G.R. No.

139300 March 14, 2001

AMIGO MANUFACTURING, INC., petitioner,

vs.
CLUETT PEABODY CO., INC., respondent.

The findings of the Bureau of Patents that two trademarks are confusingly and
deceptively similar to each other are binding upon the courts, absent any sufficient
evidence to the contrary. In the present case, the Bureau considered the totality of
the similarities between the two sets of marks and found that they were of such
degree, number and quality as to give the overall impression that the two products
are confusingly if not deceptively the same.

Statement of the Case

Petitioner Amigo Manufacturing Inc. challenges, under Rule 45 of the Rules of Court,
the January 14, 1999 Resolution1 of the Court of Appeals (CA) in CA-GR SP No.
22792, which reversed, on reconsideration, its own September 29, 1998 Decision.2
The dispositive portion of the assailed Resolution reads as follows:

"WHEREFORE, the Motion for Reconsideration is GRANTED, and the Decision dated
September 29, 1998 REVERSED. Consequently, the decision rendered by the
Director of Patents dated September 3, 1990 is hereby AFFIRMED."

The Decision of the Director of Patents, referred to by the CA, disposed as follows:

"WHEREFORE, the Petition is GRANTED. Consequently, Certificate of Registration

No. SR-2206 issued to Respondent-Registrant [herein petitioner] is hereby
cancelled.

"Let the records of this case be remanded to the Patent/Trademark Registry and
EDP Division for appropriate action in accordance with this Decision."

Petitioner also seeks the reversal of the June 30, 1999 CA Resolution3 denying its
own Motion for Reconsideration.

The Facts

The facts, which are undisputed, are summarized by the Court of Appeals in its
original Decision, as follows:

"The source of the controversy that precipitated the filing by [herein Respondent]
Cluett Peabody Co., Inc. (a New York corporation) of the present case against [herein
Petitioner] Amigo Manufacturing Inc. (a Philippine corporation) for cancellation of
trademark is [respondent's] claim of exclusive ownership (as successor in interest
of Great American Knitting Mills, Inc.) of the following trademark and devices, as
used on men's socks:

a) GOLD TOE, under Certificate of Registration No. 6797 dated September 22, 1958;

b) DEVICE, representation of a sock and magnifying glass on the toe of a sock, under
Certificate of Registration No. 13465 dated January 25, 1968;

c) DEVICE, consisting of a 'plurality of gold colored lines arranged in parallel

relation within a triangular area of toe of the stocking and spread from each other
by lines of contrasting color of the major part of the stocking' under Certificate of
Registration No. 13887 dated May 9, 1968; and

d) LINENIZED, under Certificate of Registration No. 15440 dated April 13, 1970.

On the other hand, [petitioner's] trademark and device 'GOLD TOP, Linenized for
Extra Wear' has the dominant color 'white' at the center and a 'blackish brown'
background with a magnified design of the sock's garter, and is labeled 'Amigo
Manufacturing Inc., Mandaluyong, Metro Manila, Made in the Philippines'.

In the Patent Office, this case was heard by no less than six Hearing Officers: Attys.
Rodolfo Gilbang, Rustico Casia, M. Yadao, Fabian Rufina, Neptali Bulilan and Pausi
Sapak. The last named officer drafted the decision under appeal which was in due
court signed and issued by the Director of Patents (who never presided over any
hearing) adversely against the respondent Amigo Manufacturing, Inc. as heretofore
mentioned (supra, p.1).

The decision pivots on two point: the application of the rule of idem sonans and the
existence of a confusing similarity in appearance between two trademarks (Rollo, p.
33)."4

Ruling of the Court of Appeals

In its assailed Resolution, the CA held as follows:

"After a careful consideration of [respondent's] arguments and a re-appreciation of

the records of this case. [w]e find [respondent's] motion for reconsideration
meritorious. As shown by the records, and as correctly held by the Director of
Patents, there is hardly any variance in the appearance of the marks 'GOLD TOP' and
'GOLD TOE' since both show a representation of a man's foot wearing a sock, and
the marks are printed in identical lettering. Section 4(d) of R.A. No. 166 declares to
be unregistrable, 'a mark which consists o[r] comprises a mark or trademark which
so resembles a mark or tradename registered in the Philippines of tradename
previously used in the Philippines by another and not abandoned, as to be likely,
when applied to or used in connection with the goods, business or services of the
applicant, to cause confusion or mistake or to deceive the purchasers. [Petitioner]'s
mark is a combination of the different registered marks owned by [respondent]. As
held in Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990), the
question is not whether the two articles are distinguishable by their label when set
aside but whether the general confusion made by the article upon the eye of the
casual purchaser who is unsuspicious and off his guard, is such as to likely result in
confounding it with the original. As held by the Court in the same decision[,] 'The
most successful form of copying is to employ enough points of similarity to confuse
the public with enough points of difference to confuse the courts.' Furthermore,
[petitioner]'s mark is only registered with the Supplemental Registry which gives no
right of exclusivity to the owner and cannot overturn the presumption of validity
and exclusiv[ity] given to a registered mark.

"Finally, the Philippines and the United States are parties to the Union Convention
for the Protection of Industrial Property adopted in Paris on March 20, 1883,
otherwise known as the Paris Convention. (Puma Sportschuhfabriken Rudolf
Dassler K.G. v. Intermediate Appellate Court, 158 SCRA 233). [Respondent] is
domiciled in the United States of America and is the lawful owner of several
trademark registrations in the United States for the mark 'GOLD TOE'.

xxx xxx x x x'

By virtue of the Philippines' membership to the Paris Union, trademark rights in

favor of the [respondent] were created. The object of the Convention is to accord a
national of a member nation extensive protection against infringement and other
types of unfair competition. (Puma Sportschuhfabriken Rudolf Dassler K.G. v.
Intermediate Appellate Court, 158 SCRA 233; La Chemise Lacoste, S.A. v. Fernandez,
129 SCRA 373)"5

Hence, this Petition.6

Issues

In its Memorandum,7 petitioner raises the following issues for the consideration of
this Court:

"I

Whether or not the Court of Appeals overlooked that petitioner's trademark was
used in commerce in the Philippines earlier than respondent's actual use of its
trademarks, hence the Court of Appeals erred in affirming the Decision of the
Director of Patents dated September 3, 1990.

II
Since the petitioner's actual use of its trademark was ahead of the respondent,
whether or not the Court of Appeals erred in canceling the registration of
petitioner's trademark instead of canceling the trademark of the respondent.

III

Whether or not the Court of Appeals erred in affirming the findings of the Director
of Patents that petitioner's trademark [was] confusingly similar to respondent's
trademarks.

IV

Whether or not the Court of Appeals erred in applying the Paris Convention in
holding that respondent ha[d] an exclusive right to the trademark 'gold toe' without
taking into consideration the absence of actual use in the Philippines."8

In the main, the Court will resolve three issues: (1) the date of actual use of the two
trademarks; (2) their confusing similarities, and (3) the applicability of the Paris
Convention.

The Court's Ruling

The Petition has no merit.

First Issue:
Dates of First Use of Trademark and Devices

Petitioner claims that it started the actual use of the trademark "Gold Top and
Device" in September 1956, while respondent began using the trademark "Gold
Toe" only on May 15, 1962. It contends that the claim of respondent that it had been
using the "Gold Toe" trademark at an earlier date was not substantiated. The latter's
witnesses supposedly contradicted themselves as to the date of first actual use of
their trademark, coming up with different dates such as 1952, 1947 and 1938.

We do not agree. Based on the evidence presented, this Court concurs in the findings
of the Bureau of Patents that respondent had actually used the trademark and the
devices in question prior to petitioner's use of its own. During the hearing at the
Bureau of Patents, respondent presented Bureau registrations indicating the dates
of first use in the Philippines of the trademark and the devices as follows: a) March
16, 1954, Gold Toe; b) February 1, 1952, the Representation of a Sock and a
Magnifying Glass; c) January 30, 1932, the Gold Toe Representation; and d)
February 28, 1952, "Linenized."

The registration of the above marks in favor of respondent constitutes prima facie
evidence, which petitioner failed to overturn satisfactorily, of respondent's
ownership of those marks, the dates of appropriation and the validity of other
pertinent facts stated therein. Indeed, Section 20 of Republic Act 166 provides as
follows:

"Sec. 20. Certificate of registration prima facie evidence of validity. - A certificate of

registration of a mark or trade-name shall be prima facie evidence of the validity of
the registration, the registrant's ownership of the mark or trade-name, and of the
registrant's exclusive right to use the same in connection with the goods, business
or services specified in the certificate, subject to any conditions and limitations
stated therein."9

Moreover, the validity of the Certificates of Registration was not questioned. Neither
did petitioner present any evidence to indicate that they were fraudulently issued.
Consequently, the claimed dates of respondent's first use of the marks are presumed
valid. Clearly, they were ahead of petitioner's claimed date of first use of "Gold Top
and Device" in 1958.

Section 5-A of Republic Act No. 16610 states that an applicant for a trademark or
trade name shall, among others, state the date of first use. The fact that the marks
were indeed registered by respondent shows that it did use them on the date
indicated in the Certificate of Registration.

On the other hand, petitioner failed to present proof of the date of alleged first use of
the trademark "Gold Top and Device". Thus, even assuming that respondent started
using it only on May 15, 1962, we can make no finding that petitioner had started
using it ahead of respondent.

Furthermore, petitioner registered its trademark only with the supplemental

register. In La Chemise Lacoste v. Fernandez,11 the Court held that registration with
the supplemental register gives no presumption of ownership of the trademark. Said
the Court:

"The registration of a mark upon the supplemental register is not, as in the case of
the principal register, prima facie evidence of (1) the validity of registration; (2)
registrant's ownership of the mark; and (3) registrant's exclusive right to use the
mark. It is not subject to opposition, although it may be cancelled after its issuance.
Neither may it be the subject of interference proceedings. Registration [i]n the
supplemental register is not constructive notice of registrant's claim of ownership. A
supplemental register is provided for the registration because of some defects
(conversely, defects which make a mark unregistrable on the principal register, yet
do not bar them from the supplemental register.)' (Agbayani, II Commercial Laws of
the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of
Director of Patents, Apr. 30, 1968."

As to the actual date of first use by respondent of the four marks it registered, the
seeming confusion may have stemmed from the fact that the marks have different
dates of first use. Clearly, however, these dates are indicated in the Certificates of
Registration.

In any case, absent any clear showing to the contrary, this Court accepts the finding
of the Bureau of Patents that it was respondent which had prior use of its
trademark, as shown in the various Certificates of Registration issued in its favor.
Verily, administrative agencies' findings of fact in matters falling under their
jurisdiction are generally accorded great respect, if not finality. Thus, the Court has
held:

"x x x. By reason of the special knowledge and expertise of said administrative

agencies over matters falling under their jurisdiction, they are in a better position to
pass judgment thereon; thus, their findings of fact in that regard are generally
accorded great respect, if not finality, by the courts. The findings of fact of an
administrative agency must be respected as long as they are supported by
substantial evidence, even if such evidence might not be overwhelming or even
preponderant. It is not the task of an appellate court to weigh once more the
evidence submitted before the administrative body and to substitute its own
judgment for that of the administrative agency in respect of sufficiency of
evidence."12

Second Issue:
Similarity of Trademarks

Citing various differences between the two sets of marks, petitioner assails the
finding of the director of patents that its trademark is confusingly similar to that of
respondent. Petitioner points out that the director of patents erred in its application
of the idem sonans rule, claiming that the two trademarks "Gold Toe" and "Gold
Top" do not sound alike and are pronounced differently. It avers that since the
words gold and toe are generic, respondent has no right to their exclusive use.

The arguments of petitioner are incorrect. True, it would not be guilty of

infringement on the basis alone of the similarity in the sound of petitioner's "Gold
Top" with that of respondent's "Gold Toe." Admittedly, the pronunciations of the
two do not, by themselves, create confusion.

The Bureau of Patents, however, did not rely on the idem sonans test alone in
arriving at its conclusion. This fact is shown in the following portion of its Decision:

"As shown by the drawings and labels on file, the mark registered by Respondent-
Registrant under Registration No. SR-2206 is a combination of the abovementioned
trademarks registered separately by the petitioner in the Philippines and the United
States.

"With respect to the issue of confusing similarity between the marks of the
petitioner and that of the respondent-registrant applying the tests of idem sonans,
the mark 'GOLD TOP & DEVICE' is confusingly similar with the mark 'GOLD TOE'.
The difference in sound occurs only in the final letter at the end of the marks. For
the same reason, hardly is there any variance in their appearance. 'GOLD TOE' and
'GOLD TOP' are printed in identical lettering. Both show [a] representation of a
man's foot wearing a sock. 'GOLD TOP' blatantly incorporates petitioner's
'LINENIZED' which by itself is a registered mark."13

The Bureau considered the drawings and the labels, the appearance of the labels,
the lettering, and the representation of a man's foot wearing a sock. Obviously, its
conclusion is based on the totality of the similarities between the parties'
trademarks and not on their sounds alone.

In Emerald Garment Manufacturing Corporation v. Court of Appeals,14 this Court

stated that in determining whether trademarks are confusingly similar,
jurisprudence has developed two kinds of tests, the Dominancy Test15 and the
Holistic Test.16 In its words:

"In determining whether colorable imitation exists, jurisprudence has developed

two kinds of tests the Dominancy Test applied in Asia Brewery, Inc. v. Court of
Appeals and other cases and the Holistic Test developed in Del Monte Corporation v.
Court of Appeals and its proponent cases.

As its title implies, the test of dominancy focuses on the similarity of the prevalent
features of the competing trademarks which might cause confusion or deception
and thus constitutes infringement.

xxx xxx xxx

. . . . If the competing trademark contains the main or essential or dominant features

of another, and confusion and deception is likely to result, infringement takes place.
Duplication or imitation is not necessary; nor is it necessary that the infringing label
should suggest an effort to imitate. [C. Neilman Brewing Co. v. Independent Brewing
Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The
question at issue in cases of infringement of trademarks is whether the use of the
marks involved would be likely to cause confusion or mistakes in the mind of the
public or deceive purchasers. (Auburn Rubber Corporation vs. Hanover Rubber Co.,
107 F. 2d 588; x x x.)

xxx xxx xxx

On the other side of the spectrum, the holistic test mandates that the entirety of the
marks in question must be considered in determining confusing similarity."

In the present case, a resort to either the Dominancy Test or the Holistic Test shows
that colorable imitation exists between respondent's "Gold Toe" and petitioner's
"Gold Top." A glance at petitioner's mark shows that it definitely has a lot of
similarities and in fact looks like a combination of the trademark and devices that
respondent has already registered; namely, "Gold Toe," the representation of a sock
with a magnifying glass, the "Gold Toe" representation and "linenized."

Admittedly, there are some minor differences between the two sets of marks. The
similarities, however, are of such degree, number and quality that the overall
impression given is that the two brands of socks are deceptively the same, or at least
very similar to each another. An examination of the products in question shows that
their dominant features are gold checkered lines against a predominantly black
background and a representation of a sock with a magnifying glass. In addition, both
products use the same type of lettering. Both also include a representation of a
man's foot wearing a sock and the word "linenized" with arrows printed on the
label. Lastly, the names of the brands are similar -- "Gold Top" and "Gold Toe."
Moreover, it must also be considered that petitioner and respondent are engaged in
the same line of business.

Petitioner cannot therefore ignore the fact that, when compared, most of the
features of its trademark are strikingly similar to those of respondent. In addition,
these representations are at the same location, either in the sock itself or on the
label. Petitioner presents no explanation why it chose those representations,
considering that these were the exact symbols used in respondent's marks. Thus,
the overall impression created is that the two products are deceptively and
confusingly similar to each other. Clearly, petitioner violated the applicable
trademark provisions during that time.

Let it be remembered that duly registered trademarks are protected by law as

intellectual properties and cannot be appropriated by others without violating the
due process clause. An infringement of intellectual rights is no less vicious and
condemnable as theft of material property, whether personal or real.

Third Issue:
The Paris Convention

Petitioner claims that the Court of Appeals erred in applying the Paris Convention.
Although respondent registered its trademark ahead, petitioner argues that the
actual use of the said mark is necessary in order to be entitled to the protection of
the rights acquired through registration.

As already discussed, respondent registered its trademarks under the principal

register, which means that the requirement of prior use had already been fulfilled.
To emphasize, Section 5-A of Republic Act 166 requires the date of first use to be
specified in the application for registration. Since the trademark was successfully
registered, there exists a prima facie presumption of the correctness of the contents
thereof, including the date of first use. Petitioner has failed to rebut this
presumption.
Thus, applicable is the Union Convention for the Protection of Industrial Property
adopted in Paris on March 20, 1883, otherwise known as the Paris Convention, of
which the Philippines and the United States are members. Respondent is domiciled
in the United States and is the registered owner of the "Gold Toe" trademark. Hence,
it is entitled to the protection of the Convention. A foreign-based trademark owner,
whose country of domicile is a party to an international convention relating to
protection of trademarks,17 is accorded protection against infringement or any
unfair competition as provided in Section 37 of Republic Act 166, the Trademark
Law which was the law in force at the time this case was instituted.

In sum, petitioner has failed to show any reversible error on the part of the Court of
Appeals. Hence, its Petition must fail.

WHEREFORE, the Petition is hereby DENIED and the assailed Resolution

AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 121267 October 23, 2001

SMITH KLINE & FRENCH LABORATORIES, LTD. plaintiff-appellee,

vs.
COURT OF APPEALS and DANLEX RESEARCH LABORATORIES, INC., defendant-
appellant.

This petition for review on certiorari assails the Decision dated January 27, 1995 of
the Court of Appeals in CA-G.R. SP No. 337701 which affirmed the decision of the
Bureau of Patents, Trademarks and Technology Transfer (BPTTT) granting a
compulsory license to private respondent Danlex Research Laboratories for the use
of the pharmaceutical product Cimetidine. Likewise assailed is the July 25, 1995
Resolution of the Court of Appeals denying the motion for reconsideration filed by
petitioner Smith Kline and French Laboratories, Ltd.

Petitioner is the assignee of Letters Patent No. 12207 covering the pharmaceutical
product Cimetidine, which relates to derivatives of heterocyclicthio or lower alkoxy
or amino lower alkyl thiourea, ureas or guanadines. Said patent was issued by the
BPTTT to Graham John Durant, John Collin Emmett and Robin Genellin on
November 29, 1978.2

On August 21, 1989, private respondent filed with the BPTTT a petition for
compulsory license to manufacture and produce its own brand of medicines using
Cimetidine. Private respondent invoked Section 34 (1) (e) of Republic Act No. 165,3
(the Patent Law) the law then governing patents, which states that an application
for the grant of a compulsory license under a particular patent may be filed with the
BPTTT at any time after the lapse of two (2) years from the date of grant of such
patent, if the patented invention or article relates to food or medicine, or
manufactured substances which can be used as food or medicine, or is necessary for
public health or public safety.4 The petition for compulsory license stated that
Cimetidine is useful as an antihistamine and in the treatment of ulcers, and that
private respondent is capable of using the patented product in the manufacture of a
useful product.5

Petitioner opposed the petition for compulsory license, arguing that the private
respondent had no cause of action and failed to allege how it intended to work the
patented product. Petitioner further stated that its manufacture, use and sales of
Cimetidine satisfied the needs of the Philippine market, hence, there was no need to
grant a compulsory license to private respondent to manufacture, use and sell the
same. Finally, petitioner also claimed that the grant of a compulsory license to
private respondent would not promote public safety and that the latter was only
motivated by pecuniary gain.6

After both parties were heard, the BPTTT rendered a decision directing the issuance
of a compulsory license to private respondent to use, manufacture and sell in the
Philippines its own brand of pharmaceutical products containing Cimetidine and
ordered the payment by private respondent to petitioner of royalties at the rate of
2.5% of net sales in Philippine currency.7

Petitioner thereafter filed with the Court of Appeals a petition for review of the
decision of the BPTTT, raising the following arguments: (1) the BPTTT's decision is
violative of the Paris Convention for the Protection of Industrial Property; (2) said
decision is an invalid exercise of police power; (3) the rate of royalties payable to
petitioner as fixed by the BPTTT was rendered without factual basis and amounts to
an expropriation of private property without just compensation; (4) the petition for
compulsory license should have been dismissed by the BPTTT for failure to prove
the jurisdictional requirement of publication.8

On January 27, 1995, the Court of Appeals promulgated its Decision, the dispositive
portion of which states:

WHEREFORE, the petition is DENIED, and the decision of the Bureau of Patents,
Trademarks and Technology Transfer is hereby AFFIRMED, with costs against the
Petitioner.

SO ORDERED.9

In affirming the decision of the BPTTT, the appellate court held that the grant of a
compulsory license to private respondent for the manufacture and use of Cimetidine
is in accord with the Patent Law since the patented product is medicinal in nature,
and therefore necessary for the promotion of public health and safety.10 It
explained further that the provisions of the Patent Law permitting the grant of a
compulsory license are intended not only to give a chance to others to supply the
public with the quantity of the patented article but especially to prevent the building
up of patent monopolies.11 Neither did the appellate court find the royalty rate of
2.5% of net sales fixed by the BPTTT unreasonable, considering that what was
granted under the compulsory license is only the right to manufacture Cimetidine,
without any technical assistance from petitioner, and royalty rates identical to that
fixed by the BPTTT have been prescribed for the grant of compulsory license in a
good number of patent cases.12 The Court of Appeals also ruled that contrary to
petitioner's claim, private respondent complied with the requirement of publication
under the Patent Law and had submitted proof of such compliance.13

Not satisfied with the appellate court's decision, petitioner filed a motion for
reconsideration thereof as well as a motion for the issuance of a temporary
restraining order against private respondent's sister company, Montreal
Pharmaceutical, Inc. to refrain from marketing a product similar to Cimetidine, but
both motions were denied by the Court of Appeals in its Resolution of July 25,
1995.14

Petitioner thus filed the present petition on September 15, 1995, with the following
assignment of errors:

I. The respondent Court erred in upholding the validity of the decision of public
respondent BPTTT which is an arbitrary exercise of police power and is violative of
international law.

