G.R. No.

154342 July 14, 2004

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


D E C I S I O N


CORONA, J.:

In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and La Campana
Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a) the November 15, 2001
decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming the November 26, 1998
decision,2 as modified by the June 24, 1999 order,3 of the Regional Trial Court of Makati City, Branch 57
(Makati RTC) in Civil Case No. 93-850, which held petitioners liable for, and permanently enjoined them
from, committing trademark infringement and unfair competition, and which ordered them to pay
damages to respondents E. & J. Gallo Winery (Gallo Winery) and The Andresons Group, Inc. (Andresons);
(b) the July 11, 2002 CA resolution denying their motion for reconsideration4 and (c) the aforesaid
Makati RTC decision itself.

I.

The Factual Background

Respondent Gallo Winery is a foreign corporation not doing business in the Philippines but organized
and existing under the laws of the State of California, United States of America (U.S.), where all its
wineries are located. Gallo Winery produces different kinds of wines and brandy products and sells them
in many countries under different registered trademarks, including the GALLO and ERNEST & JULIO
GALLO wine trademarks.

Respondent domestic corporation, Andresons, has been Gallo Winerys exclusive wine importer and
distributor in the Philippines since 1991, selling these products in its own name and for its own
account.5

Gallo Winerys GALLO wine trademark was registered in the principal register of the Philippine Patent
Office (now Intellectual Property Office) on November 16, 1971 under Certificate of Registration No.
17021 which was renewed on November 16, 1991 for another 20 years.6 Gallo Winery also applied for
registration of its ERNEST & JULIO GALLO wine trademark on October 11, 1990 under Application Serial
No. 901011-00073599-PN but the records do not disclose if it was ever approved by the Director of
Patents.7

On the other hand, petitioners Mighty Corporation and La Campana and their sister company, Tobacco
Industries of the Philippines (Tobacco Industries), are engaged in the cultivation, manufacture,
distribution and sale of tobacco products for which they have been using the GALLO cigarette trademark
since 1973. 8

The Bureau of Internal Revenue (BIR) approved Tobacco Industries use of GALLO 100s cigarette mark
on September 14, 1973 and GALLO filter cigarette mark on March 26, 1976, both for the manufacture
and sale of its cigarette products. In 1976, Tobacco Industries filed its manufacturers sworn statement
as basis for BIRs collection of specific tax on GALLO cigarettes.9

On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue, the registration of
the GALLO cigarette trademark in the principal register of the then Philippine Patent Office.10

In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La Campana which, on July
16, 1985, applied for trademark registration in the Philippine Patent Office.11 On July 17, 1985, the
National Library issued Certificate of Copyright Registration No. 5834 for La Campanas lifetime
copyright claim over GALLO cigarette labels.12

Subsequently, La Campana authorized Mighty Corporation to manufacture and sell cigarettes bearing
the GALLO trademark.13 BIR approved Mighty Corporations use of GALLO 100s cigarette brand, under
licensing agreement with Tobacco Industries, on May 18, 1988, and GALLO SPECIAL MENTHOL 100s
cigarette brand on April 3, 1989.14

Petitioners claim that GALLO cigarettes have been sold in the Philippines since 1973, initially by Tobacco
Industries, then by La Campana and finally by Mighty Corporation.15

On the other hand, although the GALLO wine trademark was registered in the Philippines in 1971,
respondents claim that they first introduced and sold the GALLO and ERNEST & JULIO GALLO wines in
the Philippines circa 1974 within the then U.S. military facilities only. By 1979, they had expanded their
Philippine market through authorized distributors and independent outlets.16

Respondents claim that they first learned about the existence of GALLO cigarettes in the latter part of
1992 when an Andresons employee saw such cigarettes on display with GALLO wines in a Davao
supermarket wine cellar section.17 Forthwith, respondents sent a demand letter to petitioners asking
them to stop using the GALLO trademark, to no avail.

II.

The Legal Dispute

On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark and tradename
infringement and unfair competition, with a prayer for damages and preliminary injunction.

Respondents charged petitioners with violating Article 6bis of the Paris Convention for the Protection of
Industrial Property (Paris Convention)18 and RA 166 (Trademark Law),19 specifically, Sections 22 and 23
(for trademark infringement),20 29 and 3021 (for unfair competition and false designation of origin) and
37 (for tradename infringement).22 They claimed that petitioners adopted the GALLO trademark to ride
on Gallo Winerys GALLO and ERNEST & JULIO GALLO trademarks established reputation and popularity,
thus causing confusion, deception and mistake on the part of the purchasing public who had always
associated GALLO and ERNEST & JULIO GALLO trademarks with Gallo Winerys wines. Respondents
prayed for the issuance of a writ of preliminary injunction and ex parte restraining order, plus P2 million
as actual and compensatory damages, at least P500,000 as exemplary and moral damages, and at least
P500,000 as attorneys fees and litigation expenses.23

In their answer, petitioners alleged, among other affirmative defenses, that: petitioners GALLO
cigarettes and Gallo Winerys wines were totally unrelated products; Gallo Winerys GALLO trademark
registration certificate covered wines only, not cigarettes; GALLO cigarettes and GALLO wines were sold
through different channels of trade; GALLO cigarettes, sold at P4.60 for GALLO filters and P3 for GALLO
menthols, were low-cost items compared to Gallo Winerys high-priced luxury wines which cost
between P98 to P242.50; the target market of Gallo Winerys wines was the middle or high-income
bracket with at least P10,000 monthly income while GALLO cigarette buyers were farmers, fishermen,
laborers and other low-income workers; the dominant feature of the GALLO cigarette mark was the
rooster device with the manufacturers name clearly indicated as MIGHTY CORPORATION while, in the
case of Gallo Winerys wines, it was the full names of the founders-owners ERNEST & JULIO GALLO or
just their surname GALLO; by their inaction and conduct, respondents were guilty of laches and
estoppel; and petitioners acted with honesty, justice and good faith in the exercise of their right to
manufacture and sell GALLO cigarettes.

In an order dated April 21, 1993,24 the Makati RTC denied, for lack of merit, respondents prayer for the
issuance of a writ of preliminary injunction,25 holding that respondents GALLO trademark registration
certificate covered wines only, that respondents wines and petitioners cigarettes were not related
goods and respondents failed to prove material damage or great irreparable injury as required by
Section 5, Rule 58 of the Rules of Court.26

On August 19, 1993, the Makati RTC denied, for lack of merit, respondents motion for reconsideration.
The court reiterated that respondents wines and petitioners cigarettes were not related goods since
the likelihood of deception and confusion on the part of the consuming public was very remote. The trial
court emphasized that it could not rely on foreign rulings cited by respondents "because the[se] cases
were decided by foreign courts on the basis of unknown facts peculiar to each case or upon factual
surroundings which may exist only within their jurisdiction. Moreover, there [was] no showing that
[these cases had] been tested or found applicable in our jurisdiction."27

On February 20, 1995, the CA likewise dismissed respondents petition for review on certiorari, docketed
as CA-G.R. No. 32626, thereby affirming the Makati RTCs denial of the application for issuance of a writ
of preliminary injunction against petitioners.28

After trial on the merits, however, the Makati RTC, on November 26, 1998, held petitioners liable for,
and permanently enjoined them from, committing trademark infringement and unfair competition with
respect to the GALLO trademark:

WHEREFORE, judgment is rendered in favor of the plaintiff (sic) and against the defendant (sic), to wit:

a. permanently restraining and enjoining defendants, their distributors, trade outlets, and all persons
acting for them or under their instructions, from (i) using E & Js registered trademark GALLO or any
other reproduction, counterfeit, copy or colorable imitation of said trademark, either singly or in
conjunction with other words, designs or emblems and other acts of similar nature, and (ii) committing
other acts of unfair competition against plaintiffs by manufacturing and selling their cigarettes in the
domestic or export markets under the GALLO trademark.

b. ordering defendants to pay plaintiffs

(i) actual and compensatory damages for the injury and prejudice and impairment of plaintiffs business
and goodwill as a result of the acts and conduct pleaded as basis for this suit, in an amount equal to 10%
of FOURTEEN MILLION TWO HUNDRED THIRTY FIVE THOUSAND PESOS (PHP14,235,000.00) from the
filing of the complaint until fully paid;

(ii) exemplary damages in the amount of PHP100,000.00;

(iii) attorneys fees and expenses of litigation in the amount of PHP1,130,068.91;

(iv) the cost of suit.

SO ORDERED."29

On June 24, 1999, the Makati RTC granted respondents motion for partial reconsideration and
increased the award of actual and compensatory damages to 10% of P199,290,000 or P19,929,000.30

On appeal, the CA affirmed the Makati RTC decision and subsequently denied petitioners motion for
reconsideration.

III.

The Issues

Petitioners now seek relief from this Court contending that the CA did not follow prevailing laws and
jurisprudence when it held that: [a] RA 8293 (Intellectual Property Code of the Philippines [IP Code]) was
applicable in this case; [b] GALLO cigarettes and GALLO wines were identical, similar or related goods for
the reason alone that they were purportedly forms of vice; [c] both goods passed through the same
channels of trade and [d] petitioners were liable for trademark infringement, unfair competition and
damages.31

Respondents, on the other hand, assert that this petition which invokes Rule 45 does not involve pure
questions of law, and hence, must be dismissed outright.

IV.

Discussion

THE EXCEPTIONAL CIRCUMSTANCES
IN THIS CASE OBLIGE THE COURT TO REVIEW
THE CAS FACTUAL FINDINGS

As a general rule, a petition for review on certiorari under Rule 45 must raise only "questions of law"32
(that is, the doubt pertains to the application and interpretation of law to a certain set of facts) and not
"questions of fact" (where the doubt concerns the truth or falsehood of alleged facts),33 otherwise, the
petition will be denied. We are not a trier of facts and the Court of Appeals factual findings are
generally conclusive upon us.34

This case involves questions of fact which are directly related and intertwined with questions of law. The
resolution of the factual issues concerning the goods similarity, identity, relation, channels of trade, and
acts of trademark infringement and unfair competition is greatly dependent on the interpretation of
applicable laws. The controversy here is not simply the identity or similarity of both parties trademarks
but whether or not infringement or unfair competition was committed, a conclusion based on statutory
interpretation. Furthermore, one or more of the following exceptional circumstances oblige us to review
the evidence on record:35

(1) the conclusion is grounded entirely on speculation, surmises, and conjectures;

(2) the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and
impossible;

(3) there is grave abuse of discretion;

(4) the judgment is based on a misapprehension of facts;

(5) the appellate court, in making its findings, went beyond the issues of the case, and the same are
contrary to the admissions of both the appellant and the appellee;

(6) the findings are without citation of specific evidence on which they are based;

(7) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed
by the respondents; and

(8) the findings of fact of the Court of Appeals are premised on the absence of evidence and are
contradicted [by the evidence] on record.36

In this light, after thoroughly examining the evidence on record, weighing, analyzing and balancing all
factors to determine whether trademark infringement and/or unfair competition has been committed,
we conclude that both the Court of Appeals and the trial court veered away from the law and well-
settled jurisprudence.

Thus, we give due course to the petition.

THE TRADEMARK LAW AND THE PARIS
CONVENTION ARE THE APPLICABLE LAWS,
NOT THE INTELLECTUAL PROPERTY CODE

We note that respondents sued petitioners on March 12, 1993 for trademark infringement and unfair
competition committed during the effectivity of the Paris Convention and the Trademark Law.

Yet, in the Makati RTC decision of November 26, 1998, petitioners were held liable not only under the
aforesaid governing laws but also under the IP Code which took effect only on January 1, 1998,37 or
about five years after the filing of the complaint:

Defendants unauthorized use of the GALLO trademark constitutes trademark infringement pursuant to
Section 22 of Republic Act No. 166, Section 155 of the IP Code, Article 6bis of the Paris Convention, and
Article 16 (1) of the TRIPS Agreement as it causes confusion, deception and mistake on the part of the
purchasing public.38 (Emphasis and underscoring supplied)

The CA apparently did not notice the error and affirmed the Makati RTC decision:

In the light of its finding that appellants use of the GALLO trademark on its cigarettes is likely to create
confusion with the GALLO trademark on wines previously registered and used in the Philippines by
appellee E & J Gallo Winery, the trial court thus did not err in holding that appellants acts not only
violated the provisions of the our trademark laws (R.A. No. 166 and R.A. Nos. (sic) 8293) but also Article
6bis of the Paris Convention.39 (Emphasis and underscoring supplied)

We therefore hold that the courts a quo erred in retroactively applying the IP Code in this case.

It is a fundamental principle that the validity and obligatory force of a law proceed from the fact that it
has first been promulgated. A law that is not yet effective cannot be considered as conclusively known
by the populace. To make a law binding even before it takes effect may lead to the arbitrary exercise of
the legislative power.40 Nova constitutio futuris formam imponere debet non praeteritis. A new state of
the law ought to affect the future, not the past. Any doubt must generally be resolved against the
retroactive operation of laws, whether these are original enactments, amendments or repeals.41 There
are only a few instances when laws may be given retroactive effect,42 none of which is present in this
case.

The IP Code, repealing the Trademark Law,43 was approved on June 6, 1997. Section 241 thereof
expressly decreed that it was to take effect only on January 1, 1998, without any provision for
retroactive application. Thus, the Makati RTC and the CA should have limited the consideration of the
present case within the parameters of the Trademark Law and the Paris Convention, the laws in force at
the time of the filing of the complaint.

DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION

Although the laws on trademark infringement and unfair competition have a common conception at
their root, that is, a person shall not be permitted to misrepresent his goods or his business as the goods
or business of another, the law on unfair competition is broader and more inclusive than the law on
trademark infringement. The latter is more limited but it recognizes a more exclusive right derived from
the trademark adoption and registration by the person whose goods or business is first associated with
it. The law on trademarks is thus a specialized subject distinct from the law on unfair competition,
although the two subjects are entwined with each other and are dealt with together in the Trademark
Law (now, both are covered by the IP Code). Hence, even if one fails to establish his exclusive property
right to a trademark, he may still obtain relief on the ground of his competitors unfairness or fraud.
Conduct constitutes unfair competition if the effect is to pass off on the public the goods of one man as
the goods of another. It is not necessary that any particular means should be used to this end.44

In Del Monte Corporation vs. Court of Appeals,45 we distinguished trademark infringement from unfair
competition:

(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the
passing off of one's goods as those of another.

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

(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action,
whereas in unfair competition registration is not necessary.

Pertinent Provisions on Trademark
Infringement under the Paris
Convention and the Trademark Law

Article 6bis of the Paris Convention,46 an international agreement binding on the Philippines and the
United States (Gallo Winerys country of domicile and origin) prohibits "the [registration] or use of a
trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a
mark considered by the competent authority of the country of registration or use to be well-known in
that country as being already the mark of a person entitled to the benefits of the [Paris] Convention and
used for identical or similar goods. [This rule also applies] when the essential part of the mark
constitutes a reproduction of any such well-known mark or an imitation liable to create confusion
therewith." There is no time limit for seeking the prohibition of the use of marks used in bad faith.47

Thus, under Article 6bis of the Paris Convention, the following are the elements of trademark
infringement:

(a) registration or use by another person of a trademark which is a reproduction, imitation or translation
liable to create confusion,

(b) of a mark considered by the competent authority of the country of registration or use48 to be well-
known in that country and is already the mark of a person entitled to the benefits of the Paris
Convention, and

(c) such trademark is used for identical or similar goods.

On the other hand, Section 22 of the Trademark Law holds a person liable for infringement when,
among others, he "uses without the consent of the registrant, any reproduction, counterfeit, copy or
colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or
advertising of any goods, business or services or in connection with which such use is likely to cause
confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or
services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark
or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection
with such goods, business or services."49 Trademark registration and actual use are material to the
complaining partys cause of action.

Corollary to this, Section 20 of the Trademark Law50 considers the trademark registration certificate as
prima facie evidence of the validity of the registration, the registrants ownership and exclusive right to
use the trademark in connection with the goods, business or services as classified by the Director of
Patents51 and as specified in the certificate, subject to the conditions and limitations stated therein.
Sections 2 and 2-A52 of the Trademark Law emphasize the importance of the trademarks actual use in
commerce in the Philippines prior to its registration. In the adjudication of trademark rights between
contending parties, equitable principles of laches, estoppel, and acquiescence may be considered and
applied.53

Under Sections 2, 2-A, 9-A, 20 and 22 of the Trademark Law therefore, the following constitute the
elements of trademark infringement:

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

(b) is used by another person in connection with the sale, offering for sale, or advertising of any goods,
business or services or in connection with which such use is likely to cause confusion or mistake or to
deceive purchasers or others as to the source or origin of such goods or services, or identity of such
business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another
person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such
goods, business or services as to likely cause confusion or mistake or to deceive purchasers,

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

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

In summary, the Paris Convention protects well-known trademarks only (to be determined by domestic
authorities), while the Trademark Law protects all trademarks, whether well-known or not, provided
that they have been registered and are in actual commercial use in the Philippines. Following universal
acquiescence and comity, in case of domestic legal disputes on any conflicting provisions between the
Paris Convention (which is an international agreement) and the Trademark law (which is a municipal
law) the latter will prevail.54

Under both the Paris Convention and the Trademark Law, the protection of a registered trademark is
limited only to goods identical or similar to those in respect of which such trademark is registered and
only when there is likelihood of confusion. Under both laws, the time element in commencing
infringement cases is material in ascertaining the registrants express or implied consent to anothers
use of its trademark or a colorable imitation thereof. This is why acquiescence, estoppel or laches may
defeat the registrants otherwise valid cause of action.

