EN BANC

G.R. No. 103543 July 5, 1993

ASIA BREWERY, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

Abad Santos & Associates and Sycip, Salazar, Hernandez & Gatmaitan for petitioner.

Roco, Bunag, Kapunan Law Office for private respondent.

GRIO-AQUINO, J.:

On September 15, 1988, San Miguel Corporation (SMC) filed a complaint against Asia Brewery Inc.
(ABI) for infringement of trademark and unfair competition on account of the latter's BEER PALE
PILSEN or BEER NA BEER product which has been competing with SMC's SAN MIGUEL PALE
PILSEN for a share of the local beer market. (San Miguel Corporation vs. Asia Brewery Inc., Civ.
Case. No. 56390, RTC Branch 166, Pasig, Metro Manila.).

On August 27, 1990, a decision was rendered by the trial Court, presided over by Judge Jesus O.
Bersamira, dismissing SMC's complaint because ABI "has not committed trademark infringement or
unfair competition against" SMC (p. 189, Rollo).

SMC appealed to the Court of Appeals (C.A.-G.R. CV No. 28104). On September 30, 1991, the
Court of Appeals (Sixth Division composed of Justice Jose C. Campos, Jr., chairman and ponente,
and Justices Venancio D. Aldecoa Jr. and Filemon H. Mendoza, as members) reversed the trial
court. The dispositive part of the decision reads as follows:

In the light of the foregoing analysis and under the plain language of the applicable
rule and principle on the matter, We find the defendant Asia Brewery Incorporated
GUILTY of infringement of trademark and unfair competition. The decision of the trial
court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and
against the defendant as follows:

(1) The defendant Asia Brewery Inc. its officers, agents, servants and employees are
hereby permanently enjoined and restrained from manufacturing, putting up, selling,
advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any
similar preparation, manufacture or beer in bottles and under labels substantially
identical with or like the said bottles and labels of plaintiff San Miguel Corporation
employed for that purpose, or substantially identical with or like the bottles and labels
now employed by the defendant for that purpose, or in bottles or under labels which
are calculated to deceive purchasers and consumers into the belief that the beer is
the product of the plaintiff or which will enable others to substitute, sell or palm off the
said beer of the defendant as and for the beer of the plaintiff-complainant.
 (2) The defendant Asia Brewery Inc. is hereby ordered to render an accounting and
pay the San Miguel Corporation double any and all the payments derived by
defendant from operations of its business and the sale of goods bearing the mark
"Beer Pale Pilsen" estimated at approximately Five Million Pesos (P5,000,000.00); to
recall all its products bearing the mark "Beer Pale Pilsen" from its retailers and
deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and
advertisements bearing the infringing mark and all plates, molds, materials and other
means of making the same to the Court authorized to execute this judgment for
destruction.

(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos
(P2,000,000.00) as moral damages and Half a Million Pesos (P5,000,000.00) by way
of exemplary damages.

(4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount
of P250,000.00 plus costs to this suit. (p. 90, Rollo.)

Upon a motion for reconsideration filed by ABI, the above dispositive part of the decision, was
modified by the separate opinions of the Special Sixth Division 1 so that it should read thus:

In the light of the foregoing analysis and under the plain language of the applicable
rule and principle on the matter, We find the defendant Asia Brewery
Incorporated GUILTY of infringement of trademark and unfair competition. The
decision of the trial court is hereby REVERSED, and a new judgment entered in
favor of the plaintiff and against the defendant as follows:

(1) The defendant Asia Brewery Inc., its officers, agents, servants and employees
are hereby permanently enjoined and restrained from manufacturing, putting up,
selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or
any similar preparation, manufacture or beer in bottles and under labels substantially
identical with or like the said bottles and labels of plaintiff San Miguel Corporation
employed for that purpose, or substantially identical with or like the bottles and labels
now employed by the defendant for that purpose, or in bottles or under labels which
are calculated to deceive purchasers and consumers into the belief that the beer if
the product of the plaintiff or which will enable others to substitute, sell or palm off the
said beer of the defendant as and for the beer of the plaintiff-complainant.

(2) The defendant Asia Brewery Inc. is hereby ordered 2 to recall all its products
bearing the mark Beer Pale Pilsen from its retailers and deliver these as well as all
labels, signs, prints, packages, wrappers, receptacles and advertisements bearing
the infringing mark and all plates, molds, materials and other means of making the
same to the Court authorized to execute this judgment for destruction.

(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos
(P2,000,000.00) as moral damages and Half a Million Pesos (P500,000.00) by way
of exemplary damages.

(4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount
of P250,000.00 plus costs of this suit.

In due time, ABI appealed to this Court by a petition for certiorari under Rule 45 of the Rules of
Court. The lone issue in this appeal is whether ABI infringes SMC's trademark: San Miguel Pale
Pilsen with Rectangular Hops and Malt Design, and thereby commits unfair competition against the
latter. It is a factual issue (Phil. Nut Industry Inc. v. Standard Brands Inc., 65 SCRA 575) and as a
general rule, the findings of the Court of Appeals upon factual questions are conclusive and ought
not to be disturbed by us. However, there are exceptions to this general rule, and they are:

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

conjectures;

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

(3) Where there is grave abuse of discretion;

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

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

(6) When the findings of said court are contrary to those of the trial court;

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

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

(9) When the findings of facts of the Court of Appeals are premised on the absence
of evidence and are contradicted on record. (Reynolds Philippine Corporation vs.
Court of Appeals, 169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156
SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs.
Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139 SCRA 576; Casanayan vs.
Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing Corp.
vs. IAC, 166 SCRA 458 [citing Tolentino vs. De Jesus, 56 SCRA 167; Carolina
Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102
SCRA 817; and Moran, Jr. vs. CA, 133 SCRA 88].)

Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct
findings based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.)
Where findings of the Court of Appeals and trial court are contrary to each other, the Supreme Court
may scrutinize the evidence on record. (Cruz vs. CA, 129 SCRA 222, 227.)

The present case is one of the exceptions because there is no concurrence between the trial court
and the Court of Appeals on the lone factual issue of whether ABI, by manufacturing and selling its
BEER PALE PILSEN in amber colored steinie bottles of 320 ml. capacity with a white painted
rectangular label has committed trademark infringement and unfair competition against SMC.

Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil. 100,
106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what
constitutes infringement:
 Sec. 22. Infringement, what constitutes. Any person who shall use, without the
consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of
any registered mark or trade-name in connection with the sale, offering for sale, or
advertising of any goods, business or services on or in connection with which such
use is likely to cause confusion or mistake or to deceive purchasers or others as to
the source or origin of such goods or services, or identity of such business; or
reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and
apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used upon
or in connection with such goods, business or services, shall be liable to a civil action
by the registrant for any or all of the remedies herein provided. (Emphasis supplied.)

This definition implies that only registered trade marks, trade names and service marks are
protected against infringement or unauthorized use by another or others. The use of someone else's
registered trademark, trade name or service mark is unauthorized, hence, actionable, if it is done
"without the consent of the registrant." (Ibid.)

The registered trademark of SMC for its pale pilsen beer is:

San Miguel Pale Pilsen With Rectangular Hops and Malt Design. (Philippine Bureau
of Patents, Trademarks and Technology Transfer Trademark Certificate of
Registration No. 36103, dated 23 Oct. 1986,
(p. 174, Rollo.)

As described by the trial court in its decision (Page 177, Rollo):

. . . . a rectangular design [is] bordered by what appears to be minute grains

arranged in rows of three in which there appear in each corner hop designs. At the
top is a phrase written in small print "Reg. Phil. Pat. Off." and at the bottom "Net
Contents: 320 Ml." The dominant feature is the phrase "San Miguel" written
horizontally at the upper portion. Below are the words "Pale Pilsen" written diagonally
across the middle of the rectangular design. In between is a coat of arms and the
phrase "Expertly Brewed." The "S" in "San" and the "M" of "Miguel," "P" of "Pale" and
"Pilsen" are written in Gothic letters with fine strokes of serifs, the kind that first
appeared in the 1780s in England and used for printing German as distinguished
from Roman and Italic. Below "Pale Pilsen" is the statement "And Bottled by" (first
line, "San Miguel Brewery" (second line), and "Philippines" (third line). (p. 177, Rollo;
Emphasis supplied.)

On the other hand, ABI's trademark, as described by the trial court, consists of:

. . . a rectangular design bordered by what appear to be buds of flowers with leaves.

The dominant feature is "Beer" written across the upper portion of the rectangular
design. The phrase "Pale Pilsen" appears immediately below in smaller block letters.
To the left is a hop design and to the right, written in small prints, is the phrase "Net
Contents 320 ml." Immediately below "Pale Pilsen" is the statement written in three
lines "Especially brewed and bottled by" (first line), "Asia Brewery Incorporated"
(second line), and "Philippines" (third line), (p. 177, Rollo; Emphasis supplied.)

Does ABI's BEER PALE PILSEN label or "design" infringe upon SMC's SAN MIGUEL PALE PILSEN
WITH RECTANGULAR MALT AND HOPS DESIGN? The answer is "No."
Infringement is determined by the "test of dominancy" rather than by differences or variations in the
details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of
Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217
(1956), thus:

It has been consistently held that the question of infringement of a trademark is to be

determined by the test of dominancy. Similarity in size, form and color, while
relevant, is not conclusive. If the competing trademark contains the main or essential
or dominant features of another, and confusion and deception is likely to result,
infringement takes place. Duplication or imitation is not necessary; nor it is necessary
that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co.
vs. 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. Honover Rubber Co., 107 F. 2d 588; . . . .) (Emphasis
supplied.)

In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272, 275, the test was similarity or
"resemblance between the two (trademarks) such as would be likely to cause the one mark to be
mistaken for the other. . . . [But] this is not such similitude as amounts to identity."

In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA 575, the court was more specific: the
test is "similarity in the dominant features of the trademarks."

What are the dominant features of the competing trademarks before us?

There is hardly any dispute that the dominant feature of SMC's trademark is the name of the
product: SAN MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the
beginning and end of the letters "S" and "M" on an amber background across the upper portion of
the rectangular design.

On the other hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with
the word "Beer" written in large amber letters, larger than any of the letters found in the SMC label.

The trial court perceptively observed that the word "BEER" does not appear in SMC's trademark, just
as the words "SAN MIGUEL" do not appear in ABI's trademark. Hence, there is absolutely no
similarity in the dominant features of both trademarks.

Neither in sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar
to SAN MIGUEL PALE PILSEN. No one who purchases BEER PALE PILSEN can possibly be
deceived that it is SAN MIGUEL PALE PILSEN. No evidence whatsoever was presented by SMC
proving otherwise.

Besides the dissimilarity in their names, the following other dissimilarities in the trade dress or
appearance of the competing products abound:

(1) The SAN MIGUEL PALE PILSEN bottle has a slender tapered neck.

The BEER PALE PILSEN bottle has a fat, bulging neck.

(2) The words "pale pilsen" on SMC's label are printed in bold and laced letters along
a diagonal band, whereas the words "pale pilsen" on ABI's bottle are half the size and printed in
slender block letters on a straight horizontal band. (See Exhibit "8-a".).

(3) The names of the manufacturers are prominently printed on their respective bottles.

SAN MIGUEL PALE PILSEN is "Bottled by the San Miguel Brewery, Philippines," whereas BEER
PALE PILSEN is "Especially brewed and bottled by Asia Brewery Incorporated, Philippines."

(4) On the back of ABI's bottle is printed in big, bold letters, under a row of flower buds and leaves,
its copyrighted slogan:

"BEER NA BEER!"

Whereas SMC's bottle carries no slogan.

(5) The back of the SAN MIGUEL PALE PILSEN bottle carries the SMC logo, whereas the BEER
PALE PILSEN bottle has no logo.

(6) The SAN MIGUEL PALE PILSEN bottle cap is stamped with a coat of arms and the words "San
Miguel Brewery Philippines" encircling the same.

The BEER PALE PILSEN bottle cap is stamped with the name "BEER" in the center, surrounded by
the words "Asia Brewery Incorporated Philippines."

(7) Finally, there is a substantial price difference between BEER PALE PILSEN (currently at P4.25
per bottle) and SAN MIGUEL PALE PILSEN (currently at P7.00 per bottle). One who pays only
P4.25 for a bottle of beer cannot expect to receive San Miguel Pale Pilsen from the storekeeper or
bartender.

The fact that the words pale pilsen are part of ABI's trademark does not constitute an infringement of
SMC's trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are generic words descriptive of
the color ("pale"), of a type of beer ("pilsen"), which is a light bohemian beer with a strong hops flavor
that originated in the City of Pilsen in Czechoslovakia and became famous in the Middle Ages.
(Webster's Third New International Dictionary of the English Language, Unabridged. Edited by Philip
Babcock Gove. Springfield, Mass.: G & C Merriam Co., [c] 1976, page 1716.) "Pilsen" is a "primarily
geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166, as inserted by Sec. 2 of
R.A. No. 638) hence, non-registerable and not appropriable by any beer manufacturer. The
Trademark Law provides:

Sec. 4. . . .. The owner of trade-mark, trade-name or service-mark used to distinguish

his goods, business or services from the goods, business or services of others shall
have the right to register the same [on the principal register], unless it:

xxx xxx xxx

(e) Consists of a mark or trade-name which, when applied to or used in connection

with the goods, business or services of the applicant is merely descriptive or
deceptively misdescriptive of them, or when applied to or used in connection with the
goods, business or services of the applicant is primarily geographically descriptive or
 deceptively misdescriptive of them, or is primarily merely a surname." (Emphasis
supplied.)

The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part
of its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as
"evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be
appropriated by any single manufacturer of these food products, for no other reason than that he
was the first to use them in his registered trademark. In Masso Hermanos, S.A. vs. Director of
Patents, 94 Phil. 136, 139 (1953), it was held that a dealer in shoes cannot register "Leather Shoes"
as his trademark because that would be merely descriptive and it would be unjust to deprive other
dealers in leather shoes of the right to use the same words with reference to their merchandise. No
one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai Gui vs.
Director of Patents, 96 Phil. 673, 676 [1955]):

A word or a combination of words which is merely descriptive of an article of trade, or

of its composition, characteristics, or qualities, cannot be appropriated and protected
as a trademark to the exclusion of its use by others. . . . inasmuch as all persons
have an equal right to produce and vend similar articles, they also have the right to
describe them properly and to use any appropriate language or words for that
purpose, and no person can appropriate to himself exclusively any word or
expression, properly descriptive of the article, its qualities, ingredients or
characteristics, and thus limit other persons in the use of language appropriate to the
description of their manufactures, the right to the use of such language being
common to all. This rule excluding descriptive terms has also been held to apply to
trade-names. As to whether words employed fall within this prohibition, it is said that
the true test is not whether they are exhaustively descriptive of the article designated,
but whether in themselves, and as they are commonly used by those who
understand their meaning, they are reasonably indicative and descriptive of the thing
intended. If they are thus descriptive, and not arbitrary, they cannot be appropriated
from general use and become the exclusive property of anyone. (52 Am. Jur. 542-
543.)

. . . . Others may use the same or similar descriptive word in connection with their
own wares, provided they take proper steps to prevent the public being deceived.
(Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E. [2d] 598.)

. . . . A descriptive word may be admittedly distinctive, especially if the user is the first
creator of the article. It will, however, be denied protection, not because it lacks
distinctiveness, but rather because others are equally entitled to its use. (2 Callman.
Unfair Competition and Trademarks, pp. 869-870.)" (Emphasis supplied.)

The circumstance that the manufacturer of BEER PALE PILSEN, Asia Brewery Incorporated, has
printed its name all over the bottle of its beer product: on the label, on the back of the bottle, as well
as on the bottle cap, disproves SMC's charge that ABI dishonestly and fraudulently intends to palm
off its BEER PALE PILSEN as SMC's product. In view of the visible differences between the two
products, the Court believes it is quite unlikely that a customer of average intelligence would mistake
a bottle of BEER PALE PILSEN for SAN MIGUEL PALE PILSEN.

The fact that BEER PALE PILSEN like SAN MIGUEL PALE PILSEN is bottled in amber-colored
steinie bottles of 320 ml. capacity and is also advertised in print, broadcast, and television media,
does not necessarily constitute unfair competition.
Unfair competition is the employment of deception or any other means contrary to good faith by
which a person shall pass off the goods manufactured by him or in which he deals, or his business,
or services, for those of another who has already established goodwill for his similar goods, business
or services, or any acts calculated to produce the same result. (Sec. 29, Republic Act No. 166, as
amended.) The law further enumerates the more common ways of committing unfair competition,
thus:

Sec. 29. . . .

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

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

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

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

In this case, the question to be determined is whether ABI is using a name or mark for its beer that
has previously come to designate SMC's beer, or whether ABI is passing off its BEER PALE PILSEN
as SMC's SAN MIGUEL PALE PILSEN.

. . ..The universal test question is whether the public is likely to be deceived. Nothing
less than conduct tending to pass off one man's goods or business as that of another
will constitute unfair competition. Actual or probable deception and confusion on the
part of the customers by reason of defendant's practices must always appear. (Shell
Co., of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd. et al., 120 Phil.
434, 439.)

The use of ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN
bottle, is not unlawful. As pointed out by ABI's counsel, SMC did not invent but merely borrowed the
steinie bottle from abroad and it claims neither patent nor trademark protection for that bottle shape
and design. (See rollo, page 55.) The Cerveza Especial and the Efes Pale Pilsen use the "steinie"
bottle. (See Exhibits 57-D, 57-E.) The trial court found no infringement of SMC's bottle

The court agrees with defendant that there is no infringement of plaintiff's bottle,
firstly, because according to plaintiff's witness Deogracias Villadolid, it is a standard
type of bottle called steinie, and to witness Jose Antonio Garcia, it is not a San
Miguel Corporation design but a design originally developed in the United States by
the Glass Container Manufacturer's Institute and therefore lacks exclusivity.
 Secondly, the shape was never registered as a trademark. Exhibit "C" is not a
registration of a beer bottle design required under Rep. Act 165 but the registration of
the name and other marks of ownership stamped on containers as required by Rep.
Act 623. Thirdly, the neck of defendant's bottle is much larger and has a distinct
bulge in its uppermost part. (p. 186, Rollo.)

The petitioner's contention that bottle size, shape and color may not be the exclusive property of any
one beer manufacturer is well taken. SMC's being the first to use the steinie bottle does not give
SMC a vested right to use it to the exclusion of everyone else. Being of functional or common use,
and not the exclusive invention of any one, it is available to all who might need to use it within the
industry. Nobody can acquire any exclusive right to market articles supplying simple human needs in
containers or wrappers of the general form, size and character commonly and immediately used in
marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 194-195.)

. . . protection against imitation should be properly confined to nonfunctional features.

Even if purely functional elements are slavishly copied, the resemblance will not
support an action for unfair competition, and the first user cannot claim secondary
meaning protection. Nor can the first user predicate his claim to protection on the
argument that his business was established in reliance on any such unpatented
nonfunctional feature, even "at large expenditure of money." (Callman Unfair
Competition, Trademarks and Monopolies, Sec. 19.33 [4th Ed.].) (Petition for
Review, p. 28.)

ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle
which has a fat bulging neck to differentiate it from SMC's bottle. The amber color is a functional
feature of the beer bottle. As pointed out by ABI, all bottled beer produced in the Philippines is
contained and sold in amber-colored bottles because amber is the most effective color in preventing
transmission of light and provides the maximum protection to beer. As was ruled in California
Crushed Fruit Corporation vs. Taylor B. and Candy Co., 38 F2d 885, a merchant cannot be enjoined
from using a type or color of bottle where the same has the useful purpose of protecting the contents
from the deleterious effects of light rays. Moreover, no one may have a monopoly of any color. Not
only beer, but most medicines, whether in liquid or tablet form, are sold in amber-colored bottles.

That the ABI bottle has a 320 ml. capacity is not due to a desire to imitate SMC's bottle because that
bottle capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December
1979, of the Department of Trade, Metric System Board.

With regard to the white label of both beer bottles, ABI explained that it used the color white for its
label because white presents the strongest contrast to the amber color of ABI's bottle; it is also the
most economical to use on labels, and the easiest to "bake" in the furnace (p. 16, TSN of September
20, 1988). No one can have a monopoly of the color amber for bottles, nor of white for labels, nor of
the rectangular shape which is the usual configuration of labels. Needless to say, the shape of the
bottle and of the label is unimportant. What is all important is the name of the product written on the
label of the bottle for that is how one beer may be distinguished form the others.

In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where two competing tea products were both
labelled as Formosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of
conventional color, both with labels containing designs drawn in green ink and Chinese characters
written in red ink, one label showing a double-decked jar in the center, the other, a flower pot, this
court found that the resemblances between the designs were not sufficient to mislead the ordinary
intelligent buyer, hence, there was no unfair competition. The Court held:
 . . . . In order that there may be deception of the buying public in the sense
necessary to constitute unfair competition, it is necessary to suppose a public
accustomed to buy, and therefore to some extent familiar with, the goods in question.
The test of fraudulent simulation is to be found in the likelihood of the deception of
persons in some measure acquainted with an established design and desirous of
purchasing the commodity with which that design has been associated. The test is
not found in the deception, or possibility of the deception, of the person who knows
nothing about the design which has been counterfeited, and who must be indifferent
as between that and the other. The simulation, in order to be objectionable, must be
such as appears likely to mislead the ordinarily intelligent buyer who has a need to
supply and is familiar with the article that he seeks to purchase.

The main thrust of SMC's complaint if not infringement of its trademark, but unfair competition arising
form the allegedly "confusing similarity" in the general appearance or trade dress of ABI's BEER
PALE PILSEN beside SMC's SAN MIGUEL PALE PILSEN (p. 209, Rollo)

SMC claims that the "trade dress" of BEER PALE PILSEN is "confusingly similar" to its SAN
MIGUEL PALE PILSEN because both are bottled in 320 ml. steinie type, amber-colored bottles with
white rectangular labels.

However, when as in this case, the names of the competing products are clearly different and their
respective sources are prominently printed on the label and on other parts of the bottle, mere
similarity in the shape and size of the container and label, does not constitute unfair competition. The
steinie bottle is a standard bottle for beer and is universally used. SMC did not invent it nor patent it.
The fact that SMC's bottle is registered under R.A. No. 623 (as amended by RA 5700, An Act to
Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other
Similar Containers) simply prohibits manufacturers of other foodstuffs from the unauthorized use of
SMC's bottles by refilling these with their products. It was not uncommon then for products such
as patis (fish sauce) and toyo (soy sauce) to be sold in recycled SAN MIGUEL PALE PILSEN
bottles. Registration of SMC's beer bottles did not give SMC a patent on the steinie or on bottles of
similar size, shape or color.

Most containers are standardized because they are usually made by the same manufacturer. Milk,
whether in powdered or liquid form, is sold in uniform tin cans. The same can be said of the standard
ketchup or vinegar bottle with its familiar elongated neck. Many other grocery items such as coffee,
mayonnaise, pickles and peanut butter are sold in standard glass jars. The manufacturers of these
foodstuffs have equal right to use these standards tins, bottles and jars for their products. Only their
respective labels distinguish them from each other. Just as no milk producer may sue the others for
unfair competition because they sell their milk in the same size and shape of milk can which he
uses, neither may SMC claim unfair competition arising from the fact that ABI's BEER PALE PILSEN
is sold, like SMC's SAN MIGUEL PALE PILSEN in amber steinie bottles.

The record does not bear out SMC's apprehension that BEER PALE PILSEN is being passed off as
SAN MIGUEL PALE PILSEN. This is unlikely to happen for consumers or buyers of beer generally
order their beer by brand. As pointed out by ABI's counsel, in supermarkets and tiendas, beer is
ordered by brand, and the customer surrenders his empty replacement bottles or pays a deposit to
guarantee the return of the empties. If his empties are SAN MIGUEL PALE PILSEN, he will get SAN
MIGUEL PALE PILSEN as replacement. In sari-sari stores, beer is also ordered from the tindera by
brand. The same is true in restaurants, pubs and beer gardens beer is ordered from the waiters
by brand. (Op. cit. page 50.)
Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer
market for the past hundred years, those who have been drinking no other beer but SAN MIGUEL
PALE PILSEN these many years certainly know their beer too well to be deceived by a newcomer in
the market. If they gravitate to ABI's cheaper beer, it will not be because they are confused or
deceived, but because they find the competing product to their taste.

Our decision in this case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals
and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, 3 that:

. . . to determine whether a trademark has been infringed, we must consider the mark
as a whole and not as dissected. If the buyer is deceived, it is attributable to the
marks as a totality, not usually to any part of it.

That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases
of infringement and unfair competition, the courts should "take into consideration several factors
which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the
nature and cost of the article, whether the article is bought for immediate consumption and also the
conditions under which it is usually purchased" (181 SCRA 410, 418-419).

The Del Monte case involved catsup, a common household item which is bought off the store
shelves by housewives and house help who, if they are illiterate and cannot identify the product by
name or brand, would very likely identify it by mere recollection of its appearance. Since the
competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del Monte bottles for its catsup
(despite the warning embossed on the bottles: "Del Monte Corporation. Not to be refilled.") but also
used labels which were "a colorable imitation" of Del Monte's label, we held that there was
infringement of Del Monte's trademark and unfair competition by Sunshine.

Our ruling in Del Monte would not apply to beer which is not usually picked from a store shelf but
ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant.

Moreover, SMC's brand or trademark: "SAN MIGUEL PALE PILSEN" is not infringed by ABI's mark:
"BEER NA BEER" or "BEER PALE PILSEN." ABI makes its own bottle with a bulging neck to
differentiate it from SMC's bottle, and prints ABI's name in three (3) places on said bottle (front, back
and bottle cap) to prove that it has no intention to pass of its "BEER" as "SAN MIGUEL."

There is no confusing similarity between the competing beers for the name of one is "SAN MIGUEL"
while the competitor is plain "BEER" and the points of dissimilarity between the two outnumber their
points of similarity.

Petitioner ABI has neither infringed SMC's trademark nor committed unfair competition with the
latter's SAN MIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes
with the latter in the open market, that competition is neither unfair nor fraudulent. Hence, we must
deny SMC's prayer to suppress it.

WHEREFORE, finding the petition for review meritorious, the same is hereby granted. The decision
and resolution of the Court of Appeals in CA-G.R. CV No. 28104 are hereby set aside and that of the
trial court is REINSTATED and AFFIRMED. Costs against the private respondent.

SO ORDERED.

Narvasa, C.J., Bidin, Regalado, Romero, Nocon, Bellosillo and Melo, JJ., concur.
Feliciano, J., took no part.
 FIRST DIVISION

G.R. No. 143993 August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners,

vs.
L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY,
JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the Decision dated 26 November 1999 of the Court of Appeals2 finding
respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition
and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11
July 2000 denying reconsideration. The Court of Appeals' Decision reversed the 5 September 1994
Decision3 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger,
Inc. liable for trademark infringement and unfair competition.

The Facts

Petitioner McDonald's Corporation ("McDonald's") is a corporation organized under the laws of

Delaware, United States. McDonald's operates, by itself or through its franchisees, a global chain of
fast-food restaurants. McDonald's4 owns a family of marks5 including the "Big Mac" mark for its
"double-decker hamburger sandwich."6McDonald's registered this trademark with the United States
Trademark Registry on 16 October 1979.7 Based on this Home Registration, McDonald's applied
for the registration of the same mark in the Principal Register of the then Philippine Bureau of
Patents, Trademarks and Technology ("PBPTT"), now the Intellectual Property Office
("IPO"). Pending approval of its application, McDonald's introduced its "Big Mac" hamburger
sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed
registration of the "Big Mac" mark in the Principal Register based on its Home Registration in the
United States.

Like its other marks, McDonald's displays the "Big Mac" mark in items8 and paraphernalia9 in its
restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonald's spent P10.5
million in advertisement for "Big Mac" hamburger sandwiches alone.10

Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's

Philippine franchisee.11

Respondent L.C. Big Mak Burger, Inc. ("respondent corporation") is a domestic corporation which
operates fast-food outlets and snack vans in Metro Manila and nearby provinces.12 Respondent
corporation's menu includes hamburger sandwiches and other food items.13 Respondents Francis B.
Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto
("private respondents") are the incorporators, stockholders and directors of respondent corporation.14

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big
Mak" mark for its hamburger sandwiches. McDonald's opposed respondent corporation's application
on the ground that "Big Mak" was a colorable imitation of its registered "Big Mac" mark for the same
food products. McDonald's also informed respondent Francis Dy ("respondent Dy"), the chairman of
the Board of Directors of respondent corporation, of its exclusive right to the "Big Mac" mark and
requested him to desist from using the "Big Mac" mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the
Regional Trial Court of Makati, Branch 137 ("RTC"), for trademark infringement and unfair
competition. In its Order of 11 July 1990, the RTC issued a temporary restraining order ("TRO")
against respondents enjoining them from using the "Big Mak" mark in the operation of their business
in the National Capital Region.15 On 16 August 1990, the RTC issued a writ of preliminary injunction
replacing the TRO.16

In their Answer, respondents admitted that they have been using the name "Big Mak Burger" for their
fast-food business. Respondents claimed, however, that McDonald's does not have an exclusive
right to the "Big Mac" mark or to any other similar mark. Respondents point out that the Isaiyas
Group of Corporations ("Isaiyas Group") registered the same mark for hamburger sandwiches with
the PBPTT on 31 March 1979. One Rodolfo Topacio ("Topacio") similarly registered the same mark
on 24 June 1983, prior to McDonald's registration on 18 July 1985. Alternatively, respondents
claimed that they are not liable for trademark infringement or for unfair competition, as the "Big Mak"
mark they sought to register does not constitute a colorable imitation of the "Big Mac" mark.
Respondents asserted that they did not fraudulently pass off their hamburger sandwiches as those
of petitioners' Big Mac hamburgers.17 Respondents sought damages in their counterclaim.

In their Reply, petitioners denied respondents' claim that McDonald's is not the exclusive owner of
the "Big Mac" mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the
"Big Mac" mark ahead of McDonald's, the Isaiyas Group did so only in the Supplemental Register of
the PBPTT and such registration does not provide any protection. McDonald's disclosed that it
had acquired Topacio's rights to his registration in a Deed of Assignment dated 18 May 1981.18

The Trial Court's Ruling

On 5 September 1994, the RTC rendered judgment ("RTC Decision") finding respondent corporation
liable for trademark infringement and unfair competition. However, the RTC dismissed the complaint
against private respondents and the counterclaim against petitioners for lack of merit and
insufficiency of evidence. The RTC held:

Undeniably, the mark "B[ig] M[ac]" is a registered trademark for plaintiff McDonald's, and as
such, it is entitled [to] protection against infringement.

xxxx

There exist some distinctions between the names "B[ig] M[ac]" and "B[ig] M[ak]" as
appearing in the respective signages, wrappers and containers of the food products of the
parties. But infringement goes beyond the physical features of the questioned name and the
original name. There are still other factors to be considered.
 xxxx

Significantly, the contending parties are both in the business of fast-food chains and
restaurants. An average person who is hungry and wants to eat a hamburger sandwich may
not be discriminating enough to look for a McDonald's restaurant and buy a "B[ig] M[ac]"
hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into
his pocket and order a "B[ig] M[ak]" hamburger sandwich. Plaintiff McDonald's fast-food
chain has attained wide popularity and acceptance by the consuming public so much so that
its air-conditioned food outlets and restaurants will perhaps not be mistaken by many to be
the same as defendant corporation's mobile snack vans located along busy streets or
highways. But the thing is that what is being sold by both contending parties is a food item
a hamburger sandwich which is for immediate consumption, so that a buyer may easily be
confused or deceived into thinking that the "B[ig] M[ak]" hamburger sandwich he bought is a
food-product of plaintiff McDonald's, or a subsidiary or allied outlet thereof. Surely, defendant
corporation has its own secret ingredients to make its hamburger sandwiches as palatable
and as tasty as the other brands in the market, considering the keen competition among
mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence,
the trademark "B[ig] M[ac]" has been infringed by defendant corporation when it used the
name "B[ig] M[ak]" in its signages, wrappers, and containers in connection with its food
business. xxxx

Did the same acts of defendants in using the name "B[ig] M[ak]" as a trademark or
tradename in their signages, or in causing the name "B[ig] M[ak]" to be printed on the
wrappers and containers of their food products also constitute an act of unfair competition
under Section 29 of the Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more inclusive
than the law concerning the infringement of trademark, which is of more limited range, but
within its narrower range recognizes a more exclusive right derived by the adoption and
registration of the trademark by the person whose goods or services are first
associated therewith. xxx Notwithstanding the distinction between an action for trademark
infringement and an action for unfair competition, however, the law extends substantially the
same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No.
166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the
public the goods of one man as the goods of another. The choice of "B[ig] M[ak]" as
tradename by defendant corporation is not merely for sentimental reasons but was clearly
made to take advantage of the reputation, popularity and the established goodwill of plaintiff
McDonald's. For, as stated in Section 29, a person is guilty of unfair competition 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 likely influence purchasers to believe that the goods offered are those of a
manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs have
established their valid cause of action against the defendants for trademark infringement and
unfair competition and for damages.19

The dispositive portion of the RTC Decision provides:

 WHEREFORE, judgment is rendered in favor of plaintiffs McDonald's Corporation and
McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case on [16 August 1990] is made
permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in
the amount ofP400,000.00, exemplary damages in the amount of P100,000.00, and
attorney's fees and expenses of litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy,
Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are
dismissed for lack of merit as well as for insufficiency of evidence.20

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment ("Court of Appeals' Decision")
reversing the RTC Decision and ordering McDonald's to pay respondents P1,600,000 as actual and
compensatory damages and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use
of defendants-appellants of its corporate name the whole "L.C. B[ig] M[ak] B[urger], I[nc]."
which appears on their food packages, signages and advertisements is an infringement of
their trademark "B[ig] M[ac]" which they use to identify [their] double decker sandwich, sold in
a Styrofoam box packaging material with the McDonald's logo of umbrella "M" stamped
thereon, together with the printed mark in red bl[o]ck capital letters, the words being
separated by a single space. Specifically, plaintiffs-appellees argue that defendants-
appellants' use of their corporate name is a colorable imitation of their trademark "Big Mac".

xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the
definition dictates, it is not sufficient that a similarity exists in both names, but that more
importantly, the over-all presentation, or in their essential, substantive and distinctive parts is
such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing
the genuine article. A careful comparison of the way the trademark "B[ig] M[ac]" is being
used by plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-
appellants, would readily reveal that no confusion could take place, or that the ordinary
purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-
appellees' trademark is used to designate only one product, a double decker sandwich sold
in a Styrofoam box with the "McDonalds" logo. On the other hand, what the defendants-
appellants corporation is using is not a trademark for its food product but a business or
corporate name. They use the business name "L.C. Big Mak Burger, Inc." in their restaurant
business which serves diversified food items such as siopao, noodles, pizza, and
sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendants-
appellants' corporate or business name appearing in the food packages and signages are
written in silhouette red-orange letters with the "b" and "m" in upper case letters. Above the
words "Big Mak" are the upper case letter "L.C.". Below the words "Big Mak" are the words
"Burger, Inc." spelled out in upper case letters. Furthermore, said corporate or business
name appearing in such food packages and signages is always accompanied by the
 company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper
case "m" appearing thereinand a blue lower garment. Finally, the defendants-appellants'
food packages are made of plastic material.

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the
appearance of the product and the manner that the tradename "Big Mak" is being used and
presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffs-
appellees' trademark and defendants-appellants' corporate name. Plaintiffs-appellees'
product carrying the trademark "B[ig] M[ac]" is a double decker sandwich (depicted in the
tray mat containing photographs of the various food products xxx sold in a Styrofoam box
with the "McDonald's" logo and trademark in red, bl[o]ck capital letters printed thereon xxx at
a price which is more expensive than the defendants-appellants' comparable food
products. In order to buy a "Big Mac", a customer needs to visit an air-conditioned
"McDonald's" restaurant usually located in a nearby commercial center, advertised and
identified by its logo - the umbrella "M", and its mascot "Ronald McDonald". A typical
McDonald's restaurant boasts of a playground for kids, a second floor to
accommodate additional customers, a drive-thru to allow customers with cars to make orders
without alighting from their vehicles, the interiors of the building are well-lighted, distinctly
decorated and painted with pastel colors xxx. In buying a "B[ig] M[ac]", it is necessary to
specify it by its trademark. Thus, a customer needs to look for a "McDonald's" and enter it
first before he can find a hamburger sandwich which carry the mark "Big Mac". On the other
hand,defendants-appellants sell their goods through snack vans xxxx

Anent the allegation that defendants-appellants are guilty of unfair competition,

We likewise find the same untenable.

Unfair competition is defined as "the employment of deception or any other means contrary
to good faith by which a person shall pass off the goods manufactured by him or in which he
deals, or his business, or service, for those of another who has already established good will
for his similar good, business or services, or any acts calculated to produce the same result"
(Sec. 29, Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must necessarily follow that there was malice
and that the entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that

defendants-appellants deliberately tried to pass off the goods manufactured by them for
those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-
appellants' corporate name with the plaintiffs-appellees' trademark is not sufficient evidence
to conclude unfair competition. Defendants-appellants explained that the name "M[ak]" in
their corporate name was derived from both the first names of the mother and father of
defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up
to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a
settled rule that the law always presumes good faith such that any person who seeks to be
awarded damages due to acts of another has the burden of proving that the latter acted in
bad faith or with ill motive. 21

Petitioners sought reconsideration of the Court of Appeals' Decision but the appellate court denied
their motion in its Resolution of 11 July 2000.
Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS' CORPORATE

NAME "L.C. BIG MAK BURGER, INC." IS NOT A COLORABLE IMITATION OF THE
MCDONALD'S TRADEMARK "BIG MAC", SUCH COLORABLE IMITATION BEING
AN ELEMENT OF TRADEMARK INFRINGEMENT.

A. Respondents use the words "Big Mak" as trademark for their products and not
merely as their business or corporate name.

B. As a trademark, respondents' "Big Mak" is undeniably and unquestionably similar

to petitioners' "Big Mac" trademark based on the dominancy test and the idem
sonans test resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT

SIMILARITY BETWEEN THE MARK "BIG MAK" AND THE WORD MARK "BIG MAC" AS
AN INDICATION OF RESPONDENTS' INTENT TO DECEIVE OR DEFRAUD
FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.22

Petitioners pray that we set aside the Court of Appeals' Decision and reinstate the RTC Decision.

In their Comment to the petition, respondents question the propriety of this petition as it allegedly
raises only questions of fact. On the merits, respondents contend that the Court of Appeals
committed no reversible error in finding them not liable for trademark infringement and unfair
competition and in ordering petitioners to pay damages.

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under
Rule 45.

2. On the merits, (a) whether respondents used the words "Big Mak" not only as part of the corporate
name "L.C. Big Mak Burger, Inc." but also as a trademark for their hamburger products, and (b)
whether respondent corporation is liable for trademark infringement and unfair competition.23

The Court's Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a
petition for review under Section 1 of Rule 45 ("Section 1")24 raising only questions of law. A question
of law exists when the doubt or difference arises on what the law is on a certain state of facts. There
is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. 25
Here, petitioners raise questions of fact and law in assailing the Court of Appeals' findings on
respondent corporation's non-liability for trademark infringement and unfair competition. Ordinarily,
the Court can deny due course to such a petition. In view, however, of the contradictory findings of
fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the
recognized exceptions to Section 1.26 We took a similar course of action in Asia Brewery, Inc. v.
Court of Appeals27 which also involved a suit for trademark infringement and unfair competition in
which the trial court and the Court of Appeals arrived at conflicting findings.

On the Manner Respondents Used

"Big Mak" in their Business

Petitioners contend that the Court of Appeals erred in ruling that the corporate name "L.C. Big Mak
Burger, Inc." appears in the packaging for respondents' hamburger products and not the words "Big
Mak" only.

The contention has merit.

The evidence presented during the hearings on petitioners' motion for the issuance of a writ of
preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for
their hamburger sandwiches bore the words "Big Mak." The other descriptive words "burger" and
"100% pure beef" were set in smaller type, along with the locations of branches.28 Respondents' cash
invoices simply refer to their hamburger sandwiches as "Big Mak."29It is respondents' snack vans that
carry the words "L.C. Big Mak Burger, Inc."30

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for
their hamburger sandwiches relied on by the Court of Appeals.31 Respondents' plastic wrappers and
bags were identical with those petitioners presented during the hearings for the injunctive writ except
that the letters "L.C." and the words "Burger, Inc." in respondents' evidence were added above and
below the words "Big Mak," respectively. Since petitioners' complaint was based on facts existing
before and during the hearings on the injunctive writ, the facts established during those hearings are
the proper factual bases for the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 ("Section 22) of Republic Act No. 166, as amended ("RA 166"), the law applicable to this
case,32 defines trademark infringement as follows:

Infringement, what constitutes. Any person who [1] shall use, without the consent of the
registrant, anyreproduction, counterfeit, copy or colorable imitation of any registered mark or
trade-name in connection withthe sale, offering for sale, or advertising of any goods,
business or services on or in connection with which such use is likely to cause confusion or
mistake or to deceive purchasers or others as to the source or origin of such goods or
services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably
imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used upon or in connection with such goods, business or
services, shall be liable to a civil action by the registrant for any or all of the
remedies herein provided.33

Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly
used, without petitioners' consent, a colorable imitation of the "Big Mac" mark in advertising and
selling respondents' hamburger sandwiches. This likely caused confusion in the mind of the
purchasing public on the source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of
plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable
imitation by the alleged infringer results in "likelihood of confusion."34 Of these, it is the element
of likelihood of confusion that is the gravamen of trademark infringement.35

On the Validity of the "Big Mac"Mark

and McDonald's Ownership of such Mark

A mark is valid if it is "distinctive" and thus not barred from registration under Section 436 of RA 166
("Section 4"). However, once registered, not only the mark's validity but also the registrant's
ownership of the mark is prima facie presumed.37

Respondents contend that of the two words in the "Big Mac" mark, it is only the word "Mac" that is
valid because the word "Big" is generic and descriptive (proscribed under Section 4[e]), and thus
"incapable of exclusive appropriation."38

The contention has no merit. The "Big Mac" mark, which should be treated in its entirety and not
dissected word for word,39 is neither generic nor descriptive. Generic marks are commonly used as
the name or description of a kind ofgoods,40 such as "Lite" for beer41 or "Chocolate Fudge" for
chocolate soda drink.42 Descriptive marks, on the other hand, convey the characteristics, functions,
qualities or ingredients of a product to one who has never seen it or does not know it exists,43 such as
"Arthriticare" for arthritis medication.44 On the contrary, "Big Mac" falls under theclass of fanciful or
arbitrary marks as it bears no logical relation to the actual characteristics of the product it
represents.45 As such, it is highly distinctive and thus valid. Significantly, the trademark "Little Debbie"
for snack cakes was found arbitrary or fanciful.46

The Court also finds that petitioners have duly established McDonald's exclusive ownership of the
"Big Mac" mark. Although Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of
McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to McDonald's. The
Isaiyas Group, on the other hand, registered its trademark only in the Supplemental Register. A
mark which is not registered in the Principal Register, and thus not distinctive, has no real
protection.47 Indeed, we have held that registration in the Supplemental Register is not even a prima
facie evidence of the validity of the registrant's exclusive right to use the mark on the goods specified
in the certificate.48

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation
marks, namely, confusion of goods (product confusion) and confusion of business (source or origin
confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer
Aktiengesellschaft, et al.,49 the Court distinguished these two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the confusion of goods "in which
event the ordinarily prudent purchaser would be induced to purchase one product in the
belief that he was purchasing the other." xxx The other is the confusion of business: "Here
though the goods of the parties are different, the defendant's product is such as might
reasonably be assumed to originate with the plaintiff, and the public would then be deceived
either into that belief or into the belief that there is some connection between the plaintiff and
defendant which, in fact, does not exist."
Under Act No. 666,50 the first trademark law, infringement was limited to confusion of goods only,
when the infringing mark is used on "goods of a similar kind."51 Thus, no relief was afforded to the
party whose registered mark or its colorable imitation is used on different although related goods. To
remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark
infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to
include such use of the mark or its colorable imitation that is likely to result in confusion on "the
source or origin of such goods or services, or identity of such business."52 Thus, while there is
confusion of goods when the products are competing, confusion of business exists when the
products are non-competing but related enough to produce confusion of affiliation.53

On Whether Confusion of Goods and

Confusion of Business are Applicable

Petitioners claim that respondents' use of the "Big Mak" mark on respondents' hamburgers results in
confusion of goods, particularly with respect to petitioners' hamburgers labeled "Big Mac." Thus,
petitioners alleged in their complaint:

1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of
plaintiffs in the McDonald's Marks, particularly the mark "B[ig] M[ac]". Defendants'
unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into
believing that the products and services offered by defendant Big Mak Burger, and the
business it is engaged in, are approved and sponsored by, or affiliated with,
plaintiffs.54 (Emphasis supplied)

Since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that
petitioners' "Big Mac" mark is used, trademark infringement through confusion of goods is a proper
issue in this case.

Petitioners also claim that respondents' use of the "Big Mak" mark in the sale of hamburgers, the
same business that petitioners are engaged in, results in confusion of
business. Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent of plaintiff McDonald's nor its
licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs' exclusive right to
use and/or appropriate the McDonald's marks, defendant Big Mak Burger acting through
individual defendants, has been operating "Big Mak Burger", a fast food restaurant business
dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food
products, and has caused to be printed on the wrapper of defendant's food products and
incorporated in its signages the name "Big Mak Burger", which is confusingly similar
to and/or is a colorable imitation of the plaintiff McDonald's mark "B[ig] M[ac]",
xxx. Defendant Big Mak Burger has thus unjustly created the impression that its
business is approved and sponsored by, or affiliated with, plaintiffs.xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and
infringe upon the property rights of plaintiffs McDonald's and McGeorge as the real owner
and rightful proprietor, and the licensee/franchisee, respectively, of the McDonald's
marks, and which are likely to have caused confusion or deceived the public as to the
true source, sponsorship or affiliation of defendants' food products and restaurant
business, plaintiffs have suffered and continue to suffer actual damages in the form of injury
to their business reputation and goodwill, and of the dilution of the distinctive quality of the
McDonald's marks, in particular, the mark "B[ig] M[ac]".55 (Emphasis supplied)
Respondents admit that their business includes selling hamburger sandwiches, the same food
product that petitioners sell using the "Big Mac" mark. Thus, trademark infringement through
confusion of business is also a proper issue in this case.

Respondents assert that their "Big Mak" hamburgers cater mainly to the low-income group while
petitioners' "Big Mac" hamburgers cater to the middle and upper income groups. Even if this is true,
the likelihood of confusion of business remains, since the low-income group might be led to believe
that the "Big Mak" hamburgers are the low-end hamburgers marketed by petitioners. After all,
petitioners have the exclusive right to use the "Big Mac" mark. On the other hand, respondents
would benefit by associating their low-end hamburgers, through the use of the "Big Mak" mark, with
petitioners' high-end "Big Mac" hamburgers, leading to likelihood of confusion in the identity of
business.

Respondents further claim that petitioners use the "Big Mac" mark only on petitioners' double-decker
hamburgers, while respondents use the "Big Mak" mark on hamburgers and other products like
siopao, noodles and pizza. Respondents also point out that petitioners sell their Big Mac double-
deckers in a styrofoam box with the "McDonald's" logo and trademark in red, block letters at a price
more expensive than the hamburgers of respondents. In contrast, respondents sell their Big Mak
hamburgers in plastic wrappers and plastic bags. Respondents further point out that petitioners'
restaurants are air-conditioned buildings with drive-thru service, compared to respondents' mobile
vans.

These and other factors respondents cite cannot negate the undisputed fact that respondents use
their "Big Mak" mark on hamburgers, the same food product that petitioners' sell with the use of their
registered mark "Big Mac." Whether a hamburger is single, double or triple-decker, and whether
wrapped in plastic or styrofoam, it remains the same hamburger food product. Even respondents'
use of the "Big Mak" mark on non-hamburger food products cannot excuse their infringement of
petitioners' registered mark, otherwise registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different
segments of the market, and at different price levels depending on variations of the products for
specific segments of the market. The Court has recognized that the registered trademark owner
enjoys protection in product and market areas that are the normal potential expansion of his
business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not
limited to guarding his goods or business from actual market competition with identical or
similar products of the parties, but extends to all cases in which the use by a junior
appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as
where prospective purchasers would be misled into thinking that the complaining party has
extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is
in any way connected with the activities of the infringer; or when it forestalls the normal
potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).56 (Emphasis
supplied)

On Whether Respondents' Use of the "Big Mak"

Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test
and the holistic test.57 The dominancy test focuses on the similarity of the prevalent features of the
competing trademarks that might cause confusion. In contrast, the holistic test requires the court to
consider the entirety of the marks as applied to the products, including the labels and packaging,
in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use
of respondents' "Big Mak" mark on hamburgers, relied on the holistic test. Thus, the Court of
Appeals ruled that "it is not sufficientthat a similarity exists in both name(s), but that more
importantly, the overall presentation, or in their essential, substantive and distinctive parts is such as
would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine
article." The holistic test considers the two marks in their entirety, as they appear on the goods with
their labels and packaging. It is not enough to consider their words and compare the spelling and
pronunciation of the words.58

Respondents now vigorously argue that the Court of Appeals' application of the holistic test to this
case is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy
test considers the dominant features in the competing marks in determining whether they are
confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the
appearance of the product arising from the adoption of the dominant features of the registered mark,
disregarding minor differences.59 Courts will consider more the aural and visual impressions created
by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and
market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,60 the Court ruled:

xxx It has been consistently held that the question of infringement of a trademark is to
be determined by the test of dominancy. Similarity in size, form and color, while relevant, is
not conclusive. If the competing trademark contains the main or essential or dominant
features of another, and confusion and deception is likely to result, infringement takes
place. Duplication or imitation is not necessary; nor is it necessary that the infringing label
should suggest an effort to imitate. (G. Heilman Brewing Co. vs. 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. Honover Rubber Co., 107 F. 2d 588; xxx)
(Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 Phil. Nut Industry,
Inc. v. Standard Brands Inc.,62 Converse Rubber Corporation v. Universal Rubber Products,
Inc.,63 and Asia Brewery, Inc. v. Court of Appeals.64 In the 2001 case of Societe Des Produits
Nestl, S.A. v. Court of Appeals,65 the Court explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on
trademarks and unfair competition that confusing similarity is to be determined on the
basis of visual, aural, connotative comparisons and overall impressions engendered by the
marks in controversy as they are encountered in the realities of the marketplace.
(Emphasis supplied)

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual
Property Code which defines infringement as the "colorable imitation of a registered mark xxx or
a dominant feature thereof."
Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in
likelihood of confusion. First, "Big Mak" sounds exactly the same as "Big Mac." Second, the first
word in "Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in
"Mak" are the same as the first two letters in "Mac." Fourth, the last letter in "Mak" while a "k" sounds
the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in
spelling, thus "Caloocan" is spelled "Kalookan."