II. The respondent Court erred in holding that compulsory licensing will not create a
confusion that the patented product is the brainchild of private respondent Danlex
and not of petitioner.

III.Assuming that the grant of compulsory license is in order, the respondent Court
still erred in holding that the BPTTT decision fixing the royalty at 2.5% of the net
wholesale price in peso does not amount to expropriation of private property
without just compensation.

IV.The respondent Court erred in finding that the jurisdictional requirement of

publication in a newspaper of general circulation for three (3) consecutive weeks
has been complied with by private respondent Danlex.15

While petitioner concedes that the State in the exercise of police power may
regulate the manufacture and use of medicines through the enactment and
implementation of pertinent laws, it states that such exercise is valid only if the
means employed are reasonably necessary for the accomplishment of the purpose
and if not unduly oppressive.16 According to petitioner, the grant of a compulsory
license to private respondent is an invalid exercise of police power since it was not
shown that there is an overwhelming public necessity for such grant, considering
that petitioner is able to provide an adequate supply of i to satisfy the needs of the
Philippine market. Petitioner also claims that the grant of a compulsory license to
private respondent unjustly deprives it of a reasonable return on its investment.17
It argues further that the provisions of the Patent Law on compulsory licensing
contravene the Convention of Paris for the Protection of Industrial Property18
(Paris Convention), which allegedly permits the granting of a compulsory license
over a patented product only to prevent abuses which might result from the
exercise of the exclusive rights conferred by the patent,19 or on the ground of
failure to work or insufficient working of the patented product, within four years
from the date of filing of the patent application or three years from the date of grant
of the patent, whichever expires last.20 Petitioner opines that the inclusion of
grounds for the grant of a compulsory license in Section 34 of the Patent Law other
than those provided under the Paris Convention constitutes a violation of the
Philippines' obligation to adhere to the provisions of said treaty.21

It is also contended by petitioner that the grant of a compulsory license to private

respondent will allow the latter to liberally manufacture and sell medicinal products
containing Cimetidine without even extending to petitioner due recognition for
pioneering the development and worldwide acceptance of said invention, and will
unreasonably dilute petitioner's right over the patent.22

Petitioner likewise asseverates that the rate of royalty fixed by the BPTTT at 2.5% of
net sales is grossly inadequate, taking into consideration its huge investments of
money, time and other resources in the research and development, as well as
marketing of Cimetidine. It is further alleged that such rate has no factual basis since
the appellate court and the BPTTT relied solely on analogous cases and did not
explain how such rate was arrived at.23

Lastly, petitioner claims that the appellate court erred in ruling that private
respondent had complied with the requirement of publication of the notice of the
filing of the petition for compulsory license because private respondent failed to
formally offer in evidence copies of the notice of filing of the petition and notice of
the date of hearing thereof as published and the affidavits of publication thereof.
Thus, it says, the BPTTT did not properly acquire jurisdiction over the petition for
compulsory license.24

In its Comment to the Petition, private respondent adopted the reasoning of the
Court of Appeals in the assailed decision and prayed that the petition be denied for
lack of merit.25

The petition has no merit.

The Court of Appeals did not err in affirming the validity of the grant by the BPTTT
of a compulsory license to private respondent for the use, manufacture and sale of
Cimetidine. The said grant is in accord with Section 34 of the Patent Law which
provides:
Grounds for Compulsory Licensing. (1) Any person may apply to the Director for
the grant of a license under a particular patent at any time after the expiration of
two years from the date of the grant of the patent, under any of the following
circumstances:

(a) If the patented invention is not being worked within the Philippines on a
commercial scale, although capable of being so worked, without satisfactory reason;

(b) If the demand of the patented article in the Philippines is not being met to an
adequate extent and on reasonable terms;

(c) If, by reason of refusal of the patentee to grant a license or licenses on reasonable
terms, or by reason of the conditions attached by the patentee to licensee or to the
purchase, lease or use of the patented article or working of the patented process or
machine for production, the establishment of any new trade or industry in the
Philippines is prevented, or the trade or industry therein is unduly restrained;

(d) If the working of the invention within the country is being prevented or
hindered by the importation of the patented article;

(e) If the patented invention or article relates to food or medicine or manufactured

substances which can be used as food or medicine, or is necessary for public health
or public safety.

(2) In any of the above cases, a compulsory license shall be granted to the petitioner
provided that he has proved his capability to work the patented product or to make
use of the patented product in the manufacture of a useful product, or to employ the
patented process.

(3) The term "worked" or "working" as used in this section means the manufacture
and sale of the patented article, of patented machine, or the application of the
patented process for production, in or by means of a definite and substantial
establishment or organization in the Philippines and on a scale which is reasonable
and adequate under the circumstances. Importation shall not constitute "working".
(Emphasis supplied.)

The grant of the compulsory license satisfies the requirements of the foregoing
provision. More than ten years have passed since the patent for Cimetidine was
issued to petitioner and its predecessors-in-interest, and the compulsory license
applied for by private respondent is for the use, manufacture and sale of a medicinal
product. Furthermore, both the appellate court and the BPTTT found that private
respondent had the capability to work Cimetidine or to make use thereof in the
manufacture of a useful product.

Petitioner's contention that Section 34 of the Patent Law contravenes the Paris
Convention because the former provides for grounds for the grant of a compulsory
license in addition to those found in the latter, is likewise incorrect. Article 5,
Section A(2) of the Paris Convention states:

Each country of the union shall have the right to take legislative measures providing
for the grant of compulsory licenses to prevent the abuses which might result from
the exercise of the exclusive rights conferred by the patent, for example, failure to
work.26

This issue has already been resolved by this Court in the case of Smith Kline &
French Laboratories, Ltd. vs. Court of Appeals,27 where petitioner herein
questioned the BPTTT's grant of a compulsory license to Doctors Pharmaceuticals,
Inc. also for the manufacture, use and sale of Cimetidine. We found no inconsistency
between Section 34 and the Paris Convention and held that:

It is thus clear that Section A(2) of Article 5 [of the Paris Convention] unequivocally
and explicitly respects the right of member countries to adopt legislative measures
to provide for the grant of compulsory licenses to prevent abuses which might result
from the exercise of the exclusive rights conferred by the patent. An example
provided of possible abuses is "failure to work;" however, as such, is merely
supplied by way of an example, it is plain that the treaty does not preclude the
inclusion of other forms of categories of abuses.

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines'
adhesion to the Convention, fits well within the aforequoted provisions of Article 5
of the Paris Convention. In the explanatory note of Bill No. 1156 which eventually
became R.A. No. 165, the legislative intent in the grant of a compulsory license was
not only to afford others an opportunity to provide the public with the quantity of
the patented product, but also to prevent the growth of monopolies [Congressional
Record, House of Representatives, 12 May 957, 998]. Certainly, the growth of
monopolies was among the abuses which Section A, Article 5 of the Convention
foresaw, and which our Congress likewise wished to prevent in enacting R.A. No.
165.28 (Emphasis supplied.)

Neither does the Court agree with petitioner that the grant of the compulsory
license to private respondent was erroneous because the same would lead the
public to think that the Cimetidine is the invention of private respondent and not of
petitioner. Such fears are unfounded since, as the appellate court pointed out in the
assailed decision, by the grant of the compulsory license, private respondent as
licensee explicitly acknowledges that petitioner is the source of the patented
product Cimetidine.29 Even assuming arguendo that such confusion may indeed
occur, the disadvantage is far outweighed by the benefits resulting from the grant of
the compulsory license, such as an increased supply of pharmaceutical products
containing Cimetidine, and the consequent reduction in the prices thereof.30

There is likewise no basis for the allegation that the grant of a compulsory license to
private respondent results in the deprivation of petitioner's property without just
compensation. It must be pointed out that as owner of Letters Patent No. 12207,
petitioner had already enjoyed exclusive rights to manufacture, use and sell
Cimetidine for at least two years from its grant in November, 1978. Even if other
entities like private respondent are subsequently allowed to manufacture, use and
sell the patented invention by virtue of a compulsory license, petitioner as owner of
the patent would still receive remuneration for the use of such product in the form
of royalties.

Anent the perceived inadequacy of the royalty awarded to petitioner, the Court of
Appeals correctly held that the rate of 2.5% of net wholesale price fixed by the
Director of the BPTTT is in accord with the Patent Law. Said law provides:

Sec. 35. Grant of License.(1) If the Director finds that a case for the grant of a
license under Section 34 hereof has been made out, he shall, within one hundred
eighty days from the date the petition was filed, order the grant of an appropriate
license. The order shall state the terms and conditions of the license which he
himself must fix in default of an agreement on the matter manifested or submitted
by the parties during the hearing.

xxx

Section 35-B. Terms and Conditions of Compulsory License. (1) A compulsory

license shall be non-exclusive, but this shall be without prejudice to the licensee's
right to oppose an application for such a new license.

(2) The terms and conditions of a compulsory license, fixed in accordance with
Section 35, may contain obligations and restrictions both for the licensee and for the
registered owner of the patent.

(3) A compulsory license shall only be granted subject to the payment of adequate
royalties commensurate with the extent to which the invention is worked. However,
royalty payments shall not exceed five percent (5%) of the net wholesale price (as
defined in Section 33-A) of the products manufactured under the license. If the
product, substance, or process subject of the compulsory license is involved in an
industrial project approved by the Board of Investments, the royalty payable to the
patentee or patentees shall not exceed three percent (3%) of the net wholesale price
(as defined in Section 33-A) of the patented commodity/and or commodity
manufactured under the patented process; the same rate of royalty shall be paid
whenever two or more patents are involved; which royalty shall be distributed to
the patentees in rates proportional to the extent of commercial use by the licensee
giving preferential values to the holder of the oldest subsisting product patent.

xxx

Under the aforequoted provisions, in the absence of any agreement between the
parties with respect to a compulsory license, the Director of the BPTTT may fix the
terms thereof, including the rate of the royalty payable to the licensor. The law
explicitly provides that the rate of royalty shall not exceed five percent (5%) of the
net wholesale price.

The Court agrees with the appellate court's ruling that the rate of royalty payments
fixed by the Director of the BPTTT is reasonable. The appellate court, citing Price vs.
United Laboratories,31 ruled as such, considering that the compulsory license
awarded to private respondent consists only of the bare right to use the patented
invention in the manufacture of another product, without any technical assistance
from the licensor.32 Furthermore, this Court had earlier noted in the Price case that
identical royalty rates have been prescribed by the Director of the BPTTT in
numerous patent cases.33

There was thus no error on the part of the Court of Appeals in affirming the royalty
rate fixed by the Director of the BPTTT, since it was not shown that the latter erred
or abused his discretion in prescribing said rate. The rule is that factual findings of
administrative bodies, which are considered as experts in their respective fields, are
accorded not only respect but even finality if the same are supported by substantial
evidence.34

Finally, as to the alleged lack of jurisdiction of the BPTTT over the petition filed by
private respondent for failure to comply with the publication requirement under
Section 35-F of R.A. No. 165, the Court holds that petitioner is estopped from
questioning the same since it did not raise the issue of lack of jurisdiction at the
earliest possible opportunity, i.e., during the hearings before the BPTTT.35 The
Court notes that petitioner raised this contention for the first time when it appealed
the case to the appellate court.

WHEREFORE, the petition is hereby DENIED for lack of merit and the Decision of the
Court of Appeals is hereby AFFIRMED.

SO ORDERED.

G.R. No. 172835 December 13, 2007

AIR PHILIPPINES CORPORATION, Petitioner,

vs.
PENNSWELL, INC. Respondent.

Petitioner Air Philippines Corporation seeks, via the instant Petition for Review
under Rule 45 of the Rules of Court, the nullification of the 16 February 2006
Decision1 and the 25 May 2006 Resolution2 of the Court of Appeals in CA-G.R. SP
No. 86329, which affirmed the Order3 dated 30 June 2004 of the Regional Trial
Court (RTC), Makati City, Branch 64, in Civil Case No. 00-561.
Petitioner Air Philippines Corporation is a domestic corporation engaged in the
business of air transportation services. On the other hand, respondent Pennswell,
Inc. was organized to engage in the business of manufacturing and selling industrial
chemicals, solvents, and special lubricants.

On various dates, respondent delivered and sold to petitioner sundry goods in trade,
covered by Sales Invoices No. 8846,4 9105,5 8962,6 and 8963,7 which correspond
to Purchase Orders No. 6433, 6684, 6634 and 6633, respectively. Under the
contracts, petitioners total outstanding obligation amounted to P449,864.98 with
interest at 14% per annum until the amount would be fully paid. For failure of the
petitioner to comply with its obligation under said contracts, respondent filed a
Complaint8 for a Sum of Money on 28 April 2000 with the RTC.

In its Answer,9 petitioner contended that its refusal to pay was not without valid
and justifiable reasons. In particular, petitioner alleged that it was defrauded in the
amount of P592,000.00 by respondent for its previous sale of four items, covered by
Purchase Order No. 6626. Said items were misrepresented by respondent as
belonging to a new line, but were in truth and in fact, identical with products
petitioner had previously purchased from respondent. Petitioner asserted that it
was deceived by respondent which merely altered the names and labels of such
goods. Petitioner specifically identified the items in question

According to petitioner, respondents products, namely Excellent Rust Corrosion,

Connector Grease, Electric Strength Protective Coating, and Anti-Seize Compound,
are identical with its Anti-Friction Fluid, Contact Grease, Thixohtropic Grease, and
Dry Lubricant, respectively. Petitioner asseverated that had respondent been
forthright about the identical character of the products, it would not have purchased
the items complained of. Moreover, petitioner alleged that when the purported
fraud was discovered, a conference was held between petitioner and respondent on
13 January 2000, whereby the parties agreed that respondent would return to
petitioner the amount it previously paid. However, petitioner was surprised when it
received a letter from the respondent, demanding payment of the amount of
P449,864.94, which later became the subject of respondents Complaint for
Collection of a Sum of Money against petitioner.

During the pendency of the trial, petitioner filed a Motion to Compel10 respondent
to give a detailed list of the ingredients and chemical components of the following
products, to wit: (a) Contact Grease and Connector Grease; (b) Thixohtropic Grease
and Di-Electric Strength Protective Coating; and (c) Dry Lubricant and Anti-Seize
Compound.11 It appears that petitioner had earlier requested the Philippine
Institute of Pure and Applied Chemistry (PIPAC) for the latter to conduct a
comparison of respondents goods.

On 15 March 2004, the RTC rendered an Order granting the petitioners motion. It
disposed, thus:

The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner] Air
Philippines Corporation[,] a detailed list of the ingredients or chemical components
of the following chemical products:

a. Contact Grease to be compared with Connector Grease;

b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating;

and

c. Dry Lubricant to be compared with Anti-Seize Compound[.]

[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order to
submit to [petitioner] Air Philippines Corporation the chemical components of all
the above-mentioned products for chemical comparison/analysis.12

Respondent sought reconsideration of the foregoing Order, contending that it

cannot be compelled to disclose the chemical components sought because the
matter is confidential. It argued that what petitioner endeavored to inquire upon
constituted a trade secret which respondent cannot be forced to divulge.
Respondent maintained that its products are specialized lubricants, and if their
components were revealed, its business competitors may easily imitate and market
the same types of products, in violation of its proprietary rights and to its serious
damage and prejudice.

The RTC gave credence to respondents reasoning, and reversed itself. It issued an
Order dated 30 June 2004, finding that the chemical components are respondents
trade secrets and are privileged in character. A priori, it rationalized:

The Supreme Court held in the case of Chavez vs. Presidential Commission on Good
Government, 299 SCRA 744, p. 764, that "the drafters of the Constitution also
unequivocally affirmed that aside from national security matters and intelligence
information, trade or industrial secrets (pursuant to the Intellectual Property Code
and other related laws) as well as banking transactions (pursuant to the Secrecy of
Bank Deposit Act) are also exempted from compulsory disclosure."

Trade secrets may not be the subject of compulsory disclosure. By reason of [their]
confidential and privileged character, ingredients or chemical components of the
products ordered by this Court to be disclosed constitute trade secrets lest [herein
respondent] would eventually be exposed to unwarranted business competition
with others who may imitate and market the same kinds of products in violation of
[respondents] proprietary rights. Being privileged, the detailed list of ingredients or
chemical components may not be the subject of mode of discovery under Rule 27,
Section 1 of the Rules of Court, which expressly makes privileged information an
exception from its coverage.13

Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition
for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals, which
denied the Petition and affirmed the Order dated 30 June 2004 of the RTC.

The Court of Appeals ruled that to compel respondent to reveal in detail the list of
ingredients of its lubricants is to disregard respondents rights over its trade secrets.
It was categorical in declaring that the chemical formulation of respondents
products and their ingredients are embraced within the meaning of "trade secrets."
In disallowing the disclosure, the Court of Appeals expounded, thus:

The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989]) held
that trade secrets and confidential, commercial and financial information are
exempt from public scrutiny. This is reiterated in Chavez v. Presidential Commission
on Good Government (299 SCRA 744 [1998]) where the Supreme Court enumerated
the kinds of information and transactions that are recognized as restrictions on or
privileges against compulsory disclosure. There, the Supreme Court explicitly stated
that:

"The drafters of the Constitution also unequivocally affirmed that, aside from
national security matters and intelligence information, trade or industrial secrets
(pursuant to the Intellectual Property Code and other related laws) as well as
banking transactions (pursuant to the Secrecy of Bank Deposits Act) re also exempt
from compulsory disclosure."

It is thus clear from the foregoing that a party cannot be compelled to produce,
release or disclose documents, papers, or any object which are considered trade
secrets.

In the instant case, petitioner [Air Philippines Corporation] would have

[respondent] Pennswell produce a detailed list of ingredients or composition of the
latters lubricant products so that a chemical comparison and analysis thereof can
be obtained. On this note, We believe and so hold that the ingredients or
composition of [respondent] Pennswells lubricants are trade secrets which it
cannot be compelled to disclose.

[Respondent] Pennswell has a proprietary or economic right over the ingredients or

components of its lubricant products. The formulation thereof is not known to the
general public and is peculiar only to [respondent] Pennswell. The legitimate and
economic interests of business enterprises in protecting their manufacturing and
business secrets are well-recognized in our system.

[Respondent] Pennswell has a right to guard its trade secrets, manufacturing

formulas, marketing strategies and other confidential programs and information
against the public. Otherwise, such information can be illegally and unfairly utilized
by business competitors who, through their access to [respondent] Pennswells
business secrets, may use the same for their own private gain and to the irreparable
prejudice of the latter.

xxxx

In the case before Us, the alleged trade secrets have a factual basis, i.e., it comprises
of the ingredients and formulation of [respondent] Pennswells lubricant products
which are unknown to the public and peculiar only to Pennswell.

All told, We find no grave abuse of discretion amounting to lack or excess of

jurisdiction on the part of public respondent Judge in finding that the detailed list of
ingredients or composition of the subject lubricant products which petitioner [Air
Philippines Corporation] seeks to be disclosed are trade secrets of [respondent]
Pennswell; hence, privileged against compulsory disclosure.14

Petitioners Motion for Reconsideration was denied.

Unyielding, petitioner brought the instant Petition before us, on the sole issue of:

WHETHER THE COURT OF APPEALS RULED IN ACCORDANCE WITH PREVAILING

LAWS AND JURISPRUDENCE WHEN IT UPHELD THE RULING OF THE TRIAL COURT
THAT THE CHEMICAL COMPONENTS OR INGREDIENTS OF RESPONDENTS
PRODUCTS ARE TRADE SECRETS OR INDUSTRIAL SECRETS THAT ARE NOT
SUBJECT TO COMPULSORY DISCLOSURE.15

Petitioner seeks to convince this Court that it has a right to obtain the chemical
composition and ingredients of respondents products to conduct a comparative
analysis of its products. Petitioner assails the conclusion reached by the Court of
Appeals that the matters are trade secrets which are protected by law and beyond
public scrutiny. Relying on Section 1, Rule 27 of the Rules of Court, petitioner argues
that the use of modes of discovery operates with desirable flexibility under the
discretionary control of the trial court. Furthermore, petitioner posits that its
request is not done in bad faith or in any manner as to annoy, embarrass, or oppress
respondent.