Hence, proof of all the elements of trademark infringement is a condition precedent to any finding of
liability.

THE ACTUAL COMMERCIAL USE IN THE
PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.

By respondents own judicial admission, the GALLO wine trademark was registered in the Philippines in
November 1971 but the wine itself was first marketed and sold in the country only in 1974 and only
within the former U.S. military facilities, and outside thereof, only in 1979. To prove commercial use of
the GALLO wine trademark in the Philippines, respondents presented sales invoice no. 29991 dated July
9, 1981 addressed to Conrad Company Inc., Makati, Philippines and sales invoice no. 85926 dated March
22, 1996 addressed to Andresons Global, Inc., Quezon City, Philippines. Both invoices were for the sale
and shipment of GALLO wines to the Philippines during that period.55 Nothing at all, however, was
presented to evidence the alleged sales of GALLO wines in the Philippines in 1974 or, for that matter,
prior to July 9, 1981.

On the other hand, by testimonial evidence supported by the BIR authorization letters, forms and
manufacturers sworn statement, it appears that petitioners and its predecessor-in-interest, Tobacco
Industries, have indeed been using and selling GALLO cigarettes in the Philippines since 1973 or before
July 9, 1981.56

In Emerald Garment Manufacturing Corporation vs. Court of Appeals,57 we reiterated our rulings in
Pagasa Industrial Corporation vs. Court of Appeals,58 Converse Rubber Corporation vs. Universal Rubber
Products, Inc.,59 Sterling Products International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft,60
Kabushi Kaisha Isetan vs. Intermediate Appellate Court,61 and Philip Morris vs. Court of Appeals,62
giving utmost importance to the actual commercial use of a trademark in the Philippines prior to its
registration, notwithstanding the provisions of the Paris Convention:

xxx xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's contention that private
respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before
filing its application for registration with the BPTTT and hence, has not acquired ownership over said
mark.

Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership
over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) x x x

xxx xxx xxx

The provisions of the 1965 Paris Convention for the Protection of Industrial Property relied upon by
private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) were sufficiently expounded
upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals (224 SCRA 576 [1993]):

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

Undisputably, private respondent is the senior registrant, having obtained several registration
certificates for its various trademarks "LEE," "LEE RIDERS," and "LEESURES" in both the supplemental
and principal registers, as early as 1969 to 1973. However, registration alone will not suffice. In Sterling
Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft (27 SCRA 1214 [1969]; Reiterated
in Kabushi Isetan vs. Intermediate Appellate Court (203 SCRA 583 [1991]) we declared:

xxx xxx xxx

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

xxx xxx xxx

The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of
validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie
evidence. It is not conclusive but can and may be rebutted by controverting evidence.

xxx xxx xxx

In the case at bench, however, we reverse the findings of the Director of Patents and the Court of
Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court
of Appeals relied mainly on the registration certificates as proof of use by private respondent of the
trademark "LEE" which, as we have previously discussed are not sufficient. We cannot give credence to
private respondent's claim that its "LEE" mark first reached the Philippines in the 1960's through local
sales by the Post Exchanges of the U.S. Military Bases in the Philippines (Rollo, p. 177) based as it was
solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly
owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. (Original Records, p. 52)
Similarly, we give little weight to the numerous vouchers representing various advertising expenses in
the Philippines for "LEE" products. It is well to note that these expenses were incurred only in 1981 and
1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May
1981. (Exhibit E)

On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and
other garments adopting its "STYLISTIC MR. LEE" trademark since 1975 as evidenced by appropriate
sales invoices to various stores and retailers. (Exhibit 1-e to 1-o)

Our rulings in Pagasa Industrial Corp. v. Court of Appeals (118 SCRA 526 [1982]) and Converse Rubber
Corp. v. Universal Rubber Products, Inc., (147 SCRA 154 [1987]), respectively, are instructive:

The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration.
There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate
its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to
invest it with exclusive, continuous adoption of the trademark which should consist among others, of
considerable sales since its first use. The invoices submitted by respondent which were dated way back
in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no
commercial value." The evidence for respondent must be clear, definite and free from inconsistencies.
"Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be
considered to be equivalent to the "use" contemplated by law. Respondent did not expect income from
such "samples." There were no receipts to establish sale, and no proof were presented to show that
they were subsequently sold in the Philippines.

xxx xxx xxx

For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its
own mark and for failure to establish confusing similarity between said trademarks, private respondent's
action for infringement must necessarily fail. (Emphasis supplied.)

In view of the foregoing jurisprudence and respondents judicial admission that the actual commercial
use of the GALLO wine trademark was subsequent to its registration in 1971 and to Tobacco Industries
commercial use of the GALLO cigarette trademark in 1973, we rule that, on this account, respondents
never enjoyed the exclusive right to use the GALLO wine trademark to the prejudice of Tobacco
Industries and its successors-in-interest, herein petitioners, either under the Trademark Law or the Paris
Convention.

Respondents GALLO trademark
registration is limited to wines only

We also note that the GALLO trademark registration certificates in the Philippines and in other countries
expressly state that they cover wines only, without any evidence or indication that registrant Gallo
Winery expanded or intended to expand its business to cigarettes.63

Thus, by strict application of Section 20 of the Trademark Law, Gallo Winerys exclusive right to use the
GALLO trademark should be limited to wines, the only product indicated in its registration certificates.
This strict statutory limitation on the exclusive right to use trademarks was amply clarified in our ruling
in Faberge, Inc. vs. Intermediate Appellate Court:64

Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the
foregoing statutory enactments that private respondent may be permitted to register the trademark
"BRUTE" for briefs produced by it notwithstanding petitioner's vehement protestations of unfair
dealings in marketing its own set of items which are limited to: after-shave lotion, shaving cream,
deodorant, talcum powder and toilet soap. Inasmuch as petitioner has not ventured in the production of
briefs, an item which is not listed in its certificate of registration, petitioner cannot and should not be
allowed to feign that private respondent had invaded petitioner's exclusive domain. To be sure, it is
significant that petitioner failed to annex in its Brief the so-called "eloquent proof that petitioner indeed
intended to expand its mark BRUT to other goods" (Page 27, Brief for the Petitioner; page 202, Rollo).
Even then, a mere application by petitioner in this aspect does not suffice and may not vest an exclusive
right in its favor that can ordinarily be protected by the Trademark Law. In short, paraphrasing Section
20 of the Trademark Law as applied to the documentary evidence adduced by petitioner, the certificate
of registration issued by the Director of Patents can confer upon petitioner the exclusive right to use its
own symbol only to those goods specified in the certificate, subject to any conditions and limitations
stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin in Philippine Refining
Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), when he stressed the principle enunciated by the United
States Supreme Court in American Foundries vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160)
that one who has adopted and used a trademark on his goods does not prevent the adoption and use of
the same trademark by others for products which are of a different description. Verily, this Court had
the occasion to observe in the 1966 case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966])
that no serious objection was posed by the petitioner therein since the applicant utilized the emblem
"Tango" for no other product than hair pomade in which petitioner does not deal.

This brings Us back to the incidental issue raised by petitioner which private respondent sought to belie
as regards petitioner's alleged expansion of its business. It may be recalled that petitioner claimed that it
has a pending application for registration of the emblem "BRUT 33" for briefs (page 25, Brief for the
Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes in
Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude
relief if the junior user's goods are not remote from any other product which the first user would be
likely to make or sell (vide, at page 1025). Commenting on the former provision of the Trademark Law
now embodied substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite jurist
opined that the law in point "does not require that the articles of manufacture of the previous user and
late user of the mark should possess the same descriptive properties or should fall into the same
categories as to bar the latter from registering his mark in the principal register." (supra at page 1026).

Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends only to the
goods used by the first user as specified in the certificate of registration following the clear message
conveyed by Section 20.

How do We now reconcile the apparent conflict between Section 4(d) which was relied upon by Justice
JBL Reyes in the Sta. Ana case and Section 20? It would seem that Section 4(d) does not require that the
goods manufactured by the second user be related to the goods produced by the senior user while
Section 20 limits the exclusive right of the senior user only to those goods specified in the certificate of
registration. But the rule has been laid down that the clause which comes later shall be given paramount
significance over an anterior proviso upon the presumption that it expresses the latest and dominant
purpose. (Graham Paper Co. vs. National Newspapers Asso. (Mo. App.) 193 S.W. 1003; Barnett vs.
Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen. vs. Toledo, 26 N.E., p. 1061; cited by Martin,
Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably follows that Section 20 is
controlling and, therefore, private respondent can appropriate its symbol for the briefs it manufactures
because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs. Farbenfabriken
Bayer (27 SCRA 1214 [1969]):

"Really, if the certificate of registration were to be deemed as including goods not specified therein,
then a situation may arise whereby an applicant may be tempted to register a trademark on any and all
goods which his mind may conceive even if he had never intended to use the trademark for the said
goods. We believe that such omnibus registration is not contemplated by our Trademark Law." (1226).

NO LIKELIHOOD OF CONFUSION, MISTAKE
OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS AND RESPONDENTS
GOODS OR BUSINESS

A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or deceit as to
the identity, source or origin of the goods or identity of the business as a consequence of using a certain
mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly according to the
particular (and sometimes peculiar) circumstances of each case. Thus, in trademark cases, more than in
other kinds of litigation, precedents must be studied in the light of each particular case. 65

There are two types of confusion in trademark infringement. The first is "confusion of goods" when an
otherwise prudent purchaser is induced to purchase one product in the belief that he is purchasing
another, in which case defendants goods are then bought as the plaintiffs and its poor quality reflects
badly on the plaintiffs reputation. The other is "confusion of business" wherein the goods of the parties
are different but the defendants product can reasonably (though mistakenly) be assumed to originate
from the plaintiff, thus deceiving the public into believing that there is some connection between the
plaintiff and defendant which, in fact, does not exist.66

In determining the likelihood of confusion, the Court must consider: [a] the resemblance between the
trademarks; [b] the similarity of the goods to which the trademarks are attached; [c] the likely effect on
the purchaser and *d+ the registrants express or implied consent and other fair and equitable
considerations.

Petitioners and respondents both use "GALLO" in the labels of their respective cigarette and wine
products. But, as held in the following cases, the use of an identical mark does not, by itself, lead to a
legal conclusion that there is trademark infringement:

(a) in Acoje Mining Co., Inc. vs. Director of Patent,67 we ordered the approval of Acoje Minings
application for registration of the trademark LOTUS for its soy sauce even though Philippine Refining
Company had prior registration and use of such identical mark for its edible oil which, like soy sauce,
also belonged to Class 47;

(b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,68 we upheld the Patent Directors
registration of the same trademark CAMIA for Ng Sams ham under Class 47, despite Philippine Refining
Companys prior trademark registration and actual use of such mark on its lard, butter, cooking oil (all of
which belonged to Class 47), abrasive detergents, polishing materials and soaps;

(c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,69 we dismissed
Hickoks petition to cancel private respondents HICKOK trademark registration for its Marikina shoes as
against petitioners earlier registration of the same trademark for handkerchiefs, briefs, belts and
wallets;

(d) in Shell Company of the Philippines vs. Court of Appeals,70 in a minute resolution, we dismissed the
petition for review for lack of merit and affirmed the Patent Offices registration of the trademark SHELL
used in the cigarettes manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell
Companys opposition as the prior registrant of the same trademark for its gasoline and other petroleum
products;

(e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSOs complaint for trademark
infringement against United Cigarette Corporation and allowed the latter to use the trademark ESSO for
its cigarettes, the same trademark used by ESSO for its petroleum products, and

(f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72 we affirmed the
rulings of the Patent Office and the CA that NSR Rubber Corporation could use the trademark CANON
for its sandals (Class 25) despite Canon Kabushiki Kaishas prior registration and use of the same
trademark for its paints, chemical products, toner and dyestuff (Class 2).

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

Jurisprudence has developed two tests in determining similarity and likelihood of confusion in
trademark resemblance:75

(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals76 and other cases,77 and

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals78 and its preceding
cases.79

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks
which might cause confusion or deception, and thus infringement. If the competing trademark contains
the main, essential or dominant features of another, and confusion or deception is likely to result,
infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing
label should suggest an effort to imitate. The question is whether the use of the marks involved is likely
to cause confusion or mistake in the mind of the public or deceive purchasers.80

On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in
resolving confusing similarity. Comparison of words is not the only determining factor. The trademarks
in their entirety as they appear in their respective labels or hang tags must also be considered in relation
to the goods to which they are attached. The discerning eye of the observer must focus not only on the
predominant words but also on the other features appearing in both labels in order that he may draw
his conclusion whether one is confusingly similar to the other.81

In comparing the resemblance or colorable imitation of marks, various factors have been considered,
such as the dominant color, style, size, form, meaning of letters, words, designs and emblems used, the
likelihood of deception of the mark or name's tendency to confuse82 and the commercial impression
likely to be conveyed by the trademarks if used in conjunction with the respective goods of the
parties.83

Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO cigarette
trademark is the device of a large rooster facing left, outlined in black against a gold background. The
roosters color is either green or red green for GALLO menthols and red for GALLO filters. Directly
below the large rooster device is the word GALLO. The rooster device is given prominence in the GALLO
cigarette packs in terms of size and location on the labels.84

The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no relation at all
to the product but was chosen merely as a trademark due to the fondness for fighting cocks of the son
of petitioners president. Furthermore, petitioners adopted GALLO, the Spanish word for rooster, as a
cigarette trademark to appeal to one of their target markets, the sabungeros (cockfight aficionados).85

Also, as admitted by respondents themselves,86 on the side of the GALLO cigarette packs are the words
"MADE BY MIGHTY CORPORATION," thus clearly informing the public as to the identity of the
manufacturer of the cigarettes.

On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of them, the labels are
embellished with sketches of buildings and trees, vineyards or a bunch of grapes while in a few, one or
two small roosters facing right or facing each other (atop the EJG crest, surrounded by leaves or
ribbons), with additional designs in green, red and yellow colors, appear as minor features thereof.87
Directly below or above these sketches is the entire printed name of the founder-owners, "ERNEST &
JULIO GALLO" or just their surname "GALLO,"88 which appears in different fonts, sizes, styles and labels,
unlike petitioners uniform casque-font bold-lettered GALLO mark.

Moreover, on the labels of Gallo Winerys wines are printed the words "VINTED AND BOTTLED BY
ERNEST & JULIO GALLO, MODESTO, CALIFORNIA."89

The many different features like color schemes, art works and other markings of both products drown
out the similarity between them the use of the word GALLO a family surname for the Gallo
Winerys wines and a Spanish word for rooster for petitioners cigarettes.

WINES AND CIGARETTES ARE NOT
IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS

Confusion of goods is evident where the litigants are actually in competition; but confusion of business
may arise between non-competing interests as well.90

Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6bis of the Paris
Convention which proscribe trademark infringement not only of goods specified in the certificate of
registration but also of identical or similar goods, we have also uniformly recognized and applied the
modern concept of "related goods."91 Simply stated, when goods are so related that the public may be,
or is actually, deceived and misled that they come from the same maker or manufacturer, trademark
infringement occurs.92

Non-competing goods may be those which, though they are not in actual competition, are so related to
each other that it can reasonably be assumed that they originate from one manufacturer, in which case,
confusion of business can arise out of the use of similar marks.93 They may also be those which, being
entirely unrelated, cannot be assumed to have a common source; hence, there is no confusion of
business, even though similar marks are used.94 Thus, there is no trademark infringement if the public
does not expect the plaintiff to make or sell the same class of goods as those made or sold by the
defendant.95

In resolving whether goods are related,96 several factors come into play:

(a) the business (and its location) to which the goods belong

(b) the class of product to which the goods belong

(c) the product's quality, quantity, or size, including the nature of the package, wrapper or container 97

(d) the nature and cost of the articles98

(e) the descriptive properties, physical attributes or essential characteristics with reference to their
form, composition, texture or quality

(f) the purpose of the goods99

(g) whether the article is bought for immediate consumption,100 that is, day-to-day household
items101

(h) the fields of manufacture102

(i) the conditions under which the article is usually purchased103 and

(j) the channels of trade through which the goods flow,104 how they are distributed, marketed,
displayed and sold.105

The wisdom of this approach is its recognition that each trademark infringement case presents its own
unique set of facts. No single factor is preeminent, nor can the presence or absence of one determine,
without analysis of the others, the outcome of an infringement suit. Rather, the court is required to sift
the evidence relevant to each of the criteria. This requires that the entire panoply of elements
constituting the relevant factual landscape be comprehensively examined.106 It is a weighing and
balancing process. With reference to this ultimate question, and from a balancing of the determinations
reached on all of the factors, a conclusion is reached whether the parties have a right to the relief
sought.107

A very important circumstance though is whether there exists a likelihood that an appreciable number
of ordinarily prudent purchasers will be misled, or simply confused, as to the source of the goods in
question.108 The "purchaser" is not the "completely unwary consumer" but is the "ordinarily intelligent
buyer" considering the type of product involved.109 He is "accustomed to buy, and therefore to some
extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the
likelihood of the deception of some persons in some measure acquainted with an established design
and desirous of purchasing the commodity with which that design has been associated. The test is not
found in the deception, or the possibility of deception, of the person who knows nothing about the
design which has been counterfeited, and who must be indifferent between that and the other. The
simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary
intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase."110

Hence, in the adjudication of trademark infringement, we give due regard to the goods usual
purchasers character, attitude, habits, age, training and education. 111

Applying these legal precepts to the present case, petitioners use of the GALLO cigarette trademark is
not likely to cause confusion or mistake, or to deceive the "ordinarily intelligent buyer" of either wines
or cigarettes or both as to the identity of the goods, their source and origin, or identity of the business
of petitioners and respondents.

