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Western Equipment et al. filed against Herman to discretion to permit these defendants to usurp
REYES, HENRY HERMAN etc prevent them from organizing said corporation the corporate mane of the plaintiff, and to trade
TC ruled in favor of Western Equipment, holding that thereupon in these Islands, in fraud of the
Chapter 18: Foreign Corporations the purpose of the incorporation of the proposed Philippine public and of the true owners of the
Summary corporation is illegal and void name and the goodwill incidental thereto.
Electric Supply Co., a domestic corporation, initially was a The whole purpose and intent of Herman and his
distributor of Western Electric Co. products. The latter is a Issue: WON TC erred in ruling that the purpose of associates in seeking to incorporate another
foreign corporation not licensed to do business in the incorporation is illegal and void - NO corporation under the identical name of Western
Philippines. Later on, the President of Electric Supply Co. Dispositive: The judgment of the lower court is affirmed, Electric Company, Inc., and for the same identical
with costs. So ordered. purpose as that of the plaintiff, is to trespass
wanted to incorporate as Western Electric Supply Co. Inc.
upon and profit by its good name and business
to manufacture and deal the same products. SC ruled that
Ratio: reputation.
the purpose of incorporation was illegal and void. The o The very fact that Herman and his associates
whole purpose and intent of Herman and his associates in Western Electric, although has never engaged in
business in the Philippines has a right of action have sought the use of that particular name for
seeking to incorporate another corporation under the that identical purpose is conclusive evidence of
identical name of Western Electric Company, Inc., and for against defendants. The sole purpose of the action is
to protect its reputation, its corporate name, its the fraudulent intent with which it is done.
the same identical purpose as that of the plaintiff, is to
goodwill, whenever that reputation, corporate name
trespass upon and profit by its good name and business Sterling Products Vs. Farbenfabriken Bayer
or goodwill have, through the natural development of
reputation. its trade, established themselves GR L-19906, 30 April 1969
o A trade-mark acknowledges no territorial
Facts: Facts: In this, a case for trademark infringement and
boundaries of municipalities or states or nations,
May 4, 1925 Western Equipment and Supply unfair competition, each of the principal suitors, namely,
but extends to every market where the traders
Company (Western Equipment) applied to the Director plaintiff Sterling Products International, Inc. (SPI) and
goods have become known and identified by the
of Bureau of Commerce and Industry for the issuance defendant Farbenfabriken Bayer Aktiengesellschaft (FBA),
use of the mark.
of a license to engage in business in the Philippines. seeks to exclude the other from use in the Philippines of
o Rights to the use of its corporate and trade name
o This was issued provisionally on May 20, 1926 the trademarks BAYER and BAYER CROSS IN CIRCLE. SPI
is a property right, a right in rem, which it may
and made permanent on August 23, 1926 asks this Court to strike down FBA's registration of BAYER
assert and protect against all the world, in any of
Western Electric Company Inc. (Western Electric) has CROSS IN CIRCLE covering industrial and agricultural
the courts of the worldeven in jurisdictions
never been licensed to engage in business in the products insecticides and other chemicals, not
where it does not transact businessjust the
Philippine Islands and has never engaged in business medicines from the supplemental register. FBA, for its
same as it may protect its tangible property, real
therein part, prays for the cancellation from the principal register
or personal, against trespass, or conversion.
o The words Western Electric have been of SPI's certificates of registration of the trademarks
It is very apparent that the purpose and intent of
registered by the company as a trademark under aforesaid for medicines.