A trade secret is defined as a plan or process, tool, mechanism or compound known

only to its owner and those of his employees to whom it is necessary to confide it.16
The definition also extends to a secret formula or process not patented, but known
only to certain individuals using it in compounding some article of trade having a
commercial value.17 A trade secret may consist of any formula, pattern, device, or
compilation of information that: (1) is used in one's business; and (2) gives the
employer an opportunity to obtain an advantage over competitors who do not
possess the information.18 Generally, a trade secret is a process or device intended
for continuous use in the operation of the business, for example, a machine or
formula, but can be a price list or catalogue or specialized customer list.19 It is
indubitable that trade secrets constitute proprietary rights. The inventor,
discoverer, or possessor of a trade secret or similar innovation has rights therein
which may be treated as property, and ordinarily an injunction will be granted to
prevent the disclosure of the trade secret by one who obtained the information "in
confidence" or through a "confidential relationship."20 American jurisprudence has
utilized the following factors21 to determine if an information is a trade secret, to
wit:

(1) the extent to which the information is known outside of the employer's business;

(2) the extent to which the information is known by employees and others involved
in the business;

(3) the extent of measures taken by the employer to guard the secrecy of the
information;

(4) the value of the information to the employer and to competitors;

(5) the amount of effort or money expended by the company in developing the
information; and

(6) the extent to which the information could be easily or readily obtained through
an independent source.22

In Cocoland Development Corporation v. National Labor Relations Commission,23

the issue was the legality of an employees termination on the ground of
unauthorized disclosure of trade secrets. The Court laid down the rule that any
determination by management as to the confidential nature of technologies,
processes, formulae or other so-called trade secrets must have a substantial factual
basis which can pass judicial scrutiny. The Court rejected the employers naked
contention that its own determination as to what constitutes a trade secret should
be binding and conclusive upon the NLRC. As a caveat, the Court said that to rule
otherwise would be to permit an employer to label almost anything a trade secret,
and thereby create a weapon with which he/it may arbitrarily dismiss an employee
on the pretext that the latter somehow disclosed a trade secret, even if in fact there
be none at all to speak of.24 Hence, in Cocoland, the parameters in the
determination of trade secrets were set to be such substantial factual basis that can
withstand judicial scrutiny.

The chemical composition, formulation, and ingredients of respondents special

lubricants are trade secrets within the contemplation of the law. Respondent was
established to engage in the business of general manufacturing and selling of, and to
deal in, distribute, sell or otherwise dispose of goods, wares, merchandise, products,
including but not limited to industrial chemicals, solvents, lubricants, acids, alkalies,
salts, paints, oils, varnishes, colors, pigments and similar preparations, among
others. It is unmistakable to our minds that the manufacture and production of
respondents products proceed from a formulation of a secret list of ingredients. In
the creation of its lubricants, respondent expended efforts, skills, research, and
resources. What it had achieved by virtue of its investments may not be wrested
from respondent on the mere pretext that it is necessary for petitioners defense
against a collection for a sum of money. By and large, the value of the information to
respondent is crystal clear. The ingredients constitute the very fabric of
respondents production and business. No doubt, the information is also valuable to
respondents competitors. To compel its disclosure is to cripple respondents
business, and to place it at an undue disadvantage. If the chemical composition of
respondents lubricants are opened to public scrutiny, it will stand to lose the
backbone on which its business is founded. This would result in nothing less than
the probable demise of respondents business. Respondents proprietary interest
over the ingredients which it had developed and expended money and effort on is
incontrovertible. Our conclusion is that the detailed ingredients sought to be
revealed have a commercial value to respondent. Not only do we acknowledge the
fact that the information grants it a competitive advantage; we also find that there is
clearly a glaring intent on the part of respondent to keep the information
confidential and not available to the prying public.

We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties
to inspect documents or things upon a showing of good cause before the court in
which an action is pending. Its entire provision reads:

SECTION 1. Motion for production or inspection order. Upon motion of any party
showing good cause therefore, the court in which an action is pending may (a) order
any party to produce and permit the inspection and copying or photographing, by or
on behalf of the moving party, of any designated documents, papers, books,
accounts, letters, photographs, objects or tangible things, not privileged, which
constitute or contain evidence material to any matter involved in the action and
which are in his possession, custody or control; or (b) order any party to permit
entry upon designated land or other property in his possession or control for the
purpose of inspecting, measuring, surveying, or photographing the property or any
designated relevant object or operation thereon. The order shall specify the time,
place and manner of making the inspection and taking copies and photographs, and
may prescribe such terms and conditions as are just.

A more than cursory glance at the above text would show that the production or
inspection of documents or things as a mode of discovery sanctioned by the Rules of
Court may be availed of by any party upon a showing of good cause therefor before
the court in which an action is pending. The court may order any party: a) to
produce and permit the inspection and copying or photographing of any designated
documents, papers, books, accounts, letters, photographs, objects or tangible things,
which are not privileged;25 which constitute or contain evidence material to any
matter involved in the action; and which are in his possession, custody or control; or
b) to permit entry upon designated land or other property in his possession or
control for the purpose of inspecting, measuring, surveying, or photographing the
property or any designated relevant object or operation thereon.

Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts,
letters, photographs, objects or tangible things that may be produced and inspected
should not be privileged.26 The documents must not be privileged against
disclosure.27 On the ground of public policy, the rules providing for production and
inspection of books and papers do not authorize the production or inspection of
privileged matter; that is, books and papers which, because of their confidential and
privileged character, could not be received in evidence.28 Such a condition is in
addition to the requisite that the items be specifically described, and must constitute
or contain evidence material to any matter involved in the action and which are in
the partys possession, custody or control.

Section 2429 of Rule 130 draws the types of disqualification by reason of privileged
communication, to wit: (a) communication between husband and wife; (b)
communication between attorney and client; (c) communication between physician
and patient; (d) communication between priest and penitent; and (e) public officers
and public interest. There are, however, other privileged matters that are not
mentioned by Rule 130. Among them are the following: (a) editors may not be
compelled to disclose the source of published news; (b) voters may not be
compelled to disclose for whom they voted; (c) trade secrets; (d) information
contained in tax census returns; and (d) bank deposits. 30

We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals
which upheld the finding of the RTC that there is substantial basis for respondent to
seek protection of the law for its proprietary rights over the detailed chemical
composition of its products.

That trade secrets are of a privileged nature is beyond quibble. The protection that
this jurisdiction affords to trade secrets is evident in our laws. The Interim Rules of
Procedure on Government Rehabilitation, effective 15 December 2000, which
applies to: (1) petitions for rehabilitation filed by corporations, partnerships, and
associations pursuant to Presidential Decree No. 902-A,31 as amended; and (2)
cases for rehabilitation transferred from the Securities and Exchange Commission to
the RTCs pursuant to Republic Act No. 8799, otherwise known as The Securities
Regulation Code, expressly provides that the court may issue an order to protect
trade secrets or other confidential research, development, or commercial
information belonging to the debtor.32 Moreover, the Securities Regulation Code is
explicit that the Securities and Exchange Commission is not required or authorized
to require the revelation of trade secrets or processes in any application, report or
document filed with the Commission.33 This confidentiality is made paramount as a
limitation to the right of any member of the general public, upon request, to have
access to all information filed with the Commission.34

Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets
under the following articles:

Art. 291. Revealing secrets with abuse of office. The penalty of arresto mayor and
a fine not exceeding 500 pesos shall be imposed upon any manager, employee or
servant who, in such capacity, shall learn the secrets of his principal or master and
shall reveal such secrets.

Art. 292. Revelation of industrial secrets. The penalty of prision correccional in its
minimum and medium periods and a fine not exceeding 500 pesos shall be imposed
upon the person in charge, employee or workman of any manufacturing or
industrial establishment who, to the prejudice of the owner thereof, shall reveal the
secrets of the industry of
the latter.

Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue
Code of 1997, has a restrictive provision on trade secrets, penalizing the revelation
thereof by internal revenue officers or employees, to wit:

SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who
causes or procures an officer or employee of the Bureau of Internal Revenue to
divulge any confidential information regarding the business, income or inheritance
of any taxpayer, knowledge of which was acquired by him in the discharge of his
official duties, and which it is unlawful for him to reveal, and any person who
publishes or prints in any manner whatever, not provided by law, any income,
profit, loss or expenditure appearing in any income tax return, shall be punished by
a fine of not more than two thousand pesos (P2,000), or suffer imprisonment of not
less than six (6) months nor more than five (5) years, or both.

Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes
Control Act of 1990, enacted to implement the policy of the state to regulate, restrict
or prohibit the importation, manufacture, processing, sale, distribution, use and
disposal of chemical substances and mixtures that present unreasonable risk and/or
injury to health or the environment, also contains a provision that limits the right of
the public to have access to records, reports or information concerning chemical
substances and mixtures including safety data submitted and data on emission or
discharge into the environment, if the matter is confidential such that it would
divulge trade secrets, production or sales figures; or methods, production or
processes unique to such manufacturer, processor or distributor; or would
otherwise tend to affect adversely the competitive position of such manufacturer,
processor or distributor.35

Clearly, in accordance with our statutory laws, this Court has declared that
intellectual and industrial property rights cases are not simple property cases.36
Without limiting such industrial property rights to trademarks and trade names,
this Court has ruled that all agreements concerning intellectual property are
intimately connected with economic development.37 The protection of industrial
property encourages investments in new ideas and inventions and stimulates
creative efforts for the satisfaction of human needs. It speeds up transfer of
technology and industrialization, and thereby bring about social and economic
progress.38 Verily, the protection of industrial secrets is inextricably linked to the
advancement of our economy and fosters healthy competition in trade.

Jurisprudence has consistently acknowledged the private character of trade

secrets.1wphi1 There is a privilege not to disclose ones trade secrets.39 Foremost,
this Court has declared that trade secrets and banking transactions are among the
recognized restrictions to the right of the people to information as embodied in the
Constitution.40 We said that the drafters of the Constitution also unequivocally
affirmed that, aside from national security matters and intelligence information,
trade or industrial secrets (pursuant to the Intellectual Property Code and other
related laws) as well as banking transactions (pursuant to the Secrecy of Bank
Deposits Act), are also exempted from compulsory disclosure.41

Significantly, our cases on labor are replete with examples of a protectionist stance
towards the trade secrets of employers. For instance, this Court upheld the validity
of the policy of a pharmaceutical company prohibiting its employees from marrying
employees of any competitor company, on the rationalization that the company has
a right to guard its trade secrets, manufacturing formulas, marketing strategies and
other confidential programs and information from competitors.42 Notably, it was in
a labor-related case that this Court made a stark ruling on the proper determination
of trade secrets.

In the case at bar, petitioner cannot rely on Section 7743 of Republic Act 7394, or
the Consumer Act of the Philippines, in order to compel respondent to reveal the
chemical components of its products. While it is true that all consumer products
domestically sold, whether manufactured locally or imported, shall indicate their
general make or active ingredients in their respective labels of packaging, the law
does not apply to respondent. Respondents specialized lubricants -- namely,
Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength
Protective Coating, Dry Lubricant and Anti-Seize Compound -- are not consumer
products. "Consumer products," as it is defined in Article 4(q),44 refers to goods,
services and credits, debts or obligations which are primarily for personal, family,
household or agricultural purposes, which shall include, but not be limited to, food,
drugs, cosmetics, and devices. This is not the nature of respondents products. Its
products are not intended for personal, family, household or agricultural purposes.
Rather, they are for industrial use, specifically for the use of aircraft propellers and
engines.

Petitioners argument that Republic Act No. 8203, or the Special Law on Counterfeit
Drugs, requires the disclosure of the active ingredients of a drug is also on faulty
ground.45 Respondents products are outside the scope of the cited law. They do not
come within the purview of a drug46 which, as defined therein, refers to any
chemical compound or biological substance, other than food, that is intended for use
in the treatment, prevention or diagnosis of disease in man or animals. Again, such
are not the characteristics of respondents products.

What is clear from the factual findings of the RTC and the Court of Appeals is that
the chemical formulation of respondents products is not known to the general
public and is unique only to it. Both courts uniformly ruled that these ingredients
are not within the knowledge of the public. Since such factual findings are generally
not reviewable by this Court, it is not duty-bound to analyze and weigh all over
again the evidence already considered in the proceedings below.47 We need not
delve into the factual bases of such findings as questions of fact are beyond the pale
of Rule 45 of the Rules of Court. Factual findings of the trial court when affirmed by
the Court of Appeals, are binding and conclusive on the Supreme Court.48

We do not find merit or applicability in petitioners invocation of Section 1249 of the

Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, which
grants the public access to records, reports or information concerning chemical
substances and mixtures, including safety data submitted, and data on emission or
discharge into the environment. To reiterate, Section 1250 of said Act deems as
confidential matters, which may not be made public, those that would divulge trade
secrets, including production or sales figures or methods; production or processes
unique to such manufacturer, processor or distributor, or would otherwise tend to
affect adversely the competitive position of such manufacturer, processor or
distributor. It is true that under the same Act, the Department of Environment and
Natural Resources may release information; however, the clear import of the law is
that said authority is limited by the right to confidentiality of the manufacturer,
processor or distributor, which information may be released only to a medical
research or scientific institution where the information is needed for the purpose of
medical diagnosis or treatment of a person exposed to the chemical substance or
mixture. The right to confidentiality is recognized by said Act as primordial.
Petitioner has not made the slightest attempt to show that these circumstances are
availing in the case at bar.

Indeed, the privilege is not absolute; the trial court may compel disclosure where it
is indispensable for doing justice.51 We do not, however, find reason to except
respondents trade secrets from the application of the rule on privilege. The
revelation of respondents trade secrets serves no better purpose to the disposition
of the main case pending with the RTC, which is on the collection of a sum of money.
As can be gleaned from the facts, petitioner received respondents goods in trade in
the normal course of business. To be sure, there are defenses under the laws of
contracts and sales available to petitioner. On the other hand, the greater interest of
justice ought to favor respondent as the holder of trade secrets. If we were to weigh
the conflicting interests between the parties, we rule in favor of the greater interest
of respondent. Trade secrets should receive greater protection from discovery,
because they derive economic value from being generally unknown and not readily
ascertainable by the public.52 To the mind of this Court, petitioner was not able to
show a compelling reason for us to lift the veil of confidentiality which shields
respondents trade secrets.

WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the
Resolution dated 25 May 2006, of the Court of Appeals in CA-G.R. SP No. 86329 are
AFFIRMED. No costs.

SO ORDERED.

G.R. No. 154342 July 14, 2004

MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC.,

petitioner,
vs.
E. & J. GALLO WINERY and THE ANDRESONS GROUP, INC., respondents.

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

I.

The Factual Background

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

Respondent domestic corporation, Andresons, has been Gallo Winerys exclusive

wine importer and distributor in the Philippines since 1991, selling these products
in its own name and for its own account.5

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

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

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

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

In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La

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

Subsequently, La Campana authorized Mighty Corporation to manufacture and sell

cigarettes bearing the GALLO trademark.13 BIR approved Mighty Corporations use
of GALLO 100s cigarette brand, under licensing agreement with Tobacco Industries,
on May 18, 1988, and GALLO SPECIAL MENTHOL 100s cigarette brand on April 3,
1989.14
Petitioners claim that GALLO cigarettes have been sold in the Philippines since
1973, initially by Tobacco Industries, then by La Campana and finally by Mighty
Corporation.15

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

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

II.

The Legal Dispute

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

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

In their answer, petitioners alleged, among other affirmative defenses, that:

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

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

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

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

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

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

a. permanently restraining and enjoining defendants, their distributors, trade

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

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

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

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

(iv) the cost of suit.

SO ORDERED."29

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

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

III.

The Issues

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

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

IV.

Discussion

THE EXCEPTIONAL CIRCUMSTANCES

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

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

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

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

(3) there is grave abuse of discretion;

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

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

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

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

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

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

Thus, we give due course to the petition.

THE TRADEMARK LAW AND THE PARIS

CONVENTION ARE THE APPLICABLE LAWS,
NOT THE INTELLECTUAL PROPERTY CODE
We note that respondents sued petitioners on March 12, 1993 for trademark
infringement and unfair competition committed during the effectivity of the Paris
Convention and the Trademark Law.

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

Defendants unauthorized use of the GALLO trademark constitutes trademark

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

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

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

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

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

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

DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION

Although the laws on trademark infringement and unfair competition have a

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

In Del Monte Corporation vs. Court of Appeals,45 we distinguished trademark

infringement from unfair competition:

(1) Infringement of trademark is the unauthorized use of a trademark, whereas

unfair competition is the passing off of one's goods as those of another.

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

competition fraudulent intent is essential.

(3) In infringement of trademark the prior registration of the trademark is a

prerequisite to the action, whereas in unfair competition registration is not
necessary.

Pertinent Provisions on Trademark

Infringement under the Paris
Convention and the Trademark Law

Article 6bis of the Paris Convention,46 an international agreement binding on the

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

(a) registration or use by another person of a trademark which is a reproduction,

imitation or translation liable to create confusion,

(b) of a mark considered by the competent authority of the country of registration

or use48 to be well-known in that country and is already the mark of a person
entitled to the benefits of the Paris Convention, and

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

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

Corollary to this, Section 20 of the Trademark Law50 considers the trademark

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

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

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

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

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

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

In summary, the Paris Convention protects well-known trademarks only (to be

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

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

Hence, proof of all the elements of trademark infringement is a condition precedent

to any finding of liability.

THE ACTUAL COMMERCIAL USE IN THE

PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.

By respondents own judicial admission, the GALLO wine trademark was registered
in the Philippines in November 1971 but the wine itself was first marketed and sold
in the country only in 1974 and only within the former U.S. military facilities, and
outside thereof, only in 1979. To prove commercial use of the GALLO wine
trademark in the Philippines, respondents presented sales invoice no. 29991 dated
July 9, 1981 addressed to Conrad Company Inc., Makati, Philippines and sales
invoice no. 85926 dated March 22, 1996 addressed to Andresons Global, Inc.,
Quezon City, Philippines. Both invoices were for the sale and shipment of GALLO
wines to the Philippines during that period.55 Nothing at all, however, was
presented to evidence the alleged sales of GALLO wines in the Philippines in 1974
or, for that matter, prior to July 9, 1981.
On the other hand, by testimonial evidence supported by the BIR authorization
letters, forms and manufacturers sworn statement, it appears that petitioners and
its predecessor-in-interest, Tobacco Industries, have indeed been using and selling
GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.56

In Emerald Garment Manufacturing Corporation vs. Court of Appeals,57 we

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

xxx xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's

contention that private respondent failed to prove prior actual commercial use of its
"LEE" trademark in the Philippines before filing its application for registration with
the BPTTT and hence, has not acquired ownership over said mark.

Actual use in commerce in the Philippines is an essential prerequisite for the

acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the
Philippine Trademark Law (R.A. No. 166) x x x

xxx xxx xxx

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

xxx xxx xxx

Following universal acquiescence and comity, our municipal law on trademarks

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

xxx xxx xxx

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

xxx xxx xxx

Undisputably, private respondent is the senior registrant, having obtained several

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

xxx xxx xxx

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

xxx xxx xxx

The credibility placed on a certificate of registration of one's trademark, or its

weight as evidence of validity, ownership and exclusive use, is qualified. A
registration certificate serves merely as prima facie evidence. It is not conclusive but
can and may be rebutted by controverting evidence.

xxx xxx xxx

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

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

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

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

xxx xxx xxx

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

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

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

Thus, by strict application of Section 20 of the Trademark Law, Gallo Winerys

exclusive right to use the GALLO trademark should be limited to wines, the only
product indicated in its registration certificates. This strict statutory limitation on
the exclusive right to use trademarks was amply clarified in our ruling in Faberge,
Inc. vs. Intermediate Appellate Court:64

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

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

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

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

"Really, if the certificate of registration were to be deemed as including goods not

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

NO LIKELIHOOD OF CONFUSION, MISTAKE

OR DECEIT AS TO THE IDENTITY OR SOURCE
OF PETITIONERS AND RESPONDENTS
GOODS OR BUSINESS

A crucial issue in any trademark infringement case is the likelihood of confusion,

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

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

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

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

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

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

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

(d) in Shell Company of the Philippines vs. Court of Appeals,70 in a minute

resolution, we dismissed the petition for review for lack of merit and affirmed the
Patent Offices registration of the trademark SHELL used in the cigarettes
manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell
Companys opposition as the prior registrant of the same trademark for its gasoline
and other petroleum products;

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

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

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

Jurisprudence has developed two tests in determining similarity and likelihood of

confusion in trademark resemblance:75

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

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

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

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

In comparing the resemblance or colorable imitation of marks, various factors have

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

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

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

Also, as admitted by respondents themselves,86 on the side of the GALLO cigarette

packs are the words "MADE BY MIGHTY CORPORATION," thus clearly informing the
public as to the identity of the manufacturer of the cigarettes.

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

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

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

WINES AND CIGARETTES ARE NOT

IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS

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

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

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

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

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

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

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

(d) the nature and cost of the articles98

(e) the descriptive properties, physical attributes or essential characteristics with

reference to their form, composition, texture or quality

(f) the purpose of the goods99

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

(h) the fields of manufacture102

(i) the conditions under which the article is usually purchased103 and
(j) the channels of trade through which the goods flow,104 how they are distributed,
marketed, displayed and sold.105

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

A very important circumstance though is whether there exists a likelihood that an

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

Hence, in the adjudication of trademark infringement, we give due regard to the

goods usual purchasers character, attitude, habits, age, training and education. 111

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

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

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

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

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

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

Second, it is common knowledge that supermarkets sell an infinite variety of wholly

unrelated products and the goods here involved, wines and cigarettes, have nothing
whatsoever in common with respect to their essential characteristics, quality,
quantity, size, including the nature of their packages, wrappers or containers.113

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

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

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

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

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

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

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

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

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

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

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

xxx xxx xxx

Those decisions, however, must be considered in perspective of the principle that

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

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

xxx xxx xxx

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

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

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

THE GALLO WINE TRADEMARK IS NOT A

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

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

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

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

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

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

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

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

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

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

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

a) the mark must be internationally known;

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

anything else;

c) the mark must be for use in the same or similar kinds of goods; and
d) the person claiming must be the owner of the mark (The Parties Convention
Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the
World Intellectual Property Organization, Geneva, Switzerland, 1985)

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

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

Consent of the Registrant and

Other air, Just and Equitable
Considerations

Each trademark infringement case presents a unique problem which must be

answered by weighing the conflicting interests of the litigants.124

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

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

PETITIONERS ARE ALSO NOT LIABLE

FOR UNFAIR COMPETITION

Under Section 29 of the Trademark Law, any person who employs deception or any
other means contrary to good faith by which he passes off the goods manufactured
by him or in which he deals, or his business, or services for those of the one having
established such goodwill, or who commits any acts calculated to produce said
result, is guilty of unfair competition. It includes the following acts:
(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
influence purchasers to believe that the goods offered are those of a manufacturer
or dealer other than the actual manufacturer or dealer, or who otherwise clothes the
goods with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any vendor
engaged in selling such goods with a like purpose;

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

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

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

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

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

Costs against respondents.