Obviously, wines and cigarettes are not identical or competing products. Neither do they belong to the
same class of goods. Respondents GALLO wines belong to Class 33 under Rule 84*a+ Chapter III, Part II of
the Rules of Practice in Trademark Cases while petitioners GALLO cigarettes fall under Class 34.

We are mindful that product classification alone cannot serve as the decisive factor in the resolution of
whether or not wines and cigarettes are related goods. Emphasis should be on the similarity of the
products involved and not on the arbitrary classification or general description of their properties or
characteristics. But the mere fact that one person has adopted and used a particular trademark for his
goods does not prevent the adoption and use of the same trademark by others on articles of a different
description. 112

Both the Makati RTC and the CA held that wines and cigarettes are related products because: (1) "they
are related forms of vice, harmful when taken in excess, and used for pleasure and relaxation" and (2)
"they are grouped or classified in the same section of supermarkets and groceries."

We find these premises patently insufficient and too arbitrary to support the legal conclusion that wines
and cigarettes are related products within the contemplation of the Trademark Law and the Paris
Convention.

First, anything - not only wines and cigarettes can be used for pleasure and relaxation and can be
harmful when taken in excess. Indeed, it would be a grave abuse of discretion to treat wines and
cigarettes as similar or related products likely to cause confusion just because they are pleasure-giving,
relaxing or potentially harmful. Such reasoning makes no sense.

Second, it is common knowledge that supermarkets sell an infinite variety of wholly unrelated products
and the goods here involved, wines and cigarettes, have nothing whatsoever in common with respect to
their essential characteristics, quality, quantity, size, including the nature of their packages, wrappers or
containers.113

Accordingly, the U.S. patent office and courts have consistently held that the mere fact that goods are
sold in one store under the same roof does not automatically mean that buyers are likely to be confused
as to the goods respective sources, connections or sponsorships. The fact that different products are
available in the same store is an insufficient standard, in and of itself, to warrant a finding of likelihood
of confusion.114

In this regard, we adopted the Director of Patents finding in Philippine Refining Co., Inc. vs. Ng Sam and
the Director of Patents:115

In his decision, the Director of Patents enumerated the factors that set respondents products apart
from the goods of petitioner. He opined and we quote:

"I have taken into account such factors as probable purchaser attitude and habits, marketing activities,
retail outlets, and commercial impression likely to be conveyed by the trademarks if used in conjunction
with the respective goods of the parties, I believe that ham on one hand, and lard, butter, oil, and soap
on the other are products that would not move in the same manner through the same channels of
trade. They pertain to unrelated fields of manufacture, might be distributed and marketed under
dissimilar conditions, and are displayed separately even though they frequently may be sold through the
same retail food establishments. Opposers products are ordinary day-to-day household items whereas
ham is not necessarily so. Thus, the goods of the parties are not of a character which purchasers would
likely attribute to a common origin.

The observations and conclusion of the Director of Patents are correct. The particular goods of the
parties are so unrelated that consumers, would not, in any probability mistake one as the source of
origin of the product of the other. (Emphasis supplied).

The same is true in the present case. Wines and cigarettes are non-competing and are totally unrelated
products not likely to cause confusion vis--vis the goods or the business of the petitioners and
respondents.

Wines are bottled and consumed by drinking while cigarettes are packed in cartons or packages and
smoked. There is a whale of a difference between their descriptive properties, physical attributes or
essential characteristics like form, composition, texture and quality.

GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are patronized by
middle-to-high-income earners while GALLO cigarettes appeal only to simple folks like farmers,
fishermen, laborers and other low-income workers.116 Indeed, the big price difference of these two
products is an important factor in proving that they are in fact unrelated and that they travel in different
channels of trade. There is a distinct price segmentation based on vastly different social classes of
purchasers.117

GALLO cigarettes and GALLO wines are not sold through the same channels of trade. GALLO cigarettes
are Philippine-made and petitioners neither claim nor pass off their goods as imported or emanating
from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through ambulant and sidewalk
vendors, small local sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis
Oriental, Pangasinan, Bohol, and Cebu.118 On the other hand, GALLO wines are imported, distributed
and sold in the Philippines through Gallo Winerys exclusive contracts with a domestic entity, which is
currently Andresons. By respondents own testimonial evidence, GALLO wines are sold in hotels,
expensive bars and restaurants, and high-end grocery stores and supermarkets, not through sari-sari
stores or ambulant vendors.119

Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs. Philip Morris,
Inc.120 to support its finding that GALLO wines and GALLO cigarettes are related goods. The courts a
quo should have taken into consideration the subsequent case of IDV North America, Inc. and R & A
Bailey Co. Limited vs. S & M Brands, Inc.:121

IDV correctly acknowledges, however, that there is no per se rule that the use of the same mark on
alcohol and tobacco products always will result in a likelihood of confusion. Nonetheless, IDV relies
heavily on the decision in John Walker & Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla.
1954), affd, 222 F. 2d 460 (5th Cir. 1955), wherein the court enjoined the use of the mark "JOHNNIE
WALKER" on cigars because the fame of the plaintiffs mark for scotch whiskey and because the plaintiff
advertised its scotch whiskey on, or in connection with tobacco products. The court, in John Walker &
Sons, placed great significance on the finding that the infringers use was a deliberate attempt to
capitalize on the senior marks fame. Id. At 256. IDV also relies on Carling Brewing Co. v. Philip Morris,
Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the defendants use of the
mark "BLACK LABEL" for cigarettes because it was likely to cause confusion with the plaintiffs well-
known mark "BLACK LABEL" for beer.

xxx xxx xxx

Those decisions, however, must be considered in perspective of the principle that tobacco products and
alcohol products should be considered related only in cases involving special circumstances. Schenley
Distillers, Inc. v. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special
circumstances has been found to exist where there is a finding of unfair competition or where a
famous or well-known mark is involved and there is a demonstrated intent to capitalize on that mark.
For example, in John Walker & Sons, the court was persuaded to find a relationship between products,
and hence a likelihood of confusion, because of the plaintiffs long use and extensive advertising of its
mark and placed great emphasis on the fact that the defendant used the trademark Johnnie Walker
with full knowledge of its fame and reputation and with the intention of taking advantage thereof. John
Walker & Sons, 124 F. Supp. At 256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120
U.S.P.Q. 306, 307 (1959) (holding that the decision in John Walker & Sons was merely the law on the
particular case based upon its own peculiar facts); see also Alfred Dunhill, 350 F. Supp. At 1363
(defendants adoption of Dunhill mark was not innocent). However, in Schenley, the court noted that
the relation between tobacco and whiskey products is significant where a widely known arbitrary mark
has long been used for diversified products emanating from a single source and a newcomer seeks to
use the same mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court
looked at the industry practice and the facts of the case in order to determine the nature and extent of
the relationship between the mark on the tobacco product and the mark on the alcohol product.

The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in conjunction
with tobacco or tobacco accessory products and that IDV has no intent to do so. And, unlike the
defendant in Dunhill, S & M Brands does not market bar accessories, or liqueur related products, with its
cigarettes. The advertising and promotional materials presented a trial in this action demonstrate a
complete lack of affiliation between the tobacco and liqueur products bearing the marks here at issue.

xxx xxx xxx

Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family name
Baileys as the mark for its cigarettes, to capitalize upon the fame of the BAILEYS mark for liqueurs.
See Schenley, 427 F. 2d at 785. Moreover, as will be discussed below, and as found in Mckesson &
Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so
intimately associated in the public mind that they cannot under any circumstances be sold under the
same mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308.

Taken as a whole, the evidence here demonstrates the absence of the special circumstances in which
courts have found a relationship between tobacco and alcohol products sufficient to tip the similarity of
goods analysis in favor of the protected mark and against the allegedly infringing mark. It is true that
BAILEYS liqueur, the worlds best selling liqueur and the second best selling in the United States, is a
well-known product. That fact alone, however, is insufficient to invoke the special circumstances
connection here where so much other evidence and so many other factors disprove a likelihood of
confusion. The similarity of products analysis, therefore, augers against finding that there is a likelihood
of confusion. (Emphasis supplied).

In short, tobacco and alcohol products may be considered related only in cases involving special
circumstances which exist only if a famous mark is involved and there is a demonstrated intent to
capitalize on it. Both of these are absent in the present case.

THE GALLO WINE TRADEMARK IS NOT A
WELL-KNOWN MARK IN THE CONTEXT
OF THE PARIS CONVENTION IN THIS CASE
SINCE WINES AND CIGARETTES ARE NOT
IDENTICAL OR SIMILAR GOODS

First, the records bear out that most of the trademark registrations took place in the late 1980s and the
1990s, that is, after Tobacco Industries use of the GALLO cigarette trademark in 1973 and petitioners
use of the same mark in 1984.

GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods, a requisite
element under both the Trademark Law and the Paris Convention.

Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines.
Respondents do not dispute the documentary evidence that aside from Gallo Winerys GALLO
trademark registration, the Bureau of Patents, Trademarks and Technology Transfer also issued on
September 4, 1992 Certificate of Registration No. 53356 under the Principal Register approving
Productos Alimenticios Gallo, S.As April 19, 1990 application for GALLO trademark registration and use
for its "noodles, prepared food or canned noodles, ready or canned sauces for noodles, semolina, wheat
flour and bread crumbs, pastry, confectionery, ice cream, honey, molasses syrup, yeast, baking powder,
salt, mustard, vinegar, species and ice."122

Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and
NSR Rubber Corporation,123 "GALLO" cannot be considered a "well-known" mark within the
contemplation and protection of the Paris Convention in this case since wines and cigarettes are not
identical or similar goods:

We agree with public respondents that the controlling doctrine with respect to the applicability of
Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate
Court (203 SCRA 59 [1991]). As pointed out by the BPTTT:

"Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no
automatic protection afforded an entity whose tradename is alleged to have been infringed through the
use of that name as a trademark by a local entity.

In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November
1991, the Honorable Supreme Court held that:

The Paris Convention for the Protection of Industrial Property does not automatically exclude all
countries of the world which have signed it from using a tradename which happens to be used in one
country. To illustrate if a taxicab or bus company in a town in the United Kingdom or India happens to
use the tradename Rapid Transportation, it does not necessarily follow that Rapid can no longer be
registered in Uganda, Fiji, or the Philippines.

This office is not unmindful that in (sic) the Treaty of Paris for the Protection of Intellectual Property
regarding well-known marks and possible application thereof in this case. Petitioner, as this office sees
it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in
this country at the time the then application of NSR Rubber was filed.

However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum
dated 25 October 1983 to the Director of Patents, a set of guidelines in the implementation of Article
6bis of the Treaty of Paris. These conditions are:

a) the mark must be internationally known;

b) the subject of the right must be a trademark, not a patent or copyright or anything else;

c) the mark must be for use in the same or similar kinds of goods; and

d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris
Convention. Article by Dr. Bogsch, Director General of the World Intellectual Property Organization,
Geneva, Switzerland, 1985)

From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third
requirement of the said memorandum that is the mark must be for use in the same or similar kinds of
goods. The Petitioner is using the mark "CANON" for products belonging to class 2 (paints, chemical
products) while the Respondent is using the same mark for sandals (class 25).

Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its
application for the same mark should fail." (Emphasis supplied.)

Consent of the Registrant and
Other air, Just and Equitable
Considerations

Each trademark infringement case presents a unique problem which must be answered by weighing the
conflicting interests of the litigants.124

Respondents claim that GALLO wines and GALLO cigarettes flow through the same channels of trade,
that is, retail trade. If respondents assertion is true, then both goods co-existed peacefully for a
considerable period of time. It took respondents almost 20 years to know about the existence of GALLO
cigarettes and sue petitioners for trademark infringement. Given, on one hand, the long period of time
that petitioners were engaged in the manufacture, marketing, distribution and sale of GALLO cigarettes
and, on the other, respondents delay in enforcing their rights (not to mention implied consent,
acquiescence or negligence) we hold that equity, justice and fairness require us to rule in favor of
petitioners. The scales of conscience and reason tip far more readily in favor of petitioners than
respondents.

Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they
intended to capitalize on respondents goodwill in adopting the GALLO mark for their cigarettes which
are totally unrelated to respondents GALLO wines. Thus, we rule out trademark infringement on the
part of petitioners.

PETITIONERS ARE ALSO NOT LIABLE
FOR UNFAIR COMPETITION

Under Section 29 of the Trademark Law, any person who employs deception or any other means
contrary to good faith by which he passes off the goods manufactured by him or in which he deals, or his
business, or services for those of the one having established such goodwill, or who commits any acts
calculated to produce said result, is guilty of unfair competition. It includes the following acts:

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

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

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

The universal test question is whether the public is likely to be deceived. Nothing less than conduct
tending to pass off one mans goods or business as that of another constitutes unfair competition.
Actual or probable deception and confusion on the part of customers by reason of defendants practices
must always appear.125 On this score, we find that petitioners never attempted to pass off their
cigarettes as those of respondents. There is no evidence of bad faith or fraud imputable to petitioners in
using their GALLO cigarette mark.

All told, after applying all the tests provided by the governing laws as well as those recognized by
jurisprudence, we conclude that petitioners are not liable for trademark infringement, unfair
competition or damages.

WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED. The questioned
decision and resolution of the Court of Appeals in CA-G.R. CV No. 65175 and the November 26, 1998
decision and the June 24, 1999 order of the Regional Trial Court of Makati, Branch 57 in Civil Case No.
93-850 are hereby REVERSED and SET ASIDE and the complaint against petitioners DISMISSED.

Costs against respondents.

SO ORDERED.

Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur.
Carpio-Morales, J., no part..


Footnotes

1 Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conchita
Carpio Morales (now Associate Justice of the Supreme Court) and Sergio L. Pestano of the Ninth
Division.

2 Penned by Acting Presiding Judge Bonifacio Sanz Maceda.

3 Penned by Judge Reinato O. Quilala.

4 Penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices Conchita
Carpio Morales (now Associate Justice of the Supreme Court) and Sergio L. Pestano of the former Ninth
Division.

5 Complaint, Exhibits "D" to "D-1," Records, pp. 1-2; TSN, June 9, 1997, Records, pp. 951-956.

6 Exhibits "B" to "B-6," Records, pp. 80-86.

7 Records, pp. 29-31.

8 Answer, Records, pp. 255 and 264-266; TSN, April 13, 1993, Records, pp. 767, 780-796; TSN, October
27, 1997, Records, pp. 993-1000.

9 Exhibits 9 to 12, Records, pp. 89-95, 267-268; TSN, October 27, 1997, Records, pp. 1005-1007.

10 Records, pp. 255-256, 269 and 271.

11 Records, pp. 256, 270.

12 Exhibit 15, Records, pp. 104, 256, 272.

13 Records, p. 256.

14 Exhibits 13 and 14, Records, pp. 96-98.

15 TSN, April 13, 1993, Records, pp. 780-796; TSN, December 14, 1993, Records, pp. 420-422; TSN,
October 27, 1997, Records, pp. 993-1000.

16 Complaint, Exhibit "D-2," Records, pp. 3, 110 and 328.

17 Exhibit "A," Complainants Memorandum, Records, p. 127; TSN, December 14, 1993, Records, pp.
326, 432-433.

18 CONVENTION OF PARIS FOR THE PROTECTION OF INDUSTRIAL PROPERTY of 20th March, 1883
revised at Brussels on 14th December, 1900, at Washington on 2nd June, 1911, at the Hague on 6th
November, 1925, at London on 2nd June, 1934, and at Lisbon on 31st October, 1958

x x x x x x x x x

Article 6bis

(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the
request of an interested party, to refuse or to cancel the registration and to prohibit the use of a
trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a
mark considered by the competent authority of the country of registration or use to be well-known in
that country as being already the mark of a person entitled to the benefits of the present Convention
and used for identical or similar goods. These provisions shall also apply when the essential part of the
mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion
therewith.

(2) A period of at least five years from the date of registration shall be allowed for seeking the
cancellation of such a mark. The countries of the Union may provide for a period within which the
prohibition of use must be sought.

(3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks
registered or used in bad faith.

19 Republic Act No. 166 is entitled "An Act To Provide For The Registration And Protection Of
Trademarks, Trade Names And Servicemarks, Defining Unfair Competition And False Marking And
Providing Remedies Against The Same, And For Other Purposes".