Herman and his associates in seeking to incorporate
the provisions of the Act of Congress of 20 under the name of Western Electric Company, Inc.,
February 1905 and said trademark remains in Contending parties are doing business in the Philippines.
was to unfairly and unjustly compete in the Philippine SPI markets Bayer Aspirin, Aspirin for Children and
force Islands with the Western Electric Company, Inc., in
Western Equipment, since the issuance of its license, Cafiaspirina. The BAYER and BAYER CROSS IN CIRCLE are
articles which are manufactured by, and bear the being used by SPI in the Philippines only for said products
engaged in the importation and sale of electric and name of, that company, all of which is prohibited by
telephone apparatus and supplies manufactured by Bayer Aspirin, Cafiaspirina and Bayer Aspirin for
Act No. 666 Children. On the containers (bottles or printed celophane
Western Electric and other factories o Herman and his associates, are actually asking strips, which, in turn, are placed in cardboard boxes) of
Electric Supply Company Inc., a domestic corporation the Government of the Philippine Island to permit Bayer Aspirin, Aspirin for Children and Cafiaspirina, SPI
(where Henry Herman is the President and General them to pirate the name of the Western Electric features the trademarks BAYER and BAYER CROSS IN
Manager), has been importing the same products into Company, Inc., by incorporating thereunder, so CIRCLE. FBA thru Allied Manufacturing & Trading Co., Inc.3
the Philippines for the purpose of selling the same that they may deceive the people of the distributes "Folidol" and other industrial and agricultural
1926 Herman, along with other persons, sought to Philippine Islands into thinking that the goods chemicals. FBA's "Folidol" (in steel or fiber drums or
organize a corporation to be known as Western they propose to sell are goods of the manufacture aluminum containers) displays a replica of SPI's trademark
Electric Co. Inc. for the purpose, among other things, of the real Western Electric Company. BAYER CROSS IN CIRCLE; on the tin cap and label of the
of manufacturing, buying, selling and dealing o It would be a gross prostitution of the powers of container.
generally in electrical and telephone apparatus and government to utilize those powers in such a way
supplies. as to authorize such a fraud upon the people The Bayer Cross in circle trademark was registered in
governed. It would be the grossest abuse of Germany in 1904 to Farbenfabriken vorm. Friedr. Bayer
(FFB), successor to the original Friedr. Bauyer et. Comp., trademarks owned by persons domiciled in the United ... Considering that the mark was already
and predecessor to Farbenfabriken Bayer aktiengessel States. registered in the Supplemental Register in favor of
craft (FBA). The Bayer, and Bayer Cross in circle herein applicant, the Office has no other recourse
trademarks were acquired by Sterling Drug Inc. when it What is to be secured from unfair competition in a given but to allow the application, however, Reg. No. SR-
acquired FFBs subsidiary Bayer Co. of New York as a result territory is the trade which one has in that particular 2225 is now being contested in a Petition for
of the sequestration of its assets by the US Alien Property territory. There is where his business is carried on; where Cancellation docketed as IPC No. 1046, still
Custodian during World War I. the goodwill symbolized by the trademark has immediate registrant is presumed to be the owner of the mark
value; where the infringer may profit by infringement.
until after the registration is declared cancelled.
Bayer products have been known in Philippines by the
close of the 19th century. Sterling Drugs, Inc., however, There is nothing new in what we now say. Plaintiff itself
owns the trademarks Bayer in relation to medicine. FBA concedes that the principle of territoriality of the Thereafter, Hemandas & Co. assigned to respondent
attempted to register its chemical products with the Trademark Law has been recognized in the Philippines, Gobindram Hemandas all rights, title, and interest in the
Bayer Cross in circle trademarks. Sterling Products citing Ingenohl vs. Walter E. Olsen, 71 L. ed. 762. As trademark "CHEMISE LACOSTE & DEVICE".
International and FBA seek to exclude each other from use Callmann puts it, the law of trademarks "rests upon the
of the trademarks in the Philippines. The trial court doctrine of nationality or territoriality." On November 21, 1980, the petitioner filed its application
sustained SPIs right to use the Bayer trademark for
for registration of the trademark "Crocodile Device"
medicines and directed FBA to add distinctive word(s) in Accordingly, the 1927 registration in the United States of
(Application Serial No. 43242) and "Lacoste" (Application
their mark to indicate their products come from Germany. the BAYER trademark would not of itself afford plaintiff
Both appealed. protection for the use by defendants in the Philippines of Serial No. 43241).The former was approved for publication
the same trademark for the same or different products. while the latter was opposed by Games and Garments in
Issue: Whether SPIs ownership of the trademarks extends Inter Partes Case No. 1658. In 1982, the petitioner filed a
to products not related to medicine. Petition for the Cancellation of Reg. No. SR-2225 docketed
as Inter Partes Case No. 1689. Both cases have now been
LA CHEMISE vs. FERNANDEZ, G.R. No. L-63796-97,
Held: No. SPIs certificates of registration as to the Bayer considered by this Court in Hemandas v. Hon. Roberto
May 2, 1984, GUTIERREZ, JR., J.:
trademarks registered in the Philippines cover medicines Ongpin (G.R. No. 65659).