SO ORDERED.
G.R. No. 159938 March 31, 2006

SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT, LTD., SHANGRI-LA

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

In this petition for review under Rule 45 of the Rules of Court, petitioners Shangri-
La International Hotel Management, Ltd. (SLIHM), et al. assail and seek to set aside
the Decision dated May 15, 20031 of the Court of Appeals (CA) in CA-G.R. CV No.
53351 and its Resolution2 of September 15, 2003 which effectively affirmed with
modification an earlier decision of the Regional Trial Court (RTC) of Quezon City in
Civil Case No. Q-91-8476, an action for infringement and damages, thereat
commenced by respondent Developers Group of Companies, Inc. (DGCI) against the
herein petitioners.

The facts:

At the core of the controversy are the "Shangri-La" mark and "S" logo. Respondent
DGCI claims ownership of said mark and logo in the Philippines on the strength of
its prior use thereof within the country. As DGCI stresses at every turn, it filed on
October 18, 1982 with the Bureau of Patents, Trademarks and Technology Transfer
(BPTTT) pursuant to Sections 2 and 4 of Republic Act (RA) No. 166,3 as amended,
an application for registration covering the subject mark and logo. On May 31, 1983,
the BPTTT issued in favor of DGCI the corresponding certificate of registration
therefor, i.e., Registration No. 31904. Since then, DGCI started using the "Shangri-La"
mark and "S" logo in its restaurant business.

On the other hand, the Kuok family owns and operates a chain of hotels with
interest in hotels and hotel-related transactions since 1969. As far back as 1962, it
adopted the name "Shangri-La" as part of the corporate names of all companies
organized under the aegis of the Kuok Group of Companies (the Kuok Group). The
Kuok Group has used the name "Shangri-La" in all Shangri-La hotels and hotel-
related establishments around the world which the Kuok Family owned.

To centralize the operations of all Shangri-la hotels and the ownership of the
"Shangri-La" mark and "S" logo, the Kuok Group had incorporated in Hong Kong and
Singapore, among other places, several companies that form part of the Shangri-La
International Hotel Management Ltd. Group of Companies. EDSA Shangri-La Hotel
and Resort, Inc., and Makati Shangri-La Hotel and Resort, Inc. were incorporated in
the Philippines beginning 1987 to own and operate the two (2) hotels put up by the
Kuok Group in Mandaluyong and Makati, Metro Manila.
All hotels owned, operated and managed by the aforesaid SLIHM Group of
Companies adopted and used the distinctive lettering of the name "Shangri-La" as
part of their trade names.

From the records, it appears that Shangri-La Hotel Singapore commissioned a

Singaporean design artist, a certain Mr. William Lee, to conceptualize and design the
logo of the Shangri-La hotels.

During the launching of the stylized "S" Logo in February 1975, Mr. Lee gave the
following explanation for the logo, to wit:

The logo which is shaped like a "S" represents the uniquely Asean architectural
structures as well as keep to the legendary Shangri-la theme with the mountains on
top being reflected on waters below and the connecting centre [sic] line serving as
the horizon. This logo, which is a bold, striking definitive design, embodies both
modernity and sophistication in balance and thought.

Since 1975 and up to the present, the "Shangri-La" mark and "S" logo have been
used consistently and continuously by all Shangri-La hotels and companies in their
paraphernalia, such as stationeries, envelopes, business forms, menus, displays and
receipts.

The Kuok Group and/or petitioner SLIHM caused the registration of, and in fact
registered, the "Shangri-La" mark and "S" logo in the patent offices in different
countries around the world.

On June 21, 1988, the petitioners filed with the BPTTT a petition, docketed as Inter
Partes Case No. 3145, praying for the cancellation of the registration of the "Shangri-
La" mark and "S" logo issued to respondent DGCI on the ground that the same were
illegally and fraudulently obtained and appropriated for the latter's restaurant
business. They also filed in the same office Inter Partes Case No. 3529, praying for
the registration of the same mark and logo in their own names.

Until 1987 or 1988, the petitioners did not operate any establishment in the
Philippines, albeit they advertised their hotels abroad since 1972 in numerous
business, news, and/or travel magazines widely circulated around the world, all
readily available in Philippine magazines and newsstands. They, too, maintained
reservations and booking agents in airline companies, hotel organizations, tour
operators, tour promotion organizations, and in other allied fields in the Philippines.

It is principally upon the foregoing factual backdrop that respondent DGCI filed a
complaint for Infringement and Damages with the RTC of Quezon City against the
herein petitioners SLIHM, Shangri-La Properties, Inc., Makati Shangri-La Hotel &
Resort, Inc., and Kuok Philippine Properties, Inc., docketed as Civil Case No. Q-91-
8476 and eventually raffled to Branch 99 of said court. The complaint with prayer
for injunctive relief and damages alleged that DGCI has, for the last eight (8) years,
been the prior exclusive user in the Philippines of the mark and logo in question and
the registered owner thereof for its restaurant and allied services. As DGCI alleged
in its complaint, SLIHM, et al., in promoting and advertising their hotel and other
allied projects then under construction in the country, had been using a mark and
logo confusingly similar, if not identical, with its mark and "S" logo. Accordingly,
DGCI sought to prohibit the petitioners, as defendants a quo, from using the
"Shangri-La" mark and "S" logo in their hotels in the Philippines.

In their Answer with Counterclaim, the petitioners accused DGCI of appropriating

and illegally using the "Shangri-La" mark and "S" logo, adding that the legal and
beneficial ownership thereof pertained to SLIHM and that the Kuok Group and its
related companies had been using this mark and logo since March 1962 for all their
corporate names and affairs. In this regard, they point to the Paris Convention for
the Protection of Industrial Property as affording security and protection to SLIHM's
exclusive right to said mark and logo. They further claimed having used, since late
1975, the internationally-known and specially-designed "Shangri-La" mark and "S"
logo for all the hotels in their hotel chain.

Pending trial on the merits of Civil Case No. Q-91-8476, the trial court issued a Writ
of Preliminary Injunction enjoining the petitioners from using the subject mark and
logo. The preliminary injunction issue ultimately reached the Court in G.R. No.
104583 entitled Developers Group of Companies, Inc. vs. Court of Appeals, et al. In a
decision4 dated March 8, 1993, the Court nullified the writ of preliminary injunction
issued by the trial court and directed it to proceed with the main case and decide it
with deliberate dispatch.

While trial was in progress, the petitioners filed with the court a motion to suspend
proceedings on account of the pendency before the BPTTT of Inter Partes Case No.
3145 for the cancellation of DGCI's certificate of registration. For its part,
respondent DGCI filed a similar motion in that case, invoking in this respect the
pendency of its infringement case before the trial court. The parties' respective
motions to suspend proceedings also reached the Court via their respective
petitions in G.R. No. 114802, entitled Developers Group of Companies, Inc. vs. Court
of Appeals, et al. and G.R. No. 111580, entitled Shangri-La International Hotel
Management LTD., et al. vs. Court of Appeals, et al., which were accordingly
consolidated.

In a consolidated decision5 dated June 21, 2001, the Court, limiting itself to the core
issue of whether, despite the petitioners' institution of Inter Partes Case No. 3145
before the BPTTT, herein respondent DGCI "can file a subsequent action for
infringement with the regular courts of justice in connection with the same
registered mark," ruled in the affirmative, but nonetheless ordered the BPTTT to
suspend further proceedings in said inter partes case and to await the final outcome
of the main case.
Meanwhile, trial on the merits of the infringement case proceeded. Presented as
DGCI's lone witness was Ramon Syhunliong, President and Chairman of DGCI's
Board of Directors. Among other things, this witness testified that:

1. He is a businessman, with interest in lumber, hotel, hospital, trading and

restaurant businesses but only the restaurant business bears the name "Shangri-La"
and uses the same and the "S-logo" as service marks. The restaurant now known as
"Shangri-La Finest Chinese Cuisine" was formerly known as the "Carvajal
Restaurant" until December 1982, when respondent took over said restaurant
business.

2. He had traveled widely around Asia prior to 1982, and admitted knowing the
Shangri-La Hotel in Hong Kong as early as August 1982.

3. The "S-logo" was one of two (2) designs given to him in December 1982, scribbled
on a piece of paper by a jeepney signboard artist with an office somewhere in
Balintawak. The unnamed artist supposedly produced the two designs after about
two or three days from the time he (Syhunliong) gave the idea of the design he had
in mind.

4. On October 15, 1982, or before the unknown signboard artist supposedly created
the "Shangri-La" and "S" designs, DGCI was incorporated with the primary purpose
of "owning or operating, or both, of hotels and restaurants".

5. On October 18, 1982, again prior to the alleged creation date of the mark and logo,
DGCI filed an application for trademark registration of the mark "SHANGRI-LA
FINEST CHINESE CUISINE & S. Logo" with the BPTTT. On said date, respondent
DGCI amended its Articles of Incorporation to reflect the name of its restaurant,
known and operating under the style and name of "SHANGRI-LA FINEST CHINESE
CUISINE." Respondent DGCI obtained Certificate of Registration No. 31904 for the
"Shangri-La" mark and "S" logo.

Eventually, the trial court, on the postulate that petitioners', more particularly
petitioner SLIHM's, use of the mark and logo in dispute constitutes an infringement
of DGCI's right thereto, came out with its decision6 on March 8, 1996 rendering
judgment for DGCI, as follows:

WHEREFORE, judgment is hereby rendered in favor of [respondent DGCI] and

against [SLIHM, et al.] -

a) Upholding the validity of the registration of the service mark "Shangri-la" and "S-
Logo" in the name of [respondent];

b) Declaring [petitioners'] use of said mark and logo as infringement of

[respondent's] right thereto;
c) Ordering [petitioners], their representatives, agents, licensees, assignees and
other persons acting under their authority and with their permission, to
permanently cease and desist from using and/or continuing to use said mark and
logo, or any copy, reproduction or colorable imitation

thereof, in the promotion, advertisement, rendition of their hotel and allied projects
and services or in any other manner whatsoever;

d) Ordering [petitioners] to remove said mark and logo from any premises, objects,
materials and paraphernalia used by them and/or destroy any and all prints, signs,
advertisements or other materials bearing said mark and logo in their possession
and/or under their control; and

e) Ordering [petitioners], jointly and severally, to indemnify [respondent] in the

amounts of P2,000,000.00 as actual and compensatory damages, P500,000.00 as
attorney's fee and expenses of litigation.

Let a copy of this Decision be certified to the Director, Bureau of Patents,

Trademarks and Technology Transfer for his information and appropriate action in
accordance with the provisions of Section 25, Republic Act No. 166

Costs against [petitioners].

SO ORDERED. [Words in brackets added.]

Therefrom, the petitioners went on appeal to the CA whereat their recourse was
docketed as CA G.R. SP No. 53351.

As stated at the threshold hereof, the CA, in its assailed Decision of May 15, 2003,7
affirmed that of the lower court with the modification of deleting the award of
attorney's fees. The appellate court predicated its affirmatory action on the strength
or interplay of the following premises:

1. Albeit the Kuok Group used the mark and logo since 1962, the evidence presented
shows that the bulk use of the tradename was abroad and not in the Philippines
(until 1987). Since the Kuok Group does not have proof of actual use in commerce in
the Philippines (in accordance with Section 2 of R.A. No. 166), it cannot claim
ownership of the mark and logo in accordance with the holding in Kabushi Kaisha
Isetan v. IAC8, as reiterated in Philip Morris, Inc. v. Court of Appeals.9

2. On the other hand, respondent has a right to the mark and logo by virtue of its
prior use in the Philippines and the issuance of Certificate of Registration No. 31904.

3. The use of the mark or logo in commerce through the bookings made by travel
agencies is unavailing since the Kuok Group did not establish any branch or regional
office in the Philippines. As it were, the Kuok Group was not engaged in commerce
in the Philippines inasmuch as the bookings were made through travel agents not
owned, controlled or managed by the Kuok Group.

4. While the Paris Convention protects internationally known marks, R.A. No. 166
still requires use in commerce in the Philippines. Accordingly, and on the premise
that international agreements, such as Paris Convention, must yield to a municipal
law, the question on the exclusive right over the mark and logo would still depend
on actual use in commerce in the Philippines.

Petitioners then moved for a reconsideration, which motion was denied by the CA in
its equally assailed Resolution of September 15, 2003.10

As formulated by the petitioners, the issues upon which this case hinges are:

1. Whether the CA erred in finding that respondent had the right to file an
application for registration of the "Shangri-La" mark and "S" logo although
respondent never had any prior actual commercial use thereof;

2. Whether the CA erred in finding that respondent's supposed use of the identical
"Shangri-La" mark and "S" logo of the petitioners was not evident bad faith and can
actually ripen into ownership, much less registration;

3. Whether the CA erred in overlooking petitioners' widespread prior use of the

"Shangri-La" mark and "S" logo in their operations;

4. Whether the CA erred in refusing to consider that petitioners are entitled to

protection under both R.A. No. 166, the old trademark law, and the Paris Convention
for the Protection of Industrial Property;

5. Whether the CA erred in holding that SLIHM did not have the right to legally own
the "Shangri-La" mark and "S" logo by virtue of and despite their ownership by the
Kuok Group;

6. Whether the CA erred in ruling that petitioners' use of the mark and logo
constitutes actionable infringement;

7. Whether the CA erred in awarding damages in favor of respondent despite the

absence of any evidence to support the same, and in failing to award relief in favor
of the petitioners; and

8. Whether petitioners should be prohibited from continuing their use of the mark
and logo in question.

There are two preliminary issues, however, that respondent DGCI calls our attention
to, namely:
1. Whether the certification against forum-shopping submitted on behalf of the
petitioners is sufficient;

2. Whether the issues posed by petitioners are purely factual in nature hence
improper for resolution in the instant petition for review on certiorari.

DGCI claims that the present petition for review should be dismissed outright for
certain procedural defects, to wit: an insufficient certification against forum
shopping and raising pure questions of fact. On both counts, we find the instant
petition formally and substantially sound.

In its Comment, respondent alleged that the certification against forum shopping
signed by Atty. Lee Benjamin Z. Lerma on behalf and as counsel of the petitioners
was insufficient, and that he was not duly authorized to execute such document.
Respondent further alleged that since petitioner SLIHM is a foreign entity based in
Hong Kong, the Director's Certificate executed by Mr. Madhu Rama Chandra Rao,
embodying the board resolution which authorizes Atty. Lerma to act for SLIHM and
execute the certification against forum shopping, should contain the authentication
by a consular officer of the Philippines in Hong Kong.

In National Steel Corporation v. CA,11 the Court has ruled that the certification on
non-forum shopping may be signed, for and in behalf of a corporation, by a
specifically authorized lawyer who has personal knowledge of the facts required to
be disclosed in such document. The reason for this is that a corporation can only
exercise its powers through its board of directors and/or its duly authorized officers
and agents. Physical acts, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose.12

Moreover, Rule 7, Section 5 of the Rules of Court concerning the certification against
forum shopping does not require any consular certification if the petitioner is a
foreign entity. Nonetheless, to banish any lingering doubt, petitioner SLIHM
furnished this Court with a consular certification dated October 29, 2003
authenticating the Director's Certificate authorizing Atty. Lerma to execute the
certification against forum shopping, together with petitioners' manifestation of
February 9, 2004.

Respondent also attacks the present petition as one that raises pure questions of
fact. It points out that in a petition for review under Rule 45 of the Rules of Court,
the questions that may properly be inquired into are strictly circumscribed by the
express limitation that "the petition shall raise only questions of law which must be
distinctly set forth."13 We do not, however, find that the issues involved in this
petition consist purely of questions of fact. These issues will be dealt with as we go
through the questions raised by the petitioners one by one.

Petitioners' first argument is that the respondent had no right to file an application
for registration of the "Shangri-La" mark and "S" logo because it did not have prior
actual commercial use thereof. To respondent, such an argument raises a question
of fact that was already resolved by the RTC and concurred in by the CA.

First off, all that the RTC found was that respondent was the prior user and
registrant of the subject mark and logo in the Philippines. Taken in proper context,
the trial court's finding on "prior use" can only be interpreted to mean that
respondent used the subject mark and logo in the country before the petitioners did.
It cannot be construed as being a factual finding that there was prior use of the mark
and logo before registration.

Secondly, the question raised is not purely factual in nature. In the context of this
case, it involves resolving whether a certificate of registration of a mark, and the
presumption of regularity in the performance of official functions in the issuance
thereof, are sufficient to establish prior actual use by the registrant. It further entails
answering the question of whether prior actual use is required before there may be
a valid registration of a mark.

Under the provisions of the former trademark law, R.A. No. 166, as amended, which
was in effect up to December 31, 1997, hence, the law in force at the time of
respondent's application for registration of trademark, the root of ownership of a
trademark is actual use in commerce. Section 2 of said law requires that before a
trademark can be registered, it must have been actually used in commerce and
service for not less than two months in the Philippines prior to the filing of an
application for its registration.

Registration, without more, does not confer upon the registrant an absolute right to
the registered mark. The certificate of registration is merely a prima facie proof that
the registrant is the owner of the registered mark or trade name. Evidence of prior
and continuous use of the mark or trade name by another can overcome the
presumptive ownership of the registrant and may very well entitle the former to be
declared owner in an appropriate case.14

Among the effects of registration of a mark, as catalogued by the Court in Lorenzana

v. Macagba,15 are:

1. Registration in the Principal Register gives rise to a presumption of the validity of

the registration, the registrant's ownership of the mark, and his right to the
exclusive use thereof. x x x

2. Registration in the Principal Register is limited to the actual owner of the

trademark and proceedings therein pass on the issue of ownership, which may be
contested through opposition or interference proceedings, or, after registration, in a
petition for cancellation. xxx

[Emphasis supplied]1avvphil.et
Ownership of a mark or trade name may be acquired not necessarily by registration
but by adoption and use in trade or commerce. As between actual use of a mark
without registration, and registration of the mark without actual use thereof, the
former prevails over the latter. For a rule widely accepted and firmly entrenched,
because it has come down through the years, is that actual use in commerce or
business is a pre-requisite to the acquisition of the right of ownership.16

While the present law on trademarks17 has dispensed with the requirement of
prior actual use at the time of registration, the law in force at the time of registration
must be applied, and thereunder it was held that as a condition precedent to
registration of trademark, trade name or service mark, the same must have been in
actual use in the Philippines before the filing of the application for registration.18
Trademark is a creation of use and therefore actual use is a pre-requisite to
exclusive ownership and its registration with the Philippine Patent Office is a mere
administrative confirmation of the existence of such right.19

By itself, registration is not a mode of acquiring ownership. When the applicant is

not the owner of the trademark being applied for, he has no right to apply for
registration of the same. Registration merely creates a prima facie presumption of
the validity of the registration, of the registrant's ownership of the trademark and of
the exclusive right to the use thereof.20 Such presumption, just like the presumptive
regularity in the performance of official functions, is rebuttable and must give way
to evidence to the contrary.

Here, respondent's own witness, Ramon Syhunliong, testified that a jeepney

signboard artist allegedly commissioned to create the mark and logo submitted his
designs only in December 1982.21 This was two-and-a-half months after the filing
of the respondent's trademark application on October 18, 1982 with the BPTTT. It
was also only in December 1982 when the respondent's restaurant was opened for
business.22 Respondent cannot now claim before the Court that the certificate of
registration itself is proof that the two-month prior use requirement was complied
with, what with the fact that its very own witness testified otherwise in the trial
court. And because at the time (October 18, 1982) the respondent filed its
application for trademark registration of the "Shangri-La" mark and "S" logo,
respondent was not using these in the Philippines commercially, the registration is
void.

Petitioners also argue that the respondent's use of the "Shangri-La" mark and "S"
logo was in evident bad faith and cannot therefore ripen into ownership, much less
registration. While the respondent is correct in saying that a finding of bad faith is
factual, not legal,23 hence beyond the scope of a petition for review, there are,
however, noted exceptions thereto. Among these exceptions are:

1. When the inference made is manifestly mistaken, absurd or impossible;24

2. When there is grave abuse of discretion;25

3. When the judgment is based on a misapprehension of facts;26

4. When the findings of fact are conflicting;27 and

5. When the facts set forth in the petition as well as in the petitioner's main and
reply briefs are not disputed by the respondent.28

And these are naming but a few of the recognized exceptions to the rule.