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

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

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

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

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

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

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

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

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

Chapter VII

False Designation of Origin and False

Description

SEC. 30. False designation of origin and false description forbidden. Any person who shall affix, apply,
annex or use in connection with any goods or services, or any container or containers for goods, a false
designation of origin, or any false description or representation, including words or other symbols
tending falsely to describe or represent the same, and shall cause such goods or services to enter into
commerce, and any person who shall with knowledge of the falsity of such designation of origin or
description or representation cause or procure the same to enter into commerce, shall be liable to a civil
action for damages and injunction provided in section twenty-three, Chapter V hereof, by any person
doing business in the locality falsely indicated as that of origin or in the region in which said locality is
situated, or by any person who believes that he is or is likely to be damaged by the use of any such false
description or representation.

22 Chapter XI

Provisions in Reference to Foreign Industrial Property

SEC. 37. Rights of foreign registrants. Persons who are nationals of, domiciled in, or have a bona fide
or effective business or commercial establishment in any foreign country, which is a party to any
international convention or treaty relating to marks or tradenames, or the repression of unfair
competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the
provisions of this Act to the extent and under the conditions essential to give effect to any such
convention and treaties so long as the Philippines shall continue to be a party thereto, except as
provided in the following paragraphs of this section.

No registration of a mark or tradename in the Philippines by a person described in the preceding
paragraph of this section shall be granted until such mark or tradename has been registered in the
country of origin of the applicant, unless the applicant alleges use in commerce.

For the purposes of this section, the country of origin of the applicant is the country in which he has
bona fide and effective industrial or commercial establishment, or if he has no such an establishment in
the country in which he is domiciled, or if he has not a domicile in any of the countries described in the
first paragraph of this section, the country of which he is a national.

An application for registration of a mark or tradename under the provisions of this Act filed by a person
described in the first paragraph of this section who has previously duly filed an application for
registration of the same mark or tradename in one of the countries described in said paragraph shall be
accorded the same force and effect as would be accorded to the same application if filed in the
Philippines on the same date on which the application was first filed in such foreign country: Provided,
That

(a) The application in the Philippines is filed within six months from the date on which the application
was first filed in the foreign country; and within three months from the date of filing or within such time
as the Director shall in his discretion grant, the applicant shall furnish a certified copy of the application
for or registration in the country of origin of the applicant, together with a translation thereof into
English, if not in the English language;

(b) The application conforms as nearly as practicable to the requirements of this Act, but use in
commerce need not be alleged;

(c) The rights acquired by third parties before the date of the filing of the first application in the foreign
country shall in no way be affected by a registration obtained on an application filed under this
paragraph;

(d) Nothing in this paragraph shall entitle the owner of a registration granted under this section to sue
for acts committed prior to the date on which his mark or tradename was registered in this country
unless the registration is based on use in commerce; and

(e) A mark duly registered in the country of origin of the foreign applicant may be registered on the
principal register if eligible, otherwise, on the supplemental register herein provided. The application
thereof shall be accompanied by a certified copy of the application for or registration in the country of
origin of the applicant. (As added by R.A. No. 638.)

The registration of a mark under the provisions of this section shall be independent of the registration in
the country of origin and the duration, validity or transfer in the Philippines of such registration shall be
governed by the provisions of this Act.

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

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

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

23 Complaint, Exhibits "D-1" to "D-9," Record, pp. 1-10.

24 Penned by Judge Francisco X. Velez.

25 Records, pp. 159-160.

26 Sec. 5. Preliminary injunction not granted without notice; issuance of restraining order. No
preliminary injunction shall be granted without notice to the defendant. If it shall appear from the facts
shown by affidavits or by the verified complaint that great or irreparable injury would result to the
applicant before the matter can be heard on notice, the judge to whom the application for preliminary
injunction was made, may issue a restraining order to be effective only for a period of twenty days from
the date of its issuance. Within the said twenty-day period, the judge must cause an order to be served
on the defendant, requiring him to show cause, at a specified time and place, why the injunction should
not be granted, and determine within the same period whether or not the preliminary injunction shall
be granted, and shall accordingly issue the corresponding order. In the event that the application for
preliminary injunction is denied, the restraining order is deemed automatically vacated.

Nothing herein contained shall be construed to impair, affect or modify in any way any rights granted
by, or rules pertaining to injunctions contained in, existing agrarian, labor or social legislation. (As
amended by B.P. Blg. 224, approved April 16, 1982).

27 Penned by Judge Velez; Records, pp. 302-304.

28 Penned by Associate Justice Ramon Mabutas, Jr. and concurred in by Associate Justices Nathanael P.
De Pano, Jr. and Artemon D. Luna of the Special First Division; Records, pp. 449-465.

29 Penned by Judge Maceda; Records, pp. 651-652.

30 Penned by Judge Quilala; Records, pp. 727-728.

31 Petition; Rollo, pp. 18-19.

32 Rule 45, Section 2.

33 Ramos vs. Pepsi-Cola Bottling Co. of the P.I., 19 SCRA 289, 292 [1967]; Medina vs. Asistio, Jr., 191
SCRA 218, 223 [1990]; Caia vs. People, 213 SCRA 309, 313 [1992].

34 Moomba Mining Exploration Company vs. Court of Appeals, 317 SCRA 338 [1999].

35 Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420 [1990].

36 Asia Brewery, Inc. vs. Court of Appeals, 224 SCRA 437, 443 [1993]; Philippine Nut Industry Inc. vs.
Standard Brands, Inc., 224 SCRA 437, 443 [1993]; Reynolds Philippine Corporation vs. Court of Appeals,
169 SCRA 220, 223 [1989] citing Mendoza vs. Court of Appeals, 156 SCRA 597 [1987]; Manlapaz vs. Court
of Appeals, 147 SCRA 238 [1987]; Sacay vs. Sandiganbayan, 142 SCRA 593, 609 [1986]; Guita vs. Court of
Appeals, 139 SCRA 576 [1985]; Casanayan vs. Court of Appeals, 198 SCRA 333, 336 [1991]; also Apex
Investment and Financing Corp. vs. IAC, 166 SCRA 458 [1988] citing Tolentino vs. De Jesus, 56 SCRA 167
[1974]; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734 [1980]; Manero vs. Court of
Appeals, 102 SCRA 817 [1981]; and Moran, Jr. vs. Court of Appeals, 133 SCRA 88 [1984].

37 Sec. 241, Intellectual Property Code of the Philippines.

38 Rollo, p. 191.

39 Rollo, p. 71.

40 Tolentino, Civil Code Of The Philippines Commentaries and Jurisprudence, Volume I, p. 19; See
Articles 2 to 4 of the Civil Code of the Philippines.

41 Ibid.

42 Laws may be given retroactive effect only if they are:

(a) procedural statutes which prescribe rules and forms of procedures of enforcing rights or obtaining
redress for their invasion (Subido vs. Sandiganbayan, 266 SCRA 379 [1997]; Primicias vs. Ocampo, 93
Phil. 446 [1953]; Bustos vs. Lucero, 81 Phil. 640 [1948]; Lopez vs. Gloria, 40 Phil. 26 [1919]; People vs.
Sumilang, 77 Phil. 764 [1946])

(b) remedial or curative statutes which cure errors and irregularities and validate judicial or
administrative proceedings, acts of public officers, or private deeds and contracts that otherwise would
not produce their intended consequences due to some statutory disability or failure to comply with
technical rules (Government vs. Municipality of Binalonan, 32 Phil. 634 [1915]; Subido vs.
Sandiganbayan, supra; Del Castillo vs. Securities and Exchange Commission, 96 Phil. 119 [1954]; Santos
vs. Duata, 14 SCRA 1041 [1965]; Development Bank of the Philippines vs. Court of Appeals, 96 SCRA 342
[1980]; Alunan III vs. Mirasol, 276 SCRA 501 [1997])

(c) laws interpreting others

(d) laws creating new rights (Bona vs. Briones, 38 Phil. 276 [1918]; Intestate Estate of Bustamante vs.
Cayas, 98 Phil. 107 [1955])

(e) penal statutes insofar as they favor the accused who is not a habitual criminal (Article 22, Revised
Penal Code) or

(f) by express provision of the law, (Art. 4, Civil Code of the Philippines; Alba Vda. De Raz vs. Court of
Appeals, 314 SCRA 36 [1999]), except in cases of ex post facto laws (U.S. vs. Diaz Conde, 42 Phil. 766
[1922]; U.S. vs. Gomez, 12 Phil. 279 [1908]) or impairment of obligation of contract. (Asiatic Petroleum
vs. Llanes, 49 Phil. 466 [1926]).

43 Sec. 239, Intellectual Property Code of the Philippines.

44 E. Spinner & Co. vs. Neuss Hesslein Corporation, 54 Phil. 225, 231-232 [1930].

45 181 SCRA 410, 415 [1990].

46 The Paris Convention is a compact among various member countries to accord in their own countries
to citizens of the other contracting parties trademarks and other rights comparable to those accorded
their own citizens by their domestic laws. The underlying principle is that foreign nationals should be
given the same treatment in each of the member countries as that country makes available to its citizen.
(Emerald Garden Manufacturing Corp. vs. Court of Appeals, 251 SCRA 600 [1995]).

47 See footnote 18 for full text.

48 "conditions for the filing and registration of trademarks shall be determined in each country of the
Union by its domestic law." (Art. 61, Paris Convention).

49 See footnote 20 for full text.

50 SEC 20. Certificate of registration prima facie evidence of validity. A certificate of registration of a
mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant's
ownership of the mark or tradename, and of the registrant's exclusive right to use the same in
connection with the goods, business or services specified in the certificate, subject to any conditions and
limitations stated therein.

51 SEC. 6. Classification of goods and services. The Director shall establish a classification of goods and
services, for the convenience of the Patent Office administration, but not to limit or extend the
applicants rights. The applicant may register his mark or tradename in one application for any or all of
the goods or services included in one class, upon or in connection with which he is actually using the
mark or tradename. The Director may issue a single certificate for one mark or tradename registered in
a plurality of classes upon payment of a fee equaling the sum of the fees for each registration in each
class.

52 SEC. 2. What are registrable. Trademarks, tradenames, and servicemarks owned by persons,
corporations, partnerships or associations domiciled in the Philippines and by persons, corporations,
partnerships or associations domiciled in any foreign country may be registered in accordance with the
provisions of this Act; Provided, That said trademarks, tradenames, or servicemarks are actually in use in
commerce and services not less than two months in the Philippines before the time the applications for
registration are filed. And provided, further, That the country of which the applicant for registration is a
citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is
officially certified, with a certified true copy of the foreign law translated into the English language, by
the government of the foreign country to the Government of the Republic of the Philippines. (As
amended by R.A. 865).

SEC. 2-A. Ownership of trademarks, tradenames and servicemarks; how acquired. Anyone who
lawfully produces or deals in merchandise of any kind or engages in any lawful business, or who renders
any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the
service rendered, may appropriate to his exclusive use a trademark, a tradename, or a servicemark not
so appropriated by another, to distinguish his merchandise, business or service from the merchandise,
business or service of others. The ownership or possession of a trademark, tradename, servicemark
heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in
the same manner and to the same extent as are other property rights known to the law. (As amended
by R.A. 638).

53 SEC. 9-A. Equitable principles to govern proceedings. In opposition proceedings and in all other
inter partes proceedings in the Patent Office under this Act, equitable principles of laches, estoppel, and
acquiescence where applicable, may be considered and applied. (As added by R.A. No. 638).

54 Philip Morris, Inc. vs. Court of Appeals, 224 SCRA 576 [1993].

55 Exhibits "Q" to "R-2," Records, pp. 2075-2078.

56 Exhibits "9" to "14," Records, pp. 90-98.

57 251 SCRA 600, 619 [1995].

58 118 SCRA 526 [1982].

59 147 SCRA 154 [1987].

60 27 SCRA 1214 [1969].

61 203 SCRA 583 [1991].

62 224 SCRA 576 [1993].

63 TSN, April 13, 1993, Records, p. 783; TSN, June 9, 1997, Records, p. 959.

64 215 SCRA 316, 325 [1992].

65 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336, 341 [1982].

66 Sterling Products, International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214, 1227
[1969] citing 2 Callman, Unfair Competition and Trademarks, 1945 ed., p. 1006.

67 38 SCRA 480 [1971].

68 115 SCRA 472 [1982].

69 116 SCRA 388 [1982].

70 G.R. No. L-49145, May 21, 1979.

71 116 SCRA 336 [1982].

72 336 SCRA 266 [2000].

73 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].

74 Ruben Agpalo, Trademark Law and Practice in the Philippines [1990], p.41.

75 Ibid.

76 224 SCRA 437 [1993].

77 Co Tiong vs. Director of Patents, 95 Phil. 1 [1954]; Lim Hoa vs. Director of Patents, 100 Phil. 214
[1956]; American Wire & Cable Co. vs. Director of Patents, 31 SCRA 544 [1970]; Phil. Nut Industry, Inc.
vs. Standard Brands, Inc., 65 SCRA 575 [1975]; Converse Rubber Corp. vs. Universal Rubber Products,
Inc., 147 SCRA 154 [1987].

78 181 SCRA 410 [1990].

79 Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd., 7 SCRA 771 [1963]; Bristol Myers Co. vs. Director of
Patents, 17 SCRA 128 [1966]; Fruit of the Loom, Inc. vs. Court of Appeals, 133 SCRA 405 [1984].

80 Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].

81 Ibid.

82 Ibid.

83 Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].

84 Exhibits "1" to "4"; Records 2095-2097.

85 TSN, October 27, 1997, Records, pp. 995-1000.

86 Reply, Records, p. 293.

87 Exhibits "N to Q".

88 TSN, December 14, 1993, Records, pp. 414, 421 and 442.

89 Exhibits "1" to "4."

90 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336,341 [1982].

91 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982]; Arce vs. Selecta, 1 SCRA 253
[1961]; Chua Che vs. Phil. Patents Office, 13 SCRA 67 [1965]; Ang vs. Teodoro, 74 Phil. 50 [1942]; Khe vs.
Lever Bros. Co., 49 O.G. 3891 [1941]; Ang Si Heng & Dee vs. Wellington Dept. Store, 92 Phil. 448 [1953];
Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480 [1971].

92 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982].

93 Ibid.

94 Ibid.

95 I CALLMAN 1121 cited in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115
SCRA 472 [1982].

96 It has been held that where the products are different, the prior owners chance of success is a
function of many variables, such as the:

(a) strength of his mark

(b) degree of similarity between the two marks

(c) reciprocal of defendants good faith in adopting its own mark

(d) quality of defendants product

(e) proximity of the products

(f) likelihood that the prior owner will bridge the gap

(g) actual confusion, and

(h) sophistication of the buyers. (Polaroid Corp. vs. Polaroid Elecs. Corp., 287 F. 2d 492, 495 (2d Cir.),
cert. denied, 368 U.S. 820, 82 s. Ct. 36, 7 L. Ed. 2d 25 [1961]).

[G.R. No. 148222. August 15, 2003]

PEARL & DEAN (PHIL.), INCORPORATED, petitioner, vs. SHOEMART, INCORPORATED, and NORTH EDSA
MARKETING, INCORPORATED, respondents.
D E C I S I O N
CORONA, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl &
Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision[1] of the Court of Appeals reversing the
October 31, 1996 decision[2] of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516
which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc. (NEMI) liable for
infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS

The May 22, 2001 decision of the Court of Appeals[3] contained a summary of this dispute:

Plaintiff-appellant Pearl and Dean (Phil.), Inc. is a corporation engaged in the manufacture of
advertising display units simply referred to as light boxes. These units utilize specially printed posters
sandwiched between plastic sheets and illuminated with back lights. Pearl and Dean was able to secure
a Certificate of Copyright Registration dated January 20, 1981 over these illuminated display units. The
advertising light boxes were marketed under the trademark Poster Ads. The application for
registration of the trademark was filed with the Bureau of Patents, Trademarks and Technology Transfer
on June 20, 1983, but was approved only on September 12, 1988, per Registration No. 41165. From
1981 to about 1988, Pearl and Dean employed the services of Metro Industrial Services to manufacture
its advertising displays.

Sometime in 1985, Pearl and Dean negotiated with defendant-appellant Shoemart, Inc. (SMI) for the
lease and installation of the light boxes in SM City North Edsa. Since SM City North Edsa was under
construction at that time, SMI offered as an alternative, SM Makati and SM Cubao, to which Pearl and
Dean agreed. On September 11, 1985, Pearl and Deans General Manager, Rodolfo Vergara, submitted
for signature the contracts covering SM Cubao and SM Makati to SMIs Advertising Promotions and
Publicity Division Manager, Ramonlito Abano. Only the contract for SM Makati, however, was returned
signed. On October 4, 1985, Vergara wrote Abano inquiring about the other contract and reminding him
that their agreement for installation of light boxes was not only for its SM Makati branch, but also for
SM Cubao. SMI did not bother to reply.

Instead, in a letter dated January 14, 1986, SMIs house counsel informed Pearl and Dean that it was
rescinding the contract for SM Makati due to non-performance of the terms thereof. In his reply dated
February 17, 1986, Vergara protested the unilateral action of SMI, saying it was without basis. In the
same letter, he pushed for the signing of the contract for SM Cubao.

Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to
fabricate its display units, offered to construct light boxes for Shoemarts chain of stores. SMI approved
the proposal and ten (10) light boxes were subsequently fabricated by Metro Industrial for SMI. After its
contract with Metro Industrial was terminated, SMI engaged the services of EYD Rainbow Advertising
Corporation to make the light boxes. Some 300 units were fabricated in 1991. These were delivered on
a staggered basis and installed at SM Megamall and SM City.

Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at
SM City and in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out that
aside from the two (2) reported SM branches, light boxes similar to those it manufactures were also
installed in two (2) other SM stores. It further discovered that defendant-appellant North Edsa
Marketing Inc. (NEMI), through its marketing arm, Prime Spots Marketing Services, was set up primarily
to sell advertising space in lighted display units located in SMIs different branches. Pearl and Dean
noted that NEMI is a sister company of SMI.

In the light of its discoveries, Pearl and Dean sent a letter dated December 11, 1991 to both SMI and
NEMI enjoining them to cease using the subject light boxes and to remove the same from SMIs
establishments. It also demanded the discontinued use of the trademark Poster Ads, and the
payment to Pearl and Dean of compensatory damages in the amount of Twenty Million Pesos
(P20,000,000.00).

Upon receipt of the demand letter, SMI suspended the leasing of two hundred twenty-four (224) light
boxes and NEMI took down its advertisements for Poster Ads from the lighted display units in SMIs
stores. Claiming that both SMI and NEMI failed to meet all its demands, Pearl and Dean filed this instant
case for infringement of trademark and copyright, unfair competition and damages.

In denying the charges hurled against it, SMI maintained that it independently developed its poster
panels using commonly known techniques and available technology, without notice of or reference to
Pearl and Deans copyright. SMI noted that the registration of the mark Poster Ads was only for
stationeries such as letterheads, envelopes, and the like. Besides, according to SMI, the word Poster
Ads is a generic term which cannot be appropriated as a trademark, and, as such, registration of such
mark is invalid. It also stressed that Pearl and Dean is not entitled to the reliefs prayed for in its
complaint since its advertising display units contained no copyright notice, in violation of Section 27 of
P.D. 49. SMI alleged that Pearl and Dean had no cause of action against it and that the suit was purely
intended to malign SMIs good name. On this basis, SMI, aside from praying for the dismissal of the
case, also counterclaimed for moral, actual and exemplary damages and for the cancellation of Pearl
and Deans Certification of Copyright Registration No. PD-R-2558 dated January 20, 1981 and Certificate
of Trademark Registration No. 4165 dated September 12, 1988.

NEMI, for its part, denied having manufactured, installed or used any advertising display units, nor
having engaged in the business of advertising. It repleaded SMIs averments, admissions and denials
and prayed for similar reliefs and counterclaims as SMI.

The RTC of Makati City decided in favor of P & D:

Wherefore, defendants SMI and NEMI are found jointly and severally liable for infringement of copyright
under Section 2 of PD 49, as amended, and infringement of trademark under Section 22 of RA No. 166,
as amended, and are hereby penalized under Section 28 of PD 49, as amended, and Sections 23 and 24
of RA 166, as amended. Accordingly, defendants are hereby directed:

(1) to pay plaintiff the following damages:

(a) actual damages - P16,600,000.00,
representing profits
derived by defendants
as a result of infringe-
ment of plaintiffs copyright
from 1991 to 1992

(b) moral damages - P1,000.000.00

(c) exemplary damages - P1,000,000.00

(d) attorneys fees - P1,000,000.00
plus

(e) costs of suit;

(2) to deliver, under oath, for impounding in the National Library, all light boxes of SMI which were
fabricated by Metro Industrial Services and EYD Rainbow Advertising Corporation;

(3) to deliver, under oath, to the National Library, all filler-posters using the trademark Poster Ads,
for destruction; and

(4) to permanently refrain from infringing the copyright on plaintiffs light boxes and its trademark
Poster Ads.

Defendants counterclaims are hereby ordered dismissed for lack of merit.

SO ORDERED.[4]

On appeal, however, the Court of Appeals reversed the trial court:

Since the light boxes cannot, by any stretch of the imagination, be considered as either prints, pictorial
illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a copyrightable
class O work, we have to agree with SMI when it posited that what was copyrighted were the
technical drawings only, and not the light boxes themselves, thus:

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like
plaintiff-appellants will not extend to the actual object. It has so been held under jurisprudence, of
which the leading case is Baker vs. Selden (101 U.S. 841 (1879). In that case, Selden had obtained a
copyright protection for a book entitled Seldens Condensed Ledger or Bookkeeping Simplified which
purported to explain a new system of bookkeeping. Included as part of the book were blank forms and
illustrations consisting of ruled lines and headings, specially designed for use in connection with the
system explained in the work. These forms showed the entire operation of a day or a week or a month
on a single page, or on two pages following each other. The defendant Baker then produced forms
which were similar to the forms illustrated in Seldens copyrighted books. The Court held that
exclusivity to the actual forms is not extended by a copyright. The reason was that to grant a monopoly
in the underlying art when no examination of its novelty has ever been made would be a surprise and a
fraud upon the public; that is the province of letters patent, not of copyright. And that is precisely the
point. No doubt aware that its alleged original design would never pass the rigorous examination of a
patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the public by
conveniently resorting to a copyright registration which merely employs a recordal system without the
benefit of an in-depth examination of novelty.

The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F.
Supp. 298 (S.D.N.Y. 1942)]. In this case, Muller had obtained a copyright over an unpublished drawing
entitled Bridge Approach the drawing showed a novel bridge approach to unsnarl traffic congestion.
The defendant constructed a bridge approach which was alleged to be an infringement of the new
design illustrated in plaintiffs drawings. In this case it was held that protection of the drawing does not
extend to the unauthorized duplication of the object drawn because copyright extends only to the
description or expression of the object and not to the object itself. It does not prevent one from using
the drawings to construct the object portrayed in the drawing.

In two other cases, Imperial Homes Corp. v. Lamont, 458 F. 2d 895 and Scholtz Homes, Inc. v. Maddox,
379 F. 2d 84, it was held that there is no copyright infringement when one who, without being
authorized, uses a copyrighted architectural plan to construct a structure. This is because the copyright
does not extend to the structures themselves.

In fine, we cannot find SMI liable for infringing Pearl and Deans copyright over the technical drawings of
the latters advertising display units.

xxx xxx xxx

The Supreme Court trenchantly held in Faberge, Incorporated vs. Intermediate Appellate Court that the
protective mantle of the Trademark Law extends only to the goods used by the first user as specified in
the certificate of registration, following the clear mandate conveyed by Section 20 of Republic Act 166,
as amended, otherwise known as the Trademark Law, which reads:

SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a
mark or trade-name shall be prima facie evidence of the validity of the registration, the registrants
ownership of the mark or trade-name, and of the registrants exclusive right to use the same in
connection with the goods, business or services specified in the certificate, subject to any conditions and
limitations stated therein. (underscoring supplied)

The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark
Poster Ads with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was
recorded in the Principal Register on September 12, 1988 under Registration No. 41165 covering the
following products: stationeries such as letterheads, envelopes and calling cards and newsletters.

With this as factual backdrop, we see no legal basis to the finding of liability on the part of the
defendants-appellants for their use of the words Poster Ads, in the advertising display units in suit.
Jurisprudence has interpreted Section 20 of the Trademark Law as an implicit permission to a
manufacturer to venture into the production of goods and allow that producer to appropriate the brand
name of the senior registrant on goods other than those stated in the certificate of registration. The
Supreme Court further emphasized the restrictive meaning of Section 20 when it stated, through Justice
Conrado V. Sanchez, that:

Really, if the certificate of registration were to be deemed as including goods not specified therein, then
a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods
which his mind may conceive even if he had never intended to use the trademark for the said goods.
We believe that such omnibus registration is not contemplated by our Trademark Law.

While we do not discount the striking similarity between Pearl and Deans registered trademark and
defendants-appellants Poster Ads design, as well as the parallel use by which said words were used in
the parties respective advertising copies, we cannot find defendants-appellants liable for infringement
of trademark. Poster Ads was registered by Pearl and Dean for specific use in its stationeries, in
contrast to defendants-appellants who used the same words in their advertising display units. Why
Pearl and Dean limited the use of its trademark to stationeries is simply beyond us. But, having already
done so, it must stand by the consequence of the registration which it had caused.

xxx xxx xxx

We are constrained to adopt the view of defendants-appellants that the words Poster Ads are a
simple contraction of the generic term poster advertising. In the absence of any convincing proof that
Poster Ads has acquired a secondary meaning in this jurisdiction, we find that Pearl and Deans
exclusive right to the use of Poster Ads is limited to what is written in its certificate of registration,
namely, stationeries.

Defendants-appellants cannot thus be held liable for infringement of the trademark Poster Ads.

There being no finding of either copyright or trademark infringement on the part of SMI and NEMI, the
monetary award granted by the lower court to Pearl and Dean has no leg to stand on.

xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE, and another is
rendered DISMISSING the complaint and counterclaims in the above-entitled case for lack of merit.[5]

Dissatisfied with the above decision, petitioner P & D filed the instant petition assigning the following
errors for the Courts consideration:

A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT INFRINGEMENT WAS
COMMITTED BY RESPONDENTS SM AND NEMI;

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF PEARL &
DEANS TRADEMARK POSTER ADS WAS COMMITTED BY RESPONDENTS SM AND NEMI;

C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE TRIAL COURT,
DESPITE THE LATTERS FINDING, NOT DISPUTED BY THE HONORABLE COURT OF APPEALS, THAT SM WAS
GUILTY OF BAD FAITH IN ITS NEGOTIATION OF ADVERTISING CONTRACTS WITH PEARL & DEAN.

D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM AND NEMI
LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES, ATTORNEYS FEES AND COSTS
OF SUIT.[6]

ISSUES

In resolving this very interesting case, we are challenged once again to put into proper perspective four
main concerns of intellectual property law patents, copyrights, trademarks and unfair competition
arising from infringement of any of the first three. We shall focus then on the following issues:

(1) if the engineering or technical drawings of an advertising display unit (light box) are granted
copyright protection (copyright certificate of registration) by the National Library, is the light box
depicted in such engineering drawings ipso facto also protected by such copyright?

(2) or should the light box be registered separately and protected by a patent issued by the Bureau of
Patents Trademarks and Technology Transfer (now Intellectual Property Office) in addition to the
copyright of the engineering drawings?

(3) can the owner of a registered trademark legally prevent others from using such trademark if it is a
mere abbreviation of a term descriptive of his goods, services or business?

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

Petitioner P & Ds complaint was that SMI infringed on its copyright over the light boxes when SMI had
the units manufactured by Metro and EYD Rainbow Advertising for its own account. Obviously,
petitioners position was premised on its belief that its copyright over the engineering drawings
extended ipso facto to the light boxes depicted or illustrated in said drawings. In ruling that there was
no copyright infringement, the Court of Appeals held that the copyright was limited to the drawings
alone and not to the light box itself. We agree with the appellate court.

First, petitioners application for a copyright certificate as well as Copyright Certificate No. PD-R2588
issued by the National Library on January 20, 1981 clearly stated that it was for a class O work
under Section 2 (O) of PD 49 (The Intellectual Property Decree) which was the statute then prevailing.
Said Section 2 expressly enumerated the works subject to copyright:

SEC. 2. The rights granted by this Decree shall, from the moment of creation, subsist with respect to any
of the following works:

x x x x x x x x x

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

x x x x x x x x x

Although petitioners copyright certificate was entitled Advertising Display Units (which depicted the
box-type electrical devices), its claim of copyright infringement cannot be sustained.

Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the
rights are limited to what the statute confers. It may be obtained and enjoyed only with respect to the
subjects and by the persons, and on terms and conditions specified in the statute.[7] Accordingly, it can
cover only the works falling within the statutory enumeration or description.[8]

P & D secured its copyright under the classification class O work. This being so, petitioners copyright
protection extended only to the technical drawings and not to the light box itself because the latter was
not at all in the category of prints, pictorial illustrations, advertising copies, labels, tags and box wraps.
Stated otherwise, even as we find that P & D indeed owned a valid copyright, the same could have
referred only to the technical drawings within the category of pictorial illustrations. It could not have
possibly stretched out to include the underlying light box. The strict application*9+ of the laws
enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even if its
copyright certificate was entitled Advertising Display Units. What the law does not include, it
excludes, and for the good reason: the light box was not a literary or artistic piece which could be
copyrighted under the copyright law. And no less clearly, neither could the lack of statutory authority to
make the light box copyrightable be remedied by the simplistic act of entitling the copyright certificate
issued by the National Library as Advertising Display Units.

In fine, if SMI and NEMI reprinted P & Ds technical drawings for sale to the public without license from
P & D, then no doubt they would have been guilty of copyright infringement. But this was not the case.
SMIs and NEMIs acts complained of by P & D were to have units similar or identical to the light box
illustrated in the technical drawings manufactured by Metro and EYD Rainbow Advertising, for leasing
out to different advertisers. Was this an infringement of petitioners copyright over the technical
drawings? We do not think so.

During the trial, the president of P & D himself admitted that the light box was neither a literary not an
artistic work but an engineering or marketing invention.*10+ Obviously, there appeared to be some
confusion regarding what ought or ought not to be the proper subjects of copyrights, patents and
trademarks. In the leading case of Kho vs. Court of Appeals,[11] we ruled that these three legal rights
are completely distinct and separate from one another, and the protection afforded by one cannot be
used interchangeably to cover items or works that exclusively pertain to the others:

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged
with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise and shall include a stamped or marked container of goods. In
relation thereto, a trade name means the name or designation identifying or distinguishing an
enterprise. Meanwhile, the scope of a copyright is confined to literary and artistic works which are
original intellectual creations in the literary and artistic domain protected from the moment of their
creation. Patentable inventions, on the other hand, refer to any technical solution of a problem in any
field of human activity which is new, involves an inventive step and is industrially applicable.

ON THE ISSUE OF PATENT INFRINGEMENT

This brings us to the next point: if, despite its manufacture and commercial use of the light boxes
without license from petitioner, private respondents cannot be held legally liable for infringement of P &
Ds copyright over its technical drawings of the said light boxes, should they be liable instead for
infringement of patent? We do not think so either.

For some reason or another, petitioner never secured a patent for the light boxes. It therefore acquired
no patent rights which could have protected its invention, if in fact it really was. And because it had no
patent, petitioner could not legally prevent anyone from manufacturing or commercially using the
contraption. In Creser Precision Systems, Inc. vs. Court of Appeals,*12+ we held that there can be no
infringement of a patent until a patent has been issued, since whatever right one has to the invention
covered by the patent arises alone from the grant of patent. x x x (A)n inventor has no common law right
to a monopoly of his invention. He has the right to make use of and vend his invention, but if he
voluntarily discloses it, such as by offering it for sale, the world is free to copy and use it with impunity.
A patent, however, gives the inventor the right to exclude all others. As a patentee, he has the exclusive
right of making, selling or using the invention.*13+ On the assumption that petitioners advertising units
were patentable inventions, petitioner revealed them fully to the public by submitting the engineering
drawings thereof to the National Library.

To be able to effectively and legally preclude others from copying and profiting from the invention, a
patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is to
bring new designs and technologies into the public domain through disclosure.[14] Ideas, once disclosed
to the public without the protection of a valid patent, are subject to appropriation without significant
restraint.[15]

On one side of the coin is the public which will benefit from new ideas; on the other are the inventors
who must be protected. As held in Bauer & Cie vs. ODonnel,*16+ The act secured to the inventor the
exclusive right to make use, and vend the thing patented, and consequently to prevent others from
exercising like privileges without the consent of the patentee. It was passed for the purpose of
encouraging useful invention and promoting new and useful inventions by the protection and
stimulation given to inventive genius, and was intended to secure to the public, after the lapse of the
exclusive privileges granted the benefit of such inventions and improvements.

The law attempts to strike an ideal balance between the two interests:

(The p)atent system thus embodies a carefully crafted bargain for encouraging the creation and
disclosure of new useful and non-obvious advances in technology and design, in return for the exclusive
right to practice the invention for a number of years. The inventor may keep his invention secret and
reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to the
community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but upon the
expiration of that period, the knowledge of the invention inures to the people, who are thus enabled to
practice it and profit by its use.*17+

The patent law has a three-fold purpose: first, patent law seeks to foster and reward invention; second,
it promotes disclosures of inventions to stimulate further innovation and to permit the public to practice
the invention once the patent expires; third, the stringent requirements for patent protection seek to
ensure that ideas in the public domain remain there for the free use of the public.*18+

It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-depth
investigation is required because in rewarding a useful invention, the rights and welfare of the
community must be fairly dealt with and effectively guarded. To that end, the prerequisites to obtaining
a patent are strictly observed and when a patent is issued, the limitations on its exercise are equally
strictly enforced. To begin with, a genuine invention or discovery must be demonstrated lest in the
constant demand for new appliances, the heavy hand of tribute be laid on each slight technological
advance in art.*19+

There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect
that a person is claiming the creation of a work. The law confers the copyright from the moment of
creation[20] and the copyright certificate is issued upon registration with the National Library of a sworn
ex-parte claim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude
others from the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright
certificate over the technical drawings.

Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO)
to scrutinize the light boxs eligibility as a patentable invention. The irony here is that, had petitioner
secured a patent instead, its exclusivity would have been for 17 years only. But through the simplified
procedure of copyright-registration with the National Library without undergoing the rigor of
defending the patentability of its invention before the IPO and the public the petitioner would be
protected for 50 years. This situation could not have been the intention of the law.