In short, aurally the two marks are the same, with the first word of both marks phonetically the same,
and the second word of both marks also phonetically the same. Visually, the two marks
have both two words and six letters, with the first word of both marks having the same letters and the
second word having the same first two letters. In spelling, considering the Filipino language, even
the last letters of both marks are the same.

Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the
features of "Big Mac." Applied to the same food product of hamburgers, the two marks will likely
result in confusion in the public mind.

The Court has taken into account the aural effects of the words and letters contained in the marks
in determining the issue of confusing similarity. Thus, in Marvex Commercial Co., Inc. v. Petra
Hawpia & Co., et al.,66 the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled
from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that
"SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop";
"Jantzen" and "Jass-Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite";
"Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe"
and "Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-
Mark Law and Practice", pp. 419-421, cities, as coming within the purview of the idem
sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-
Up" and "Lemon-Up". In Co Tiong vs. Director of Patents, this Court unequivocally said that
"Celdura" and "Cordura" are confusingly similar in sound; this Court held in Sapolin Co. vs.
Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark
"Sapolin", as the sound of the two names is almost the same. (Emphasis supplied)

Certainly, "Big Mac" and "Big Mak" for hamburgers create even greater confusion, not only aurally
but also visually.

Indeed, a person cannot distinguish "Big Mac" from "Big Mak" by their sound. When one hears a
"Big Mac" or "Big Mak" hamburger advertisement over the radio, one would not know whether the
"Mac" or "Mak" ends with a "c" or a "k."

Petitioners' aggressive promotion of the "Big Mac" mark, as borne by their advertisement expenses,
has built goodwill and reputation for such mark making it one of the easily recognizable marks in the
market today. This increases the likelihood that consumers will mistakenly associate petitioners'
hamburgers and business with those of respondents'.

Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their
hamburger sandwiches indicates their intent to imitate petitioners' "Big Mac" mark. Contrary to the
Court of Appeals' finding, respondents' claim that their "Big Mak" mark was inspired by the first
names of respondent Dy's mother (Maxima) and father (Kimsoy) is not credible. As petitioners well
noted:
 [R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more
creative choice for a corporate name by using the names of his parents, especially since he
was allegedly driven by sentimental reasons. For one, he could have put his father's name
ahead of his mother's, as is usually done in this patriarchal society, and derived letters from
said names in that order. Or, he could have taken an equal number of letters (i.e., two) from
each name, as is the more usual thing done. Surely, the more plausible reason behind
Respondents' choice of the word "M[ak]", especially when taken in conjunction with the word
"B[ig]", was their intent to take advantage of Petitioners' xxx "B[ig] M[ac]" trademark, with
their allegedsentiment-focused "explanation" merely thought of as a
convenient, albeit unavailing, excuse or defense for such an unfair choice of name.67

Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was
fortuitous,68 the inescapable conclusion is that respondents adopted the "Big Mak" mark to "ride on
the coattails" of the more established "Big Mac" mark.69 This saves respondents much of the expense
in advertising to create market recognition of their mark and hamburgers.70

Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners' claim of
trademark infringement.

On the Lack of Proof of

Actual Confusion

Petitioners' failure to present proof of actual confusion does not negate their claim of trademark
infringement. As noted in American Wire & Cable Co. v. Director of Patents,71 Section
22 requires the less stringent standard of "likelihood of confusion" only. While proof
of actual confusion is the best evidence of infringement, its absence is inconsequential.72

On the Issue of Unfair Competition

Section 29 ("Section 29")73 of RA 166 defines unfair competition, thus:

xxxx

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

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

(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words thereon, or
in any 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 shalldeceive the public and defraud another of his legitimate trade,
or any subsequent vendor of such goods or any agent of any vendor engaged in selling such
goods with a like purpose;
 (b) Any person who by any artifice, or device, or who employs any other means calculated to
induce the false belief that such person is offering the services of another who has identified
such services in the mind of the public; or

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

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.74 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.75 Actual fraudulent intent need not be shown.76

Unfair competition is broader than trademark infringement and includes passing off goods with or
without trademark infringement. Trademark infringement is a form of unfair competition.77 Trademark
infringement constitutes unfair competition when there is not merely likelihood of confusion, but
also actual or probable deception on the public because of the general appearance of the goods.
There can be trademark infringement without unfair competition as when the infringer discloses on
the labels containing the mark that he manufactures the goods, thus preventing the public from
being deceived that the goods originate from the trademark owner.78

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed
off their hamburgers as "Big Mac" hamburgers. Petitioners add that respondents' fraudulent intent
can be inferred from the similarity of the marks in question.79

Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors.80 Thus, the defendant gives his goods the
general appearance of the goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor.

The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark "B[ig] M[ac]" is used by plaintiff McDonald's to identify its double decker hamburger
sandwich. The packaging material is a styrofoam box with the McDonald's logo and
trademark in red with block capital letters printed on it. All letters of the "B[ig] M[ac]" mark are
also in red and block capital letters. On the other hand,defendants' "B[ig] M[ak]" script print is
in orange with only the letter "B" and "M" being capitalized and the packaging material
is plastic wrapper. xxxx Further, plaintiffs' logo and mascot are the umbrella "M" and "Ronald
McDonald's", respectively, compared to the mascot of defendant Corporation which is a
chubby boy called "Macky" displayed or printed between the words "Big" and
"Mak."81 (Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the
general appearance of petitioners' "Big Mac" hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in the words that
give respondents' "Big Mak" hamburgers the general appearance of petitioners' "Big Mac"
hamburgers. Section 29(a) expressly provides that the similarity in the general appearance of the
goods may be in the "devices or words" used on the wrappings. Respondents have applied on their
plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. What
attracts the attention of the buying public are the words "Big Mak" which are almost the same, aurally
and visually, as the words "Big Mac." The dissimilarities in the material and other devices are
insignificant compared to the glaring similarity in the words used in the wrappings.

Section 29(a) also provides that the defendant gives "his goods the general appearance of goods of
another manufacturer." Respondents' goods are hamburgers which are also the goods of petitioners.
If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the "Big
Mak" mark would not give their goods the general appearance of petitioners' "Big Mac" hamburgers.
In such case, there is only trademark infringement but no unfair competition. However, since
respondents chose to apply the "Big Mak" mark on hamburgers, just like petitioner's use of the "Big
Mac" mark on hamburgers, respondents have obviously clothed their goods with the general
appearance of petitioners' goods.

Moreover, there is no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big
Mak Burger, Inc." Respondents introduced during the trial plastic wrappers and bags with the words
"L.C. Big Mak Burger, Inc." to inform the public of the name of the seller of the
hamburgers. However, petitioners introduced during the injunctive hearings plastic wrappers and
bags with the "Big Mak" mark without the name "L.C. Big Mak Burger, Inc." Respondents' belated
presentation of plastic wrappers and bags bearing the name of "L.C. Big Mak Burger, Inc." as the
seller of the hamburgers is an after-thought designed to exculpate them from their unfair business
conduct. As earlier stated, we cannot consider respondents' evidence since petitioners' complaint
was based on facts existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C.
Big Mak Burger, Inc." and not those of petitioners who have the exclusive right to the "Big Mac"
mark. This clearly shows respondents' intent to deceive the public. Had respondents' placed a notice
on their plastic wrappers and bags that the hamburgers are sold by "L.C. Big Mak Burger, Inc.", then
they could validly claim that they did not intend to deceive the public. In such case, there is only
trademark infringement but no unfair competition.82 Respondents, however, did not give such notice.
We hold that as found by the RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 2383 ("Section 23") in relation to Section 29 of RA 166, a plaintiff who successfully
maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary
reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in
its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor
of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by
respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of
respondent corporation's gross sales for three (1988-1989 and 1991) of the six years (1984-1990)
respondents have used the "Big Mak" mark.84

The RTC also did not err in awarding exemplary damages by way of correction for the public
good85 in view of the finding of unfair competition where intent to deceive the public is essential. The
award of attorney's fees and expenses of litigation is also in order.86

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November
1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision
dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C.
Big Mak Burger, Inc. liable for trademark infringement and unfair competition.
SO ORDERED.

Davide, C.J. (Chairman), Quisumbing, Ynares-Santiago and Azcuna, JJ., concur.

 FIRST DIVISION

G.R. No. 112012 April 4, 2001

SOCIETE DES PRODUITS NESTLE, S.A. and NESTLE PHILIPPINES, INC., petitioners,
vs.
COURT OF APPEALS and CFC CORPORATION., respondents.

YNARES-SANTIAGO, J.:

This is a petition for review assailing the Decision of the Court of Appeals in CA-G.R. SP No.
24101,1 reversing and setting aside the decision of the Bureau of Patents, Trademarks and
Technology Transfer (BPTTT),2 which denied private respondents application for registration of the
trade-mark, FLAVOR MASTER.

On January 18, 1984, private respondent CFC Corporation filed with the BPTTT an application for
the registration of the trademark "FLAVOR MASTER" for instant coffee, under Serial No. 52994. The
application, as a matter of due course, was published in the July 18, 1988 issue of the BPTTTs
Official Gazette.

Petitioner Societe Des Produits Nestle, S.A., a Swiss company registered under Swiss laws and
domiciled in Switzerland, filed an unverified Notice of Opposition,3 claiming that the trademark of
private respondents product is "confusingly similar to its trademarks for coffee and coffee extracts,
to wit: MASTER ROAST and MASTER BLEND."

Likewise, a verified Notice of Opposition was filed by Nestle Philippines, Inc., a Philippine
corporation and a licensee of Societe Des Produits Nestle S.A., against CFCs application for
registration of the trademark FLAVOR MASTER.4Nestle claimed that the use, if any, by CFC of the
trademark FLAVOR MASTER and its registration would likely cause confusion in the trade; or
deceive purchasers and would falsely suggest to the purchasing public a connection in the business
of Nestle, as the dominant word present in the three (3) trademarks is "MASTER"; or that the goods
of CFC might be mistaken as having originated from the latter.

In answer to the two oppositions, CFC argued that its trademark, FLAVOR MASTER, is not
confusingly similar with the formers trademarks, MASTER ROAST and MASTER BLEND, alleging
that, "except for the word MASTER (which cannot be exclusively appropriated by any person for
being a descriptive or generic name), the other words that are used respectively with said word in
the three trademarks are very different from each other in meaning, spelling, pronunciation, and
sound". CFC further argued that its trademark, FLAVOR MASTER, "is clearly very different from any
of Nestles alleged trademarks MASTER ROAST and MASTER BLEND, especially when the marks
are viewed in their entirety, by considering their pictorial representations, color schemes and the
letters of their respective labels."

In its Decision No. 90-47 dated December 27, 1990, the BPTTT denied CFCs application for
registration.5 CFC elevated the matter to the Court of Appeals, where it was docketed as CA-G.R.
SP No. 24101.

The Court of Appeals defined the issue thus: "Does appellant CFCs trade dress bear a striking
resemblance with appellees trademarks as to create in the purchasing publics mind the mistaken
impression that both coffee products come from one and the same source?"
As stated above, the Court of Appeals, in the assailed decision dated September 23, 1993, reversed
Decision No. 90-47 of the BPTTT and ordered the Director of Patents to approve CFCs application.
The Court of Appeals ruled:

Were We to take even a lackadaisical glance at the overall appearance of the contending
marks, the physical discrepancies between appellant CFCs and appellees respective logos
are so ostensible that the casual purchaser cannot likely mistake one for the other. Appellant
CFCs label (Exhibit "4") is predominantly a blend of dark and lighter shade of orange where
the words "FLAVOR MASTER", "FLAVOR" appearing on top of "MASTER", shaded in
mocha with thin white inner and outer sidings per letter and identically lettered except for the
slightly protruding bottom curve of the letter "S" adjoining the bottom tip of the letter "A" in the
word "MASTER", are printed across the top of a simmering red coffee cup. Underneath
"FLAVOR MASTER" appears "Premium Instant Coffee" printed in white, slim and slanted
letters. Appellees "MASTER ROAST" label (Exhibit "7"), however, is almost double the width
of appellant CFCs. At the top is printed in brown color the word "NESCAFE" against a white
backdrop. Occupying the center is a square-shaped configuration shaded with dark brown
and picturing a heap of coffee beans, where the word "MASTER" is inscribed in the middle.
"MASTER" in appellees label is printed in taller capital letters, with the letter "M" further
capitalized. The letters are shaded with red and bounded with thin gold-colored inner and
outer sidings. Just above the word "MASTER" is a red window like portrait of what appears
to be a coffee shrub clad in gold. Below the "MASTER" appears the word "ROAST"
impressed in smaller, white print. And further below are the inscriptions in white: "A selection
of prime Arabica and Robusta coffee." With regard to appellees "MASTER BLEND" label
(Exhibit "6") of which only a xeroxed copy is submitted, the letters are bolder and taller as
compared to appellant CFCs and the word "MASTER" appears on top of the word "BLEND"
and below it are the words "100% pure instant coffee" printed in small letters.

From the foregoing description, while the contending marks depict the same product, the
glaring dissimilarities in their presentation far outweigh and dispel any aspect of similitude.
To borrow the words of the Supreme Court in American Cyanamid Co. v. Director of Patents
(76 SCRA 568), appellant CFCs and appellees labels are entirely different in size,
background, colors, contents and pictorial arrangement; in short, the general appearances of
the labels bearing the respective trademarks are so distinct from each other that appellees
cannot assert that the dominant features, if any, of its trademarks were used or appropriated
in appellant CFCs own. The distinctions are so well-defined so as to foreclose any
probability or likelihood of confusion or deception on the part of the normally intelligent buyer
when he or she encounters both coffee products at the grocery shelf. The answer therefore
to the query is a clear-cut NO.6

Petitioners are now before this Court on the following assignment of errors:

1. RESPONDENT COURT GRAVELY ERRED IN REVERSING AND SETTING ASIDE THE

DECISION (NO. 90-47) OF THE DIRECTOR OF THE BUREAU OF PATENTS,
TRADEMARKS AND TECHNOLOGY TRANSFER (BPTTT) DATED DECEMBER 27, 1990.

2. RESPONDENT COURT ERRED IN FINDING THAT APPELLANT CFCS TRADE DRESS

IS BEYOND THE SCOPE OF THE PROSCRIPTION LAID DOWN BY JURISPRUDENCE
AND THE TRADEMARK LAW.

3. RESPONDENT COURT ERRED IN HOLDING THAT THE TOTALITY RULE, RATHER

THAN THE TEST OF DOMINANCY, APPLIES TO THE CASE.
 4. RESPONDENT COURT ERRED IN INVOKING THE TOTALITY RULE APPLIED IN THE
CASES OF BRISTOL MYERS V. DIRECTOR OF PATENTS, ET AL. (17 SCRA 128), MEAD
JOHNSON & CO. V. NVJ VAN DORF LTD., (7 SCRA 768) AND AMERICAN CYANAMID
CO. V. DIRECTOR OF PATENTS (76 SCRA 568).

The petition is impressed with merit.

A trademark has been generally defined as "any word, name, symbol or device adopted and used by
a manufacturer or merchant to identify his goods and distinguish them from those manufactured and
sold by others."7

A manufacturers trademark is entitled to protection. As Mr. Justice Frankfurter observed in the case
of Mishawaka Mfg. Co. v. Kresge Co.:8

The protection of trade-marks is the laws recognition of the psychological function of

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

Section 4 (d) of Republic Act No. 166 or the Trademark Law, as amended, which was in force at the
time, provides thus:

Registration of trade-marks, trade-names and service-marks on the principal register. - There

is hereby established a register of trade-marks, trade-names and service marks which shall
be known as the principal register. The owner of a trade-mark, trade-name or service-mark
used to distinguish his goods, business or services from the goods, business or services of
others shall have the right to register the same on the principal register, unless it:

xxx xxx xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-

name registered in the Philippines or a mark or trade-name 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 purchasers;

xxx xxx xxx

(Emphasis supplied)

The law prescribes a more stringent standard in that there should not only be confusing similarity but
that it should not likely cause confusion or mistake or deceive purchasers.

Hence, the question in this case is whether there is a likelihood that the trademark FLAVOR
MASTER may cause confusion or mistake or may deceive purchasers that said product is the same
or is manufactured by the same company. In other words, the issue is whether the trademark
FLAVOR MASTER is a colorable imitation of the trademarks MASTER ROAST and MASTER
BLEND.

Colorable imitation denotes such a close or ingenious imitation as to be calculated to deceive

ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving
such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be
the other.9 In determining if colorable imitation exists, jurisprudence has developed two kinds of tests
- the Dominancy Test and the Holistic Test.10 The test of dominancy focuses on the similarity of the
prevalent features of the competing trademarks which might cause confusion or deception and thus
constitute infringement. 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.11

In the case at bar, the Court of Appeals held that:

The determination of whether two trademarks are indeed confusingly similar must be taken
from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in
buying the more common and less expensive household products like coffee, and are
therefore less inclined to closely examine specific details of similarities and dissimilarities
between competing products. The Supreme Court in Del Monte Corporation v. CA, 181
SCRA 410, held that:

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

From this perspective, the test of similarity is to consider the two marks in their entirety, as
they appear in the respective labels, in relation to the goods to which they are attached
(Bristol Myers Company v. Director of Patents, et al., 17 SCRA 128, citing Mead Johnson &
Co. v. NVJ Van Dorp, Ltd., et al., 7 SCRA 768). The mark must be considered as a whole
and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not
usually to any part of it (Del Monte Corp. v. CA, supra), as what appellees would want it to be
when they essentially argue that much of the confusion springs from appellant CFCs use of
the word "MASTER" which appellees claim to be the dominant feature of their own
trademarks that captivates the prospective consumers. Be it further emphasized that 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 (Mead Johnson & Co. v. NVJ Van Dorp, Ltd., supra).12

The Court of Appeals applied some judicial precedents which are not on all fours with this case. It
must be emphasized that in infringement or trademark cases in the Philippines, particularly in
ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no
set rules can be deduced. Each case must be decided on its own merits.13 In Esso Standard, Inc. v.
Court of Appeals,14 we ruled that the likelihood of confusion is a relative concept; to be determined
only according to the particular, and sometimes peculiar, circumstances of each case. In trademark
cases, even more than in any other litigation, precedent must be studied in light of the facts of the
particular case. The wisdom of the likelihood of confusion test lies in its recognition that each
trademark infringement case presents its own unique set of facts. Indeed, the complexities attendant
to an accurate assessment of likelihood of confusion require that the entire panoply of elements
constituting the relevant factual landscape be comprehensively examined.15

The Court of Appeals application of the case of Del Monte Corporation v. Court of Appeals16 is,
therefore, misplaced. In Del Monte, the issue was about the alleged similarity of Del Montes logo
with that of Sunshine Sauce Manufacturing Industries. Both corporations market the catsup product
which is an inexpensive and common household item.

Since Del Monte alleged that Sunshines logo was confusingly similar to or was a colorable imitation
of the formers logo, there was a need to go into the details of the two logos as well as the shapes of
the labels or marks, the brands printed on the labels, the words or lettering on the labels or marks
and the shapes and colors of the labels or marks. The same criteria, however, cannot be applied in
the instant petition as the facts and circumstances herein are peculiarly different from those in
the Del Monte case.

In the same manner, the Court of Appeals erred in applying the totality rule as defined in the cases
of Bristol Myers v. Director of Patents;17 Mead Johnson & Co. v. NVJ Van Dorf Ltd.;18 and American
Cyanamid Co. v. Director of Patents.19 The totality rule states that "the test is not simply to take their
words and compare the spelling and pronunciation of said words. In determining whether two
trademarks are confusingly similar, the two marks in their entirety as they appear in the respective
labels must 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
on both labels."20

As this Court has often declared, each case must be studied according to the peculiar circumstances
of each case. That is the reason why in trademark cases, jurisprudential precedents should be
applied only to a case if they are specifically in point.

In the above cases cited by the Court of Appeals to justify the application of the totality or holistic test
to this instant case, the factual circumstances are substantially different. In the Bristol Myers case,
this Court held that although both BIOFERIN and BUFFERIN are primarily used for the relief of pains
such as headaches and colds, and their names are practically the same in spelling and
pronunciation, both labels have strikingly different backgrounds and surroundings. In addition, one is
dispensable only upon doctors prescription, while the other may be purchased over-the-counter.

In the Mead Johnson case, the differences between ALACTA and ALASKA are glaring and striking
to the eye. Also, ALACTA refers to "Pharmaceutical Preparations which Supply Nutritional Needs,"
falling under Class 6 of the official classification of Medicines and Pharmaceutical Preparations to be
used as prescribed by physicians. On the other hand, ALASKA refers to "Foods and Ingredients of
Foods" falling under Class 47, and does not require medical prescription.

In the American Cyanamid case, the word SULMET is distinguishable from the word SULMETINE,
as the former is derived from a combination of the syllables "SUL" which is derived from sulfa and
"MET" from methyl, both of which are chemical compounds present in the article manufactured by
the contending parties. This Court held that the addition of the syllable "INE" in respondents label is
sufficient to distinguish respondents product or trademark from that of petitioner. Also, both products
are for medicinal veterinary use and the buyer will be more wary of the nature of the product he is
buying. In any case, both products are not identical as SULMETs label indicates that it is used in a
drinking water solution while that of SULMETINE indicates that they are tablets.

It cannot also be said that the products in the above cases can be bought off the shelf except,
perhaps, for ALASKA. The said products are not the usual "common and inexpensive" household
items which an "undiscerningly rash" buyer would unthinkingly buy.In the case at bar, other than the
fact that both Nestles and CFCs products are inexpensive and common household items, the
similarity ends there. What is being questioned here is the use by CFC of the trademark MASTER.
In view of the difficulty of applying jurisprudential precedents to trademark cases due to the
peculiarity of each case, judicial fora should not readily apply a certain test or standard just because
of seeming similarities. As this Court has pointed above, there could be more telling differences than
similarities as to make a jurisprudential precedent inapplicable.

Nestle points out that the dominancy test should have been applied to determine whether there is a
confusing similarity between CFCs FLAVOR MASTER and Nestles MASTER ROAST and
MASTER BLEND.

We agree.

As the Court of Appeals itself has stated, "[t]he determination of whether two trademarks are indeed
confusingly similar must be taken from the viewpoint of the ordinary purchasers who are, in general,
undiscerningly rash in buying the more common and less expensive household products like coffee,
and are therefore less inclined to closely examine specific details of similarities and dissimilarities
between competing products."21

The basis for the Court of Appeals application of the totality or holistic test is the "ordinary
purchaser" buying the product under "normally prevalent conditions in trade" and the attention such
products normally elicit from said ordinary purchaser. An ordinary purchaser or buyer does not
usually make such scrutiny nor does he usually have the time to do so. The average shopper is
usually in a hurry and does not inspect every product on the shelf as if he were browsing in a
library.22

The Court of Appeals held that the test to be applied should be the totality or holistic test reasoning,
since what is of paramount consideration is the ordinary purchaser who is, in general, undiscerningly
rash in buying the more common and less expensive household products like coffee, and is
therefore less inclined to closely examine specific details of similarities and dissimilarities between
competing products.

This Court cannot agree with the above reasoning. If the ordinary purchaser is "undiscerningly rash"
in buying such common and inexpensive household products as instant coffee, and would therefore
be "less inclined to closely examine specific details of similarities and dissimilarities" between the
two competing products, then it would be less likely for the ordinary purchaser to notice that CFCs
trademark FLAVOR MASTER carries the colors orange and mocha while that of Nestles uses red
and brown. The application of the totality or holistic test is improper since the ordinary purchaser
would not be inclined to notice the specific features, similarities or dissimilarities, considering that the
product is an inexpensive and common household item.

It must be emphasized that the products bearing the trademarks in question are "inexpensive and
common" household items bought off the shelf by "undiscerningly rash" purchasers. As such, if the
ordinary purchaser is "undiscerningly rash", then he would not have the time nor the inclination to
make a keen and perceptive examination of the physical discrepancies in the trademarks of the
products in order to exercise his choice.

While this Court agrees with the Court of Appeals detailed enumeration of differences between the
respective trademarks of the two coffee products, this Court cannot agree that totality test is the one
applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this
case in light of its peculiar factual milieu.
Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks
and unfair competition that confusing similarity is to be determined on the basis of visual, aural,
connotative comparisons and overall impressions engendered by the marks in controversy as they
are encountered in the realities of the marketplace.23 The totality or holistic test only relies on visual
comparison between two trademarks whereas the dominancy test relies not only on the visual but
also on the aural and connotative comparisons and overall impressions between the two
trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held
that:

From the evidence at hand, it is sufficiently established that the word MASTER is the
dominant feature of opposers mark. The word MASTER is printed across the middle portion
of the label in bold letters almost twice the size of the printed word ROAST. Further, the word
MASTER has always been given emphasis in the TV and radio commercials and other
advertisements made in promoting the product. This can be gleaned from the fact that
Robert Jaworski and Atty. Ric Puno Jr.., the personalities engaged to promote the product,
are given the titles Master of the Game and Master of the Talk Show, respectively. In due
time, because of these advertising schemes the mind of the buying public had come to learn
to associate the word MASTER with the opposers goods.

x x x. It is the observation of this Office that much of the dominance which the word MASTER
has acquired through Opposers advertising schemes is carried over when the same is
incorporated into respondent-applicants trademark FLAVOR MASTER. Thus, when one
looks at the label bearing the trademark FLAVOR MASTER (Exh. 4) ones attention is easily
attracted to the word MASTER, rather than to the dissimilarities that exist. Therefore, the
possibility of confusion as to the goods which bear the competing marks or as to the origins
thereof is not farfetched. x x x.24

In addition, the word "MASTER" is neither a generic nor a descriptive term. As such, said term can
not be invalidated as a trademark and, therefore, may be legally protected. Generic terms25 are those
which constitute "the common descriptive name of an article or substance," or comprise the "genus
of which the particular product is a species," or are "commonly used as the name or description of a
kind of goods," or "imply reference to every member of a genus and the exclusion of individuating
characters," or "refer to the basic nature of the wares or services provided rather than to the more
idiosyncratic characteristics of a particular product," and are not legally protectable. On the other
hand, a term is descriptive26 and therefore invalid as a trademark if, as understood in its normal and
natural sense, it "forthwith conveys the characteristics, functions, qualities or ingredients of a product
to one who has never seen it and does not know what it is," or "if it forthwith conveys an immediate
idea of the ingredients, qualities or characteristics of the goods," or if it clearly denotes what goods
or services are provided in such a way that the consumer does not have to exercise powers of
perception or imagination.

Rather, the term "MASTER" is a suggestive term brought about by the advertising scheme of Nestle.
Suggestive terms27 are those which, in the phraseology of one court, require "imagination, thought
and perception to reach a conclusion as to the nature of the goods." Such terms, "which subtly
connote something about the product," are eligible for protection in the absence of secondary
meaning. While suggestive marks are capable of shedding "some light" upon certain characteristics
of the goods or services in dispute, they nevertheless involve "an element of incongruity,"
"figurativeness," or " imaginative effort on the part of the observer."
This is evident from the advertising scheme adopted by Nestle in promoting its coffee products. In
this case, Nestle has, over time, promoted its products as "coffee perfection worthy of masters like
Robert Jaworski and Ric Puno Jr."

In associating its coffee products with the term "MASTER" and thereby impressing them with the
attributes of said term, Nestle advertised its products thus:

Robert Jaworski. Living Legend. A true hard court hero. Fast on his feet. Sure in every shot
he makes. A master strategist. In one word, unmatched.

MASTER ROAST. Equally unmatched. Rich and deeply satisfying. Made from a unique
combination of the best coffee beans - Arabica for superior taste and aroma, Robusta for
strength and body. A masterpiece only NESCAFE, the worlds coffee masters, can create.

MASTER ROAST. Coffee perfection worthy of masters like Robert Jaworski.28

In the art of conversation, Ric Puno Jr. is master. Witty. Well-informed. Confident.

In the art of coffee-making, nothing equals Master Roast, the coffee masterpiece from
Nescafe, the worlds coffee masters. A unique combination of the best coffee beans -
Arabica for superior taste and aroma, Robusta for strength and body. Truly distinctive and
rich in flavor.

Master Roast. Coffee perfection worthy of masters like Ric Puno Jr.29

The term "MASTER", therefore, has acquired a certain connotation to mean the coffee products
MASTER ROAST and MASTER BLEND produced by Nestle. As such, the use by CFC of the term
"MASTER" in the trademark for its coffee product FLAVOR MASTER is likely to cause confusion or
mistake or even to deceive the ordinary purchasers.

In closing, it may not be amiss to quote the case of American Chicle Co. v. Topps Chewing Gum,
Inc.,30 to wit:

Why it should have chosen a mark that had long been employed by [plaintiff] and had
become known to the trade instead of adopting some other means of identifying its goods is
hard to see unless there was a deliberate purpose to obtain some advantage from the trade
that [plaintiff] had built up. Indeed, it is generally true that, as soon as we see that a second
comer in a market has, for no reason that he can assign, plagiarized the "make-up" of an
earlier comer, we need no more; . . . [W]e feel bound to compel him to exercise his ingenuity
in quarters further afield.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. SP No.
24101 is REVERSED and SET ASIDE and the decision of the Bureau of Patents, Trademarks and
Technology Transfer in Inter Partes Cases Nos. 3200 and 3202 is REINSTATED.

SO ORDERED.

Davide, Jr., C.J. (Chairman), Kapunan, and Pardo, JJ., concur.

Puno J., on official leave.
 FIRST DIVISION

G.R. No. 166115 February 2, 2007

McDONALDS CORPORATION, Petitioner,

vs.
MACJOY FASTFOOD CORPORATION, Respondent.

DECISION

GARCIA, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, herein petitioner
McDonalds Corporation seeks the reversal and setting aside of the following issuances of the Court
of Appeals (CA) in CA-G.R. SP No. 57247, to wit:

1. Decision dated 29 July 20041 reversing an earlier decision of the Intellectual Property
Office (IPO) which rejected herein respondent MacJoy FastFood Corporations application
for registration of the trademark "MACJOY & DEVICE"; and

2. Resolution dated 12 November 20042 denying the petitioners motion for reconsideration.

As culled from the record, the facts are as follows:

On 14 March 1991, respondent MacJoy Fastfood Corporation, a domestic corporation engaged in

the sale of fast food products in Cebu City, filed with the then Bureau of Patents, Trademarks and
Technology Transfer (BPTT), now the Intellectual Property Office (IPO), an application, thereat
identified as Application Serial No. 75274, for the registration of the trademark "MACJOY & DEVICE"
for fried chicken, chicken barbeque, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo
and steaks under classes 29 and 30 of the International Classification of Goods.

Petitioner McDonalds Corporation, a corporation duly organized and existing under the laws of the
State of Delaware, USA, filed a verified Notice of Opposition3 against the respondents application
claiming that the trademark "MACJOY & DEVICE" so resembles its corporate logo, otherwise known
as the Golden Arches or "M" design, and its marks "McDonalds," McChicken," "MacFries," "BigMac,"
"McDo," "McSpaghetti," "McSnack," and "Mc," (hereinafter collectively known as the MCDONALDS
marks) such that when used on identical or related goods, the trademark applied for would confuse
or deceive purchasers into believing that the goods originate from the same source or origin.
Likewise, the petitioner alleged that the respondents use and adoption in bad faith of the "MACJOY
& DEVICE" mark would falsely tend to suggest a connection or affiliation with petitioners restaurant
services and food products, thus, constituting a fraud upon the general public and further cause the
dilution of the distinctiveness of petitioners registered and internationally recognized MCDONALDS
marks to its prejudice and irreparable damage. The application and the opposition thereto was
docketed as Inter Partes Case No. 3861.

Respondent denied the aforementioned allegations of the petitioner and averred that it has used the
mark "MACJOY" for the past many years in good faith and has spent considerable sums of money
for said marks extensive promotion in tri-media, especially in Cebu City where it has been doing
business long before the petitioner opened its outlet thereat sometime in 1992; and that its use of
said mark would not confuse affiliation with the petitioners restaurant services and food products
because of the differences in the design and detail of the two (2) marks.
In a decision4 dated December 28, 1998, the IPO, ratiocinating that the predominance of the letter
"M," and the prefixes "Mac/Mc" in both the "MACJOY" and the "MCDONALDS" marks lead to the
conclusion that there is confusing similarity between them especially since both are used on almost
the same products falling under classes 29 and 30 of the International Classification of Goods, i.e.,
food and ingredients of food, sustained the petitioners opposition and rejected the respondents
application, viz:

WHEREFORE, the Opposition to the registration of the mark MACJOY & DEVICE for use in fried
chicken and chicken barbecue, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo, and
steaks is, as it is hereby, SUSTAINED. Accordingly, Application Serial No. 75274 of the herein
Respondent-Applicant is REJECTED.

Let the filewrapper of MACJOY subject matter of this case be sent to the Administrative, Financial
and Human Resources Development Bureau for appropriate action in accordance with this Decision,
with a copy to be furnished the Bureau of Trademarks for information and to update its record.

SO ORDERED.

In time, the respondent moved for a reconsideration but the IPO denied the motion in its Order5 of
January 14, 2000.

Therefrom, the respondent went to the CA via a Petition for Review with prayer for Preliminary
Injunction6 under Rule 43 of the Rules of Court, whereat its appellate recourse was docketed as CA-
G.R. SP No. 57247.

Finding no confusing similarity between the marks "MACJOY" and "MCDONALDS," the CA, in its
herein assailed Decision7 dated July 29, 2004, reversed and set aside the appealed IPO decision
and order, thus:

WHEREFORE, in view of the foregoing, judgment is hereby rendered by us REVERSING and

SETTING ASIDE the Decision of the IPO dated 28 December 1998 and its Order dated 14 January
2000 and ORDERING the IPO to give due course to petitioners Application Serial No. 75274.

SO ORDERED.

Explains the CA in its decision:

xxx, it is clear that the IPO brushed aside and rendered useless the glaring and drastic differences
and variations in style of the two trademarks and even decreed that these pronounced differences
are "miniscule" and considered them to have been "overshadowed by the appearance of the
predominant features" such as "M," "Mc," and "Mac" appearing in both MCDONALDS and MACJOY
marks. Instead of taking into account these differences, the IPO unreasonably shrugged off these
differences in the device, letters and marks in the trademark sought to be registered. The IPO
brushed aside and ignored the following irrefutable facts and circumstances showing differences
between the marks of MACJOY and MCDONALDS. They are, as averred by the petitioner [now
respondent]:

1. The word "MacJoy" is written in round script while the word "McDonalds" is written in
single stroke gothic;
 2. The word "MacJoy" comes with the picture of a chicken head with cap and bowtie and
wings sprouting on both sides, while the word "McDonalds" comes with an arches "M" in
gold colors, and absolutely without any picture of a chicken;

3. The word "MacJoy" is set in deep pink and white color scheme while "McDonalds" is
written in red, yellow and black color combination;

4. The faade of the respective stores of the parties are entirely different. Exhibits 1 and 1-A,
show that [respondents] restaurant is set also in the same bold, brilliant and noticeable color
scheme as that of its wrappers, containers, cups, etc., while [petitioners] restaurant is in
yellow and red colors, and with the mascot of "Ronald McDonald" being prominently
displayed therein." (Words in brackets supplied.)

Petitioner promptly filed a motion for reconsideration. However, in its similarly challenged
Resolution8 of November 12, 2004, the CA denied the motion, as it further held:

Whether a mark or label of a competitor resembles another is to be determined by an inspection of

the points of difference and resemblance as a whole, and not merely the points of resemblance. The
articles and trademarks employed and used by the [respondent] Macjoy Fastfood Corporation are so
different and distinct as to preclude any probability or likelihood of confusion or deception on the part
of the public to the injury of the trade or business of the [petitioner] McDonalds Corporation. The
"Macjoy & Device" mark is dissimilar in color, design, spelling, size, concept and appearance to the
McDonalds marks. (Words in brackets supplied.)

Hence, the petitioners present recourse on the following grounds:

I.

THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS "MACJOY & DEVICE"
MARK IS NOT CONFUSINGLY SIMILAR TO PETITIONERS "McDONALDS MARKS." IT FAILED
TO CORRECTLY APPLY THE DOMINANCY TEST WHICH HAS BEEN CONSISTENTLY APPLIED
BY THIS HONORABLE COURT IN DETERMINING THE EXISTENCE OF CONFUSING
SIMILARITY BETWEEN COMPETING MARKS.

A. The McDonalds Marks belong to a well-known and established "family of marks"

distinguished by the use of the prefix "Mc" and/or "Mac" and the corporate "M" logo
design.

B. The prefix "Mc" and/or "Mac" is the dominant portion of both Petitioners
McDonalds Marks and the Respondents "Macjoy & Device" mark. As such, the
marks are confusingly similar under the Dominancy Test.

C. Petitioners McDonalds Marks are well-known and world-famous marks which

must be protected under the Paris Convention.

II.

THE COURT OF APPEALS ERRED IN RULING THAT THE DECISION OF THE IPO DATED 28
DECEMBER 1998 AND ITS ORDER DATED 14 JANUARY 2000 WERE NOT BASED ON
SUBSTANTIAL EVIDENCE.
In its Comment,9 the respondent asserts that the petition should be dismissed outright for being
procedurally defective: first, because the person who signed the certification against forum shopping
in behalf of the petitioner was not specifically authorized to do so, and second, because the petition
does not present a reviewable issue as what it challenges are the factual findings of the CA. In any
event, the respondent insists that the CA committed no reversible error in finding no confusing
similarity between the trademarks in question.

The petition is impressed with merit.

Contrary to respondents claim, the petitioners Managing Counsel, Sheila Lehr, was specifically
authorized to sign on behalf of the petitioner the Verification and Certification10 attached to the
petition. As can be gleaned from the petitioners Board of Directors Resolution dated December 5,
2002, as embodied in the Certificate of the Assistant Secretary dated December 21, 2004,11 Sheila
Lehr was one of those authorized and empowered "to execute and deliver for and on behalf of [the
petitioner] all documents as may be required in connection with x x x the protection and maintenance
of any foreign patents, trademarks, trade-names, and copyrights owned now or hereafter by [the
petitioner], including, but not limited to, x x x documents required to institute opposition or
cancellation proceedings against conflicting trademarks, and to do such other acts and things and to
execute such other documents as may be necessary and appropriate to effect and carry out the
intent of this resolution." Indeed, the afore-stated authority given to Lehr necessarily includes the
authority to execute and sign the mandatorily required certification of non-forum shopping to support
the instant petition for review which stemmed from the "opposition proceedings" lodged by the
petitioner before the IPO. Considering that the person who executed and signed the certification
against forum shopping has the authority to do so, the petition, therefore, is not procedurally
defective.

As regards the respondents argument that the petition raises only questions of fact which are not
proper in a petition for review, suffice it to say that the contradictory findings of the IPO and the CA
constrain us to give due course to the petition, this being one of the recognized exceptions to
Section 1, Rule 45 of the Rules of Court. True, this Court is not the proper venue to consider factual
issues as it is not a trier of facts.12 Nevertheless, when the factual findings of the appellate court are
mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or
contrary to the findings culled by the court of origin,13 as here, this Court will review them.

The old Trademark Law, Republic Act (R.A.) No. 166, as amended, defines a "trademark" as any
distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and
used by a manufacturer or merchant on his goods to identify and distinguish them from those
manufactured, sold, or dealt in by others.14

Under the same law, the registration of a trademark is subject to the provisions of Section 4 thereof,
paragraph (d) of which is pertinent to this case. The provision reads:

Section 4. Registration of trademarks, trade-names and service-marks on the principal register.

There is hereby established a register of trademarks, tradenames and service-marks which shall be
known as the principal register. The owner of the trade-mark, trade-name or service-mark used to
distinguish his goods, business or services of others shall have the right to register the same on the
principal register, unless it:

xxx xxx xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name

registered in the Philippines or a mark or trade-name 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 purchasers;

xxx xxx xxx

Essentially, the issue here is whether there is a confusing similarity between the MCDONALDS
marks of the petitioner and the respondents "MACJOY & DEVICE" trademark when applied to
Classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food.

In determining similarity and likelihood of confusion, jurisprudence has developed two tests, the
dominancy test and the holistic test.15 The dominancy test focuses on the similarity of the prevalent
features of the competing trademarks that might cause confusion or deception.16 In contrast, the
holistic test requires the court to consider the entirety of the marks as applied to the products,
including the labels and packaging, in determining confusing similarity.17 Under the latter test, a
comparison of the words is not the only determinant factor.18 1awphi1.net

Here, the IPO used the dominancy test in concluding that there was confusing similarity between the
two (2) trademarks in question as it took note of the appearance of the predominant features "M",
"Mc" and/or "Mac" in both the marks. In reversing the conclusion reached by the IPO, the CA, while
seemingly applying the dominancy test, in fact actually applied the holistic test. The appellate court
ruled in this wise:

Applying the Dominancy test to the present case, the IPO should have taken into consideration the
entirety of the two marks instead of simply fixing its gaze on the single letter "M" or on the
combinations "Mc" or "Mac". A mere cursory look of the subject marks will reveal that, save for the
letters "M" and "c", no other similarity exists in the subject marks.

We agree with the [respondent] that it is entirely unwarranted for the IPO to consider the prefix "Mac"
as the predominant feature and the rest of the designs in [respondents] mark as details. Taking into
account such paramount factors as color, designs, spelling, sound, concept, sizes and audio and
visual effects, the prefix "Mc" will appear to be the only similarity in the two completely different
marks; and it is the prefix "Mc" that would thus appear as the miniscule detail. When pitted against
each other, the two marks reflect a distinct and disparate visual impression that negates any
possible confusing similarity in the mind of the buying public. (Words in brackets supplied.)

Petitioner now vigorously points out that the dominancy test should be the one applied in this case.

We agree.

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no set rules can be deduced because each case must be decided on its merits.19 In such
cases, even more than in any other litigation, precedent must be studied in the light of the facts of
the particular case.20 That is the reason why in trademark cases, jurisprudential precedents should
be applied only to a case if they are specifically in point.21

While we agree with the CAs detailed enumeration of differences between the two (2) competing
trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the
dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the
Court has consistently used and applied the dominancy test in determining confusing similarity or
likelihood of confusion between competing trademarks.22
Notably, in McDonalds Corp. v. LC Big Mak Burger, Inc.,23 a case where the trademark "Big Mak"
was found to be confusingly similar with the "Big Mac" mark of the herein the petitioner, the Court
explicitly held:

This Court, xxx, has relied on the dominancy test rather than the holistic test. The dominancy test
considers the dominant features in the competing marks in determining whether they are confusingly
similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of
the product arising from the adoption of the dominant features of the registered mark, disregarding
minor differences. Courts will consider more the aural and visual impressions created by the marks
in the public mind, giving little weight to factors like prices, quality, sales outlets and market
segments.

Moreover, in Societe Des Produits Nestle, S.A. v. CA24 the Court, applying the dominancy test,
concluded that the use by the respondent therein of the word "MASTER" for its coffee product
"FLAVOR MASTER" was likely to cause confusion with therein petitioners coffee products
"MASTER ROAST" and "MASTER BLEND" and further ruled:

xxx, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and
unfair competition that confusing similarity is to be determined on the basis of visual, aural,
connotative comparisons and overall impressions engendered by the marks in controversy as they
are encountered in the marketplace. The totality or holistic test only relies on visual comparisons
between two trademarks whereas the dominancy test relies not only on the visual but also on the
aural and connotative comparisons and overall impressions between the two trademarks.

Applying the dominancy test to the instant case, the Court finds that herein petitioners
"MCDONALDS" and respondents "MACJOY" marks are confusingly similar with each other such
that an ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as
dominant features. The first letter "M" in both marks puts emphasis on the prefixes "Mc" and/or
"Mac" by the similar way in which they are depicted i.e. in an arch-like, capitalized and stylized
manner.25

For sure, it is the prefix "Mc," an abbreviation of "Mac," which visually and aurally catches the
attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way as did
"McDonalds," "MacFries," "McSpaghetti," "McDo," "Big Mac" and the rest of the MCDONALDS
marks which all use the prefixes Mc and/or Mac.

Besides and most importantly, both trademarks are used in the sale of fastfood products.
Indisputably, the respondents trademark application for the "MACJOY & DEVICE" trademark covers
goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken,
chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioners trademark registration for
the MCDONALDS marks in the Philippines covers goods which are similar if not identical to those
covered by the respondents application.

Thus, we concur with the IPOs findings that:

In the case at bar, the predominant features such as the "M," "Mc," and "Mac" appearing in both
McDonalds marks and the MACJOY & DEVICE" easily attract the attention of would-be customers.
Even non-regular customers of their fastfood restaurants would readily notice the predominance of
the "M" design, "Mc/Mac" prefixes shown in both marks. Such that the common awareness or
perception of customers that the trademarks McDonalds mark and MACJOY & DEVICE are one and
the same, or an affiliate, or under the sponsorship of the other is not far-fetched.

The differences and variations in styles as the device depicting a head of chicken with cap and
bowtie and wings sprouting on both sides of the chicken head, the heart-shaped "M," and the stylistic
letters in "MACJOY & DEVICE;" in contrast to the arch-like "M" and the one-styled gothic letters in
McDonalds marks are of no moment. These minuscule variations are overshadowed by the
appearance of the predominant features mentioned hereinabove.

Thus, with the predominance of the letter "M," and prefixes "Mac/Mc" found in both marks, the
inevitable conclusion is there is confusing similarity between the trademarks Mc Donalds marks and
"MACJOY AND DEVICE" especially considering the fact that both marks are being used on almost
the same products falling under Classes 29 and 30 of the International Classification of Goods i.e.
Food and ingredients of food.

With the existence of confusing similarity between the subject trademarks, the resulting issue to be
resolved is who, as between the parties, has the rightful claim of ownership over the said marks.

We rule for the petitioner.

A mark is valid if it is distinctive and hence not barred from registration under the Trademark Law.
However, once registered, not only the marks validity but also the registrants ownership thereof is
prima facie presumed.26

Pursuant to Section 3727 of R.A. No. 166, as amended, as well as the provision regarding the
protection of industrial property of foreign nationals in this country as embodied in the Paris
Convention28 under which the Philippines and the petitioners domicile, the United States, are
adherent-members, the petitioner was able to register its MCDONALDS marks successively, i.e.,
"McDonalds" in 04 October, 197129 ; the corporate logo which is the "M" or the golden arches design
and the "McDonalds" with the "M" or golden arches design both in 30 June 197730 ; and so on and
so forth.31

On the other hand, it is not disputed that the respondents application for registration of its trademark
"MACJOY & DEVICE" was filed only on March 14, 1991 albeit the date of first use in the Philippines
was December 7, 1987.32

Hence, from the evidence on record, it is clear that the petitioner has duly established its ownership
of the mark/s.

Respondents contention that it was the first user of the mark in the Philippines having used
"MACJOY & DEVICE" on its restaurant business and food products since December, 1987 at Cebu
City while the first McDonalds outlet of the petitioner thereat was opened only in 1992, is downright
unmeritorious. For the requirement of "actual use in commerce x x x in the Philippines" before one
may register a trademark, trade-name and service mark under the Trademark Law33 pertains to the
territorial jurisdiction of the Philippines and is not only confined to a certain region, province, city or
barangay.

Likewise wanting in merit is the respondents claim that the petitioner cannot acquire ownership of
the word "Mac" because it is a personal name which may not be monopolized as a trademark as
against others of the same name or surname. As stated earlier, once a trademark has been
registered, the validity of the mark is prima facie presumed. In this case, the respondent failed to
overcome such presumption. We agree with the observations of the petitioner regarding the
respondents explanation that the word "MACJOY" is based on the name of its presidents niece,
Scarlett Yu Carcell. In the words of the petitioner:

First of all, Respondent failed to present evidence to support the foregoing claim which, at best, is a
mere self-serving assertion. Secondly, it cannot be denied that there is absolutely no connection
between the name "Scarlett Yu Carcel" and "MacJoy" to merit the coinage of the latter word. Even
assuming that the word "MacJoy" was chosen as a term of endearment, fondness and affection for a
certain Scarlett Yu Carcel, allegedly the niece of Respondents president, as well as to supposedly
bring good luck to Respondents business, one cannot help but wonder why out of all the possible
letters or combinations of letters available to Respondent, its president had to choose and adopt a
mark with the prefix "Mac" as the dominant feature thereof. A more plausible explanation perhaps is
that the niece of Respondents president was fond of the food products and services of the
Respondent, but that is beside the point." 34

By reason of the respondents implausible and insufficient explanation as to how and why out of the
many choices of words it could have used for its trade-name and/or trademark, it chose the word
"MACJOY," the only logical conclusion deducible therefrom is that the respondent would want to ride
high on the established reputation and goodwill of the MCDONALDs marks, which, as applied to
petitioners restaurant business and food products, is undoubtedly beyond question.

Thus, the IPO was correct in rejecting and denying the respondents application for registration of
the trademark "MACJOY & DEVICE." As this Court ruled in Faberge Inc. v. IAC,35 citing Chuanchow
Soy & Canning Co. v. Dir. of Patents and Villapanta:36

When one applies for the registration of a trademark or label which is almost the same or very
closely resembles one already used and registered by another, the application should be rejected
and dismissed outright, even without any opposition on the part of the owner and user of a
previously registered label or trademark, this not only to avoid confusion on the part of the public, but
also to protect an already used and registered trademark and an established goodwill.

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed Decision and Resolution
of the Court of Appeals in CA-G.R. SP NO. 57247, are REVERSED and SET ASIDE and the
Decision of the Intellectual Property Office in Inter Partes Case No. 3861 is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Asscociate Justice
 ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in
the above decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1Penned by Associate Justice Isaias P. Dicdican and concurred in by Associate Justices Elvi
John S. Asuncion and Ramon Bato, Jr.; Rollo, pp. 209-219.

2 Id. at 256-257.

3 Id. at 77-81.

4 Id. at 114-122.

5 Id. at 139-142.

6 Id. at 144-159.

7 Supra note 1.

8 Supra note 2.

9 Rollo, pp. 291-306.

10 Id. at 72.

11 Id. at 74 & 76

12Moomba Mining Exploration Co. v. CA, G.R. No. 108846, October 26, 99, 317 SCRA 38,
397.