The CA itself, in its Decision of May 15, 2003, found that the respondent's president
and chairman of the board, Ramon Syhunliong, had been a guest at the petitioners'
hotel before he caused the registration of the mark and logo, and surmised that he
must have copied the idea there:

Did Mr. Ramon Syhunliong, [respondent's] President copy the mark and devise from
one of [petitioners'] hotel (Kowloon Shangri-la) abroad? The mere fact that he was a
visitor of [petitioners'] hotel abroad at one time (September 27, 1982) establishes
[petitioners'] allegation that he got the idea there.29

Yet, in the very next paragraph, despite the preceding admission that the mark and
logo must have been copied, the CA tries to make it appear that the adoption of the
same mark and logo could have been coincidental:

The word or name "Shangri-la" and the S-logo, are not uncommon. The word
"Shangri-la" refers to a (a) remote beautiful imaginary place where life approaches
perfection or (b) imaginary mountain land depicted as a utopia in the novel Lost
Horizon by James Hilton. The Lost Horizon was a well-read and popular novel
written in 1976. It is not impossible that the parties, inspired by the novel, both
adopted the mark for their business to conjure [a] place of beauty and pleasure.

The S-logo is, likewise, not unusual. The devise looks like a modified Old English
print.30

To jump from a recognition of the fact that the mark and logo must have been
copied to a rationalization for the possibility that both the petitioners and the
respondent coincidentally chose the same name and logo is not only contradictory,
but also manifestly mistaken or absurd. Furthermore, the "S" logo appears nothing
like the "Old English" print that the CA makes it out to be, but is obviously a symbol
with oriental or Asian overtones. At any rate, it is ludicrous to believe that the
parties would come up with the exact same lettering for the word "Shangri-La" and
the exact same logo to boot. As correctly observed by the petitioners, to which we
are in full accord:

x x x When a trademark copycat adopts the word portion of another's trademark as

his own, there may still be some doubt that the adoption is intentional. But if he
copies not only the word but also the word's exact font and lettering style and in
addition, he copies also the logo portion of the trademark, the slightest doubt
vanishes. It is then replaced by the certainty that the adoption was deliberate,
malicious and in bad faith.31

It is truly difficult to understand why, of the millions of terms and combination of

letters and designs available, the respondent had to choose exactly the same mark
and logo as that of the petitioners, if there was no intent to take advantage of the
goodwill of petitioners' mark and logo.32

One who has imitated the trademark of another cannot bring an action for
infringement, particularly against the true owner of the mark, because he would be
coming to court with unclean hands.33 Priority is of no avail to the bad faith
plaintiff. Good faith is required in order to ensure that a second user may not merely
take advantage of the goodwill established by the true owner.

This point is further bolstered by the fact that under either Section 17 of R.A. No.
166, or Section 151 of R.A. No. 8293, or Article 6bis(3) of the Paris Convention, no
time limit is fixed for the cancellation of marks registered or used in bad faith.34
This is precisely why petitioners had filed an inter partes case before the BPTTT for
the cancellation of respondent's registration, the proceedings on which were
suspended pending resolution of the instant case.

Respondent DGCI also rebukes the next issue raised by the petitioners as being
purely factual in nature, namely, whether the CA erred in overlooking petitioners'
widespread prior use of the "Shangri-La" mark and "S" logo in their operations. The
question, however, is not whether there had been widespread prior use, which
would have been factual, but whether that prior use entitles the petitioners to use
the mark and logo in the Philippines. This is clearly a question which is legal in
nature.

It has already been established in the two courts below, and admitted by the
respondent's president himself, that petitioners had prior widespread use of the
mark and logo abroad:

There is, to be sure, an impressive mass of proof that petitioner SLIHM and its
related companies abroad used the name and logo for one purpose or another x x
x.35 [Emphasis supplied]

In respondent's own words, "[T]he Court of Appeals did note petitioners' use of the
mark and logo but held that such use did not confer to them ownership or exclusive
right to use them in the Philippines."36 To petitioners' mind, it was error for the CA
to rule that their worldwide use of the mark and logo in dispute could not have
conferred upon them any right thereto. Again, this is a legal question which is well
worth delving into.
R.A. No. 166, as amended, under which this case was heard and decided provides:

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

Section 2-A. Ownership of trademarks, trade names and service marks; how
acquired. - Anyone who lawfully produces or deals in merchandise of any kind or
who engages in any lawful business, or who renders any lawful service in
commerce, by actual use thereof in manufacture or trade, in business, and in the
service rendered, may appropriate to his exclusive use a trademark, a trade name,
or a service-mark not so appropriated by another, to distinguish his merchandise,
business or service from the merchandise, business or services of others. The
ownership or possession of a trademark, trade name, service mark, heretofore or
hereafter appropriated, as in this section provided, shall be recognized and
protected in the same manner and to the same extent as are other property rights
known to this law. [Emphasis supplied]

Admittedly, the CA was not amiss in saying that the law requires the actual use in
commerce of the said trade name and "S" logo in the Philippines. Hence, consistent
with its finding that the bulk of the petitioners' evidence shows that the alleged use
of the Shangri-La trade name was done abroad and not in the Philippines, it is
understandable for that court to rule in respondent's favor. Unfortunately, however,
what the CA failed to perceive is that there is a crucial difference between the
aforequoted Section 2 and Section 2-A of R.A. No. 166. For, while Section 2 provides
for what is registrable, Section 2-A, on the other hand, sets out how ownership is
acquired. These are two distinct concepts.

Under Section 2, in order to register a trademark, one must be the owner thereof
and must have actually used the mark in commerce in the Philippines for 2 months
prior to the application for registration. Since "ownership" of the trademark is
required for registration, Section 2-A of the same law sets out to define how one
goes about acquiring ownership thereof. Under Section 2-A, it is clear that actual use
in commerce is also the test of ownership but the provision went further by saying
that the mark must not have been so appropriated by another. Additionally, it is
significant to note that Section 2-A does not require that the actual use of a
trademark must be within the Philippines. Hence, under R.A. No. 166, as amended,
one may be an owner of a mark due to actual use thereof but not yet have the right
to register such ownership here due to failure to use it within the Philippines for
two months.

While the petitioners may not have qualified under Section 2 of R.A. No. 166 as a
registrant, neither did respondent DGCI, since the latter also failed to fulfill the 2-
month actual use requirement. What is worse, DGCI was not even the owner of the
mark. For it to have been the owner, the mark must not have been already
appropriated (i.e., used) by someone else. At the time of respondent DGCI's
registration of the mark, the same was already being used by the petitioners, albeit
abroad, of which DGCI's president was fully aware.

It is respondent's contention that since the petitioners adopted the "Shangri-La"

mark and "S" logo as a mere corporate name or as the name of their hotels, instead
of using them as a trademark or service mark, then such name and logo are not
trademarks. The two concepts of corporate name or business name and trademark
or service mark, are not mutually exclusive. It is common, indeed likely, that the
name of a corporation or business is also a trade name, trademark or service mark.
Section 38 of R.A. No. 166 defines the terms as follows:

Sec. 38. Words and terms defined and construed - In the construction of this Act,
unless the contrary is plainly apparent from the context - The term "trade name"
includes individual names and surnames, firm names, trade names, devices or
words used by manufacturers, industrialists, merchants, agriculturists, and others to
identify their business, vocations or occupations; the names or titles lawfully
adopted and used by natural or juridical persons, unions, and any manufacturing,
industrial, commercial, agricultural or other organizations engaged in trade or
commerce.

The term "trade mark" includes any word, name, symbol, emblem, sign or device or
any combination thereof adopted and used by a manufacturer or merchant to
identify his goods and distinguish them from those manufactured, sold or dealt in by
others.

The term "service mark" means a mark used in the sale or advertising of services to
identify the services of one person and distinguish them from the services of others
and includes without limitation the marks, names, symbols, titles, designations,
slogans, character names, and distinctive features of radio or other advertising.
[Emphasis supplied]

Clearly, from the broad definitions quoted above, the petitioners can be considered
as having used the "Shangri-La" name and "S" logo as a tradename and service mark.

The new Intellectual Property Code (IPC), Republic Act No. 8293, undoubtedly
shows the firm resolve of the Philippines to observe and follow the Paris Convention
by incorporating the relevant portions of the Convention such that persons who
may question a mark (that is, oppose registration, petition for the cancellation
thereof, sue for unfair competition) include persons whose internationally well-
known mark, whether or not registered, is

identical with or confusingly similar to or constitutes a translation of a mark that is

sought to be registered or is actually registered.37

However, while the Philippines was already a signatory to the Paris Convention, the
IPC only took effect on January 1, 1988, and in the absence of a retroactivity clause,
R.A. No. 166 still applies.38 Under the prevailing law and jurisprudence at the time,
the CA had not erred in ruling that:

The Paris Convention mandates that protection should be afforded to

internationally known marks as signatory to the Paris Convention, without regard
as to whether the foreign corporation is registered, licensed or doing business in the
Philippines. It goes without saying that the same runs afoul to Republic Act No. 166,
which requires the actual use in commerce in the Philippines of the subject mark or
devise. The apparent conflict between the two (2) was settled by the Supreme Court
in this wise -

"Following universal acquiescence and comity, our municipal law on trademarks

regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a
municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of
Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization,
1971 Ed., p. 20). Withal, the fact that international law has been made part of the
law of the land does not by any means imply the primacy of international law over
national law in the municipal sphere. Under the doctrine of incorporation as applied
in most countries, rules of international law are given a standing equal, not superior,
to national legislative enactments (Salonga and Yap, Public International Law,
Fourth ed., 1974, p. 16)."39 [Emphasis supplied]

Consequently, the petitioners cannot claim protection under the Paris Convention.
Nevertheless, with the double infirmity of lack of two-month prior use, as well as
bad faith in the respondent's registration of the mark, it is evident that the
petitioners cannot be guilty of infringement. It would be a great injustice to adjudge
the petitioners guilty of infringing a mark when they are actually the originator and
creator thereof.

Nor can the petitioners' separate personalities from their mother corporation be an
obstacle in the enforcement of their rights as part of the Kuok Group of Companies
and as official repository, manager and operator of the subject mark and logo.
Besides, R.A. No. 166 did not require the party seeking relief to be the owner of the
mark but "any person who believes that he is or will be damaged by the registration
of a mark or trade name."40
WHEREFORE, the instant petition is GRANTED. The assailed Decision and
Resolution of the Court of Appeals dated May 15, 2003 and September 15, 2003,
respectively, and the Decision of the Regional Trial Court of Quezon City dated
March 8, 1996 are hereby SET ASIDE. Accordingly, the complaint for infringement in
Civil Case No. Q-91-8476 is ordered DISMISSED.

SO ORDERED.

G.R. No. 179127 December 24, 2008

IN-N-OUT BURGER, INC., petitioner,

vs.
SEHWANI, INCORPORATED AND/OR BENITAS FRITES, INC., respondents.

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking to reverse the Decision1 dated 18 July 2006 rendered by the Court of
Appeals in CA-G.R. SP No. 92785, which reversed the Decision2 dated 23 December
2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No.
10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO
Director of Legal Affairs and the IPO Director General do not have jurisdiction over
cases involving unfair competition.

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

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations

organized in the Philippines.4

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

Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA)
of the IPO an administrative complaint against respondents for unfair competition
and cancellation of trademark registration. Petitioner averred in its complaint that it
is the owner of the trade name IN-N-OUT and the following trademarks: (1) "IN-N-
OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger Logo."
These trademarks are registered with the Trademark Office of the US and in various
parts of the world, are internationally well-known, and have become distinctive of
its business and goods through its long and exclusive commercial use.6 Petitioner
pointed out that its internationally well-known trademarks and the mark of the
respondents are all registered for the restaurant business and are clearly identical
and confusingly similar. Petitioner claimed that respondents are making it appear
that their goods and services are those of the petitioner, thus, misleading ordinary
and unsuspecting consumers that they are purchasing petitioners products.7

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

Petitioner was able to register the mark "Double Double" on 4 July 2002, based on
their application filed on 2 June 1997.9 It alleged that respondents also used this
mark, as well as the menu color scheme. Petitioners also averred that respondent
Benitas receipts bore the phrase, "representing IN-N-OUT Burger."10 It should be
noted that that although respondent Sehwahi, Incorporated registered a mark which
appeared as "IN N OUT (the inside of the letter "O" formed like a star)," respondents
used the mark "IN-N-OUT."11

To counter petitioners complaint, respondents filed before the BLA-IPO an Answer

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

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo,

rendered a Decision dated 22 December 2003,13 in favor of petitioner. According to
said Decision, petitioner had the legal capacity to sue in the Philippines, since its
country of origin or domicile was a member of and a signatory to the Convention of
Paris on Protection of Industrial Property. And although petitioner had never done
business in the Philippines, it was widely known in this country through the use
herein of products bearing its corporate and trade name. Petitioners marks are
internationally well-known, given the world-wide registration of the mark "IN-N-
OUT," and its numerous advertisements in various publications and in the Internet.
Moreover, the IPO had already declared in a previous inter partes case that "In-N-
Out Burger and Arrow Design" was an internationally well-known mark. Given these
circumstances, the IPO Director for Legal Affairs pronounced in her Decision that
petitioner had the right to use its tradename and mark "IN-N-OUT" in the
Philippines to the exclusion of others, including the respondents. However,
respondents used the mark "IN N OUT" in good faith and were not guilty of unfair
competition, since respondent Sehwani, Incorporated did not evince any intent to
ride upon petitioners goodwill by copying the mark "IN-N-OUT Burger" exactly. The
inside of the letter "O" in the mark used by respondents formed a star. In addition,
the simple act of respondent Sehwani, Incorporated of inquiring into the existence
of a pending application for registration of the "IN-N-OUT" mark was not deemed
fraudulent. The dispositive part of the Decision of the IPO Director for Legal Affairs
reads:

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17

December 1993 for the mark "IN-N-OUT" (the inside of the letter "O" formed like a
star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently,
respondents Sehwani, Inc. and Benitas Frites are hereby ordered to permanently
cease and desist from using the mark "IN-N-OUT" and "IN-N-OUT BURGER LOGO"
on its goods and in its business. With regards the mark "Double-Double,"
considering that as earlier discussed, the mark has been approved by this Office for
publication and that as shown by evidence, Complainant is the owner of the said
mark, Respondents are so hereby ordered to permanently cease and desist from
using the mark Double-Double. NO COSTS. 14

Both parties filed their respective Motions for Reconsideration of the

aforementioned Decision. Respondents Motion for Reconsideration15 and
petitioners Motion for Partial Reconsideration16 were denied by the IPO Director
for Legal Affairs in Resolution No. 2004-1817 dated 28 October 2004 and Resolution
No. 2005-05 dated 25 April 2005,18 respectively.

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

G.R. No. 171053

On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated

28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November
2004, respondents filed an Appeal Memorandum with IPO Director General Emma
Francisco (Director General Francisco). However, in an Order dated 7 December
2004, the appeal was dismissed by the IPO Director General for being filed beyond
the 15-day reglementary period to appeal.

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

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL

NO. 14-2004-00004 ON A MERE TECHNICALITY

THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND RESOLUTION (1)

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

Respondents thus prayed:

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

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

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents

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

Dismayed with the outcome of their petition before the Court of Appeals,
respondents raised the matter to the Supreme Court in a Petition for Review under
Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani,
Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.19
This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,20
finding that herein respondents failed to file their Appeal Memorandum before the
IPO Director General within the period prescribed by law and, consequently, they
lost their right to appeal. The Court further affirmed the Decision dated 22
December 2003 of the IPO Director of Legal Affairs holding that herein petitioner
had the legal capacity to sue for the protection of its trademarks, even though it was
not doing business in the Philippines, and ordering the cancellation of the
registration obtained by herein respondent Sehwani, Incorporated of the
internationally well-known marks of petitioner, and directing respondents to stop
using the said marks. Respondents filed a Motion for Reconsideration of the
Decision of this Court in G.R. No. 171053, but it was denied with finality in a
Resolution dated 21 January 2008.

G.R. No. 179127

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

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

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

WHEREFORE, premises considered, the [herein respondents] are held guilty of

unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is
hereby MODIFIED as follows:
[Herein Respondents] are hereby ordered to jointly and severally pay [herein
petitioner]:

1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED

SEVENTY FOUR AND 28/100(P212,574.28);

2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS

(P500,000.00);

3. Attorneys fees and expenses of litigation in the amount of FIVE HUNDRED

THOUSAND PESOS (P500,000.00).

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

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

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

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING

PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO
PAY DAMAGES AND ATTORNEYS FEES TO RESPONDENTS

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE

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

Respondents assailed before the appellate court the foregoing 23 December 2005
Decision of the IPO Director General, alleging that their use of the disputed mark
was not tainted with fraudulent intent; hence, they should not be held liable for
damages. They argued that petitioner had never entered into any transaction
involving its goods and services in the Philippines and, therefore, could not claim
that its goods and services had already been identified in the mind of the public.
Respondents added that the disputed mark was not well-known. Finally, they
maintained that petitioners complaint was already barred by laches.23
At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the
following prayer:

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

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

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

(c) after giving due course to this petition:

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

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

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

(iv) make the injunction permanent.

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

On 18 July 2006, the Court of Appeals promulgated a Decision25 in CA-G.R. SP No.

92785 reversing the Decision dated 23 December 2005 of the IPO Director General.

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

The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on

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

In the end, the Court of Appeals decreed:

WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005

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

The Court of Appeals, in a Resolution dated 31 July 2007,27 denied petitioners

Motion for Reconsideration of its aforementioned Decision.

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

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED

DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007
DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE
COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;

II

WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

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

As previously narrated herein, on 15 October 2007, during the pendency of the

present Petition, this Court already promulgated its Decision29 in G.R. No. 171053
on 15 October 2007, which affirmed the IPO Director Generals dismissal of
respondents appeal for being filed beyond the reglementary period, and left the 22
December 2003 Decision of the IPO Director for Legal Affairs, canceling the
trademark registration of respondent Sehwani, Incorporated and enjoining
respondents from using the disputed marks.

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

Formal Defects of the Petition

Respondents contend that the Verification/Certification executed by Atty. Edmund

Jason Barranda of Villaraza and Angangco, which petitioner attached to the present
Petition, is defective and should result in the dismissal of the said Petition.

Respondents point out that the Secretarys Certificate executed by Arnold M.

Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers of
Villaraza and Angangco to represent it in the present Petition and to sign the
Verification and Certification against Forum Shopping, among other acts, was not
properly notarized. The jurat of the aforementioned Secretarys Certificate reads:

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

Rachel A. Blake (Sgd.)

Notary Public30

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

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

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

A jurat is that part of an affidavit in which the notary certifies that before him/her,
the document was subscribed and sworn to by the executor. Ordinarily, the
language of the jurat should avow that the document was subscribed and sworn to
before the notary public. In contrast, an acknowledgment is the act of one who has
executed a deed in going before some competent officer or court and declaring it to
be his act or deed. It involves an extra step undertaken whereby the signor actually
declares to the notary that the executor of a document has attested to the notary
that the same is his/her own free act and deed.33 A Secretarys Certificate, as that
executed by petitioner in favor of the lawyers of the Angangco and Villaraza law
office, only requires a jurat.34

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

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

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

Forum Shopping

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

Forum shopping is the institution of two or more actions or proceedings grounded

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

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

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

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

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

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

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

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

The Jurisdiction of the IPO

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

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

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

The Court disagrees with the Court of Appeals.

Section 10 of the Intellectual Property Code specifically identifies the functions of

the Bureau of Legal Affairs, thus:

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

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

10.2 (a) Exercise original jurisdiction in administrative complaints for violations of

laws involving intellectual property rights; Provided, That its jurisdiction is limited
to complaints where the total damages claimed are not less than Two hundred
thousand pesos (P200,000): Provided, futher, That availment of the provisional
remedies may be granted in accordance with the Rules of Court. The Director of
Legal Affairs shall have the power to hold and punish for contempt all those who
disregard orders or writs issued in the course of the proceedings.
(b) After formal investigation, the Director for Legal Affairs may impose one (1) or
more of the following administrative penalties:

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

(ii) The acceptance of a voluntary assurance of compliance or discontinuance as may

be imposed. Such voluntary assurance may include one or more of the following:

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

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

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

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

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

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

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

(v) The imposition of administrative fines in such amount as deemed reasonable by

the Director of Legal Affairs, which shall in no case be less than Five thousand pesos
(P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition,
an additional fine of not more than One thousand pesos (P1,000) shall be imposed
for each day of continuing violation;

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

(viii) The assessment of damages;

(ix) Censure; and

(x) Other analogous penalties or sanctions.

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

Unquestionably, petitioners complaint, which seeks the cancellation of the disputed

mark in the name of respondent Sehwani, Incorporated, and damages for violation
of petitioners intellectual property rights, falls within the jurisdiction of the IPO
Director of Legal Affairs.