In the oft-cited case of Baker vs. Selden[21], the United States Supreme Court held that only the
expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the
copyright of a book which expounded on a new accounting system he had developed. The publication
illustrated blank forms of ledgers utilized in such a system. The defendant reproduced forms similar to
those illustrated in the plaintiffs copyrighted book. The US Supreme Court ruled that:

There is no doubt that a work on the subject of book-keeping, though only explanatory of well known
systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is a
clear distinction between the books, as such, and the art, which it is, intended to illustrate. The mere
statement of the proposition is so evident that it requires hardly any argument to support it. The same
distinction may be predicated of every other art as well as that of bookkeeping. A treatise on the
composition and use of medicines, be they old or new; on the construction and use of ploughs or
watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode of
drawing lines to produce the effect of perspective, would be the subject of copyright; but no one would
contend that the copyright of the treatise would give the exclusive right to the art or manufacture
described therein. The copyright of the book, if not pirated from other works, would be valid without
regard to the novelty or want of novelty of its subject matter. The novelty of the art or thing described
or explained has nothing to do with the validity of the copyright. To give to the author of the book an
exclusive property in the art described therein, when no examination of its novelty has ever been
officially made, would be a surprise and a fraud upon the public. That is the province of letters patent,
not of copyright. The claim to an invention of discovery of an art or manufacture must be subjected to
the examination of the Patent Office before an exclusive right therein can be obtained; and a patent
from the government can only secure it.

The difference between the two things, letters patent and copyright, may be illustrated by reference to
the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of great
value in the healing art. If the discoverer writes and publishes a book on the subject (as regular
physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he
gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the
mixture as a new art, manufacture or composition of matter. He may copyright his book, if he pleases;
but that only secures to him the exclusive right of printing and publishing his book. So of all other
inventions or discoveries.

The copyright of a book on perspective, no matter how many drawings and illustrations it may contain,
gives no exclusive right to the modes of drawing described, though they may never have been known or
used before. By publishing the book without getting a patent for the art, the latter is given to the public.

x x x

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book
intended to convey instruction in the art, any person may practice and use the art itself which he has
described and illustrated therein. The use of the art is a totally different thing from a publication of the
book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to make,
sell and use account books prepared upon the plan set forth in such book. Whether the art might or
might not have been patented, is a question, which is not before us. It was not patented, and is open
and free to the use of the public. And, of course, in using the art, the ruled lines and headings of
accounts must necessarily be used as incident to it.

The plausibility of the claim put forward by the complainant in this case arises from a confusion of ideas
produced by the peculiar nature of the art described in the books, which have been made the subject of
copyright. In describing the art, the illustrations and diagrams employed happened to correspond more
closely than usual with the actual work performed by the operator who uses the art. x x x The
description of the art in a book, though entitled to the benefit of copyright, lays no foundation for an
exclusive claim to the art itself. The object of the one is explanation; the object of the other is use. The
former may be secured by copyright. The latter can only be secured, if it can be secured at all, by letters
patent. (underscoring supplied)

ON THE ISSUE OF TRADEMARK INFRINGEMENT

This issue concerns the use by respondents of the mark Poster Ads which petitioners president said
was a contraction of poster advertising. P & D was able to secure a trademark certificate for it, but one
where the goods specified were stationeries such as letterheads, envelopes, calling cards and
newsletters.*22+ Petitioner admitted it did not commercially engage in or market these goods. On the
contrary, it dealt in electrically operated backlit advertising units and the sale of advertising spaces
thereon, which, however, were not at all specified in the trademark certificate.

Under the circumstances, the Court of Appeals correctly cited Faberge Inc. vs. Intermediate Appellate
Court,*23+ where we, invoking Section 20 of the old Trademark Law, ruled that the certificate of
registration issued by the Director of Patents can confer (upon petitioner) the exclusive right to use its
own symbol only to those goods specified in the certificate, subject to any conditions and limitations
specified in the certificate x x x. One who has adopted and used a trademark on his goods does not
prevent the adoption and use of the same trademark by others for products which are of a different
description.*24+ Faberge, Inc. was correct and was in fact recently reiterated in Canon Kabushiki Kaisha
vs. Court of Appeals.[25]

Assuming arguendo that Poster Ads could validly qualify as a trademark, the failure of P & D to secure
a trademark registration for specific use on the light boxes meant that there could not have been any
trademark infringement since registration was an essential element thereof.

ON THE ISSUE OF UNFAIR COMPETITION

If at all, the cause of action should have been for unfair competition, a situation which was possible even
if P & D had no registration.*26+ However, while the petitioners complaint in the RTC also cited unfair
competition, the trial court did not find private respondents liable therefor. Petitioner did not appeal
this particular point; hence, it cannot now revive its claim of unfair competition.

But even disregarding procedural issues, we nevertheless cannot hold respondents guilty of unfair
competition.

By the nature of things, there can be no unfair competition under the law on copyrights although it is
applicable to disputes over the use of trademarks. Even a name or phrase incapable of appropriation as
a trademark or tradename may, by long and exclusive use by a business (such that the name or phrase
becomes associated with the business or product in the mind of the purchasing public), be entitled to
protection against unfair competition.*27+ In this case, there was no evidence that P & Ds use of Poster
Ads was distinctive or well-known. As noted by the Court of Appeals, petitioners expert witnesses
himself had testified that Poster Ads was too generic a name. So it was difficult to identify it with any
company, honestly speaking.*28+ This crucial admission by its own expert witness that Poster Ads
could not be associated with P & D showed that, in the mind of the public, the goods and services
carrying the trademark Poster Ads could not be distinguished from the goods and services of other
entities.

This fact also prevented the application of the doctrine of secondary meaning. Poster Ads was generic
and incapable of being used as a trademark because it was used in the field of poster advertising, the
very business engaged in by petitioner. Secondary meaning means that a word or phrase originally
incapable of exclusive appropriation with reference to an article in the market (because it is
geographically or otherwise descriptive) might nevertheless have been used for so long and so
exclusively by one producer with reference to his article that, in the trade and to that branch of the
purchasing public, the word or phrase has come to mean that the article was his property.[29] The
admission by petitioners own expert witness that he himself could not associate Poster Ads with
petitioner P & D because it was too generic definitely precluded the application of this exception.

Having discussed the most important and critical issues, we see no need to belabor the rest.

All told, the Court finds no reversible error committed by the Court of Appeals when it reversed the
Regional Trial Court of Makati City.

WHEREFORE, the petition is hereby DENIED and the decision of the Court of Appeals dated May 22,
2001 is AFFIRMED in toto.

SO ORDERED.

G.R. No. 115758 March 19, 2002

ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, petitioner,
vs.
HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and COMPANY, and ANG TIAM
CHAY, respondents.

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 dated May 24, 1993 of the Court of
Appeals setting aside and declaring as null and void the Orders2 dated February 10, 1992 and March 19,
1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary
injunction.

The facts of the case are as follows:

On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages with a
prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-10926,
against the respondents Summerville General Merchandising and Company (Summerville, for brevity)
and Ang Tiam Chay.

The petitioner's complaint alleges that petitioner, doing business under the name and style of KEC
Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial Cream
Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she
also has patent rights on Chin Chun Su & Device and Chin Chun Su for medicated cream after purchasing
the same from Quintin Cheng, the registered owner thereof in the Supplemental Register of the
Philippine Patent Office on February 7, 1980 under Registration Certificate No. 4529; that respondent
Summerville advertised and sold petitioner's cream products under the brand name Chin Chun Su, in
similar containers that petitioner uses, thereby misleading the public, and resulting in the decline in the
petitioner's business sales and income; and, that the respondents should be enjoined from allegedly
infringing on the copyrights and patents of the petitioner.

The respondents, on the other hand, alleged as their defense that Summerville is the exclusive and
authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun Yi
Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to register
its trade name Chin Chun Su Medicated Cream with the Philippine Patent Office and other appropriate
governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained the copyrights
through misrepresentation and falsification; and, that the authority of Quintin Cheng, assignee of the
patent registration certificate, to distribute and market Chin Chun Su products in the Philippines had
already been terminated by the said Taiwanese Manufacturing Company.

After due hearing on the application for preliminary injunction, the trial court granted the same in an
Order dated February 10, 1992, the dispositive portion of which reads:

ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cosmetic
Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is required to file
with the Court a bond executed to defendants in the amount of five hundred thousand pesos
(P500,000.00) to the effect that plaintiff will pay to defendants all damages which defendants may
sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled thereto.

SO ORDERED.3

The respondents moved for reconsideration but their motion for reconsideration was denied by the trial
court in an Order dated March 19, 1992.4

On April 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals, docketed as
CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary injunction issued by the
trial court. After the respondents filed their reply and almost a month after petitioner submitted her
comment, or on August 14 1992, the latter moved to dismiss the petition for violation of Supreme Court
Circular No. 28-91, a circular prohibiting forum shopping. According to the petitioner, the respondents
did not state the docket number of the civil case in the caption of their petition and, more significantly,
they did not include therein a certificate of non-forum shopping. The respondents opposed the petition
and submitted to the appellate court a certificate of non-forum shopping for their petition.

On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in favor of the
respondents, the dispositive portion of which reads:

WHEREFORE, the petition is hereby given due course and the orders of respondent court dated February
10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying petitioners' motion
for reconsideration are hereby set aside and declared null and void. Respondent court is directed to
forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the issue raised by the parties
on the merits.

SO ORDERED.5

In granting the petition, the appellate court ruled that:

The registration of the trademark or brandname "Chin Chun Su" by KEC with the supplemental register
of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in
the principal register, which is duly protected by the Trademark Law.1wphi1.nt

xxx xxx xxx

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393:

"Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has
appropriated the trademark. By the very fact that the trademark cannot as yet be on guard and there
are certain defects, some obstacles which the use must still overcome before he can claim legal
ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the
same. It would be deceptive for a party with nothing more than a registration in the Supplemental
Register to posture before courts of justice as if the registration is in the Principal Register.

The reliance of the private respondent on the last sentence of the Patent office action on application
Serial No. 30954 that 'registrants is presumed to be the owner of the mark until after the registration is
declared cancelled' is, therefore, misplaced and grounded on shaky foundation. The supposed
presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice
before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us
in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual
basis. As even in cases where presumption and precept may factually be reconciled, we have held that
the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L-10612, May 30, 1958,
Unreported). One may be declared an unfair competitor even if his competing trademark is registered
(Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534)."6


The petitioner filed a motion for reconsideration. This she followed with several motions to declare
respondents in contempt of court for publishing advertisements notifying the public of the promulgation
of the assailed decision of the appellate court and stating that genuine Chin Chun Su products could be
obtained only from Summerville General Merchandising and Co.

In the meantime, the trial court went on to hear petitioner's complaint for final injunction and damages.
On October 22, 1993, the trial court rendered a Decision7 barring the petitioner from using the
trademark Chin Chun Su and upholding the right of the respondents to use the same, but recognizing
the copyright of the petitioner over the oval shaped container of her beauty cream. The trial court did
not award damages and costs to any of the parties but to their respective counsels were awarded
Seventy-Five Thousand Pesos (P75,000.00) each as attorney's fees. The petitioner duly appealed the said
decision to the Court of Appeals.

On June 3, 1994, the Court of Appeals promulgated a Resolution8 denying the petitioner's motions for
reconsideration and for contempt of court in CA-G.R. SP No. 27803.

Hence, this petition anchored on the following assignment of errors:

I

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON PETITIONER'S MOTION TO DISMISS.

II

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY RESOLVE PETITIONER'S MOTION
FOR RECONSIDERATION.

III

IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR RECONSIDERATION, THE HONORABLE
COURT OF APPEALS DENIED PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED
PETITIONER'S RIGHT TO DUE PROCESS.

IV

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE RESPONDENTS IN
CONTEMPT.9

The petitioner faults the appellate court for not dismissing the petition on the ground of violation of
Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated
Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on her
motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The
appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In
delaying the resolution thereof, the appellate court denied the petitioner's right to seek the timely
appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of court
against the respondents.

We rule in favor of the respondents.

Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for the
issuance of a writ of preliminary injunction is a proof that the applicant is entitled to the relief
demanded, and the whole or part of such relief consists in restraining the commission or continuance of
the act or acts complained of, either for a limited period or perpetually. Thus, a preliminary injunction
order may be granted only when the application for the issuance of the same shows facts entitling the
applicant to the relief demanded.10 This is the reason why we have ruled that it must be shown that the
invasion of the right sought to be protected is material and substantial, that the right of complainant is
clear and unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent
serious damage.11

In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the ground
that she is entitled to the use of the trademark on Chin Chun Su and its container based on her copyright
and patent over the same. We first find it appropriate to rule on whether the copyright and patent over
the name and container of a beauty cream product would entitle the registrant to the use and
ownership over the same to the exclusion of others.

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged
with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or
services (service mark) of an enterprise and shall include a stamped or marked container of goods.12 In
relation thereto, a trade name means the name or designation identifying or distinguishing an
enterprise.13 Meanwhile, the scope of a copyright is confined to literary and artistic works which are
original intellectual creations in the literary and artistic domain protected from the moment of their
creation.14 Patentable inventions, on the other hand, refer to any technical solution of a problem in any
field of human activity which is new, involves an inventive step and is industrially applicable.15

Petitioner has no right to support her claim for the exclusive use of the subject trade name and its
container. The name and container of a beauty cream product are proper subjects of a trademark
inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the
same in the sale of the beauty cream product, the user must sufficiently prove that she registered or
used it before anybody else did. The petitioner's copyright and patent registration of the name and
container would not guarantee her the right to the exclusive use of the same for the reason that they
are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction order
cannot be issued for the reason that the petitioner has not proven that she has a clear right over the
said name and container to the exclusion of others, not having proven that she has registered a
trademark thereto or used the same before anyone did.

We cannot likewise overlook the decision of the trial court in the case for final injunction and damages.
The dispositive portion of said decision held that the petitioner does not have trademark rights on the
name and container of the beauty cream product. The said decision on the merits of the trial court
rendered the issuance of the writ of a preliminary injunction moot and academic notwithstanding the
fact that the same has been appealed in the Court of Appeals. This is supported by our ruling in La Vista
Association, Inc. v. Court of Appeals16, to wit:

Considering that preliminary injunction is a provisional remedy which may be granted at any time after
the commencement of the action and before judgment when it is established that the plaintiff is
entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and it
appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner
in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant petition
having been rendered moot and academic. An injunction issued by the trial court after it has already
made a clear pronouncement as to the plaintiff's right thereto, that is, after the same issue has been
decided on the merits, the trial court having appreciated the evidence presented, is proper,
notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the
proceedings for preliminary injunction cannot stand separately or proceed independently of the
decision rendered on the merit of the main case for injunction. The merit of the main case having been
already determined in favor of the applicant, the preliminary determination of its non-existence ceases
to have any force and effect. (italics supplied)

La Vista categorically pronounced that the issuance of a final injunction renders any question on the
preliminary injunctive order moot and academic despite the fact that the decision granting a final
injunction is pending appeal. Conversely, a decision denying the applicant-plaintiff's right to a final
injunction, although appealed, renders moot and academic any objection to the prior dissolution of a
writ of preliminary injunction.

The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for non-
compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised the
technical objection of non-compliance with Supreme Court Circular No. 28-91 by filing a motion to
dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of
the Revised Rules of Civil Procedure which provides that "(I)n petitions for certiorari before the Supreme
Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due
course thereto, the court may require the respondents to file their comment to, and not a motion to
dismiss, the petition xxx (italics supplied)". Secondly, the issue was raised one month after petitioner
had filed her answer/comment and after private respondent had replied thereto. Under Section 1, Rule
16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within the time for but
before filing the answer to the complaint or pleading asserting a claim. She therefore could no longer
submit a motion to dismiss nor raise defenses and objections not included in the answer/comment she
had earlier tendered. Thirdly, substantial justice and equity require this Court not to revive a dissolved
writ of injunction in favor of a party without any legal right thereto merely on a technical infirmity. The
granting of an injunctive writ based on a technical ground rather than compliance with the requisites for
the issuance of the same is contrary to the primary objective of legal procedure which is to serve as a
means to dispense justice to the deserving party.

The petitioner likewise contends that the appellate court unduly delayed the resolution of her motion
for reconsideration. But we find that petitioner contributed to this delay when she filed successive
contentious motions in the same proceeding, the last of which was on October 27, 1993, necessitating
counter-manifestations from private respondents with the last one being filed on November 9, 1993.
Nonetheless, it is well-settled that non-observance of the period for deciding cases or their incidents
does not render such judgments ineffective or void.17 With respect to the purported damages she
suffered due to the alleged delay in resolving her motion for reconsideration, we find that the said issue
has likewise been rendered moot and academic by our ruling that she has no right over the trademark
and, consequently, to the issuance of a writ of preliminary injunction.1wphi1.nt

Finally, we rule that the Court of Appeals correctly denied the petitioner's several motions for contempt
of court. There is nothing contemptuous about the advertisements complained of which, as regards the
proceedings in CA-G.R. SP No. 27803 merely announced in plain and straightforward language the
promulgation of the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule 39
of the Revised Rules of Civil Procedure, the said decision nullifying the injunctive writ was immediately
executory.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 24,
1993 and June 3, 1994, respectively, are hereby AFFIRMED. With costs against the petitioner.

SO ORDERED.