13Smith Kline Beckman Corporation v. CA, G.R. No. 126627, August 14, 2003, 409 SCRA
33, 39.

14 Section 38, R.A. 166, as amended

15Mighty Corporation v. E & J Gallo Winery, G.R. No. 154342, July 14, 2004, 434 SCRA
473, 506.
16 McDonalds Corporation v. L.C. Big Mak Burger, Inc., supra

17 Id.

Emerald Garment Manufacturing Corporation v. Court of Appeals, G.R. No. 100098,

18

December 29, 1995, 251 SCRA 600, 615-616.

19Societe Des Produits Nestle, S.A. v. CA, GR No. 112012, April 4, 2001, 356 SCRA 207,
217.

20 Id.

21 Id. at p. 218.

22Applied in McDonalds Corp. v. L.C. Big Mak Burger, Inc., supra; Societe Des Produits
Nestle, S.A. v. CA, supra; Asia Brewery, Inc. v. CA, G.R. No. 103543, July 5, 1993, 224
SCRA 437; Converse Rubber Corp. v. Universal Rubber Products, Inc., G.R. No. L-27906,
January 8, 1987, 147 SCRA 154; Phil. Nut Industry Inc. v. Standard Brands, Inc., G.R. No. L-
23035, July 31, 1975, 65 SCRA 575.

23 Supra note 14, at 32.

24 Supra note 23.

25 "MacJoy" mark, Rollo p. 297 and "MCDONALDS" marks, Rollo, pp. 86, 89 & 91.

26
McDonalds Corporation v L.C. Big Mak Burger Inc., supra note 14; 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 registrants
ownership of the mark or trade name, and of the registrants exclusive right to use the same
in connection with the goods, business or services specified in the certificate, subject to any
conditions and limitations stated therein.

27 Sec. 37. Rights of Foreign Registrants-Persons who are nationals of, domiciled in, or have
a bona fide or effective business or commercial establishment in any foreign country, which
is a party to an international convention or treaty relating to marks or tradenames on the
repression of unfair competition to which the Philippines may be a party, shall be entitled to
the benefits and subject to the provisions of this Act . . . x x x

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

28The Paris Convention is essentially a compact among the various member countries to
accord in their own countries to citizens of the other contracting parties trademarks and
other rights comparable to those accorded their own citizens by their domestic laws. The
underlying principle is that foreign nationals should be given the same treatment in each of
the member countries as that country makes available to its own citizens. In addition, the
Convention sought to create uniformity in certain respects by obligating each nation to
assure to nationals of countries of the Union an effective protection against unfair
competition. Article 2 of the Paris Convention provides that: ART. 2. Nationals of each of the
countries of the Union shall, as regards the protection of industrial property, enjoy in all the
other countries of the Union the advantages that their respective laws now grant, or may
hereafter grant, to nationals, without prejudice to the rights specially provided by the present
Convention. Consequently, they shall have the same protection as the latter, and the same
legal remedy against any infringement of their rights, provided they observe the conditions
and formalities imposed upon nationals.

29 Rollo, p. 86

30 Id. at 89 & 91

31Registration No. 31966, dated June 24, 1983 for the mark "McChicken", Id. at 93;
Registration No. 34065, dated March 06, 1985, for the mark "McDonalds with "corporate
logo"arches design, Id. at 94; Registration No. 34065, dated July 18, 1985 for the mark "Big
Mac", Id. at 97; Registration No. 39988, dated July 14, 1988 for the mark "MacFries", Id. at
99; Registration No. 45583, dated July 14, 1988, for the mark "McSpaghetti", Id. at 101;
Registration No. 50987, dated July 24, 1991, for the servicemark "McDo" , Id. at 100;
Registration No. 32009, dated June 24, 1983 for the trademark "Big Mac" and Circle Design
Rollo, p. 106; Registration No. 48491, dated June 25, 1990 for the service mark "McSnack"
Id. at 105; Registration No. 51789, dated December 02, 1991, for the trademark "Mc" (Id. at
107).

32 IPO Decision; Rollo, pp. 120-121.

33 Section 2 of R.A. 166, as amended, provides: Sec. 2. What are registrable. Trademarks,
tradenames and service marks owned by persons, corporations, partnerships or associations
domiciled in the Philippines and by persons, corporations, partnerships or associations
domiciled in any foreign country may be registered in accordance with the provisions of this
Act; Provided, That said trademarks, tradenames, or service marks are actually in use in
commerce and services not less than two months in the Philippines before the time the
applications for registration are filed; And provided, further, That the country of which the
applicant for registration is a citizen grants by law substantially similar privileges to citizens of
the Philippines, and such fact is officially certified, with a certified true copy of the foreign law
translated into the English language, by the government of the foreign country to the
Government of the Republic of the Philippines. (As amended by R.A. No. 865).

34 Rollo, pp. 55-56.

35 G.R. No. 71189, November 4, 1992.

36 G.R. No. L-13947, 108 Phil. 833, 836.

 SECOND DIVISION

G.R. No. 164321 March 23, 2011

SKECHERS, U.S.A., INC., Petitioner,

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP., and/or INTER PACIFIC TRADING CORP.
and/or STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or
STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T.
MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors,
officers, employees and/or occupants of its premises located at S-7, Ed & Joe's Commercial
Arcade, No. 153 Quirino Avenue, Paraaque City, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

TRENDWORKS INTERNATIONAL CORPORATION, Petitioner-Intervenor,

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or
STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG
FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or
JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees
and/or occupants of its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153
Quirino Avenue, Paraaque City, Respondents.

RESOLUTION

PERALTA, J.:

For resolution are the twin Motions for Reconsideration1 filed by petitioner and petitioner-intervenor
from the Decision rendered in favor of respondents, dated November 30, 2006.

At the outset, a brief narration of the factual and procedural antecedents that transpired and led to
the filing of the motions is in order.

The present controversy arose when petitioner filed with Branch 24 of the Regional Trial Court
(RTC) of Manila an application for the issuance of search warrants against an outlet and warehouse
operated by respondents for infringement of trademark under Section 155, in relation to Section 170
of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines.2 In
the course of its business, petitioner has registered the trademark "SKECHERS"3 and the trademark
"S" (within an oval design)4 with the Intellectual Property Office (IPO).

Two search warrants5 were issued by the RTC and were served on the premises of respondents. As
a result of the raid, more than 6,000 pairs of shoes bearing the "S" logo were seized.

Later, respondents moved to quash the search warrants, arguing that there was no confusing
similarity between petitioners "Skechers" rubber shoes and its "Strong" rubber shoes.

On November 7, 2002, the RTC issued an Order6 quashing the search warrants and directing the
NBI to return the seized goods. The RTC agreed with respondents view that Skechers rubber shoes
and Strong rubber shoes have glaring differences such that an ordinary prudent purchaser would not
likely be misled or confused in purchasing the wrong article.
Aggrieved, petitioner filed a petition for certiorari7 with the Court of Appeals (CA) assailing the RTC
Order. On November 17, 2003, the CA issued a Decision8 affirming the ruling of the RTC.

Subsequently, petitioner filed the present petition9 before this Court which puts forth the following
assignment of errors:

A. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

IN CONSIDERING MATTERS OF DEFENSE IN A CRIMINAL TRIAL FOR TRADEMARK
INFRINGEMENT IN PASSING UPON THE VALIDITY OF THE SEARCH WARRANT WHEN
IT SHOULD HAVE LIMITED ITSELF TO A DETERMINATION OF WHETHER THE TRIAL
COURT COMMITTED GRAVE ABUSE OF DISCRETION IN QUASHING THE SEARCH
WARRANTS.

B. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

IN FINDING THAT RESPONDENTS ARE NOT GUILTY OF TRADEMARK INFRINGEMENT
IN THE CASE WHERE THE SOLE TRIABLE ISSUE IS THE EXISTENCE OF PROBABLE
CAUSE TO ISSUE A SEARCH WARRANT.10

In the meantime, petitioner-intervenor filed a Petition-in-Intervention11 with this Court claiming to be

the sole licensed distributor of Skechers products here in the Philippines.

On November 30, 2006, this Court rendered a Decision12 dismissing the petition.

Both petitioner and petitioner-intervenor filed separate motions for reconsideration.

In petitioners motion for reconsideration, petitioner moved for a reconsideration of the earlier
decision on the following grounds:

(a) THIS HONORABLE COURT MUST RE-EXAMINE THE FACTS OF THIS CASE DUE TO
THE SIGNIFICANCE AND REPERCUSSIONS OF ITS DECISION.

(b) COMMERCIAL QUANTITIES OF THE SEIZED ITEMS WITH THE UNAUTHORIZED

REPRODUCTIONS OF THE "S" TRADEMARK OWNED BY PETITIONER WERE
INTENDED FOR DISTRIBUTION IN THE PHILIPPINE MARKET TO THE DETRIMENT OF
PETITIONER RETURNING THE GOODS TO RESPONDENTS WILL ADVERSELY
AFFECT THE GOODWILL AND REPUTATION OF PETITIONER.

(c) THE SEARCH WARRANT COURT AND THE COURT OF APPEALS BOTH ACTED
WITH GRAVE ABUSE OF DISCRETION.

(d) THE SEARCH WARRANT COURT DID NOT PROPERLY RE-EVALUATE THE
EVIDENCE PRESENTED DURING THE SEARCH WARRANT APPLICATION
PROCEEDINGS.

(e) THE SOLID TRIANGLE CASE IS NOT APPLICABLE IN THIS CASE, AS IT IS BASED
ON A DIFFERENT FACTUAL MILIEU. PRELIMINARY FINDING OF GUILT (OR ABSENCE
THEREOF) MADE BY THE SEARCH WARRANT COURT AND THE COURT OF APPEALS
WAS IMPROPER.

(f) THE SEARCH WARRANT COURT OVERSTEPPED ITS DISCRETION. THE LAW IS
CLEAR. THE DOMINANCY TEST SHOULD BE USED.
 (g) THE COURT OF APPEALS COMMITTED ERRORS OF JURISDICTION.13

On the other hand, petitioner-intervenors motion for reconsideration raises the following errors for
this Courts consideration, to wit:

(a) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED
CONTRARY TO LAW AND JURISPRUDENCE IN ADOPTING THE ALREADY-REJECTED
HOLISTIC TEST IN DETERMINING THE ISSUE OF CONFUSING SIMILARITY;

(b) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED
CONTRARY TO LAW IN HOLDING THAT THERE IS NO PROBABLE CAUSE FOR
TRADEMARK INFRINGEMENT; AND

(c) THE COURT OF APPEALS SANCTIONED THE TRIAL COURTS DEPARTURE FROM
THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHEN IT
UPHELD THE QUASHAL OF THE SEARCH WARRANT ON THE BASIS SOLELY OF A
FINDING THAT THERE IS NO CONFUSING SIMILARITY.14

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the
primary issue posed by them dwells on the issue of whether or not respondent is guilty of trademark
infringement.

After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision.

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293.
Specifically, Section 155 of R.A. No. 8293 states:

Remedies; Infringement. Any person who shall, without the consent of the owner of the registered
mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.15

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to
cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed
tests the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the
similarity of the prevalent or dominant features of the competing trademarks that might cause
confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not
necessary; neither is it required that the mark sought to be registered suggests an effort to imitate.
Given more consideration are the aural and visual impressions created by the marks on the buyers
of goods, giving little weight to factors like prices, quality, sales outlets, and market segments.16

In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as
applied to the products, including the labels and packaging, in determining confusing similarity. The
discerning eye of the observer must focus not only on the predominant words, but also on the other
features appearing on both labels so that the observer may draw conclusion on whether one is
confusingly similar to the other.17

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was purchasing the other;
and (2) confusion of business (source or origin confusion), where, although the goods of the parties
are different, the product, the mark of which registration is applied for by one party, is such as might
reasonably be assumed to originate with the registrant of an earlier product, and the public would
then be deceived either into that belief or into the belief that there is some connection between the
two parties, though inexistent.18

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by
respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the
IPO. While it is undisputed that petitioners stylized "S" is within an oval design, to this Courts mind,
the dominant feature of the trademark is the stylized "S," as it is precisely the stylized "S" which
catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact
that it used the same stylized "S", the same being the dominant feature of petitioners trademark,
already constitutes infringement under the Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be
considered as highly identifiable to the products of petitioner alone. The CA even supported its
conclusion by stating that the letter "S" has been used in so many existing trademarks, the most
popular of which is the trademark "S" enclosed by an inverted triangle, which the CA says is
identifiable to Superman. Such reasoning, however, misses the entire point, which is that respondent
had used a stylized "S," which is the same stylized "S" which petitioner has a registered trademark
for. The letter "S" used in the Superman logo, on the other hand, has a block-like tip on the upper
portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA
of the letter "S" used in the Superman trademark with petitioners stylized "S" is not appropriate to
the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on
the font and the size of the lettering, the stylized "S" utilized by respondent is the very same stylized
"S" used by petitioner; a stylized "S" which is unique and distinguishes petitioners trademark.
Indubitably, the likelihood of confusion is present as purchasers will associate the respondents use
of the stylized "S" as having been authorized by petitioner or that respondents product is connected
with petitioners business.

Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed
petitioners trademark. For its part, the RTC noted the following supposed dissimilarities between the
shoes, to wit:

1. The mark "S" found in Strong Shoes is not enclosed in an "oval design."

2. The word "Strong" is conspicuously placed at the backside and insoles.

 3. The hang tags and labels attached to the shoes bears the word "Strong" for respondent
and "Skechers U.S.A." for private complainant;

4. Strong shoes are modestly priced compared to the costs of Skechers Shoes.19

While there may be dissimilarities between the appearances of the shoes, to this Courts mind such
dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be
readily observed by simply comparing petitioners Energy20 model and respondents Strong21 rubber
shoes, respondent also used the color scheme of blue, white and gray utilized by petitioner. Even
the design and "wavelike" pattern of the midsole and outer sole of respondents shoes are very
similar to petitioners shoes, if not exact patterns thereof. At the side of the midsole near the heel of
both shoes are two elongated designs in practically the same location. Even the outer soles of both
shoes have the same number of ridges, five at the back and six in front. On the side of respondents
shoes, near the upper part, appears the stylized "S," placed in the exact location as that of the
stylized "S" on petitioners shoes. On top of the "tongue" of both shoes appears the stylized "S" in
practically the same location and size. Moreover, at the back of petitioners shoes, near the heel
counter, appears "Skechers Sport Trail" written in white lettering. However, on respondents shoes
appears "Strong Sport Trail" noticeably written in the same white lettering, font size, direction and
orientation as that of petitioners shoes. On top of the heel collar of petitioners shoes are two
grayish-white semi-transparent circles. Not surprisingly, respondents shoes also have two grayish-
white semi-transparent circles in the exact same location. lihpwa1

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic
test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to
this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and
frivolous that it is indubitable that respondents products will cause confusion and mistake in the
eyes of the public. Respondents shoes may not be an exact replica of petitioners shoes, but the
features and overall design are so similar and alike that confusion is highly likely.
1avv phi 1

In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc.,22 this Court, in a case for
unfair competition, had opined that even if not all the details are identical, as long as the general
appearance of the two products are such that any ordinary purchaser would be deceived, the
imitator should be liable, to wit:

From said examination, We find the shoes manufactured by defendants to contain, as found by the
trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and
manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for their
respective brands, of course. We fully agree with the trial court that "the respective designs, shapes,
the colors of the ankle patches, the bands, the toe patch and the soles of the two products are
exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish
"Custombuilt" from "Chuck Taylor." These elements are more than sufficient to serve as basis for a
charge of unfair competition. Even if not all the details just mentioned were identical, with the general
appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and
discriminating customer could be deceived, and, therefore, Custombuilt could easily be passed off
for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must
be held liable. x x x23

Neither can the difference in price be a complete defense in trademark infringement. In McDonalds
Corporation v. L.C. Big Mak Burger. Inc.,24 this Court held:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or
trade-name is likely to lead to a confusion of source, as where prospective purchasers would be
misled into thinking that the complaining party has extended his business into the field (see 148 ALR
56 et seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it
forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).
x x x25

Indeed, the registered trademark owner may use its mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market.26 The purchasing public might be mistaken in thinking
that petitioner had ventured into a lower market segment such that it is not inconceivable for the
public to think that Strong or Strong Sport Trail might be associated or connected with petitioners
brand, which scenario is plausible especially since both petitioner and respondent manufacture
rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the
goodwill and reputation of the business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as consumers against confusion on these
goods.27 While respondents shoes contain some dissimilarities with petitioners shoes, this Court
cannot close its eye to the fact that for all intents and purpose, respondent had deliberately
attempted to copy petitioners mark and overall design and features of the shoes. Let it be
remembered, that defendants in cases of infringement do not normally copy but only make colorable
changes.28The 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.29

WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED. The Decision
dated November 30, 2006 is RECONSIDERED and SET ASIDE.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ANTONIO EDUARDO B. NACHURA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Associate Justice
Second Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I
certify that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

Footnotes

1 Rollo, pp. 1046-1071 & 1078-1118.

2An Act Prescribing the Intellectual Property Code and Establishing the Intellectual Property
Office, Providing for Its Powers and Functions, and for Other Purposes. Took effect on
January 1, 1998.

3 Under Registration No. 63364; see rollo, p. 107.

4
Under Registration No. 4-1996-110182; see rollo, p. 109.

5 Search Warrant Nos. 02-2827 and 02-2828; see rollo, pp. 144-146, 147-148.

6 Rollo, pp. 173-176.

7 Id. at 195-220.

8 Id. at 72-83.

9 Id. at 11-59.

10 Id. at 26-27.

11 Id. at 557-603.

12Penned by Associate Justice Minita V. Chico-Nazario, with Chief Justice Artemio V.

Panganiban and Associate Justices Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez
and Romeo J. Callejo, Sr. concurring; id. at 1032-1045.

13 Rollo, p. 1079.

14 Id. at 1047-1048.
15 Emphasis supplied.

Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073,
16

November 25, 2009, 605 SCRA 523, 531; McDonalds Corporation v. MacJoy Fastfood
Corporation, G.R. No. 166115, February 2, 2007, 514 SCRA 95, 106; McDonalds
Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 434 (2004).

Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493
17

SCRA 333, 357.

18McDonalds Corporation v. L.C. Big Mak Burger, Inc., supra note 16, at 428, citing Sterling
Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., 137
Phil. 838, 852 (1969).

19 Rollo, p. 174.

20 See rollo, pp. 498-500, 572-574.

21 Id.

22 186 Phil. 85 (1980).

23 Id. at 94-95.

24 Supra note 16.

25
Id. at 432.

26 Dermaline, Inc v. Myra Pharmaceuticals, Inc., G.R. No. 190065, August 16, 2010.

27 Berris Agricultural Co., Inc., v. Norvy Abyadang, G.R. No. 183404, October 13, 2010.

28 Del Monte Corporation v. Court of Appeals, 260 Phil. 435, 443 (1990).

29 Id.
 SECOND DIVISION

G.R. No. 172276 August 8, 2010

SOCIETE DES PRODUITS NESTLE, S.A., Petitioner,

vs.
MARTIN T. DY, JR., Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition challenges
the 1 September 2005 Decision and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV
No. 62730, finding respondent Martin T. Dy, Jr. (Dy, Jr.) not liable for trademark infringement. The
Court of Appeals reversed the 18 September 1998 Decision of the Regional Trial Court (RTC),
Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.

The Facts

Petitioner Societe Des Produits Nestle, S.A. (Nestle) is a foreign corporation organized under the
laws of Switzerland. It manufactures food products and beverages. As evidenced by Certificate of
Registration No. R-14621 issued on 7 April 1969 by the then Bureau of Patents, Trademarks and
Technology Transfer, Nestle owns the "NAN" trademark for its line of infant powdered milk products,
consisting of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. NAN is classified under Class 6 "diatetic
preparations for infant feeding."

Nestle distributes and sells its NAN milk products all over the Philippines. It has been investing
tremendous amounts of resources to train its sales force and to promote the NAN milk products
through advertisements and press releases.

Dy, Jr. owns 5M Enterprises. He imports Sunny Boy powdered milk from Australia and repacks the
powdered milk into three sizes of plastic packs bearing the name "NANNY." The packs weigh 80,
180 and 450 grams and are sold for 8.90, 17.50 and 39.90, respectively. NANNY is is also
classified under Class 6 "full cream milk for adults in [sic] all ages." Dy, Jr. distributes and sells
the powdered milk in Dumaguete, Negros Oriental, Cagayan de Oro, and parts of Mindanao.

In a letter dated 1 August 1985, Nestle requested Dy, Jr. to refrain from using "NANNY" and to
undertake that he would stop infringing the "NAN" trademark. Dy, Jr. did not act on Nestles request.
On 1 March 1990, Nestle filed before the RTC, Judicial Region 7, Branch 31, Dumaguete City, a
complaint against Dy, Jr. for infringement. Dy, Jr. filed a motion to dismiss alleging that the complaint
did not state a cause of action. In its 4 June 1990 order, the trial court dismissed the complaint.
Nestle appealed the 4 June 1990 order to the Court of Appeals. In its 16 February 1993 Resolution,
the Court of Appeals set aside the 4 June 1990 order and remanded the case to the trial court for
further proceedings.

Pursuant to Supreme Court Administrative Order No. 113-95, Nestle filed with the trial court a motion
to transfer the case to the RTC, Judicial Region 7, Branch 9, Cebu City, which was designated as a
special court for intellectual property rights.
 The RTCs Ruling

In its 18 September 1998 Decision, the trial court found Dy, Jr. liable for infringement. The trial court
held:

If determination of infringement shall only be limited on whether or not the mark used would likely
cause confusion or mistake in the minds of the buying public or deceive customers, such in [sic] the
most considered view of this forum would be highly unlikely to happen in the instant case. This is
because upon comparison of the plaintiffs NAN and defendants NANNY, the following features
would reveal the absence of any deceptive tendency in defendants NANNY: (1) all NAN products
are contained tin cans [sic], while NANNY are contained in plastic packs; (2) the predominant colors
used in the labels of NAN products are blue and white, while the predominant colors in the plastic
packings of NANNY are blue and green; (3) the labels of NAN products have at the bottom portion
an elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the
trade-name "Nestle", while the plastic packs of NANNY have a drawing of milking cows lazing on a
vast green field, back-dropped with snow covered mountains; (4) the word NAN are [sic] all in large,
formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular
style of letters with curved ends; and (5) all NAN products are milk formulas intended for use of [sic]
infants, while NANNY is an instant full cream powdered milk intended for use of [sic] adults.

The foregoing has clearly shown that infringement in the instant case cannot be proven with the use
of the "test of dominancy" because the deceptive tendency of the unregistered trademark NANNY is
not apparent from the essential features of the registered trademark NAN.

However, in Esso Standard Eastern, Inc. vs. Court of Appeals, et al. L-29971, Aug. 31, 1982, the
Supreme Court took the occasion of discussing what is implied in the definition of "infringement"
when it stated: "Implicit in this definition is the concept that the goods must be so related that there is
likelihood either of confusion of goods or business. x x x But as to whether trademark infringement
exists depends for the most part upon whether or not the goods are so related that the public may
be, or is actually, deceived and misled that they came from the same maker or manufacturer. For
non-competing goods may be those which, though they are not in actual competition, are so related
to each other that it might reasonably be assumed that they originate from one manufacturer. Non-
competing goods may also be those which, being entirely unrelated, could not reasonably be
assumed to have a common source. In the former case of related goods, confusion of business
could arise out of the use of similar marks; in the latter case of non-related goods, it could not."

Furthermore, in said case the Supreme Court as well discussed on when goods may become so
related for purposes of infringement when it stated: "Goods are related when they belong to the
same class or have same descriptive properties; when they possess the same physical attributes or
essential characteristics with reference to their form, composition, texture or quality. They may also
be related because they serve the same purpose or are sold in grocery stores. x x x

Considering that defendants NANNY belongs to the same class as that of plaintiffs NAN because
both are food products, the defendants unregistered trade mark NANNY should be held an
infringement to plaintiffs registered trademark NAN because defendants use of NANNY would imply
that it came from the manufacturer of NAN. Furthermore, since the word "nanny" means a "childs
nurse," there might result the not so remote probability that defendants NANNY may be confused
with infant formula NAN despite the aparent [sic] disparity between the features of the two products.

Dy, Jr. appealed the 18 September 1998 Decision to the Court of Appeals.

The Court of Appeals Ruling

In its 1 September 2005 Decision, the Court of Appeals reversed the trial courts 18 September 1998
Decision and found Dy, Jr. not liable for infringement. The Court of Appeals held:

[T]he trial court appeared to have made a finding that there is no colorable imitation of the registered
mark "NAN" in Dys use of "NANNY" for his own milk packs. Yet it did not stop there. It continued on
applying the "concept of related goods."

The Supreme Court utlilized the "concept of related goods" in the said case of Esso Standard
Easter, Inc. versus Court of Appeals, et al. wherein two contending parties used the same trademark
"ESSO" for two different goods, i.e. petroleum products and cigarettes. It rules that there is
infringement of trademark involving two goods bearing the same mark or label, even if the said
goods are non-competing, if and only if they are so related that the public may be, or is actually,
deceived that they originate from the one maker or manufacturer. Since petroleum products and
cigarettes, in kind and nature, flow through different trade channels, and since the possibility of
confusion is unlikely in the general appearances of each mark as a whole, the Court held in this case
that they cannot be so related in the context of infringement.

In applying the concept of related goods in the present case, the trial court haphazardly concluded
that since plaintiff-appellees NAN and defendant-appellants NANNY belong to the same class
being food products, the unregistered NANNY should be held an infringement of Nestles NAN
because "the use of NANNY would imply that it came from the manufacturer of NAN." Said court
went on to elaborate further: "since the word "NANNY" means a "childs nurse," there might result
the not so remote probability that defendants NANNY may be confused with infant formula NAN
despite the aparent (sic) disparity between the features of the two products as discussed above."

The trial courts application of the doctrine laid down by the Supreme Court in the Esso Standard
case aforementioned and the cases cited therein is quite misplaced. The goods of the two
contending parties in those cases bear similar marks or labels: "Esso" for petroleum products and
cigarettes, "Selecta" for biscuits and milk, "X-7" for soap and perfume, lipstick and nail polish. In the
instant case, two dissimilar marks are involved plaintiff-appellees "NAN" and defendant-
appellants "NANNY." Obviously, the concept of related goods cannot be utilized in the instant case
in the same way that it was used in the Esso Standard case.

In the Esso Standard case, the Supreme Court even cautioned judges that in resolving infringement
or trademark cases in the Philippines, particularly in ascertaining whether one trademark is
confusingly similar to or is a colorable imitation of another, precedent must be studied in the light of
the facts of the particular case. Each case must be decided on its own merits. In the more recent
case of Societe Des Produits Nestle S.A. Versus Court of Appeals, the High Court further stressed
that due to the peculiarity of the facts of each infringement case, a judicial forum should not readily
apply a certain test or standard just because of seeming similarities. The entire panoply of elements
constituting the relevant factual landscape should be comprehensively examined.

While it is true that both NAN and NANNY are milk products and that the word "NAN" is contained in
the word "NANNY," there are more glaring dissimilarities in the entirety of their trademarks as they
appear in their respective labels and also 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. Even the trial court found these glaring dissimilarities as above-
quoted. We need not add more of these factual dissimilarities.

NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all infant preparations,
while NANNY is a full cream milk for adults in [sic] all ages. NAN milk products are sold in tin cans
and hence, far expensive than the full cream milk NANNY sold in three (3) plastic packs containing
80, 180 and 450 grams and worth 8.90, 17.50 and 39.90 per milk pack. The labels of NAN
products are of the colors blue and white and have at the bottom portion an elliptical shaped figure
containing inside it a drawing of nestling birds, which is overlapped by the trade-name "Nestle." On
the other hand, the plastic packs NANNY have a drawing of milking cows lazing on a vast green
field, back-dropped with snow-capped mountains and using the predominant colors of blue and
green. The word NAN are [sic] all in large, formal and conservative-like block letters, while the word
NANNY are [sic] all in small and irregular style of letters with curved ends. With these material
differences apparent in the packaging of both milk products, NANNY full cream milk cannot possibly
be an infringement of NAN infant milk. 1avvphi1

Moreover, NAN infant milk preparation is more expensive than NANNY instant full cream milk. The
cheaper price of NANNY would give, at the very first instance, a considerable warning to the
ordinary purchaser on whether he is buying an infant milk or a full cream milk for adults. A cursory
examination of the packaging would confirm the striking differences between the products in
question.

In view of the foregoing, we find that the mark NANNY is not confusingly similar to NAN. Dy
therefore cannot be held liable for infringement.

Nestle filed a motion for reconsideration. In its 4 April 2006 Resolution, the Court of Appeals denied
the motion for lack of merit. Hence, the present petition.

Issue

The issue is whether Dy, Jr. is liable for infringement.

The Courts Ruling

The petition is meritorious.

Section 22 of Republic Act (R.A.) No. 166, as amended, states:

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

Section 155 of R.A. No. 8293 states:

Remedies; Infringement. Any person who shall, without the consent of the owner of the registered
mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.

In Prosource International, Inc. v. Horphag Research Management SA, the Court laid down the
elements of infringement under R.A. Nos. 166 and 8293:

In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, 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) [It] 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) [T]he trademark is used for identical or similar goods[;] and

(d) [S]uch act is done without the consent of the trademark registrant or assignee."

On the other hand, the elements of infringement under R.A. No. 8293 are as follows:

The trademark being infringed is registered in the Intellectual Property Office; however, in
infringement of trade name, the same need not be registered;

The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by

the infringer;

The infringing mark or trade name is used in connection with the sale, offering for sale, or
advertising of any goods, business or services; or the infringing mark or trade name 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;
 The use or application of the infringing mark or trade name is likely to cause confusion or
mistake or to deceive purchasers or others as to the goods or services themselves or as to
the source or origin of such goods or services or the idenity of such business; and

It is without the consent of the trademark or trade name owner or the assignee thereof.

Among the elements, the element of likelihood of confusion is the gravamen of trademark
infringement. There are two types of confusion in trademark infringement: confusion of goods and
confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer
Aktiengesellschaft, the Court distinguished the two types of confusion:

Callman notes two types of confusion. The first is the confusion of goods "in which event the
ordinarily prudent purchaser would be induced to purchase one product in the belief that he was
purchasing the other." In which case, "defendants goods are then bought as the plaintiffs, and the
poorer quality of the former reflects adversely on the plaintiffs reputation." The other is the confusion
of business: "Here though the goods of the parties are different, the defendants product is such as
might reasonably be assumed to originate with the plaintiff, and the public would then be deceived
either into that belief or into the belief that there is some connection between the plaintiff and
defendant which, in fact, does not exist."

There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The
dominancy test focuses on the similarity of the main, prevalent or essential features of the competing
trademarks that might cause confusion. Infringement takes place when the competing trademark
contains the essential features of another. Imitation or an effort to imitate is unnecessary. The
question is whether the use of the marks is likely to cause confusion or deceive purchasers.

The holistic test considers the entirety of the marks, including labels and packaging, in determining
confusing similarity. The focus is not only on the predominant words but also on the other features
appearing on the labels.

In cases involving trademark infringement, no set of rules can be deduced. Each case must be
decided on its own merits. Jurisprudential precedents must be studied in the light of the facts of each
particular case. In McDonalds Corporation v. MacJoy Fastfood Corporation, the Court held:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no set rules can be deduced because each case must be decided on its merits. In such
cases, even more than in any other litigation, precedent must be studied in the light of the facts of
the particular case. That is the reason why in trademark cases, jurisprudential precedents should be
applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In
recent cases with similar factual milieus, the Court has consistently applied the dominancy test.
In Prosource International, Inc., the Court applied the dominancy test in holding that "PCO-
GENOLS" is confusingly similar to "PYCNOGENOL." The Court held:

The trial and appellate courts applied the Dominancy Test in determining whether there was a
confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial
court found, and the CA affirmed, that:

"Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix "GENOL" which on
evidence, appears to be merely descriptive and furnish no indication of the origin of the article and
hence, open for trademark registration by the plaintiff through combination with another word or
phrase such as PYCNOGENOL, Exhibits "A" to "A-3." Furthermore, although the letters "Y" between
P and C, "N" between O and C and "S" after L are missing in the [petitioners] mark PCO-GENOLS,
nevertheless, when the two words are pronounced, the sound effects are confusingly similar not to
mention that they are both described by their manufacturers as a food supplement and thus,
identified as such by their public consumers. And although there were dissimilarities in the trademark
due to the type of letters used as well as the size, color and design employed on their individual
packages/bottles, still the close relationship of the competing products name is sounds as they were
pronounced, clearly indicates that purchasers could be misled into believing that they are the same
and/or originates from a common source and manufacturer."

We find no cogent reason to depart from such conclusion.

This is not the first time the Court takes into account the aural effects of the words and letters
contained in the marks in determining the issue of confusing similarity. In Marvex Commercial Co.,
Inc. v. Petra Hawpia & Co., et al., cited in McDonalds Corporation v. L.C. Big Mak Burger, Inc., the
Court held:

"The following random list of confusingly similar sounds in the matter of trademarks, culled from
Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that "SALONPAS"
and "LIONPAS" are confusingly similar in sound: "Gold Dust" and ""Gold Drop"; "Jantzen" and "Jass-
Sea"; "Silver Flash" and Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite";
"Chartreuse" and Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex";
"Zuso" and Hoo Hoo." Leon Amdur, in his book "Trade-Mark Law and Practice," pp. 419-421, cities
[sic], as coming within the purview of the idem sonans rule, "Yusea" and "U-C-A," "Steinway Pianos"
and "Steinberg Pianos," and "Seven-Up" and "Lemon-Up." In Co Tiong vs. Director of Patents, this
Court unequivocally said that "Celdura" and "Condura" are confusingly similar in sound; this Court
held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the
trademark "Sapolin," as the sound of the two names is almost the same."

In McDonalds Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy test in
holding that "MACJOY" is confusingly similar to "MCDONALDS." The Court held:

While we agree with the CAs detailed enumeration of differences between the two (2) competing
trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the
dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the
Court has consistently used and applied the dominancy test in determining confusing similarity or
likelihood of confusion between competing trademarks.

xxxx

Applying the dominancy test to the instant case, the Court finds that herein petitioners
"MCDONALDS" and respondents "MACJOY" marks are are confusingly similar with each other that
an ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as
dominant features. x x x

For sure, it is the prefix "Mc," and abbreviation of "Mac," which visually and aurally catches the
attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way as did
"McDonalds," "MacFries," "McSpaghetti," "McDo," "Big Mac" and the rest of the MCDONALDS
marks which all use the prefixes Mc and/or Mac.
Besides and most importantly, both trademarks are used in the sale of fastfood products.
Indisputably, the respondents trademark application for the "MACJOY & DEVICE" trademark covers
goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken,
chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioners trademark registration for
the MCDONALDS marks in the Philippines covers goods which are similar if not identical to those
covered by the respondents application.

In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court applied the dominancy test in
holding that "BIG MAK" is confusingly similar to "BIG MAC." The Court held:

This Court x x x has relied on the dominancy test rather than the holistic test. The dominancy test
considers the dominant features in the competing marks in determining whether they are confusingly
similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of
the product arising from the adoption of the dominant features of the registered mark, disregarding
minor differences. Courts will consider more the aural and visual impressions created by the marks
in the public mind, giving little weight to factors like prices, quality, sales outlets and market
segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:

x x x It has been consistently held that the question of infringement of a trademark is to be

determined by the test of dominancy. Similarity in size, form and color, while relevant, is not
conclusive. If the competing trademark contains the main or essential or dominant features of
another, and confusion and deception is likely to result, infringement takes place. Duplication or
imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to
imitate. (G. Heilman Brewing Co. vs. 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. Honover Rubber
Co., 107 F. 2d 588; x x x)

xxxx

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual
Property Code which defines infringement as the "colorable imitation of a registered mark x x x or
a dominant feature thereof."

Applying the dominancy test, the Court finds that respondents use of the "Big Mak" mark results in
likelihood of confusion. First, "Big Mak" sounds exactly the same as "Big Mac." Second, the first
word in "Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in
"Mak" are the same as the first two letters in "Mac." Fourth, the last letter "Mak" while a "k" sounds
the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in
spelling, thus "Caloocan" is spelled "Kalookan."

In Societe Des Produits Nestle, S.A v. Court of Appeals, the Court applied the dominancy test in
holding that "FLAVOR MASTER" is confusingly similar to "MASTER ROAST" and "MASTER
BLEND." The Court held:

While this Court agrees with the Court of Appeals detailed enumeration of differences between the
respective trademarks of the two coffee products, this Court cannot agree that totality test is the one
applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this
case in light of its peculiar factual milieu.
Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks
and unfair competition that confusing similarity is to be determined on the basis of visual, aural,
connotative comparisons and overall impressions engendered by the marks in controversy as they
are encountered in the realities of the marketplace. The totality or holistic test only relies on visual
comparison between two trademarks whereas the dominancy test relies not only on the visual but
also on the aural and connotative comparisons and overall impressions between the two
trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held
that:

From the evidence at hand, it is sufficiently established that the word MASTER is the dominant
feature of opposers mark. The word MASTER is printed across the middle portion of the label in
bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always
been given emphasis in the TV and radio commercials and other advertisements made in promoting
the product. x x x In due time, because of these advertising schemes the mind of the buying public
had come to learn to associate the word MASTER with the opposers goods.

x x x. It is the observation of this Office that much of the dominance which the word MASTER has
acquired through Opposers advertising schemes is carried over when the same is incorporated into
respondent-applicants trademark FLAVOR MASTER. Thus, when one looks at the label bearing the
trademark FLAVOR MASTER (exh. 4) ones attention is easily attracted to the word MASTER, rather
than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which
bear the competing marks or as to the origins thereof is not farfetched.

Applying the dominancy test in the present case, the Court finds that "NANNY" is confusingly similar
to "NAN." "NAN" is the prevalent feature of Nestles line of infant powdered milk products. It is written
in bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-
2. Clearly, "NANNY" contains the prevalent feature "NAN." The first three letters of "NANNY" are
exactly the same as the letters of "NAN." When "NAN" and "NANNY" are pronounced, the aural
effect is confusingly similar.

In determining the issue of confusing similarity, the Court takes into account the aural effect of the
letters contained in the marks. In Marvex Commercial Company, Inc. v. Petra Hawpia & Company,
the Court held:

It is our considered view that the trademarks "SALONPAS" and "LIONPAS" are confusingly similar in
sound.

Both these words have the same suffix, "PAS", which is used to denote a plaster that adheres to the
body with curative powers. "PAS," being merely descriptive, furnishes no indication of the origin of
the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-
20635, March 31, 1966) and may properly become the subject of a trademark by combination with
another word or phrase.

xxxx

The following random list of confusingly similar sounds in the matter of trademarks, culled from
Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that "SALONPAS"
and "LIONPAS" are confusingly similar in sound: "Gold Dust" and ""Gold Drop"; "Jantzen" and "Jass-
Sea"; "Silver Flash" and Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite";
"Chartreuse" and Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex";
"Zuso" and Hoo Hoo." Leon Amdur, in his book "Trade-Mark Law and Practice," pp. 419-421, cities
[sic], as coming within the purview of the idem sonans rule, "Yusea" and "U-C-A," "Steinway Pianos"
and "Steinberg Pianos," and "Seven-Up" and "Lemon-Up." In Co Tiong vs. Director of Patents, this
Court unequivocally said that "Celdura" and "Condura" are confusingly similar in sound; this Court
held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the
trademark "Sapolin," as the sound of the two names is almost the same.

The scope of protection afforded to registered trademark owners is not limited to protection from
infringers with identical goods. The scope of protection extends to protection from infringers with
related goods, and to market areas that are the normal expansion of business of the registered
trademark owners. Section 138 of R.A. No. 8293 states:

Certificates of Registration. A certificate of registration of a mark shall be prima facie evidence of

validity of the registration, the registrants ownership of the mark, and of the registrants exclusive
right to use the same in connection with the goods or services and those that are related
thereto specified in the certificate. (Emphasis supplied)

In Mighty Corporation v. E. & J. Gallo Winery, the Court held that, "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." In that case, the Court enumerated factors in
determining whether goods are related: (1) classification of the goods; (2) nature of the goods; (3)
descriptive properties, physical attributes or essential characteristics of the goods, with reference to
their form, composition, texture or quality; and (4) style of distribution and marketing of the goods,
including how the goods are displayed and sold.

NANNY and NAN have the same classification, descriptive properties and physical attributes. Both
are classified under Class 6, both are milk products, and both are in powder form. Also, NANNY and
NAN are displayed in the same section of stores the milk section.

The Court agrees with the lower courts that there are differences between NAN and NANNY: (1)
NAN is intended for infants while NANNY is intended for children past their infancy and for adults;
and (2) NAN is more expensive than NANNY. However, as the registered owner of the "NAN" mark,
Nestle should be free to use its mark on similar products, in different segments of the market, and at
different price levels. In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held that the
scope of protection afforded to registered trademark owners extends to market areas that are the
normal expansion of business:

xxx

Even respondents use of the "Big Mak" mark on non-hamburger food products cannot excuse their
infringement of petitioners registered mark, otherwise registered marks will lose their protection
under the law.

The registered trademark owner may use his mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market. The Court has recognized that the registered
trademark owner enjoys protection in product and market areas that are the normal potential
expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or
trade-name is likely to lead to a confusion of source, as where prospective purchasers would be
misled into thinking that the complaining party has extended his business into the field (see 148 ALR
56 et sq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it
forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).
(Emphasis supplied)

WHEREFORE, we GRANT the petition. We SET ASIDE the 1 September 2005 Decision and 4 April
2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62730 and REINSTATE the 18
September 1998 Decision of the Regional Trial Court, Judicial Region 7, Branch 9, Cebu City, in
Civil Case No. CEB-19345.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice
 FIRST DIVISION

G.R. No. 100098 December 29, 1995

EMERALD GARMENT MANUFACTURING CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY
TRANSFER and H.D. LEE COMPANY, INC., respondents.

KAPUNAN, J.:

In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald
Garment Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29
November 1990 in CA-G.R. SP No. 15266 declaring petitioner's trademark to be confusingly similar
to that of private respondent and the resolution dated 17 May 1991 denying petitioner's motion for
reconsideration.

The record reveals the following antecedent facts:

On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized
under the laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology
Transfer (BPTTT) a Petition for Cancellation of Registration No. SR 5054 (Supplemental Register)
for the trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs, jackets,
jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued on 27 October 1980 in the
name of petitioner Emerald Garment Manufacturing Corporation, a domestic corporation organized
and existing under Philippine laws. The petition was docketed as Inter Partes Case No. 1558.1

Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris
Convention for the Protection of Industrial Property, averred that petitioner's trademark "so closely
resembled its own trademark, 'LEE' as previously registered and used in the Philippines, and not
abandoned, as to be likely, when applied to or used in connection with petitioner's goods, to cause
confusion, mistake and deception on the part of the purchasing public as to the origin of the goods."2

In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and
unmistakably different from that of private respondent and that its certificate of registration was
legally and validly granted.3

On 20 February 1984, petitioner caused the publication of its application for registration of the
trademark "STYLISTIC MR. LEE" in the Principal Register."4

On 27 July 1984, private respondent filed a notice of opposition to petitioner's application for
registration also on grounds that petitioner's trademark was confusingly similar to its "LEE"
trademark.5 The case was docketed as Inter Partes Case No. 1860.

On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985,
issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common
question of law was involved.6
On 19 July 1988, the Director of Patents rendered a decision granting private respondent's petition
for cancellation and opposition to registration.

The Director of Patents found private respondent to be the prior registrant of the trademark "LEE" in
the Philippines and that it had been using said mark in the Philippines.7

Moreover, the Director of Patents, using the test of dominancy, declared that petitioner's trademark
was confusingly similar to private respondent's mark because "it is the word 'Lee' which draws the
attention of the buyer and leads him to conclude that the goods originated from the same
manufacturer. It is undeniably the dominant feature of the mark."8

On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with
the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on
grounds that the same would cause it great and irreparable damage and injury. Private respondent
submitted its opposition on 22 August 1988.9

On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioner's motion to stay
execution subject to the following terms and conditions:

1. That under this resolution, Respondent-Registrant is authorized only to dispose of

its current stock using the mark "STYLISTIC MR. LEE";

2. That Respondent-Registrant is strictly prohibited from further production,

regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in
addition to its current stock;

3. That this relief Order shall automatically cease upon resolution of the Appeal by
the Court of Appeals and, if the Respondent's appeal loses, all goods bearing the
mark "STYLISTIC MR. LEE" shall be removed from the market, otherwise such
goods shall be seized in accordance with the law.

SO ORDERED.10

On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the
Director of Patents dated 19 July 1988 in all respects.11

In said decision the Court of Appeals expounded, thus:

xxx xxx xxx

Whether or not a trademark causes confusion and is likely to deceive the public is a
question of fact which is to be resolved by applying the "test of dominancy", meaning,
if the competing trademark contains the main or essential or dominant features of
another by reason of which confusion and deception are likely to result, then
infringement takes place; that duplication or imitation is not necessary, a similarity in
the dominant features of the trademark would be sufficient.

The word "LEE" is the most prominent and distinctive feature of the appellant's
trademark and all of the appellee's "LEE" trademarks. It is the mark which draws the
attention of the buyer and leads him to conclude that the goods originated from the
same manufacturer. While it is true that there are other words such as "STYLISTIC",
 printed in the appellant's label, such word is printed in such small letters over the
word "LEE" that it is not conspicuous enough to draw the attention of ordinary buyers
whereas the word "LEE" is printed across the label in big, bold letters and of the
same color, style, type and size of lettering as that of the trademark of the appellee.
The alleged difference is too insubstantial to be noticeable. Even
granting arguendo that the word "STYLISTIC" is conspicuous enough to draw
attention, the goods may easily be mistaken for just another variation or line of
garments under the ap appelle's "LEE" trademarks in view of the fact that the
appellee has registered trademarks which use other words in addition to the principal
mark "LEE" such as "LEE RIDERS", "LEESURES" and "LEE LEENS". The likelihood
of confusion is further made more probable by the fact that both parties are engaged
in the same line of business. It is well to reiterate that the determinative factor in
ascertaining whether or not the marks are confusingly similar to each other is not
whether the challenged mark would actually cause confusion or deception of the
purchasers but whether the use of such mark would likely cause confusion or
mistake on the part of the buying public.

xxx xxx xxx

The appellee has sufficiently established its right to prior use and registration of the
trademark "LEE" in the Philippines and is thus entitled to protection from any
infringement upon the same. It is thus axiomatic that one who has identified a
peculiar symbol or mark with his goods thereby acquires a property right in such
symbol or mark, and if another infringes the trademark, he thereby invokes this
property right.

The merchandise or goods being sold by the parties are not that expensive as
alleged to be by the appellant and are quite ordinary commodities purchased by the
average person and at times, by the ignorant and the unlettered. Ordinary
purchasers will not as a rule examine the small letterings printed on the label but will
simply be guided by the presence of the striking mark "LEE". Whatever difference
there may be will pale in insignificance in the face of an evident similarity in the
dominant features and overall appearance of the labels of the parties.12

xxx xxx xxx

On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision
of the Court of Appeals.

Private respondent opposed said motion on 8 January 1991 on grounds that it involved an
impermissible change of theory on appeal. Petitioner allegedly raised entirely new and unrelated
arguments and defenses not previously raised in the proceedings below such as laches and a claim
that private respondent appropriated the style and appearance of petitioner's trademark when it
registered its "LEE" mark under Registration No. 44220.13

On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's motion for
reconsideration and ruled thus:

xxx xxx xxx

 A defense not raised in the trial court cannot be raised on appeal for the first time. An
issue raised for the first time on appeal and not raised timely in the proceedings in
the lower court is barred by estoppel.

The object of requiring the parties to present all questions and issues to the lower
court before they can be presented to this Court is to have the lower court rule upon
them, so that this Court on appeal may determine whether or not such ruling was
erroneous. The purpose is also in furtherance of justice to require the party to first
present the question he contends for in the lower court so that the other party may
not be taken by surprise and may present evidence to properly meet the issues
raised.

Moreover, for a question to be raised on appeal, the same must also be within the
issues raised by the parties in their pleadings. Consequently, when a party
deliberately adopts a certain theory, and the case is tried and decided based upon
such theory presented in the court below, he will not be permitted to change his
theory on appeal. To permit him to do so would be unfair to the adverse party. A
question raised for the first time on appeal, there having opportunity to raise them in
the court of origin constitutes a change of theory which is not permissible on appeal.

In the instant case, appellant's main defense pleaded in its answer dated March 23,
1982 was that there was "no confusing similarity between the competing trademark
involved. On appeal, the appellant raised a single issue, to wit:

The only issue involved in this case is whether or not respondent-

registrant's trademark "STYLISTIC MR. LEE" is confusingly similar
with the petitioner's trademarks "LEE or LEERIDERS, LEE-LEENS
and LEE-SURES."

Appellant's main argument in this motion for reconsideration on the other hand is that
the appellee is estopped by laches from asserting its right to its trademark. Appellant
claims although belatedly that appellee went to court with "unclean hands" by
changing the appearance of its trademark to make it identical to the appellant's
trademark.

Neither defenses were raised by the appellant in the proceedings before the Bureau
of Patents. Appellant cannot raise them now for the first time on appeal, let alone on
a mere motion for reconsideration of the decision of this Court dismissing the
appellant's appeal.

While there may be instances and situations justifying relaxation of this rule, the
circumstance of the instant case, equity would be better served by applying the
settled rule it appearing that appellant has not given any reason at all as to why the
defenses raised in its motion for reconsideration was not invoked earlier.14

xxx xxx xxx

Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE

RESPONDENT CAUSED THE ISSUANCE OF A FOURTH "LEE" TRADEMARK
IMITATING THAT OF THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN
 EIGHT MONTHS AFTER THE BUREAU OF PATENT'S DECISION DATED JULY
19, 1988.

II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF

ESTOPPEL BY LACHES MUST BE RAISED IN THE PROCEEDINGS BEFORE
THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER.

