existence depends to a large degree upon the finding or opinion of the judge conducting the examination (Luna v. Plaza, 26 SCRA 310),. 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. 21. Correction of errors must be based on sound and valid grounds Herein, the court complied with the constitutional and statutory requirements for the issuance of a valid search warrant when 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 court executed a complete turnabout and declared that there was no probable cause to justify its earlier issuance of the warrants. Although the lower court should be given

the opportunity to correct its errors, if there be any, but the rectification must be based on sound and valid grounds. The allegation that vital facts were deliberately suppressed or concealed by La Chemise Lacoste 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. 22. Application for a search warrant is heard ex parte 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. Herein, the allegation of Hemandas that the applicant withheld information from the court was clearly no basis to order the return of the seized items. 23. Certificate of registration in the Supplemental Register not prima facie evidence of validity of registration 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).

24. Section 19-A, RA 166 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 “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.” 25. Rationale of Section 19-A 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)” 26. Registration in the Supplemental Register merely serves as notice 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. 27. One may be an unfair competitor even if his competing trademark is registered The reliance of Hemandas on the last sentence of the Patent office action on application Serial 30954 that “registrant is presumed to be the owner of the mark until after the registration is declared cancelled” is 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 in the petitions, 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. One may be declared an unfair competitor even if his competing trademark is registered. 28. Proceedings before Patent Office do not partake nature of prejudicial question; Section 5, Rule 111 The proceedings pending before the Patent Office (involving IPC 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 “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. 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 the present case. 29. CA case La Chemise Lacoste vs. Sadhwani The same 20 November 1980 memorandum of the Minister of Trade was involved in the appellate court’s decision in La Chemise Lacoste S. A. v. Ram Sadhwani (AC-GR SP-13356, 17 June 1983). The Minister of Trade 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 was challenged. The

Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision 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. 30. Due process vis-à-vis the Minister’s determination in his memorandum; Section 9 of RA 166 not applicable to situations covered by the Paris Convention Due process is a rule of reason. The order of the Patent Office is based not only on the undisputed fact of ownership of the trademark 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 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. Section 9 of RA 166, which requires notice and hearing whenever an opposition to the registration of a trademark is made, does not apply 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 RA 166, would be superfluous.

31. Difference in trademark to be resolved in criminal proceedings not in preliminary matter in an administrative proceedings 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. 32. Purpose of the law protecting a trademark 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 bringing into 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). 33. Purpose of enactment of trademark laws 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).

34. Basis of law on trademarks and tradenames 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). 35. Ruling in favor of first registrant in the Supplemental Register will render the essence of trademark laws nugatory The records show that the goodwill and reputation of La Chemise Lacoste’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. 36. The Court’s order to the Director of Patents 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 the Court to those facts.

37. Real victims of counterfeit consumer items The Court stresses its 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 the Philippines. 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 913 dated 7 October 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. Filipinos 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. 38. Court processes should not be used as instrument to tie the hands of the law 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.

G.R. No. 75067 February 26, 1988

PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner vs. THE INTERMEDIATE APPELLATE COURT and MIL-ORO MANUFACTURING CORPORATION, respondents.

GUTIERREZ, JR., J.:

This is a petition for review by way of certiorari of the Court of Appeals' decision which reversed the order of the Regional Trial Court and dismissed the civil case filed by the petitioner on the grounds of litis pendentia and lack of legal capacity to sue.

On July 25, 1985, the petitioner, a foreign corporation duly organized and existing under the laws of the Federal Republic of Germany and the manufacturer and producer of "PUMA PRODUCTS," filed a complaint for infringement of patent or trademark with a prayer for the

issuance of a writ of preliminary injunction against the private respondent before the Regional Trial Court of Makati.

