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G.R. No.

154491

November 14, 2008

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


Plant, petitioner,
vs.
QUINTIN J. GOMEZ, a.k.a. "KIT" GOMEZ and DANILO E.
GALICIA, a.k.a. "DANNY GALICIA",respondents.
DECISION
BRION, J.:
Is the hoarding of a competitor's product containers
punishable as unfair competition under the Intellectual
Property Code (IP Code, Republic Act No. 8293) that would
entitle the aggrieved party to a search warrant against the
hoarder? This is the issue we grapple with in this petition for
review oncertiorari involving two rival multinational softdrink
giants; petitioner Coca-Cola Bottlers, Phils., Inc. (Coca-Cola)
accuses Pepsi Cola Products Phils., Inc. (Pepsi), represented
by the respondents, of hoarding empty Coke bottles in bad
faith to discredit its business and to sabotage its operation in
Bicolandia.
BACKGROUND
The facts, as culled from the records, are summarized below.
On July 2, 2001, Coca-Cola applied for a search warrant
against Pepsi for hoarding Coke empty bottles in Pepsi's yard
in Concepcion Grande, Naga City, an act allegedly penalized
as unfair competition under the IP Code. Coca-Cola claimed
that the bottles must be confiscated to preclude their illegal
use, destruction or concealment by the respondents. 1 In
support of the application, Coca-Cola submitted the sworn
statements of three witnesses: Naga plant representative
Arnel John Ponce said he was informed that one of their plant

security guards had gained access into the Pepsi compound


and had seen empty Coke bottles; acting plant security
officer Ylano A. Regaspi said he investigated reports that
Pepsi was hoarding large quantities of Coke bottles by
requesting their security guard to enter the Pepsi plant and
he was informed by the security guard that Pepsi hoarded
several Coke bottles; security guard Edwin Lirio stated that
he entered Pepsi's yard on July 2, 2001 at 4 p.m. and saw
empty Coke bottles inside Pepsi shells or cases. 2
Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo
of Naga City, after taking the joint deposition of the
witnesses, issued Search Warrant No. 2001-013 to seize 2,500
Litro and 3,000 eight and 12 ounces empty Coke bottles at
Pepsi's Naga yard for violation of Section 168.3 (c) of the IP
Code.4 The local police seized and brought to the MTC's
custody 2,464 Litro and 4,036 eight and 12 ounces empty
Coke bottles, 205 Pepsi shells for Litro, and 168 Pepsi shells
for smaller (eight and 12 ounces) empty Coke bottles, and
later filed with the Office of the City Prosecutor of Naga a
complaint against two Pepsi officers for violation of Section
168.3 (c) in relation to Section 170 of the IP Code. 5The
named respondents, also the respondents in this petition,
were Pepsi regional sales managerDanilo E. Galicia (Galicia)
and its Naga general manager Quintin J. Gomez,
Jr. (Gomez).
In their counter-affidavits, Galicia and Gomez claimed that
the bottles came from various Pepsi retailers and wholesalers
who included them in their return to make up for shortages of
empty Pepsi bottles; they had no way of ascertaining
beforehand the return of empty Coke bottles as they simply
received what had been delivered; the presence of the
bottles in their yard was not intentional nor deliberate; Ponce
and Regaspi's statements are hearsay as they had no
personal knowledge of the alleged crime; there is no mention

in the IP Code of the crime of possession of empty bottles;


and that the ambiguity of the law, which has a penal nature,
must be construed strictly against the State and liberally in
their favor. Pepsi security guards Eduardo E. Miral and Rene
Acebuche executed a joint affidavit stating that per their
logbook, Lirio did not visit or enter the plant premises in the
afternoon of July 2, 2001.
The respondents also filed motions for the return of their
shells and to quash the search warrant. They contended that
no probable cause existed to justify the issuance of the
search warrant; the facts charged do not constitute an
offense; and their Naga plant was in urgent need of the
shells.
Coca-Cola opposed the motions as the shells were part of the
evidence of the crime, arguing that Pepsi used the shells in
hoarding the bottles. It insisted that the issuance of warrant
was based on probable cause for unfair competition under
the IP Code, and that the respondents violated R.A. 623, the
law regulating the use of stamped or marked bottles, boxes,
and other similar containers.
THE MTC RULINGS
On September 19, 2001, the MTC issued the first assailed
order6 denying the twin motions. It explained there was an
exhaustive examination of the applicant and its witnesses
through searching questions and that the Pepsi shells are
prima facie evidence that the bottles were placed there by
the respondents.
In their motion for reconsideration, the respondents argued
for the quashal of the warrant as the MTC did not conduct a
probing and exhaustive examination; the applicant and its
witnesses had no personal knowledge of facts surrounding
the hoarding; the court failed to order the return of the

"borrowed" shells; there was no crime involved; the warrant


was issued based on hearsay evidence; and the seizure of
the shells was illegal because they were not included in the
warrant.
On November 14, 2001, the MTC denied the motion for
reconsideration in the second assailed order, 7 explaining that
the issue of whether there was unfair competition can only
be resolved during trial.
The respondents responded by filing a petition for certiorari
under Rule 65 of the Revised Rules of Court before the
Regional Trial Court (RTC) of Naga City on the ground that the
subject search warrant was issued without probable cause
and that the empty shells were neither mentioned in the
warrant nor the objects of the perceived crime.
THE RTC RULINGS
On May 8, 2002, the RTC voided the warrant for lack of
probable cause and the non-commission of the crime of
unfair competition, even as it implied that other laws may
have been violated by the respondents. The RTC, though,
found no grave abuse of discretion on the part of the issuing
MTC judge.8 Thus,
Accordingly, as prayed for, Search Warrant No. 200102 issued by the Honorable Judge Julian C. Ocampo III
on July 2, 2001 is ANNULLED and SET ASIDE. The
Orders issued by the Pairing Judge of Br. 1, MTCC of
Naga City dated September 19, 2001 and November
14, 2001 are also declared VOID and SET ASIDE. The
City Prosecutor of Naga City and SPO1 Ernesto Paredes
are directed to return to the Petitioner the properties
seized by virtue of Search Warrant No. 2001-02. No
costs.