III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE

RESPONDENT'S PRIOR REGISTRATION OF ITS TRADEMARK AND
DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO
PROVE COMMERCIAL
USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION.15

In addition, petitioner reiterates the issues it raised in the Court of Appeals:

I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONER'S

TRADEMARK SYTLISTIC MR. LEE, IS CONFUSINGLY SIMILAR WITH THE
PRIVATE RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEE-LEENS AND
LEE-SURES.

II. PETITIONER'S EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT

IS THE PRIOR USER AND ITS TRADEMARK IS DIFFERENT FROM THAT OF THE
PRIVATE RESPONDENT.

III. PETITIONER'S TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE

RESPONDENT'S AND THE REGISTRATION OF ITS TRADEMARK IS PRIMA
FACIE EVIDENCE OF GOOD FAITH.

IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK CANNOT BE CONFUSED

WITH PRIVATE RESPONDENT'S LEE TRADEMARK.16

Petitioner contends that private respondent is estopped from instituting an action for infringement
before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A of R.A. No. 166,
otherwise known as the Law on Trade-marks, Trade-names and Unfair Competition:

Sec. 9-A. Equitable principles to govern proceedings. In opposition proceedings

and in all other inter partes proceedings in the patent office under this act, equitable
principles of laches, estoppel, and acquiescence, where applicable, may be
considered and applied.

Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE" since 1 May 1975, yet,
it was only on 18 September 1981 that private respondent filed a petition for cancellation of
petitioner's certificate of registration for the said trademark. Similarly, private respondent's notice of
opposition to petitioner's application for registration in the principal register was belatedly filed on 27
July 1984.17

Private respondent counters by maintaining that petitioner was barred from raising new issues on
appeal, the only contention in the proceedings below being the presence or absence of confusing
similarity between the two trademarks in question.18

We reject petitioner's contention.

Petitioner's trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166)
provides that "marks and tradenames for the supplemental register shall not be published for or be
subject to opposition, but shall be published on registration in the Official Gazette."19 The reckoning
point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed
trademark but 27 October 1980,20 the date the certificate of registration SR No. 5054 was published
in the Official Gazette and issued to petitioner.

It was only on the date of publication and issuance of the registration certificate that private
respondent may be considered "officially" put on notice that petitioner has appropriated or is using
said mark, which, after all, is the function and purpose of registration in the supplemental
register.21 The record is bereft of evidence that private respondent was aware of petitioner's
trademark before the date of said publication and issuance. Hence, when private respondent
instituted cancellation proceedings on 18 September 1981, less than a year had passed.

Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of
opposition to petitioner's application for registration in the principal register since said application
was published only on 20 February 1984.22 From the time of publication to the time of filing the
opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on
grounds of estoppel and laches, the delay must be
lengthy.23

More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently
contends that its trademark "STYLISTIC MR. LEE" is entirely different from and not confusingly
similar to private respondent's "LEE" trademark.

Private respondent maintains otherwise. It asserts that petitioner's trademark tends to mislead and
confuse the public and thus constitutes an infringement of its own mark, since the dominant feature
therein is the word "LEE."

The pertinent provision of R.A. No. 166 (Trademark Law) states thus:

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

Practical application, however, of the aforesaid provision is easier said than done. In the history of
trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly
similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be
decided on its own merits.

In Esso Standard Eastern, Inc. v. Court of Appeals,24 we held:

. . . But likelihood of confusion is a relative concept; to be determined only according

to the particular, and sometimes peculiar, circumstances of each case. It is
 unquestionably true that, as stated in Coburn vs. Puritan Mills, Inc.: "In trademark
cases, even more than in other litigation, precedent must be studied in the light of the
facts of the particular case."

xxx xxx xxx

Likewise, it has been observed that:

In determining whether a particular name or mark is a "colorable imitation" of

another, no all-embracing rule seems possible in view of the great number of factors
which must necessarily be considered in resolving this question of fact, such as the
class of product or business to which the article belongs; the product's quality,
quantity, or size, including its wrapper or container; the dominant color, style, size,
form, meaning of letters, words, designs and emblems used; the nature of the
package, wrapper or container; the character of the product's purchasers; location of
the business; the likelihood of deception or the mark or name's tendency to confuse;
etc.25

Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term
has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary
purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary
purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one
supposing it to be the other."26

Colorable imitation does not mean such similitude as amounts to identity. Nor does it
require that all the details be literally copied. Colorable imitation refers to such
similarity in form, content, words, sound, meaning, special arrangement, or general
appearance of the trademark or tradename with that of the other mark or tradename
in their over-all presentation or in their essential, substantive and distinctive parts as
would likely mislead or confuse persons in the ordinary course of purchasing the
genuine article.27

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 28 and other cases 29 and the
Holistic Test developed in Del Monte Corporation v. Court of Appeals 30 and its proponent cases.31

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 it is 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. Honover Rubber Co.,
107 F. 2d 588; . . .)32

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.

xxx xxx xxx

In determining whether the trademarks are confusingly similar, a comparison of the

words is not the only determinant factor. The trademarks in their entirety as they
appear in their respective labels or hang tags must also be considered in relation to
the goods to which they are attached. The discerning eye of the observer must focus
not only on the predominant words but also on the other features appearing in both
labels in order that he may draw his conclusion whether one is confusingly similar to
the other.33

xxx xxx xxx

Applying the foregoing tenets to the present controversy and taking into account the factual
circumstances of this case, we considered the trademarks involved as a whole and rule that
petitioner's "STYLISTIC MR. LEE" is not confusingly similar to private respondent's "LEE" trademark.

Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its label the word "LEE" is
prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities
between the two marks become conspicuous, noticeable and substantial enough to matter
especially in the light of the following variables that must be factored in.

First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not
your ordinary household items like catsup, soysauce or soap which are of minimal cost. Maong
pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more
cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception,
then, is less likely. In Del Monte Corporation v. Court of Appeals, 34 we noted that:

. . . Among these, what essentially determines the attitudes of the purchaser,

specifically his inclination to be cautious, is the cost of the goods. To be sure, a
person who buys a box of candies will not exercise as much care as one who buys
an expensive watch. As a general rule, an ordinary buyer does not exercise as much
prudence in buying an article for which he pays a few centavos as he does in
purchasing a more valuable thing. Expensive and valuable items are normally bought
only after deliberate, comparative and analytical investigation. But mass products,
low priced articles in wide use, and matters of everyday purchase requiring frequent
replacement are bought by the casual consumer without great
care. . . .

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not
ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is,
therefore, more or less knowledgeable and familiar with his preference and will not easily be
distracted.

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary
purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary
consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok 35 is better suited to the present case. There,
the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent
familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood
of the deception of some persons in some measure acquainted with an established design and
desirous of purchasing the commodity with which that design has been associated. The test is not
found in the deception, or the possibility of deception, of the person who knows nothing about the
design which has been counterfeited, and who must be indifferent between that and the other. The
simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary
intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase."

There is no cause for the Court of Appeal's apprehension that petitioner's products might be
mistaken as "another variation or line of garments under private respondent's 'LEE' trademark".36 As
one would readily observe, private respondent's variation follows a standard format "LEERIDERS,"
"LEESURES" and "LEELEENS." It is, therefore, improbable that the public would immediately and
naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another variation under private
respondent's "LEE" mark.

As we have previously intimated the issue of confusing similarity between trademarks is resolved by
considering the distinct characteristics of each case. In the present controversy, taking into account
these unique factors, we conclude that the similarities in the trademarks in question are not sufficient
as to likely cause deception and confusion tantamount to infringement.

Another way of resolving the conflict is to consider the marks involved from the point of view of what
marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4 (e):

CHAPTER II-A. The Principal Register

(Inserted by Sec. 2, Rep. Act No. 638.)

Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal

register. There is hereby established a register of trade-marks, trade-names and
service-marks which shall be known as the principal register. The owner of a trade-
mark, trade-name or service-mark used to distinguish his goods, business or
services from the goods, business or services of others shall have the right to
register the same on the principal register, unless it:

xxx xxx xxx

(e) Consists of a mark or trade-name which, when applied to or used in connection

with the goods, business or services of the applicant is merely descriptive or
deceptively misdescriptive of them, or when applied to or used in connection with the
goods, business or services of the applicant is primarily geographically descriptive or
deceptively misdescriptive of them, or is primarily merely a surname; (Emphasis
ours.)

xxx xxx xxx

"LEE" is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership
over and singular use of said term.

. . . It has been held that a personal name or surname may not be monopolized as a
trademark or tradename as against others of the same name or surname. For in the
absence of contract, fraud, or estoppel, any man may use his name or surname in all
legitimate ways. Thus, "Wellington" is a surname, and its first user has no cause of
 action against the junior user of "Wellington" as it is incapable of exclusive
appropriation.37

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) which explicitly provides that:

CHAPTER II. Registration of Marks and Trade-names.

Sec. 2. What are registrable. Trade-marks, trade-names, and service marks

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

Sec. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired.

Anyone who lawfully produces or deals in merchandise of any kind or who
engages in lawful business, or who renders any lawful service in commerce, by
actual use hereof in manufacture or trade, in business, and in the service rendered;
may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark
not so appropriated by another, to distinguish his merchandise, business or services
from others. The ownership or possession of trade-mark, trade-name, service-mark,
heretofore or hereafter appropriated, as in this section provided, shall be recognized
and protected in the same manner and to the same extent as are other property
rights to the law. (As amended.) (Emphasis ours.)

The provisions of the 1965 Paris Convention for the Protection of Industrial Property 38 relied upon by
private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166)39 were sufficiently
expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals:40

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

xxx xxx xxx

Undisputably, private respondent is the senior registrant, having obtained several registration
certificates for its various trademarks "LEE," "LEERIDERS," and "LEESURES" in both the
supplemental and principal registers, as early as 1969 to 1973.41 However, registration alone will not
suffice. In Sterling Products International, Inc. v.Farbenfabriken Bayer Aktiengesellschaft,42 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

It would seem quite clear that adoption alone of a trademark would not give exclusive
right thereto. Such right "grows out of their actual use." Adoption is not use. One may
make advertisements, issue circulars, give out price lists on certain goods; but these
alone would not give exclusive right of use. For trademark is a creation of use. The
underlying reason for all these is that purchasers have come to understand the mark
as indicating the origin of the wares. Flowing from this is the trader's right to
protection in the trade he has built up and the goodwill he has accumulated from use
of the trademark. Registration of a trademark, of course, has value: it is an
administrative act declaratory of a pre-existing right. Registration does not, however,
perfect a trademark right. (Emphasis ours.)

xxx xxx xxx

To augment its arguments that it was, not only the prior registrant, but also the prior user, private
respondent invokes Sec. 20 of the Trademark Law, thus:

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

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

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

Moreover, the aforequoted provision applies only to registrations in the principal

register.43 Registrations in the supplemental register do not enjoy a similar privilege. A supplemental
register was created precisely for the registration of marks which are not registrable on the principal
register due to some defects.44

The determination as to who is the prior user of the trademark is a question of fact and it is this
Court's working principle not to disturb the findings of the Director of Patents on this issue in the
absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents
are conclusive upon the Supreme Court provided they are supported by substantial evidence.45

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 Philippines46 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. 47Similarly, we give little weight to the numerous
vouchers representing various advertising expenses in the Philippines for "LEE" products. 48 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 1981.49

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.50

Our rulings in Pagasa Industrial Corp. v. Court of Appeals 51 and Converse Rubber Corp. v. Universal Rubber
Products, Inc.,52respectively, 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

The sales invoices provide the best proof that there were actual sales of petitioner's
product in the country and that there was actual use for a protracted period of
petitioner's trademark or part thereof through these sales.

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.

WHEREFORE, premises considered, the questioned decision and resolution are hereby
REVERSED and SET ASIDE.

SO ORDERED.

Bellosillo and Hermosisima, Jr., JJ., concur.

Separate Opinions

PADILLA, J., dissenting:

I dissent. I vote deny the petition; I agree with BPTTT and the CA that petitioner's trademark
"STYLISTIC MR. LEE" is confusingly similar to private respondent's earlier registered trademarks
"LEE" or "LEE RIDER, LEE-LEENS and LEE-SURES" such that the trademark "STYLISTIC MR.
LEE" is an infringement of the earlier registered trademarks.

Separate Opinions

PADILLA, J., dissenting:

I dissent. I vote deny the petition; I agree with BPTTT and the CA that petitioner's trademark
"STYLISTIC MR. LEE" is confusingly similar to private respondent's earlier registered trademarks
"LEE" or "LEE RIDER, LEE-LEENS and LEE-SURES" such that the trademark "STYLISTIC MR.
LEE" is an infringement of the earlier registered trademarks.

Footnotes

1 Rollo, pp. 3, 27, 53.

2 Id., at 27, 55.

3 Id., at 27, 54.

4 Id., at 3, 27.
5 Id., at 54.

6 Ibid.

7 Id., at 39.

8 Id., at 38.

9 Id., at 4.

10 Id., at 42.

11 Id., at 33.

12 Id., at 31-33.

13 Id., at 175.

14 Id., at 23-25.

15 Id., at 7, 14-15.

16 Ibid.

17 Id., at 12, 158.

18 Id., at 193.

19 The whole paragraph reads as follows:

Chapter IV-A. The supplemental register.

Sec. 19-A.

xxx xxx xxx

Marks and trade-names for the supplemental register shall not be published for or be
subject to opposition, but shall be published on registration in the Official Gazette.
Whenever any person believes that he is or will be damaged by the registration of a
mark or trade-name on this register, he may at any time apply to the director to
cancel such registration. Upon receiving the application, the director shall give notice
thereof to the registrant. If it is found after a hearing that the registrant was not
entitled to register the mark at the time of his application for registration thereof, or
that the mark was not used by the registrant or has been abandoned, the registration
shall be cancelled by the director.

20 Supra, see Note 1.

21 Sec. 19-A, R.A. No. 166; La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373
(1984).
22 Supra, see Note 4.

23 Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p.

32, citing La Insular v. Jao Oge, 47 Phil. 75, (1924); La Insular v. Yu So, 45 Phil. 398
(1923).

24 116 SCRA 336 (1982).

25 Jaime N. Salazar, Trademarks and Tradenames, 55 SCRA 422 (1974); See

also Colorable Imitation of Trademarks, Tradenames, Labels, Packages, Wrappers,
etc., 16 SCRA 502 (1966).

26 Etepha v. Director of Patents, 16 SCRA 495 (1966).

27 Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p. 41.

28 224 SCRA 437 (1993).

29 Co Tiong v. Director of Patents, 95 Phil. 1 (1954); Lim Hoa v. Director of Patents,

100 Phil. 214 (1956); American Wire & Cable Co. v. Director of Patents, 31 SCRA
544 (1970); Phil. Nut Industry, Inc. v. Standard Brands, Inc., 65 SCRA 575 (1975);
Converse Rubber Corp. v. Universal Rubber Products, Inc., 147 SCRA 154 (1987).

30 181 SCRA 410 (1990).

31 Mead Johnson & Co. v. N.V.J. Van Dorp, Ltd., 7 SCRA 771 (1963); Bristol Myers
Co. v. Director of Patents, 17 SCRA 128 (1966); Fruit of the Loom, Inc. v. CA, 133
SCRA 405 (1984).

32 Supra, see note 28.

33 Fruit of the Loom, Inc. v. CA, supra, see note 31.

34 Supra, see note 30.

35 42 Phil. 190 (1921).

36 Supra, see note 12.

37 Ruben Agpalo, Trademark Law and Practice in the Philippines, 1990, p.

18, citing Ang Si Heng v. Wellington Dept. Store, Inc., 92 Phil. 448 (1953).

38 The Philippines became a signatory thereto on 27 September 1965.

The Paris Convention is essentially a compact among the various member countries
to accord in their own countries to citizens of the other contracting parties trademark
and other rights comparable to those accorded their own citizens by their domestic
laws. The underlying principle is that foreign nationals should be given the same
treatment in each of the member countries as that country makes available to its own
citizens. In addition the Convention sought to create uniformity in certain respects by
obligating each nation assure to nationals of countries of the Union an effective
protection against unfair competition. (Ruben Agpalo, Trademark Law And Practice
in the Philippines, 1990, pp. 200-201.)

39 Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-
name has been registered or assigned under this Act may bring an action
hereinunder for infringement, for unfair competition, or false designation of origin and
false description, whether or not it has been licensed to do business in the
Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended,
otherwise known as the Corporation Law, at the time it brings complaint: Provided,
That the country of which the said foreign or juristic person is a citizen, or in which it
is domiciled, by treaty, convention or law, grants a similar privilege to corporate or
juristic persons of the Philippines. (As amended.)

40 224 SCRA 576 (1993).

41 Rollo, p. 170; Exhibits A, B, C, & C-1.

42 27 SCRA 1214 (1969); Reiterated in Kabushi Kaisha Isetan v. Intermediate

Appellate Court, 203 SCRA 583 (1991).

43 La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984).

44 Ibid.

45 Unno Commercial Enterprises, Inc. v. General Milling Corp., 120 SCRA 804
(1983); Kabushi Kaisha Isetan v. Intermediate Appellate Court, 203 SCRA 583
(1991).

46 Rollo, p. 177.

47 Original Records, p. 52.

48 Exhibits F-1 to F-59.

49 Exhibit E.

50 Exhibits 1-e to 1-o.

51 118 SCRA 526 (1982).

52 147 SCRA 154 (1987).

 EN BANC

G.R. No. L-21587 May 19, 1966

BRISTOL MYERS COMPANY, petitioner,

vs.
THE DIRECTOR OF PATENTS and UNITED AMERICAN PHARMACEUTICALS,
INC., respondents.

Picazo and Agcaoili for petitioner.

Sycip, Salazar, Luna and Associates for respondent United American Pharmaceuticals, Inc.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General A. A. Torres and Solicitor
A. V. Sempio-Diy, for Director of Patents.

BENGZON, J.P., J.:

A petition for registration in the Principal Register of the Patent Office of the trademark "BIOFERIN"
was filed on October 21, 1957 by United American Pharmaceuticals, Inc. Said domestic corporation
first used the afore-stated trademark in the Philippines on August 13, 1957. It covers "a medicinal
preparation of antihistamic, analgesic, antipyritic with vitamin C and Bioflavenoid used in the
treatment of common colds, influenza and other febrile diseases with capillary hemmorrhagic
tendencies." The product falls under Class 6 of the official classification, that is, "Medicines and
Pharmaceutical Preparations".

Bristol Myers Co., a corporation of the State of Delaware, U.S.A., filed on January 6, 1959 an
opposition to the application. Said oppositor is the owner in the Philippines of the trademark
"BUFFERIN" under Certificate of Registration No. 4578 issued by the Philippine Patent Office on
March 3, 1954. Its trademark is also registered in the United States under Certificate of Registration
No. 566190 issued on November 4, 1952. It was first used in the Philippines on May 13, 1953. The
product covered by "BUFFERIN" also belongs to Class 6, Medicines and Pharmaceutical
Preparations. Designated as "Antacid analgesic", it is intended for relief in cases of "simple
headaches, neuralgia, colds, menstrual pain and minor muscular aches."

The thrust of oppositor's contention was that the registration of the applicant's trademark "BIOFERIN
would violate its rights and interests in its registered trademark "BUFFERIN" as well as mislead and
confuse the public as to the source and origin of the goods covered by the respective marks, in view
of the allegedly practically the same spelling, pronunciation and letter-type design of the two
trademarks covering goods of the same class.

The parties thereafter filed on January 18, 1961 a joint petition stipulating as to the facts and
submitting the case upon the issue of whether or not, considering all the factors involved, in both
trademarks as the parties would discuss in their memoranda, there will be such confusing
similarity between the two trademarks as will be likely to deceive the purchasing public.

After submission of memoranda, on June 21, 1963 the Director of Patents rendered a decision
granting the petition for registration and dismissing the opposition, on the ground that, all factors
considered the trademarks in question are not confusingly similar, so that the damage feared by the
oppositor will not result.

From said decision the oppositor appealed to this Court by petition for review filed on July 24, 1963.
The sole issue raised thereby is: Are the trademarks "BIOFERIN" and "BUFFERIN", as presented to
the public in their respective labels, confusingly similar?
Appellant contends that confusing similarity will obtain because both products are primarily used for
the relief of pains such as headaches and colds; and because words "BIOFERIN and "BUFFERIN"
are practically the same in spelling and pronunciation.

In determining whether two trademarks are confusingly similar, the test is not simply to take
their words and compare the spelling and pronunciation of said words. Rather, it is to consider
the two marks in their entirety, as they appear in the respective labels, in relation to the goods to
which they are attached. Said rule was enunciated by this by this Court through Justice Felix
Bautista Angelo in Mead Johnson & Co. vs. N.V.J Van Dorp, Ltd., L,17501, April 27, 1963, thus:

It is true that between petitioner's trademark "ALACTA" and respondent's "ALASKA" there
are similarities in spelling, appearance and sound for both are composed of six letters of
three syllables each and each syllable has the same vowel, but in determining if they are
confusingly similar a comparison of said words is not the only determining factor. The two
marks in their entirety as they appear in the respective labels 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. ...

Applying this test to the trademarks involved in this case, it is at once evident that the Director of
Patents did not err in finding no confusing similarity. For though the words "BIOFERIN" and
"BUFFERIN" have the same suffix and similar sounding prefixes, they appear in their respective
labels with strikingly different backgrounds and surroundings, as to color , size and design.

For convenience we sum up these differences, as follows:

Relevant
"BIOFERIN" "BUFFERIN"
Factors

1. Shape & Rectangular, about 3-3/4" 2-1/4" Rectangular, 3-3/4"' 1-1/4"

Size of Label

2. Color of Predominantly Yellow Predominantly White

Label

3. Color Olive-green Blue

background
of Word-mark

4. Over-all At the top center-word At left side of label Wood-

Layout mark "BIOFERIN"; below it
are contents of medicine, arranged
horizontally; at bottom, center, "United
Pharmaceuticals, Inc." in olivegreen
background. At left side
dosage, printed perpendicularly; at
right side,indications,also
perpendicularly printed.
mark "BUFFERIN"; with "Bristol
Myers Co., New York, N.Y."
below at right side, contents,
indications dosage are grouped
together, printed
perpendicularly
 5. Form of Capsules Tablets
product label says: "50 capsules" label says: "36 Tablets"

6. Label states: No such statement

Prescription "To be dispensed only by or on the
prescription of a physician"

Accordingly, taken as they will appear to a prospective customer, the trademark in question are not
apt to confuse. Furthermore, the product of the applicant is expressly stated as dispensable only
upon doctor's prescription, while that of oppositor does not require the same. The chances of being
confused into purchasing one for the other are therefore all the more rendered negligible. Although
oppositor avers that some drugstores sell "BIOFERIN" without asking for a doctor's prescription, the
same if true would be an irregularity not attributable to the applicant, who has already clearly stated
the requirement of a doctor's prescription upon the face of the label of its product.

Wherefore, the decision of the Director of Patents appealed from is hereby affirmed without costs.
So ordered.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal,
Zaldivar and Sanchez, JJ., concur.
 FIRST DIVISION

G.R. No. 180677 February 18, 2013

VICTORIO P. DIAZ, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES AND LEVI STRAUSS [PHILS.], INC., Respondents.

DECISION

BERSAMIN, J.:

It is the tendency of the allegedly infringing mark to be confused with the registered trademark that is
the gravamen of the offense of infringement of a registered trademark. The acquittal of the accused
should follow if the allegedly infringing mark is not likely to cause confusion. Thereby, the evidence
of the State does not satisfy the quantum of proof beyond reasonable doubt.

Accused Victorio P. Diaz (Diaz) appeals the resolutions promulgated on July 17, 20071 and
November 22, 2007,2whereby the Court of Appeals (CA), respectively, dismissed his appeal in C.A.-
G.R. CR No. 30133 for the belated filing of the appellant's brief, and denied his motion for
reconsideration. Thereby, the decision rendered on February 13, 2006 in Criminal Case No. 00-0318
and Criminal Case No. 00-0319 by the Regional Trial Court, Branch 255, in Las Pifias City (RTC)
convicting him for two counts of infringement of trademark were affirmed.3

Antecedents

On February 10, 2000, the Department of Justice filed two informations in the RTC of Las Pias City,
charging Diaz with violation of Section 155, in relation to Section 170, of Republic Act No. 8293, also
known as the Intellectual Property Code of the Philippines (Intellectual Property Code), to wit:

Criminal Case No. 00-0318

That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the
jurisdiction of this Honorable Court, the abovenamed accused, with criminal intent to defraud Levis
Strauss (Phil.) Inc. (hereinafter referred to as LEVIS), did then and there, willfully, unlawfully,
feloniously, knowingly and intentionally engaged in commerce by reproducing, counterfeiting,
copying and colorably imitating Levis registered trademarks or dominant features thereof such as
the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH
PATTERNED ARCUATE DESIGN, TAB AND COMPOSITE ARCUATE/TAB/TWO HORSE PATCH,
and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and
jeans, including other preparatory steps necessary to carry out the sale of said patches and jeans,
which likely caused confusion, mistake, and /or deceived the general consuming public, without the
consent, permit or authority of the registered owner, LEVIS, thus depriving and defrauding the latter
of its right to the exclusive use of its trademarks and legitimate trade, to the damage and prejudice of
LEVIS.

CONTRARY TO LAW.4

Criminal Case No. 00-0319

That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the
jurisdiction of this Honorable Court, the abovenamed accused, with criminal intent to defraud Levis
Strauss (Phil.) Inc. (hereinafter referred to as LEVIS), did then and there, willfully, unlawfully,
feloniously, knowingly and intentionally engaged in commerce by reproducing, counterfeiting,
copying and colorably imitating Levis registered trademarks or dominant features thereof such as
the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH
PATTERNED ARCUATE DESIGN, TAB AND COMPOSITE ARCUATE/TAB/TWO HORSE PATCH,
and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and
jeans, including other preparatory steps necessary to carry out the sale of said patches and jeans,
which likely caused confusion, mistake, and /or deceived the general consuming public, without the
consent, permit or authority of the registered owner, LEVIS, thus depriving and defrauding the latter
of its right to the exclusive use of its trademarks and legitimate trade, to the damage and prejudice of
LEVIS.

CONTRARY TO LAW.5

The cases were consolidated for a joint trial. Diaz entered his pleas of not guilty to each information
on June 21, 2000.6

1.

Evidence of the Prosecution

Levi Strauss and Company (Levis), a foreign corporation based in the State of Delaware, United
States of America, had been engaged in the apparel business. It is the owner of trademarks and
designs of Levis jeans like LEVIS 501, the arcuate design, the two-horse brand, the two-horse
patch, the two-horse patch with pattern arcuate, and the composite tab arcuate. LEVIS 501 has the
following registered trademarks, to wit: (1) the leather patch showing two horses pulling a pair of
pants; (2) the arcuate pattern with the inscription "LEVI STRAUSS & CO;" (3) the arcuate design that
refers to "the two parallel stitching curving downward that are being sewn on both back pockets of a
Levis Jeans;" and (4) the tab or piece of cloth located on the structural seam of the right back
pocket, upper left side. All these trademarks were registered in the Philippine Patent Office in the
1970s, 1980s and early part of 1990s.7

Levi Strauss Philippines, Inc. (Levis Philippines) is a licensee of Levis. After receiving information
that Diaz was selling counterfeit LEVIS 501 jeans in his tailoring shops in Almanza and Talon, Las
Pias City, Levis Philippines hired a private investigation group to verify the information.
Surveillance and the purchase of jeans from the tailoring shops of Diaz established that the jeans
bought from the tailoring shops of Diaz were counterfeit or imitations of LEVIS 501. Levis
Philippines then sought the assistance of the National Bureau of Investigation (NBI) for purposes of
applying for a search warrant against Diaz to be served at his tailoring shops. The search warrants
were issued in due course. Armed with the search warrants, NBI agents searched the tailoring shops
of Diaz and seized several fake LEVIS 501 jeans from them. Levis Philippines claimed that it did
not authorize the making and selling of the seized jeans; that each of the jeans were mere imitations
of genuine LEVIS 501 jeans by each of them bearing the registered trademarks, like the arcuate
design, the tab, and the leather patch; and that the seized jeans could be mistaken for original
LEVIS 501 jeans due to the placement of the arcuate, tab, and two-horse leather patch.8

2.

Evidence of the Defense

On his part, Diaz admitted being the owner of the shops searched, but he denied any criminal
liability.

Diaz stated that he did not manufacture Levis jeans, and that he used the label "LS Jeans Tailoring"
in the jeans that he made and sold; that the label "LS Jeans Tailoring" was registered with the
Intellectual Property Office; that his shops received clothes for sewing or repair; that his shops
offered made-to-order jeans, whose styles or designs were done in accordance with instructions of
the customers; that since the time his shops began operating in 1992, he had received no notice or
warning regarding his operations; that the jeans he produced were easily recognizable because the
label "LS Jeans Tailoring," and the names of the customers were placed inside the pockets, and
each of the jeans had an "LSJT" red tab; that "LS" stood for "Latest Style;" and that the leather patch
on his jeans had two buffaloes, not two horses.9

Ruling of the RTC

On February 13, 2006, the RTC rendered its decision finding Diaz guilty as charged, disposing thus:

WHEREFORE, premises considered, the Court finds accused Victorio P. Diaz, a.k.a. Vic Diaz,
GUILTY beyond reasonable doubt of twice violating Sec. 155, in relation to Sec. 170, of RA No.
8293, as alleged in the Informations in Criminal Case Nos. 00-0318 & 00-0319, respectively, and
hereby sentences him to suffer in each of the cases the penalty of imprisonment of TWO (2) YEARS
of prision correcional, as minimum, up to FIVE (5) YEARS of prision correcional, as maximum, as
well as pay a fine of 50,000.00 for each of the herein cases, with subsidiary imprisonment in case
of insolvency, and to suffer the accessory penalties provided for by law.

Also, accused Diaz is hereby ordered to pay to the private complainant Levis Strauss (Phils.), Inc.
the following, thus:

1. 50,000.00 in exemplary damages; and

2. 222,000.00 as and by way of attorneys fees.

Costs de officio.

SO ORDERED.10

Ruling of the CA

Diaz appealed, but the CA dismissed the appeal on July 17, 2007 on the ground that Diaz had not
filed his appellants brief on time despite being granted his requested several extension periods.

Upon denial of his motion for reconsideration, Diaz is now before the Court to plead for his acquittal.

Issue

Diaz submits that:

THE COURT OF APPEALS VIOLATED EXISTING LAW AND JURISPRUDENCE WHEN IT

APPLIED RIGIDLY THE RULE ON TECHNICALITIES AND OVERRIDE SUBSTANTIAL JUSTICE
BY DISMISSING THE APPEAL OF THE PETITIONER FOR LATE FILING OF APPELLANTS
BRIEF.11
 Ruling

The Court first resolves whether the CA properly dismissed the appeal of Diaz due to the late filing of
his appellants brief.

Under Section 7, Rule 44 of the Rules of Court, the appellant is required to file the appellants brief in
the CA "within forty-five (45) days from receipt of the notice of the clerk that all the evidence, oral
and documentary, are attached to the record, seven (7) copies of his legibly typewritten,
mimeographed or printed brief, with proof of service of two (2) copies thereof upon the appellee."
Section 1(e) of Rule 50 of the Rules of Court grants to the CA the discretion to dismiss an appeal
either motu proprio or on motion of the appellee should the appellant fail to serve and file the
required number of copies of the appellants brief within the time provided by the Rules of Court.12

The usage of the word may in Section 1(e) of Rule 50 indicates that the dismissal of the appeal upon
failure to file the appellants brief is not mandatory, but discretionary. Verily, the failure to serve and
file the required number of copies of the appellants brief within the time provided by the Rules of
Court does not have the immediate effect of causing the outright dismissal of the appeal. This
means that the discretion to dismiss the appeal on that basis is lodged in the CA, by virtue of which
the CA may still allow the appeal to proceed despite the late filing of the appellants brief, when the
circumstances so warrant its liberality. In deciding to dismiss the appeal, then, the CA is bound to
exercise its sound discretion upon taking all the pertinent circumstances into due consideration.

The records reveal that Diazs counsel thrice sought an extension of the period to file the appellants
brief. The first time was on March 12, 2007, the request being for an extension of 30 days to
commence on March 11, 2007. The CA granted his motion under its resolution of March 21, 2007.
On April 10, 2007, the last day of the 30-day extension, the counsel filed another motion, seeking an
additional 15 days. The CA allowed the counsel until April 25, 2007 to serve and file the appellants
brief. On April 25, 2007, the counsel went a third time to the CA with another request for 15 days.
The CA still granted such third motion for extension, giving the counsel until May 10, 2007.
Notwithstanding the liberality of the CA, the counsel did not literally comply, filing the appellants brief
only on May 28, 2007, which was the 18th day beyond the third extension period granted.

Under the circumstances, the failure to file the appellants brief on time rightly deserved the outright
rejection of the appeal. The acts of his counsel bound Diaz like any other client. It was, of course,
only the counsel who was well aware that the Rules of Court fixed the periods to file pleadings and
equally significant papers like the appellants brief with the lofty objective of avoiding delays in the
administration of justice.

Yet, we have before us an appeal in two criminal cases in which the appellant lost his chance to be
heard by the CA on appeal because of the failure of his counsel to serve and file the appellants brief
on time despite the grant of several extensions the counsel requested. Diaz was convicted and
sentenced to suffer two indeterminate sentences that would require him to spend time in detention
for each conviction lasting two years, as minimum, to five years, as maximum, and to pay fines
totaling 100,000.00 (with subsidiary imprisonment in case of his insolvency). His personal liberty is
now no less at stake. This reality impels us to look beyond the technicality and delve into the merits
of the case to see for ourselves if the appeal, had it not been dismissed, would have been worth the
time of the CA to pass upon. After all, his appellants brief had been meanwhile submitted to the CA.
While delving into the merits of the case, we have uncovered a weakness in the evidence of guilt
that cannot be simply ignored and glossed over if we were to be true to our oaths to do justice to
everyone.
We feel that despite the CA being probably right in dismissing the excuses of oversight and
excusable negligence tendered by Diazs counsel to justify the belated filing of the appellants brief
as unworthy of serious consideration, Diaz should not be made to suffer the dire consequence. Any
accused in his shoes, with his personal liberty as well as his personal fortune at stake, expectedly
but innocently put his fullest trust in his counsels abilities and professionalism in the handling of his
appeal. He thereby delivered his fate to the hands of his counsel. Whether or not those hands were
efficient or trained enough for the job of handling the appeal was a learning that he would get only in
the end. Likelier than not, he was probably even unaware of the three times that his counsel had
requested the CA for extensions. If he were now to be left to his unwanted fate, he would surely
suffer despite his innocence. How costly a learning it would be for him! That is where the Court
comes in. It is most important for us as dispensers of justice not to allow the inadvertence or
incompetence of any counsel to result in the outright deprivation of an appellants right to life, liberty
or property.13

We do not mind if this softening of judicial attitudes be mislabeled as excessive leniency. With so
much on the line, the people whose futures hang in a balance should not be left to suffer from the
incompetence, mindlessness or lack of professionalism of any member of the Law Profession. They
reasonably expect a just result in every litigation. The courts must give them that just result. That
assurance is the peoples birthright. Thus, we have to undo Diazs dire fate.

Even as we now set aside the CAs rejection of the appeal of Diaz, we will not remand the records to
the CA for its review. In an appeal of criminal convictions, the records are laid open for review. To
avoid further delays, therefore, we take it upon ourselves to review the records and resolve the issue
of guilt, considering that the records are already before us.

Section 155 of R.A. No. 8293 defines the acts that constitute infringement of trademark, viz:

Remedies; Infringement. Any person who shall, without the consent of the owner of the registered
mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.

The elements of the offense of trademark infringement under the Intellectual Property Code are,
therefore, the following:

1. The trademark being infringed is registered in the Intellectual Property Office;

2. The trademark is reproduced, counterfeited, copied, or colorably imitated by the infringer;

 3. The infringing mark is used in connection with the sale, offering for sale, or advertising of
any goods, business or services; or the infringing mark 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;

4. The use or application of the infringing mark is likely to cause confusion or mistake or to
deceive purchasers or others as to the goods or services themselves or as to the source or
origin of such goods or services or the identity of such business; and

5. The use or application of the infringing mark is without the consent of the trademark owner
or the assignee thereof.14

As can be seen, the likelihood of confusion is the gravamen of the offense of trademark
infringement.15 There are two tests to determine likelihood of confusion, namely: the dominancy test,
and the holistic test. The contrasting concept of these tests was explained in Societes Des Produits
Nestle, S.A. v. Dy, Jr., thus:

x x x. The dominancy test focuses on the similarity of the main, prevalent or essential features of the
competing trademarks that might cause confusion. Infringement takes place when the competing
trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary.
The question is whether the use of the marks is likely to cause confusion or deceive purchasers.

The holistic test considers the entirety of the marks, including labels and packaging, in determining
confusing similarity. The focus is not only on the predominant words but also on the other features
appearing on the labels.16

As to what test should be applied in a trademark infringement case, we said in McDonalds

Corporation v. Macjoy Fastfood Corporation17 that:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no set rules can be deduced because each case must be decided on its merits. In such
cases, even more than in any other litigation, precedent must be studied in the light of the facts of
the particular case. That is the reason why in trademark cases, jurisprudential precedents should be
applied only to a case if they are specifically in point.

The case of Emerald Garment Manufacturing Corporation v. Court of Appeals,18 which involved an
alleged trademark infringement of jeans products, is worth referring to. There, H.D. Lee Co., Inc.
(H.D. Lee), a corporation based in the United States of America, claimed that Emerald Garments
trademark of "STYLISTIC MR. LEE" that it used on its jeans products was confusingly similar to the
"LEE" trademark that H.D. Lee used on its own jeans products. Applying the holistic test, the Court
ruled that there was no infringement.

The holistic test is applicable here considering that the herein criminal cases also involved trademark
infringement in relation to jeans products. Accordingly, the jeans trademarks of Levis Philippines
and Diaz must be considered as a whole in determining the likelihood of confusion between them.
The maong pants or jeans made and sold by Levis Philippines, which included LEVIS 501, were
very popular in the Philippines. The consuming public knew that the original LEVIS 501 jeans were
under a foreign brand and quite expensive. Such jeans could be purchased only in malls or
boutiques as ready-to-wear items, and were not available in tailoring shops like those of Diazs as
well as not acquired on a "made-to-order" basis. Under the circumstances, the consuming public
could easily discern if the jeans were original or fake LEVIS 501, or were manufactured by other
brands of jeans. Confusion and deception were remote, for, as the Court has observed in Emerald
Garments:

First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not
your ordinary household items like catsup, soy sauce or soap which are of minimal cost. Maong
pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more
cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception,
then, is less likely. In Del Monte Corporation v. Court of Appeals, we noted that:

.... Among these, what essentially determines the attitudes of the purchaser, specifically his
inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies
will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary
buyer does not exercise as much prudence in buying an article for which he pays a few centavos as
he does in purchasing a more valuable thing. Expensive and valuable items are normally bought
only after deliberate, comparative and analytical investigation. But mass products, low priced articles
in wide use, and matters of everyday purchase requiring frequent replacement are bought by the
casual consumer without great care....

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not
ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is,
therefore, more or less knowledgeable and familiar with his preference and will not easily be
distracted.

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary
purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary
consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok is better suited to the present case. There, the
"ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar
with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the
deception of some persons in some measure acquainted with an established design and desirous of
purchasing the commodity with which that design has been associated. The test is not found in the
deception, or the possibility of deception, of the person who knows nothing about the design which
has been counterfeited, and who must be indifferent between that and the other. The simulation, in
order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer
who has a need to supply and is familiar with the article that he seeks to purchase.19

Diaz used the trademark "LS JEANS TAILORING" for the jeans he produced and sold in his tailoring
shops. His trademark was visually and aurally different from the trademark "LEVI STRAUSS & CO"
appearing on the patch of original jeans under the trademark LEVIS 501. The word "LS" could not
be confused as a derivative from "LEVI STRAUSS" by virtue of the "LS" being connected to the word
"TAILORING", thereby openly suggesting that the jeans bearing the trademark "LS JEANS
TAILORING" came or were bought from the tailoring shops of Diaz, not from the malls or boutiques
selling original LEVIS 501 jeans to the consuming public.

There were other remarkable differences between the two trademarks that the consuming public
would easily perceive. Diaz aptly noted such differences, as follows:

The prosecution also alleged that the accused copied the "two horse design" of the petitioner-
private complainant but the evidence will show that there was no such design in the seized jeans.
Instead, what is shown is "buffalo design." Again, a horse and a buffalo are two different animals
which an ordinary customer can easily distinguish. x x x.
The prosecution further alleged that the red tab was copied by the accused. However, evidence will
show that the red tab used by the private complainant indicates the word "LEVIS" while that of the
accused indicates the letters "LSJT" which means LS JEANS TAILORING. Again, even an ordinary
customer can distinguish the word LEVIS from the letters LSJT.

xxxx

In terms of classes of customers and channels of trade, the jeans products of the private
complainant and the accused cater to different classes of customers and flow through the different
channels of trade. The customers of the private complainant are mall goers belonging to class A and
B market group while that of the accused are those who belong to class D and E market who can
only afford Php 300 for a pair of made-toorder pants.20 x x x.

Moreover, based on the certificate issued by the Intellectual Property Office, "LS JEANS
TAILORING" was a registered trademark of Diaz. He had registered his trademark prior to the filing
of the present cases.21 The Intellectual Property Office would certainly not have allowed the
registration had Diazs trademark been confusingly similar with the registered trademark for LEVIS
501 jeans.

Given the foregoing, it should be plain that there was no likelihood of confusion between the
trademarks involved. Thereby, the evidence of guilt did not satisfy the quantum of proof required for
a criminal conviction, which is proof beyond reasonable doubt. According to Section 2, Rule 133 of
the Rules of Court, proof beyond a reasonable doubt does not mean such a degree of proof as,
excluding possibility of error, produces absolute certainty. Moral certainty only is required, or that
degree of proof which produces conviction in an unprejudiced mind. Consequently, Diaz should be
acquitted of the charges.

WHEREFORE, the Court ACQUITS petitioner VICTORIO P. DIAZ of the crimes of infringement of
trademark charged in Criminal Case No. 00-0318 and Criminal Case No. 00-0319 for failure of the
State to establish his guilt by proof beyond reasonable doubt.

No pronouncement on costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

TERESITA J. LEONARDO-DE CASTRO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1Rollo, pp. 29-32; penned by Associate Justice Ramon M. Bato, Jr., with Associate Justice
Andres B. Reyes, Jr. (now Presiding Justice) and Associate Justice Jose C. Mendoza (now a
Member of the Court) concurring.

2 Id. at 34-36.

3 Id. at 37-56.

4 Records, p. 3.

5 Id. at 9.

6 Id. at 192.

7 Id. at 26-101.

8 Id. at 98-148.

9 TSN, November 11, 2004, pp. 1-30.

10 Rollo, p. 56.

11 Id. at 10-11.

12 Section 1(e), Rule 50, Rules of Court, states:

Section 1. Grounds for dismissal of appeal. An appeal may be dismissed by the

Court of Appeals, on its own motion or on that of the appellee, on the following
grounds:

xxxx

(e) Failure of the appellant to serve and file the required number of copies of his brief
or memorandum within the time provided by these Rules.

xxxx
13See, e.g., The Government of the Kingdom of Belgium v. Court of Appeals, G.R. No.
164150, April 14, 2008, 551 SCRA 223, 242.

14Societe Des Produits Nestle, S.A. v. Dy, Jr., G.R. No. 172276, August 9, 2010, 627 SCRA
223, 233-234; citing Prosource International, Inc. v. Horphag Research Management SA,
G.R. No. 180073, November 25, 2009, 605 SCRA 523, 530.

15 Societe Des Produits Nestle, S.A. v. Dy, Jr., id.

16 Id. at 235.

17 G.R. No. 166115, February 2, 2007, 514 SCRA 95, 107.

18
G.R. No. 100098, December 29, 1995, 251 SCRA 600.

19 Id. at 616-617.

20 Rollo, pp. 19-20.

21 Records, p. 696.
G.R. No. 158589 June 27, 2006

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

DECISION

GARCIA, J.:

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

1. Decision dated January 21, 20031 affirming an earlier decision of the Regional Trial Court
of Pasig City, Branch 166, in its Civil Case No. 47374, which dismissed the complaint for
trademark infringement and damages thereat commenced by the petitioners against
respondent Fortune Tobacco Corporation; and

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

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United
States of America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the
Philippine Patents Office (PPO), the registered owner of the trademark "MARK VII" for cigarettes.
Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the
registered owner of the trademark "MARK TEN" for cigarettes as evidenced by PPO Certificate of
Registration No. 11147. And as can be seen in Trademark Certificate of Registration No. 19053,
another subsidiary of Philip Morris, Inc., the Swiss company Fabriques de Tabac Reunies, S.A., is
the assignee of the trademark "LARK," which was originally registered in 1964 by Ligget and Myers
Tobacco Company. On the other hand, respondent Fortune Tobacco Corporation, a company
organized in the Philippines, manufactures and sells cigarettes using the trademark "MARK."

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

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

In the Complaint xxx with prayer for the issuance of a preliminary injunction, [petitioners] alleged that
they are foreign corporations not doing business in the Philippines and are suing on an isolated
transaction. xxx they averred that the countries in which they are domiciled grant xxx to corporate or
juristic persons of the Philippines the privilege to bring action for infringement, xxx without need of a
license to do business in those countries. [Petitioners] likewise manifested [being registered owners
of the trademark "MARK VII" and "MARK TEN" for cigarettes as evidenced by the corresponding
certificates of registration and an applicant for the registration of the trademark "LARK MILDS"]. xxx.
[Petitioners] claimed that they have registered the aforementioned trademarks in their respective
countries of origin and that, by virtue of the long and extensive usage of the same, these trademarks
have already gained international fame and acceptance. Imputing bad faith on the part of the
[respondent], petitioners claimed that the [respondent], without any previous consent from any of the
[petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar
trademark "MARK" xxx Accordingly, they argued that [respondents] use of the trademark "MARK" in
its cigarette products have caused and is likely to cause confusion or mistake, or would deceive
purchasers and the public in general into buying these products under the impression and mistaken
belief that they are buying [petitioners] products.

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

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

xxx
lawphil.net
xxx xxx.

Meanwhile, after the [respondent] filed its Opposition (Records, Vo. I, p. 26), the matter of the
[petitioners] prayer for the issuance of a writ of preliminary injunction was negatively resolved by the
court in an Order xxx dated March 28, 1973. [The incidental issue of the propriety of an injunction
would eventually be elevated to the CA and would finally be resolved by the Supreme Court in its
Decision dated July 16, 1993 in G.R. No. 91332]. xxx.

xxx xxx xxx

After the termination of the trial on the merits xxx trial court rendered its Decision xxx dated
November 3, 1999 dismissing the complaint and counterclaim after making a finding that the
[respondent] did not commit trademark infringement against the [petitioners]. Resolving first the
issue of whether or not [petitioners] have capacity to institute the instant action, the trial court opined
that [petitioners] failure to present evidence to support their allegation that their respective countries
indeed grant Philippine corporations reciprocal or similar privileges by law xxx justifies the dismissal
of the complaint xxx. It added that the testimonies of [petitioners] witnesses xxx essentially declared
that [petitioners] are in fact doing business in the Philippines, but [petitioners] failed to establish that
they are doing so in accordance with the legal requirement of first securing a license. Hence, the
court declared that [petitioners] are barred from maintaining any action in Philippine courts pursuant
to Section 133 of the Corporation Code.

The issue of whether or not there was infringement of the [petitioners] trademarks by the
[respondent] was likewise answered xxx in the negative. It expounded that "in order for a name,
symbol or device to constitute a trademark, it must, either by itself or by association, point distinctly
to the origin or ownership of the article to which it is applied and be of such nature as to permit an
exclusive appropriation by one person". Applying such principle to the instant case, the trial court
was of the opinion that the words "MARK", "TEN", "LARK" and the Roman Numerals "VII", either
alone or in combination of each other do not by themselves or by association point distinctly to the
origin or ownership of the cigarettes to which they refer, such that the buying public could not be
deceived into believing that [respondents] "MARK" cigarettes originated either from the USA,
Canada, or Switzerland.
Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial
court stated that the general rule is that an infringement exists if the resemblance is so close that it
deceives or is likely to deceive a customer exercising ordinary caution in his dealings and induces
him to purchase the goods of one manufacturer in the belief that they are those of another. xxx. The
trial court ruled that the [petitioners] failed to pass these tests as it neither presented witnesses or
purchasers attesting that they have bought [respondents] product believing that they bought
[petitioners] "MARK VII", "MARK TEN" or "LARK", and have also failed to introduce in evidence a
specific magazine or periodical circulated locally, which promotes and popularizes their products in
the Philippines. It, moreover, elucidated that the words consisting of the trademarks allegedly
infringed by [respondent] failed to show that they have acquired a secondary meaning as to identify
them as [petitioners] products. Hence, the court ruled that the [petitioners] cannot avail themselves
of the doctrine of secondary meaning.

As to the issue of damages, the trial court deemed it just not to award any to either party stating that,
since the [petitioners] filed the action in the belief that they were aggrieved by what they perceived to
be an infringement of their trademark, no wrongful act or omission can be attributed to them.
xxx.3 (Words in brackets supplied)

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

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

xxx the appellants [petitioners] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not
qualify as well-known marks entitled to protection even without the benefit of actual use in the local
market and that the similarities in the trademarks in question are insufficient as to cause deception
or confusion tantamount to infringement. Consequently, as regards the third issue, there is likewise
no basis for the award of damages prayed for by the appellants herein.4 (Word in bracket supplied)

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

In its Comment,5 respondent, aside from asserting the correctness of the CAs finding on its liability
for trademark infringement and damages, also puts in issue the propriety of the petition as it
allegedly raises questions of fact.

The petition is bereft of merit.

Dealing first with the procedural matter interposed by respondent, we find that the petition raises
both questions of fact and law contrary to the prescription against raising factual questions in a
petition for review on certiorari filed before the Court. A question of law exists when the doubt or
difference arises as to what the law is on a certain state of facts; there is a question of fact when the
doubt or difference arises as to the truth or falsity of alleged facts.6
Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of
facts.7 Unless the factual findings of the appellate court are mistaken, absurd, speculative,
conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of
origin,8 we will not disturb them.