Prior to the filing of the said civil suit, three cases were pending before the Philippine Patent Office, namely:

Inter Partes Case No. 1259 entitled 'PUMA SPORTSCHUHFABRIKEN v. MIL-ORO MANUFACTURING CORPORATION, respondent-applicant which is an opposition to the registration of petitioner's trademark 'PUMA and DEVICE' in the PRINCIPAL REGISTER;

Inter Partes Case No. 1675 similarly entitled, 'PUMA SPORTSCHUHFABRIKEN RUDOLF DASSLER, K.G., petitioner, versus MIL-ORO MANUFACTURING CORPORATION, respondent-registrant,' which is a case for the cancellation of the trademark registration of the petitioner; and

Inter Partes Case No. 1945 also between the same parties this time the petitioner praying for

the cancellation of private respondent's Certificate of Registration No. 26875 (pp. 40-41, 255, Rollo) (pp. 51 -52, Rollo)

On July 31, 1985, the trial court issued a temporary restraining order, restraining the private respondent and the Director of Patents from using the trademark "PUMA' or any reproduction, counterfeit copy or colorable imitation thereof, and to withdraw from the market all products bearing the same trademark.

On August 9, 1985, the private respondent filed a motion to dismiss on the grounds that the petitioners' complaint states no cause of action, petitioner has no legal personality to sue, and litis pendentia.

On August 19, 1985, the trial court denied the motion to dismiss and at the same time granted the petitioner's application for a writ of injunction. The private respondents appealed to the Court of Appeals.

On June 23, 1986, the Court of Appeals reversed

the order of the trial court and ordered the respondent judge to dismiss the civil case filed by the petitioner.

In reversing the order of the trial court, the Court of Appeals ruled that the requisites of lis pendens as ground for the motion to dismiss have been met. It said:

Obviously, the parties are Identical. They are the same protagonists. As to the second requisite, which is Identity of rights and reliefs prayed for, both sides maintain that they are the rightful owners of the trademark "PUMA" for socks and belts such that both parties seek the cancellation of the trademark of the other (see prayer in private respondent's complaint, pp, 54-55, Rollo, Annex "A" to the Petition). Inevitably, in either the lower court or in the Patent Office, there is a need to resolve the issue as to who is the rightful owner of the TRADEMARK 'PUMA' for socks and belts.After all,the right to register a trademark must be based on ownership thereof (Operators Inc. v. Director of Patents, L-17910, Oct.

29,1965,15 SCRA 147). Ownership of the trademark is an essential requisite to be proved by the applicant either in a cancellation case or in a suit for infringement of trademark. The relief prayed for by the parties in Inter Partes Cases Nos. 1259, 1675 and 1945 and Civil Case No. 11189 before respondent court seek for the cancellation of usurper's trademark, and the right of the legal owner to have exclusive use of said trademark. From the totality of the obtaining circumstances, the rights of the respective parties are dependent upon the resolution of a single issue, that is, the rightful ownership of the trademark in question. The second requisite needed to justify a motion to dismiss based on lis pendens is present.

As to the third requisite, the decisions and orders of administrative agencies rendered pursuant to their quasi-judicial authority have upon their finality the character of res judicata (Brilliantes v. Castro, 99 Phil. 497). The rule which forbids the re-opening of a matter once judicially determined by competent authority applies as well to judicial

acts of public executive and administrative officers and boards acting within their jurisdiction as to the judgments of Courts having general judicial powers (Brilliantes vs. Castro, supra). It may be recalled that the resolution and determination of the issue on ownership are both within the jurisdiction of the Director of Patents and the Regional Trial Court (Sec 25, RA 166). It would thus be confusing for two (2) different forums to hear the same case and resolve a main and determinative issue with both forums risking the possibility of arriving at different conclusions. In the construction of laws and statutes regarding jurisdiction, one must interpret them in a complementary manner for it is presumed that the legislature does not intend any absurdity in the laws it makes (Statutory Construction, Martin, p. 133). Ms is precisely the reason why both decisions of the Director of Patents and Regional Trial Court are appealable to the Intermediate Appellate Court (Sec. 9, BP 129), as both are co-equal in rank regarding the cases that may fall within their jurisdiction.