SO ORDERED.9
In a motion for reconsideration, which the RTC denied on July
12, 2002, the petitioner stressed that the decision of the RTC
was contradictory because it absolved Judge Ocampo of
grave abuse of discretion in issuing the search warrant, but
at the same time nullified the issued warrant. The MTC
should have dismissed the petition when it found out that
Judge Ocampo did not commit any grave abuse of discretion.
Bypassing the Court of Appeals, the petitioner asks us
through this petition for review on certiorariunder Rule 45 of
the Rules of Court to reverse the decision of the RTC.
Essentially, the petition raises questions against the RTC's
nullification of the warrant when it found no grave abuse of
discretion committed by the issuing judge.
THE PETITION and
THE PARTIES' POSITIONS
In its petition, the petitioner insists the RTC should have
dismissed the respondents' petition for certiorari because it
found no grave abuse of discretion by the MTC in issuing the
search warrant. The petitioner further argues that the IP
Code was enacted into law to remedy various forms of unfair
competition accompanying globalization as well as to replace
the inutile provision of unfair competition under Article 189 of
the Revised Penal Code. Section 168.3(c) of the IP Code does
not limit the scope of protection on the particular acts
enumerated as it expands the meaning of unfair competition
to include "other acts contrary to good faith of a nature
calculated to discredit the goods, business or services of
another." The inherent element of unfair competition is fraud
or deceit, and that hoarding of large quantities of a
competitor's empty bottles is necessarily characterized by
bad faith. It claims that its Bicol bottling operation was

prejudiced by the respondents' hoarding and destruction of


its empty bottles.
The petitioner also argues that the quashal of the search
warrant was improper because it complied with all the
essential requisites of a valid warrant. The empty bottles
were concealed in Pepsi shells to prevent discovery while
they were systematically being destroyed to hamper the
petitioner's bottling operation and to undermine the
capability of its bottling operations in Bicol.
The respondents counter-argue that although Judge Ocampo
conducted his own examination, he gravely erred and abused
his discretion when he ignored the rule on the need of
sufficient evidence to establish probable cause; satisfactory
and convincing evidence is essential to hold them guilty of
unfair competition; the hoarding of empty Coke bottles did
not cause actual or probable deception and confusion on the
part of the general public; the alleged criminal acts do not
show conduct aimed at deceiving the public; there was no
attempt to use the empty bottles or pass them off as the
respondents' goods.
The respondents also argue that the IP Code does not
criminalize bottle hoarding, as the acts penalized must
always involve fraud and deceit. The hoarding does not make
them liable for unfair competition as there was no deception
or fraud on the end-users.
THE ISSUE
Based on the parties' positions, the basic issue submitted to
us for resolution is whether the Naga MTC was correct in
issuing Search Warrant No. 2001-01 for the seizure of the
empty Coke bottles from Pepsi's yard for probable violation of
Section 168.3 (c) of the IP Code. This basic issue involves two
sub-issues, namely, the substantive issue of whether the

application for search warrant effectively charged an offense,


i.e., a violation of Section 168.3 (c) of the IP Code; and the
procedural issue of whether the MTC observed the
procedures required by the Rules of Court in the issuance of
search warrants.
OUR RULING
We resolve to deny the petition for lack of merit.
We clarify at the outset that while we agree with the RTC
decision, our agreement is more in the result than in the
reasons that supported it. The decision is correct in nullifying
the search warrant because it was issued on an invalid
substantive basis - the acts imputed on the respondents do
not violate Section 168.3 (c) of the IP Code. For this reason,
we deny the present petition.
The issuance of a search warrant10 against a personal
property11 is governed by Rule 126 of the Revised Rules of
Court whose relevant sections state:
Section 4. Requisites for issuing search warrant. - A
search warrant shall not issue except uponprobable
cause in connection with one specific offense to
be determined personally by the judge after
examination under oath or affirmation of the
complainant and the witnesses he may produce, and
particularly describing the place to be searched and
the things to be seized which may be anywhere in the
Philippines.
Section 5. Examination of complainant; record. - The
judge must, before issuing the warrant,personally
examine in the form of searching questions and
answers, in writing and under oath, the
complainant and the witnesses he may produce on

facts personally known to them and attach to the


record their sworn statements together with the
affidavits submitted.
Section 6. Issuance and form of search warrant. - If the
judge is satisfied of the existence of facts upon which
the application is based or that there is probable cause
to believe that they exist, he shall issue the warrant,
which must be substantially in the form prescribed by
these Rules. [Emphasis supplied]
To paraphrase this rule, a search warrant may be issued only
if there is probable cause in connection with a specific
offense alleged in an application based on the personal
knowledge of the applicant and his or her witnesses. This is
the substantive requirement in the issuance of a search
warrant. Procedurally, the determination of probable cause is
a personal task of the judge before whom the application for
search warrant is filed, as he has to examine under oath or
affirmation the applicant and his or her witnesses in the form
of "searching questions and answers" in writing and under
oath. The warrant, if issued, must particularly describe the
place to be searched and the things to be seized.
We paraphrase these requirements to stress that they have
substantive and procedural aspects. Apparently, the RTC
recognized this dual nature of the requirements and, hence,
treated them separately; it approved of the way the MTC
handled the procedural aspects of the issuance of the search
warrant but found its action on the substantive aspect
wanting. It therefore resolved to nullify the warrant, without
however expressly declaring that the MTC gravely abused its
discretion when it issued the warrant applied for. The RTC's
error, however, is in the form rather than the substance of
the decision as the nullification of the issued warrant for the
reason the RTC gave was equivalent to the declaration that

grave abuse of discretion was committed. In fact, we so rule


as the discussions below will show.
Jurisprudence teaches us that probable cause, as a condition
for the issuance of a search warrant, is such reasons
supported by facts and circumstances as will warrant a
cautious man in the belief that his action and the means
taken in prosecuting it are legally just and proper. Probable
cause requires facts and circumstances that would lead a
reasonably prudent man to believe that an offense has been
committed and the objects sought in connection with that
offense are in the place to be searched. 12 Implicit in this
statement is the recognition that an underlying offense must,
in the first place, exist. In other words, the acts alleged,
taken together, must constitute an offense and that these
acts are imputable to an offender in relation with whom a
search warrant is applied for.
In the context of the present case, the question is whether
the act charged - alleged to be hoarding of empty Coke
bottles - constitutes an offense under Section 168.3 (c) of the
IP Code. Section 168 in its entirety states:
SECTION 168. Unfair Competition, Rights, Regulation
and Remedies. -

deals, or his business, or services for those of the one


having established such goodwill, or who shall commit
any acts calculated to produce said result, shall be
guilty of unfair competition, and shall be subject to an
action therefor.
168.3. In particular, and without in any way limiting
the scope of protection against unfair competition, the
following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and
gives them the general appearance of goods of
another manufacturer or dealer, either as to the
goods themselves or in the wrapping of the
packages in which they are contained, or the
devices or words thereon, or in any other
feature of their appearance, which would be
likely to influence purchasers to believe that the
goods offered are those of a manufacturer or
dealer, other than the actual manufacturer or
dealer, or who otherwise clothes the goods with
such appearance as shall deceive the public and
defraud another of his legitimate trade, or any
subsequent vendor of such goods or any agent
of any vendor engaged in selling such goods
with a like purpose;

168.1. A person who has identified in the mind of the


public the goods he manufactures or deals in, his
business or services from those of others, whether or
not a registered mark is employed, has a property
right in the goodwill of the said goods, business or
services so identified, which will be protected in the
same manner as other property rights.