It is petitioners posture, however, that their contentions should

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

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

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

A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination
thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish
them from those manufactured, sold, or dealt in by others.11 Inarguably, a trademark deserves
protection. For, as Mr. Justice Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:12

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

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

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

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

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

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

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

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

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

Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages
denied non-registrants or ordinary users, like respondent. But while petitioners enjoy the statutory
presumptions arising from such registration,19 i.e., as to the validity of the registration, ownership and
the exclusive right to use the registered marks, they may not successfully sue on the basis alone of
their respective certificates of registration of trademarks. For, petitioners are still foreign
corporations. As such, they ought, as a condition to availment of the rights and privileges vis--vis
their trademarks in this country, to show proof that, on top of Philippine registration, their country
grants substantially similar rights and privileges to Filipino citizens pursuant to Section 21-A20 of R.A.
No. 166.

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

As well, the fact that their respective home countries, namely, the United States, Switzerland and
Canada, are, together with the Philippines, members of the Paris Union does not automatically
entitle petitioners to the protection of their trademarks in this country absent actual use of the marks
in local commerce and trade.
True, the Philippines adherence to the Paris Convention24 effectively obligates the country to honor
and enforce its provisions25 as regards the protection of industrial property of foreign nationals in this
country. However, any protection accorded has to be made subject to the limitations of Philippine
laws.26 Hence, despite Article 2 of the Paris Convention which substantially provides that (1)
nationals of member-countries shall have in this country rights specially provided by the Convention
as are consistent with Philippine laws, and enjoy the privileges that Philippine laws now grant or may
hereafter grant to its nationals, and (2) while no domicile requirement in the country where protection
is claimed shall be required of persons entitled to the benefits of the Union for the enjoyment of any
industrial property rights,27 foreign nationals must still observe and comply with the conditions
imposed by Philippine law on its nationals.

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

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

The provisions of the 1965 Paris Convention relied upon by private respondent and Sec. 21-A of
the Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip
Morris, Inc., et. al. vs. Court of Appeals:

xxx xxx xxx

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

xxx xxx xxx

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

Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as
to the actual use of such trademark in local commerce. As it were, registration does not confer upon
the registrant an absolute right to the registered mark. The certificate of registration merely
constitutes prima facie evidence that the registrant is the owner of the registered mark. Evidence of
non-usage of the mark rebuts the presumption of trademark ownership,34 as what happened here
when petitioners no less admitted not doing business in this country.35

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

Petitioners reliance on Converse Rubber Corporation38 is quite misplaced, that case being cast in a
different factual milieu. There, we ruled that a foreign owner of a Philippine trademark, albeit not
licensed to do, and not so engaged in, business in the Philippines, may actually earn reputation or
goodwill for its goods in the country. But unlike in the instant case, evidence of actual sales of
Converse rubber shoes, such as sales invoices, receipts and the testimony of a legitimate trader,
was presented in Converse.

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

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

This brings us to the principal issue of infringement.

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

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

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

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

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

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

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

For one, as rightly concluded by the CA after comparing the trademarks involved in their entirety as
they appear on the products,46 the striking dissimilarities are significant enough to warn any
purchaser that one is different from the other. Indeed, although the perceived offending word
"MARK" is itself prominent in petitioners trademarks "MARK VII" and "MARK TEN," the entire
marking system should be considered as a whole and not dissected, because a discerning eye
would focus not only on the predominant word but also on the other features appearing in the labels.
Only then would such discerning observer draw his conclusion whether one mark would be
confusingly similar to the other and whether or not sufficient differences existed between the
marks.47

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

But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that
a trademark serves as a tool to point out distinctly the origin or ownership of the goods to which it is
affixed,48 the likelihood of confusion tantamount to infringement appears to be farfetched. The reason
for the origin and/or ownership angle is that unless the words or devices do so point out the origin or
ownership, the person who first adopted them cannot be injured by any appropriation or imitation of
them by others, nor can the public be deceived.49

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

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

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

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

It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly
by those who are already predisposed to a certain brand. Accordingly, the ordinary buyer thereof
would be all too familiar with his brand and discriminating as well. We, thus, concur with the CA
when it held, citing a definition found in Dy Buncio v. Tan Tiao Bok,52 that the "ordinary purchaser" in
this case means "one accustomed to buy, and therefore to some extent familiar with, the goods in
question."

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

This Court is not persuaded.

In Mighty Corporation v. E & J Gallo Winery,53 the Court held that the following constitute the
elements of trademark infringement in accordance not only with Section 22 of R.A. No. 166, as
amended, but also Sections 2, 2-A, 9-A54and 20 thereof:

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

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

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

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

As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN"
and "LARK" for cigarettes in the Philippines, prior actual commercial use thereof had not been
proven. In fact, petitioners judicial admission of not doing business in this country effectively belies
any pretension to the contrary.
Likewise, we note that petitioners even failed to support their claim that their respective marks are
well-known and/or have acquired goodwill in the Philippines so as to be entitled to protection even
without actual use in this country in accordance with Article 6bis55 of the Paris Convention. As
correctly found by the CA, affirming that of the trial court:

xxx the records are bereft of evidence to establish that the appellants [petitioners] products are
indeed well-known in the Philippines, either through actual sale of the product or through different
forms of advertising. This finding is supported by the fact that appellants admit in their Complaint that
they are not doing business in the Philippines, hence, admitting that their products are not being sold
in the local market. We likewise see no cogent reason to disturb the trial courts finding that the
appellants failed to establish that their products are widely known by local purchasers as "(n)o
specific magazine or periodical published in the Philippines, or in other countries but circulated
locally" have been presented by the appellants during trial. The appellants also were not able to
show the length of time or the extent of the promotion or advertisement made to popularize their
products in the Philippines.56

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

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

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

Costs against the petitioners.

SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Asscociate Justice

ADOLFO S. AZCUNA
Associate Justice

ATTESTATION
I attest that the conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it
is hereby certified that the conclusions in the above decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes

1Penned by Associate Justice Mercedes Gozo-Dadole (ret.) and concurred in by Associate

Justices Bennie Adefuin-Dela Cruz (ret.) and Mariano C. del Castillo; Rollo, pp. 9-34.

2 Id. at 36.

3
CA Decision; Id. at 10-19.

4 CA Decision; Id. at 33.

5 Id. at 228-296.

6Ramos v. Pepsi-Cola Bottling Co. of the Phils., L-22533, February 9, 1967, 19 SCRA 289,
292.

7Moomba Mining Exploration Co. v. CA, G.R. No. 108846, October 26, 99, 317 SCRA 388,
397.

8Smith Kline Beckman Corporation v. CA, G.R. No. 126627, August 14, 2003, 409 SCRA
33, 39.

9 F. D. Regalado, REMEDIAL LAW COMPENDIUM, Vol. 1, 1999 ed., p. 541.

10Ibid., citing Pilar Dev. Corp. v. IAC, et al., G.R. No. 72283, December 12, 1986, 146 SCRA
215.

11 Sec. 38 of R.A. No. 166.

316 U.S. 203, 53 USPQ 323 [1942] cited in Societe Des Produits Nestle, S.A. v. Court of
12

Appeals, G.R. No. 112012, April 4, 2001, 356 SCRA 207, 215.
13 Sec. 2-A. Ownership of trademarks, trade names and servicemarks; how acquired.
Anyone who lawfully produces or deals in merchandise of any kind or who engages in any
lawful business, xxx, by actual use thereof in manufacture or trade, in business, xxx, may
appropriate to his exclusive use a trademark, a trade name, or a servicemark not so
appropriated by another, to distinguish his merchandise, [or] business xxx from the
merchandise, business or service of others. The ownership or possession of a trademark,
trade name, servicemark, heretofore or hereafter appropriated, as in this section provided,
shall be recognized and protected in the same manner and to the same extent as are other
property rights known to the law.

14 SEC. 5. Requirements of the application. xxx

(a) Sworn statement of the applicants domicile and citizenship, the date of the
applicants first use of the mark or trade-name, the date of the applicants first use of
the mark or trade-name in commerce or business, the goods, business or services in
connection with which the mark or trade-name is used and the mode or manner in
which the mark is used in connection with such goods, business or services, and that
the person making the application believes himself, or the firm, corporation or
association on whose behalf he makes the verification, to be the owner of the mark
or trade-name sought to be registered, that the mark or trade-name is in use in
commerce or business, and that to be best of his knowledge no person, firm,
corporation or association has the right to use such mark or trade-name in commerce
or business either in the identical form thereof or in such near resemblance thereto
as might be calculated to deceive; xxx.

15 Sec. 37. Rights of Foreign Registrants-Persons who are nationals of, domiciled in, or have
a bona fide or effective business or commercial establishment in any foreign country, which
is a party to an international convention or treaty relating to marks or tradenames on the
repression of unfair competition to which the Philippines may be a party, shall be entitled to
the benefits and subject to the provisions of this Act . . . x x x

"Tradenames of persons described in the first paragraph of this section shall be

protected without the obligation of filing or registration (sic) whether or not they form
parts of marks."

16
G.R. No. L-27906, January 8, 1987, 147 SCRA 154.

17 Philip Morris, Inc., et al. vs. CA, et al., July 16, 1993, 224 SCRA 576, 595.

18 Superseded by R.A. No. 8293 which took effect on January 1, 1998.

19SEC. 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 registrants ownership of the mark xxx, and of the registrants exclusive right
to use the same xxx, subject to any conditions and limitations stated therein. (Superseded by
Sec. 138 of R.A. No. 8293).

20SECTION 21-A. Any foreign corporation or juristic person to which a mark or trade-name
has been registered or assigned under this Act may bring an action hereunder for
infringement, xxx, whether or not it has been licensed to do business in the Philippines under
Act [No. 1495] or the Corporation Law, at the time it brings complaint: Provided, That the
country of which the said foreign corporation or juristic person is a citizen or in which it is
domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic
persons of the Philippines. (Superseded by Section 160 of R.A. No. 8293)

21 G.R. No. L-40163, June 19, 1982, 114 SCRA 420.

22Puma Sportschufabriken Rudolf Dassler, K.G. v. IAC., G.R. No. 75067, February 26, 1988,
158 SCRA 233.

23Agpalo, The Law on Trademark, Infringement and Unfair Competition, 2000 ed., pp. 209-
210.

24The Paris Convention is essentially a compact among the various member countries to
accord in their own countries to citizens of the other contracting parties trademarks and
other rights comparable to those accorded their own citizens by their domestic laws. The
underlying principle is that foreign nationals should be given the same treatment in each of
the member countries as that country makes available to its own citizens. (La Chemise
Lacoste, S.A. v. Fernandez, G.R. No. L-63796-97, May 21, 1984, 129 SCRA 373.)

25 See La Chemise Lacoste S.A. v. Fernandez, supra at pp. 386-387.

26 Agpalo, The Law on Trademark, Infringement and Unfair Competition, supra at p. 199.

27 ART. 2. Nationals of each of the countries of the Union shall, as regards the protection of
industrial property, enjoy in all the other countries of the Union the advantages that their
respective laws now grant, or may hereafter grant, to nationals, without prejudice to the
rights specially provided by the present Convention. Consequently, they shall have the same
protection as the latter, and the same legal remedy against any infringement of their rights,
provided they observe the conditions and formalities imposed upon nationals.

28 Sec. 2. What are registrable. Trademarks, tradenames and service marks owned by
persons, corporations, partnerships or associations domiciled in the Philippines and by
persons, corporations, partnerships or associations domiciled in any foreign country may be
registered in accordance with the provisions of this Act; Provided, That said trademarks,
tradenames, or service marks are actually in use in commerce and services not less than
two months in the Philippines before the time the applications for registration are filed; And
provided, further, That the country of which the applicant for registration is a citizen grants by
law substantially similar privileges to citizens of the Philippines, and such fact is officially
certified, . (As amended by R.A. No. 865).

29Sec. 2-A. Ownership of trademarks, trade names and servicemarks; 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 servicemark not so appropriated by another,
to distinguish his merchandise, business or service from the merchandise, business or
service of others. The ownership or possession of a trademark, trade name, servicemark,
heretofore or hereafter appropriated, as in this section provided, shall be recognized and
protected in the same manner and to the same extent as are other property rights known to
the law. (Now Sec. 122 of R.A. No. 8293.)

30 G.R. No. 100098, December 29, 1995, 251 SCRA 600, 619-621.
31 L-19906, April 30, 1969, 27 SCRA 1214.

32 G.R. No. 75420, November 15, 1991, 203 SCRA 583.

33 Supra.

34 Emerald Garment Mfg. Corp. supra at p. 623.

35 Petitioners Complaint in the RTC; Rollo, p. 207.

36 G.R. No. 159938, March 31, 2006.

37 Supra note 32.

38 Supra note 16.

39 Sec. 241 of IP Code.

McDonalds Corp. v. L.C. Big Mak Burger, Inc., G.R. No. 143993, August 18, 2004, 437
40

SCRA 10.

41Emerald Garment Mfg. Corporation v. CA, supra, citing Esso Standard Eastern Inc. v. CA,
L-29971, August 31, 1982, 116 SCRA 336; also in Mighty Corporation v. E & J Gallo Winery,
G.R. No. 154342, July 14, 2004, 434 SCRA 473, 504.

42 Id. at p. 506.

43Applied in McDonalds Corp. v. L.C. Big Mak Burger, Inc., supra; Asia Brewery, Inc. v. CA,
G.R. No. 103543, July 5, 1993, 224 SCRA 437; Converse Rubber Corp. v. Universal Rubber
Products, Inc., supra; Phil. Nut Industry Inc. v. Standard Brands, Inc., et al., L-23035, July
31, 1975, 65 SCRA 575.

44 Emerald Garment Mfg. Corporation v. Court of Appeals, supra at p. 615.

45 Applied in Emerald Garment Mfg. Corporation v. Court of Appeals, supra; Del Monte Corp.
v. CA, G.R. No. 78325, January 25, 1990, 181 SCRA 410; Fruit of the Loom, Inc. v. CA, et
al., L-32747, September 29, 1984, 133 SCRA 405; Bristol Myers Co. v. Dir. of Patents, et al.,
L-21587, May 19, 1966, 17 SCRA 128.

46
See CA Decision; Rollo, pp. 28-30.

47Mead Johnson & Co. v. N.V.J. Van Dorp. Ltd., et al., L-17501, April 27, 1963, 7 SCRA 768,
771.

48 Gabriel v. Perez, et al., L-24075, January 31, 1974, 55 SCRA 406.

49 74 Am. Jur. 2d, Trademarks and Tradenames, Sec. 5.

50 Supra at p. 417.
51 Emerald Garment Mfg. Corp. v. CA, supra at p. 618.

52 42 Phil. 190 (1921).

53 G.R. No. 154342, July 14, 2004, 434 SCRA 473, 496-497.

54 Sec. 9-A. Equitable principles to govern proceedings. In opposition proceedings and in

all other inter partes proceedings under this Act, equitable principles of laches, estoppel,
and acquiescence where applicable, may be considered and applied. (As added by R.A. No.
638.)

55Art. 6bis provides: x x x the countries of the Union undertakes, either administratively if
their legislation so permits, or at the request of an interested party, to refuse or to cancel the
registration and to prohibit the use of a trademark which constitutes a reproduction, imitation
or translation, liable to create confusion, of a mark considered by the competent authority of
the country of registration or use to be well-known in that country as being already the mark
of a person entitled to the benefits of the present Convention and used for identical or similar
goods. These provisions shall also apply when the essential part of the mark constitutes a
reproduction of any of such well-known mark or an imitation liable to create confusion
therewith.

56 Rollo, p. 179.

57 Sambar v. Levi Strauss & Co., G.R. No. 132604, March 6, 2002, 378 SCRA 364, 370.
 FIRST DIVISION

G.R. No. L-78325 January 25, 1990

DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners,

vs.
COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents.

Bito, Misa & Lozada for petitioners.

Reynaldo F. Singson for private respondent.

CRUZ, J.:

The petitioners are questioning the decision of the respondent court upholding the dismissal by the
trial court of their complaint against the private respondent for infringement of trademark and unfair
competition.

Petitioner Del Monte Corporation is a foreign company organized under the laws of the United
States and not engaged in business in the Philippines. Both the Philippines and the United States
are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of
the parties rights and advantages which their own nationals enjoy for the repression of acts of
infringement and unfair competition.

Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under
the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture,
distribute and sell in the Philippines various agricultural products, including catsup, under the Del
Monte trademark and logo.

On October 27,1965, Del Monte authorized Philpack to register with the Philippine Patent Office the
Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration
No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1 On November 20,
1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its
logo. 2

Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by

the Bureau of Domestic Trade on April 17,1980, to engage in the manufacture, packing, distribution
and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup.3

This logo was registered in the Supplemental Register on September 20, 1983. 4

The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the
private respondent bought from the junk shops for recycling.

Having received reports that the private respondent was using its exclusively designed bottles and a
logo confusingly similar to Del Monte's, Philpack warned it to desist from doing so on pain of legal
action. Thereafter, claiming that the demand had been ignored, Philpack and Del Monte filed a
complaint against the private respondent for infringement of trademark and unfair competition, with a
prayer for damages and the issuance of a writ of preliminary injunction. 5
In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo
was substantially different from the Del Monte logo and would not confuse the buying public to the
detriment of the petitioners. 6

After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were
substantial differences between the logos or trademarks of the parties; that the defendant had
ceased using the petitioners' bottles; and that in any case the defendant became the owner of the
said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed
to establish the defendant's malice or bad faith, which was an essential element of infringement of
trademark or unfair competition. 7

This decision was affirmed in toto by the respondent court, which is now faulted in this petition
for certiorari under Rule 45 of the Rules of Court.

Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part as follows:

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

Sec. 29 of the same law states as follows:

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

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

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

(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would likely 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 ally other means
calculated to induce the false belief that such person is offering the services of
another who has identified such services in the mind of the public; or

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

To arrive at a proper resolution of this case, it is important to bear in mind the following
distinctions between infringement of trademark and 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. 8

In the challenged decision, the respondent court cited the following test laid down by this
Court in a number of cases:

In determining whether two trademarks are confusingly similar, the two marks in their
entirety as they appear in the respective labels must be considered in relation to the
goods to which they are attached; the discerning eye of the observer must focus not
only on the predorninant words but also on the other features appearing on both
labels. 9

and applying the same, held that there was no colorable imitation of the petitioners'
trademark and logo by the private respondent. The respondent court agreed with the findings
of the trial court that:

In order to resolve the said issue, the Court now attempts to make a comparison of the two products,
to wit:

1. As to the shape of label or make:

Del Monte: Semi-rectangular with a crown or tomato shape design on top of the
rectangle.

Sunshine: Regular rectangle.

2. As to brand printed on label:

Del Monte: Tomato catsup mark.

 Sunshine: Fruit catsup.

3. As to the words or lettering on label or mark:

Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C.,
Philippines.

Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by

Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro
Manila.

4. As to color of logo:

Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in
white.

Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow.

5. As to shape of logo:

Del Monte: In the shape of a tomato.

Sunshine: Entirely different in shape.

6. As to label below the cap:

Del Monte: Seal covering the cap down to the neck of the bottle, with picture of
tomatoes with words "made from real tomatoes."

Sunshine: There is a label below the cap which says "Sunshine Brand."

7. As to the color of the products:

Del Monte: Darker red.

Sunshine: Lighter than Del Monte.

While the Court does recognize these distinctions, it does not agree with the conclusion that there
was no infringement or unfair competition. It seems to us that the lower courts have been so pre-
occupied with the details that they have not seen the total picture.

It has been correctly held that side-by-side comparison is not the final test of similarity. 10 Such
comparison requires a careful scrutiny to determine in what points the labels of the products differ,
as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he
usually have the time to do so. The average shopper is usually in a hurry and does not inspect every
product on the shelf as if he were browsing in a library. Where the housewife has to return home as
soon as possible to her baby or the working woman has to make quick purchases during her off
hours, she is apt to be confused by similar labels even if they do have minute differences. The male
shopper is worse as he usually does not bother about such distinctions.
The question is not whether the two articles are distinguishable by their label when set side by side
but whether the general confusion made by the article upon the eye of the casual purchaser who is
unsuspicious and off his guard, is such as to likely result in his confounding it with the original. 11 As
observed in several cases, the general impression of the ordinary purchaser, buying under the
normally prevalent conditions in trade and giving the attention such purchasers usually give in
buying that class of goods is the touchstone. 12

It has been held that in making purchases, the consumer must depend upon his recollection of the
appearance of the product which he intends to purchase. 13 The buyer having in mind the mark/label
of the respondent must rely upon his memory of the petitioner's mark. 14 Unlike the judge who has
ample time to minutely examine the labels in question in the comfort of his sala, the ordinary
shopper does not enjoy the same opportunity.

A number of courts have held that to determine whether a trademark has been infringed, we must
consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the
marks as a totality, not usually to any part of it. 15 The court therefore should be guided by its first
impression, 16 for a buyer acts quickly and is governed by a casual glance, the value of which may be
dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17

It has also been held that it is not the function of the court in cases of infringement and unfair
competition to educate purchasers but rather to take their carelessness for granted, and to be ever
conscious of the fact that marks need not be identical. A confusing similarity will justify the
intervention of equity. 18 The judge must also be aware of the fact that usually a defendant in cases of
infringement does not normally copy but makes only colorable changes. 19Well has it been said that
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. 20

We also note that the respondent court failed to take into consideration several factors which should
have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature
and cost of the article, whether the article is bought for immediate consumption and also the
conditions under which it is usually purchased . 21Among these, what essentially determines the
attitude of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be
sure, a person who buys a box of candies will not exercise as much care as one who buys an
expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in
buying an article for which he pays a few centavos as he does in purchasing a more valuable
thing. 22 Expensive and valuable items are normally bought only after deliberate, comparative and
analytical investigation. But mass products, low priced articles in wide use, and matters of everyday
purchase requiring frequent replacement are bought by the casual consumer without great care. 23 In
this latter category is catsup.

At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a
colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label
are green and red-orange, the same with Sunshine. The word "catsup" in both bottles is printed in
white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the
figure nevertheless approximates that of a tomato.

As previously stated, the person who infringes a trade mark does not normally copy out but only
makes colorable changes, employing enough points of similarity to confuse the public with enough
points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer
prepares to package his product, he has before him a boundless choice of words, phrases, colors
and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine
chose, without a reasonable explanation, to use the same colors and letters as those used by Del
Monte though the field of its selection was so broad, the inevitable conclusion is that it was done
deliberately to deceive .24

It has been aptly observed that the ultimate ratio in cases of grave doubt is the rule that as between
a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest
dealing has already achieved favor with the public, any doubt should be resolved against the
newcomer inasmuch as the field from which he can select a desirable trademark to indicate the
origin of his product is obviously a large one. 25

Coming now to the second issue, we find that the private respondent is not guilty of infringement for
having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely
registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26 we declared that:

(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.
There is no such presumption in the registration in the Supplemental Register.

(2) Registration in the Principal Register is limited to the actual owner of the trademark and
proceedings therein on the issue of ownership which may be contested through opposition or
interference proceedings or, after registration, in a petition for cancellation.

Registration in the Principal Register is constructive notice of the registrant's claim of

ownership, while registration in the Supplemental Register is merely proof of actual use of
the trademark and notice that the registrant has used or appropriated it. It is not subject to
opposition although it may be cancelled after the issuance. Corollarily, registration in the
Principal Register is a basis for an action for infringement while registration in the
Supplemental Register is not.

(3) In applications for registration in the Principal Register, publication of the application is
necessary. This is not so in applications for registrations in the Supplemental Register.

It can be inferred from the foregoing that although Del Monte has actual use of the bottle's
configuration, the petitioners cannot claim exclusive use thereof because it has not been registered
in the Principal Register. However, we find that Sunshine, despite the many choices available to it
and notwithstanding that the caution "Del Monte Corporation, Not to be Refilled" was embossed on
the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces.
This clearly shows the private respondent's bad faith and its intention to capitalize on the latter's
reputation and goodwill and pass off its own product as that of Del Monte.

The Court observes that the reasons given by the respondent court in resolving the case in favor of
Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the
company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label
was not improper because the Bureau of Patent presumably considered other trademarks before
approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27 where this Court declared
that selling oil in containers of another with markings erased, without intent to deceive, was not
unfair competition.

Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the
Principal Register but only in the Supplemental Register where the presumption of the validity of the
trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent.
Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated
that since registration was only in the Supplemental Register, this did not vest the registrant with the
exclusive right to use the label nor did it give rise to the presumption of the validity of the registration.

On the argument that no unfair competition was committed, the Shell Case is not on all fours with
the case at bar because:

(1) In Shell, the absence of intent to deceive was supported by the fact that the respondent
therein, before marketing its product, totally obliterated and erased the brands/mark of the
different companies stenciled on the containers thereof, except for a single isolated
transaction. The respondent in the present case made no similar effort.

(2) In Shell, what was involved was a single isolated transaction. Of the many drums used,
there was only one container where the Shell label was not erased, while in the case at
hand, the respondent admitted that it made use of several Del Monte bottles and without
obliterating the embossed warning.

(3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a
general rule, dealers are well acquainted with the manufacturer from whom they make their
purchases and since they are more experienced, they cannot be so easily deceived like the
inexperienced public. There may well be similarities and imitations which deceive all, but
generally the interests of the dealers are not regarded with the same solicitude as are the
interests of the ordinary consumer. For it is the form in which the wares come to the final
buyer that is of significance. 28

As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the
cancellation of the private respondent's registration and withdrawal of all its products bearing the
questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes
unfair competition; hence, the respondent should be permanently enjoined from the use of such
bottles.

The court must rule, however, that the damage prayed for cannot be granted because the petitioner
has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides:

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

The complaining party, upon proper showing may also be granted injunction. 1wphi 1

Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code,
which provides:
 Art. 2222. The court may award nominal damages in every obligation arising from any
source enumerated in Art. 1157, or in every case where any property right has been invaded.

Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages
in the amount of Pl,000.00.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24,
1986 and the Resolution dated April 27,1987, are REVERSED and SET ASIDE and a new judgment
is hereby rendered:

(1) Canceling the private respondent's Certificate of Register No. SR-6310 and permanently
enjoining the private respondent from using a label similar to that of the petitioners.

(2) Prohibiting the private respondent from using the empty bottles of the petitioners as
containers for its own products.

(3) Ordering the private respondent to pay the petitioners nominal damages in the amount of
Pl,000.00, and the costs of the suit.

SO ORDERED.

Narvasa Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Footnotes

1
Original Records, pp. 29-30.

2
Ibid., Annex 2 pp. 8-9; Annex 3, pp. 16-17.

3
Id., Annex A. p. 41.

4
Id., Annex B, pp. 42-43.

5
Id., pp. 1-6.

6
Id., pp. 38-40.

7
Id., pp. 166-168. Decision penned by Judge Roque A. Tamayo, affirmed in the Court of
Appeals by Coquia, J., ponente, with Luciano and Cui, JJ., concurring.

8
Jose C. Vitug, Pandect of Commercial Law & Jurisprudence, l st ed., p. 291 citing
Compania General de Tabacos v. de Aljambra Cigar and Cigarette Manufacturing Co., 33
Phil 485; Ogura v. Chua, 59 Phil. 471: Parke Davies & Co. v. Kiu Foo & Co., 60 Phil. 928.

9
Mead Johnson Co. v. N.V.J. Von Dorp. Ltd., 7 SCRA 768; Bristol Myers Co. v. Director of
Patents, 17 SCRA 128.
10
Stuart v. F.G. Stewart Co., 91 F 243.

11
Notaseme Hosiery v. Strauss 201 F 99.

McLean v. Fleming 96 US 245; Fischer v. Blank, 138 N.Y. 244; Tillman Bendel v. California
12

Packing Corporation, 63 F 2d 498.

13
Martini & Rossi v. Consumer's People's Products, 57 F 2d 599.

14
Stuart v. F. G. Stewart Co., 91 F 243.

Helmet Co. v. Wm Wrigley Jr. Co., 245 F 842; Pennzoil Co. v. Pennsylvania Petroleum
15

Co., 159 M.D. 187,

William Waltke & Co. v. Geo H. Schafer, 49 App. D.C. 294; Ward Baking Co. v. Potter
16

Wrintington, 298 F 398.

17
Vortex Mfg. Co. v. Ply-Rite Contracting Co., 33 F 2d 302.

18
Hilton v. Hilton, 90 N.J. Eq 564.

Bickmore Gall Cure Co. v. Karns, 134 F 833-1 J.C. Penny Co. v. H.D. Lee Merchantile Co.,
19

120 F 2d 949.

20
Baker and Master Printers Union of New Jersey, 34 F. Supp. 808.

21
11 H.D. Nims, The Law of Unfair Competition and Trademark, 1947, p. 1027.

22
Ibid., p. 1030.

23
11 Rudolf Callman, The Law of Unfair Competition and Trademark, 1945, pp. 1137, 1136.

Ibid., Vol. 111, 2nd ed. pp. 1527-1528 cited in Converse Rubber Corporation v. Universal
24

Rubber Product Inc., 147 SCRA 155.

William Waltke & Co. v. Geo H. Schafer & Co., 49 App. D.C. 294; Standard Oil v. Michie 34
25

F 2d 802.

26
154 SCRA 723.

27
11 SCRA 436.

28
Supra., p. 1141.
 THIRD DIVISION

G.R. No. 179127 December 24, 2008

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

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

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the
Decision1dated 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 DECISIONDATED 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 DECISIONDATED 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.37The 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,44ultimately
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.

xxxx

[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.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

RUBEN T. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
Footnotes

1Penned by Associate Justice Magdangal M. de Leon with Associate Justices Godardo A.

Jacinto and Marina L. Buzon, concurring. Rollo, pp. 51-74.

2 Penned by IPO Director General Adrian S. Cristobal, Jr. Rollo, pp. 116-131.

3 Rollo, p. 139.

4 Id. at 166.

5 Id. at 144-145.

6 Id. at 140-144.

7 Id. at 148-158.

8 Id. at 53.

9 Id. at 15.

10 Id. at 19-20.

11 Id. at 430.

12 Id. at 166-174.

13 Id. at 178-195.

14 Id. at 195.

15 Id. at 697-704

16 Id. at 705-722.

17 Id. at 619.

18 Id. at 727-731.

19 Id. at 619.

20 Sehwani, Incorporated v. In-N-Out Burger, Inc., 536 SCRA 225.

21 Rollo, pp. 120-130.

22 Id. at 130-131.
23 Id. at 75-108.

24 Id. at 106-107.

25 Id. at 51-73.

26 Id. at 73.

27 Id. at 363-364.

28 Id. at 981.

29 Sehwani, Incorporated v. In-N-Out Burger, Inc., supra note 20.

30This Court notes that Section 8202 of the Government Code of the State of California
provides that:

8202(a) When executing a jurat, a notary shall administer an oath or affirmation to the affiant
and shall determine, from satisfactory evidence as described in Section 1185 of the Civil
Code, that the affiant is the person executing the document. The affiant shall sign the
document in the presence of the notary.

(b) To any affidavit subscribed and sworn to before a notary, these shall be attached a jurat
in the following form:

State of California

County of ____________

Subscribed and sworn to (or affirmed) before me on this ___ day of ______, 20__, by
________________, proved to me on the basis of satisfactory evidence to be the
person(s) who appeared before me.

Seal__________________

Signature______________

31 G.R. No. 164948, 27 June 2006, 493 SCRA 415.

32
Rule 8, Section 2 and Rule 3, Section 11 of the 2004 Rules on Notarial Practice state that:

SEC. 2. Contents of the Concluding Part of the Notarial Certificate. - The notarial
certificate shall include the following:

(a) the name of the notary public as exactly indicated in the commission;

(b) the serial number of the commission of the notary public;

 (c) the words "Notary Public" and the province or city where the notary public is
commissioned, the expiration date of the commission, the office address of the
notary public; and

(d) the roll of attorney's number, the professional tax receipt number and the place
and date of issuance thereof, and the IBP membership number.

SEC. 11. Jurisdiction and Term. - A person commissioned as notary public may
perform notarial acts in any place within the territorial jurisdiction of the
commissioning court for a period of two (2) years commencing the first day of
January of the year in which the commissioning is made, unless earlier revoked or
the notary public has resigned under these Rules and the Rules of Court.

33 See Azuela v. Court of Appeals, G.R. No. 122880, 12 April 2006, 487 SCRA 119, 143.

34 Agpalo, Legal Forms (2006), pp. 71-72.

35 LDP Marketing, Inc v. Monter, G.R. No. 159653, 25 January 2006, 480 SCRA 137, 141.

36 Pajuyo v. Court of Appeals, G.R. No. 146364, 3 June 2004, 430 SCRA 492, 509.

37Torres v. Specialized Packaging Development Corporation, G.R. No. 149634, 6 July 2004,
433 SCRA 455, 463-464.

38 MSF Tire and Rubber, Inc. v. Court of Appeals, 370 Phil. 824, 832 (1999).

La Campana Development Corporation v. See, G.R. No. 149195, 26 June 2006, 492
39

SCRA 584, 588-589.

40 Sehwani, Incorporated v. In-N-Out Burger, Inc., supra note 20 at 232-233.

41 Rollo, p. 83.

42See Ateneo de Naga University v. Manalo, G.R. No. 160455, 9 May 2005, 458 SCRA 325,
336-337.

43 Aguilar, THE INTELLECTUAL PROPERTY CODE (1st ed., 2004), pp. 7-9.

44 Supra note 20.

45 Oropeza Marketing Corporation v. Allied Banking Corporation, 441 Phil. 551, 564 (2002).

46McDonalds Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993,18 August 2004,
437 SCRA 10, 37.

47 Rollo, pp. 121-124.

48Office of the Ombudsman v. Santos, G.R. No. 166116, 31 March 2006, 486 SCRA 463,
470.
49 Section 156.3 of the Intellectual Property Code states that:

156.3 In cases where actual intent to mislead the public or defraud the complainant is
shown, in the discretion of the court, the damages may be doubled.

Lamis v. Ong, G.R. No. 148923, 11 August 2005, 466 SCRA 510, 519-520 and Cebu
50

Country Club, Inc. v. Elizagaque, G.R. No. 160273, 18 January 2008, 542 SCRA 65, 75-76.

51 Del Rosario v. Court of Appeals, 334 Phil. 812, 827-829 (1997).

52Pilipinas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., G.R. No.
159831, 14 October 2005, 473 SCRA 151, 175.
 SECOND DIVISION

G.R. No. 185917 June 1, 2011

FREDCO MANUFACTURING CORPORATION Petitioner,

vs.
PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), Respondents.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 24 October 2008 Decision2 and 8 January
2009 Resolution3of the Court of Appeals in CA-G.R. SP No. 103394.

The Antecedent Facts

On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized

and existing under the laws of the Philippines, filed a Petition for Cancellation of Registration No.
56561 before the Bureau of Legal Affairs of the Intellectual Property Office (IPO) against
respondents President and Fellows of Harvard College (Harvard University), a corporation organized
and existing under the laws of Massachusetts, United States of America. The case was docketed as
Inter Partes Case No. 14-2005-00094.

Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993
for the mark "Harvard Veritas Shield Symbol" for decals, tote bags, serving trays, sweatshirts, t-
shirts, hats and flying discs under Classes 16, 18, 21, 25 and 28 of the Nice International
Classification of Goods and Services. Fredco alleged that the mark "Harvard" for t-shirts, polo
shirts, sandos, briefs, jackets and slacks was first used in the Philippines on 2 January 1982 by New
York Garments Manufacturing & Export Co., Inc. (New York Garments), a domestic corporation and
Fredcos predecessor-in-interest. On 24 January 1985, New York Garments filed for trademark
registration of the mark "Harvard" for goods under Class 25. The application matured into a
registration and a Certificate of Registration was issued on 12 December 1988, with a 20-year term
subject to renewal at the end of the term. The registration was later assigned to Romeo Chuateco, a
member of the family that owned New York Garments.

Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9
November 1995 and had since then handled the manufacture, promotion and marketing of "Harvard"
clothing articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard
University, New York Garments had already registered the mark "Harvard" for goods under Class
25. Fredco alleged that the registration was cancelled on 30 July 1998 when New York Garments
inadvertently failed to file an affidavit of use/non-use on the fifth anniversary of the registration but
the right to the mark "Harvard" remained with its predecessor New York Garments and now with
Fredco.

Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark
"Harvard" in numerous countries worldwide, including the Philippines. Among the countries where
Harvard University has registered its name and mark "Harvard" are:
 1. Argentina 26. South Korea
2. Benelux4 27. Malaysia

3. Brazil 28. Mexico

4. Canada 29. New Zealand

5. Chile 30. Norway
6. China P.R. 31. Peru
7. Colombia 32. Philippines

8. Costa Rica 33. Poland

9. Cyprus 34. Portugal

10. Czech Republic 35. Russia

11. Denmark 36. South Africa

12. Ecuador 37. Switzerland

13. Egypt 38. Singapore
14. Finland 39. Slovak Republic
15. France 40. Spain

16. Great Britain 41. Sweden

17. Germany 42. Taiwan

18. Greece 43. Thailand

19. Hong Kong 44. Turkey

20. India 45. United Arab Emirates
21. Indonesia 46. Uruguay

22. Ireland 47. United States of America

23. Israel 48. Venezuela

24. Italy 49. Zimbabwe

25. Japan 50. European Community5

The name and mark "Harvard" was adopted in 1639 as the name of Harvard College6 of Cambridge,
Massachusetts, U.S.A. The name and mark "Harvard" was allegedly used in commerce as early as
1872. Harvard University is over 350 years old and is a highly regarded institution of higher learning
in the United States and throughout the world. Harvard University promotes, uses, and advertises its
name "Harvard" through various publications, services, and products in foreign countries, including
the Philippines. Harvard University further alleged that the name and the mark have been rated as
one of the most famous brands in the world, valued between US $750,000,000 and US
$1,000,000,000.
Harvard University alleged that in March 2002, it discovered, through its international trademark
watch program, Fredcos website www.harvard-usa.com. The website advertises and promotes the
brand name "Harvard Jeans USA" without Harvard Universitys consent. The websites main page
shows an oblong logo bearing the mark "Harvard Jeans USA," "Established 1936," and
"Cambridge, Massachusetts." On 20 April 2004, Harvard University filed an administrative complaint
against Fredco before the IPO for trademark infringement and/or unfair competition with damages. lawphi1

Harvard University alleged that its valid and existing certificates of trademark registration in the
Philippines are:

1. Trademark Registration No. 56561 issued on 25 November 1993 for "Harvard Veritas
Shield Design" for goods and services in Classes 16, 18, 21, 25 and 28 (decals, tote bags,
serving trays, sweatshirts, t-shirts, hats and flying discs) of the Nice International
Classification of Goods and Services;

2. Trademark Registration No. 57526 issued on 24 March 1994 for "Harvard Veritas Shield
Symbol" for services in Class 41; Trademark Registration No. 56539 issued on 25 November
1998 for "Harvard" for services in Class 41; and

3. Trademark Registration No. 66677 issued on 8 December 1998 for "Harvard Graphics" for
goods in Class 9. Harvard University further alleged that it filed the requisite affidavits of use
for the mark "Harvard Veritas Shield Symbol" with the IPO.

Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for
"Harvard Medical International & Shield Design" for services in Classes 41 and 44. In 1989, Harvard
University established the Harvard Trademark Licensing Program, operated by the Office for
Technology and Trademark Licensing, to oversee and manage the worldwide licensing of the
"Harvard" name and trademarks for various goods and services. Harvard University stated that it
never authorized or licensed any person to use its name and mark "Harvard" in connection with any
goods or services in the Philippines.

In a Decision7 dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal
Affairs, IPO cancelled Harvard Universitys registration of the mark "Harvard" under Class 25, as
follows:

WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED.

Consequently, Trademark Registration Number 56561 for the trademark "HARVARD VE RI TAS
SHIELD SYMBOL" issued on November 25, 1993 to PRESIDENT AND FELLOWS OF HARVARD
COLLEGE (HARVARD UNIVERSITY) should be CANCELLED only with respect to goods falling
under Class 25. On the other hand, considering that the goods of Respondent-Registrant falling
under Classes 16, 18, 21 and 28 are not confusingly similar with the Petitioners goods, the
Respondent-Registrant has acquired vested right over the same and therefore, should not be
cancelled.

Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for the
trademark "HARVARD VE RI TAS SHIELD SYMBOL", subject matter of this case together with a
copy of this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action.

SO ORDERED.8
Harvard University filed an appeal before the Office of the Director General of the IPO. In a
Decision9 dated 21 April 2008, the Office of the Director General, IPO reversed the decision of the
Bureau of Legal Affairs, IPO.

The Director General ruled that more than the use of the trademark in the Philippines, the applicant
must be the owner of the mark sought to be registered. The Director General ruled that the right to
register a trademark is based on ownership and when the applicant is not the owner, he has no right
to register the mark. The Director General noted that the mark covered by Harvard Universitys
Registration No. 56561 is not only the word "Harvard" but also the logo, emblem or symbol of
Harvard University. The Director General ruled that Fredco failed to explain how its predecessor
New York Garments came up with the mark "Harvard." In addition, there was no evidence that
Fredco or New York Garments was licensed or authorized by Harvard University to use its name in
commerce or for any other use.

The dispositive portion of the decision of the Office of the Director General, IPO reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed decision is
hereby REVERSED and SET ASIDE. Let a copy of this Decision as well as the trademark
application and records be furnished and returned to the Director of Bureau of Legal Affairs for
appropriate action. Further, let also the Directors of the Bureau of Trademarks and the
Administrative, Financial and Human Resources Development Services Bureau, and the library of
the Documentation, Information and Technology Transfer Bureau be furnished a copy of this
Decision for information, guidance, and records purposes.

SO ORDERED.10

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director
General.

The Decision of the Court of Appeals

In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director
General of the IPO.

The Court of Appeals adopted the findings of the Office of the Director General and ruled that the
latter correctly set aside the cancellation by the Director of the Bureau of Legal Affairs of Harvard
Universitys trademark registration under Class 25. The Court of Appeals ruled that Harvard
University was able to substantiate that it appropriated and used the marks "Harvard" and "Harvard
Veritas Shield Symbol" in Class 25 way ahead of Fredco and its predecessor New York Garments.
The Court of Appeals also ruled that the records failed to disclose any explanation for Fredcos use
of the name and mark "Harvard" and the words "USA," "Established 1936," and "Cambridge,
Massachusetts" within an oblong device, "US Legend" and "Europes No. 1 Brand." Citing Shangri-
La International Hotel Management, Ltd. v. Developers Group of Companies, Inc.,11 the Court of
Appeals ruled:

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.
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.12

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated April 21,
2008 of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes Case No. 14-2005-
00094 is hereby AFFIRMED.

SO ORDERED.13

Fredco filed a motion for reconsideration.

In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of
merit.

Hence, this petition before the Court.

The Issue

The issue in this case is whether the Court of Appeals committed a reversible error in affirming the
decision of the Office of the Director General of the IPO.

The Ruling of this Court

The petition has no merit.

There is no dispute that the mark "Harvard" used by Fredco is the same as the mark "Harvard" in the
"Harvard Veritas Shield Symbol" of Harvard University. It is also not disputed that Harvard University
was named Harvard College in 1639 and that then, as now, Harvard University is located in
Cambridge, Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the
mark "Harvard" in commerce since 1872. It is also established that Harvard University has been
using the marks "Harvard" and "Harvard Veritas Shield Symbol" for Class 25 goods in the United
States since 1953. Further, there is no dispute that Harvard University has registered the name and
mark "Harvard" in at least 50 countries.

On the other hand, Fredcos predecessor-in-interest, New York Garments, started using the mark
"Harvard" in the Philippines only in 1982. New York Garments filed an application with the Philippine
Patent Office in 1985 to register the mark "Harvard," which application was approved in 1988.
Fredco insists that the date of actual use in the Philippines should prevail on the issue of who has
the better right to register the marks.

Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be
registered, it must have been actually used in commerce for not less than two months in the
Philippines prior to the filing of an application for its registration. While Harvard University had actual
prior use of its marks abroad for a long time, it did not have actual prior use in the Philippines of the
mark "Harvard Veritas Shield Symbol" before its application for registration of the mark "Harvard"
with the then Philippine Patents Office. However, Harvard Universitys registration of the name
"Harvard" is based on home registration which is allowed under Section 37 of R.A. No. 166.15 As
pointed out by Harvard University in its Comment:

Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that
the applicant thereof must prove that the same has been actually in use in commerce or services for
not less than two (2) months in the Philippines before the application for registration is filed, where
the trademark sought to be registered has already been registered in a foreign country that is a
member of the Paris Convention, the requirement of proof of use in the commerce in the Philippines
for the said period is not necessary. An applicant for registration based on home certificate of
registration need not even have used the mark or trade name in this country.16

Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard
Universitys registration "is based on home registration for the mark Harvard Veritas Shield for
Class 25."17

In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293),18 "[m]arks registered
under Republic Act No. 166 shall remain in force but shall be deemed to have been granted
under this Act x x x," which does not require actual prior use of the mark in the Philippines. Since
the mark "Harvard Veritas Shield Symbol" is now deemed granted under R.A. No. 8293, any alleged
defect arising from the absence of actual prior use in the Philippines has been cured by Section
239.2.19 In addition, Fredcos registration was already cancelled on 30 July 1998 when it failed to file
the required affidavit of use/non-use for the fifth anniversary of the marks registration. Hence, at the
time of Fredcos filing of the Petition for Cancellation before the Bureau of Legal Affairs of the IPO,
Fredco was no longer the registrant or presumptive owner of the mark "Harvard."

There are two compelling reasons why Fredcos petition must fail.

First, Fredcos registration of the mark "Harvard" and its identification of origin as "Cambridge,
Massachusetts" falsely suggest that Fredco or its goods are connected with Harvard University,
which uses the same mark "Harvard" and is also located in Cambridge, Massachusetts. This can
easily be gleaned from the following oblong logo of Fredco that it attaches to its clothing line:

Fredcos registration of the mark "Harvard" should not have been allowed because Section 4(a) of
R.A. No. 166 prohibits the registration of a mark "which may disparage or falsely suggest a
connection with persons, living or dead, institutions, beliefs x x x." Section 4(a) of R.A. No. 166
provides:

Section 4. Registration of trade-marks, trade-names and service- marks on the principal register.
There is hereby established a register of trade-mark, trade-names and service-marks which shall be
known as the principal register. The owner of a trade-mark, a trade-name or service-mark used to
distinguish his goods, business or services from the goods, business or services of others shall have
the right to register the same on the principal register, unless it:

(a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may
disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or
national symbols, or bring them into contempt or disrepute;

(b) x x x (emphasis supplied)

Fredcos use of the mark "Harvard," coupled with its claimed origin in Cambridge, Massachusetts,
obviously suggests a false connection with Harvard University. On this ground alone, Fredcos
registration of the mark "Harvard" should have been disallowed.

Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with
Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in
1936, or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the
Court of Appeals or to the IPO why it used the mark "Harvard" on its oblong logo with the words
"Cambridge, Massachusetts," "Established in 1936," and "USA." Fredco now claims before this
Court that it used these words "to evoke a lifestyle or suggest a desirable aura of petitioners
clothing lines." Fredcos belated justification merely confirms that it sought to connect or associate its
products with Harvard University, riding on the prestige and popularity of Harvard University, and
thus appropriating part of Harvard Universitys goodwill without the latters consent.

Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act,20 the trademark law of the
United States. These provisions are intended to protect the right of publicity of famous individuals
and institutions from commercial exploitation of their goodwill by others.21 What Fredco has done in
using the mark "Harvard" and the words "Cambridge, Massachusetts," "USA" to evoke a "desirable
aura" to its products is precisely to exploit commercially the goodwill of Harvard University without
the latters consent. This is a clear violation of Section 4(a) of R.A. No. 166. Under Section 17(c)22 of
R.A. No. 166, such violation is a ground for cancellation of Fredcos registration of the mark
"Harvard" because the registration was obtained in violation of Section 4 of R.A. No. 166.

Second, the Philippines and the United States of America are both signatories to the Paris
Convention for the Protection of Industrial Property (Paris Convention). The Philippines became a
signatory to the Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris
Convention state:

ARTICLE 6bis

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

ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of filing or
registration, whether or not it forms part of a trademark. (Emphasis supplied)

Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the
Paris Convention that they are afforded an effective protection against violation of their intellectual
property rights in the Philippines in the same way that their own countries are obligated to accord
similar protection to Philippine nationals.23

Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows:

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

xxxx
Trade-names of persons described in the first paragraph of this section shall be protected
without the obligation of filing or registration whether or not they form parts of marks.24

x x x x (Emphasis supplied)

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris
Convention, whether or not the trade name forms part of a trademark, is protected "without the
obligation of filing or registration."

"Harvard" is the trade name of the world famous Harvard University, and it is also a trademark of
Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166,
Harvard University is entitled to protection in the Philippines of its trade name "Harvard" even without
registration of such trade name in the Philippines. This means that no educational entity in the
Philippines can use the trade name "Harvard" without the consent of Harvard University. Likewise,
no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark
"Harvard," that its products or services are authorized, approved, or licensed by, or sourced from,
Harvard University without the latters consent.

Article 6bis of the Paris Convention has been administratively implemented in the Philippines
through two directives of the then Ministry (now Department) of Trade, which directives were upheld
by this Court in several cases.25 On 20 November 1980, then Minister of Trade Secretary Luis
Villafuerte issued a Memorandum directing the Director of Patents to reject, pursuant to the Paris
Convention, all pending applications for Philippine registration of signature and other world-famous
trademarks by applicants other than their original owners.26 The Memorandum states:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is
a signatory, you are hereby directed to reject all pending applications for Philippine registration of
signature and other world-famous trademarks by applicants other than its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as Lacoste,
Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin
Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks should
be asked to surrender their certificates of registration, if any, to avoid suits for damages and other
legal action by the trademarks foreign or local owners or original users.

You are also required to submit to the undersigned a progress report on the matter.

For immediate compliance.27

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin
affirmed the earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of
Patents to implement measures necessary to comply with the Philippines obligations under the
Paris Convention, thus:

1. Whether the trademark under consideration is well-known in the Philippines or is a mark

already belonging to a person entitled to the benefits of the CONVENTION, this should be
established, pursuant to Philippine Patent Office procedures in inter partes and ex parte
cases, according to any of the following criteria or any combination thereof:
 (a) a declaration by the Minister of Trade and Industry that the trademark being
considered is already well-known in the Philippines such that permission for its use
by other than its original owner will constitute a reproduction, imitation, translation or
other infringement;

(b) that the trademark is used in commerce internationally, supported by proof that
goods bearing the trademark are sold on an international scale, advertisements, the
establishment of factories, sales offices, distributorships, and the like, in different
countries, including volume or other measure of international trade and commerce;

(c) that the trademark is duly registered in the industrial property office(s) of
another country or countries, taking into consideration the dates of such
registration;

(d) that the trademark has been long established and obtained goodwill and general
international consumer recognition as belonging to one owner or source;

(e) that the trademark actually belongs to a party claiming ownership and has the
right to registration under the provisions of the aforestated PARIS CONVENTION.