only. Nothing in the certificates include chemicals or
insecticides. SPI thus may not claim first use of the FACTS: La Chemise Lacoste, the petitioner is a foreign
Respondent Hemandas argues in his comment on the
trademarks prior to the registrations thereof on any corporation, organized and existing under the laws of
petition for certiorari that the petitioner being a foreign
product other than medicines. For if otherwise held, a France and not doing business in the Philippines, It is
corporation failed to allege essential facts bearing upon its
situation may arise whereby an applicant may be undeniable from the records that it is the actual owner of
tempte3d to register a trademark on any and all goods capacity to sue before Philippine courts. He states that not
the abovementioned trademarks used on clothings and
which his mind may conceive even if he had never only is the petitioner not doing business in the Philippines
other goods specifically sporting apparels sold in many
intended to use the trademark for the said goods. but it also is not licensed to do business in the Philippines.
parts of the world and which have been marketed in the
Philippines since 1964, The main basis of the private
Omnibus registration is not contemplated by the respondent's case is its claim of alleged prior registration. The argument has no merit. In the present case, the
Trademark Law. The net result of the decision is that SPI petitioner is a foreign corporation not doing business in the
may hold on its Bayer trademark for medicines and FBA Philippines. The marketing of its products in the Philippines
may continue using the same trademarks for insecticide In 1975, Hemandas & Co., a duly licensed domestic firm
is done through an exclusive distributor, Rustan
and other chemicals, not medicine. applied for and was issued Reg. No. SR-2225 (SR stands for
Commercial Corporation The latter is an independent
The formula fashioned by the lower court avoids the Supplemental Register) for the trademark "CHEMISE
entity which buys and then markets not only products of
mischief of confusion of origin, and does not visit FBA with LACOSTE & CROCODILE DEVICE" by the Philippine Patent
the petitioner but also many other products bearing
reprobation and condemnation. A statement that its Office for use on T-shirts, sportswear and other garment
product came from Germany anyhow is but a statement of equally well-known and established trademarks and
products of the company.
fact. tradenames. in other words, Rustan is not a mere agent or
conduit of the petitioner.
Two years later, it applied for the registration of the same
Neither will the 1927 registration in the United States of
the BAYER trademark for insecticides serve plaintiff any. trademark under the Principal Register. The Patent Office
The rules and regulations promulgated by the Board of
The United States is not the Philippines. Registration in the eventually issued an order dated March 3, 1977 which
Investments pursuant to its rule-making power under
United States is not registration in the Philippines. At the states that:
Presidential Decree No. 1789, otherwise known as the
time of the United States registration in 1927, we had our Omnibus Investment Code, support a finding that the
own Trademark Law, Act No. 666 aforesaid of the Philippine xxx xxx xxx petitioner is not doing business in the Philippines. Rule I,
Commission, which provided for registration here of
Sec. 1 (g) of said rules and regulations defines "doing bearing the same name as the foreign corporation, when it when foreign corporations not doing business in the
business" as one" which includes, inter alia: appears that they have personal knowledge of the Philippines may nonetheless sue in our courts. In East
existence of such a foreign corporation, and it is apparent Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1),
(1) ... A foreign firm which does business through that the purpose of the proposed domestic corporation is we recognized a right of foreign corporation to sue on
middlemen acting on their own names, such as to deal and trade in the same goods as those of the foreign isolated transactions. In General Garments Corp. v.