(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

168.2. Any person who shall employ deception or any


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

(c) Any person who shall make any false


statement in the course of trade or who shall
commit any other act contrary to good faith of a

nature calculated to discredit the goods,


business or services of another.
168.4. The remedies provided by Sections 156, 157
and 161 shall apply mutatis mutandis. (Sec. 29, R.A.
No. 166a)
The petitioner theorizes that the above section does not limit
the scope of protection on the particular acts enumerated as
it expands the meaning of unfair competition to include
"other acts contrary to good faith of a nature calculated to
discredit the goods, business or services of another."
Allegedly, the respondents' hoarding of Coca Cola empty
bottles is one such act.
We do not agree with the petitioner's expansive
interpretation of Section 168.3 (c).
"Unfair competition," previously defined in Philippine
jurisprudence in relation with R.A. No. 166 and Articles 188
and 189 of the Revised Penal Code, is now covered by
Section 168 of the IP Code as this Code has expressly
repealed R.A. No. 165 and R.A. No. 166, and Articles 188 and
189 of the Revised Penal Code.
Articles 168.1 and 168.2, as quoted above, provide the
concept and general rule on the definition of unfair
competition. The law does not thereby cover every unfair act
committed in the course of business; it covers only acts
characterized by "deception or any other means contrary to
good faith" in the passing off of goods and services as those
of another who has established goodwill in relation with these
goods or services, or any other act calculated to produce the
same result.
What unfair competition is, is further particularized under
Section 168.3 when it provides specifics of what unfair

competition is "without in any way limiting the scope of


protection against unfair competition." Part of these
particulars is provided under Section 168.3(c) which provides
the general "catch-all" phrase that the petitioner cites. Under
this phrase, a person shall be guilty of unfair competition
"who shall commit any other act contrary to good faith of a
nature calculated to discredit the goods, business or services
of another."
From jurisprudence, unfair competition has been defined as
the passing off (or palming off) or attempting to pass off
upon the public the goods or business of one person as the
goods or business of another with the end and probable
effect of deceiving the public. It formulated the "true test" of
unfair competition: whether the acts of defendant are such
as are calculated to deceive the ordinary buyer making his
purchases under the ordinary conditions which prevail in the
particular trade to which the controversy relates. 13 One of the
essential requisites in an action to restrain unfair competition
is proof of fraud; the intent to deceive must be shown before
the right to recover can exist.14 The advent of the IP Code has
not significantly changed these rulings as they are fully in
accord with what Section 168 of the Code in its entirety
provides. Deception, passing off and fraud upon the
public are still the key elements that must be present for
unfair competition to exist.
The act alleged to violate the petitioner's rights under
Section 168.3 (c) is hoarding which we gather to be the
collection of the petitioner's empty bottles so that they can
be withdrawn from circulation and thus impede the
circulation of the petitioner's bottled products. This,
according to the petitioner, is an act contrary to good faith a conclusion that, if true, is indeed an unfair act on the part
of the respondents. The critical question, however, is not the
intrinsic unfairness of the act of hoarding; what is critical for

purposes of Section 168.3 (c) is to determine if the hoarding,


as charged, "is of a nature calculated to discredit the goods,
business or services" of the petitioner.
We hold that it is not. Hoarding as defined by the petitioner is
not even an act within the contemplation of the IP Code.
The petitioner's cited basis is a provision of the IP Code, a set
of rules that refer to a very specific subject - intellectual
property. Aside from the IP Code's actual substantive
contents (which relate specifically to patents, licensing,
trademarks, trade names, service marks, copyrights, and the
protection and infringement of the intellectual properties that
these protective measures embody), the coverage and intent
of the Code is expressly reflected in its "Declaration of State
Policy" which states:
Section 2. Declaration of State Policy. - The State
recognizes that an effective intellectual and industrial
property system is vital to the development of
domestic and creative activity, facilitates transfer of
technology, attracts foreign investments, and ensures
market access for our products. It shall protect and
secure the exclusive rights of scientists, inventors,
artists and other gifted citizens to their intellectual
property and creations, particularly when beneficial to
the people, for such periods as provided in this Act.
The use of intellectual property bears a social function.
To this end, the State shall promote the diffusion of
knowledge and information for the promotion of
national development and progress and the common
good.
It is also the policy of the State to streamline
administrative procedures of registering patents,
trademarks and copyright, to liberalize the registration

on the transfer of technology, and to enhance the


enforcement of intellectual property rights in the
Philippines. (n)
"Intellectual property rights" have furthermore been defined
under Section 4 of the Code to consist of: a) Copyright and
Related Rights; b) Trademarks and Service Marks; c)
Geographic Indications; d) IndustrialDesigns; e) Patents; f)
Layout-Designs (Topographies) of Integrated Circuits; and
g)Protection of Undisclosed Information.
Given the IP Code's specific focus, a first test that should be
made when a question arises on whether a matter is covered
by the Code is to ask if it refers to an intellectual property as
defined in the Code. If it does not, then coverage by the Code
may be negated.
A second test, if a disputed matter does not expressly refer
to an intellectual property right as defined above, is whether
it falls under the general "unfair competition" concept and
definition under Sections 168.1 and 168.2 of the Code. The
question then is whether there is "deception" or any other
similar act in "passing off" of goods or services to be those of
another who enjoys established goodwill.
Separately from these tests is the application of the
principles of statutory construction giving particular
attention, not so much to the focus of the IP Code generally,
but to the terms of Section 168 in particular. Under the
principle of "noscitur a sociis," when a particular word or
phrase is ambiguous in itself or is equally susceptible of
various meanings, its correct construction may be made clear
and specific by considering the company of words in which it
is found or with which it is associated. 15
As basis for this interpretative analysis, we note that Section
168.1 speaks of a person who has earned goodwill with

respect to his goods and services and who is entitled to


protection under the Code, with or without a registered
mark. Section 168.2, as previously discussed, refers to the
general definition of unfair competition. Section 168.3, on
the other hand, refers to the specific instances of unfair
competition, with Section 168.1 referring to the sale of
goods given the appearance of the goods of
another; Section 168.2, to the inducement of belief that his
or her goods or services are that of another who has earned
goodwill; while the disputed Section 168.3 being a "catch
all" clause whose coverage the parties now dispute.
Under all the above approaches, we conclude that the
"hoarding" - as defined and charged by the petitioner - does
not fall within the coverage of the IP Code and of Section 168
in particular. It does not relate to any patent, trademark,
trade name or service mark that the respondents have
invaded, intruded into or used without proper authority from
the petitioner. Nor are the respondents alleged to be
fraudulently "passing off" their products or services as those
of the petitioner. The respondents are not also alleged to be
undertaking any representation or misrepresentation that
would confuse or tend to confuse the goods of the petitioner
with those of the respondents, or vice versa. What in fact the
petitioner alleges is an act foreign to the Code, to the
concepts it embodies and to the acts it regulates; as alleged,
hoarding inflicts unfairness by seeking to limit the
opposition's sales by depriving it of the bottles it can use for
these sales.
In this light, hoarding for purposes of destruction is closer to
what another law - R.A. No. 623 - covers, to wit:
SECTION 1. Persons engaged or licensed to engage in
the manufacture, bottling or selling of soda water,
mineral or aerated waters, cider, milk, cream, or other
lawful beverages in bottles, boxes, casks, kegs, or