2. The word trademark, as used in this MEMORANDUM, shall include tradenames,

service marks, logos, signs, emblems, insignia or other similar devices used for
identification and recognition by consumers.

3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of,
trademarks which constitute a reproduction, translation or imitation of a trademark owned by
a person, natural or corporate, who is a citizen of a country signatory to the PARIS
CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

x x x x28 (Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is
that the trademark to be protected must be "well-known" in the country where protection is
sought.29 The Court declared that the power to determine whether a trademark is well-known lies in
the competent authority of the country of registration or use.30 The Court then stated that the
competent authority would either be the registering authority if it has the power to decide this, or the
courts of the country in question if the issue comes before the courts.31

To be protected under the two directives of the Ministry of Trade, an internationally well-known mark
need not be registered or used in the Philippines.32 All that is required is that the mark is well-known
internationally and in the Philippines for identical or similar goods, whether or not the mark is
registered or used in the Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger,
Inc.:33

The fact that respondents marks are neither registered nor used in the Philippines is of no
moment. The scope of protection initially afforded by Article 6bis of the Paris Convention has been
expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-
Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and
the Paris Union agreed to a nonbinding recommendation that a well-known mark should be
protected in a country even if the mark is neither registered nor used in that country. Part I,
Article 2(3) thereof provides:
(3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for
determining whether a mark is a well-known mark:

(i) that the mark has been used in, or that the mark has been registered or that an application
for registration of the mark has been filed in or in respect of, the Member State:

(ii) that the mark is well known in, or that the mark has been registered or that an application
for registration of the mark has been filed in or in respect of, any jurisdiction other than the
Member State; or

(iii) that the mark is well known by the public at large in the Member State.34 (Italics in the
original decision; boldface supplied)

Indeed, Section 123.1(e) of R.A. No. 8293 now categorically states that "a mark which is considered
by the competent authority of the Philippines to be well-known internationally and in the
Philippines, whether or not it is registered here," cannot be registered by another in the
Philippines. Section 123.1(e) does not require that the well-known mark be used in commerce in the
Philippines but only that it be well-known in the Philippines. Moreover, Rule 102 of the Rules and
Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers,
which implement R.A. No. 8293, provides:

Rule 102. Criteria for determining whether a mark is well-known. In determining whether a mark is
well-known, the following criteria or any combination thereof may be taken into account:

(a) the duration, extent and geographical area of any use of the mark, in particular, the
duration, extent and geographical area of any promotion of the mark, including advertising or
publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which
the mark applies;

(b) the market share, in the Philippines and in other countries, of the goods and/or services
to which the mark applies;

(c) the degree of the inherent or acquired distinction of the mark;

(d) the quality-image or reputation acquired by the mark;

(e) the extent to which the mark has been registered in the world;

(f) the exclusivity of registration attained by the mark in the world;

(g) the extent to which the mark has been used in the world;

(h) the exclusivity of use attained by the mark in the world;

(i) the commercial value attributed to the mark in the world;

(j) the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether the mark is a well-known
mark; and
 (l) the presence or absence of identical or similar marks validly registered for or used on
identical or similar goods or services and owned by persons other than the person claiming
that his mark is a well-known mark. (Emphasis supplied)

Since "any combination" of the foregoing criteria is sufficient to determine that a mark is well-
known, it is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while
under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to
protection, internationally well-known marks are the exceptions to this rule.

In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director
General found that:

Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard
University, a recognized and respected institution of higher learning located in Cambridge,
Massachusetts, U.S.A. Initially referred to simply as "the new college," the institution was named
"Harvard College" on 13 March 1639, after its first principal donor, a young clergyman named John
Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard bequeathed about
four hundred books in his will to form the basis of the college library collection, along with half his
personal wealth worth several hundred pounds. The earliest known official reference to Harvard as a
"university" rather than "college" occurred in the new Massachusetts Constitution of 1780.

Records also show that the first use of the name HARVARD was in 1638 for educational services,
policy courses of instructions and training at the university level. It has a Charter. Its first commercial
use of the name or mark HARVARD for Class 25 was on 31 December 1953 covered by UPTON
Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that the Appellate may have used the
mark HARVARD in the Philippines ahead of the Appellant, it still cannot be denied that the
Appellants use thereof was decades, even centuries, ahead of the Appellees. More importantly, the
name HARVARD was the name of a person whose deeds were considered to be a cornerstone of
the university. The Appellants logos, emblems or symbols are owned by Harvard University. The
name HARVARD and the logos, emblems or symbols are endemic and cannot be separated from
the institution.35

Finally, in its assailed Decision, the Court of Appeals ruled:

Records show that Harvard University is the oldest and one of the foremost educational institutions
in the United States, it being established in 1636. It is located primarily in Cambridge, Massachusetts
and was named after John Harvard, a puritan minister who left to the college his books and half of
his estate.

The mark "Harvard College" was first used in commerce in the United States in 1638 for educational
services, specifically, providing courses of instruction and training at the university level (Class 41).
Its application for registration with the United States Patent and Trademark Office was filed on
September 20, 2000 and it was registered on October 16, 2001. The marks "Harvard" and "Harvard
Ve ri tas Shield Symbol" were first used in commerce in the the United States on December 31,
1953 for athletic uniforms, boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts,
infant jackets, leather jackets, night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and
underwear (Class 25). The applications for registration with the USPTO were filed on September 9,
1996, the mark "Harvard" was registered on December 9, 1997 and the mark "Harvard Ve ri tas
Shield Symbol" was registered on September 30, 1997.36

We also note that in a Decision37 dated 18 December 2008 involving a separate case between
Harvard University and Streetward International, Inc.,38 the Bureau of Legal Affairs of the IPO ruled
that the mark "Harvard" is a "well-known mark." This Decision, which cites among others the
numerous trademark registrations of Harvard University in various countries, has become final and
executory.

There is no question then, and this Court so declares, that "Harvard" is a well-known name and mark
not only in the United States but also internationally, including the Philippines. The mark "Harvard" is
rated as one of the most famous marks in the world. It has been registered in at least 50 countries. It
has been used and promoted extensively in numerous publications worldwide. It has established a
considerable goodwill worldwide since the founding of Harvard University more than 350 years ago.
It is easily recognizable as the trade name and mark of Harvard University of Cambridge,
Massachusetts, U.S.A., internationally known as one of the leading educational institutions in the
world. As such, even before Harvard University applied for registration of the mark "Harvard" in the
Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention.
Again, even without applying the Paris Convention, Harvard University can invoke Section 4(a) of
R.A. No. 166 which prohibits the registration of a mark "which may disparage or falsely suggest a
connection with persons, living or dead, institutions, beliefs x x x."

WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January
2009 Resolution of the Court of Appeals in CA-G.R. SP No. 103394.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ANTONIO EDUARDO B. NACHURA

Associate Justice

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE C. MENDOZA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
RENATO C. CORONA
Chief Justice

Footnotes

1 Under Rule 45 of the 1997 Rules of Civil Procedure.

2Rollo, pp. 103-116. Penned by Associate Justice Remedios A. Salazar-Fernando with

Associate Justices Rosalinda Asuncion-Vicente and Ramon M. Bato, Jr., concurring.

3Id. at 118-119. Penned by Associate Justice Remedios A. Salazar-Fernando with Associate

Justices Arcangelita M. Romilla-Lontok and Ramon M. Bato, Jr., concurring.

4 Belgium, the Netherlands and Luxembourg.

5 Exhibits "5" to "5-r." Rollo, pp. 288-306.

6 Originally called "New College," founded in 1636. Rollo, p. 129.

7 Id. at 135-156.

8 Id. at 156.

9 Id. at 121-133. Penned by Director General Adrian S. Cristobal, Jr.

10 Id. at 133.

11 G.R. No. 159938, 31 March 2006, 486 SCRA 405.

12 Rollo, p. 114.

13 Id. at 115-116.

An Act to Provide for the Registration and Protection of Trade-Marks, Trade-Names and
14

Service- Marks, Defining Unfair Competition and False Markings and Providing Remedies
Against the Same, and For Other Purposes.

Decision of the Bureau of Legal Affairs, rollo, p. 154; Decision of the Director
15

General, rollo, p. 122.

16 Id. at 157.

17 Id. at 122.

18 Intellectual Property Code.

 Harvard University filed Affidavits of Use for the 5th and 10th Anniversaries of Registration
19

No. 56561. Decision of the Director General, rollo, p. 132.

Roger E. Schechter and John R.Thomas, INTELLECTUAL PROPERTY: THE LAW OF

20

COPYRIGHTS, PATENTS AND TRADEMARKS (2003), p. 603.

21 Id. at 263.

Section 17(c) of R.A. No. 166, as amended, provides: "Grounds for cancellation. Any
22

person, who believes that he is or will be damaged by the registration of a mark or trade-
name, may, upon the payment of the prescribed fee, apply to cancel said registration upon
any of the following grounds:

(a) x x x

xxxx

(c) That the registration was obtained fraudulently or contrary to the provisions of
section four, Chapter II hereof;

x x x." (Emphasis supplied)

23 See La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., 214 Phil. 332 (1984).

24 The original version of R.A. No. 166 already contains this provision.

25
Mirpuri v. Court of Appeals, 376 Phil. 628 (1999); Puma Sportschuhfabriken Rudolf
Dassler, K.G. v. IAC, 241 Phil. 1029 (1988); La Chemise Lacoste, S.A. v. Hon. Fernandez,
etc., et al., supra note 23.

26 Mirpuri v. Court of Appeals, id.

27 Id. at 656-657.

28Id. at 658-659. Also cited in La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al.,
supra note 23.

29 Id. at 656.

30
Id.

31 Id.

Sehwani, Incorporated v. In-N-Out Burger, Inc., G.R. No. 171053, 15 October 2007, 536
32

SCRA 225.

33 Id.

34 Id. at 240.
35 Rollo, pp. 129-130.

36 Id. at 112-113.

37 Id. at 1251-1263. Penned by Bureau of Legal Affairs Director Estrellita Beltran-Abelardo.

38 IPC No. 14-2008-00107; Decision No. 2008-232.

[A.M. No. 02-1-11-SC.February 19, 2002]

RE:DESIGNATION OF AN INTELLECTUAL PROPERTY JUDGE FOR MLA.

EN BANC

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated FEB 19 2002.

A.M. No. 02-1-11-SC (Re:Designation of an Intellectual Property Judge for Manila.)

(A) - Acting on the memorandum dated 15 January 2002 of Deputy Court Administrator Christopher O.
Lock, favorably endorsed by Court Administrator Presbitero J. Velasco, Jr., the Court hereby designates
Branch 24 of the Regional Trial Court of Manila, presided over by Judge ANTONIO M. EUGENIO, JR., as
Special Intellectual Property Court for Manila in substitution of Branch 1 of said Court which was designated
Special Intellectual Property Court, then presided over by Judge Rebecca de Guia Salvador (now Associate
Justice of the Court of Appeals), pursuant to Administrative Order No. 113-95 dated 5 October 1995.

As judge of the Special Intellectual Property Court, Judge Antonio M. Eugenio, Jr. shall try and decide cases
involving violations of intellectual property rights under the Intellectual Property Code (R.A. No. 8293)
committed within the City of Manila.

The earlier designation of Branch 1 of the Regional Trial Court of Manila as a Special Intellectual Property
Court is hereby REVOKED, and the cases involving violations of intellectual property rights earlier assigned
to said Branch 1 pursuant to and by virtue of Administrative Order No. 113-95 are hereby re-assigned to
Branch 24 of said Court.

(B) - Furthermore, acting on the recommendation of Hon. Associate Justice Reynato S. Puno, Chairman of
the Committee on Revision of the Rules of Court, and the Office of the Court Administrator, and in order to
ensure speedy disposition of cases involving violations of intellectual property rights under the Intellectual
Property Code (R.A. No. 8293), the following Regional Trial Courts (RTCs) are hereby designated Special
Intellectual Property Courts:

Region 1:

1)Hon. Antonio M. Esteves

Presiding Judge, Branch 5
RTC, Baguio City
2)Hon. Manuel L. Argel
Presiding Judge, Branch 65
RTC, Laoag City
Region 2:
1)Hon. Rolando R. Velasco
Presiding Judge, Branch 6
RTC, Aparri, Cagayan
Region 5:
1)Hon. Vladimir B. Bruselas
Presiding Judge, Branch 6
RTC, Legazpi City
 2)Hon. Filemon B. Montenegro
Presiding Judge, Branch 26
RTC, Naga City
Region 8:
1)Hon. Frisco T. Lilagan
Presiding Judge, Branch 34
RTC, Tacloban City
Region 12:
1)Hon. Albert B. Abragan
Presiding Judge, Branch 3
RTC, Iligan City

The foregoing Special Intellectual Property Courts shall try and decide cases involving violations of
intellectual property rights defined under the Intellectual Property Code committed within their respective
territorial areas.Since there are only a few cases of violations of intellectual property rights now pending in
other branches of the aforementioned Regional Trial Courts, such cases shall remain with and shall be
decided by the branches to which they have been assigned.Only cases hereafter filed may be assigned to
the above designated special courts.

(C) - Finally, in order to ensure a just and equitable distribution of cases among the Judges concerned, all
the aforementioned Special Intellectual Property Courts shall continue to participate in the raffles of other
cases:Provided, however, that the Executive Judges concerned shall adopt a procedure whereby every
intellectual property right case assigned to a Special Intellectual Property Court should be considered a case
raffled to it and be duly credited to such court.

This Resolution shall take effect immediately and the Office of the Court Administrator shall implement it.

Very truly yours,

LUZVIMINDA D. PUNO

Clerk of Court
(Sgd.) MA. LUISA D. VILLARAMA
Asst. Clerk of Court
A.M. N0. 03-03-03-SC
[JULY 01, 2003]
RE: CONSOLIDATION OF INTELLECTUAL PROPERTY COURTS WITH
COMMERCIAL COURTS
RESOLUTION
WHEREAS, to implement the provisions of Section 5.2 of Republic Act No.
8799 (The Securities Regulation Code), and in the interest of a speedy and
efficient administration of justice, the Supreme Court en bane, in the (a)
Resolution dated 21 November 2000 (Annex 1), 4 July 2001 (Annex 1-a), 12
November 2002 (Annex 1-b), and 9 July 2002 (Annex 1-c), all issued in A.M.
No. 00-11-03-SC; (b) Resolution dated 27 August 2001 in A.M. No. 01-5-
298 RTC (Annex 2); and (c) Resolution dated 8 July 2002 in A.M. No. 01-12-
656-RTC (Annex 3), resolved to designate certain branches of the Regional
Trial Courts to try and decide cases formerly cognizable by the Securities
and Exchange Commission;
WHEREAS, pursuant to the same Resolution, sixty-five (65) Regional Trial
Courts, distributed in all regions (NCJR and Regions 1-12), were designated
as SEC courts ("SEC Courts"), which courts have presently a total of 812
pending SEC cases (see Annex 6, Table); chan robles virtual law library
WHEREAS, in A.O No. 113-95, dated 2 October 1995, as amended by A.O.
No. 104-96, dated 21 October 1996, the Regional Trial Courts in the National
Capital Region and Regions 3, 4, 6, 7, 9, 10 and 11, with twenty-seven (27)
judges, were specially designated to try and decide cases for violations of
Intellectual Property Rights (Annex 4), and to ensure the speedy disposition
of cases involving violations of intellectual property rights under the
Intellectual Property Code (Rep. Act No. 8293), the Supreme Court en bane,
in A.M. No. 02-1-11- SC, dated February 19, 2002, designated the Regional
Trial Courts in Regions 1, 2, 5, 8 and 12, with a total of seven (7) judges,
and Branch 24 of the Regional Trial Court of Manila with one (1) judge, as
Special Intellectual Property Courts ("Special IP Courts") (Annex 5)
WHEREAS, pursuant to A.M. No. 02-1-11 SC and A.O. No. 113-95, these
Special IP Courts have a total caseload of 503 cases. Of this number 434 IP
cases are pending in the NCJR (Annex 6, Table); chan robles virtual law library
WHEREAS, since the establishment of Special IP Courts (except for the
Special IP Courts in Manila), 15 designated courts, in Regions 1, 2, 3, 4, 5,
6, 7, 8, 9 and 12 have zero (0) IP cases, and do not warrant their continued
designations as Intellectual Property Courts (Annex 7, Table); chan robles virtual law
library
WHEREAS, intellectual property cases are commercial in nature;
WHEREAS, to streamline the court structure and to promote expediency and
efficiency in handling such special cases, the jurisdiction to hear and decide
IPC and SEC cases are best consolidated in one court;
NOW, THEREFORE, the Court Resolves: chan ro blesvi rtual lawlib rary
1. The Regional Courts previously designated as SEC Courts through the: (a)
Resolutions of this Court dated 21 November 2000, 4 July 2001, 12
November 2002, and 9 July 2002, all issued in A.M. No. 00-11-03-SC, (b)
Resolution dated 27 August 2001 in A.M. No. 01-5-298-RTC; and (c)
Resolution dated 8 July 2002 in A.M. No. 01-12-656-RTC are hereby
DESIGNATED and shall be CALLED as Special Commercial Courts to try and
decide cases involving violations of Intellectual Property Rights which fall
within their jurisdiction and those cases formerly cognizable by the
Securities and Exchange Commission; chan robles virtual law library
2. The designation of Intellectual Property Courts under Administrative Order
No. 113-95 dated 2 October 1995, as amended by Administrative Order No.
104-96 dated 21 October 1996 and Resolution dated 19 February 2002 in
A.M. No. 02-1-11-SC, is hereby revoked. However, the Regional Trial Court,
Branch 24, Manila is hereby designated as an additional Special Commercial
Court in the City of Manila;
3. Upon the effectivity of this Resolution, all IP cases shall be transferred to
the designated Special Commercial Courts except those which have
undergone the pretrial stage in civil cases or those where any of the accused
has been arraigned in criminal cases which shall be retained by the court
previously assigned to try them;
4. The Special Commercial Courts shall have jurisdiction over cases arising
within their respective territorial jurisdiction with respect to the National
Capital Judicial Region and within the respective provinces with respect to
the First to Twelfth Judicial Regions. Thus, cases shall be filed in the Office
of the Clerk of Court in the official station of the designated Special
Commercial Court; chan robles virtual law library
5. In the event of inhibition of the judge of a designated Special Commercial
Court, the following guidelines shall be observed: (a) where there is only one
(1) Special Commercial Court, the case shall be raffled among the other
judges in the station; (b) where there are two (2) Special Commercial Courts
in the station, the Executive Judge shall immediately assign the case to the
other Special Commercial Court; and (c) in case of inhibition of both judges
of the Special Commercial Courts, the Executive Judge shall raffle the case
among the judges in the station; and
6. In order to ensure a just and equitable distribution of cases, the
designated Special Commercial Courts shall continue to participate in the
raffles of other cases. Provided, however, that the Executive Judge
concerned shall adopt a procedure whereby every IP and SEC case assigned
to a Special Commercial Court should be considered a case raffled to it and
duly credited to such court. chan robles virtual law library
This Resolution shall take effect on 1 July 2003 and shall be published in two
(2) newspapers of general circulation.
17 June 2003 chan robles virtual law library
Davide, Jr. C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutirrez, Carpio, Corona, Callejo Sr., Carpio-Morales,
Azcuna and Tinga, JJ.
Austria-Martinez, J. on leave
 THIRD DIVISION

March 25, 2015

G.R. No. 209843

TAIWAN KOLIN CORPORATION, LTD., Petitioner,

vs.
KOLIN ELECTRONICS CO., INC., Respondent.

DECISION

VELASCO, JR., J.:

Nature of the Case

Before the Court is a petition for review under Rule 45 of the Rules of Court interposed by petitioner
Taiwan Kolin Corporation, Ltd. (Taiwan Kolin), assailing the April 30, 2013 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 122565 and its subsequent November 6, 2013 Resolution.2 The
assailed issuances effectively denied petitioner's trademark application for the use of "KOLIN" on its
television and DVD players.

The Facts

On February 29, 1996, Taiwan Kolin filed with the Intellectual Property Office (IPO), then Bureau of
Patents, Trademarks, and Technology Transfer, a trademark application, docketed as Application
No. 4-1996-106310, for the use of "KOLIN" on a combination of goods, including colored televisions,
refrigerators, window-type and split-type air conditioners, electric fans and water dispensers. Said
goods allegedly fall under Classes 9, 11, and 21 of the Nice Classification (NCL).

Application No. 4-1996-106310 would eventually be considered abandoned for Taiwan Kolins failure
to respond to IPOs Paper No. 5 requiring it to elect one class of good for its coverage. However, the
same application was subsequently revived through Application Serial No. 4-2002-011002,3 with
petitioner electing Class 9 as the subject of its application, particularly: television sets, cassette
recorder, VCD Amplifiers, camcorders and other audio/video electronic equipment, flat iron, vacuum
cleaners, cordless handsets, videophones, facsimile machines, teleprinters, cellular phones and
automatic goods vending machine. The application would in time be duly published.4

On July 13, 2006, respondent Kolin Electronics Co., Inc. (Kolin Electronics) opposed petitioners
revived application, docketed as Inter Partes Case No. 14-2006-00096. As argued, the mark Taiwan
Kolin seeks to register is identical, if not confusingly similar, with its "KOLIN" mark registered on
November 23, 2003, covering the following products under Class 9 of the NCL: automatic voltage
regulator, converter, recharger, stereo booster, AC-DC regulated power supply, step-down
transformer, and PA amplified AC-DC.5

To digress a bit, Kolin Electronics "KOLIN" registration was, as it turns out, the subject of a prior
legal dispute between the parties in Inter Partes Case No. 14-1998-00050 beforethe IPO. In the said
case, Kolin Electronics own application was opposed by Taiwan Kolin, being, as Taiwan Kolin
claimed, the prior registrant and user of the "KOLIN" trademark, having registered the same in
Taipei, Taiwan on December 1, 1988. The Bureau of Legal Affairs of the IPO (BLA-IPO), however,
did not accord priority right to Taiwan Kolins Taipei registration absent evidence to prove that it has
already used the said mark in the Philippines as early as 1988. On appeal, the IPO Director General
affirmed the BLA-IPOs Decision. Taiwan Kolin elevated the case to the CA, but without injunctive
relief, Kolin Electronics was able to register the "KOLIN" trademark on November 23, 2003for its
products.6 Subsequently, the CA, on July 31, 2006, affirmed7 the Decision of the Director General.

In answer to respondents opposition in Inter Partes Case No. 14-2006-00096, petitioner argued that
it should be accorded the benefits of a foreign-registered mark under Secs. 3 and 131.1 of Republic
Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines (IP Code);8 that it
has already registered the "KOLIN" mark in the Peoples Republic of China, Malaysia and Vietnam,
all of which are parties to the Paris Convention for the Protection of Industrial Property (Paris
Convention) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS);
and that benefits accorded to a well-known mark should be accorded to petitioner.9

Ruling of the BLA-IPO

By Decision10 dated August 16, 2007, the BLA-IPO denied petitioners application disposing as
follows:

In view of all the foregoing, the instant Opposition is as, it is hereby SUSTAINED. Accordingly,
application bearing Serial No. 4-1996-106310 for the mark "KOLIN" filed in the name of TAIWAN
KOLIN., LTD. on February 29, 1996 for goods falling under Class 09 of the International
Classification of Goods such as cassette recorder, VCD, woofer, amplifiers, camcorders and other
audio/video electronic equipment, flat iron, vacuum cleaners, cordless handsets, videophones,
facsimile machines, teleprinters, cellular phones, automatic goods vending machines and other
electronic equipment is hereby REJECTED.

Let the file wrapper of "KOLIN", subject of this case be forwarded to the Bureau of Trademarks
(BOT) for appropriate action in accordance with this Decision.

SO ORDERED.

Citing Sec. 123(d) of the IP Code,11 the BLA-IPO held that a mark cannot be registered if it is
identical with a registered mark belonging to a different proprietor in respect of the same or closely-
related goods. Accordingly, respondent, as the registered owner of the mark "KOLIN" for goods
falling under Class 9 of the NCL, should then be protected against anyone who impinges on its right,
including petitioner who seeks to register an identical mark to be used on goods also belonging to
Class 9 of the NCL.12 The BLA-IPO also noted that there was proof of actual confusion in the form of
consumers writing numerous e-mails to respondent asking for information, service, and complaints
about petitioners products.13

Petitioner moved for reconsideration but the same was denied on January 26, 2009 for lack of
merit.14 Thus, petitioner appealed the above Decision to the Office of the Director General of the IPO.

Ruling of the IPO Director General

On November 23, 2011, the IPO Director General rendered a Decision15 reversing that of the BLA-
IPO in the following wise:

Wherefore, premises considered, the appeal is hereby GRANTED. The Appellants Trademark
Application No. 4-1996-106310 is hereby GIVEN DUE COURSE subject to the use limitation or
restriction for the goods "television and DVD player". Let a copy of this Decision as well as the
trademark application and records be furnished and returned to the Director of the Bureau of Legal
Affairs for appropriate action. Further, let the Director of the Bureau of Trademarks and the library of
the Documentation, Information and Technology Transfer Bureau be furnished a copy of this
Decision for information, guidance, and records purposes.

SO ORDERED.

In so ruling, the IPO Director General ratiocinated that product classification alone cannot serve as
the decisive factor in the resolution of whether or not the goods are related and that emphasis
should be on the similarity of the products involved and not on the arbitrary classification or general
description of their properties or characteristics. As held, 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.16

Aggrieved, respondent elevated the case to the CA.

Ruling of the Court of Appeals

In its assailed Decision, the CA found for Kolin Electronics, on the strength of the following premises:
(a) the mark sought to be registered by Taiwan Kolin is confusingly similar to the one already
registered in favor of Kolin Electronics; (b) there are no other designs, special shape or easily
identifiable earmarks that would differentiate the products of both competing companies;17 and (c) the
intertwined use of television sets with amplifier, booster and voltage regulator bolstered the fact that
televisions can be considered as within the normal expansion of Kolin Electronics,18 and is thereby
deemed covered by its trademark as explicitly protected under Sec. 13819 of the IP
Code.20 Resultantly, the CA granted respondents appeal thusly:

WHEREFORE, the appeal is GRANTED. The November 23, 2011 Decision of the Director General
of the Intellectual Property Office in Inter Partes Case No. 14-2006-0096 is REVERSED and SET
ASIDE. The September 17, 2007 Decision of the Bureau of Legal Affairs of the same office is
REINSTATED.

SO ORDERED.

Petitioner moved for reconsideration only to be denied by the CA through its equally assailed
November 6, 2013 Resolution. Hence, the instant recourse.

The Issue

The primordial issue to be resolved boils down to whether or not petitioner is entitled to its trademark
registration of "KOLIN" over its specific goods of television sets and DVD players. Petitioner
postulates, in the main, that its goods are not closely related to those of Kolin Electronics. On the
other hand, respondent hinges its case on the CAs findings that its and petitioners products are
closely-related. Thus, granting petitioners application for trademark registration, according to
respondent, would cause confusion as to the public.

The Court's Ruling

The petition is impressed with merit.

Identical marks may be registered for
products from the same classification

To bolster its opposition against petitioners application to register trademark "KOLIN," respondent
maintains that the element of mark identity argues against approval of such application, quoting the
BLA IPOs ruling in this regard:21

Indubitably, Respondent-Applicants [herein petitioner] mark is identical to the registered mark of

herein Opposer [herein respondent] and the identical mark is used on goods belonging to Class 9 to
which Opposers goods are also classified. On this point alone, Respondent-Applicants application
should already be denied.

The argument is specious.

The parties admit that their respective sets of goods belong to Class 9 of the NCL, which includes
the following:22

Class 9

Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring,

signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus
and instruments for conducting, switching, transforming, accumulating, regulating or controlling
electricity; apparatus for recording, transmission or reproduction of sound or images; magneticdata
carriers, recording discs; compact discs, DVDs and other digital recording media; mechanisms for
coin-operated apparatus; cash registers, calculating machines, data processing equipment,
computers; computer software; fire-extinguishing apparatus.

But mere uniformity in categorization, by itself, does not automatically preclude the registration of
what appears to be an identical mark, if that be the case. In fact, this Court, in a long line of cases,
has held that such circumstance does not necessarily result in any trademark infringement. The
survey of jurisprudence cited in Mighty Corporation v. E. & J Gallo Winery23 is enlightening on this
point:

(a) in Acoje Mining Co., Inc. vs. Director of Patents,24 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,25 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,26 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.

Verily, whether or not the products covered by the trademark sought to be registered by Taiwan
Kolin, on the one hand, and those covered by the prior issued certificate of registration in favor of
Kolin Electronics, on the other, fall under the same categories in the NCL is not the sole and decisive
factor in determining a possible violation of Kolin Electronics intellectual property right should
petitioners application be granted. It is hornbook doctrine, as held in the above-cited cases, that
emphasis should be on the similarity of the products involved and not on the arbitrary classification
or general description of their properties or characteristics. The mere fact that one person has
adopted and used a trademark on his goods would not, without more, prevent the adoption and use
of the same trademark by others on unrelated articles of a different kind.27 The CA erred in denying
petitioners registration application

Respondent next parlays the idea of relation between products as a factor militating against
petitioners application. Citing Esso Standard Eastern, Inc. v. Court of Appeals,28 respondent argues
that the goods covered by petitioners application and those covered by its registration are actually
related belonging as they do to the same class or have the same physical characteristics with
reference to their form, composition, texture, or quality, or if they serve the same purpose.
Respondent likewise draws parallelisms between the present controversy and the following cases:29

(a) In Arce & Sons, Inc. vs. Selecta Biscuit Company,30 biscuits were held related to milk
because they were both food products;

(b) In Chua Che vs. Phil. Patents Office,31 soap and perfume, lipstick and nail polish are held
to be similarly related because they are common household items;

(c) In Ang vs. Teodoro,32 the trademark "Ang Tibay" for shoes and slippers was disallowed to
be used for shirts and pants because they belong to the same general class of goods; and

(d) In Khe vs. Lever Bros. Co.,33 soap and pomade, although noncompetitive, were held to be
similar or belong to the same class, since both are toilet articles.

Respondent avers that Kolin Electronics and Taiwan Kolins products are closely-related not only
because both fall under Class 9 of the NCL, but mainly because they both relate to electronic
products, instruments, apparatus, or appliances.34 Pushing the point, respondent would argue that
Taiwan Kolin and Kolin Electronics goods are inherently similar in that they are all plugged into
electric sockets and perform a useful function.35 Furthermore, respondent echoes the appellate
courts ratiocination in denying petitioners application, viz:36

Significantly, Kolin Electronics goods (automatic voltage regulator; converter; recharger; stereo
booster; AC-DC regulated power supply; step-down transformer; and PA amplified AC-DC) and
Taiwan Kolins television sets and DVD players are both classified under class 9 of the NICE
agreement. At first glance, it is also evident that all these goods are generally described as electrical
devices. x x x [T]he goods of both Kolin Electronics and Taiwan Kolin will inevitably be introduced to
the public as "KOLIN" products and will be offered for sale in the same channels of trade. Contrary to
Taiwan Kolins claim, power supply as well as audio and stereo equipment like booster and amplifier
are not only sold in hardware and electrical shops. These products are commonly found in appliance
stores alongside television sets and DVD players. With the present trend in todays entertainment of
having a home theater system, it is not unlikely to see a stereo booster, amplifier and automatic
voltage regulator displayed together with the television sets and DVD players. With the intertwined
use of these products bearing the identical "KOLIN" mark, the ordinary intelligent consumer would
likely assume that they are produced by the same manufacturer.

In sum, the intertwined use, the same classification of the products as class 9 under the NICE
Agreement, and the fact that they generally flow through the same channel of trade clearly establish
that Taiwan Kolins television sets and DVD players are closely related to Kolin Electronics goods.
As correctly pointed out by the BLA-IPO, allowing Taiwan Kolins registration would only confuse
consumers as to the origin of the products they intend to purchase. Accordingly, protection should
be afforded to Kolin Electronics, as the registered owner of the "KOLIN" trademark.37(emphasis
added)

The CAs approach and reasoning to arrive at the assailed holding that the approval of petitioners
application is likely to cause confusion or deceive fail to persuade.

a. The products covered by

petitioners application and
respondents registration are
unrelated

A certificate of trademark registration confers upon the trademark owner the exclusive right to sue
those who have adopted a similar mark not only in connection with the goods or services specified in
the certificate, but also with those that are related thereto.38

In resolving one of the pivotal issues in this casewhether or not the products of the parties
involved are relatedthe doctrine in Mighty Corporation is authoritative. There, the Court held that
the goods should be tested against several factors before arriving at a sound conclusion on the
question of relatedness. Among these are:

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

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

(c) the products quality, quantity, or size, including the nature of the package, wrapper or
container;

(d) the nature and cost of the articles;

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

(f) the purpose of the goods;

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

(h) the fields of manufacture;

(i) the conditions under which the article is usually purchased; and

(j) the channels of trade through which the goods flow, how they are distributed, marketed,
displayed and sold.39

As mentioned, the classification of the products under the NCL is merely part and parcel of the
factors to be considered in ascertaining whether the goods are related. It is not sufficient to state that
the goods involved herein are electronic products under Class 9 in order to establish relatedness
between the goods, for this only accounts for one of many considerations enumerated in Mighty
Corporation. In this case, credence is accorded to petitioners assertions that:40
 a. Taiwan Kolins goods are classified as home appliances as opposed to Kolin Electronics
goods which are power supply and audio equipment accessories;

b. Taiwan Kolins television sets and DVD players perform distinct function and purpose from
Kolin Electronics power supply and audio equipment; and

c. Taiwan Kolin sells and distributes its various home appliance products on wholesale and
to accredited dealers, whereas Kolin Electronics goods are sold and flow through electrical
and hardware stores.

Clearly then, it was erroneous for respondent to assume over the CA to conclude that all electronic
products are related and that the coverage of one electronic product necessarily precludes the
registration of a similar mark over another. In this digital age wherein electronic products have not
only diversified by leaps and bounds, and are geared towards interoperability, it is difficult to assert
readily, as respondent simplistically did, that all devices that require plugging into sockets are
necessarily related goods.

It bears to stress at this point that the list of products included in Class 941 can be sub-categorized
into five (5) classifications, namely: (1) apparatus and instruments for scientific or research
purposes, (2) information technology and audiovisual equipment, (3) apparatus and devices for
controlling the distribution and use of electricity, (4) optical apparatus and instruments, and (5) safety
equipment.42 From this sub-classification, it becomes apparent that petitioners products, i.e.,
televisions and DVD players, belong to audio visiual equipment, while that of respondent, consisting
of automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated power supply,
step-down transformer, and PA amplified AC-DC, generally fall under devices for controlling the
distribution and use of electricity.

b. The ordinarily intelligent

buyer is not likely to be
confused

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no rigid set rules can plausible be formulated. Each case must be decided on its merits,
with due regard to the goods or services involved, the usual purchasers character and attitude,
among others. In such cases, even more than in any other litigation, precedent must be studied in
the light of the facts of a particular case. That is the reason why in trademark cases, jurisprudential
precedents should be applied only to a case if they are specifically in point.43 For a clearer
perspective and as matter of record, the following image on the left44 is the trademark applied for by
petitioner, while the image juxtaposed to its right45 is the trademark registered by respondent:
While both competing marks refer to the word "KOLIN" written in upper case letters and in bold font,
the Court at once notes the distinct visual and aural differences between them: Kolin Electronics
mark is italicized and colored black while that of Taiwan Kolin is white in pantone red color
background. The differing features between the two, though they may appear minimal, are sufficient
to distinguish one brand from the other.

It cannot be stressed enough that the products involved in the case at bar are, generally speaking,
various kinds of electronic products. These are not ordinary consumable household items, like
catsup, soy sauce or soap which are of minimal cost.46 The products of the contending parties are
relatively luxury items not easily considered affordable. Accordingly, the casual buyer is predisposed
to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and
deception, then, is less likely.47 As further elucidated in Del Monte Corporation v. Court of Appeals:48

x x x Among these, what essentially determines the attitudes of the purchaser, specifically his
inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies
will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary
buyer does not exercise as much prudence in buying an article for which he pays a few centavos as
he does in purchasing a more valuable thing. Expensive and valuable items are normally bought
only after deliberate, comparative and analytical investigation. But mass products, low priced articles
in wide use, and matters of everyday purchase requiring frequent replacement are bought by the
casual consumer without great care x x x. (emphasis added) Respondent has made much reliance
on Arce & Sons, Chua Che, Ang, and Khe, oblivious that they involved common household items
i.e., biscuits and milk, cosmetics, clothes, and toilet articles, respectively whereas the extant case
involves luxury items not regularly and inexpensively purchased by the consuming public. In accord
with common empirical experience, the useful lives of televisions and DVD players last for about five
(5) years, minimum, making replacement purchases very infrequent. The same goes true with
converters and regulators that are seldom replaced despite the acquisition of new equipment to be
plugged onto it. In addition, the amount the buyer would be parting with cannot be deemed minimal
considering that the price of televisions or DVD players can exceed todays monthly minimum wage.
In light of these circumstances, it is then expected that the ordinary intelligent buyer would be more
discerning when it comes to deciding which electronic product they are going to purchase, and it is
this standard which this Court applies herein in determining the likelihood of confusion should
petitioners application be granted.

To be sure, the extant case is reminiscent of Emerald Garment Manufacturing Corporation v. Court
of Appeals,49wherein the opposing trademarks are that of Emerald Garment Manufacturing
Corporations "Stylistic Mr. Lee" and H.D. Lees "LEE." In the said case, the appellate court affirmed
the decision of the Director of Patents denying Emerald Garments application for registration due to
confusing similarity with H.D. Lees trademark. This Court, however, was of a different beat and
ruled that there is no confusing similarity between the marks, given that the products covered by the
trademark, i.e., jeans, were, at that time, considered pricey, typically purchased by intelligent buyers
familiar with the products and are more circumspect, and, therefore, would not easily be deceived.
As held:

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary
purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary
consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok50 is better suited to the present case. There,
the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent
familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood
of the deception of some persons in some measure acquainted with an established design and
desirous of purchasing the commodity with which that design has been associated. The test is not
found in the deception, or the possibility of deception, of the person who knows nothing about the
design which has been counterfeited, and who must be indifferent between that and the other. The
simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary
intelligent buyer who has a need to supply and is familiar with the article that he seeks to
purchase."51 (emphasis added)

Consistent with the above ruling, this Court finds that the differences between the two marks, subtle
as they may be, are sufficient to prevent any confusion that may ensue should petitioners trademark
application be granted. As held in Esso Standard Eastern, Inc.:52

Respondent court correctly ruled that considering the general appearances of each mark as a whole,
the possibility of any confusion is unlikely. A comparison of the labels of the samples of the goods
submitted by the parties shows a great many differences on the trademarks used. As pointed out by
respondent court in its appealed decision, "(A) witness for the plaintiff, Mr. Buhay, admitted that the
color of the ESSO used by the plaintiff for the oval design where the blue word ESSO is contained
is the distinct and unique kind of blue. In his answer to the trial courts question, Mr. Buhay informed
the court that the plaintiff never used its trademark on any product where the combination of colors is
similar to the label of the Esso cigarettes," and "Another witness for the plaintiff, Mr. Tengco, testified
that generally, the plaintiffs trademark comes all in either red, white, blue or any combination of the
three colors. It is to be pointed out that not even a shade of these colors appears on the trademark
of the appellants cigarette. The only color that the appellant uses in its trademark is green."

Even the lower court, which ruled initially for petitioner, found that a "noticeable difference between
the brand ESSO being used by the defendants and the trademark ESSO of the plaintiff is that the
former has a rectangular background, while in that of the plaintiff the word ESSO is enclosed in an
oval background."

All told, We are convinced that petitioner's trademark registration not only covers unrelated good, but
is also incapable of deceiving the ordinary intelligent buyer. The ordinary purchaser must be thought
of as having, and credited with, at least a modicum of intelligence to be able to see the differences
between the two trademarks in question.53

Questions of fact may still be entertained

On a final note, the policy according factual findings of courts a quo great respect, if not finality, is
not binding where they have overlooked, misapprehended, or misapplied any fact or circumstance of
weight and substances.54 So it must be here; the nature of the products involved materially affects
the outcome of the instant case. A reversal of the appellate Court's Decision is then in order.

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Decision and the
Resolution of the Court of Appeals in CA-G.R. SP No. 122565, dated April 30, 2013 and November
6, 2013, respectively, are hereby REVERSED and SET ASIDE. Accordingly, the Decision of the
Intellectual Property Office Director General in Inter Partes Case No. 14-2006-00096, dated
November 23, 2011, is hereby REINSTATED.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:
 DIOSDADO M. PERALTA
Associate Justice

MARTIN S. VILLARAMA, JR. BIENVENIDO L. REYES

Associate Justice Associate Justice

FRANCIS H. JARDELEZA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Footnotes

1
Rollo, pp. 47-58. Penned by Associate Justice Pedro B. Corales and concurred in by
Associate Justices Sesimindo E. Villon and Fiorito S. Macalino.

2
Id. at 62-63.

3
Filed on December 27, 2002.

4
Rollo, p. 49.

5
Id.

6
Id. at 49-50.

7
Id. at 50; citing the Motion for Reconsideration filed by Taiwan Kolin before the CA in CA-
G.R. SP No. 80641 entitled Taiwan Kolin Corporation, Ltd. v. Kolin Electronics Co., Inc., CA
rollo, pp. 854-868.

8
Section 3. International Conventions and Reciprocity. - Any person who is a national or who
is domiciled or has a real and effective industrial establishment in a country which is a party
to any convention, treaty or agreement relating to intellectual property rights or the
repression of unfair competition, to which the Philippines is also a party, or extends
reciprocal rights to nationals of the Philippines by law, shall be entitled to benefits to the
extent necessary togive effect to any provision of such convention, treaty or reciprocal law, in
addition to the rights to which any owner of an intellectual property right is otherwise entitled
by this Act. (n)

Section 131. Priority Right. - 131.1. An application for registration of a mark filed in
the Philippines by a person referred to in Section 3, and who previously duly filed an
application for registration of the same mark in one of those countries, shall be
considered as filed as of the day the application was first filed in the foreign country.

9
Rollo, p. 50.

10
Id. at 119-133. Penned by Director Estrellita Beltran-Abelardo.

11
Section 123. Registrability. - 123.1. A mark cannot be registered if it:

xxxx

(d) Is identical with a registered mark belonging to a different proprietor or a mark

with an earlier filing or priority date, in respect of:

(i) The same goods or services, or

(ii) Closely related goods or services, or

(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion.

12
Rollo, pp. 131-132.

13
Id. at 51.

14
Id. at 135-137.

15
Id. at 64-71. Penned by Director General Ricardo R. Blancaflor.

16
Id. at 70.

17
Id. at 55.

Citing McDonalds Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993, August 18,
18

2004, 437 SCRA 10.

19
Sec. 138. Certificates of Registration. A certificate of registration of a mark shall be prima
facie evidence of the validity of the registration, the registrants ownership of the mark, and of
the registrants exclusive right to use the same in connection with the goods or services and
those that are related thereto specified in the certificate.

20
Rollo, p. 58.

21
Id. at 1796.
 See<http://web2.wipo.int/nicepub/edition-
22

20150101/classheadings/?pagination=no&lang=en&explanatory_notes=show> (visited
February 13, 2015).

23
G.R. No. 154342, July 14, 2004, 434 SCRA 473, 505.

24
No. L-28744, April 29, 1971, 38 SCRA 480.

25
No. L-26676, July 30, 1982, 115 SCRA 472.

26
No. L-44707, August 31, 1982, 116 SCRA 388.

Hickok Manufacturing Co., Inc. v. Court of Appeals and Santos Lim Bun Liong, No. L-
27

44707, August 31, 1982, 116 SCRA 388, 390.

28
No. L-29971, August 31, 1982, 116 SCRA 336.

29
Rollo, pp. 1801-1802.

30
No. L-14761, January 28, 1961, 1 SCRA 253.

31
No. L-18337, January 30, 1965, 13 SCRA 67.

32
74 Phil. 50 (1942).

33
49 O.G. 3891 (1941).

34
Rollo, p. 1802.

35
Id. at 1803.

36
Id. at 1798-1799.

37
See also rollo, pp. 56-57.

38
Id. at 69; citing Esso Standard Eastern, Inc. v. Court of Appeals, supra note 28.

39
Supra note 23, at 510-511.

40
Rollo, pp. 31-32.

41
Supra note 22.

See <http://web2.wipo.int/nicepub/edition-
42

20150101/information_files/class/9/?lang=en>(visited February 18, 2015).

Diaz v. People, G.R. No. 180677, February 18, 2013, 691 SCRA 139, 153; citing
43

McDonalds Corporation v. Macjoy Fastfood Corporation, G.R. No. 116155, February 2,

2007, 514 SCRA 95, 107.
44
See<http://onlineservices.ipophil.gov.ph/ipophilsearch/ShowImage.ashx?id=21367d64b3a5
-787c-419f-b6ad-d9c0e7501e8d42007d64b3a5-787c-419f-b6ad-
d9c0e7501e8d20110027d64b3a5-787c-419f-b6ad-d9c0e7501e8d > (visited February 16,
2015).

45
See<http://onlineservices.ipophil.gov.ph/ipophilsearch/ShowImage.ashx?id=2136871630eb
-85f2-40e8-ad03-cf4b80943fd04199871630eb-85f2-40e8-ad03-
cf4b80943fd03087497871630eb-85f2-40e8-ad03-cf4b80943fd0> (visited February 16,
2015).

46
Diaz v. People, supra note 43, at 154; citing Emerald Garment Manufacturing Corporation
v. Court of Appeals, G.R. No. 100098, December 29, 1995, 251 SCRA 600.

47
Id.

48
No. L-78325, January 25, 1990, 181 SCRA 410, 419.

49
Supra note 46.

50
42 Phil. 190 (1921).

51
Emerald Garment Manufacturing Corporation v. Court of Appeals, supra note 46, at 617.

52
Supra note 28, at 345; citations omitted.

Fruit of the Loom, Inc. v. Court of Appeals, No. L-32747, November 29, 1984, 133 SCRA
53

405, 411.

Development Bank of the Philippines v. Traders Royal Bank, G .R. No. 171982, August 18,
54

2010, 628 SCRA 404, 413-414.

 THIRD DIVISION

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.

DECISION

CORONA, J.:

In this petition for review on certiorari under Rule 45, petitioners Mighty Corporation and La
Campana Fabrica de Tabaco, Inc. (La Campana) seek to annul, reverse and set aside: (a) the
November 15, 2001 decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 65175 affirming the
November 26, 1998 decision,2 as modified by the June 24, 1999 order,3 of the Regional Trial Court of
Makati City, Branch 57 (Makati RTC) in Civil Case No. 93-850, which held petitioners liable for, and
permanently enjoined them from, committing trademark infringement and unfair competition, and
which ordered them to pay damages to respondents E. & J. Gallo Winery (Gallo Winery) and The
Andresons Group, Inc. (Andresons); (b) the July 11, 2002 CA resolution denying their motion for
reconsideration4and (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 circa1974 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
createconfusion 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 facieevidence 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 useof 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 inKabushi
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 facieevidence. 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,"88which 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."91Simply 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-saristores 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
circumstanceswhich 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 elementunder both the Trademark Law and the Paris Convention.

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

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

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

"Regarding the applicability of Article 8 of the Paris Convention, this Office

believes that there is no automatic protection afforded an entity whose
tradename is alleged to have been infringed through the use of that name as a
trademark by a local entity.

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

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

This office is not unmindful that in (sic) the Treaty of Paris for the Protection of
Intellectual Property regarding well-known marks and possible application thereof in
this case. Petitioner, as this office sees it, is trying to seek refuge under its protective
mantle, claiming that the subject mark is well known in this country at the time the
then application of NSR Rubber was filed.
 However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin,
issued a memorandum dated 25 October 1983 to the Director of Patents, a set of
guidelines in the implementation of Article 6bis of the Treaty of Paris. These
conditions are:

a) the mark must be internationally known;

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

anything else;

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

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

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

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

Consent of the Registrant and

Other air, Just and Equitable
Considerations

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

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

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

PETITIONERS ARE ALSO NOT LIABLE

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

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

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

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

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

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

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

Costs against respondents.

SO ORDERED.

Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur.

Carpio-Morales, J., no part..

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

2
Penned by Acting Presiding Judge Bonifacio Sanz Maceda.

3
Penned by Judge Reinato O. Quilala.

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

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

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

7
Records, pp. 29-31.

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

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

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

11
Records, pp. 256, 270.

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

13
Records, p. 256.

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

TSN, April 13, 1993, Records, pp. 780-796; TSN, December 14, 1993, Records, pp. 420-
15

422; TSN, October 27, 1997, Records, pp. 993-1000.

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

Exhibit "A," Complainants Memorandum, Records, p. 127; TSN, December 14, 1993,
17

Records, pp. 326, 432-433.

CONVENTION OF PARIS FOR THE PROTECTION OF INDUSTRIAL PROPERTY of 20th

18

March, 1883 revised at Brussels on 14th December, 1900, at Washington on 2nd June,
1911, at the Hague on 6th November, 1925, at London on 2nd June, 1934, and at Lisbon on
31st October, 1958

xxxxxxxxx
 Article 6bis

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

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

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

Republic Act No. 166 is entitled "An Act To Provide For The Registration And Protection Of
19

Trademarks, Trade Names And Servicemarks, Defining Unfair Competition And False
Marking And Providing Remedies Against The Same, And For Other Purposes".

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

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

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

SEC. 29. Unfair competition, rights and remedies. A person who has identified in the
21

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

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

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

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

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

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

Chapter VII

False Designation of Origin and False

Description

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

22
Chapter XI
 Provisions in Reference to Foreign Industrial Property

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

No registration of a mark or tradename in the Philippines by a person described in

the preceding paragraph of this section shall be granted until such mark or
tradename has been registered in the country of origin of the applicant, unless the
applicant alleges use in commerce.

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

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

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

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

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

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

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

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

Tradenames of persons described in the first paragraph of this section shall be

protected without the obligation of filing or registration whether or not they form parts
of marks.