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

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

xxxx

b) Exercise exclusive appellate jurisdiction over all decisions rendered by the

Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the
Director of Documentation, Information and Technology Transfer Bureau. The
decisions of the Director General in the exercise of his appellate jurisdiction in
respect of the decisions of the Director of Patents, and the Director of Trademarks
shall be appealable to the Court of Appeals in accordance with the Rules of Court;
and those in respect of the decisions of the Director of Documentation, Information
and Technology Transfer Bureau shall be appealable to the Secretary of Trade and
Industry;

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual
Property Code, conferring upon the BLA-IPO jurisdiction over administrative
complaints for violations of intellectual property rights, is a general provision, over
which the specific provision of Section 163 of the same Code, found under Part III
thereof particularly governing trademarks, service marks, and tradenames, must
prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all
actions involving trademarks, including charges of unfair competition, are under the
exclusive jurisdiction of civil courts.
Such interpretation is not supported by the provisions of the Intellectual Property
Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair
competition, nothing in the said section states that the regular courts have sole
jurisdiction over unfair competition cases, to the exclusion of administrative bodies.
On the contrary, Sections 160 and 170, which are also found under Part III of the
Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and
the IPO over unfair competition cases. These two provisions read:

Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark

Enforcement Action.Any foreign national or juridical person who meets the
requirements of Section 3 of this Act and does not engage in business in the
Philippines may bring a civil or administrative action hereunder for opposition,
cancellation, infringement, unfair competition, or false designation of origin and
false description, whether or not it is licensed to do business in the Philippines
under existing laws.

xxxx

Section 170. Penalties.Independent of the civil and administrative sanctions

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

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

Unfair Competition

The Court will no longer touch on the issue of the validity or propriety of the 22
December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the
cancellation of the certificate of registration of respondent Sehwani, Incorporated
for the mark "IN-N-OUT" and (2) ordered respondents to permanently cease and
desist from using the disputed mark on its goods and business. Such an issue has
already been settled by this Court in its final and executory Decision dated 15
October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,44
ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That
petitioner has the superior right to own and use the "IN-N-OUT" trademarks vis--
vis respondents is a finding which this Court may no longer disturb under the
doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right,
fact, or matter in issue directly adjudicated or necessarily involved in the
determination of an action before a competent court in which judgment is rendered
on the merits is conclusively settled by the judgment therein and cannot again be
litigated between the parties and their privies whether or not the claims, demands,
purposes, or subject matters of the two actions are the same.45

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

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

In his Decision dated 23 December 2005, the IPO Director General ably explains the
basis for his finding of the existence of unfair competition in this case, viz:

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

There is no evidence that the [respondents] were authorized by the [petitioner] to

use the latters marks in the business. [Respondents] explanation that they are not
using their own registered trademark due to the difficulty in printing the "star" does
not justify the unauthorized use of the [petitioners] trademark instead.

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

[Respondents] use of IN-N-OUT BURGER in busineses signages reveals fraudulent

intent to deceive purchasers. Exhibit "GG," which shows the business establishment
of [respondents] illustrates the imitation of [petitioners] corporate name IN-N-OUT
and signage IN-N-OUT BURGER. Even the Director noticed it and held:
"We also note that In-N-Out Burger is likewise, [petitioners] corporate name. It has
used the "IN-N-OUT" Burger name in its restaurant business in Baldwin Park,
California in the United States of America since 1948. Thus it has the exclusive right
to use the tradenems "In-N-Out" Burger in the Philippines and the respondents are
unlawfully using and appropriating the same."

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

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

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

Administrative proceedings are governed by the "substantial evidence rule." A

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

With such finding, the award of damages in favor of petitioner is but proper. This is
in accordance with Section 168.4 of the Intellectual Property Code, which provides
that the remedies under Sections 156, 157 and 161 for infringement shall apply
mutatis mutandis to unfair competition. The remedies provided under Section 156
include the right to damages, to be computed in the following manner:
Section 156. Actions, and Damages and Injunction for Infringement.156.1 The
owner of a registered mark may recover damages from any person who infringes his
rights, and the measure of the damages suffered shall be either the reasonable profit
which the complaining party would have made, had the defendant not infringed his
rights, or the profit which the defendant actually made out of the infringement, or in
the event such measure of damages cannot be readily ascertained with reasonable
certainty, then the court may award as damages a reasonable percentage based
upon the amount of gross sales of the defendant or the value of the services in
connection with which the mark or trade name was used in the infringement of the
rights of the complaining party.

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

Taking into account the deliberate intent of respondents to engage in unfair

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

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

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed

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

SO ORDERED.
G.R. No. 167715 November 17, 2010

PHIL PHARMAWEALTH, INC., Petitioner,

vs.
PFIZER, INC. and PFIZER (PHIL.) INC., Respondents.

Before the Court is a petition for review on certiorari seeking to annul and set aside
the Resolutions dated January 18, 20051 and April 11, 20052 by the Court of
Appeals (CA) in CA-G.R. SP No. 82734.

The instant case arose from a Complaint3 for patent infringement filed against
petitioner Phil Pharmawealth, Inc. by respondent companies, Pfizer, Inc. and Pfizer
(Phil.), Inc., with the Bureau of Legal Affairs of the Intellectual Property Office (BLA-
IPO). The Complaint alleged as follows:

xxxx

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

7. Patent No. 21116 thus covers ampicillin sodium/sulbactam sodium (hereafter

"Sulbactam Ampicillin"). Ampicillin sodium is a specific example of the broad beta-
lactam antibiotic disclosed and claimed in the Patent. It is the compound which
efficacy is being enhanced by co-administering the same with sulbactam sodium.
Sulbactam sodium, on the other hand, is a specific compound of the formula IA
disclosed and claimed in the Patent.

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

9. Sometime in January and February 2003, complainants came to know that

respondent [herein petitioner] submitted bids for the supply of Sulbactam
Ampicillin to several hospitals without the consent of complainants and in violation
of the complainants' intellectual property rights. x x x

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

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

x x x x4

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

In an Order5 dated July 15, 2003 the BLA-IPO issued a preliminary injunction which
was effective for ninety days from petitioner's receipt of the said Order.

Prior to the expiration of the ninety-day period, respondents filed a Motion for
Extension of Writ of Preliminary Injunction6 which, however, was denied by the
BLA-IPO in an Order7 dated October 15, 2003.

Respondents filed a Motion for Reconsideration but the same was also denied by the
BLA-IPO in a Resolution8 dated January 23, 2004.

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

While the case was pending before the CA, respondents filed a Complaint9 with the
Regional Trial Court (RTC) of Makati City for infringement and unfair competition
with damages against herein petitioner. In said case, respondents prayed for the
issuance of a temporary restraining order and preliminary injunction to prevent
herein petitioner from importing, distributing, selling or offering for sale sulbactam
ampicillin products to any entity in the Philippines. Respondents asked the trial
court that, after trial, judgment be rendered awarding damages in their favor and
making the injunction permanent.
On August 24, 2004, the RTC of Makati City issued an Order10 directing the issuance
of a temporary restraining order conditioned upon respondents' filing of a bond.

In a subsequent Order11 dated April 6, 2005, the same RTC directed the issuance of
a writ of preliminary injunction "prohibiting and restraining [petitioner], its agents,
representatives and assigns from importing, distributing or selling Sulbactam
Ampicillin products to any entity in the Philippines."

Meanwhile, on November 16, 2004, petitioner filed a Motion to Dismiss12 the

petition filed with the CA on the ground of forum shopping, contending that the case
filed with the RTC has the same objective as the petition filed with the CA, which is
to obtain an injunction prohibiting petitioner from importing, distributing and
selling Sulbactam Ampicillin products.

On January 18, 2005, the CA issued its questioned Resolution13 approving the bond
posted by respondents pursuant to the Resolution issued by the appellate court on
March 23, 2004 which directed the issuance of a temporary restraining order
conditioned upon the filing of a bond. On even date, the CA issued a temporary
restraining order14 which prohibited petitioner "from importing, distributing,
selling or offering for sale Sulbactam Ampicillin products to any hospital or to any
other entity in the Philippines, or from infringing Pfizer Inc.'s Philippine Patent No.
21116 and impounding all the sales invoices and other documents evidencing sales
by [petitioner] of Sulbactam Ampicillin products."

On February 7, 2005, petitioner again filed a Motion to Dismiss15 the case for being
moot and academic, contending that respondents' patent had already lapsed. In the
same manner, petitioner also moved for the reconsideration of the temporary
restraining order issued by the CA on the same basis that the patent right sought to
be protected has been extinguished due to the lapse of the patent license and on the
ground that the CA has no jurisdiction to review the order of the BLA-IPO as said
jurisdiction is vested by law in the Office of the Director General of the IPO.

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

Hence, the present petition raising the following issues:

a) Can an injunctive relief be issued based on an action of patent infringement when

the patent allegedly infringed has already lapsed?

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

c) Is there forum shopping when a party files two actions with two seemingly
different causes of action and yet pray for the same relief?16
In the first issue raised, petitioner argues that respondents' exclusive right to
monopolize the subject matter of the patent exists only within the term of the
patent. Petitioner claims that since respondents' patent expired on July 16, 2004, the
latter no longer possess any right of monopoly and, as such, there is no more basis
for the issuance of a restraining order or injunction against petitioner insofar as the
disputed patent is concerned.

The Court agrees.

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

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

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

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

Section 3, Rule 58, of the Rules of Court lays down the requirements for the issuance
of a writ of preliminary injunction, viz:
(a) That the applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts

complained of during the litigation would probably work injustice to the applicant;
or

(c) That a party, court, or agency or a person is doing, threatening, or attempting to

do, or is procuring or suffering to be done, some act or acts probably in violation of
the rights of the applicant respecting the subject of the action or proceeding, and
tending to render the judgment ineffectual.

In this connection, pertinent portions of Section 5, Rule 58 of the same Rules

provide that if the matter is of extreme urgency and the applicant will suffer grave
injustice and irreparable injury, a temporary restraining order may be issued ex
parte.

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

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

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

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

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

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

In the first place, respondents' act of filing their complaint originally with the BLA-
IPO is already in consonance with the doctrine of primary jurisdiction.

This Court has held that:

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

Based on the foregoing, the Court finds that respondents' initial filing of their
complaint with the BLA-IPO, instead of the regular courts, is in keeping with the
doctrine of primary jurisdiction owing to the fact that the determination of the basic
issue of whether petitioner violated respondents' patent rights requires the exercise
by the IPO of sound administrative discretion which is based on the agency's special
competence, knowledge and experience.

However, the propriety of extending the life of the writ of preliminary injunction
issued by the BLA-IPO in the exercise of its quasi-judicial power is no longer a
matter that falls within the jurisdiction of the said administrative agency,
particularly that of its Director General. The resolution of this issue which was
raised before the CA does not demand the exercise by the IPO of sound
administrative discretion requiring special knowledge, experience and services in
determining technical and intricate matters of fact. It is settled that one of the
exceptions to the doctrine of primary jurisdiction is where the question involved is
purely legal and will ultimately have to be decided by the courts of justice.23 This is
the case with respect to the issue raised in the petition filed with the CA.

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

Lastly, petitioner avers that respondents are guilty of forum shopping for having
filed separate actions before the IPO and the RTC praying for the same relief.

The Court agrees.

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

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

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

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

The Court is not persuaded.

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

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

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

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

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

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

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

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

B. After hearing, issue a writ of preliminary injunction enjoining respondent, its

agents, representatives and assigns from importing, distributing, selling or offering
for sale Sulbactam Ampicillin products to the hospitals named in paragraph 9 of the
Complaint or to any other entity in the Philippines, or from otherwise infringing
Pfizer Inc.'s Philippine Patent No. 21116; and

C. After trial, render judgment:

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

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

(a) at least P1,000,000.00 as actual damages;

(b) P700,000.00 as attorney's fees and litigation expenses;

(d) P1,000,000.00 as exemplary damages; and

(d) costs of this suit.

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

(iv) making the injunction permanent.32

In an almost identical manner, respondents prayed for the following in their

complaint filed with the RTC:

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

(1) temporarily restraining Pharmawealth, its agents, representatives and assigns

from importing, distributing, selling or offering for sale infringing sulbactam
ampicillin products to various government and private hospitals or to any other
entity in the Philippines, or from otherwise infringing Pfizer Inc.'s Philippine Patent
No. 26810.

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

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

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

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

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

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

(c) After trial, render judgment:

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

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

(i) at least P3,000,000.00 as actual damages;

(ii) P500,000.00 as attorney's fees and P1,000,000.00 as litigation expenses;

(iii) P3,000,000.00 as exemplary damages; and

(iv) costs of this suit.

(3) ordering the condemnation, seizure or forfeiture of Pharmawealth's infringing

goods or products, wherever they may be found, including the materials and
implements used in the commission of infringement, to be disposed of in such
manner as may be deemed appropriate by this Honorable Court; and

(4) making the injunction permanent.33

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

It bears to reiterate that what is truly important to consider in determining whether

forum shopping exists or not is the vexation caused the courts and parties-litigant
by a party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or to grant the same or substantially the same reliefs, in
the process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issue.341avvphi1

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

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

WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of the

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

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

SO ORDERED.

G.R. No. 174379

E.I DUPONT DE NEMOURS AND CO., (assignee of inventors Carino, Duncia and
Wong), Petitioner
vs.
DIRECTOR EMMA C. FRANCISCO (in ger capacity as DIRECTOR GENERAL OF
THE INTELLECTUAL PROPERTY OFFICE), DIRECTOR EPIFANIO M. VELASCO (in
his capacity as the DIRECTOR OF THE BUREAU OF PATENTS, and
THERAPHARMA, INC., Respondents

A patent is granted to provide rights and protection to the inventor after an

invention is disclosed to the public. It also seeks to restrain and prevent
unauthorized persons from unjustly profiting from a protected invention. However,
ideas not covered by a patent are free for the public to use and exploit. Thus, there
are procedural rules on the application and grant of patents established to protect
against any infringement. To balance the public interests involved, failure to comply
with strict procedural rules will result in the failure to obtain a patent.

This resolves a Petition for Review on Certiorari 1 assailing the Court of Appeals
Amended Decision2 dated August 30, 2006, which denied the revival of Philippine
Patent Application No. 35526, and the Court of Appeals Resolution3 dated January
31, 2006, which granted the intervention of Therapharma, Inc. in the revival
proceedings.

E.I. Dupont Nemours and Company (E.I. Dupont Nemours) is an American

corporation organized under the laws of the State of Delaware. 4 It is the assignee of
inv~ntors David John Carini, John Jonas Vytautas Duncia, and Pancras Chor Bun
Wong, all citizens of the United States of America.5

On July 10, 1987, E.I. Dupont Nemours filed Philippine Patent Application No. 35526
before the Bureau of Patents, Trademarks, and Technology Transfer.6 The
application was for Angiotensin II Receptor Blocking Imidazole (losartan), an
invention related to the treatment of hypertension and congestive heart failure.7
The product was produced and marketed by Merck, Sharpe, and Dohme Corporation
(Merck), E.I. Dupont Nemours' licensee, under the brand names Cozaar and
Hyzaar.8
The patent application was handled by Atty. Nicanor D. Mapili (Atty. Mapili), a local
resident agent who handled a majority of E.I. Dupont Nemours' patent applications
in the Philippines from 1972 to 1996.9

On December 19, 2000, E.I. Dupont Nemours' new counsel, Ortega, Del Castillo,
Bacorro, Odulio, Calma, and Carbonell,10 sent the Intellectual Property Office11 a
letter requesting that an office action be issued on Philippine Patent Application No.
35526. 12

In response, Patent Examiner Precila O. Bulihan of Intellectual Property Office sent

an office action marked Paper No. 2 on January 30, 2002,13 which stated:

The appointed attorney on record was the late Atty. Nicanor D. Mapili. The
reconstituted documents provided no documents that will show that the authority
to prosecute the instant application is now transferred to the present counsel. No
official revocation on record is available.

Therefore, an official revocation of the Power of Attorney of the former counsel and
the appointment of the present by the applicant is therefore required before further
action can be undertaken.

....

1. Contrary to what was alleged, the Chemical Examining Division's (CED) record
will show that as far as the said division is concern[ ed], it did not fail to issue the
proper and timely action on the instant application. CED record shows that the
subject application was assigned to the examiner on June 7, 1988. A month after that
was July 19, 1988, the first Office Action was mailed but was declared abandoned as
of September 20, 1988 for applicant's failure to respond within the period as
prescribed under Rule 112. Since then, no other official transactions were recorded.
Tlris record is complemented by the Examiner-in-charge's own record ....

....

2. It was noted that it took thirteen (13) long years for the applicant to request for
such Office Action. This is not expected of the applicant since it is an acceptable fact
that almost all inventors/ applicants wish for the early disposition for their
applications.14

On May 29, 2002, E.I. Dupont Nemours replied to the office action by submitting a
Power of Attorney executed by Miriam Meconnahey, authorizing Ortega, Castillo,
Del Castillo, Bacorro, Odulio, Calma, and Carbonell to prosecute and handle its
patent applications. 15 On the same day, it also filed a Petition for Revival with Cost
of Philippine Patent Application No. 35526. 16
In its Petition for Revival, E.I. Dupont Nemours argued that its former counsel, Atty.
Mapili, did not inform it about the abandonment of the application, and it was not
aware that Atty. Mapili had already died. 17 It argued that it discovered Atty.
Mapili's death when its senior-level patent attorney visited the Philippines in 1996.
18 It argued that it only had actual notice of the abandonment on January 30, 2002,
the date of Paper No. 2. 19 Thus, it argued that its Petition for Revival was properly
filed under Section 113 of the 1962 Revised Rules of Practice before the Philippines
Patent Office in Patent Cases (1962 Revised Rules of Practice).20

On April 18, 2002, the Director of Patents denied the Petition for Revival for having
been filed out of time.21 The Resolution22 stated:

Propriety dictates that the well-settled rule on agency should be applied to this case
to maintain the objectivity and discipline of the Office. Therefore, for cases such as
the instant case, let the Office maintain its position that mistakes of the counsel bind
the client,' regardless of the degree of negligence committed by the former counsel.
Although it appears that the former counsel, Atty. Nicanor Mapili was remiss in his
obligations as counsel for the applicants, the Office cannot revive the abandoned
application because of the limitations provided in Rule 115. Clearly, the Petition for
Revival was filed beyond the reglementary period. Since the law and rules do not
give the Director of Patents the discretion to stretch the period for revival, the Office
is constrained to apply Rule 115 to the instant case.

In view of the foregoing considerations, applicants' petition to revive the subject

application is hereby denied.

SO ORDERED.23

E.I. Dupont Nemours appealed the denial to the Director-General of the Intellectual
Property Office on August 26, 2002.24 In the Decision25 dated October 22, 2003,
Director-General Emma C. Francisco denied the appeal and affirmed the Resolution
of the Director of Patents.

On November 21, 2003, petitioner filed before the Court of Appeals a Petition for
Review seeking to set aside the Intellectual Property Office's Decision dated October
22, 2003. 26

On August 31, 2004, the Court of Appeals granted the Petition for Review. 27 In
allowing the Petition for Revival, the Court of Appeals stated:

After an exhaustive examination of the records of this case, this Court believes that
there is sufficient justification to relax the application of the above-cited doctrine in
this case, and to afford petitioner some relief from the gross negligence committed
by its former lawyer, Atty. Nicanor D. Mapili[.]28
The Office of the Solicitor General, on behalf of the Intellectual Property Office,
moved for reconsideration of this Decision on September 22, 2004. 29

In the interim, Therapharma, Inc. moved for leave to intervene and admit the
Attached Motion for Reconsideration dated October 11, 200430 and argued that the
Court of Appeals' August 31, 2004 Decision directly affects its "vested" rights to sell
its own product. 31

Therapharma, Inc. alleged that on January 4, 2003, it filed before the Bureau of Food
and Drugs its own application for a losartan product "Lifezar," a medication for
hypertension, which the Bureau granted.32 It argued that it made a search of
existing patent applications for similar products before its application, and that no
existing patent registration was found since E.I. Dupont Nemours' application for its
losartan product was considered abandoned by the Bureau of Patents, Trademarks,
and Technology Transfer.33 It alleged that sometime in 2003 to 2004, there was an
exchange of correspondence between Therapharma, Inc. and Merck. In this
exchange, Merck informed Therapharma, Inc. that it was pursuing a patent on the
losartan products in the Philippines and that it would pursue any legal action
necessary to protect its product.34

On January 31, 2006, the Court of Appeals issued the Resolution35 granting the
Motion for Leave to Intervene. According to the Court of Appeals, Therapharma, Inc.
had an interest in the revival of E.I. Dupont Nemours' patent application since it was
the local competitor for the losartan product. 36 It stated hat even if the Petition for
Review was premised on the revival of the patent application, Therapharma, Inc.' s
intervention was not premature since E.I. Dupont Nemours, through Merck, already
threatened Therapharma, Inc. with legal action if it continued to market its losartan
product.37

E.I. Dupont Nemours moved for reconsideration on February 22, 2006, assailing the
Court of Appeals' January 31, 2006 Resolution.38

On August 30,. 2006, the Court of Appeals resolved both Motions for
Reconsideration and rendered the Amended Decision39 reversing its August 31,
2004 Decision.