barrels, and other similar containers, with their names


or the names of their principals or products, or other
marks of ownership stamped or marked thereon, may
register with the Philippine Patent Office a description
of the names or are used by them, under the same
conditions, rules, and regulations, made applicable by
law or regulation to the issuance of trademarks.
SECTION 2. It shall be unlawful for any person, without
the written consent of the manufacturer, bottler or
seller who has successfully registered the marks of
ownership in accordance with the provisions of the
next preceding section, to fill such bottles, boxes,
kegs, barrels, or other similar containers so
marked or stamped, for the purpose of sale, or
to sell, dispose of, buy, or traffic in, or wantonly
destroy the same, whether filled or not, or to
use the same for drinking vessels or glasses or
for any other purpose than that registered by
the manufacturer, bottler or seller. Any violation of
this section shall be punished by a fine or not more
than one hundred pesos or imprisonment of not more
than thirty days or both.
As its coverage is defined under Section 1, the Act appears to
be a measure that may overlap or be affected by the
provisions of Part II of the IP Code on "The Law on
Trademarks, Service Marks and Trade Names." What is
certain is that the IP Code has not expressly repealed this
Act. The Act appears, too, to have specific reference to a
special type of registrants - the manufacturers, bottlers or
sellers of soda water, mineral or aerated waters, cider, milk,
cream, or other lawful beverages in bottles, boxes, casks,
kegs, or barrels, and other similar containers - who are given
special protection with respect to the containers they use. In
this sense, it is in fact a law of specific coverage and

application, compared with the general terms and application


of the IP Code. Thus, under its Section 2, it speaks specifically
of unlawful use of containers and even of the unlawfulness of
their wanton destruction - a matter that escapes the IP
Code's generalities unless linked with the concepts of
"deception" and "passing off" as discussed above.
Unfortunately, the Act is not the law in issue in the present
case and one that the parties did not consider at all in the
search warrant application. The petitioner in fact could not
have cited it in its search warrant application since the "one
specific offense" that the law allows and which the petitioner
used was Section 168.3 (c). If it serves any purpose at all in
our discussions, it is to show that the underlying factual
situation of the present case is in fact covered by another
law, not by the IP Code that the petitioner cites. Viewed in
this light, the lack of probable cause to support the disputed
search warrant at once becomes apparent.
Where, as in this case, the imputed acts do not violate the
cited offense, the ruling of this Court penned by Mr. Justice
Bellosillo is particularly instructive:
In the issuance of search warrants, the Rules of Court
requires a finding of probable cause in connection
with one specific offense to be determined personally
by the judge after examination of the complainant and
the witnesses he may produce, and particularly
describing the place to be searched and the things to
be seized. Hence, since there is no crime to speak
of, the search warrant does not even begin to
fulfill these stringent requirements and is
therefore defective on its face. The nullity of the
warrant renders moot and academic the other issues
raised in petitioners' Motion to Quash and Motion for
Reconsideration. Since the assailed search warrant is
null and void, all property seized by virtue thereof

should be returned to petitioners in accordance with


established jurisprudence.16
Based on the foregoing, we conclude that the RTC correctly
ruled that the petitioner's search warrant should properly be
quashed for the petitioner's failure to show that the acts
imputed to the respondents do not violate the cited offense.
There could not have been any probable cause to support the
issuance of a search warrant because no crime in the first
place was effectively charged. This conclusion renders
unnecessary any further discussion on whether the search
warrant application properly alleged that the imputed act of
holding Coke empties was in fact a "hoarding" in bad faith
aimed to prejudice the petitioner's operations, or whether the
MTC duly complied with the procedural requirements for the
issuance of a search warrant under Rule 126 of the Rules of
Court.
WHEREFORE, we hereby DENY the petition for lack of merit.
Accordingly, we confirm that Search Warrant No. 2001-01,
issued by the Municipal Trial Court, Branch 1, Naga City,
is NULL and VOID. Costs against the petitioner.
SO ORDERED.

THIRD DIVISION

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.

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

PEARL
&
DEAN
(PHIL.), INCORPORATED, petitioner, vs. SHOEMA
RT,
INCORPORATED, and
NORTH
EDSA
MARKETING, INCORPORATED,respondents.
DECISION
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
Appeals[3] contained a summary of this dispute:

Court

of

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

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 infringement 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 tradename, 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 defendantsappellants 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 defendantsappellants 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 aboveentitled 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:
xxxxxxxxx
(O) Prints, pictorial illustrations, advertising copies, labels,
tags, and box wraps;
xxxxxxxxx
Although petitioners copyright certificate was entitled
Advertising Display Units (which depicted the box-type
electrical devices), its claim of copyright infringement cannot
be sustained.

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.

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]

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:

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

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 copyrightregistration 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.
xxx
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.

DECISION
BELLOSILLO, J.:
The primary purpose of the patent system is not the
reward of the individual but the advancement of the arts and
sciences. The function of a patent is to add to the sum of
useful knowledge and one of the purposes of the patent
system is to encourage dissemination of information
concerning discoveries and inventions. This is a matter which
is properly within the competence of the Patent Office the
official action of which has the presumption of correctness
and may not be interfered with in the absence of new
evidence carrying thorough conviction that the Office has
erred. Since the Patent Office is an expert body preeminently
qualified to determine questions of patentability, its findings
must be accepted if they are consistent with the evidence,
with doubts as to patentability resolved in favor of the Patent
Office.[1]

FIRST DIVISION

[G.R. No. 113388. September 5, 1997]

ANGELITA
MANZANO, petitioner,
vs.
COURT
OF
APPEALS, and MELECIA MADOLARIA, as Assignor
to NEW UNITED FOUNDRY MANUFACTURING
CORPORATION, respondents.

Petitioner Angelita Manzano filed with the Philippine


Patent Office on 19 February 1982 an action for the
cancellation of Letters Patent No. UM-4609 for a gas burner
registered in the name of respondent Melecia Madolaria who
subsequently assigned the letters patent to New United
Foundry and Manufacturing Corporation (UNITED FOUNDRY,
for brevity). Petitioner alleged that (a) the utility model
covered by the letters patent, in this case, an LPG gas
burner, was not inventive, new or useful; (b) the specification
of the letters patent did not comply with the requirements of
Sec. 14, RA No. 165, as amended; (c) respondent Melecia
Madolaria was not the original, true and actual inventor nor
did she derive her rights from the original, true and actual
inventor of the utility model covered by the letters patent;
and, (d) the letters patent was secured by means of fraud or
misrepresentation. In support of her petition for cancellation
petitioner further alleged that (a) the utility model covered
by the letters patent of respondent had been known or used
by others in the Philippines for more than one (1) year before
she filed her application for letters patent on 9 December
1979; (b) the products which were produced in accordance
with the utility model covered by the letters patent had been