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

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

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

24
Penned by Judge Francisco X. Velez.

25
Records, pp. 159-160.

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

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

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

Penned by Associate Justice Ramon Mabutas, Jr. and concurred in by Associate Justices
28

Nathanael P. De Pano, Jr. and Artemon D. Luna of the Special First Division; Records, pp.
449-465.

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

30
Penned by Judge Quilala; Records, pp. 727-728.
31
Petition; Rollo, pp. 18-19.

32
Rule 45, Section 2.

Ramos vs. Pepsi-Cola Bottling Co. of the P.I., 19 SCRA 289, 292 [1967]; Medina vs.
33

Asistio, Jr., 191 SCRA 218, 223 [1990]; Caia vs. People, 213 SCRA 309, 313 [1992].

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

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

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

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

38
Rollo, p. 191.

39
Rollo, p. 71.

Tolentino, Civil Code Of The Philippines Commentaries and Jurisprudence, Volume I, p. 19;
40

See Articles 2 to 4 of the Civil Code of the Philippines.

41
Ibid.

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

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

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

(c) laws interpreting others

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

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

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

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

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

45
181 SCRA 410, 415 [1990].

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

47
See footnote 18 for full text.

"conditions for the filing and registration of trademarks shall be determined in each country
48

of the Union by its domestic law." (Art. 61, Paris Convention).

49
See footnote 20 for full text.

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

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

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

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

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

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

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

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

57
251 SCRA 600, 619 [1995].

58
118 SCRA 526 [1982].

59
147 SCRA 154 [1987].

60
27 SCRA 1214 [1969].

61
203 SCRA 583 [1991].

62
224 SCRA 576 [1993].

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

64
215 SCRA 316, 325 [1992].

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

Sterling Products, International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA

66

1214, 1227 [1969] citing 2 Callman, Unfair Competition and Trademarks, 1945 ed., p. 1006.

67
38 SCRA 480 [1971].
68
115 SCRA 472 [1982].

69
116 SCRA 388 [1982].

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

71
116 SCRA 336 [1982].

72
336 SCRA 266 [2000].

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

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

75
Ibid.

76
224 SCRA 437 [1993].

Co Tiong vs. Director of Patents, 95 Phil. 1 [1954]; Lim Hoa vs. Director of Patents, 100
77

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

78
181 SCRA 410 [1990].

Mead Johnson & Co. vs. N.V.J. Van Dorp, Ltd., 7 SCRA 771 [1963]; Bristol Myers Co. vs.
79

Director of Patents, 17 SCRA 128 [1966]; Fruit of the Loom, Inc. vs. Court of Appeals, 133
SCRA 405 [1984].

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

81
Ibid.

82
Ibid.

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

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

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

86
Reply, Records, p. 293.

87
Exhibits "N to Q".

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

89
Exhibits "1" to "4."

90
Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336,341 [1982].
 Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982]; Arce vs. Selecta,
91

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

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

93
Ibid.

94
Ibid.

I CALLMAN 1121 cited in Philippine Refining Co., Inc. vs. Ng Sam and the Director of
95

Patents, 115 SCRA 472 [1982].

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

(a) strength of his mark

(b) degree of similarity between the two marks

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

(d) quality of defendants product

(e) proximity of the products

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

(g) actual confusion, and

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

Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995];
97

Del Monte Corporation, vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery, Inc. vs.
Court of Appeals, 224 SCRA 437 [1993].

98
Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].

99
Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982].

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

Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472
101

[1982].

102
Ibid.
103
Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].

104
Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 [1982].

Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472
105

[1982].

106
Thompson Medical Co. vs. Pfizer, Inc. 753 F. 2d 208, 225 USPQ 124 (2d Cir.) 1985.

Kiki Undies Corp. vs. Promenade Hosiery Mills, Inc., 411 F. 2d 1097, 1099 (2d Cir. 1969),
107

cert. denied, 396 U.S. 1094, 90 S. Ct. 707, 24 L. Ed. 698 [1970]; Lever Bros. Co. vs.
American Bakeries Co., 693 F. 2d 251, C.A. N.Y., November 3, 1982.

Mushroom Makers, Inc. vs. R.G. Barry Corp., 580 F. 2d 44, 47 (2d Cir. 1978), cert. denied,
108

439 U.S. 1116, 99 s. Ct. 1022, 59 L. Ed. 2d 75 [1979].

109
Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600 [1995].

110
Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190 [1921].

Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600
111

[1995]; Del Monte Corporation, et al. vs. Court of Appeals, 181 SCRA 410 [1990]; Asia
Brewery, Inc. vs. Court of Appeals, et al., 224 SCRA 437 [1993]; Philippine Refining Co.,
Inc. vs. Ng Sam and the Director of Patents, 115 SCRA 472 [1982].

112
Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 115 SCRA 472 [1982].

Emerald Garment Manufacturing Corporation vs. Court of Appeals, 251 SCRA 600
113

[1995]; Del Monte Corporation, vs. Court of Appeals, 181 SCRA 410 [1990]; Asia Brewery,
Inc. vs. Court of Appeals, 224 SCRA 437 [1993].

California Fruit Growers Exchange vs. Sunkist Baking Co., 166 F. 2d 971, 76 U.S.P.Q. 85
114

(7th Cir. 1947); Hot Shot Quality Products, Inc. vs. Sifers Chemicals, Inc. 452 F.2d 1080, 172
U.S.P.Q. 350 (10th Cir. 1971); Federated Foods, Inc. vs. Ft. Howard Paper Co., 544 F.2d
1098, 192 U.S.P.Q. 24; Faultless Starch Co. vs. Sales Producers Associates, Inc., 530 F. 2d
1400, 189 U.S.P.Q. (C.C.P.A. 1976); Lever Bros. Co. vs. American Bakeries Co., 693 F. 2d
251, 216 U.S.P.Q. 177 (2d Cir. 1982); Nestle Co. vs. Nash-Finch Co., 4 U.S.P.Q. 2d 1085
(T.T.A.B.).

115
115 SCRA 472, 478 [1982].

Answer, Records, p. 258; TSN, December 14, 1993, Records, p. 420; TSN, June 9, 1997,
116

Records, p. 958; TSN, September 8, 1997, Records, p. 965-967.

Emerald Manufacturing, 251 SCRA 600 [1995]; Acoje Mining Co., Inc. vs. Director of
117

Patents, 38 SCRA 480 [1981]; Field Enterprises Educational Corp. vs. Grosset & Dunlap,
Inc. 256 F. Supp. 382, 150 U.S.P.Q. 517 (S.D.N.Y. 1966); Haviland & Co. vs. Johann
Haviland China Corp., 269 F. Supp. 928, 154 U.S.P.Q. 287 (S.D.N.Y. 1967); Estee Lauder,
Inc. vs. The Gap, Inc., 108 F. 3d. 1503, 42 U.S.P.Q. 2d 1228(2nd Cir. 1997).
 Answer, Records, p. 257; TSN, April 13, 1993, Records, pp. 783; TSN, December 14,
118

1993, Records, p. 420; TSN, September 8, 1997, Records, pp. 966, 971-972.

119
TSN, June 9, 1997, Record, pp. 952-958; TSN, December 14, 1993, Records, p. 432.

120
297 F. Supp. 1330, 160 USPQ 303.

121
26 F. Supp. 2d 815 (E.D. Va. 1998).

122
Exhibit 18, Records, pp. 107-108.

123
366 SCRA 266 [2000].

124
52 Am. Jur. 577.

Shell Co. of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd., 120 Phil. 434, 439
125

[1964].
 SECOND DIVISION

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.

DECISION

GARCIA, J.:

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.
xxx

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 servicemark 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.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Asscociate Justice

ADOLFO S. AZCUNA
Associate Justice

ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it
is hereby certified that the conclusions in the above decision were reached in consultation before the
case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes
1Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices
Delilah Vidallon-Magtolis (now ret.) and Edgardo F. Sundiam, concurring; Rollo, pp. 71-91.

2 Id. at 92-93.

3AN ACT TO PROVIDE FOR THE REGISTRATION AND PROTECTION OF

TRADEMARKS, TRADE NAMES AND SERVICE MARKS, DEFINING UNFAIR
COMPETITION AND FALSE MARKING AND PROVIDING REMEDIES AGAINST THE
SAME, AND FOR OTHER PURPOSES.

4Developers Group of Companies, Inc. vs. Court of Appeals, et al, G.R. No. 104583, March
8, 1993, 219 SCRA 715-723.

5
Developers Group of Companies, Inc. vs. Court of Appeals, et al., G.R. No. 114802 and
Shangri-La International Hotel Management LTD., et al. vs. Court of Appeals, et al., .G.R.
No. 111580, June 21, 2001, 359 SCRA 273-282.

6 Rollo, pp. 114-121.

7 Supra note 1.

8 G.R. No. 75420, November 15, 1991, 203 SCRA 583.

9 G.R. No. 91332, July 16, 1993, 224 SCRA 576.

10 Supra note 2.

11 G.R. No. 134468, August 29, 2002, 388 SCRA 85, 91-92.

12 BA Savings Bank v. Sia, G.R. No. 131214, July 27, 2000, 336 SCRA 484, 485.

13 Section 1, Rule 45, Rules of Court.

14Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, G.R. No.

L-19906, April 30, 1969, 27 SCRA 1214; Chung Te v. Ng Kian Giab, G.R. No. L-23791,
November 23, 1966, 18 SCRA 747.

15 G.R. No. 33773, October 22, 1987, 154 SCRA 728-729.

16
Emerald Garments Mfg. Corp. v. Court of Appeals, G.R. No. 100098, December 29, 1995,
251 SCRA 600; Sterling Products International, Inc. v. Farbenfabriken Bayer
Aktiengesellschaft, G.R. No. L-19906, April 30, 1969, 27 SCRA 1214.

17 Section 124 of Republic No. Act 8293, The Intellectual Property Code.

Heirs of Crisanta Y. Gabrielle-Almoradie v. CA, G.R. No. L-91385, January 4, 1994, 229
18

SCRA 15.

Marvex Commercial v. Petra Hawpia & Co., G.R. No. L-19297, December 22, 1966, 18
19

SCRA 1178.
20Unno Commercial Enterprises, Inc. v.General Milling Corporation, G.R. No. L-28554,
February 28, 1983, 120 SCRA 804.

21 TSN, April 13, 1994, pp. 12, 13.

22 Ibid.

23Cheesman v. Internediate Appellate Court, G.R. No. 74833, January 21, 1991, 193 SCRA
100.

24 Luna v. Linatoc, 74 Phil. 15 (1942).

25 Buyco v. People, 95 Phil. 453 (1954).

26 Cruz v. Sosing and Court of Appeals, 94 Phil. 26 (1953).

27 Casica v. Villaseca, 101 Phil. 1205 (1957).

28Garcia v. Court of Appeals, G.R. No. L-26490, June 30, 1970, 33 SCRA 622; Alsua-Betts
v. Court of Appeals, G.R. Nos. L-46430-31, July 30, 1979, 92 SCRA 332.

29 Court of Appeals Decision; Rollo, p. 87; Annex "A" of Petition.

30 Ibid.

31 Petitioner's Memorandum, pp. 1-2; Rollo, pp. 448-449.

32American Wire & Cable Co. v. Director of Patents, G.R. No. L-26557, February 18, 1970,
31 SCRA 544, 551.

33 Ubeda v. Zialcita, 13 Phil. 11, 19 (1909).

American Cyanamid Company v. Director of Patents, G.R. No. L-23954, April 29, 1977, 76
34

SCRA 568; La Estrella Distillery v. Director of Patents, 105 Phil. 1213 (1959).

35 Respondent's Comment at p. 21 thereof; Rollo, pp. 150-201, at p. 170.

36 Ibid, p. 21; Rollo, p. 170.

37 Secs. 123(3) and 131.3, Intellectual Property Code, RA No. 9283.

38Article 4, The Civil Code: "Laws shall have no retroactive effect, unless the contrary is
provided."

39 Philip Morris, et al. v. CA, et al., G.R. No. 91332, 593, July 16, 1993, 224 SCRA 576.

40 Section 17, RA No. 166.

 THIRD DIVISION

G.R. No. 180073 November 25, 2009

PROSOURCE INTERNATIONAL, INC., Petitioner,

vs.
HORPHAG RESEARCH MANAGEMENT SA, Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and
set aside the Court of Appeals (CA) Decision1 dated July 27, 2007 and Resolution2 dated October
15, 2007 in CA-G.R. CV No. 87556. The assailed decision affirmed the Regional Trial Court
(RTC)3 Decision4 dated January 16, 2006 and Order5 dated May 3, 2006 in Civil Case No. 68048;
while the assailed resolution denied petitioners motion for reconsideration.

The facts are as follows:

Respondent Horphag Research Management SA is a corporation duly organized and existing under
the laws of Switzerland and the owner6 of trademark PYCNOGENOL, a food supplement sold and
distributed by Zuellig Pharma Corporation. Respondent later discovered that petitioner Prosource
International, Inc. was also distributing a similar food supplement using the mark PCO-GENOLS
since 1996.7 This prompted respondent to demand that petitioner cease and desist from using the
aforesaid mark.8

Without notifying respondent, petitioner discontinued the use of, and withdrew from the market, the
products under the name PCO-GENOLS as of June 19, 2000. It, likewise, changed its mark from
PCO-GENOLS to PCO-PLUS.9

On August 22, 2000, respondent filed a Complaint10 for Infringement of Trademark with Prayer for
Preliminary Injunction against petitioner, praying that the latter cease and desist from using the
brand PCO-GENOLS for being confusingly similar with respondents trademark PYCNOGENOL. It,
likewise, prayed for actual and nominal damages, as well as attorneys fees.11

In its Answer,12 petitioner contended that respondent could not file the infringement case considering
that the latter is not the registered owner of the trademark PYCNOGENOL, but one Horphag
Research Limited. It, likewise, claimed that the two marks were not confusingly similar. Finally, it
denied liability, since it discontinued the use of the mark prior to the institution of the infringement
case. Petitioner thus prayed for the dismissal of the complaint. By way of counterclaim, petitioner
prayed that respondent be directed to pay exemplary damages and attorneys fees.13

During the pre-trial, the parties admitted the following:

1. Defendant [petitioner] is a corporation duly organized and existing under the laws of the
Republic of the Philippines with business address at No. 7 Annapolis Street, Greenhills, San
Juan, Metro Manila;

2. The trademark PYCNOGENOL of the plaintiff is duly registered with the Intellectual
Property Office but not with the Bureau of Food and Drug (BFAD).
 3. The defendants product PCO-GENOLS is duly registered with the BFAD but not with the
Intellectual Property Office (IPO).

4. The defendant corporation discontinued the use of and had withdrawn from the market the
products under the name of PCO-GENOLS as of June 19, 2000, with its trademark changed
from PCO-GENOLS to PCO-PLUS.

5. Plaintiff corporation sent a demand letter to the defendant dated 02 June 2000.14

On January 16, 2006, the RTC decided in favor of respondent. It observed that PYCNOGENOL and
PCO-GENOLS have the same suffix "GENOL" which appears to be merely descriptive and thus
open for trademark registration by combining it with other words. The trial court, likewise, concluded
that the marks, when read, sound similar, and thus confusingly similar especially since they both
refer to food supplements. The court added that petitioners liability was not negated by its act of
pulling out of the market the products bearing the questioned mark since the fact remains that from
1996 until June 2000, petitioner had infringed respondents product by using the trademark PCO-
GENOLS. As respondent manifested that it was no longer interested in recovering actual damages,
petitioner was made to answer only for attorneys fees amounting to 50,000.00.15 For lack of
sufficient factual and legal basis, the court dismissed petitioners counterclaim. Petitioners motion
for reconsideration was likewise denied.

On appeal to the CA, petitioner failed to obtain a favorable decision. The appellate court explained
that under the Dominancy or the Holistic Test, PCO-GENOLS is deceptively similar to
PYCNOGENOL. It also found just and equitable the award of attorneys fees especially since
respondent was compelled to litigate.16

Hence, this petition, assigning the following errors:

I. THAT THE COURT OF APPEALS ERRED IN AFFRIMING THE RULING OF THE LOWER
[COURT] THAT RESPONDENTS TRADEMARK P[YC]NOGENOLS (SIC) WAS
INFRINGED BY PETITIONERS PCO-GENOLS.

II. THAT THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF

ATTORNEYS FEES IN FAVOR OF RESPONDENT HORPHAG RESEARCH
MANAGEMENT S.A. IN THE AMOUNT OF Php50,000.00.17

The petition is without merit.

It must be recalled that respondent filed a complaint for trademark infringement against petitioner for
the latters use of the mark PCO-GENOLS which the former claimed to be confusingly similar to its
trademark PYCNOGENOL. Petitioners use of the questioned mark started in 1996 and ended in
June 2000. The instant case should thus be decided in light of the provisions of Republic Act (R.A.)
No. 16618 for the acts committed until December 31, 1997, and R.A. No. 829319 for those committed
from January 1, 1998 until June 19, 2000.

A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination
thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish
them from those manufactured, sold, or dealt by others. Inarguably, a trademark deserves
protection.20
Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define what constitutes
trademark infringement, as follows:

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

Sec. 155. Remedies; Infringement. Any person who shall, without the consent of the owner of the
registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That infringement takes place at the moment any of the acts stated in Subsection 155.1 or
this subsection are committed regardless of whether there is actual sale of goods or services using
the infringing material.

In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, 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) [It] 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) [T]he trademark is used for identical or similar goods[;] and

(d) [S]uch act is done without the consent of the trademark registrant or assignee.21
On the other hand, the elements of infringement under R.A. No. 8293 are as follows:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in
infringement of trade name, the same need not be registered;

(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated
by the infringer;

(3) The infringing mark or trade name is used in connection with the sale, offering for sale, or
advertising of any goods, business or services; or the infringing mark or trade name 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;

(4) The use or application of the infringing mark or trade name is likely to cause confusion or
mistake or to deceive purchasers or others as to the goods or services themselves or as to
the source or origin of such goods or services or the identity of such business; and

(5) It is without the consent of the trademark or trade name owner or the assignee thereof.22

In the foregoing enumeration, it is the element of "likelihood of confusion" that is the gravamen of
trademark infringement. But "likelihood of confusion" is a relative concept. The particular, and
sometimes peculiar, circumstances of each case are determinative of its existence. Thus, in
trademark infringement cases, precedents must be evaluated in the light of each particular case.23

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the
Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of
the prevalent features of the competing trademarks that might cause confusion and deception, thus
constituting infringement.24 If the competing trademark contains the main, essential and 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 to deceive purchasers.25 Courts will consider more
the aural and visual impressions created by the marks in the public mind, giving little weight to
factors like prices, quality, sales outlets, and market segments.26

In contrast, the Holistic Test entails a consideration of the entirety of the marks as applied to the
products, including the labels and packaging, in determining confusing similarity.27 The discerning
eye of the observer must focus not only on the predominant words but also on the other features
appearing on both labels in order that the observer may draw his conclusion whether one is
confusingly similar to the other.28

The trial and appellate courts applied the Dominancy Test in determining whether there was a
confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial
court found, and the CA affirmed, that:

Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix "GENOL" which on
evidence, appears to be merely descriptive and furnish no indication of the origin of the article and
hence, open for trademark registration by the plaintiff thru combination with another word or phrase
such as PYCNOGENOL, Exhibits "A" to "A-3." Furthermore, although the letters "Y" between P and
C, "N" between O and C and "S" after L are missing in the [petitioners] mark PCO-GENOLS,
nevertheless, when the two words are pronounced, the sound effects are confusingly similar not to
mention that they are both described by their manufacturers as a food supplement and thus,
identified as such by their public consumers. And although there were dissimilarities in the trademark
due to the type of letters used as well as the size, color and design employed on their individual
packages/bottles, still the close relationship of the competing products name in sounds as they were
pronounced, clearly indicates that purchasers could be misled into believing that they are the same
and/or originates from a common source and manufacturer.29

We find no cogent reason to depart from such conclusion.

This is not the first time that the Court takes into account the aural effects of the words and letters
contained in the marks in determining the issue of confusing similarity. In Marvex Commercial Co.,
Inc. v. Petra Hawpia & Co., et al.,30 cited in McDonalds Corporation v. L.C. Big Mak Burger,
Inc.,31 the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled from
Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that "SALONPAS"
and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop"; "Jantzen" and "Jass-
Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite";
"Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex";
"Zuso" and "Hoo Hoo." Leon Amdur, in his book "Trade-Mark Law and Practice," pp. 419-421, cities,
as coming within the purview of the idem sonans rule, "Yusea" and "U-C-A," "Steinway Pianos" and
"Steinberg Pianos," and "Seven-Up" and "Lemon-Up." In Co Tiong vs. Director of Patents, this Court
unequivocally said that "Celdura" and "Cordura" are confusingly similar in sound; this Court held in
Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark
"Sapolin," as the sound of the two names is almost the same.32

Finally, we reiterate that the issue of trademark infringement is factual, with both the trial and
appellate courts finding the allegations of infringement to be meritorious. As we have consistently
held, factual determinations of the trial court, concurred in by the CA, are final and binding on this
Court.33 Hence, petitioner is liable for trademark infringement.

We, likewise, sustain the award of attorneys fees in favor of respondent. Article 2208 of the Civil
Code enumerates the instances when attorneys fees are awarded, viz.:

Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:

1. When exemplary damages are awarded;

2. When the defendants act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;

3. In criminal cases of malicious prosecution against the plaintiff;

4. In case of a clearly unfounded civil action or proceeding against the plaintiff;

5. Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff"s plainly valid, just and demandable claim;

6. In actions for legal support;

7. In actions for the recovery of wages of household helpers, laborers and skilled workers;
 8. In actions for indemnity under workmens compensation and employers liability laws;

9. In a separate civil action to recover civil liability arising from a crime;

10. When at least double judicial costs are awarded;

11. In any other case where the court deems it just and equitable that attorneys fees and
expenses of litigation should be recovered.

In all cases, the attorneys fees and expenses of litigation must be reasonable.

As a rule, an award of attorneys fees should be deleted where the award of moral and exemplary
damages is not granted.34 Nonetheless, attorneys fees may be awarded where the court deems it
just and equitable even if moral and exemplary damages are unavailing.35 In the instant case, we
find no reversible error in the grant of attorneys fees by the CA.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals
Decision dated July 27, 2007 and its Resolution dated October 15, 2007 in CA-G.R. CV No. 87556
are AFFIRMED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

WE CONCUR:

RENATO C. CORONA
Associate Justice
Chairperson

MINITA V. CHICO-NAZARIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

DIOSDADO M. PERALTA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Juan Q.
Enriquez, Jr. and Marlene Gonzales-Sison, concurring; rollo, pp. 38-47.

2 Id. at 48.

3 Branch 167, Pasig City.

4 Penned by Judge Alfredo C. Flores; rollo, pp. 230-234.

5 Id. at 248-250.

6Evidenced by Registration No. 62413 issued by the Bureau of Patents, Trademarks and
Technology Transfer.

7 Rollo, p. 39.

8 Id. at 163-164.

9 Id. at 68.

10 Id. at 49-54.

11 Id. at 50-51.

12 Id. at 57-61.

13 Id. at 60.

14 Id. at 68-69.

15 Id. at 233-234.

16 Id. at 44-46.

17 Id. at 26.

18 Trademark Law.
19 Intellectual Property Code.

Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493
20

SCRA 333, 345.

21 Id. at 360.

22Ruben E. Agpalo, The Law on Trademark, Infringement and Unfair Competition (2000), pp.
142-143.

23 Philip Morris, Inc. v. Fortune Tobacco Corporation, supra note 20, at 356.

Philip Morris, Inc. v. Fortune Tobacco Corporation, id; Mighty Corporation v. E. & J. Gallo
24

Winery, G.R. No. 154342, July 14, 2004, 434 SCRA 473, 506.

25 Mighty Corporation v. E. & J. Gallo Winery, supra note 24, at 506-507.

26McDonalds Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993, August 18, 2004,
437 SCRA 10, 32.

27 Philip Morris, Inc. v. Fortune Tobacco Corporation, supra note 20, at 356-357.

28 Mighty Corporation v. E. & J. Gallo Winery, supra note 24, at 507.

29 Rollo, p. 45.

30 125 Phil. 295 (1966).

31 Supra note 26.

32 McDonalds Corporation v. L.C. Big Mak Burger, Inc., supra note 26, at 34.

33 Philip Morris, Inc. v. Fortune Tobacco Corporation, supra note 20, at 361-362.

34Francisco v. Co, G.R. No. 151339, January 31, 2006, 481 SCRA 241; Ibaan Rural Bank,
Inc. v. Court of Appeals, 378 Phil. 707 (1999).

Villanueva v. Court of Appeals, G.R. No. 132955, October 27, 2006, 505 SCRA 564;
35

Carlos v. Sandoval, G.R. Nos. 135830, 136035 and 137743, September 30, 2005, 471
SCRA 266.
 SECOND DIVISION

G.R. No. 169504 March 3, 2010

COFFEE PARTNERS, INC., Petitioner,

vs.
SAN FRANCISCO COFFEE & ROASTERY, INC., Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 15 June 2005 Decision2 and the 1 September 2005 Resolution3 of
the Court of Appeals in CA-G.R. SP No. 80396. In its 15 June 2005 Decision, the Court of Appeals
set aside the 22 October 2003 Decision4 of the Office of the Director General-Intellectual Property
Office and reinstated the 14 August 2002 Decision5 of the Bureau of Legal Affairs-Intellectual
Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion
for reconsideration and respondents motion for partial reconsideration.

The Facts

Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and
maintaining coffee shops in the country. It registered with the Securities and Exchange Commission
(SEC) in January 2001. It has a franchise agreement6 with Coffee Partners Ltd. (CPL), a business
entity organized and existing under the laws of British Virgin Islands, for a non-exclusive right to
operate coffee shops in the Philippines using trademarks designed by CPL such as "SAN
FRANCISCO COFFEE."

Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered
with the SEC in May 1995. It registered the business name "SAN FRANCISCO COFFEE &
ROASTERY, INC." with the Department of Trade and Industry (DTI) in June 1995. Respondent had
since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willys, and
other coffee companies.

In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company
name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting,
and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee
carts in malls and other commercial establishments in Metro Manila.

In June 2001, respondent discovered that petitioner was about to open a coffee shop under the
name "SAN FRANCISCO COFFEE" in Libis, Quezon City. According to respondent, petitioners
shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the
business of selling coffee. Respondent sent a letter to petitioner demanding that the latter stop using
the name "SAN FRANCISCO COFFEE." Respondent also filed a complaint with the Bureau of Legal
Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair competition with claims
for damages.

In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the
Intellectual Property Office (IPO) applications for registration of the mark "SAN FRANCISCO
COFFEE & DEVICE" for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark
could not be confused with respondents trade name because of the notable distinctions in their
appearances. Petitioner argued respondent stopped operating under the trade name "SAN
FRANCISCO COFFEE" when it formed a joint venture with Boyd Coffee USA. Petitioner contended
respondent did not cite any specific acts that would lead one to believe petitioner had, through
fraudulent means, passed off its mark as that of respondent, or that it had diverted business away
from respondent.

Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon
City opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall,
Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed
in January 2001 with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said
he became involved in the business when one Arthur Gindang invited him to invest in a coffee shop
and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop "SAN
FRANCISCO COFFEE" has branches in Malaysia and Singapore. He added that he formed CPL in
1997 along with two other colleagues, Shirley Miller John and Leah Warren, who were former
managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar
venture and adopted the name "SAN FRANCISCO COFFEE" from the famous city in California
where he and his former colleagues once lived and where special coffee roasts came from.

The Ruling of the Bureau of Legal Affairs-Intellectual Property Office

In its 14 August 2002 Decision, the BLA-IPO held that petitioners trademark infringed on
respondents trade name. It ruled that the right to the exclusive use of a trade name with freedom
from infringement by similarity is determined from priority of adoption. Since respondent registered
its business name with the DTI in 1995 and petitioner registered its trademark with the IPO in 2001
in the Philippines and in 1997 in other countries, then respondent must be protected from
infringement of its trade name.

The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial
evidence indicated respondent continuously used its trade name in connection with the purpose for
which it was organized. It found that although respondent was no longer involved in blending,
roasting, and distribution of coffee because of the creation of BCCPI, it continued making plans and
doing research on the retailing of coffee and the setting up of coffee carts. The BLA-IPO ruled that
for abandonment to exist, the disuse must be permanent, intentional, and voluntary.

The BLA-IPO held that petitioners use of the trademark "SAN FRANCISCO COFFEE" will likely
cause confusion because of the exact similarity in sound, spelling, pronunciation, and commercial
impression of the words "SAN FRANCISCO" which is the dominant portion of respondents trade
name and petitioners trademark. It held that no significant difference resulted even with a diamond-
shaped figure with a cup in the center in petitioner's trademark because greater weight is given to
words the medium consumers use in ordering coffee products.

On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that
petitioner adopted the trademark "SAN FRANCISCO COFFEE" because of the authority granted to it
by its franchisor. The BLA-IPO held there was no evidence of intent to defraud on the part of
petitioner.

The BLA-IPO also dismissed respondents claim of actual damages because its claims of profit loss
were based on mere assumptions as respondent had not even started the operation of its coffee
carts. The BLA-IPO likewise dismissed respondents claim of moral damages, but granted its claim
of attorneys fees.
Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while
respondent questioned the denial of actual damages. The BLA-IPO denied the parties partial motion
for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property
Office (ODG-IPO).

The Ruling of the Office of the Director General-

Intellectual Property Office

In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioners use of
the trademark "SAN FRANCISCO COFFEE" did not infringe on respondent's trade name. The ODG-
IPO found that respondent had stopped using its trade name after it entered into a joint venture with
Boyd Coffee USA in 1998 while petitioner continuously used the trademark since June 2001 when it
opened its first coffee shop in Libis, Quezon City. It ruled that between a subsequent user of a trade
name in good faith and a prior user who had stopped using such trade name, it would be inequitable
to rule in favor of the latter.

The Ruling of the Court of Appeals

In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the
ODG-IPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002
decision of the BLA-IPO finding infringement. The appellate court denied respondents claim for
actual damages and retained the award of attorneys fees. In its 1 September 2005 Resolution, the
Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial
reconsideration.

The Issue

The sole issue is whether petitioners use of the trademark "SAN FRANCISCO COFFEE" constitutes
infringement of respondents trade name "SAN FRANCISCO COFFEE & ROASTERY, INC.," even if
the trade name is not registered with the Intellectual Property Office (IPO).

The Courts Ruling

The petition has no merit.

Petitioner contends that when a trade name is not registered, a suit for infringement is not available.
Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondents
registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when
petitioner opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek
the renewal of its business name registration. Petitioner stresses respondents failure to continue the
use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims
no confusion is likely to occur between its trademark and respondents trade name because of a
wide divergence in the channels of trade, petitioner serving ready-made coffee while respondent is
in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun
"San Francisco" and the generic word "coffee" are not capable of exclusive appropriation.

Respondent maintains the law protects trade names from infringement even if they are not
registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293)7 dispensed with
registration of a trade name with the IPO as a requirement for the filing of an action for infringement.
All that is required is that the trade name is previously used in trade or commerce in the Philippines.
Respondent insists it never abandoned the use of its trade name as evidenced by its letter to
petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the
infringement case. Respondent alleges petitioners trademark is confusingly similar to respondents
trade name. Respondent stresses ordinarily prudent consumers are likely to be misled about the
source, affiliation, or sponsorship of petitioners coffee.

As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that
respondent continued to make plans and do research on the retailing of coffee and the
establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of
Appeals, which further found that while respondent stopped using its trade name in its business of
selling coffee, it continued to import and sell coffee machines, one of the services for which the use
of the business name has been registered. The binding effect of the factual findings of the Court of
Appeals on this Court applies with greater force when both the quasi-judicial body or tribunal like the
BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also
settled that absent any circumstance requiring the overturning of the factual conclusions made by
the quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court
necessarily upholds such findings of fact.8

Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management
SA,9 this Court laid down what constitutes infringement of an unregistered trade name, thus:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in
infringement of trade name, the same need not be registered;

(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated
by the infringer;

(3) The infringing mark or trade name is used in connection with the sale, offering for sale, or
advertising of any goods, business or services; or the infringing mark or trade name 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;

(4) The use or application of the infringing mark or trade name is likely to cause confusion or
mistake or to deceive purchasers or others as to the goods or services themselves or as to
the source or origin of such goods or services or the identity of such business; and

(5) It is without the consent of the trademark or trade name owner or the assignee
thereof.10 (Emphasis supplied)

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed
by its owner against the owner of an infringing trademark. All that is required is that the trade name
is previously used in trade or commerce in the Philippines.11

Section 22 of Republic Act No. 166,12 as amended, required registration of a trade name as a
condition for the institution of an infringement suit, to wit:

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

However, RA 8293, which took effect on 1 January 1998, has dispensed with the registration
requirement. Section 165.2 of RA 8293 categorically states that trade names shall be protected,
even prior to or without registration with the IPO, against any unlawful act including any subsequent
use of the trade name by a third party, whether as a trade name or a trademark likely to mislead the
public. Thus:
1avvph!1

SEC. 165.2 (a) Notwithstanding any laws or regulations providing for any obligation to
register trade names, such names shall be protected, even prior to or without registration,
against any unlawful act committed by third parties.

(b) In particular, any subsequent use of a trade name by a third party, whether as a trade name or a
mark or collective mark, or any such use of a similar trade name or mark, likely to mislead the public,
shall be deemed unlawful. (Emphasis supplied)

It is the likelihood of confusion that is the gravamen of infringement. But there is no absolute
standard for likelihood of confusion. Only the particular, and sometimes peculiar, circumstances of
each case can determine its existence. Thus, in infringement cases, precedents must be evaluated
in the light of each particular case.13

In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the
dominancy test and the holistic test. The dominancy test focuses on the similarity of the prevalent
features of the competing trademarks that might cause confusion and deception, thus constituting
infringement. If the competing trademark contains the main, essential, and dominant features of
another, and confusion or deception is likely to result, infringement occurs. Exact duplication or
imitation is not required. The question is whether the use of the marks involved is likely to cause
confusion or mistake in the mind of the public or to deceive consumers.14

In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the
products, including the labels and packaging, in determining confusing similarity.15 The discerning
eye of the observer must focus not only on the predominant words but also on the other features
appearing on both marks in order that the observer may draw his conclusion whether one is
confusingly similar to the other.16

Applying either the dominancy test or the holistic test, petitioners "SAN FRANCISCO COFFEE"
trademark is a clear infringement of respondents "SAN FRANCISCO COFFEE & ROASTERY, INC."
trade name. The descriptive words "SAN FRANCISCO COFFEE" are precisely the dominant
features of respondents trade name. Petitioner and respondent are engaged in the same business
of selling coffee, whether wholesale or retail. The likelihood of confusion is higher in cases where the
business of one corporation is the same or substantially the same as that of another corporation. In
this case, the consuming public will likely be confused as to the source of the coffee being sold at
petitioners coffee shops. Petitioners argument that "San Francisco" is just a proper name referring
to the famous city in California and that "coffee" is simply a generic term, is untenable. Respondent
has acquired an exclusive right to the use of the trade name "SAN FRANCISCO COFFEE &
ROASTERY, INC." since the registration of the business name with the DTI in 1995. Thus,
respondents use of its trade name from then on must be free from any infringement by similarity. Of
course, this does not mean that respondent has exclusive use of the geographic word "San
Francisco" or the generic word "coffee." Geographic or generic words are not, per se, subject to
exclusive appropriation. It is only the combination of the words "SAN FRANCISCO COFFEE," which
is respondents trade name in its coffee business, that is protected against infringement on matters
related to the coffee business to avoid confusing or deceiving the public.

In Philips Export B.V. v. Court of Appeals,17 this Court held that a corporation has an exclusive right
to the use of its name. The right proceeds from the theory that it is a fraud on the corporation which
has acquired a right to that name and perhaps carried on its business thereunder, that another
should attempt to use the same name, or the same name with a slight variation in such a way as to
induce persons to deal with it in the belief that they are dealing with the corporation which has given
a reputation to the name.18

This Court is not just a court of law, but also of equity. We cannot allow petitioner to profit by the
name and reputation so far built by respondent without running afoul of the basic demands of fair
play. Not only the law but equity considerations hold petitioner liable for infringement of respondents
trade name.

The Court of Appeals was correct in setting aside the 22 October 2003 Decision of the Office of the
Director General-Intellectual Property Office and in reinstating the 14 August 2002 Decision of the
Bureau of Legal Affairs-Intellectual Property Office.

WHEREFORE, we DENY the petition for review. We AFFIRM the 15 June 2005 Decision and 1
September 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 80396.

Costs against petitioner.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.*

Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE P. PEREZ
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson
 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Footnotes

* Designated additional member per Raffle dated 15 February 2010.

1 Under Rule 45 of the Rules of Court.

2Rollo, pp. 71-98. Penned by Associate Justice Arturo D. Brion, with Associate Justices
Eugenio S. Labitoria and Eliezer R. Delos Santos, concurring.

3 Id. at 100-101.

4 Id. at 195-212.

5 Id. at pp. 149-161.

6 Id. at 128-140.

7 Otherwise known as the Intellectual Property Code. Took effect on 1 January 1998.

8 New City Builders, Inc. v. NLRC, 499 Phil. 207 (2005).

9 G.R. No. 180073, 25 November 2009.

10 Id.

11Philips Export B.V. v. Court of Appeals, G.R. No. 96161, 21 February 1992, 206 SCRA
457.

12 Otherwise known as the Trademark Law. Took effect on 20 June 1947.

Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, 27 June 2006, 493
13

SCRA 333.

14 Id.

15 Id.

16 Prosource International, Inc. v. Horphag Research Management SA, supra note 9.

17 Supra note 11.

18 Id.
 FIRST DIVISION

G.R. No. 169440 November 23, 2011

GEMMA ONG A.K.A. Maria Teresa Gemma Catacutan, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a petition for review on certiorari, filed under Rule 45 of the Rules of Court, to set aside
and reverse the June 16, 2005 Decision1 of the Court of Appeals in CA-G.R. CR No. 28308, which
affirmed the September 23, 2003 Decision2 of the Regional Trial Court (RTC) of Manila, Branch 24 in
Criminal Case No. 00-184454.

On July 28, 2000, petitioner Gemma Ong a.k.a. Maria Teresa Gemma Catacutan (Gemma) was
charged before the RTC for Infringement under Section 155 in relation to Section 170 of Republic
Act No. 8293 or the Intellectual Property Code. The accusatory portion of the Information reads:

That sometime in September 25, 1998 and prior thereto at Sta. Cruz, Manila and within the
jurisdiction of this Honorable Court, the above-named accused did then and there, knowingly,
maliciously, unlawfully and feloniously engage in the distribution, sale, [and] offering for sale of
counterfeit Marlboro cigarettes which had caused confusion, deceiving the public that such
cigarettes [were] Marlboro cigarettes and those of the Telengtan Brothers and Sons, Inc., doing
business under the style of La Suerte Cigar and Cigarettes Factory, the exclusive manufacturer of
Marlboro Cigarette in the Philippines and that of Philip Morris Products, Inc. (PMP7) the registered
owner and proprietor of the MARLBORO trademark together with the devices, including the famous-
Root Device, to their damage and prejudice, without the accused seeking their permit or authority to
manufacture and distribute the same.3

On August 1, 2000, Judge Rebecca G. Salvador of RTC Manila, Branch 1, issued a warrant of arrest
against Gemma, but lifted4 and set aside5 the same after Gemma voluntarily surrendered on August
4, 2000, and filed a cash bond for 12,000.00.

Gemma pleaded not guilty to the charge upon arraignment on October 17, 2000.6 After the pre-trial
conference on February 13, 2001,7 trial on the merits ensued.

The prosecution called to the witness stand the following: Roger Sherman Slagle, the Director of
Operations of Philip Morris Malaysia, and Philip Morris Philippines, Inc.s (PMPI) product/brand
security expert, to testify that according to his examination, the products they seized at the subject
premises were counterfeit cigarettes;8 as well as Jesse Lara, who, as then Senior Investigator III at
the Intellectual Property Rights (IPR) Unit of the Economic Intelligence and Investigation Bureau
(EIIB), Department of Finance, led the investigating team, to testify on the events that led to the
arrest of Gemma.9 The prosecution also presented the billing accountant of Quasha Ancheta Pea &
Nolasco Law Office (Quasha Law Office), Juliet Flores, to show that PMPI, being one of Quasha
Law Offices clients, paid the amount of $4,069.12 for legal services rendered.10 The last witness for
the prosecution was Atty. Alonzo Q. Ancheta, a senior law partner at Quasha Law Office, who
testified that as the duly appointed Attorney-in-Fact of PMPI, he was in charge of the EIIB search
operation in the subject premises. Atty. Ancheta said that while he was not personally present during
the implementation of the search warrant, he sent Atty. Leonardo Salvador, who constantly reported
the developments to him.11

The facts, as succinctly summarized by the Court of Appeals, are as follows:

On September 10, 1998, Jesse S. Lara, then Senior Investigator III at the Intellectual Property
Rights (IPR) Unit of the Economic Intelligence and Investigation Bureau (EIIB), Department of
Finance, received reliable information that counterfeit "Marlboro" cigarettes were being distributed
and sold by two (2) Chinese nationals, Johnny Sia and Jessie Concepcion, in the areas of Tondo,
Binondo, Sta. Cruz and Quiapo, Manila. A mission team formed by EIIB, including Lara, conducted
surveillance operation to verify the report. EIIB agents Leonardo Villanueva and Jigo Madrigal did a
"test-buy" on the different sari-sari stores of Manila located in Quiapo, Tondo, Sta. Cruz and
Blumentritt areas and took samples of "Marlboro" cigarettes sold therein. During the surveillance, the
container van delivering the "Marlboro" packed in black plastic bags was seen parked at 1677
Bulacan corner Hizon Streets, Sta. Cruz, Manila [(the subject premises)]. Upon inquiry from the
Barangay Chairman, they also learned that the place is owned by a certain Mr. Jackson Ong.

The EIIB team coordinated with officers of Philip Morris, Inc., owner of the trademark Marlboro Label
in the Philippines duly registered with the Philippine Patents Office and subsequently with the
Intellectual Property Office (IPO) since 1956. Initial examination made by Philip Morris, Inc. on those
random sample purchases revealed that the cigarettes were indeed fake products unauthorized by
the company. With official indorsement by the EIIB, Senior Investigator Lara filed an application for
search warrant before the Regional Trial Court of Dasmarias, Cavite, Branch 90.

On September 24, 1998, Executive Judge Dolores L. Espaol issued a search warrant after finding
probable cause to believe that Mr. Jackson Ong has in his possession/control in the premises
located at 1675-1677 Bulacan St. cor. M. Hizon St., Sta. Cruz, Manila, the following properties:

"Substantial number of fake locally made and imported fake cigarettes bearing the Marlboro brand,
together with the corresponding labels, cartons, boxes and other packaging as well as receipts,
invoices and other documents relative to the purchase, sale, and distribution of the aforesaid fake
Marlboro cigarettes."

On September 25, 1998, the EIIB team led by Senior Investigator Lara implemented the search
warrant, together with SPO2 Rommel P. Sese of the Western Police District (WPD) as
representative of the Philippine National Police (PNP), Barangay Chairman Ernesto Traje, Sr.,
Barangay Kagawad Vivian V. Rallonza and Atty. Leonardo P. Salvador who was sent by [Quasha
Pea & Nolasco Law Office,] the law firm engaged by Philip Morris, Inc. They proceeded to the
subject premises but Jackson Ong, the alleged owner, was not there. It was accused, who is
supposedly either the spouse or common-law wife of Jackson Ong, who entertained them. At first,
accused refused to allow them entry into the premises but eventually the team was able to search
the premises and found Marlboro cigarettes stocked in several boxes containing fifty (50) reams
inside each box which were packed in black plastic sacks like in "balikbayan boxes." The "Inventory"
and "Certification In the Conduct of Search" were duly accomplished and signed by the members of
the EIIB and the other representatives present during the actual search (SPO2 Sese, Jess Lara,
Traje, Sr., Henry Mariano, Isidro Burgos and Atty. Salvador). Accused signed her name in the said
documents as "Gemma Ong," as the Owner/Representative, while a certain employee, Girlie
Cantillo, also signed as witness.

On September 28, 1998, a Return of Search Warrant was submitted by the EIIB to the issuing court
stating that the articles seized pursuant to the warrant were stored in the premises of the EIIB and
requesting that EIIB be granted temporary custody of the goods. Acting on the Urgent Motion To
Transfer Custody of Confiscated Articles filed by Philip Morris Products, Inc. (PMPI) of Virginia,
U.S.A., Executive Judge Dolores L. Espaol ordered the custody of the seized goods transferred
from EIIB to PMPI c/o Quasha Ancheta Pea and Nolasco Law Office, the Attorney-in-Fact of PMPI.
Judge Espaol subsequently also issued an order dated October 15, 1998 authorizing PMPI to
secure and take out samples of the unauthorized products from the confiscated cartons/boxes of
Marlboro cigarettes which are stored at Four Winds Phils. Inc. warehouse located at No. 2241
Pasong Tamo Extension, Makati City under the direct and personal control and supervision of Sheriff
IV Tomas C. Azurin. PMPI had earlier sought such order from the court for the purpose of laboratory
analysis and scientific testing of the samples from the confiscated cigarettes.

On the basis of the results of the examination conducted by PMPI on the samples obtained from the
confiscated boxes of cigarettes bearing the Marlboro brand, which confirmed the same to be
unauthorized products and not genuine Marlboro cigarettes, the EIIB filed a case for Violation of
Sections 155 and 168 in relation to Section 170 of Republic Act No. 8293 against Jackson Ong who
is not an authorized distributor of Marlboro products in the Philippines.12

After the prosecution rested its case, the defense filed a Demurrer to Evidence,13 which the RTC
denied on March 26, 2003.14 The defense moved for a reconsideration of this order but the same
was denied on April 22, 2003.15

Gemma, as the lone witness for the defense, then took the witness stand. She said that she is
married to Co Yok Piao, a Chinese national, but she still uses her maiden name Catacutan.16 She
denied that she is the Gemma Ong accused in this case. She testified that she was arrested on
August 4, 2000, without the arresting officers asking for her name. She said that when she pleaded
to be released, she was instructed to post a cash bond, which she did in the amount of 12,000.00.
Gemma averred that when she posted her bond and signed her certificate of arraignment, she did so
under her real name Maria Teresa Gemma Catacutan, as opposed to the signatures in the Inventory
and Certification in the Conduct of Search (search documents), which she denied signing. She
claimed that she was not able to bring up her defense of mistaken identity early on as she did not
know when the proper time to raise it was. She avowed that she was not interrogated by the police
prior to her arrest, despite the two-year gap between it and the search of the subject premises. She
alleged that she did not know Jackson Ong and that the prosecution witnesses, whom she first saw
during her trial, couldnt even point to her as the person present during the raid when they testified in
court. Gemma further asseverated that while she could not remember where she was on September
25, 1998, she was sure that she was not at the subject premises on that date. Gemma presented
her Identification Card issued by the Professional Regulation Commission (PRC) to show that she is
a dentist by profession, although she claimed that she is a businessperson in practice. She said that
she used to buy and sell gear fabrics, t-shirts, truck materials, and real estate17 under the business
name "Fascinate Trading" based in Bulacan Street, Sta. Cruz, Manila, but that it had ceased
operations in February 1998.18 Gemma denied ever having engaged in the manufacture and sale of
any kind of cigarettes and claimed that she could not even distinguish between a fake and a genuine
Marlboro cigarette.19

On September 30, 2003, the RTC convicted Gemma of the crime as charged. The dispositive
portion of its Decision reads:

Accordingly, this Court finds accused Gemma Catacutan guilty beyond reasonable doubt of violation
of Section 155 in relation to Section 170 of Republic Act No. 8293 and hereby sentences her to
suffer the penalty of imprisonment of two (2) years and to pay a fine of Fifty Thousand ( 50,000.00)
Pesos.
Accused is further directed to indemnify private complainant the sum of US$4,069.12 or its peso
equivalent, as actual damages.

The records of the case as against Jackson Ong is hereby ordered archived pending his arrest.

With costs against accused Gemma Catacutan.20

In resolving the case, the RTC narrowed down the issue to whether Gemma Catacutan was the
same accused identified as Gemma Ong. The RTC answered this in the affirmative as it found
Gemmas defense of mistaken identity as untenable, especially since she claimed to be a
professional. The RTC explained:

Ranged against the positive and forthright declaration of the prosecution witnesses, the mere
uncorroborated and self-serving denials of the accused cannot stand. (People vs. Hortaleza, 258
SCRA 201)

We note in disbelief that it was only in the hearing of November 26, 2001, that accused[s] former
lawyer manifested that accused is known as Gemma Catacutan never as Gemma Ong (tsn,
November 26, 2001, p. 3) and as admitted by her, she never revealed her true identity when
arrested, when she posted her bail bond and even during her arraignment.

She could have protested at the time of her arrest that they were arresting the wrong person but this
she did not do. She proceeded to post a bond for her provisional liberty, hired a lawyer to defend her
but failed to divulge the very information that could have led to an early dismissal of the case, if true.

Her pretensions of ignorance as to the proper stage of when to explain (tsn, May 26, 2003), p. 13
can hardly be given credit. A dentist by profession, it is utterly incredible that she remained meek all
through-out her arrest and the posting of her bail bond.21

The RTC also unfurled the fact that while Gemma claimed to have never engaged in the sale and
manufacture of Marlboro cigarettes, the address of her business "Fascinate Trading" is registered as
1677 Bulacan Street, Sta. Cruz, Manila, the same property raided by the EIIB that contained the
counterfeit cigarettes.22

Aggrieved, Gemma appealed the RTCs decision to the Court of Appeals based on the following
grounds:

THE LOWER COURT GRIEVOUSLY ERRED IN CONVICTING DR. MARIA TERESA

GEMMA CATACUTAN GUILTY OF THE CRIME OF VIOLATION OF THE INTELLECTUAL
PROPERTY RIGHTS LAW DESPITE UTTER LACK OF EVIDENCE.

II

THE LOWER COURT IN CONVICTING DR. MARIA TERESA GEMMA CATACUTAN ON

THE BASIS OF SURMISE (sic), CONJECTURES AND GUESSWORK COMMITTED
GRAVE VIOLENCE AGAINST THE CONSTITUTIONAL PRESUMPTION OF INNOCENCE.