Kho vs Court of Appeals
on February 9, 2012
Intellectual Property Law on Copyright Proper Subjects of Copyright

Elidad Kho is the owner of KEC Cosmetics Laboratory and she was also the holder of copyrights over Chin
Chun Su and its Oval Facial Cream Container/Case. She also bought the patent rights over the Chin Chun
Su & Device and Chin Chun Su for medicated cream from one Quintin Cheng, who was the assignee of
Shun Yi Factory a Taiwanese factory actually manufacturing Chin Chun Su products.

Kho filed a petition for injunction against Summerville General Merchandising and Company to enjoin
the latter from advertising and selling Chin Chun Su products, in similar containers as that of Kho, for
this is misleading the public and causing Kho to lose income; the petition is also to enjoin Summerville
from infringing upon Khos copyrights.

Summerville in their defense alleged that they are the exclusive and authorized importer, re-packer and
distributor of Chin Chun Su products; that Shun Yi even authorized Summerville to register its trade
name Chin Chun Su Medicated Cream with the Philippine Patent Office; that Quintin Cheng, from home
Kho acquired her patent rights, had been terminated by Shun Yi.

ISSUE: Whether or not Kho has the exclusive right to use the trade name and its container.

HELD: No. Kho has no right to support her claim for the exclusive use of the subject trade name and its
container. The name and container of a beauty cream product are proper subjects of a trademark (not
copyright like what she registered for) inasmuch as the same falls squarely within its definition. In order
to be entitled to exclusively use the same in the sale of the beauty cream product, the user must
sufficiently prove that she registered or used it before anybody else did. Khos copyright and patent
registration of the name and container would not guarantee her the right to the exclusive use of the
same for the reason that they are not appropriate subjects of the said intellectual rights. Consequently,
a preliminary injunction order cannot be issued for the reason that the petitioner has not proven that
she has a clear right over the said name and container to the exclusion of others, not having proven that
she has registered a trademark thereto or used the same before anyone did.

Intellectual Property Law on Copyright Copyrightable Subject

Pearl and Dean Inc. is a corporation engaged in the manufacture of advertising display units called light
boxes. In January 1981, Pearl and Dean was able to acquire copyrights over the designs of the display
units. In 1988, their trademark application for Poster Ads was approved; they used the same
trademark to advertise their light boxes.

In 1985, Pearl and Dean negotiated with Shoemart Inc. (SM) so that the former may be contracted to
install light boxes in the ad spaces of SM. Eventually, SM rejected Pearl and Deans proposal.

Two years later, Pear and Dean received report that light boxes exactly the same as theirs are being
used by SM in their ad spaces. They demanded SM to stop using the light boxes and at the same time
asked for damages amounting to P20 M. SM refused to pay damages though they struck down the light
boxes. Pearl and Dean eventually sued SM. SM argued that it did not infringe on Pearl and Deans
trademark because Pearl and Deans trademark is only applicable to envelopes and stationeries and not
to the type of ad spaces owned by SM. SM also averred that Poster Ads is a generic term hence it is
not subject to trademark registration. SM also averred that the actual light boxes are not copyrightable.
The RTC ruled in favor of Pearl and Dean. But the Court of Appeals ruled in favor of SM.

ISSUE: Whether or not the Court of Appeals is correct.

HELD: Yes. The light boxes cannot, by any stretch of the imagination, be considered as either prints,
pictorial illustrations, advertising copies, labels, tags or box wraps, to be properly classified as a
copyrightable; what was copyrighted were the technical drawings only, and not the light boxes
themselves. In other cases, it was held that there is no copyright infringement when one who, without
being authorized, uses a copyrighted architectural plan to construct a structure. This is because the
copyright does not extend to the structures themselves.

On the trademark infringement allegation, the words Poster Ads are a simple contraction of the
generic term poster advertising. In the absence of any convincing proof that Poster Ads has acquired
a secondary meaning in this jurisdiction, Pearl and Deans exclusive right to the use of Poster Ads is
limited to what is written in its certificate of registration, namely, stationeries.


PHIL PHARMAWEALTH, INC.,
Petitioner,



- versus -





PFIZER, INC. and PFIZER (PHIL.) INC.,
Respondents.
G.R. No. 167715

Present:

CARPIO, J., Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

Promulgated:

November 17, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


PERALTA, J.:


Before the Court is a petition for review on certiorari seeking to annul and set aside the Resolutions
dated January 18, 2005[1] and April 11, 2005[2] by the Court of Appeals (CA) in CA-G.R. SP No. 82734.

The instant case arose from a Complaint[3] for patent infringement filed against petitioner Phil
Pharmawealth, Inc. by respondent companies, Pfizer, Inc. and Pfizer (Phil.), Inc., with the Bureau of Legal
Affairs of the Intellectual Property Office (BLA-IPO). The Complaint alleged as follows:

x x x x

6. Pfizer is the registered owner of Philippine Letters Patent No. 21116 (the Patent)
which was issued by this Honorable Office on July 16, 1987. The patent is valid until July 16, 2004. The
claims of this Patent are directed to a method of increasing the effectiveness of a beta-lactam antibiotic
in a mammalian subject, which comprises co-administering to said subject a beta-lactam antibiotic
effectiveness increasing amount of a compound of the formula IA. The scope of the claims of the
Patent extends to a combination of penicillin such as ampicillin sodium and beta-lactam antibiotic like
sulbactam sodium.

7. Patent No. 21116 thus covers ampicillin sodium/sulbactam sodium (hereafter
Sulbactam Ampicillin). Ampicillin sodium is a specific example of the broad beta-lactam antibiotic
disclosed and claimed in the Patent. It is the compound which efficacy is being enhanced by co-
administering the same with sulbactam sodium. Sulbactam sodium, on the other hand, is a specific
compound of the formula IA disclosed and claimed in the Patent.

8. Pfizer is marketing Sulbactam Ampicillin under the brand name Unasyn. Pfizer's
Unasyn products, which come in oral and IV formulas, are covered by Certificates of Product
Registration (CPR) issued by the Bureau of Food and Drugs (BFAD) under the name of complainants.
The sole and exclusive distributor of Unasyn products in the Philippines is Zuellig Pharma Corporation,
pursuant to a Distribution Services Agreement it executed with Pfizer Phils. on January 23, 2001.

9. Sometime in January and February 2003, complainants came to know that respondent
[herein petitioner] submitted bids for the supply of Sulbactam Ampicillin to several hospitals without the
consent of complainants and in violation of the complainants' intellectual property rights. x x x

x x x x

10. Complainants thus wrote the above hospitals and demanded that the latter
immediately cease and desist from accepting bids for the supply [of] Sulbactam Ampicillin or awarding
the same to entities other than complainants. Complainants, in the same letters sent through
undersigned counsel, also demanded that respondent immediately withdraw its bids to supply
Sulbactam Ampicillin.

11. In gross and evident bad faith, respondent and the hospitals named in paragraph 9
hereof, willfully ignored complainants' just, plain and valid demands, refused to comply therewith and
continued to infringe the Patent, all to the damage and prejudice of complainants. As registered owner
of the Patent, Pfizer is entitled to protection under Section 76 of the IP Code.

x x x x[4]
Respondents prayed for permanent injunction, damages and the forfeiture and impounding of the
alleged infringing products. They also asked for the issuance of a temporary restraining order and a
preliminary injunction that would prevent herein petitioner, its agents, representatives and assigns,
from importing, distributing, selling or offering the subject product for sale to any entity in the
Philippines.

In an Order[5] dated July 15, 2003 the BLA-IPO issued a preliminary injunction which was effective
for ninety days from petitioner's receipt of the said Order.

Prior to the expiration of the ninety-day period, respondents filed a Motion for Extension of Writ of
Preliminary Injunction[6] which, however, was denied by the BLA-IPO in an Order[7] dated October 15,
2003.

Respondents filed a Motion for Reconsideration but the same was also denied by the BLA-IPO in a
Resolution[8] dated January 23, 2004.

Respondents then filed a special civil action for certiorari with the CA assailing the October 15,
2003 and January 23, 2004 Resolutions of the BLA-IPO. Respondents also prayed for the issuance of a
preliminary mandatory injunction for the reinstatement and extension of the writ of preliminary
injunction issued by the BLA-IPO.

While the case was pending before the CA, respondents filed a Complaint[9] with the Regional Trial
Court (RTC) of Makati City for infringement and unfair competition with damages against herein
petitioner. In said case, respondents prayed for the issuance of a temporary restraining order and
preliminary injunction to prevent herein petitioner from importing, distributing, selling or offering for
sale sulbactam ampicillin products to any entity in the Philippines. Respondents asked the trial court
that, after trial, judgment be rendered awarding damages in their favor and making the injunction
permanent.

On August 24, 2004, the RTC of Makati City issued an Order[10] directing the issuance of a
temporary restraining order conditioned upon respondents' filing of a bond.

In a subsequent Order[11] dated April 6, 2005, the same RTC directed the issuance of a writ of
preliminary injunction prohibiting and restraining *petitioner+, its agents, representatives and assigns
from importing, distributing or selling Sulbactam Ampicillin products to any entity in the Philippines.

Meanwhile, on November 16, 2004, petitioner filed a Motion to Dismiss[12] the petition filed with
the CA on the ground of forum shopping, contending that the case filed with the RTC has the same
objective as the petition filed with the CA, which is to obtain an injunction prohibiting petitioner from
importing, distributing and selling Sulbactam Ampicillin products.

On January 18, 2005, the CA issued its questioned Resolution[13] approving the bond posted by
respondents pursuant to the Resolution issued by the appellate court on March 23, 2004 which directed
the issuance of a temporary restraining order conditioned upon the filing of a bond. On even date, the
CA issued a temporary restraining order[14+ which prohibited petitioner from importing, distributing,
selling or offering for sale Sulbactam Ampicillin products to any hospital or to any other entity in the
Philippines, or from infringing Pfizer Inc.'s Philippine Patent No. 21116 and impounding all the sales
invoices and other documents evidencing sales by *petitioner+ of Sulbactam Ampicillin products.

On February 7, 2005, petitioner again filed a Motion to Dismiss[15] the case for being moot and
academic, contending that respondents' patent had already lapsed. In the same manner, petitioner also
moved for the reconsideration of the temporary restraining order issued by the CA on the same basis
that the patent right sought to be protected has been extinguished due to the lapse of the patent
license and on the ground that the CA has no jurisdiction to review the order of the BLA-IPO as said
jurisdiction is vested by law in the Office of the Director General of the IPO.

On April 11, 2005, the CA rendered its presently assailed Resolution denying the Motion to Dismiss,
dated November 16, 2004, and the motion for reconsideration, as well as Motion to Dismiss, both dated
February 7, 2005.

Hence, the present petition raising the following issues:


a) Can an injunctive relief be issued based on an action of patent infringement when the
patent allegedly infringed has already lapsed?

b) What tribunal has jurisdiction to review the decisions of the Director of Legal Affairs of
the Intellectual Property Office?

c) Is there forum shopping when a party files two actions with two seemingly different
causes of action and yet pray for the same relief?[16]


In the first issue raised, petitioner argues that respondents' exclusive right to monopolize the
subject matter of the patent exists only within the term of the patent. Petitioner claims that since
respondents' patent expired on July 16, 2004, the latter no longer possess any right of monopoly and, as
such, there is no more basis for the issuance of a restraining order or injunction against petitioner
insofar as the disputed patent is concerned.

The Court agrees.

Section 37 of Republic Act No. (RA) 165,[17] which was the governing law at the time of the
issuance of respondents' patent, provides:

Section 37. Rights of patentees. A patentee shall have the exclusive right to make, use and
sell the patented machine, article or product, and to use the patented process for the purpose of
industry or commerce, throughout the territory of the Philippines for the term of the patent; and such
making, using, or selling by any person without the authorization of the patentee constitutes
infringement of the patent.[18]


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

On the basis of the foregoing, the Court agrees with petitioner that after July 16, 2004, respondents
no longer possess the exclusive right to make, use and sell the articles or products covered by Philippine
Letters Patent No. 21116.

Section 3, Rule 58, of the Rules of Court lays down the requirements for the issuance of a writ
of preliminary injunction, viz:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the acts complained of, or in requiring the performance of
an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the
litigation would probably work injustice to the applicant; or

(c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is procuring
or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting
the subject of the action or proceeding, and tending to render the judgment ineffectual.


In this connection, pertinent portions of Section 5, Rule 58 of the same Rules provide that if the
matter is of extreme urgency and the applicant will suffer grave injustice and irreparable injury, a
temporary restraining order may be issued ex parte.

From the foregoing, it can be inferred that two requisites must exist to warrant the issuance of an
injunctive relief, namely: (1) the existence of a clear and unmistakable right that must be protected; and
(2) an urgent and paramount necessity for the writ to prevent serious damage.[19]

In the instant case, it is clear that when the CA issued its January 18, 2005 Resolution approving the
bond filed by respondents, the latter no longer had a right that must be protected, considering that
Philippine Letters Patent No. 21116 which was issued to them already expired on July 16, 2004. Hence,
the issuance by the CA of a temporary restraining order in favor of the respondents is not proper.

In fact, the CA should have granted petitioner's motion to dismiss the petition for certiorari filed
before it as the only issue raised therein is the propriety of extending the writ of preliminary injunction
issued by the BLA-IPO. Since the patent which was the basis for issuing the injunction, was no longer
valid, any issue as to the propriety of extending the life of the injunction was already rendered moot and
academic.

As to the second issue raised, the Court, is not persuaded by petitioner's argument that, pursuant
to the doctrine of primary jurisdiction, the Director General of the IPO and not the CA has jurisdiction to
review the questioned Orders of the Director of the BLA-IPO.

It is true that under Section 7(b) of RA 8293, otherwise known as the Intellectual Property Code of
the Philippines, which is the presently prevailing law, the Director General of the IPO exercises exclusive
appellate jurisdiction over all decisions rendered by the Director of the BLA-IPO. However, what is being
questioned before the CA is not a decision, but an interlocutory order of the BLA-IPO denying
respondents' motion to extend the life of the preliminary injunction issued in their favor.

RA 8293 is silent with respect to any remedy available to litigants who intend to question an
interlocutory order issued by the BLA-IPO. Moreover, Section 1(c), Rule 14 of the Rules and Regulations
on Administrative Complaints for Violation of Laws Involving Intellectual Property Rights simply provides
that interlocutory orders shall not be appealable. The said Rules and Regulations do not prescribe a
procedure within the administrative machinery to be followed in assailing orders issued by the BLA-IPO
pending final resolution of a case filed with them. Hence, in the absence of such a remedy, the
provisions of the Rules of Court shall apply in a suppletory manner, as provided under Section 3, Rule 1
of the same Rules and Regulations. Hence, in the present case, respondents correctly resorted to the
filing of a special civil action for certiorari with the CA to question the assailed Orders of the BLA-IPO, as
they cannot appeal therefrom and they have no other plain, speedy and adequate remedy in the
ordinary course of law. This is consistent with Sections 1[20] and 4,[21] Rule 65 of the Rules of Court, as
amended.
In the first place, respondents' act of filing their complaint originally with the BLA-IPO is already in
consonance with the doctrine of primary jurisdiction.

This Court has held that:

[i]n cases involving specialized disputes, the practice has been to refer the same to an
administrative agency of special competence in observance of the doctrine of primary jurisdiction. The
Court has ratiocinated that it cannot or will not determine a controversy involving a question which is
within the jurisdiction of the administrative tribunal prior to the resolution of that question by the
administrative tribunal, where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative tribunal to determine
technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the
premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is
to guide a court in determining whether it should refrain from exercising its jurisdiction until after an
administrative agency has determined some question or some aspect of some question arising in the
proceeding before the court. It applies where the claim is originally cognizable in the courts and comes
into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory
scheme, has been placed within the special competence of an administrative body; in such case, the
judicial process is suspended pending referral of such issues to the administrative body for its view.[22]


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

Moreover, as discussed earlier, RA 8293 and its implementing rules and regulations do not provide
for a procedural remedy to question interlocutory orders issued by the BLA-IPO. In this regard, it bears
to reiterate that the judicial power of the courts, as provided for under the Constitution, includes the
authority of the courts to determine in an appropriate action the validity of the acts of the political
departments.[24] Judicial power also includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to determine whether
or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the Government.[25] Hence, the CA, and not the IPO Director
General, has jurisdiction to determine whether the BLA-IPO committed grave abuse of discretion in
denying respondents' motion to extend the effectivity of the writ of preliminary injunction which the
said office earlier issued.
Lastly, petitioner avers that respondents are guilty of forum shopping for having filed separate
actions before the IPO and the RTC praying for the same relief.

The Court agrees.

Forum shopping is defined as the act of a party against whom an adverse judgment has been
rendered in one forum, of seeking another (and possibly favorable) opinion in another forum (other
than by appeal or the special civil action of certiorari), or the institution of two (2) or more actions or
proceedings grounded on the same cause on the supposition that one or the other court would make a
favorable disposition.[26]

The elements of forum shopping are: (a) identity of parties, or at least such parties that represent
the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; (c) identity of the two preceding particulars, such that any judgment
rendered in the other action will, regardless of which party is successful, amount to res judicata in the
action under consideration.[27]

There is no question as to the identity of parties in the complaints filed with the IPO and the RTC.

Respondents argue that they cannot be held guilty of forum shopping because their complaints are
based on different causes of action as shown by the fact that the said complaints are founded on
violations of different patents.
The Court is not persuaded.