in public use or on sale in the Philippines for more than one


(1) year before the application for patent therefor was filed.
Petitioner presented the following documents which she
correspondingly marked as exhibits: (a) affidavit of petitioner
alleging the existence of prior art, marked Exh. A; (b) a
brochure distributed by Manila Gas Corporation disclosing a
pictorial representation of Ransome Burner made by
Ransome Torch and Burner Company, USA, marked Exh. D;
and, (c) a brochure distributed by Esso Gasul or Esso
Standard Eastern, Inc., of the Philippines showing a picture of
another similar burner with top elevation view and another
perspective view of the same burner, marked Exh. E.
Testifying for herself petitioner narrated that her husband
Ong Bun Tua worked as a helper in the UNITED FOUNDRY
where respondent Melecia Madolaria used to be affiliated
with from 1965 to 1970; that Ong helped in the casting of an
LPG burner which was the same utility model of a burner for
which Letters Patent No. UM-4609 was issued, and that after
her husbands separation from the shop she organized Besco
Metal Manufacturing (BESCO METAL, for brevity) for the
casting of LPG burners one of which had the configuration,
form and component parts similar to those being
manufactured by UNITED FOUNDRY. Petitioner presented in
evidence an alleged model of an LPG burner marked Exh. K
and covered by the Letters Patent of respondent, and
testified that it was given to her in January 1982 by one of
her customers who allegedly acquired it from UNITED
FOUNDRY. Petitioner also presented in evidence her own
model of an LPG burner called Ransome burner marked Exh.
L, which was allegedly manufactured in 1974 or 1975 and
sold by her in the course of her business operation in the
name of BESCO METAL. Petitioner claimed that this Ransome
burner (Exh. L) had the same configuration and mechanism
as that of the model which was patented in favor of private
respondent Melecia Madolaria. Also presented by petitioner
was a burner cup of an imported Ransome burner marked
Exh M which was allegedly existing even before the patent
application of private respondent.
Petitioner presented two (2) other witnesses, namely, her
husband Ong Bun Tua and Fidel Francisco. Ong testified that

he worked as a helper in the UNITED FOUNDRY from 1965 to


1970 where he helped in the casting of LPG burners with the
same form, configuration and mechanism as that of the
model covered by the Letters Patent issued to private
respondent.Francisco testified that he had been employed
with the Manila Gas Corporation from 1930 to 1941 and from
1952 up to 1969 where he retired as supervisor and that
Manila Gas Corporation imported Ransome burners way back
in 1965 which were advertised through brochures to promote
their sale.
Private respondent, on the other hand, presented only
one witness, Rolando Madolaria, who testified, among others,
that he was the General Supervisor of the UNITED FOUNDRY
in the foundry, machine and buffing section; that in his early
years with the company, UNITED FOUNDRY was engaged in
the manufacture of different kinds of gas stoves as well as
burners based on sketches and specifications furnished by
customers; that the company manufactured early models of
single-piece types of burners where the mouth and throat
were not detachable; that in the latter part of 1978
respondent Melecia Madolaria confided in him that
complaints were being brought to her attention concerning
the early models being manufactured; that he was then
instructed by private respondent to cast several
experimental models based on revised sketches and
specifications; that private respondent again made some
innovations; that after a few months, private respondent
discovered the solution to all the defects of the earlier
models and, based on her latest sketches and specifications,
he was able to cast several models incorporating the
additions
to
the
innovations
introduced
in
the
models. Various tests were conducted on the latest model in
the presence and under the supervision of Melecia
Madolaria and they obtained perfect results. Rolando
Madolaria testified that private respondent decided to file her
application for utility model patent in December 1979.
On 7 July 1986 the Director of Patents Cesar C. Sandiego
issued Decision No. 86-56 denying the petition for
cancellation and holding that the evidence of petitioner was
not able to establish convincingly that the patented utility
model of private respondent was anticipated. Not one of the

various pictorial representations of business clearly and


convincingly showed that the devices presented by petitioner
was identical or substantially identical with the utility model
of the respondent. The decision also stated that even
assuming that the brochures depicted clearly each and every
element of the patented gas burner device so that the prior
art and patented device became identical although in truth
they were not, they could not serve as anticipatory bars for
the reason that they were undated. The dates when they
were distributed to the public were not indicated and,
therefore, were useless prior art references. The records and
evidence also do not support the petitioners contention that
Letters Patent No. UM-4609 was obtained by means of fraud
and/or misrepresentation. No evidence whatsoever was
presented by petitioner to show that the then applicant
Melecia Madolaria withheld with intent to deceive material
facts which, if disclosed, would have resulted in the refusal
by the Philippine Patent Office to issue the Letters Patent
under inquiry.
Petitioner elevated the decision of the Director of Patents
to the Court of Appeals which on 15 October 1993 affirmed
the decision of the Director of Patents. Hence, this petition
for review on certiorari alleging that the Court of Appeals
erred (a) in relying on imaginary differences which in
actuality did not exist between the model of private
respondent covered by Letters Patent No. UM-4609 and the
previously known model of Esso Standard Eastern, Inc., and
Manila Gas Corporation, making such imaginary differences
grounded entirely on speculation, surmises and conjectures;
(b) in rendering judgment based on misapprehension of
facts; (c) in relying mainly on the testimony of private
respondents sole witness Rolando Madolaria; and, (d) in not
canceling Letters Patent No. UM-4609 in the name of private
respondent.
Petitioner submits that the differences cited by the Court
of Appeals between the utility model of private respondent
and the models of Manila Gas Corporation and Esso Standard
Eastern, Inc., are more imaginary than real. She alleges that
based on Exhs. E, E-1, F and F-1 or the brochures of Manila
Gas Corporation and Esso Standard Eastern, Inc., presented
by petitioner, the cup-shaped burner mouth and threaded

hole on the side are shown to be similar to the utility model


of private respondent. The exhibits also show a detachable
burner mouth having a plurality of upwardly existing
undulations adopted to act as gas passage when the cover is
attached to the top of said cup-shaped mouth all of which are
the same as those in the patented model. Petitioner also
denies as substantial difference the short cylindrical tube of
the burner mouth appearing in the brochures of the burners
being sold by Manila Gas Corporation and the long cylindered
tube of private respondents model of the gas burner.
Petitioner argues that the actual demonstration made
during the hearing disclosed the similarities in form,
operation and mechanism and parts between the utility
model of private respondent and those depicted in the
brochures. The findings of the Patent Office and the Court of
Appeals that the brochures of Manila Gas Corporation and
Esso Standard Eastern, Inc., are undated cannot overcome
the fact of their circulation before private respondent filed
her application for utility model patent. Petitioner thus asks
this Court to take judicial notice of the fact that Esso
Standard Eastern, Inc., disappeared before 1979 and
reappeared only during the Martial Law years as Petrophil
Corporation. Petitioner also emphasizes that the brochures
indicated the telephone number of Manila Gas Corporation as
5-79-81 which is a five (5) numbered telephone number
existing before 1975 because telephones in Metro Manila
started to have six (6) numbers only after that year.
Petitioner further contends that the utility model of
private respondent is absolutely similar to the LPG burner
being sold by petitioner in 1975 and 1976, and also to the
Ransome burner depicted in the old brochures of Manila Gas
Corporation and Esso Standard Eastern, Inc., fabricated by
Ransome Torch and Burner Company of Oakland, California,
USA, especially when considered through actual physical
examination, assembly and disassembly of the models of
petitioner and private respondent. Petitioner faults the Court
of Appeals for disregarding the testimonies of Ong Bun Tua
and Fidel Francisco for their failure to produce documents on
the alleged importation by Manila Gas Corporation of
Ransome burners in 1965 which had the same configuration,

form and mechanism as that of the private respondents


patented model.

entitled to the protection the invention must be new to the


world.[3]

Finally, it is argued that the testimony of private


respondents lone witness Rolando Madolaria should not have
been given weight by the Patent Office and the Court of
Appeals because it contained mere after-thoughts and
pretensions.