indentors, commercial brokers or commission corporation. Director of Patents (41 SCRA 50), we sustained the right of
merchants, shall not be deemed doing business in Puritan Sportswear Corp., a foreign corporation not
the Philippines. But such indentors, commercial We further held: licensed to do and not doing business in the Philippines, to
brokers or commission merchants shall be the ones file a petition for cancellation of a trademark before the
deemed to be doing business in the Philippines. Patent Office.
xxx xxx xxx

(2) Appointing a representative or distributor who More important is the nature of the case which led to this
... That company is not here seeking to enforce any
is domiciled in the Philippines, unless said petition. What preceded this petition for certiorari was a
legal or control rights arising from, or growing out
representative or distributor has an independent letter complaint filed before the NBI charging Hemandas
of, any business which it has transacted in the
status, i.e., it transacts business in its name and with a criminal offense, i.e., violation of Article 189 of the
Philippine Islands. The sole purpose of the action:
for its account, and not in the name or for the Revised Penal Code. If prosecution follows after the
account of a principal Thus, where a foreign firm is completion of the preliminary investigation being
Is to protect its reputation, its corporate name, its conducted by the Special Prosecutor the information shall
represented by a person or local company which
goodwill, whenever that reputation, corporate be in the name of the People of the Philippines and no
does not act in its name but in the name of the
name or goodwill have, through the natural longer the petitioner which is only an aggrieved party
foreign firm the latter is doing business in the
development of its trade, established themselves.' since a criminal offense is essentially an act against the
And it contends that its rights to the use of its State. It is the latter which is principally the injured party
corporate and trade name: although there is a private right violated. Petitioner's
xxx xxx xxx
capacity to sue would become, therefore, of not much
Is a property right, a right in rem, which it may significance in the main case. We cannot snow a possible
Applying the above provisions to the facts of this case, we assert and protect against all the world, in any of violator of our criminal statutes to escape prosecution
find and conclude that the petitioner is not doing business the courts of the world-even in jurisdictions where upon a far-fetched contention that the aggrieved party or
in the Philippines. Rustan is actually a middleman acting it does not transact business-just the same as it victim of a crime has no standing to sue.
and transacting business in its own name and or its own may protect its tangible property, real or personal,
account and not in the name or for the account of the against trespass, or conversion. Citing sec. 10, In upholding the right of the petitioner to maintain the
petitioner. Nims on Unfair Competition and TradeMarks and present suit before our courts for unfair competition or
cases cited; secs. 21-22, Hopkins on TradeMarks, infringement of trademarks of a foreign corporation, we
But even assuming the truth of the private respondent's Trade Names and Unfair Competition and cases are moreover recognizing our duties and the rights of
allegation that the petitioner failed to allege material facts cited.' That point is sustained by the authorities, foreign states under the Paris Convention for the Protection
in its petition relative to capacity to sue, the petitioner and is well stated in Hanover Star Mining Co. v. of Industrial Property to which the Philippines and France
may still maintain the present suit against respondent Allen and Wheeler Co. (208 Fed., 513). in which the are parties. We are simply interpreting and enforcing a
Hemandas. As early as 1927, this Court was, and it still is, syllabus says: solemn international commitment of the Philippines
of the view that a foreign corporation not doing business in embodied in a multilateral treaty to which we are a party
the Philippines needs no license to sue before Philippine Since it is the trade and not the mark that is to be and which we entered into because it is in our national
courts for infringement of trademark and unfair protected, a trade-mark acknowledges no interest to do so.