Section 2, Rule 2 of the Rules of Court defines a cause of action as the act or omission by which a
party violates a right of another. In the instant case, respondents' cause of action in their complaint filed
with the IPO is the alleged act of petitioner in importing, distributing, selling or offering for sale
Sulbactam Ampicillin products, acts that are supposedly violative of respondents' right to the exclusive
sale of the said products which are covered by the latter's patent. However, a careful reading of the
complaint filed with the RTC of Makati City would show that respondents have the same cause of action
as in their complaint filed with the IPO. They claim that they have the exclusive right to make, use and
sell Sulbactam Ampicillin products and that petitioner violated this right. Thus, it does not matter that
the patents upon which the complaints were based are different. The fact remains that in both
complaints the rights violated and the acts violative of such rights are identical.

In fact, respondents seek substantially the same reliefs in their separate complaints with the IPO
and the RTC for the purpose of accomplishing the same objective.

It is settled by this Court in several cases that the filing by a party of two apparently different
actions but with the same objective constitutes forum shopping.[28] The Court discussed this species of
forum shopping as follows:

Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was
filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint in the
Second Case seeks to declare such purported sale involving the same real property as unenforceable as
against the Bank, which is the petitioner herein. In other words, in the Second Case, the majority
stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do
in the original case in the trial court. In brief, the objective or the relief being sought, though worded
differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the
property to respondent.[29]


In Danville Maritime, Inc. v. Commission on Audit,[30] the Court ruled as follows:

In the attempt to make the two actions appear to be different, petitioner impleaded different
respondents therein PNOC in the case before the lower court and the COA in the case before this
Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the
questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the
Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the
complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and
from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to
comply with the paragraph 1 of the memorandum of agreement and damages. One can see that
although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in
both actions is the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn
the letter directive of the COA of October 10, 1988 disapproving the sale.[31]


In the instant case, the prayer of respondents in their complaint filed with the IPO is as follows:

A. Immediately upon the filing of this action, issue an ex parte order (a) temporarily
restraining respondent, its agents, representatives and assigns from importing, distributing, selling or
offering for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of this Complaint
or to any other entity in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No.
21116; and (b) impounding all the sales invoices and other documents evidencing sales by respondent of
Sulbactam Ampicillin products.

B. After hearing, issue a writ of preliminary injunction enjoining respondent, its agents,
representatives and assigns from importing, distributing, selling or offering for sale Sulbactam Ampicillin
products to the hospitals named in paragraph 9 of the Complaint or to any other entity in the
Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No. 21116; and

C. After trial, render judgment:

(i) declaring that respondent has infringed Pfizer Inc.'s Philippine Patent No. 21116 and that
respondent has no right whatsoever over complainant's patent;

(ii) ordering respondent to pay complainants the following amounts:

(a) at least P1,000,000.00 as actual damages;
(b) P700,000.00 as attorney's fees and litigation
expenses;
(d) P1,000,000.00 as exemplary damages; and
(d) costs of this suit.

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

(iv) making the injunction permanent.[32]


In an almost identical manner, respondents prayed for the following in their complaint filed with
the RTC:

(a) Immediately upon the filing of this action, issue an ex parte order:

(1) temporarily restraining Pharmawealth, its agents,
representatives and assigns from importing, distributing, selling or offering
for sale infringing sulbactam ampicillin products to various government and
private hospitals or to any other entity in the
Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent No. 26810.

(2) impounding all the sales invoices and other documents evidencing sales by pharmawealth of
sulbactam ampicillin products; and

(3) disposing of the infringing goods outside the channels of commerce.

(b) After hearing, issue a writ of preliminary injunction:

(1) enjoining Pharmawealth, its agents, representatives and assigns from importing, distributing,
selling or offering for sale infringing sulbactam ampicillin products to various government hospitals or to
any other entity in the Philippines, or from otherwise infringing Patent No. 26810;

(2) impounding all the sales invoices and other documents evidencing sales by Pharmawealth of
sulbactam ampicillin products; and

(3) disposing of the infringing goods outside the channels of
commerce.

(c) After trial, render judgment:

(1) finding Pharmawealth to have infringed Patent No. 26810 and declaring Pharmawealth to
have no right whatsoever over plaintiff's patent;

(2) ordering Pharmawealth to pay plaintiffs the following amounts:

(i) at least P3,000,000.00 as actual damages;
(ii) P500,000.00 as attorney's fees and
P1,000,000.00 as litigation expenses;
(iii) P3,000,000.00 as exemplary damages; and
(iv) costs of this suit.

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

(4) making the injunction permanent.[33]


It is clear from the foregoing that the ultimate objective which respondents seek to achieve in their
separate complaints filed with the RTC and the IPO, is to ask for damages for the alleged violation of
their right to exclusively sell Sulbactam Ampicillin products and to permanently prevent or prohibit
petitioner from selling said products to any entity. Owing to the substantial identity of parties, reliefs
and issues in the IPO and RTC cases, a decision in one case will necessarily amount to res judicata in the
other action.

It bears to reiterate that what is truly important to consider in determining whether forum
shopping exists or not is the vexation caused the courts and parties-litigant by a party who asks different
courts and/or administrative agencies to rule on the same or related causes and/or to grant the same or
substantially the same reliefs, in the process creating the possibility of conflicting decisions being
rendered by the different fora upon the same issue.[34]

Thus, the Court agrees with petitioner that respondents are indeed guilty of forum shopping.

Jurisprudence holds that if the forum shopping is not considered willful and deliberate, the
subsequent case shall be dismissed without prejudice, on the ground of either litis pendentia or res
judicata.[35] However, if the forum shopping is willful and deliberate, both (or all, if there are more than
two) actions shall be dismissed with prejudice.[36] In the present case, the Court finds that respondents
did not deliberately violate the rule on non-forum shopping. Respondents may not be totally blamed for
erroneously believing that they can file separate actions simply on the basis of different patents.
Moreover, in the suit filed with the RTC of Makati City, respondents were candid enough to inform the
trial court of the pendency of the complaint filed with the BLA-IPO as well as the petition for certiorari
filed with the CA. On these bases, only Civil Case No. 04-754 should be dismissed on the ground of litis
pendentia.

WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of the Court of Appeals,
dated January 18, 2005 and April 11, 2005, in CA-G.R. No. 82734, are REVERSED and SET ASIDE. The
petition for certiorari filed with the Court of Appeals is DISMISSED for being moot and academic.

Civil Case No. 04-754, filed with the Regional Trial Court of Makati City, Branch 138, is likewise
DISMISSED on the ground of litis pendentia.

SO ORDERED.


IN-N-OUT BURGER, INC,
Petitioner,



- versus -



SEHWANI, INCORPORATED AND/OR BENITAS FRITES, INC.,
Respondents.

G.R. No. 179127
Present:

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:

December 24, 2008
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


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 Decision[1] dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which
reversed the Decision[2] dated 23 December 2005 of the Director General of the Intellectual Property
Office (IPO) in Appeal No. 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 petitioners products.*7+

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

Petitioner was able to register the mark Double Double on 4 July 2002, based on their application filed
on 2 June 1997.[9] It alleged that respondents also used this mark, as well as the menu color scheme.
Petitioners also averred that respondent Benitas receipts bore the phrase, representing IN-N-OUT
Burger.*10+ It should be noted that that although 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 petitioners complaint, respondents filed before the BLA-IPO an Answer with Counterclaim.
Respondents asserted therein that they had been using the mark IN N OUT in the Philippines since 15
October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of
Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the mark IN
N OUT (the inside of the letter O formed like a star). Upon approval of its application, a certificate of
registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17
December 1993. On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered
into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, IN N
OUT. Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the
mark IN N OUT, should be accorded the presumption of a valid registration of its mark with the
exclusive right to use the same. Respondents argued that none of the grounds provided under the
Intellectual Property Code for the cancellation of a certificate of registration are present in this case.
Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never
operated in the Philippines.[12]

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22
December 2003,[13] in favor of petitioner. According to said Decision, petitioner had the legal capacity
to sue in the Philippines, since its country of origin or domicile was a member of and a signatory to the
Convention of Paris on Protection of Industrial Property. And although petitioner had never done
business in the Philippines, it was widely known in this country through the use herein of products
bearing its corporate and trade name. Petitioners marks are internationally well-known, given the
world-wide registration of the mark IN-N-OUT, and its numerous advertisements in various
publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case
that In-N-Out Burger and Arrow Design was an internationally well-known mark. Given these
circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right
to use its tradename and mark IN-N-OUT in the Philippines to the exclusion of others, including the
respondents. However, respondents used the mark IN N OUT in good faith and were not guilty of
unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon
petitioners goodwill by copying the mark IN-N-OUT Burger exactly. The inside of the letter O in the
mark used by respondents formed a star. In addition, the simple act of respondent Sehwani,
Incorporated of inquiring into the existence of a pending application for registration of the IN-N-OUT
mark was not deemed fraudulent. 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 Benitas 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 Reconsideration*15+ and petitioners Motion for Partial Reconsideration*16+
were denied by the IPO Director for Legal Affairs in Resolution No. 2004-18[17] dated 28 October 2004
and Resolution No. 2005-05 dated 25 April 2005,[18] respectively.

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

G.R. No. 171053

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

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

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

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


Respondents thus prayed:

WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this
petition, and thereafter order the Office of the Director General of the Intellectual Property Office to
reinstate and give due course to *respondent+s Appeal No. 14-2004-00004.

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


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

Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter
to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January
2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.[19]

This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,[20] finding that herein
respondents failed to file their Appeal Memorandum before the IPO Director General within the period
prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the
Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had
the legal capacity to sue for the protection of its trademarks, even though it was not doing business in
the Philippines, and ordering the cancellation of the registration obtained by herein respondent
Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents
to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this
Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008.

G.R. No. 179127

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

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

In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioners
appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal
Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite
respondents claims that they had been using the mark since 1982, they only started constructing their
restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming
ownership of the mark IN-N-OUT. Moreover, the sole distinction of the mark registered in the name
of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter O, a
minor difference which still deceived purchasers. Respondents were not even actually using the star in
their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief
over the respondents reasoning for the non-use of the star symbol. The IPO Director General also
considered respondents use of petitioners registered mark Double-Double as a sign of bad faith and
an intent to mislead the public. Thus, the IPO Director General ruled that petitioner was entitled to an
award for the actual damages it suffered by reason of respondents acts of unfair competition,
exemplary damages, and attorneys fees.*21+ The fallo of the Decision reads:

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

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

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

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

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

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

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


Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals
another Petition for Review under Rule 43 of the Rules of Court, docketed 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 ATTORNEYS FEES TO RESPONDENTS

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


Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO
Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent;
hence, they should not be held liable for damages. They argued that petitioner had never entered into
any transaction involving its goods and services in the 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 petitioners complaint was already
barred by laches.[23]

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

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

(a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and
[petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO
Director Generals Decision dated 23 December 2005, which modified the Decision No. 2003-02 dated
22 December 2003 of the BLA, until further orders from this Honorable Court.

(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 attorneys 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 attorneys 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 Decision[25] in CA-G.R. SP No. 92785 reversing the
Decision dated 23 December 2005 of the IPO Director General.

The Court of Appeals, in its Decision, initially addressed petitioners assertion that respondents had
committed forum shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It
ruled that respondents were not guilty of forum shopping, distinguishing between the respondents two
Petitions. The subject of Respondents Petition in CA-G.R SP No. 88004 was the 7 December 2004
Decision of the IPO Director General dismissing respondents appeal of the 22 December 2003 Decision
of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark
registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents
from using the disputed trademark. Respondents Petition in CA-G.R. SP No. 92785 sought the review of
the 23 December 2005 Decision of the IPO Director General partially modifying the 22 December 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
attorneys fees, to petitioner.

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

In the end, the Court of Appeals decreed:

WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director
General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-01 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, respondents claims in its Complaint docketed as IPV No.
10-2001-00004 are hereby DISMISSED.[26]


The Court of Appeals, in a Resolution dated 31 July 2007,*27+ denied petitioners Motion for
Reconsideration of its aforementioned Decision.

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

I

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

II

WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND


III

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


As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this
Court already promulgated its Decision[29] in G.R. No. 171053 on 15 October 2007, which affirmed the
IPO Director Generals dismissal of respondents appeal for being filed beyond the reglementary period,
and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark
registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed
marks.

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

Formal Defects of the Petition

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

Respondents point out that the Secretarys Certificate executed by Arnold M. Wensinger on 20 August
2007, stating that petitioner had authorized the lawyers of Villaraza 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 Secretarys Certificate reads:

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

Rachel A. Blake (Sgd.)
Notary Public[30]


Respondents aver that the said Secretarys Certificate cannot properly authorize Atty. Barranda to sign
the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to
state that: (1) petitioners Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same
person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and
deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.[31]

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

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

A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was
subscribed and sworn to by the executor. Ordinarily, the language of the 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 Secretarys Certificate, as that executed by petitioner in favor of the lawyers of the
Angangco and Villaraza law office, only requires a jurat.[34]

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

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

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

Forum Shopping

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

Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on
the supposition that one or the other court would make a favorable disposition. It is an act of
malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In
determining whether or not there is forum shopping, what is important is the vexation caused the
courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on
the same or related causes and/or grant the same or substantially the same reliefs and in the process
creates the possibility of conflicting decisions being rendered by the different bodies upon the same
issues.[38]

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

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

There is no question that both Petitions involved identical parties, and raised at least one similar ground
for which they sought the same relief. Among the grounds stated by the respondents for their Petition
in CA-G.R SP No. 88004 was that *T+he Bureau of Legal Affairs (sic) Decision and Resolution (1)
canceling *herein respondent Sehwani, Incorporated+s certificate of registration for the mark IN-N-
OUT and (2) ordering *herein respondents+ to permanently cease and desist from using the subject
mark on its goods and business are contrary to law and/or is (sic) not supported by evidence.*40+ The
same ground was again invoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as
follows: The IPO Director General committed grave error in affirming the Bureau of Legal Affairs (sic)
Decision (1) canceling *herein respondent Sehwani, Incorporated+s certificate of registration for the
mark IN-N-OUT, and (2) ordering *herein respondents+ to permanently cease and desist from using the
subject mark on its goods and business.*41+ Both Petitions, in effect, seek the reversal of the 22
December 2003 Decision of the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of
these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the
merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under
the principle of res judicata.

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

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

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

The parties and their counsel, however, are once again warned against taking procedural rules lightly. It
will do them well to remember that the Courts have taken a stricter stance against the disregard of
procedural rules, especially in connection with the submission of the certificate against forum shopping,
and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable
circumstances.

The Jurisdiction of the IPO

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

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


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

The Court disagrees with the Court of Appeals.

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

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

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

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

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

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

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

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

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

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

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

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

(iii) The condemnation or seizure of products which are subject of the offense. The goods seized
hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal
Affairs, such as by sale, donation to distressed local governments or to charitable or relief institutions,
exportation, recycling into other goods, or any combination thereof, under such guidelines as he may
provide;

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

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

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

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

(viii) 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, petitioners complaint, which seeks the cancellation of the disputed mark in the name
of respondent Sehwani, Incorporated, and damages for violation of petitioners intellectual property
rights, falls within the jurisdiction of the IPO Director of Legal Affairs.

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

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

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
petitioners administrative case against respondents and the IPO Director General had exclusive
jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs.

Unfair Competition

The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003
Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of
registration of respondent Sehwani, Incorporated for the mark IN-N-OUT and (2) ordered respondents
to permanently cease and desist from using the disputed mark on its goods and business. Such an issue
has already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R.
No. 171053, Sehwani, Incorporated v. In-N-Out Burger,[44] ultimately affirming the foregoing judgment
of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the IN-N-
OUT trademarks vis--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 *petitioners+ registered mark Double-Double for use on
hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents]
are using do not bear the mark registered by the *respondent+, but the *petitioners+ IN-N-OUT Burgers
name and trademark IN-N-OUT with Arrow design.

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

Further, [respondents] are giving their products the general appearance that would likely influence
purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be
inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to
restrain such unfair competition. x x x.

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 *petitioners+ 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, [petitioners+ corporate name. It has used the IN-N-
OUT Burger name in its restaurant business in Baldwin Park, California in the United States of America
since 1948. Thus it has the exclusive right to use the tradenems In-N-Out Burger in the Philippines and
the respondents are unlawfully using and appropriating the same.

The Office cannot give credence to the *respondents+ claim of good faith and that they have openly and
continuously used the subject mark since 1982 and is (sic) in the process of expanding its business. They
contend that assuming that there is value in the foreign registrations presented as evidence by the
[petitioner], the purported exclusive right to the use of the subject mark based on such foreign
registrations is not essential to a right of action for unfair competition. [Respondents] also claim that
actual or probable deception and confusion on the part of customers by reason of respondents
practices must always appear, and in the present case, the BLA has found none. This Office finds the
arguments untenable.

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

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


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

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

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


In the present case, the Court deems it just and fair that the IPO Director General computed the
damages due to petitioner by applying the reasonable percentage of 30% to the respondents gross
sales, and then doubling the amount thereof on account of respondents actual intent to mislead the
public or defraud the petitioner,[49] thus, arriving at the amount of actual damages of P212,574.28.

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

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

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, 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.

SO ORDERED.