In issuing Letters Patent No. UM-4609 to Melecia


Madolaria for an LPG Burner on 22 July 1981, the Philippine
Patent Office found her invention novel and patentable. The
issuance of such patent creates a presumption which yields
only to clear and cogent evidence that the patentee was the
original and first inventor. The burden of proving want of
novelty is on him who avers it and the burden is a heavy one
which is met only by clear and satisfactory proof which
overcomes every reasonable doubt.[4] Hence, a utility model
shall not be considered new if before the application for a
patent it has been publicly known or publicly used in this
country or has been described in a printed publication or
publications circulated within the country, or if it is
substantially similar to any other utility model so known,
used or described within the country.[5]

We cannot sustain petitioner. Section 7 of RA No. 165, as


amended, which is the law on patents, expressly provides Sec. 7. Inventions patentable. Any invention of a new and
useful machine, manufactured product or substance, process
or an improvement of any of the foregoing, shall be
patentable.
Further, Sec. 55 of the same law provides Sec. 55. Design patents and patents for utility models. - (a)
Any new, original and ornamental design for an article of
manufacture and (b) any new model of implements or tools
or of any industrial product or of part of the same, which
does not possess the quality of invention, but which is of
practical utility by reason of its form, configuration,
construction or composition, may be protected by the author
thereof, the former by a patent for a design and the latter by
a patent for a utility model, in the same manner and subject
to the same provisions and requirements as relate to patents
for inventions insofar as they are applicable except as
otherwise herein provided.
The element of novelty is an essential requisite of the
patentability of an invention or discovery. If a device or
process has been known or used by others prior to its
invention or discovery by the applicant, an application for a
patent therefor should be denied; and if the application has
been granted, the court, in a judicial proceeding in which the
validity of the patent is drawn in question, will hold it void
and ineffective.[2] It has been repeatedly held that an
invention must possess the essential elements of novelty,
originality and precedence, and for the patentee to be

As found by the Director of Patents, the standard of


evidence sufficient to overcome the presumption of legality
of the issuance of UM-4609 to respondent Madolaria was not
legally met by petitioner in her action for the cancellation of
the patent. Thus the Director of Patents explained his reasons
for the denial of the petition to cancel private respondents
patent Scrutiny of Exhs. D and E readily reveals that the utility
model (LPG Burner) is not anticipated. Not one of the various
pictorial representations of burners clearly and convincingly
show that the device presented therein is identical or
substantially identical in construction with the aforesaid
utility model. It is relevant and material to state that in
determining whether novelty or newness is negatived by any
prior art, only one item of the prior art may be used at a
time. For anticipation to occur, the prior art must show that
each element is found either expressly or described or under
principles of inherency in a single prior art reference or that
the claimed invention was probably known in a single prior
art device or practice. (Kalman v. Kimberly Clark, 218 USPQ
781, 789)

Even assuming gratia arguendi that the aforesaid brochures


do depict clearly on all fours each and every element of the
patented gas burner device so that the prior art and the said
patented device become identical, although in truth they are
not, they cannot serve as anticipatory bars for the reason
that they are undated. The dates when they were distributed
to the public were not indicated and, therefore, they are
useless prior art references.

manufactured and/or imported before the filing of the


application for issuance of patent of the subject utility
model. What is more, some component parts of Exh. M are
missing, as only the cup was presented so that the same
could not be compared to the utility model (subject matter of
this case) which consists of several other detachable parts in
combination to form the complete LPG burner.
xxxx

xxxx
Furthermore, and more significantly, the model marked Exh.
K does not show whether or not it was manufactured and/or
cast before the application for the issuance of patent for the
LPG burner was filed by Melecia Madolaria.
With respect to Exh. L, petitioner claimed it to be her own
model of LPG burner allegedly manufactured sometime in
1974 or 1975 and sold by her in the course of her business
operation in the name of Besco Metal Manufacturing, which
burner was denominated as Ransome burner
xxxx
But a careful examination of Exh. L would show that it does
not bear the word Ransome which is the burner referred to as
the product being sold by the Petitioner. This is not the way
to prove that Exh. L anticipates Letters Patent No. UM-4609
through Exhs. C and D. Another factor working against the
Petitioners claims is that an examination of Exh. L would
disclose that there is no indication of the time or date it was
manufactured. This Office, thus has no way of determining
whether Exh. L was really manufactured before the filing of
the aforesaid application which matured into Letters Patent
No. UM-4609, subject matter of the cancellation proceeding.
At this juncture, it is worthwhile to point out that petitioner
also presented Exh. M which is the alleged burner cup of an
imported Ransome burner. Again, this Office finds the same
as unreliable evidence to show anticipation. It observed that
there is no date indicated therein as to when it was

It must likewise be pointed out that Ong Bun Tua testified on


the brochures allegedly of Manila Gas and of Esso Gasul
marked Exhs. E and F and on the alleged fact that Manila Gas
Corporation was importing from the United States Ransome
burners. But the same could not be given credence since he
himself admitted during cross- examination that he has never
been connected with Manila Gas Corporation. He could not
even present any importation papers relating to the alleged
imported ransome burners. Neither did his wife.[6]
The above findings and conclusions of the Director of
Patent were reiterated and affirmed by the Court of Appeals.
[7]