competition. Thus, in Western Equipment and Supply Co. territorial boundaries of municipalities or states or
v. Reyes (51 Phil. 115), this Court held that a foreign nations, but extends to every market where the
corporation which has never done any business in the trader's goods have become known and Identified
Philippines and which is unlicensed and unregistered to do by the use of the mark. WELLS FARGO BANKS & UNION TRUST COMPANY VS
business here, but is widely and favorably known in the COLLECTOR OF INTERNAL REVENUE
Philippines through the use therein of its products bearing
Our recognizing the capacity of the petitioner to sue is not
its corporate and tradename, has a legal right to maintain 70 Phil. 325 Mercantile Law Corporation Code Shares
by any means novel or precedent setting. Our
an action in the Philippines to restrain the residents and of Stock Situs of Shares of Stock
jurisprudence is replete with cases illustrating instances
inhabitants thereof from organizing a corporation therein
In September 1932, Birdie Lillian Eye died in Los Angeles, and unfair competition, with a prayer for damages and In resolving whether goods are related, several
California, USA which was also her place of domicile. She preliminary injunction. factors come into play:
left various properties. Among those properties They claimed that petitioners adopted the Gallo the business (and its location) to which the goods
include some intangibles consisting of 70,000 shares in the trademark to ride on Gallo Winerys and Gallo and Ernest & belong
Benguet Consolidated Mining Company, a corporation Julio Gallo trademarks established reputation and the class of product to which the good belong
organized and existing under Philippine laws. popularity, thus causing confusion, deception and mistake the products quality, quantity, or size, including the
on the part of the purchasing public who had always nature of the package, wrapper or container
The Collector of Internal Revenue sought to assess and associated Gallo and Ernest and Julio & Gallo trademarks the nature and cost of the articles
collect estate tax on the said shares. Wells Fargo Banks & with Gallo Winerys wines. the descriptive properties, physical attributes or
Union Trust Company, the trustee of the estate of the In their answer, petitioners alleged, among other essential characteristics with reference to their form,
decedent Eye, objected to said assessment. Wells Fargo affirmative defenses that: petitioners Gallo cigarettes and composition, texture or quality
averred that said shares were already subjected to Gallo Winerys wine were totally unrelated products. To wit: the purpose of the goods
inheritance tax in California and hence cannot be taxed 1. Gallo Winerys GALLO trademark registration whether the article is bought for immediate
again in the Philippines (note at that time the Philippines certificates covered wines only, and not cigarettes; consumption, that is, day-to-day household items
was still under the Commonwealth and were not yet totally 2. GALLO cigarettes and GALLO wines were sold through the field of manufacture
independent from the US). different channels of trade; the conditions under which the article is usually
3. the target market of Gallo Winerys wines was the purchased and
ISSUE: Whether or not the shares are subject to estate tax
middle or high-income bracket while Gallo cigarette buyers the articles of the trade through which the goods flow,
in the Philippines.
were farmers, fishermen, laborers and other low-income how they are distributed, marketed, displayed and sold.
HELD: Yes. The Supreme Court ruled that even though the workers; The test of fraudulent simulation is to the likelihood of the
Philippines was considered a US territory at that time, it is 4. the dominant feature of the Gallo cigarette was the deception of some persons in some measure acquainted
still a separate jurisdiction from the US in several aspects rooster device with the manufacturers name clearly with an established design and desirous of purchasing the
particularly taxation. Hence, the Philippines has the power indicated as MIGHTY CORPORATION, while in the case of commodity with which that design has been associated.
to tax said shares. The situs of taxation is here in the Gallo Winerys wines, it was the full names of the founders- The simulation, in order to be objectionable, must be as
Philippines because the situs of the shares of stock owners ERNEST & JULIO GALLO or just their surname appears likely to mislead the ordinary intelligent buyer who
concerned is here in the Philippines because of the fact GALLO; has a need to supply and is familiar with the article that he
that the said shares were issued here by a corporation On April 21, 1993, the Makati RTC denied, for lack of merit, seeks to purchase.
organized and existing under the laws of the Philippines respondents prayer for the issuance of a writ of The petitioners are not liable for trademark infringement,
which is also domiciled here. Further, (and this is the preliminary injunction. unfair competition or damages.
deeper reason), when Eye was alive, she actually delivered On August 19, 1993, respondents motion for WHEREFORE, petition is granted.
the title to said shares to the resident secretary of the reconsideration was denied.
corporation here in the Philippines hence the shares never On February 20, 1995, the CA likewise dismissed PHILIP MORRIS V. CA (G.R. NO. 91332)
left the Philippines. respondents petition for review on certiorari.