The Court of Appeals ruled that the public interest would be prejudiced by the
revival of E.I. Dupont Nemours' application.40 It found that losartan was used to
treat hypertension, "a chronic ailment afflicting an estimated 12.6 million
Filipinos,"41 and noted that the presence of competition lowered the price for
losartan products. 42 It also found that the revival of the application prejudiced
Therapharma, Inc.' s interest, in that it had already invested more than
P20,000,000.00 to develop its own losartan product and that it acted in good faith
when it marketed its product.43
The Court of Appeals likewise found that it erroneously based its August 31, 2004
Decision on E.I Dupont Nemours' allegation that it took seven (7) to 13 years for the
Intellectual Property Office to act on a patent application. 44 It stated that while it
might have taken that long to issue the patent, it did not take that long for the
Intellectual Property Office to act on application.45 Citing Schuartz v. Court of
Appeals,46 it found that both E.I. Dupont Nemours and Atty. Mapili were
inexcusably negligent in

prosecuting the patent application.47

On October 19, 2006, petitioner E.I. Dupont Nemours filed before this Court this
Petition for Review on Certiorari.48 Both respondents Intellectual Property Office
and Therapharma, Inc. were directed to comment on the comment on the
Petition.49 Upon submission of their respective Comments,50 petitioner was
directed to file its Consolidated Reply. 51 Thereafter, the parties were directed to
file their respective memoranda. 52

The arguments of the parties present several issues for this Court's resolution, as
follows:

First, whether the Petition for Review on Certiorari complied with Rule 45, Section 4
of the Rules of Court when petitioner failed to attach certain documents to support
the allegations in the complaint;

Second, whether petitioner should have filed a petition for certiorari under Rule 65
of the Rules of Court;

Third, whether the Petition for Review on Certiorari raises questions of fact;

Fourth, whether the Court of Appeals erred in allowing the intervention of

respondent Therapharma, Inc. in petitioner's appeal;

Fifth, whether the Court of Appeals erred in denying petitioner's appeal for the
revival of its patent application on the grounds that (a) petitioner committed
inexcusable negligence in the prosecution of its patent application; and (b) third-
party rights and the public interest would be prejudiced by the appeal;

Sixth, whether Schuartz applies to this case in that the negligence of a patent
applicant's counsel binds the applicant; and

Lastly, whether the invention has already become part of public domain.

The question of whether the Court of Appeals may resolve a motion for intervention
is a question that assails an interlocutory order and requests a review of a lower
court's exercise of discretion. Generally, a petition for certiorari under Rule 65 of the
Rules of Court will lie to raise this issue in a limited manner. There must be a clear
showing of grave abuse of discretion for writ of certiorari to be issued.

However, when the Court of Appeals has already resolved the question of
intervention and the merits of the case, an appeal through a petition for review on
certiorari under Rule 45 of the Rules of Court is the proper remedy.

Respondent Therapharma, Inc. argues that the Petition should be dismissed outright
for being the wrong mode of appeal.53 It argues that petitioner should have filed a
petition for certiorari under Rule 65 since petitioner was assailing an act done by
the Court of Appeals in the exercise of its discretion. 54 It argues that petitions
under Rule 45 are limited to questions of law, and petitioner raised findings of fact
that have already been affirmed by the Court of Appeals. 55 Petitioner, on the other
hand, argues that Rule 65 is only available when there is no appeal or any plain,
speedy remedy in the ordinary course of law. Since a petition for review under Rule
45 was still available to it, it argues that it correctly availed itself of this remedy. 56
Petitioner also argues that there are exceptions to the general rule on the
conclusiveness of the Court of Appeals' findings of fact. 57 It argues that it was
necessary for it to discuss relevant facts in order for it to show that the Court of
Appeals made a misapprehension of facts. 58

The special civil action of certiorari under Rule 65 is intended to correct errors of
jurisdiction. 59 Courts lose competence in relation to an order if it acts in grave
abuse of discretion amounting to lack or excess of jurisdiction.60 A petition for
review under Rule 45, on the other hand, is a mode of appeal intended to correct
errors of judgment.61 Errors of judgment are errors committed by a court within its
jurisdiction.62 This includes a review of the conclusions of law63 of the lower court
and, in appropriate cases, evaluation of the admissibility, weight, and inference from
the evidence presented.

Intervention results in an interlocutory order ancillary to a principal action.64 Its

grant or denial is subject to the sound discretion of the court.65 Interlocutory
orders, or orders that do not make a final disposition of the merits of the main
controversy or cause of action,66 are generally not reviewable.67 The only
exception is a limited one, in that when there is no plain, speedy, and adequate
remedy, and where it can be shown that the court acted without, in excess, or with
such grave abuse of discretion that such action ousts it of jurisdiction.

Judicial economy, or the goal to have cases prosecuted with the least cost to the
parties,68 requires that unnecessary or frivolous reviews of orders by the trial
court, which facilitate the resolution of the main merits of the case, be reviewed
together with the main merits of the case. After all, it would be more efficient for an
appellate court to review a case in its entire context when the case is finally
disposed.
The question of whether intervention is proper is a question of law. Settled is the
distinction between a question of law and a question of fact. A question of fact arises
when there is doubt as to the truth or falsity of certain facts.69 A question of law, on
the other hand, arises when "the appeal raises doubt as to the applicable law on a
certain set of facts." 70 The test often used by this Court to determine whether there
is a question of fact or a question of law "is not the appellation given to such
question by the party raising the same; rather, it is whether the appellate court can
determine the issue raised without reviewing or evaluating the evidence, in which
case, it is a question of law; otherwise it is a question of fact."71

Petitioner raises the question of whether Republic Act No. 165 allows the Court of
Appeals to grant a motion for intervention. This necessarily requires a
determination of whether Rule 19 of the Rules of Court 72 applies in appeals of
cases filed under Republic Act No. 165. The determination of this question does not
require a review of re-evaluation of the evidence. It requires a determination of the
applicable law.

II

If a petition fails to attach material portions of the record, it may still be given due
course if it falls under certain exceptions. Although Rule 45, Section 4 of the Rules of
Court requires that the petition "be accompanied by ... such material portions of the
record as would support the petition," the failure to do so will not necessarily
warrant the outright dismissal of the complaint. 73

Respondent Therapharma, Inc. argues that the Petition should have been outright
dismissed since it failed to attach certain documents to support its factual
allegations and legal arguments, particularly: the annexes of the Petition for Review
it had filed before the Court of Appeals and the annexes in the Motion for Leave to
Intervene it had filed. 74 It argues that petitioner's failure to attach the documents
violates Rule 45, Section 4, which requires the submission of material portions of
the record. 75

On the other hand, petitioner argues that it was able to attach the Court of Appeals
Decision dated August 31, 2004, the Resolution dated January 31, 2006, and the
Amended Decision dated August 30, 2006, all of which were sufficient for this Court
to give due course to its Petition. 76

In Magsino v. De Ocampo, 77 this Court applied the procedural guideposts in Galvez

v. Court of Appeals 78 in determining whether the Court of Appeals correctly
dismissed a petition for review under Rule 42 for failure to attach relevant portions
of the record. Thus:

In Galvez v. Court of Appeals, a case that involved the dismissal of a petition for
certiorari to assail an unfavorable ruling brought about by the failure to attach
copies of all pleadings submitted and other material portions of the record in the
trial court (like the complaint, answer and position paper) as would support the
allegations of the petition, the Court recognized three guideposts for the CA to
consider in determining whether or not the rules of procedures should be relaxed,
as follows:

First, not all pleadings and parts of case records are required to be attached to the
petition. Only those which are relevant and pertinent must accompany it. The test of
relevancy is whether the document in question will support the material allegations
in the petition, whether said document will make out a prima facie case of grave
abuse of discretion as to convince the court to give due course to the petition.

Second, even if a document is relevant and pertinent to the petition, it need not be
appended if it is shown that the contents thereof can also [sic] found in another
document already attached to the petition. Thus, if the material allegations in a
position paper are summarized in a questioned judgment, it will suffice that only a
certified true copy of the judgment is attached.

Third, a petition lacking an essential pleading or part of the case record may still be
given due course or reinstated (if earlier dismissed) upon showing that petitioner
later submitted the documents required, or that it will serve the higher interest of
justice that the case be decided on the merits.79

Although Magsino referred to a petition for review under Rule 42 before the Court
of Appeals, the procedural guideposts cited in Mafilsino may apply to this case since
the contents of a pleading under Rule 4280 are substantially the same as the
contents of a pleading under Rule 45,81 in that both procedural rules require the
submission of "material portions of the record as would support the allegations of
the petition."82

In support of its Petition for Review on Certiorari, petitioner attached the Court of
Appeals Decision dated August 31, 2004, 83 the Resolution dated January 31,
2006,84 and the Amended Decision dated August 30, 2006.85 The Court of Appeals
Resolution and Amended Decision quoted extensive portions of its rollo in support
of its rulings. 86 These conclusions were sufficient to convince this Court not to
outright dismiss the Petition but to require respondents to first comment on the
Petition, in satisfaction of the first and second procedural guideposts in Magsino.

Upon filing of its Consolidated Reply,87 petitioner was able to attach the following
additional documents:

(1) Petition for Review filed before the Court of Appeals;88

(2) Letters dated July 18, 1995, December 12, 1995, and December 29, 1995;89

(3) Declaration of Ms. Miriam Meconnahey dated June 25, 2002;90

(4) Spreadsheet of petitioner's patent applications handled by Atty. Mapili;91

(5) Power of Attorney and Appointment of Resident Agent dated September 26,
1996;92

(6) Letter dated December 19, 2000 requesting an Office Action on Patent
Application No. 35526;93

(7) Paper No. 2 dated January 30, 2002;94

(8) Petition for Revival dated January 30, 2002 with attached Power of Attorney and
Appointment of Resident Agent;95

(9) Resolution dated July 24, 2002 by Director of the Bureau of Patents;96 and

(10) Notice of and Memorandum on Appeal before the DirectorGeneral of the

Intellectual Property Office.97

The third procedural guidepost in Magsino was complied with upon the submission
of these documents. Petitioner, therefore, has substantially complied with Rule 45,
Section 4 of the Rules of Court.

III

Appeal is not a right but a mere privilege granted by statute.98 It may only be
exercised in accordance with the law that grants it.

Accordingly, the Court of Appeals is not bound by the rules of procedure in

administrative agencies. The procedural rules of an administrative agency only
govern proceedings within the agency. Once the Court of Appeals has given due
course to an appeal from a ruling of an administrative agency, the proceedings
before it are governed by the Rules of Court.

However, petitioner argues that intervention should not have been allowed on
appeal99 since the revival of a patent application is ex parte and is "strictly a contest
between the examiner and the applicant"100 under Sections 78101 and 79102 of
the 1962 Revised Rules of Practice. 103 It argues that the disallowance of any
intervention is to ensure the confidentiality of the proceedings under Sections 13
and 14 of the 1962 Revised Rules of Practice. 104

Respondents argue that the 1962 Revised Rules of Practice is only applicable before
the Intellectual Property Office. 105 In particular, respondent Therapharma, Inc.
argues that the issue before the Court of Appeals was beyond the realm of patent
examination proceedings since it did not involve the patentability of petitioner's
invention. 106 It further argues that its intervention did not violate the
confidentiality of the patent application proceedings since petitioner was not
required to divulge confidential information regarding its patent application. 107

In the 1962 Revised Rules of Practice, final decisions of the Director of Patents are
appealed to this Court and governed by Republic Act No. 165. In particular:

PARTX
PETITION AND APPEALS

....

CHAPTER IV
APPEALS TO THE SUPREME COURT FROM FINAL ORDERS OR
DECISIONS OF THE DIRECTOR OF PATENTS IN EX PARTE AND
INTER PARTES PROCEEDINGS

265. Appeals to the Supreme Court in ex parte and inter partes proceedings.-Any
person who is dissatisfied with the final decision of the Director of Patents,
(affirming that of a Principal Examiner) denying him a patent for an invention,
industrial design or utility model; any person who is dissatisfied with any final
decision of the Director of Patents (affirming that of the Executive Examiner) in any
proceeding; and any party who is dissatisfied with any final decision of the Director
of Patents in an inter partes proceeding, may appeal such final decision to the
Supreme Court within thirty days from the date he receives a copy of such decision.
(Republic Act No. 165, section 16, as amended by section 3, Republic Act No. 864.)

266. Procedure on appeal to the Supreme Court.-For the procedure on appeal to the
Supreme Court, from the final decisions of the Director of Patents, see sections 63 to
73, inclusive, of Republic Act No. 165 (patent law).

Particularly instructive is Section 73 of Republic Act No. 165, which provides:

Section 73. Rules of Court applicable. - In all other matters not herein provided, the
applicable provisions of the Rules of Court shall govern.

Republic Act No. 165 has since been amended by Republic Act No. 8293, otherwise
known as the Intellectual Property Code of the Philippines (Intellectual Property
Code), in 1997. This is the applicable law with regard to the revival of petitioner's
patent application. Section 7 (7.1 )(a) of the Intellectual Property Code states:

SECTION 7. The Director General and Deputies Director General. -

7 .1. Functions. - The Director General shall exercise the following powers and
functions:

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

Thus, it is the Rules of Court, not the 1962 Revised Rules of Practice, which governs
the Court of Appeals' proceedings in appeals from the decisions of the Director-
General of the Intellectual Property Office regarding the revival of patent
applications.

Rule 19 of the Rules of Court provides that a court has the discretion to determine
whether to give due course to an intervention. Rule 19, Section 1 states:

RULE 19
INTERVENTION

SECTION 1. Who may intervene. -A person who has a legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both, or is
so situated as to be adversely affected by a distribution or other disposition of
property in the custody of the court or of an officer thereof may, with leave of court,
be allowed to intervene in the action. The court shall consider whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenor's rights may be fully protected in
a separate proceeding.

The only questions the court need to consider in a motion to intervene are whether
the intervenor has standing to intervene, whether the motion will / unduly delay the
proceedings or prejudice rights already established, and whether the intervenor's
rights may be protected in a separate action.108

If an administrative agency's procedural rules expressly prohibit an intervention by

third parties, the prohibition is limited only to the proceedings before the
administrative agency. Once the matter is brought before the Court of Appeals in a
petition for review, any prior prohibition on intervention does not apply since the
only question to be determined is whether the intervenor has established a right to
intervene under the Rules of Court.

In this case, respondent Therapharma, Inc. filed its Motion for Leave to Intervene
109 before the Court of Appeals, not before the Intellectual Property Office. In
assessing whether to grant the intervention, the Court of Appeals considered
respondent Therapharma, Inc.' s legal interest in the case and its other options for
the protection of its interests. 110 This was within the discretion of the Court of
Appeals under the Rules of Court.

Respondent Therapharma, Inc. was able to show that it had legal interest to
intervene in the appeal of petitioner's revival of its patent application. While its
intervention may have been premature as no patent has been granted yet,
petitioner's own actions gave rise to respondent Therapharma, Inc.' s right to
protect its losartan product.

Respondent Therapharma, Inc. filed an application for product registration before

the Bureau of Food and Drugs on June 4, 2003 and was granted a Certificate of
Product Registration on January 27, 2004. 111 It conducted patent searches from
October 15, 1995 and found that no patent application for losartan had been filed
either before the Bureau of Patents, Trademarks, and Technology Transfer or before
the Intellectual Property Office.112

As early as December 11, 2003, petitioner through Merck was already sending
communications threatening legal action if respondent Therapharma, Inc. continued
to develop and market losartan in the Philippines. The letter stated:

Merck is strongly committed to the protection of its valuable intellectual property

rights, including the subject losartan patents. While fair competition by sale of
pharmaceutical products which are domestically produced legally is always
welcomed by Merck and MSD Philippines, Merck will vigorously pursue all available
legal remedies against any unauthorized manufacturer, distributor or supplier of
losartan in countries where its patents are in force and where such activity is
prohibited by law. Thus, Merck is committed to preventing the distribution of
losartan in the Philippines if it originates from, or travels through, a country in
which Merck holds patent rights. 113 (Emphasis supplied)

This letter was presented before the Court of Appeals, which eventually granted the
revival of the patent application in its August 31, 2004 Decision. Petitioner had no
pending patent application for its losartan product when it threatened respondent
Therapharma, Inc. with legal action.114

Respondent Therapharma, Inc. expressed its willingness to enter into a Non-Use and
Confidentiality Contract if there was a pending patent application. 115 After several
negotiations on the clauses of the contract, 116 the parties were unable to come to
an agreement. In its letter dated May 24, 2004, 117 respondent Therapharma, Inc.
expressed its frustration on petitioner's refusal to give a clear answer on whether it
had a pending patent application:

For easy reference, we have reproduced below paragraph 5 of the Confidentiality

and Non-Use Agreement ("Confidentiality Agreement"), underscoring your
proposed amendment:
"THERAPHARMA agrees that upon receipt of Specifications and Claims of
Application No. 35526 or at any time thereafter, before it becomes part of the public
domain, through no fault of THERAPHARMA, it will not, either directly or indirectly,
alone, or through, on behalf of, or in conjunction with any other person or entity,
make use of any information contained therein, particularly the product covered by
its claims and the equivalents thereof, in any manner whatsoever."

We find your proposed insertion odd. What may be confidential, and which we
agree you have every right to protect by way of the Confidentiality Agreement, are
the Specifications and Claims in the patent application, not the product per se. The
product has been in the market for years. Hence, how can it be confidential? Or is
the ambiguity intended to create a legal handle because you have no cause of action
against us should we launch our own version of the losartan product?

....

Finally, the questions we posed in our previous letters are plain and simple - Is the
Philippine Patent Application No. 35526 still pending before the IPO, i.e., it has
neither been withdrawn by your licensor nor denied registration by the IPO for any
reason whatsoever? When did your licensor file said application with the IPO?
These questions are easy to answer, unless there is an intention to mislead. You are
also

aware that the IPO is the only government agency that can grant letters patent. This
is why we find disturbing your statement that the pendency of the patent
application before the IPO is "not relevant". Hence, unless we receive unequivocal
answers to the questions above, we regret that we cannot agree to execute the
Confidentiality Agreement; otherwise, we may be acknowledging by contract a right
that you do not have, and never will have, by law. 118 (Emphasis and underscoring
in the original)

The threat of legal action against respondent Therapharma, Inc. was real and
imminent. If respondent Therapharma, Inc. waited until petitioner was granted a
patent application so it could file a petition for compulsory licensing and petition for
cancellation of patent under Section 240119 and Section 247 120 of the 1962
Revised Rules of Practice, 121 its continued marketing of Lifezar would be
considered as an infringement of petitioner's patent.

Even assuming that the Intellectual Property Office granted the revival of Philippine
Patent Application No. 35526 back in 2000, petitioner's claim of absolute
confidentiality in patent proceedings is inaccurate.

In the 1962 Revised Rules of Practice, the Bureau of Patents, Trademarks, and
Technology Transfer previously required secrecy in pending patent applications.
Section 13 states:
13. Pending applications are preserved in secrecy.-No information will be given to
anyone respecting the filing by any particular person of any application for a patent,
the pendency of any particular case before the Office, or the subject matter of any
particular application, unless the same is authorized by the applicant in writing, and
unless it shall be necessary, in the opinion of the Director of Patents for the proper
conduct of business before the Office.

The Intellectual Property Code, however, changed numerous aspects of the old
patent law. The Intellectual Property Code was enacted not only to amend certain
provisions of existing laws on trademark, patent, and copyright, but also to honor
the country's commitments under the World Trade Organization - Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), a treaty
that entered force in the Philippines on January 1, 1995.122

The mandatory disclosure requirement in the TRIPS Agreement123 precipitated the

shift from a first-to-invent system to a first-to-file system. The first-to-file system
required citizens of foreign countries to register their patents in the Philippines
before they can sue for infringement. 124

Lawmakers, however, expressed their concern over the extension of the period of
protection for registered patents. 125 Under Section 21 126 of Republic Act No. 165,
a patent had a term of 17 years. The Intellectual Property Code extended the period
to 20 years. 127

During the interpellations before the House of Representatives, then Representative

Neptali Gonzales II (Gonzales) explained that under the Intellectual Property Code,
the period of protection would have been shortened because of the publication
requirement:

MR. TANADA. Under the proposed measure, Your Honor, what is the period of
protection that is given to the holder of the patent registered?

MR. GONZALES. Seventeen years from grant of patent, Mr. Speaker. Unlike before ...

MR. TANADA. Under the present law, Mr. Speaker.

MR. GONZALES. I mean 17 years from filing, Mr. Speaker, unlike before which is 20
years from grant. Okay.

I am sorry, Mr. Speaker. Seventeen years from filing under the existing law, 20 years
from grant under the proposed measure. It would appear, Mr. Speaker, that the
proposed measure seeks to extend the grant of the patent.

MR. TA.NADA. But you have made the period of protection longer, Mr. Speaker.
MR. GONZALES. On the contrary, Mr. Speaker, when a similar question was
previously propounded before, actually Mr. Speaker, it may decrease in fact the
period of protection, Mr. Speaker. Because unlike before 17 years from grant, Mr.
Speaker, now 20 years from application or from filing but actually, Mr. Speaker, it
normally takes three to four years before a patent is actually granted even under the
proposed measure. Because as you can see[,] publication in the BPTTT Gazette
would even taken place after 18 months from filing. In other words, the procedure
itself is such a manner that normally takes a period of about three years to finally
grant the patent. So even if 20 years is given from the time of filing actually in
essence it will be the same, Mr. Speaker, because under the existing law 17 years
from grant. But even under our existing law from the time that a patent application
is filed it also takes about three to four years, Mr. Speaker, to grant the same.

Now, why from filing, Mr. Speaker? Because the patent holder applicant is now
required to publish in a manner easily understood by a person trained or with the
same skill as that of a patent holder. And from that time this is published, this
process covered by the patent is already made available. In fact, from the time that it
is published, any interested person may even examine and go over the records as
filed with the BPTTT and, therefore, this new technology or new invention is now
made available to persons equipped or possessed with the same skills as that of the
patent holder. And that is the reason why the patent is - the time of the patent is
now tacked from the time it is filed because as a compromise it is now mandatory to
publish the said patent together with its description - the description of the process
and even would, at times demand the deposit of sample of the industrial design, Mr.
Speaker. 128

Gonzales further clarified that the publication requirements of the Intellectual

Property Code would necessarily shorten the period for confidentiality of patent
applications:

MR. MONFORT. Now, another question is, (another is) you know, the time from the
filing of the date up to publication which is the period of pendency or
confidentiality, may I know how many years will it take, that confidentiality period,
variability.