The validity of the patent issued by the Philippine Patent


Office in favor of private respondent and the question over
the inventiveness, novelty and usefulness of the improved
model of the LPG burner are matters which are better
determined by the Patent Office. The technical staff of the
Philippine Patent Office composed of experts in their field has
by the issuance of the patent in question accepted private
respondents model of gas burner as a discovery. There is a
presumption that the Office has correctly determined the
patentability of the model[8] and such action must not be
interfered with in the absence of competent evidence to the
contrary.
The rule is settled that the findings of fact of the Director
of Patents, especially when affirmed by the Court of Appeals,
are conclusive on this Court when supported by substantial
evidence. Petitioner has failed to show compelling grounds

for a reversal of the findings and conclusions of the Patent


Office and the Court of Appeals.
The alleged failure of the Director of Patents and the
Court of Appeals to accord evidentiary weight to the
testimonies of the witnesses of petitioner showing
anticipation
is
not
a
justification
to
grant
the
petition. Pursuant to the requirement of clear and convincing
evidence to overthrow the presumption of validity of a
patent, it has been held that oral testimony to show
anticipation is open to suspicion and if uncorroborated by
cogent evidence, as what occurred in this case, it may be
held insufficient.[9]
Finally, petitioner would want this Court to review all over
again the evidence she presented before the Patent
Office. She argues that contrary to the decision of the Patent
Office and the Court of Appeals, the evidence she presented
clearly proves that the patented model of private respondent
is no longer new and, therefore, fraud attended the
acquisition of patent by private respondent.
It has been held that the question on priority of invention
is one of fact. Novelty and utility are likewise questions of
fact. The validity of patent is decided on the basis of factual
inquiries.Whether evidence presented comes within the
scope of prior art is a factual issue to be resolved by the
Patent Office.[10] There is question of fact when the doubt or
difference arises as to the truth or falsehood of alleged facts
or when the query necessarily invites calibration of the whole
evidence considering mainly the credibility of witnesses,
existence
and
relevance
of
specific
surrounding
circumstances, their relation to each other and to the whole
and the probabilities of the situation.[11]
Time and again we have held that it is not the function of
the Supreme Court to analyze or weigh all over again the
evidence and credibility of witnesses presented before the
lower tribunal or office. The Supreme Court is not a trier of
facts. Its jurisdiction is limited to reviewing and revising
errors of law imputed to the lower court, its findings of fact
being conclusive and not reviewable by this Court.

WHEREFORE, the Petition is DENIED. The Decision of the


Court of Appeals affirming that of the Philippine Patent Office
is AFFIRMED. Costs against petitioner.

SECOND DIVISION

[G.R. No. 118708. February 2, 1998]

CRESER
PRECISION
SYSTEMS,
INC., petitioner,
vs. COURT
OF
APPEALS
AND
FLORO
INTERNATIONAL CORP., respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari assails the
decision[1]. The decision of the Court of Appeals was penned
by Justice Gloria C. Paras and concurred in by Justice Salome
A. Montoya and Justice Hector L. Hofilea.
1 of the Court of Appeals dated November 9, 1994 in
C.A.-G.R. SP. No. 34425 entitled Floro International Corp. vs.
Hon. Tirso D.C Cruz and Creser Precision System, Inc., the
dispositive portion of which reads:
WHEREFORE, THE PETITION IS HEREBY GRANTED. THE
COMPLAINT FOR INJUNCTION AND DAMAGES, CIVIL CASE NO.
93-1856 BEFORE THE RESPONDENT JUDGE IS HEREBY
ORDERED DISMISSED AND HIS ORDERS THEREIN OF
DECEMBER 29, 1993 AND MAY 11, 1994 ARE ORDERED SET
ASIDE.
Private respondent is a domestic corporation engaged in
the manufacture, production, distribution and sale of military
armaments, munitions, airmunitions and other similar
materials.[2]
On January 23, 1990, private respondent was granted by
the Bureau of Patents, Trademarks and Technology Transfer
(BPTTT), a Letters Patent No. UM-6938 [3] covering an aerial

fuze which was published in the September-October 1990,


Vol. III, No. 5 issue of the Bureau of Patents Official Gazette. [4]
Sometime in November 1993, private respondent,
through its president, Mr. Gregory Floro, Jr., discovered that
petitioner submitted samples of its patented aerial fuze to
the Armed Forces of the Philippines (AFP) for testing. He
learned that petitioner was claiming the aforesaid aerial
fuze as its own and planning to bid and manufacture the
same commercially without license or authority from private
respondent. To protect its right, private respondent on
December 3, 1993, sent a letter[5] to petitioner advising it fro
its existing patent and its rights thereunder, warning
petitioner of a possible court action and/or application for
injunction, should it proceed with the scheduled testing by
the military on December 7, 1993.
In response to private respondents demand, petitioner
filed on December 8, 1993 a complaint[6] for injunction and
damages arising from the alleged infringement before the
Regional Trial Court of Quezon City, Branch 88. The complaint
alleged, among others: that petitioner is the first, true and
actual inventor of an aerial fuze denominated as Fuze, PDR
77 CB4 which is developed as early as December 1981 under
the Self-Reliance Defense Posture Program (SRDP) of the AFP;
that sometime in 1986, petitioner began supplying the AFP
with the said aerial fuze; that private respondents aerial fuze
is identical in every respect to the petitioners fuze; and that
the only difference between the two fuzes are miniscule and
merely cosmetic in nature. Petitioner prayed that a
temporary restraining order and/or writ of preliminary
injunction be issued enjoining private respondent including
any and all persons acting on its behalf from manufacturing,
marketing and/or profiting therefrom, and/or from performing
any other act in connection therewith or tending to prejudice
and deprive it of any rights, privileges and benefits to which
it is duly entitled as the first, true and actual inventor of
the aerial fuze.
On December 10, 1993, the trial court issued a
temporary restraining order. Thereafter, hearings were held
on the application of petitioner for the issuance of a writ of
preliminary injunction, with both parties presenting their

evidence. After the hearings, the trial court directed the


parties to submit their respective memoranda in support of
their positions.
On December 27, 1993, private respondent submitted its
memorandum[7] alleging that petitioner has no cause of
action to file a complaint of infringement against it since it
has no patent for the aerial fuze which it claims to have
invented; that petitioners available remedy is to file a
petition for cancellation of patent before the Bureau of
Patents; that private respondent as the patent holder cannot
be stripped of its property right over the patented aerial
fuze consisting of the exclusive right to manufacture, use and
sell the same and that it stands to suffer irreparable damage
and injury if it is enjoined from the exercise of its property
right over its patent.
On December 29, 1993, the trial court issued an
Order[8] granting the issuance of a writ of preliminary
injunction against private respondent the dispositive portion
of which reads:
WHEREFORE, plaintiffs application for the issuance of a writ
of preliminary injunction is granted and, upon posting of the
corresponding bond by plaintiff in the amount of PHP
200,000.00, let the writ of preliminary injunction be issued by
the branch Clerk of this Court enjoining the defendant and
any and all persons acting on its behalf or by and under its
authority, from manufacturing, marketing and/or selling
aerial fuzes identical, to those of plaintiff, and from profiting
therefrom, and/or from performing any other act in
connection therewith until further orders from this Court.
Private respondent moved for reconsideration but this
was denied by the trial courts in its Order[9] of May 11, 1994,
pertinent portions of which read:
For resolution before this Court is the Motion for
Reconsideration filed by the defendant and the plaintiffs
Opposition thereto. The Court finds no sufficient cause to
reconsider its order dated December 29, 1993. During the
hearing for the issuance of the preliminary injunction, the