After the trial on the merits, however, the Makati RTC, Facts:
Note: As a rule, intangibles follow the person (mobilia on November 26, 1998, held petitioners liable for, Petitioners are foreign corporations organized under US
sequuntur personam). Hence, intangibles are taxable in permanently enjoined from committing trademark laws not doing business in the Philippines and registered
the place where their owner may be domiciled. However, infringement and unfair competition with respect to the owners of symbols MARK VII, MARK TEN, and LARK
Section 104 of the NIRC provides that if the shares have GALLO trademark. used in their cigarette products. Petitioners moved to
attained business situs here in the Philippines, then said On appeal, the CA affirmed the Makati RTCs decision and enjoin respondent Fortune Tobacco from manufacturing
shares are taxable here even if the owner of said shares subsequently denied petitioners motion for and selling cigarettes bearing the symbol MARK asserting
are domiciled abroad. reconsideration. that it is identical or confusingly similar with their
ISSUE: trademarks. Petitioners relied on Section 21-A of the
Whether GALLO cigarettes and GALLO wines were Trademark Law to bring their suit and the Paris Convention
identical, similar or related goods for the reason alone that to protect their trademarks. The court denied the prayer
they were purportedly forms of vice. for injunction stating that since petitioners are not doing
HELD: business in the Philippines, respondents cigarettes would
On March 12, 1993, respondents sued petitioners in
Wines and cigarettes are not identical, similar, competing not cause irreparable damage to petitioner. CA granted the
the RTC-Makati for trademark and trade name infringement
or related goods. injunction but on a subsequent motion, dissolved the writ.
Issues: question whether they have an exclusive right over their the thought of having to participate in throwing into the
(1) Whether or not petitioners mark may be afforded symbol as to justify issuance of the controversial writ will streets Filipino workers engaged in the manufacture and
protection under said laws; depend on actual use of their trademarks in the Philippines sale of private respondents MARK cigarettes who might
(2) Whether or not petitioner may be granted injunctive in line with Sections 2 and 2-A of the same law. It is thus be retrenched and forced to join the ranks of the many
relief. incongruous for petitioners to claim that when a foreign unemployed and unproductive as a result of the issuance
corporation not licensed to do business in Philippines files of a simple writ of preliminary injunction and this, during
Ruling: a complaint for infringement, the entity need not be the pendency of the case before the trial court, not to
(1) NO. Yet, insofar as this discourse is concerned, there is actually using its trademark in commerce in the mention the diminution of tax revenues represented to be
no necessity to treat the matter with an extensive Philippines. Such a foreign corporation may have the close to a quarter million pesos annually. On the other
response because adherence of the Philippines to the 1965 personality to file a suit for infringement but it may not hand, if the status quo is maintained, there will be no
international covenant due to pact sunt servanda had been necessarily be entitled to protection due to absence of damage that would be suffered by petitioners inasmuch as
acknowledged in La Chemise. Given these confluence of actual use of the emblem in the local market. they are not doing business in the Philippines. In view of
existing laws amidst the cases involving trademarks, there the explicit representation of petitioners in the complaint
can be no disagreement to the guiding principle in (2) NO. More telling are the allegations of petitioners in that they are not engaged in business in the Philippines, it
commercial law that foreign corporations not engaged in their complaint as well as in the very petition filed with this inevitably follows that no conceivable damage can be
business in the Philippines may maintain a cause of action Court indicating that they are not doing business in the suffered by them not to mention the foremost
for infringement primarily because of Section 21-A of the Philippines, for these frank representations are consideration heretofore discussed on the absence of their
Trademark Law when the legal standing to sue is alleged, inconsistent and incongruent with any pretense of a right right to be protected.
which petitioners have done in the case at hand. which can breached. Indeed, to be entitled to an injunctive
writ, petitioner must show that there exists a right to be
Petitioners may have the capacity to sue for infringement protected and that the facts against which injunction is
irrespective of lack of business activity in the Philippines directed are violative of said right. On the economic
on account of Section 21-A of the Trademark Law but the repercussion of this case, we are extremely bothered by