The record reveals that on March 31, 1986, the Philippine Patent Office rendered a decision in Inter Partes Cases Nos. 1259 and 1675 whereby it concluded that petitioner is the prior and actual adaptor of the trademark 'PUMA and DEVICE used on sports socks and belts, and that MIL-ORO CORPORATION is the rightful owner thereof. ... (pp. 6-7, CA — decision, pp. 51-52, Rollo)

With regard to the petitioner's legal capacity to sue, the Court of Appeals likewise held that it had no such capacity because it failed to allege reciprocity in its complaint:

As to private respondent's having no legal personality to sue, the record discloses that private respondent was suing under Sec. 21-A of Republic Act No. 166, as amended (p. 50, Annex "A", Petition). This is the exception to the general rule that a foreign corporation doing business in the Philippines must secure a license to do business before said foreign corporation could maintain a court or administrative suit (Sec. 133,

Corporation Code, in relation to Sec. 21-A, RA 638, as amended). However, there are some conditions which must be met before that exception could be made to apply, namely: (a) the trademark of the suing corporation must be registered in the Philippines, or that it be the assignee thereof: and (b) that there exists a reciprocal treatment to Philippine Corporations either by law or convention by the country of origin of the foreign corporation (Sec. 21-A Trademark Law). Petitioner recognizes that private respondent is the holder of several certificates of registration, otherwise, the former would not have instituted cancellation proceedings in the Patent's Office. Petitioner actually zeroes on the second requisite provided by Section 21-A of the Trademark Law which is the private respondent's failure to allege reciprocity in the complaint. ...

Citing the case of Leviton Industries v. Salvador (114 SCRA 420), it further ruled:

Failure to allege reciprocity, it being an essential

fact under the trademark law regarding its capacity to sue before the Philippine courts, is fatal to the foreign corporations' cause. The Concurring Opinion of Chief Justice Aquino on the same case is more emphatic when he said:

Respondent Leviton Manufacturing Co. Inc., alleged in par. 2 of its complaint for unfair competition that its action 'is being filed under the provisions of Section 21-A of Republic Act No. 166, as amended.' Respondent is bound by the allegation in its complaint. It cannot sue under Section 21-A because it has not complied with the requirements hereof that (1) its trademark Leviton has been registered with the Patent Office and (2) that it should show that the State of New York grants to Philippine Corporations the privilege to bring an action for unfair competition in that state. Respondent 'Leviton has to comply with those requirements before it can be allowed to maintain an action for unfair competition. (p. 9, CA — decision). (p. 55, Rollo).

The Court of Appeals further ruled that in issuing

the writ of preliminary injunction, the trial court committed grave abuse of discretion because it deprived the private respondent of its day in court as the latter was not given the chance to present its counter-evidence.

In this petition for review, the petitioner contends that the Court of appeals erred in holding that: (1) it had no legal capacity to sue; (2) the doctrine of lis pendens is applicable as a ground for dismissing the case and (3) the writ of injunction was improperly issued.

Petitioner maintains that it has substantially complied with the requirements of Section 21-A of Republic Act R.A. No. 166, as amended. According to the petitioner, its complaint specifically alleged that it is not doing business in the Philippines and is suing under the said Repulbic Act; that Section 21-A thereof provides that "the country of which the said 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" but does not mandatorily require that such reciprocity between the Federal Republic of Germany and the Philippines be pleaded; that such reciprocity arrangement is embodied in and supplied by the Union Convention for the Protection of Industrial Property Paris Convention) to which both the Philippines and Federal Republic of Germany are signatories and that since the Paris 'Convention is a treaty which, pursuant to our Constitution, forms part of the law of the land, our courts are bound to take judicial notice of such treaty, and, consequently, this fact need not be averred in the complaint.

We agree.