plaintiff has amply proven its entitlement to the relief prayed


for. It is undisputed that the plaintiff has developed its aerial
fuze way back in 1981 while the defendant began
manufacturing the same only in 1987. Thus, it is only logical
to conclude that it was the plaintiffs aerial fuze that was
copied or imitated which gives the plaintiff the right to have
the defendant enjoined from manufacturing, marketing
and/or selling aerial fuzes identical to those of the plaintiff,
and from profiting therefrom and/or performing any other act
in connection therewith until further orders from this Court.
With regards to the defendants assertion that an action for
infringement may only be brought by anyone possessing
right, title or interest to the patented invention, (Section 42,
RA 165) qualified by Section 10, RA 165 to include only the
first true and actual inventor, his heirs, legal representatives
to assignees, this court finds the foregoing to be untenable.
Sec. 10 merely enumerates the persons who may have an
invention patented which does not necessarily limit to these
persons the right to institute an action for infringement.
Defendant further contends that the order in issue is
disruptive of the status quo. On the contrary, the order
issued by the Court in effect maintained the status quo. The
last actual , peaceable uncontested status existing prior to
this controversy was the plaintiff manufacturing and selling
its own aerial fuzes PDR 77 CB4 which was ordered stopped
through the defendants letter. With issuance of the order, the
operations of the plaintiff continue. Lastly, this court believes
that the defendant will not suffer irreparable injury by virtue
of said order. The defendants claim is primarily hinged on its
patent (Letters Patent No. UM-6983) the validity of which is
being questioned in this case.
WHEREFORE, premises considered, the Motion for
Reconsideration is hereby denied for lack of merit.
SO ORDERED.
Aggrieved, private respondent on June 27, 1994, filed a
petition for certiorari, mandamus and prohibition[10]before
respondent Court of Appeals raising as grounds the following:

a. Petitioner has no cause of action for infringement


against private respondent, the latter not having
any patent for the aerial fuze which it claims to
have invented and developed and allegedly
infringed by private respondent;
b. The case being an action for cancellation or
invalidation of private respondents Letters
Patent over its own aerial fuze, the proper venue
is the Office of the Director of Patents;
c. The trial court acted in grave abuse of discretion
and or in excess of jurisdiction in finding that
petitioner has fully established its clear title or
right to preliminary injunction;
d. The trial court acted in grave abuse of discretion
and/or in excess of jurisdiction in granting the
preliminary injunction, it being disruptive of the
status quo; and
e. The trial court acted in grave abuse of discretion
and/or in excess of jurisdiction in granting the
preliminary injunction thereby depriving private
respondent of its property rights over the
patented aerial fuze and cause it irreparable
damages.
On November 9, 1994, the respondent court rendered the
now assailed decision reversing the trial courts Order of
December 29, 1993 and dismissing the complaint filed by
petitioner.
The motion for reconsideration was also denied on
January 17, 1995.[11] Hence, this present petition.
It is petitioners contention that it can file, under Section
42 of the Patent Law (R.A. 165), an action for infringement
not as a patentee but as an entity in possession of a right,
title or interest in and to the patented invention. It advances
the theory that while the absence of a patent may prevent
one from lawfully suing another for infringement of said

patent, such absence does not bar the first true and actual
inventor of the patented invention from suing another who
was granted a patent in a suit for declaratory or injunctive
relief recognized under American patent laws. This remedy,
petitioner points out, may be likened to a civil action for
infringement under Section 42 of the Philippine Patent Law.
We find the above arguments untenable.
Section 42 of R.A. 165, otherwise known as the Patent
Law, explicitly provides:
SECTION. 42. Civil action for infringement. Any patentee, or
anyone possessing any right, title or interest in and to the
patented invention, whose rights have been infringed, may
bring a civil action before the proper Court of First Instance
(now Regional Trial court), to recover from the infringer
damages sustained by reason of the infringement and to
secure an injunction for the protection of his right. x x x
Under the aforequoted law, only the patentee or his
successors-in-interest may file an action for infringement.
The phrase anyone possessing any right, title or interest in
and to the patented invention upon which petitioner
maintains its present suit, refers only to the patentees
successors-in-interest, assignees or grantees since actions
for infringement of patent may be brought in the name of the
person or persons interested, whether as patentee, assignees
or grantees, of the exclusive right.[12] Moreover, 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. [13] In short, a
person or entity who has not been granted letters patent
over an invention and has not acquired any right or title
thereto either as assignee or as licensee, has no cause of
action for infringement because the right to maintain an
infringement suit depends on the existence of the patent. [14]
Petitioner admits it has no patent over its aerial fuze.
Therefore, it has no legal basis or cause of action to institute
the petition for injunction and damages arising from the
alleged infringement by private respondent. While petitioner
claims to be the first inventor of the aerial fuze, still it has no

right of property over the same upon which it can maintain a


suit unless it obtains a patent therefor. Under American
jurisprudence, and inventor has no common-law right to a
monopoly of his invention. He has the right to make, use and
vend his own 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, using or selling the invention. [15]

Thus, as correctly ruled by the respondent Court of


Appeals in its assailed decision: since the petitioner (private
respondent herein) is the patentee of the disputed invention
embraced by letters of patent UM No. 6938 issued to it on
January 23, 1990 by the Bureau of Patents, it has in its favor
not only the presumption of validity of its patent, but that of
a legal and factual first and true inventor of the invention.

Further, the remedy of declaratory judgment or injunctive


suit on patent invalidity relied upon by petitioner cannot be
likened to the civil action for infringement under Section 42
of the Patent Law. The reason for this is that the said remedy
is available only to the patent holder or his successors-ininterest. Thus, anyone who has no patent over an invention
but claims to have a right or interest thereto can not file an
action for declaratory judgment or injunctive suit which is not
recognized in this jurisdiction. Said person, however, is not
left without any remedy. He can, under Section 28 of the
aforementioned law, file a petition for cancellation of the
patent within three (3) years from the publication of said
patent with the Director of Patents and raise as ground
therefor that the person to whom the patent was issued is
not the true and actual inventor. Hence, petitioners remedy is
not to file an action for injunction or infringement but to file a
petition for cancellation of private respondent patent.
Petitioner however failed to do so. As such, it can not now
assail or impugn the validity of the private respondents
letters patent by claiming that it is the true and actual
inventor of the aerial fuze.

The validity of the patent issued by the Philippine Patent


Office in favor of the private respondent and the question
over the investments, novelty and usefulness of the
improved process therein specified and described are
matters which are better determined by the Philippines
patent Office, composed of experts in their field, have, by the
issuance of the patent in question, accepted the thinness of
the private respondents new tiles as a discovery. There is a
presumption that the Philippine Patent Office has correctly
determined the patentability of the improvement by the
private respondent of the process in question.

In the case of Aguas vs. De Leon,[16] we stated that:

In fine, in the absence of error or abuse of power or lack


or jurisdiction or grave abuse of discretion, we sustain the
assailed decision of the respondent Court of Appeal.
WHEREFORE, the decision of the Court of Appeals is
hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.