MR. GONZALES. Eighteen months, Mr. Speaker.

MR. MONFORT. How many?

MR. GONZALES. Eighteen months.

MR. MONFORT. I do not think it is 18 months.

MR. GONZALES. It is provided for in the law, Mr. Speaker, because prior to the
publication, naturally, the records become confidential because the essence of a
patent, trademark, or copyright is to give the author or the inventor exclusive right
to work on his own invention. And that is his invention, and naturally, it is but right
that he should have the exclusive right over his invention.

On the other hand, the law requires that after 18 months, it should now be
published. When it is now published, naturally, it ceases to be confidential in
character because it is now ready for examination. It is now ready for possible
copying of any interested person because the application, as we have repeatedly
said on the floor, would require the filing of a description of the invention that can
be carried out by a Eerson similarly trained in the arts and sciences as that of the
patent holder.129

Thus, the absolute secrecy required by the 1962 Revised Rules of Practice would not
be applicable to a patent application before the Intellectual Property Office. Section
13 of the 1962 Revised Rules of Practice does not appear in the Intellectual Property
Code, 130 in the Rules and Regulations on Inventions, 131 or in the Revised
Implementing Rules and Regulations for Patents, Utility Models and Industrial
Design. 132 The Intellectual Property Code now states that all patent applications
must be published in the Intellectual Property Office Gazette and that any interested
party may inspect all documents submitted to the Intellectual Property Office. The
patent application is only confidential before its publication. Sections 44 and 45 of
the Intellectual Property Code provide:

SECTION 44. Publication of Patent Application. -

44.1. The patent application shall be published in the IPO Gazette together with a
search document established by or on behalf of the Office citing any documents that
reflect prior art, after the expiration of eighteen (18) months from the filing date or
priority date.

44.2. After publication of a patent application, any interested party may inspect the
application documents filed with the Office.

44.3. The Director General, subject to the approval of the Secretary of Trade and
Industry, may prohibit or restrict the publication of an application, if in his opinion,
to do so would be prejudicial to the national security and interests of the Republic of
the Philippines. (n)

SECTION 45. Confidentiality Before Publication. -A patent application, which has not
yet been published, and all related documents, shall not be made available for
inspection without the consent of the applicant.

It was inaccurate, therefore, for petitioner to argue that secrecy in patent

applications prevents any intervention from interested parties. The confidentiality
in patent applications under the Intellectual Property Code is not absolute since a
party may already intervene after the publication of application.
IV

An abandoned patent application may only be revived within four (4) months from
the date of abandonment. No extension of this period is provided by the 1962
Revised Rules of Practice. Section 113 states:

113. Revival of abandoned application.-An application abandoned for failure to

prosecute may be revived as a pending application if it is shown to the satisfaction
of the Director that the delay was unavoidable. An abandoned application may be
revived as a pending application within four months from the date of abandonment
upon good cause shown and upon the payment of the required fee of 25. An
application not revived within the specified period shall be deemed forfeited.

Petitioner argues that it was not negligent in the prosecution of its patent
application133 since it was Atty. Mapili or his heirs who failed to inform it of crucial
developments with regard to its patent application. 134 It argues that as a client in a
foreign country, it does not have immediate supervision over its local counsel so it
should not be bound by its counsel's negligence. 135 In any case, it complied with all
the requirements for the revival of an abandoned application under Rule 113 of the
1962 Revised Rules of Practice. 136

Respondents, on the other hand, argue that petitioner was inexcusably and grossly
negligent in the prosecution of its patent application since it allowed eight (8) years
to pass before asking for a status update on its application. 137 Respondent
Intellectual Property Office argues that petitioner's inaction for eight (8) years
constitutes actual abandonment. 138 It also points out that from the time petitioner
submitted its new Special Power of Attorney on September 29, 1996, it took them
another four (4) years to request a status update on its application. 139

Under Chapter VII, Section 1 ll(a) of the 1962 Revised Rules of Practice, a patent
application is deemed abandoned if the applicant fails to prosecute the application
within four months from the date of the mailing of J the notice of the last action by
the Bureau of Patents, Trademarks, and Technology Transfer, and not from
applicant's actual notice. Section 11 l(a)

states:

Chapter VII

TIME FOR RESPONSE BY APPLICANT; ABANDONMENT OF APPLICATION

111. Abandonment for failure to respond within the time limit.-

(a) If an applicant fails to prosecute his application within four months after the date
when the last official notice of action by the Office was mailed to him, or within such
time as may be fixed (rule 112), the application will become abandoned.
According to the records of the Bureau of Patents, Trademarks, and Technology
Transfer Chemical Examining Division, petitioner filed Philippine Patent Application
No. 35526 on July 10, 1987. It was assigned to an examiner on June 7, 1988. An
Office Action was mailed to petitioner's agent, Atty. Mapili, on July 19, 1988. Because
petitioner failed to respond within the allowable period, the application was
deemed abandoned on September 20, 1988.140 Under Section 113, petitioner had
until January 20, 1989 to file for a revival of the patent application. Its Petition for
Revival, however, was filed on May 30, 2002, 141 13 years after the date of
abandonment.

Section 113 has since been superseded by Section 133.4 of the Intellectual Property
Code, Rule 930 of the Rules and Regulations on Inventions, and Rule 929 of the
Revised Implementing Rules and Regulations for Patents, Utility Models and
Industrial Design. The period of four (4) months from the date of abandonment,
however, remains unchanged. The Intellectual Property Code even provides for a
shorter period of three (3) months within which to file for revival:

SECTION 133. Examination and Publication.

....

133.4. An abandoned application may be revived as a pending application within

three (3) months from the date of abandonment, upon good cause shown and the
payment of the required fee.

Rule 930 of the Rules and Regulations on Inventions provides:

Rule 930. Revival of application. - An application deemed withdrawn for failure to

prosecute may be revived as a pending application within a

period of four (4) months from the mailing date of the notice of withdrawal if it is
shown to the satisfaction of the Director that the failure was due to fraud, accident,
mistake or excusable negligence.

A petition to revive an application deemed withdrawn must be accompanied by (1)

a showing of the cause of the failure to prosecute, (2) a complete proposed
response, and (3) the required fee.

An application not revived in accordance with this rule shall be deemed forfeited.

Rule 929 of the Revised Implementing Rules and Regulations for Patents, Utility
Models and Industrial Design provides:

Rule 929. Revival of Application. - An application deemed withdrawn for failure to

prosecute may be revived as a pending application within a period of four (4)
months from the mailing date of the notice of withdrawal if it is shown to the
satisfaction of the Director that the failure was due to fraud, accident, mistake, or
excusable negligence. A petition to revive an application deemed withdrawn shall be
accompanied by:

(a) A showing of a justifiable reason for the failure to prosecute;

(b) A complete proposed response; and

(c) Full payment of the required fee.

No revival shall be granted to an application that has been previously revived with
cost.

An application not revived in accordance with this Rule shall be deemed forfeited.

Even if the delay was unavoidable, or the failure to prosecute was due to fraud,
accident, mistake, or excusable negligence, or the Petition was accompanied by a
complete proposed response, or all fees were paid, the Petition would still be denied
since these regulations only provide a four (4 )- month period within which to file
for the revival of the application. The rules do not provide any exception that could
extend this four (4)-month period to 13 years.

Petitioners patent application, therefore, should not be revived since it was filed
beyond the allowable period.

Even assuming that the four (4)-month period could be extended, petitioner was
inexcussably negligent in the prosecution of its patent application.

Negligence is inexcusable if its commission could have been avoided through

ordinary diligence and prudence. 142 It is also settled that negligence of counsel
binds the client as this "ensures against the resulting uncertainty and tentativeness
of proceedings if clients were allowed to merely disown. 143 their counsels'
conduct."

Petitioner's resident agent, Atty. Mapili, was undoubtedly negligent in failing to

respond to the Office Action sent by the Bureau of Patents, Trademarks, and
Technology Transfer on June 19, 1988. Because of his negligence, petitioner's patent
application was declared abandoned. He was again negligent when he failed to
revive the abandoned application within four (4) months from the date of
abandonment.

Petitioner tries to disown Atty. Mapili 's conduct by arguing that it was not informed
of the abandonment of its patent application or of Atty. Mapili's death. By its own
evidence, however, petitioner requested a status update from Atty. Mapili only on
July 18, 1995, eight (8) years after the filing of its application. 144 It alleged that it
only found out about Atty. Mapili 's death sometime in March 1996, as a result of its
senior patent attorney's visit to the Philippines. 145 Although it was in petitioner's
discretion as a foreign client to put its complete trust and confidence on its local
resident agent, there was a correlative duty on its part to be diligent in keeping itself
updated on the progress of its patent applications. Its failure to be informed of the
abandonment of its patent application was caused by its own lack of prudence.

In Bernardo v. Court of Appeals, 146 "[n]o prudent party will leave the fate of his
case entirely to his lawyer .... It is the duty of a party-litigant to be in contact with his
counsel from time to time in order to be informed of the progress of his case." 147

Even if Atty. Mapili's death prevented petitioner from submitting a petition for
revival on time, it was clearly negligent when it subsequently failed to immediately
apprise itself of the status of its patent application.

Upon learning of Atty. Mapilis death, petitioner issued a Power of Attorney and
Appointment of Resident Agent in favor of Bito, Lozada, Ortega & Castillo on March
25, 1996. 148 Despite the immediate action in the substitution of its resident agent,
it only requested a status update of Philippine Patent Application No. 35526 from
the Intellectual Property Office on December 14, 2000, 149 or four (4) years after it
learned of Atty. Mapili' s death.

Petitioner attempts to explain that it took them four (4) years to request a status
update because the Bureau of Patents, Trademarks, and Technology Transfer failed
to take any action when it submitted its Power of Attorney and Appointment of
Resident Agent in favor of Bito, Lozada, Ortega & Castillo.150 The Power of
Attorney, however, shows that it was only to inform the Bureau that all notices
relating to its pending patent applications should be sent to it. Philippine Patent
Application No. 35526 was declared abandoned on September 20, 1988. As far as
the Bureau was concerned, it was a forfeited application that had already been
archived. It was not the Bureau's duty to resurrect previous notices of forfeited and
abandoned applications to be sent to new resident agents unless a specific status
update was requested. Considering that petitioner only requested a status update
on December 14, 2000, it was only then that the Intellectual Property Office would
start sending notices to it.

Contrary to the posturing of petitioner, Schuartz is applicable.

In Schuartz, several foreign inventors seeking to file patent applications in the

Philippines hired the law firm Siguion Reyna, Montecillo and Ongsiako to process
their applications. 151 The Bureau of Patents, Trademarks, and Technology
Transfer mailed the law firm several notices of abandonment on its patent
applications from June 1987 to September 1987. The law firm only found out about
this in December 1987, after it dismissed two (2) of its employees in charge of
handling correspondences from the Bureau. 152 The law firm filed petitions for
revival of its patent applications from March 1988, all of which were denied by the
Director of the Bureau of Patents for being filed out of time. 153 An appeal was
subsequently filed before the Court of Appeals but was dismissed for being filed
beyond the reglementary period. 154

This Court found that although the Court of Appeals may have erred in counting the
period for appeal, it could not grant the Petition. This Court stated:

[P]etitioners lost sight of the fact that the petition could not be granted because of
laches. Prior to the filing of the petition for revival of the patent application with the
Bureau of Patents, an unreasonable period of time had lapsed due to the negligence
of petitioners' counsel. By such inaction, petitioners were deemed to have forfeited
their right to revive their applications for patent.

Facts show that the patent attorneys appointed to follow up the applications for
patent registration had been negligent in complying with the rules of practice
prescribed by the Bureau of Patents.1wphi1 The firm had been notified about the
abandonment as early as June 1987, but it was only after December 7, 1987, when
their employees Bangkas and Rosas had been dismissed, that they came to know
about it. This clearly showed that petitioners' counsel had been remiss in the
handling of their clients' applications.

"A lawyer's fidelity to the cause of his client requires him to be ever mindful of the
responsibilities that should be expected of him. A lawyer shall not neglect a legal
matter entrusted to him." In the instant case, petitioners' patent attorneys not only
failed to take notice of the notices of abandonment, but they failed to revive the
application within the four-month period, as provided in the rules of practice in
patent cases. These applications are deemed forfeited upon the lapse of such period.
155 (Emphasis supplied)

Petitioner attempts to distinguish itself from Schuartz by arguing that the

petitioners in Schuartz had actual notice of abandonment while petitioner here was
only able to have actual notice when it received Paper No. 2.

The four (4 )-month period in Section 111 156of the 1962 Revised Rules of Practice,
however, is not counted from actual notice of abandonment but from mailing of the
notice. Since it appears from the Intellectual Property Office's records that a notice
of abandonment was mailed to petitioner's resident agent on July 19, 1988,157 the
time for taking action is counted from this period. Petitioner's patent application
cannot be revived simply because the period for revival has already lapsed and no
extension of this period is provided for by the 1962 Revised Rules of Practice.

VI
The right of priority given to a patent applicant is only relevant when there are two
or more conflicting patent applications on the same invention. Because a right of
priority does not automatically grant letters patent to an applicant, possession of a
right of priority does not confer any property rights on the applicant in the absence
of an actual patent.

Petitioner argues that its patent application was filed on July 10, 1987, within 12
months from the prior filing of a U.S. patent application on July 11, 1986.158 It
argues that it is protected from becoming part of the public domain because of
convention priority under the Paris Convention for the Protection of Industrial
Property and Section 9 of Republic Act No. 165. 159

Respondent Therapharma, Inc., on the other hand, argues that a mere patent
application does not vest any right in the applicant before the issuance of the
patent.160 It argues that the "priority date" argued by petitioner is only relevant in
determining who has a better right to the patent among the other applicants who
subsequently apply for the same invention. 161

Under Section 31 of the Intellectual Property Code, a right of priority is given to any
patent applicant who has previously applied for a patent in a country that grants the
same privilege to Filipinos. Section 31 states:

SECTION 31. Right of Priority. - An application for patent filed by any person who
has previously applied for the same invention in another country which by treaty,
convention, or law affords similar privileges to Filipino citizens, shall be considered
as filed as of the date of filing the foreign application: Provided, That:

a. the local application expressly claims priority;

b. it is filed within twelve (12) months from the date the earliest foreign application
was filed; and

c. a certified copy of the foreign application together with an English translation is

filed within six (6) months from the date of filing in the Philippines.

A patent applicant with the right of priority is given preference in the grant of a
patent when there are two or more applicants for the same invention. Section 29 of
the Intellectual Property Code provides:

SECTION 29. First to File Rule. - If two (2) or more persons have made the invention
separately and independently of each other, the right to the patent shall belong to
the person who filed an application for such invention, or where two or more
applications are filed for the same invention, to the applicant who has the earliest
filing date or, the earliest priority date.
Since both the United States162 and the Philippines163 are signatories to the Paris
Convention for the Protection of Industrial Property, an applicant who has filed a
patent application in the United States may have a right of priority over the same
invention in a patent application in the Philippines.164 However, this right of
priority does not immediately entitle a patent applicant the grant of a patent. A right
of priority is not equivalent to a patent. Otherwise, a patent holder of any member-
state of the Paris Convention need not apply for patents in other countries where it
wishes to exercise its patent.

It was, therefore, inaccurate for petitioner to argue that its prior patent application
in the United States removed the invention from the public domain in the
Philippines. This argument is only relevant if respondent Therapharma, Inc. had a
conflicting patent application with the Intellectual Property Office. A right of priority
has no bearing in a case for revival of an abandoned patent application.

VII

The grant of a patent is to provide protection to any inventor from any patent
infringement. 165 Once an invention is disclosed to the public, only the patent
holder has the exclusive right to manufacture, utilize, and market the invention.166
In Creser Precision Systems v. Court of Appeals:167

Under American jurisprudence, an 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. 168

Under the Intellectual Property Code, a patent holder has the right to "to restrain,
prohibit and prevent" 169 any unauthorized person or entity from manufacturing,
selling, or importing any product derived from the patent. However, after a patent is
granted and published in the Intellectual Property Office Gazette, 170 any interested
third party "may inspect the complete description, claims, and drawings of the
patent." 171

The grant of a patent provides protection to the patent holder from the
indiscriminate use of the invention. However, its mandatory publication also has the
correlative effect of bringing new ideas into the public consciousness. After the
publication of the patent, any person may examine the invention and develop it into
something further than what the original patent holder may have envisioned. After
the lapse of 20 years, 172 the invention becomes part of the public domain and is
free for the public to use. In Pearl and Dean v. Shoemart, Inc.: 173

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. Ideas, once disclosed to the public without the
protection of a valid patent, are subject to appropriation without significant
restraint.

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. O'Donnell, "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 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 interests:

"(The p)atent system thus embodies a carefully varafted 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."

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."

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."174 (Emphasis supplied)

In addition, a patent holder of inventions relating to food or medicine does not enjoy
absolute monopoly over the patent. Both Republic Act No. 165 and the Intellectual
Property Code provide for compulsory licensing. Compulsory licensing is defined in
the Intellectual Property Code as the "grant a license to exploit a patented invention,
even without the agreement of the patent owner." 175
Under Republic Act No. 165, a compulsory license may be granted to any applicant
three (3) years after the grant of a patent if the invention relates to food or medicine
necessary for public health or safety. 176 In Smith Kline & French Laboratories, Ltd.
vs. Court of Appeals: 177

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines'
adhesion to the [Paris] Convention, fits well within the aforequoted provisions of
Article 5 of the Paris Convention. In the explanatory note of Bill No. 1156 which
eventually became R.A. No. 165, the legislative intent in the grant of a compulsory
license was not only to afford others an opportunity to provide the public with the
quantity of the patented product, but also to prevent the growth of monopolies.
Certainly, the growth of monopolies was among the abuses which Section A, Article
5 of the Convention foresaw, and which our Congress likewise wished to prevent in
enacting R.A. No. 165. 178

The patent holders proprietary right over the patent only lasts for three (3) years
from the grant of the patent, after which any person may be allowed to manufacture,
use or sell the invention subject to the payment of royalties:

The right to exclude others from the manufacturing, using or vending an invention
relating to food or medicine should be conditioned to allowing any person to
manufacture, use or vend the same after a period of three years from the date of the
grant of the letters patent. After all, the patentee is not entirely deprived of any
proprietary right. In fact, he has been given the period of three years of complete
monopoly over the patent. Compulsory licensing of a patent on food or medicine
without regard to the other conditions imposed in Section 34 is not an undue
deprivation of proprietary interests over a patent right because the law sees to it
that even after three years of complete monopoly something is awarded to the
inventor in the form of a bilateral and workable licensing agreement and a
reasonable royalty to be agreed upon by the parties and in default of such
agreement, the Director of Patent may fix the terms and conditions of the
license.179

A patent is a monopoly granted only for specific purposes and objectives. Thus, its
procedures must be complied with to attain its social objective. Any request for
leniency in its procedures should be taken in this context. Petitioner, however, has
failed to convince this court that the revival of its patent application would have a
significant impact on the pharmaceutical industry.

Hypertension, or high blood pressure, is considered a "major risk factor for

cardiovascular disease" 180 such as "heart disease, stroke, kidney failure and
blindness." 181 In a study conducted by the World Health Organization, 25% of
adults aged 21 years and older in the Philippines suffer from high blood pressure.
182 According to the Department of Health, heart disease remains the leading cause
of mortality in the Philippines. 183 Angiotensin II Receptor Blocking Imidazole or
"losartan" is one of the medications used for the treatment ofhypertension. 184

In a study conducted by the Philippine Institute for Development Studies,

"affordability of drugs remains a serious problem" 185 in the Philippines. It found
that because of the cost of drugs, accessibility to drugs become prohibitive for the
lowest-earning households and are "even more prohibitive for the u:nemployed and
indigent." 186 Several measures have been enacted by the government to address
the high costs of medicine, among them, parallel drug importation187 and the
passage of Republic Act No. 9502, otherwise known as the Universally Accessible
Cheaper and Quality Medicines Act of 2008. 188 Figures submitted by respondent
Therapharma, Inc., however, also show that the presence of competition in the local
pharmaceutical market may ensure the public access to cheaper medicines.

According to respondent Therapharma, Inc., the retail price of petitioner's losartan

product, Cozaar, decreased within one (1) month of respondent Therapharma, Inc.' s
entry into the market: 189

Respondent Therapharma, Inc. also presented figures showing that there was a 44%
increase in the number of losartan units sold within five (5) months of its entry into
the market. 190 More Filipinos are able to purchase losartan products when there
are two (2) different players providing competitive prices in the market.

Lifezar, and another of respondent Therapharma, Inc.'s products, Combizar, have

also been recommended as cheaper alternative losartan medication, since they were
priced "50 percent less than foreign brands." 191

Public interest will be prejudiced if, despite petitioner's inexcusable negligence, its
Petition for Revival is granted.1awp++i1 Even without a pending patent application
and the absence of any exception to extend the period for revival, petitioner was
already threatening to pursue legal action against respondent Therapharma, Inc. if it
continued to develop and market its losartan product, Lifezar. 192 Once petitioner is
granted a patent for its losartan products, Cozaar and Hyzaar, the loss of
competition in the market for losartan products may result in higher prices. For the
protection of public interest, Philippine Patent Application No. 35526 should be
considered a forfeited patent application.
WHEREFORE, the Petition is DENIED. The Resolution dated January 31, 2006 and
the Amended Decision dated August 30, 2006 of the Court of Appeals are
AFFIRMED.

SO ORDERED.