In the leading case of La Chemise Lacoste, S.A .v. Fernandez, (129 SCRA 373), we ruled:

But even assuming the truth of the private respondents allegation that the petitioner failed to allege material facto in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hernandes.

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. 11 5), 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 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.

Quoting the Paris Convention and the case of

Vanity Fair Mills, Inc. v. T. Eaton, Co. (234 F. 2d 633), this Court further said:

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

... [T]o 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 an nations. 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. (at pp. 389-390, La Chemise Lacoste, S.A. v. Fernandez, supra).

In the case of of Cerverse Rubber Corporation V. Universal Rubber Products, Inc. (174 SCRA 165), we likewise re-aafirmed our adherence to the Paris Convention:

The ruling in the aforecited case is in consonance with the Convention of Converse Rubber Corporation v. Universal Rubber Products, Inc. (I 47 SCRA 165), we likewise re-affirmed our adherence to the Paris Convention: the Union of Paris for the Protection of Industrial Property to which the Philippines became a party on September 27, 1965. Article 8 thereof provides that 'a trade name [corporation 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 the trademark.'

The object of the Convention is to accord a national of a member nation extensive protection 'against infringement and other types of unfair competition [Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F. 2d 633]." (at p. 165)

The mandate of the aforementioned Convention finds implementation in Section 37 of RA No. 166, otherwise known as the trademark Law:

Rights of Foreign Registrants. — Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to an international convention or treaty relating to marks or tradenames on the represssion of unfair competition to which the Philippines may be party, shall be entitled to the benefits and subject to the provisions of this Act ...

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

We, therefore, hold that the petitioner had the legal capacity to file the action below.

Anent the issue of lis pendens as a ground for a motion to dismiss, the petitioner submits that the relief prayed for in its civil action is different from the relief sought in the Inter Partes cases. More important, however, is the fact that for lis pendens to be a valid ground for the dismissal of a case, the other case pending between the same parties and having the same cause must be a court action. As we have held in Solancho v. Ramos (19 SCRA 848):

As noted above, the defendants contend that the pendency of an administrative between themselves and the plaintiff before the Bureau of Lands is a sufficient ground to dismiss the action. On the other hand, the plaintiff, believing that this ground as interposed by the defendants is a

sufficient ground for the dismissal of his complaint, filed a motion to withdraw his free patent application No. 16649.

This is not what is contemplated under the law because under section 1(d), Rule 16 (formerly Rule 8) of the Rules of Court, one of the grounds for the dismissal of an action is that "there is another action pending between the same parties for the same cause." Note that the Rule uses the phrase another action. This phrase should be construed in line with Section 1 of Rule 2, which defines the word action, thus--

Action means an ordinary suit in a court of justice by which one party prosecutes another for the enforcement or protection of alright, or the prevention or redress of a wrong. Every other remedy is a special proceeding.

It is,therefore,very clear that the Bureau of Land is not covered under the aforementioned provisions of the Rules of Court. (at p. 851)

Thus, the Court of Appeals likewise erred in

holding that the requisites of lis pendens were present so as to justify the dismissal of the case below.

As regards the propriety of the issuance of the writ of preliminary injunuction, the records show that herein private respondent was given the opportunity to present its counter-evidence against the issuance thereof but it intentionally refused to do so to be consistent with its theory that the civil case should be dismissed in the first place.

Considering the fact that "PUMA" is an internationally known brand name, it is pertinent to reiterate the directive to lower courts, which equally applies to administrative agencies, found in La Chemise Lacoste, S.A. v. Fernandez, supra):

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 have 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 whisky, and items of clothing like jeans, T-shirts, neckties, etc. — the list is quite lengthy — 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. (at p. 403)

WHEREFORE, the appealed decision of the Court of Appeals dated June 23, 1986 is REVERSED and SET ASIDE and the order of the Regional Trial Court of Makati is hereby Reinstated.

SO ORDERED.