III
 THE LOWER COURT COMMITTED SERIOUS REVERSIBLE ERROR IN CONVICTING
THE ACCUSED-APPELLANT WHO HAD NOT BEEN POSITIVELY IDENTIFIED AND
PINPOINTED AS MANUFACTURER NOR (sic) DISTRIBUTOR OF FAKE MARLBORO
PRODUCT.

IV

THE LOWER COURT COMMITTED SERIOUS REVERSIBLE ERROR IN NOT GIVING THE
SLIGHTEST CREDENCE TO THE UNCONTRADICTED, UNREFUTED AND CANDID
TESTIMONY OF THE ACCUSED-APPELLANT, BUT INSTEAD, CONVICTED HER ON
[T]HE BASIS OF EXTRAPOLATED EVIDENCE NOT BORNE BY THE RECORDS.

THE LOWER COURT COMMITTED A GRAVE REVERSIBLE ERROR IN CONVICTING

ACCUSED-APPELLANT DESPITE THE UTTER AND PATHETIC LACK OF EVIDENCE TO
SUSTAIN THE PROSECUTIONS LAME, SHALLOW AND UNCONFOUNDED THEORY OF
GUILT.23

The Court of Appeals found Gemmas appeal to be unmeritorious. It said that Gemma was positively
identified by the prosecution witnesses as the woman who entertained them during the search of the
subject premises on September 25, 1998, and the woman who signed the Certification in the
Conduct of Search and Inventory. The Court of Appeals agreed with the RTCs rejection of Gemmas
defense of mistaken identity, as she should have raised it at the earliest opportunity, which was at
the time of her arrest, the posting of her bail bond, or during her arraignment. The Court of Appeals
held that the amendment of the prosecution witnesses affidavits was explained during the hearing,
and although the original affidavits were the ones marked during the pre-trial, the amended ones
provided the basis for the filing of the Information against Gemma and her co-accused Jackson Ong.
The Court of Appeals also noted that the March 20, 2000 Resolution of the State Prosecutor
specifically mentioned that the search warrant was served on Gemma Ong. The Court of Appeals
then proclaimed that in the hierarchy of evidence, the testimony of the witness in court commands
greater weight than his written affidavit.24

The Court of Appeals affirmed the conviction of Gemma for trademark infringement under Section
155 of Republic Act No. 8293, as the counterfeit goods seized by the EIIB were not only found in her
possession and control, but also in the building registered under her business, Fascinate Trading.
The Court of Appeals said that the prosecution had satisfactorily proven Gemmas commission of
the offense since the unauthorized use of the trademark Marlboro, owned by PMPI, was clearly
intended to deceive the public as to the origin of the cigarettes being distributed and sold, or
intended to be distributed and sold. The Court of Appeals further sustained the penalty and damages
imposed by the RTC for being in accord with the law and facts.25

Gemma is now before this Court with the following assignment of errors:

A.

THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE TESTIMONIES OF

PROSECUTION WITNESSES IDENTIFYING PETITIONER AS PRESENT AT THE TIME AND
PLACE WHEN THE SEARCH AND SEIZURE TOOK PLACE.

B.
THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE TESTIMONIES OF
PROSECUTION WITNESSES THAT THEY SAW PETITIONER SIGN HER NAME AS "GEMMA
ONG" AS OWNER/CLAIMANT/REPRESENTATIVE (OF THE ARTICLES SEIZED) ON THE
SEARCH WARRANT (EXH. "A"), CERTIFICATION IN THE CONDUCT OF SEARCH (EXH. "B")
AND INVENTORY OF THE S[E]IZED ARTICLES AT THE TIME OF THE SEARCH (EXH. "D").

C.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONERS SIGNATURE IN

EXHIBITS "A", "B" AND "C" ARE NOT HERS BUT WERE FORGED, BEING COMPLETELY AND
PATENTLY DISSIMILAR TO HER TRUE AND REAL SIGNATURE AS SHOWN IN HER OFFICIAL
I.D AS PROFESSIONAL DENTIST.

D.

THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE AFFIDAVITS OF THE

PROSECUTION WITNESSES WHICH DID NOT MENTION PETITIONERS PRESENCE AT THE
TIME AND PLACE OF THE SEARCH CANNOT TAKE PRECEDENCE OVER THEIR CONTRARY
TESTIMONIES IN COURT THAT SHE WAS PRESENT AND IN FACT THE OCCUPANT AND
OWNER OF THE PREMISES FROM WHICH SHE INITIALLY BLOCKED THEIR ENTRY INTO.

E.

THE COURT OF APPEALS ERRED IN CONCLUDING THAT [PETITIONER] WAS THE VERY
SAME PERSON WHO WAS CAUGHT IN POSSESSION AND CONTROL OF THE PREMISES
WHERE THE COUNTERFEIT ARTICLES WERE SEIZED BECAUSE SHE ALLEGEDLY NEVER
PROTESTED BEING WRONGFULLY ACCUSED AT THE TIME OF HER ARREST ON 4 AUGUST
2000, WHEN SHE POSTED HER CASH BOND AND WHEN SHE EVEN SIGNED HER NAME AS
MA. TERESA GEMMA CATACUTAN IN THE WAIVER, UNDERTAKING AND CERTIFICATE OR
ARRAIGNMENT, ALL IN THE NAME OF THE ACCUSED AS "GEMMA ONG, a.k.a. MA. THERESA
CATACUTAN."

F.

THE COURT OF APPEALS ERRED IN NOT ACQUITTING [PETITIONER] FOR FAILURE OF THE
PROSECUTION TO PROVE THE GUILT OF THE ACCUSED-APPELLANT BEYOND
REASONABLE DOUBT.26

Gemma argues that if it were true that she was in the subject premises when it was raided on
September 25, 1998, then her name and presence would have been mentioned in the respective
affidavits of Slagle and Atty. Ancheta; and the EIIB agents who conducted the search would have
confronted, investigated, or arrested her. Gemma insists that the fact that her name was only
mentioned for the first time in the amended affidavits yields to the conclusion that she was not in the
subject premises when it was searched and that the testimonies of the prosecution witnesses were
perjured.27

Gemma further claims that the courts below were wrong in finding that she never protested that she
was mistakenly identified. She claims that she was arrested without the benefit of a preliminary
investigation and all she wanted to do at that point was to "get out [of] the clutches of overzealous
and eager beaver policemen who were exuberant in arresting an innocent party like"28 her. Gemma
also explains that her non-protest during her arraignment was upon the advice of her former lawyer,
who said that he would correct it in the proper time during the trial.
Respondent People of the Philippines, in its comment,29 avers that there are only two issues to be
resolved in this case, to wit:

1. THE INSTANT PETITION IS FATALLY DEFECTIVE AS IT RAISES QUESTIONS OF

FACT WHICH ARE NOT PROPER FOR REVIEW UNDER RULE 45 OF THE REVISED
RULES OF COURT.

2. THE COURT OF APPEALS DID NOT ERR IN AFFIRMING PETITIONERS CONVICTION

FOR VIOLATION OF SECTION 155 IN RELATION TO SECTION 170 OF R.A. 8293
(INTELLECTUAL PROPERTY CODE OF THE PHILIPPINES).30

Respondent claims that a perusal of the issues in Gemmas petition readily discloses that only
questions of fact have been raised, which are not reviewable in an appeal by
certiorari.31 Respondent asseverates that Gemmas conviction was warranted as the prosecution had
sufficiently established her presence during the search of the subject premises where she signed the
search documents as "Gemma Ong." Moreover, the respondent avers, Gemma failed to timely
protest her arrest and raise her claim that she is not Gemma Ong.32

Issues

A study of the pleadings filed before this Court shows that the only issues to be resolved are the
following:

1. Whether or not accused-appellants petition for review on certiorari under Rule 45 of the
Rules of Court is fatally defective as it raises questions of fact; and

2. Whether or not Gemmas guilt was proven beyond reasonable doubt in light of her alleged
mistaken identity.

This Courts Ruling

Procedural Issue

As this case reached this Court via Rule 45 of the Rules of Court, the basic rule is that factual
questions are beyond the province of this Court, because only questions of law may be raised in a
petition for review.33 However, in exceptional cases, this Court has taken cognizance of questions of
fact in order to resolve legal issues, such as when there was palpable error or a grave
misapprehension of facts by the lower court.34 In Armed Forces of the Philippines Mutual Benefit
Association, Inc. v. Court of Appeals,35 we said that although submission of issues of fact in an
appeal by certiorari taken to this Court is ordinarily proscribed, this Court nonetheless retains the
option in the exercise of its sound discretion, taking into account the attendant circumstances, either
to decide the case or refer it to the proper court for determination.36 Since the determination of the
identity of Gemma is the very issue affecting her guilt or innocence, this Court chooses to take
cognizance of this case in the interest of proper administration of justice.

Gemma is guilty of violating Section 155 in relation to Section 170 of Republic Act No. 8293

Gemma was charged and convicted of violating Section 155 in relation to Section 170 of Republic
Act No. 8293, or the Intellectual Property Code of the Philippines.
Section 155. Remedies; Infringement. - Any person who shall, without the consent of the owner of
the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material. (Sec. 22, R.A. No 166a)

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 ( 50,000) to Two hundred thousand pesos ( 200,000), shall be imposed on any
person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and
Subsection 169.1. (Arts. 188 and 189, Revised Penal Code.) (Emphases supplied.)

A "mark" is any visible sign capable of distinguishing the goods (trademark) or services (service
mark) of an enterprise and shall include a stamped or marked container of goods.37

In McDonalds Corporation and McGeorge Food Industries, Inc. v. L.C. Big Mak Burger, Inc.,38 this
Court held:

To establish trademark infringement, the following elements must be shown: (1) the validity of
plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable
imitation by the alleged infringer results in "likelihood of confusion." Of these, it is the element of
likelihood of confusion that is the gravamen of trademark infringement.

A mark is valid if it is distinctive and not barred from registration. Once registered, not only the
marks validity, but also the registrants ownership of the mark is prima facie presumed.39

The prosecution was able to establish that the trademark "Marlboro" was not only valid for being
neither generic nor descriptive, it was also exclusively owned by PMPI, as evidenced by the
certificates of registration issued by the Intellectual Property Office of the Department of Trade and
Industry.40

Anent the element of confusion, both the RTC and the Court of Appeals have correctly held that the
counterfeit cigarettes seized from Gemmas possession were intended to confuse and deceive the
public as to the origin of the cigarettes intended to be sold, as they not only bore PMPIs mark, but
they were also packaged almost exactly as PMPIs products.41

Regarding the Claim of Mistaken Identity

Despite all these findings, Gemma has posited only a single defense, from the RTC all the way up to
this Court: that she is not the Gemma Ong named and accused in this case. She bases this claim on
the alleged discrepancies in the prosecution witnesses original affidavits vis--vis the amended
ones, which discrepancies, according to her, strongly suggest her innocence.

This Court has time and again held that between an affidavit executed outside the court, and a
testimony given in open court, the latter almost always prevails.

Discrepancies between a sworn statement and testimony in court do not outrightly justify the
acquittal of an accused. Such discrepancies do not necessarily discredit the witness since ex parte
affidavits are often incomplete. They do not purport to contain a complete compendium of the details
of the event narrated by the affiant. Thus, our rulings generally consider sworn statements taken out
of court to be inferior to in court testimony. x x x.42

A reading of the original affidavits43 executed by Slagle and Atty. Ancheta, readily reveals that they
concentrated on the facts and events leading up to the search and seizure of the contraband
materials from the subject premises. They not only failed to mention Gemma Ongs presence there,
but they also failed to mention the other witnesses names and presence there as well. Although this
might appear to be a mistake on the part of a known and established law firm like the Quasha Law
Office, the firm immediately sought to rectify this by having the affidavits of Slagle, Atty. Ancheta,
and Lara amended.

If it were true that Gemma was not at the subject premises at all on September 25, 1998, then she
should have grabbed every chance to correct this notion and expose this mistake before she was
arrested. She could have brought up her defense of mistaken identity or absence at the raid in the
preliminary investigation conducted prior to the issuance of her warrant of arrest; but instead, she
chose to ignore her subpoena and disregard the preliminary investigation. Even then, Gemma had
the opportunity to raise the fact that she was not Gemma Ong; not only during her arrest, but also
during the posting of the cash bond for her bail, and more importantly, during her arraignment, when
she was asked if she understood the charges against her. Gemma also knew that the Information
was filed against her on the basis of the amended affidavits, thus, she could have filed a motion to
quash the information before she entered her plea, or asked that a reinvestigation be conducted.
However, all these Gemma failed to do. We agree with the RTC that it is highly unlikely that a person
of her stature and educational attainment would be so meek and timid that she failed to protest
against her being wrongly identified, accused, arrested, and potentially imprisoned. If what she says
were true, she would not have agreed to post bail or to be arraigned without at the very least,
bringing up the fact that she was not the Gemma Ong the police officers were looking for. In
addition, her own lawyer, Atty. Maglinao, brought up the fact that she was not Gemma Ong, only for
the purpose of correcting the Information, and not to contest it, to wit:

WITNESS ROGER SHERMAN SLAGLE UNDER THE SAME OATH FOR CONTINUATION OF
DIRECT EXAMINATION BY:

ATTY. ERESE:

With the kind permission of the hon. court.

COURT: Proceed.

ATTY. MAGLINAO:
I would just want to be on record that my client, Gemma Catacutan has never been known as
Gemma Ong because her real name is Gemma Catacutan.

COURT: Do you have any objection to the amendment of the information?

ATTY. MAGLINAO:

No, your Honor. May we request to correct the information from Gemma Ong to Gemma
Catacutan.44

Gemma further accuses the prosecution witnesses of falsely testifying and of perjuring themselves
just so they can satisfy a big client like PMPI by showing that somebody had been arrested for
counterfeiting its cigarettes. The crimes Gemma is imputing on these witnesses are serious crimes,
and in the absence of concrete and convincing evidence, this Court could not believe her mere
allegations that imply that these people would destroy someones life just so they can please a
client, more so over mere cigarettes. In Principio v. Hon. Barrientos,45 we said:

Bad faith is never presumed while good faith is always presumed and the chapter on Human
Relations of the Civil Code directs every person, inter alia, to observe good faith, which springs from
the fountain of good conscience. Therefore, he who claims bad faith must prove it. For one to be in
bad faith, the same must be "evident." x x x.46

The prosecution witnesses, contrary to Gemmas claim, had positively identified her as the person
who initially refused the search team entrance, then later acquiesced to the search operations.
Slagle explained that even though he mentioned Gemma only in his amended affidavit, he was sure
that she was at the subject premises on the day that they searched it:

Testimony of Roger Sherman Slagle

ATTY. MAGLINAO:

Q In this amended affidavit you mentioned the name, Gemma Catacutan as one of the accused?

A Yes sir.

Q Can you tell the court how you were able to include the name of Gemma Catacutan in your
amended affidavit, when in fact it did not appear in the first affidavit?

A When we arrived she was there and she was very nervous and upset.

xxxx

A It is very clear to me when I arrived there that she was somehow involved.47 (Emphases ours.)

Lara on the other hand, even pointed to her and thus positively identified her to be the one who had
signed the search documents,48 as the owner of the subject premises, to wit:

Testimony of Jesse Lara

ATTY. FREZ
Q : Mr. Witness, do you know this person who wrote the name Gemma Ong?

A : Yes, sir, Gemma Ong is the owner of the premises when we served the search warrant and also,
she was the one who refused us to gain entry during the service of the search warrant.

Q : Were you able to gain entry at the premises?

A : Yes, sir.

Q : So, as regard to the person whom you identify as the one who refused you to gain entry, would
you be able to identify this person?

A : Yes, sir, that lady in pink is Mrs. Gemma Ong.

(As witness is pointing to the accused Gemma Ong).

Q : Mr. Witness, why do you say that the person whom you pointed to us is the one who wrote the
name Mrs. Gemma Ong?

WITNESS

Because when we served the search warrant she signed it in our presence and that is her own
signature.

xxxx

ATTY. FREZ

Q : So, Mr. Witness, in this Inventory, we made some markings during the pre-trial conference and I
see here above the signature (Owner/Representative), there exist a handwritten name which reads
GEMMA ONG and above it, there exist a signature, are you familiar with this person which appears
to be Gemma Ong?

A : Yes, sir, Gemma Ong signed that in my presence.

Q : Your Honor, during the pre-trial conference, it was previously marked as Exhibit "D-1". Mr.
Witness, I also see here a Verification but there also exist an entry below the name and I quote
"Owner/Claimant/Representative", there appears a handwritten name Gemma Ong and a signature
above it, are you familiar with this person which appears to be Gemma Ong?

A : Yes, sir, Gemma Ong signed that in my presence.

xxxx

Q : Mr. Witness, in this document which is the certification in the Conduct of Search and I have here
above the entry (Owner/Representative), a handwritten name which reads Gemma Ong and there
exist a signature above the handwritten name, can you identify the signature?

A : Yes, sir, this was signed by Gemma Ong in my presence.49 (Emphases ours.)
Lara further attested to the fact that the search warrant was served on Gemma, who later on
entertained the search team:

ATTY. FREZ

Mr. Witness, the person to whom you served the search warrant is identified as Mrs. Gemma Ong,
do you know her relationship with the accused Jackson Ong?

ATTY. FERNANDEZ

Objection, your honor, the witness would be incompetent . . .

COURT

May answer.

(The stenographer read back the question).

WITNESS

I am not familiar with the relationship of Mrs. Gemma Ong with Jackson Ong because during the
service of the search warrant, Mrs. Gemma Ong was there together with two employees and when I
asked where was Jackson Ong, she was the one who entertained us.

ATTY. FREZ

So, the search warrant was served against Gemma Ong?

WITNESS

Yes, Sir.50

Positive identification of a culprit is of great weight in determining whether an accused is guilty or

not.51 Gemma, in claiming the defense of mistaken identity, is in reality denying her involvement in
the crime. This Court has held that the defense of denial is insipid and weak as it is easy to fabricate
and difficult to prove; thus, it cannot take precedence over the positive testimony of the offended
party.52 The defense of denial is unavailing when placed astride the undisputed fact that there was
positive identification of the accused.53

While Gemma claims she does not know Jackson Ong, the subject premises where the counterfeit
cigarettes were seized was registered under her admitted business "Fascinate Trading."54 Aside
from the bare allegation that she had stopped operations in the subject premises as early as
February 1998, she has neither proven nor shown any evidence that she had relinquished control of
the building after that date. Gemmas allegation that she did not sign the search documents, and that
the signatures therein did not match the signature on her PRC identification card, must also be
struck down as she has not shown proof that her PRC signature is the only way she has ever signed
her name. She could have, at the very least, gotten a handwriting expert to testify on her behalf that
there is no way that the signatures in the search documents and the signature on her PRC
identification card could have been written by one and the same person; instead, she relied on the
flimsy contention that the two signatures were, on their face, different.
1aw p++i1
Gemmas defense consists of her claim of mistaken identity, her denial of her involvement in the
crime, and her accusation against the prosecution witnesses of allegedly giving false testimonies
and committing perjury. These are all weak, unproven, and unfounded claims, and will not stand
against the strong evidence against her.

WHEREFORE, this Court DENIES the Petition. The June 16, 2005 Decision of the Court of Appeals
in CA-G.R. CR No. 28308 is AFFIRMED.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

ANTONIO T. CARPIO* MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE**
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.

RENATO C. CORONA
Chief Justice

Footnotes

* Per raffle dated October 19, 2011.

** Per raffle dated October 19, 2011.

1 Rollo, pp. 19-36; penned by Associate Justice Martin S. Villarama, Jr. (now Associate
Justice of this Court) with Associate Justices Lucas P. Bersamin (now Associate Justice of
this Court) and Lucenito N. Tagle, concurring.

2 Records, pp. 325-331.

3 Id. at 1.
4 Id. at 30.

5 Id. at 28-30.

6 Id. at 38.

7 Id. at 51-53.

8 TSN, November 14, 2001, pp. 3-9.

9 TSN, January 22, 2002, pp. 6-25.

10 TSN, October 10, 2001, pp. 3-13.

11 TSN, April 12, 2002, pp. 3-20.

12 Rollo, pp. 19-21.

13 Records, pp. 229-235.

14 Id. at 261.

15 Id. at 282.

16 TSN, May 26, 2003, pp. 36-37.

17 Id. at 39-40.

18 TSN, June 9, 2003, pp. 13-15.

19 TSN, May 26, 2003, pp. 5-30.

20 Records, pp. 330-331.

21 Id. at 329-330.

22 Id. at 330.

23 Rollo, pp. 29-30.

24 Id. at 32-33.

25 Id. at 34-35.

26 Id. at 47-48.

27 Id. at 49-50.

28 Id. at 57.
29 Id. at 119-139.

30 Id. at 126-127.

31 Id. at 127-128.

32 Id. at 127-132.

33 Hko Ah Pao v. Ting, G.R. No. 153476, September 27, 2006, 503 SCRA 551, 559.

34 Santos v. People and Sandiganbayan, 400 Phil. 1175, 1201 (2000).

35 370 Phil. 150 (1999).

36 Id. at 165.

37 Section 121.1, Republic Act No. 8293.

38 480 Phil. 402 (2004).

39 Id. at 424-425.

40 Records (thin folder), pp. 13-54.

41 TSN, November 27, 2001, pp. 3-14.

42 People v. Minangga and Agando, 388 Phil. 353, 362 (2000).

43 Records, pp. 158-169.

44 TSN, November 26, 2001, pp. 3-4.

45 515 Phil. 799 (2005).

46 Id. at 811.

47 TSN, November 27, 2001, pp. 16-17.

48 Records, pp. 153 and 155.

49 TSN, January 22, 2002, pp. 15-22.

50 TSN, January 22, 2002, pp. 24-25.

51 People v. Bihag, Jr. and Hilot, 396 Phil. 289, 296 (2000).

52 People v. Pangilinan, 443 Phil. 198, 235-236 (2003).

53 People v. Quimzon, 471 Phil. 182, 203 (2004).

54 Records, p. 298.
 THIRD DIVISION

G.R. No. 194062 June 17, 2013

REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY, ORLANDO REYES,
FERRER SUAZO and ALVIN U. TV, Petitioners,
vs.
PETRON CORPORATION, PILIPINAS SHELL PETROLEUM CORPORATION, and SHELL
INTERNATIONAL PETROLEUM COMPANY LIMITED, Respondents.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
petitioners seeking the reversal of the Decision1 dated July 2, 2010, and Resolution2 dated October
11, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 106385.

Stripped of non-essentials, the facts of the case, as summarized by the CA, are as follows:

Petitioners Petron Corporation ("Petron" for brevity) and Pilipinas Shell Petroleum Corporation
("Shell" for brevity) are two of the largest bulk suppliers and producers of LPG in the Philippines.
Petron is the registered owner in the Philippines of the trademarks GASUL and GASUL cylinders
used for its LGP products. It is the sole entity in the Philippines authorized to allow refillers and
distributors to refill, use, sell, and distribute GASUL LPG containers, products and its trademarks.

Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename,
trademarks, symbols or designs of its principal, Shell International Petroleum Company Limited,
including the marks SHELLANE and SHELL device in connection with the production, sale and
distribution of SHELLANE LPGs. It is the only corporation in the Philippines authorized to allow
refillers and distributors to refill, use, sell and distribute SHELLANE LGP containers and products.
Private respondents, on the other hand, are the directors and officers of Republic Gas Corporation
("REGASCO" for brevity), an entity duly licensed to engage in, conduct and carry on, the business of
refilling, buying, selling, distributing and marketing at wholesale and retail of Liquefied Petroleum
Gas ("LPG").

LPG Dealers Associations, such as the Shellane Dealers Association, Inc., Petron Gasul Dealers
Association, Inc. and Totalgaz Dealers Association, received reports that certain entities were
engaged in the unauthorized refilling, sale and distribution of LPG cylinders bearing the registered
tradenames and trademarks of the petitioners. As a consequence, on February 5, 2004, Genesis
Adarlo (hereinafter referred to as Adarlo), on behalf of the aforementioned dealers associations, filed
a letter-complaint in the National Bureau of Investigation ("NBI") regarding the alleged illegal trading
of petroleum products and/or underdelivery or underfilling in the sale of LPG products.

Acting on the said letter-complaint, NBI Senior Agent Marvin E. De Jemil (hereinafter referred to as
"De Jemil") was assigned to verify and confirm the allegations contained in the letter-complaint. An
investigation was thereafter conducted, particularly within the areas of Caloocan, Malabon,
Novaliches and Valenzuela, which showed that several persons and/or establishments, including
REGASCO, were suspected of having violated provisions of Batas Pambansa Blg. 33 (B.P. 33). The
surveillance revealed that REGASCO LPG Refilling Plant in Malabon was engaged in the refilling
and sale of LPG cylinders bearing the registered marks of the petitioners without authority from the
latter. Based on its General Information Sheet filed in the Securities and Exchange Commission,
REGASCOs members of its Board of Directors are: (1) Arnel U. Ty President, (2) Marie Antoinette
Ty Treasurer, (3) Orlando Reyes Corporate Secretary, (4) Ferrer Suazo and (5) Alvin Ty
(hereinafter referred to collectively as private respondents).

De Jemil, with other NBI operatives, then conducted a test-buy operation on February 19, 2004 with
the former and a confidential asset going undercover. They brought with them four (4) empty LPG
cylinders bearing the trademarks of SHELLANE and GASUL and included the same with the
purchase of J&S, a REGASCOs regular customer. Inside REGASCOs refilling plant, they witnessed
that REGASCOs employees carried the empty LPG cylinders to a refilling station and refilled the
LPG empty cylinders. Money was then given as payment for the refilling of the J&Ss empty
cylinders which included the four LPG cylinders brought in by De Jemil and his companion. Cash
Invoice No. 191391 dated February 19, 2004 was issued as evidence for the consideration paid.

After leaving the premises of REGASCO LPG Refilling Plant in Malabon, De Jemil and the other NBI
operatives proceeded to the NBI headquarters for the proper marking of the LPG cylinders. The LPG
cylinders refilled by REGASCO were likewise found later to be underrefilled.

Thus, on March 5, 2004, De Jemil applied for the issuance of search warrants in the Regional Trial
Court, Branch 24, in the City of Manila against the private respondents and/or occupants of
REGASCO LPG Refilling Plant located at Asucena Street, Longos, Malabon, Metro Manila for
alleged violation of Section 2 (c), in relation to Section 4, of B.P. 33, as amended by PD 1865. In his
sworn affidavit attached to the applications for search warrants, Agent De Jemil alleged as follows:

"x x x.

"4. Respondents REGASCO LPG Refilling Plant-Malabon is not one of those entities authorized to
refill LPG cylinders bearing the marks of PSPC, Petron and Total Philippines Corporation. A
Certification dated February 6, 2004 confirming such fact, together with its supporting documents,
are attached as Annex "E" hereof.

6. For several days in the month of February 2004, the other NBI operatives and I conducted
surveillance and investigation on respondents REGASCO LPG refilling Plant-Malabon. Our
surveillance and investigation revealed that respondents REGASCO LPG Refilling Plant-Malabon is
engaged in the refilling and sale of LPG cylinders bearing the marks of Shell International, PSPC
and Petron.

x x x.

8. The confidential asset and I, together with the other operatives of the NBI, put together a test-buy
operation. On February 19, 2004, I, together with the confidential asset, went undercover and
executed our testbuy operation. Both the confidential assets and I brought with us four (4) empty
LPG cylinders branded as Shellane and Gasul. x x x in order to have a successful test buy, we
decided to "ride-on" our purchases with the purchase of Gasul and Shellane LPG by J & S, one of
REGASCOs regular customers.

9. We proceeded to the location of respondents REGASCO LPG Refilling Plant-Malabon and asked
from an employee of REGASCO inside the refilling plant for refill of the empty LPG cylinders that we
have brought along, together with the LPG cylinders brought by J & S. The REGASCO employee,
with some assistance from other employees, carried the empty LPG cylinders to a refilling station
and we witnessed the actual refilling of our empty LPG cylinders.
10. Since the REGASCO employees were under the impression that we were together with J & S,
they made the necessary refilling of our empty LPG cylinders alongside the LPG cylinders brought
by J & S. When we requested for a receipt, the REGASCO employees naturally counted our LPG
cylinders together with the LPG cylinders brought by J & S for refilling. Hence, the amount stated in
Cash Invoice No. 191391 dated February 19, 2004, equivalent to Sixteen Thousand Two Hundred
Eighty-Six and 40/100 (Php16,286.40), necessarily included the amount for the refilling of our four
(4) empty LPG cylinders. x x x.

11. After we accomplished the purchase of the illegally refilled LPG cylinders from respondents
REGASCO LPG Refilling Plant-Malabon, we left its premises bringing with us the said LPG
cylinders. Immediately, we proceeded to our headquarters and made the proper markings of the
illegally refilled LPG cylinders purchased from respondents REGASCO LPG Refilling Plant-Malabon
by indicating therein where and when they were purchased. Since REGASCO is not an authorized
refiller, the four (4) LPG cylinders illegally refilled by respondents REGASCO LPG Refilling Plant-
Malabon, were without any seals, and when weighed, were underrefilled. Photographs of the LPG
cylinders illegally refilled from respondents REGASCO LPG Refilling Plant-Malabon are attached as
Annex "G" hereof. x x x."

After conducting a personal examination under oath of Agent De Jemil and his witness, Joel Cruz,
and upon reviewing their sworn affidavits and other attached documents, Judge Antonio M. Eugenio,
Presiding Judge of the RTC, Branch 24, in the City of Manila found probable cause and
correspondingly issued Search Warrants Nos. 04-5049 and 04-5050.

Upon the issuance of the said search warrants, Special Investigator Edgardo C. Kawada and other
NBI operatives immediately proceeded to the REGASCO LPG Refilling Station in Malabon and
served the search warrants on the private respondents. After searching the premises of REGASCO,
they were able to seize several empty and filled Shellane and Gasul cylinders as well as other allied
paraphernalia.

Subsequently, on January 28, 2005, the NBI lodged a complaint in the Department of Justice against
the private respondents for alleged violations of Sections 155 and 168 of Republic Act (RA) No.
8293, otherwise known as the Intellectual Property Code of the Philippines.

On January 15, 2006, Assistant City Prosecutor Armando C. Velasco recommended the dismissal of
the complaint. The prosecutor found that there was no proof introduced by the petitioners that would
show that private respondent REGASCO was engaged in selling petitioners products or that it
imitated and reproduced the registered trademarks of the petitioners. He further held that he saw no
deception on the part of REGASCO in the conduct of its business of refilling and marketing LPG.
The Resolution issued by Assistant City Prosecutor Velasco reads as follows in its dispositive
portion:

"WHEREFORE, foregoing considered, the undersigned finds the evidence against the respondents
to be insufficient to form a well-founded belief that they have probably committed violations of
Republic Act No. 9293. The DISMISSAL of this case is hereby respectfully recommended for
insufficiency of evidence."

On appeal, the Secretary of the Department of Justice affirmed the prosecutors dismissal of the
complaint in a Resolution dated September 18, 2008, reasoning therein that:

"x x x, the empty Shellane and Gasul LPG cylinders were brought by the NBI agent specifically for
refilling. Refilling the same empty cylinders is by no means an offense in itself it being the
legitimate business of Regasco to engage in the refilling and marketing of liquefied petroleum gas. In
other words, the empty cylinders were merely filled by the employees of Regasco because they
were brought precisely for that purpose. They did not pass off the goods as those of complainants
as no other act was done other than to refill them in the normal course of its business.

"In some instances, the empty cylinders were merely swapped by customers for those which are
already filled. In this case, the end-users know fully well that the contents of their cylinders are not
those produced by complainants. And the reason is quite simple it is an independent refilling
station.

"At any rate, it is settled doctrine that a corporation has a personality separate and distinct from its
stockholders as in the case of herein respondents. To sustain the present allegations, the acts
complained of must be shown to have been committed by respondents in their individual capacity by
clear and convincing evidence. There being none, the complaint must necessarily fail. As it were,
some of the respondents are even gainfully employed in other business pursuits. x x x."3

Dispensing with the filing of a motion for reconsideration, respondents sought recourse to the CA
through a petition for certiorari.

In a Decision dated July 2, 2010, the CA granted respondents certiorari petition. The fallo states:

WHEREFORE, in view of the foregoing premises, the petition filed in this case is hereby GRANTED.
The assailed Resolution dated September 18, 2008 of the Department of Justice in I.S. No. 2005-
055 is hereby REVERSED and SET ASIDE.

SO ORDERED.4

Petitioners then filed a motion for reconsideration. However, the same was denied by the CA in a
Resolution dated October 11, 2010.

Accordingly, petitioners filed the instant Petition for Review on Certiorari raising the following issues
for our resolution:

Whether the Petition for Certiorari filed by RESPONDENTS should have been denied outright.

Whether sufficient evidence was presented to prove that the crimes of Trademark Infringement and
Unfair Competition as defined and penalized in Section 155 and Section 168 in relation to Section
170 of Republic Act No. 8293 (The Intellectual Property Code of the Philippines) had been
committed.

Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable for the offense charged.5

Let us discuss the issues in seriatim.

Anent the first issue, the general rule is that a motion for reconsideration is a condition sine qua non
before a certiorari petition may lie, its purpose being to grant an opportunity for the court a quo to
correct any error attributed to it by re-examination of the legal and factual circumstances of the
case.6

However, this rule is not absolute as jurisprudence has laid down several recognized exceptions
permitting a resort to the special civil action for certiorari without first filing a motion for
reconsideration, viz.:
 (a) Where the order is a patent nullity, as where the court a quo has no jurisdiction;

(b) Where the questions raised in the certiorari proceedings have been duly raised and
passed upon by the lower court, or are the same as those raised and passed upon in the
lower court.

(c) Where there is an urgent necessity for the resolution of the question and any further delay
would prejudice the interests of the Government or of the petitioner or the subject matter of
the petition is perishable;

(d) Where, under the circumstances, a motion for reconsideration would be useless;

(e) Where petitioner was deprived of due process and there is extreme urgency for relief;

(f) Where, in a criminal case, relief from an order of arrest is urgent and the granting of such
relief by the trial court is improbable;

(g) Where the proceedings in the lower court are a nullity for lack of due process;

(h) Where the proceeding was ex parte or in which the petitioner had no opportunity to
object; and,

(i) Where the issue raised is one purely of law or public interest is involved.7

In the present case, the filing of a motion for reconsideration may already be dispensed with
considering that the questions raised in this petition are the same as those that have already been
squarely argued and passed upon by the Secretary of Justice in her assailed resolution.

Apropos the second and third issues, the same may be simplified to one core issue: whether
probable cause exists to hold petitioners liable for the crimes of trademark infringement and unfair
competition as defined and penalized under Sections 155 and 168, in relation to Section 170 of
Republic Act (R.A.) No. 8293.

Section 155 of R.A. No. 8293 identifies the acts constituting trademark infringement as follows:

Section 155. Remedies; Infringement. Any person who shall, without the consent of the owner of
the registered mark:

155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered
mark of the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2 Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.8

From the foregoing provision, the Court in a very similar case, made it categorically clear that the
mere unauthorized use of a container bearing a registered trademark in connection with the sale,
distribution or advertising of goods or services which is likely to cause confusion, mistake or
deception among the buyers or consumers can be considered as trademark infringement.9

Here, petitioners have actually committed trademark infringement when they refilled, without the
respondents consent, the LPG containers bearing the registered marks of the respondents. As
noted by respondents, petitioners acts will inevitably confuse the consuming public, since they have
no way of knowing that the gas contained in the LPG tanks bearing respondents marks is in reality
not the latters LPG product after the same had been illegally refilled. The public will then be led to
believe that petitioners are authorized refillers and distributors of respondents LPG products,
considering that they are accepting empty containers of respondents and refilling them for resale.

As to the charge of unfair competition, Section 168.3, in relation to Section 170, of R.A. No. 8293
describes the acts constituting unfair competition as follows:

Section 168. Unfair Competition, Rights, Regulations and Remedies. x x x.

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

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

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 (50,000) to Two hundred thousand pesos (200,000), shall be imposed on any
person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and
Subsection 169.1.

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or
attempting to pass off upon the public of the goods or business of one person as the goods or
business of another with the end and probable effect of deceiving the public.10

Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors. Thus, the defendant gives his goods the
general appearance of the goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor.11
In the present case, respondents pertinently observed that by refilling and selling LPG cylinders
bearing their registered marks, petitioners are selling goods by giving them the general appearance
of goods of another manufacturer.

What's more, the CA correctly pointed out that there is a showing that the consumers may be misled
into believing that the LPGs contained in the cylinders bearing the marks "GASUL" and
"SHELLANE" are those goods or products of the petitioners when, in fact, they are not. Obviously,
the mere use of those LPG cylinders bearing the trademarks "GASUL" and "SHELLANE" will give
the LPGs sold by REGASCO the general appearance of the products of the petitioners.

In sum, this Court finds that there is sufficient evidence to warrant the prosecution of petitioners for
trademark infringement and unfair competition, considering that petitioner Republic Gas Corporation,
being a corporation, possesses a personality separate and distinct from the person of its officers,
directors and stockholders.12Petitioners, being corporate officers and/or directors, through whose act,
default or omission the corporation commits a crime, may themselves be individually held
answerable for the crime.13 Veritably, the CA appropriately pointed out that petitioners, being in direct
control and supervision in the management and conduct of the affairs of the corporation, must have
known or are aware that the corporation is engaged in the act of refilling LPG cylinders bearing the
marks of the respondents without authority or consent from the latter which, under the
circumstances, could probably constitute the crimes of trademark infringement and unfair
competition. The existence of the corporate entity does not shield from prosecution the corporate
agent who knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners
cannot hide behind the cloak of the separate corporate personality of the corporation to escape
criminal liability. A corporate officer cannot protect himself behind a corporation where he is the
actual, present and efficient actor.14

WHEREFORE, premises considered, the petition is hereby DENIED and the Decision dated July 2,
2010 and Resolution dated October 11, 2010 of the Court of Appeals in CA-G.R. SP No. 106385 are
AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ROBERTO A. ABAD JOSE CATRAL MENDOZA

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, l
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1Penned by Associate Justice Isaias Dicdican, with Associate Justices Andres B. Reyes, Jr.
(now Presiding Justice) and Stephen Cruz, concurring; rollo, pp. 7-24.

2 Id. at 26-27.

3 Id. at 8-13.

4 Id. at 24. (Emphasis in the original.)

5 Id. at 38.

6Medado v. Heirs of the Late Antonio Consing, G.R. No. 186720, February 8, 2012, 665
SCRA 534, 547.

7HPS Software and Communication Corporation, et al. v. Philippine Long Distance

Telephone Company (PLDT), et. al., G.R. Nos. 170217 & 170694, December 10, 2012.
(Emphasis supplied.)

8 (Emphasis and underscoring supplied.)

9 Ty v. De Jemil, G.R. No. 182147, December 15, 2010, 638 SCRA 671, 689.

10 Superior Commercial Enterprises, Inc. v. Kunnan Enterprises Ltd. and Sports Concept &

Distributor, Inc., G.R. No. 169974, April 20, 2010, 618 SCRA 531, 555.

11McDonalds Corporation and McGeorge Food Industries, Inc. v. L.C. Big Mak Burger, Inc.,
et al., 480 Phil. 402, 440 (2004).

12Kukan International Corporation v. Hon. Amor Reyes. et. a!., G.R. No. 182729, September
29, 2010.631 SCRA 596,617-618.
13 Ching v. Secretary of Justice, 517 Phil. 151, 178 (2006).

14 Rollo, p. 23.
 THIRD DIVISION

G.R. No. 189669 February 16, 2015

PILIPINAS SHELL PETROLEUM CORPORATION and PETRON CORPORATION, Petitioners,

vs.
ROMARS INTERNATIONAL GASES CORPORATION, Respondent.

DECISION

PERALTA, J.:

This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that
the Decision1of the Court of Appeals (CA), dated March 13, 2009, and the Resolution2 dated
September 14, 2009, denying petitioner's motion for reconsideration thereof, be reversed and set
aside.

The antecedent facts are:

Petitioners received information that respondent was selling, offering for sale, or distributing liquefied
petroleum gas (LPG) by illegally refilling the steel cylinders manufactured byand bearing the duly
registered trademark and device of respondent Petron. Petron then obtained the services of a
paralegal investigation team who sent their people to investigate. The investigators went to
respondent's premises located in San Juan, Baao, Camarines Sur, bringing along four empty
cylinders of Shellane, Gasul, Total and Superkalan and asked that the same be refilled.
Respondent's employees then refilled said empty cylinders at respondent's refilling station. The
refilled cylinders were brought to the Marketing Coordinator of Petron Gasul who verified that
respondent was not authorized to distribute and/or sell, or otherwise deal with Petron LPG products,
and/or use or imitate any Petron trademarks. Petitioners then requested the National Bureau of
Investigation (NBI) to investigate said activities of respondent for the purpose of apprehending and
prosecuting establishments conducting illegal refilling, distribution and/or sale of LPG products using
the same containers of Petron and Shell, which acts constitute a violation of Section 168,3 in relation
to Section 1704 of Republic Act (R.A.) No. 8293, otherwise known as the Intellectual Property Code
of the Philippines, and/or Section 25 of R.A. No. 623, otherwise known as An Act To Regulate the
Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers.

The NBI proceeded with their investigation and reportedly found commercial quantities of Petron
Gasul and Shellane cylinders stockpiled at respondent's warehouse. They also witnessed trucks
coming from respondent's refilling facility loaded with Gasul, Shellane and Marsflame cylinders,
which then deposit said cylinders in different places, one of them a store called "Edrich Enterprises"
located at 272 National Highway, San Nicolas, Iriga City. The investigators then bought Shellane
and Gasul cylinders from Edrich Enterprises, for which they were issued an official receipt.

Thus, the NBI, in behalf of Petron and Shell, filed with the Regional Trial Court of Naga City (RTC-
Naga), two separate Applications for Search Warrant for Violation of Section 155.1,6 in relation to
Section 1707 of R.A. No. 8293 against respondent and/or its occupants. On October 23, 2002, the
RTC-Naga City issued an Order granting said Applications and Search Warrant Nos. 2002-27 and
2002-28 were issued. On the same day, the NBI served the warrants at the respondent's premises in
an orderly and peaceful manner, and articles or items described in the warrants were seized.

On November 4, 2002, respondent filed a Motion to Quash Search Warrant Nos. 2002-27 and 2002-
28, where the only grounds cited were: (a) there was no probable cause; (b) there had been a lapse
of four weeks from the date of the test-buy to the date of the search and seizure operations; (c) most
of the cylinders seized were not owned by respondent but by a third person; and (d) Edrich
Enterprises is an authorized outlet of Gasul and Marsflame. In an Order dated February 21, 2003,
the RTC-Naga denied the Motion to Quash.

However, on March 27,2003, respondent's new counsel filed an Appearance with Motion for
Reconsideration. It was only in said motion where respondent raised for the first time, the issue of
the impropriety of filing the Application for Search Warrant at the RTC-Naga City when the alleged
crime was committed in a place within the territorial jurisdiction of the RTC-Iriga City. Respondent
pointed out that the application filed with the RTC-Naga failed to state any compelling reason to
justify the filing of the same in a court which does not have territorial jurisdiction over the place of the
commission of the crime, as required by Section 2 (b), Rule 126 of the Revised Rules of Criminal
Procedure. Petitioner opposed the Motion for Reconsideration, arguing that it was already too late
for respondent to raise the issue regarding the venue of the filing of the application for search
warrant, as this would be in violation of the Omnibus Motion Rule.

In an Order dated July 28, 2003,the RTC-Naga issued an Order granting respondent's Motion for
Reconsideration, thereby quashing Search Warrant Nos. 2002-27 and 2002-28.

Petitioner then appealed to the CA, but the appellate court, in its Decision dated March 13,2009,
affirmed the RTC Order quashing the search warrants. Petitioner's motion for reconsideration of the
CA Decision was denied per Resolution dated September 14, 2009.

Elevating the matter to this Court via a petition for review on certiorari, petitioner presents herein the
following issues:

A.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT VENUE IN AN APPLICATION

FOR SEARCH WARRANT IS JURISDICTIONAL. THIS IS BECAUSE A SEARCH WARRANT CASE
IS NOT A CRIMINAL CASE.

B.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENT'S MOTION TO

QUASHIS NOT SUBJECT TO THE OMNIBUS MOTION RULE AND THATTHE ISSUE OF LACK
OF JURISDICTION MAY NOT BE WAIVED AND MAY EVEN BE RAISED FOR THE FIRST TIME
ON APPEAL.8

Petitioner's arguments deserve closer examination.

Section 2, Rule 126 of the Revised Rules of Criminal Procedure provides thus:

SEC. 2. Court where applications for search warrant shall be filed. - An application for search
warrant shall be filed with the following:

(a) Any court within whose territorial jurisdiction a crime was committed.

(b) For compelling reasons stated in the application, any court within the judicial region
where the crime was committed if the place of the commission of the crime is known, or any
court within the judicial region where the warrant shall be enforced.
However, if the criminal action has already been filed, the application shall only be made in the court
where the criminal action is pending. (Emphasis supplied)

The above provision is clear enough. Under paragraph (b) thereof, the application for search warrant
in this case should have stated compelling reasons why the same was being filed with the RTC-
Naga instead of the RTC-Iriga City, considering that it is the latter court that has territorial jurisdiction
over the place where the alleged crime was committed and also the place where the search warrant
was enforced. The wordings of the provision is of a mandatory nature, requiring a statement of
compelling reasons if the application is filed in a court which does not have territorial jurisdiction over
the place of commission of the crime. Since Section 2, Article III of the 1987 Constitution guarantees
the right of persons to be free from unreasonable searches and seizures, and search warrants
constitute a limitation on this right, then Section 2, Rule 126 of the Revised Rules of Criminal
Procedure should be construed strictly against state authorities who would be enforcing the search
warrants. On this point, then, petitioner's application for a search warrant was indeed insufficient for
failing to comply with the requirement to state therein the compelling reasons why they had to file the
application in a court that did not have territorial jurisdiction over the place where the alleged crime
was committed.

Notwithstanding said failure to state the compelling reasons in the application, the more pressing
question that would determine the outcome of the case is, did the RTC-Naga act properly in taking
into consideration the issue of said defect in resolving respondent's motion for reconsideration where
the issue was raised for the very first time? The record bears out that, indeed, respondent failed to
include said issue at the first instance in its motion to quash. Does the omnibus motion rule cover a
motion to quash search warrants?

The omnibus motion rule embodied in Section 8, Rule 15, in relation to Section 1, Rule 9, demands
that all available objections be included in a party's motion, otherwise, said objections shall be
deemed waived; and, the only grounds the court could take cognizance of, even if not pleaded in
said motion are: (a) lack of jurisdiction over the subject matter; (b) existence of another action
pending between the same parties for the same cause; and (c) bar by prior judgment or by statute of
limitations.9 It should be stressed here that the Court has ruled in a number of cases that the
omnibus motion rule is applicable to motions to quash search warrants.10 Furthermore, the Court
distinctly stated in Abuan v. People,11 that "the motion to quash the search warrant which the
accused may file shall be governed by the omnibus motion rule, provided, however, that objections
not available, existent or known during the proceedings for the quashal of the warrant may be raised
in the hearing of the motion to suppress x x x."12

In accordance with the omnibus motion rule, therefore, the trial court could only take cognizance of
an issue that was not raised in the motion to quash if, (1) said issue was not available or existent
when they filed the motion to quash the search warrant; or (2) the issue was one involving
jurisdiction over the subject matter. Obviously, the issue of the defect in the application was available
and existent at the time of filing of the motion to quash. What remains to be answered then is, if the
newly raised issue of the defect in the application is an issue of jurisdiction.

In resolving whether the issue raised for the first time in respondent's motion for reconsideration was
an issue of jurisdiction, the CA rationcinated, thus:

It is jurisprudentially settled that the concept of venue of actions in criminal cases, unlike in civil
cases, is jurisdictional. The place where the crime was committed determines not only the venue of
the action but is an essential element of jurisdiction. It is a fundamental rule that for jurisdiction to be
acquired by courts in criminal cases, the offense should have been committed or any one of its
essential ingredients should have taken place within the territorial jurisdiction of the court. Territorial
jurisdiction in criminal cases is the territory where the court has jurisdiction to take cognizance or to
try the offense allegedly committed therein by the accused. Thus, it cannot take jurisdiction over a
person charged with an offense allegedly committed outside of that limited territory.13

Unfortunately, the foregoing reasoning of the CA, is inceptionally flawed, because as pronounced by
the Court in Malaloan v. Court of Appeals,14 and reiterated in the more recent Worldwide Web
Corporation v. People of the Philippines,15 to wit:

x x x as we held in Malaloan v. Court of Appeals, an application for a search warrant is a "special

criminal process," rather than a criminal action:

The basic flaw in this reasoning is in erroneously equating the application for and the obtention of a
search warrant with the institution and prosecution of a criminal action in a trial court. It would thus
categorize what is only a special criminal process, the power to issue which is inherent in all courts,
as equivalent to a criminal action, jurisdiction over which is reposed in specific courts of indicated
competence. It ignores the fact that the requisites, procedure and purpose for the issuance of a
search warrant are completely different from those for the institution of a criminal action.

For, indeed, a warrant, such as a warrant of arrest or a search warrant, merely constitutes
process. A search warrant is defined in our jurisdiction as an order in writing issued in the name of
1w phi 1

the People of the Philippines signed by a judge and directed to a peace officer, commanding him to
search for personal property and bring it before the court. A search warrant is in the nature of a
criminal process akin to a writ of discovery. It is a special and peculiar remedy, drastic in its nature,
and made necessary because of a public necessity.

In American jurisdictions, from which we have taken our jural concept and provisions on search
warrants, such warrant is definitively considered merely as a process, generally issued by a court in
the exercise of its ancillary jurisdiction, and not a criminal action to be entertained by a court
pursuant to its original jurisdiction. x x x. (Emphasis supplied)

Clearly then, an application for a search warrant is not a criminal action. x x x16 (Emphasis supplied)

The foregoing explanation shows why the CA arrived at the wrong conclusion. It gravely erred in
equating the proceedings for applications for search warrants with criminal actions themselves. As
elucidated by the Court, proceedings for said applications are not criminal in nature and, thus, the
rule that venue is jurisdictional does not apply thereto. Evidently, the issue of whether the application
should have been filed in RTC-Iriga City or RTC-Naga, is not one involving jurisdiction because, as
stated in the afore-quoted case, the power to issue a special criminal process is inherent in all
courts.

Inferring from the foregoing, the Court deems it improper for the RTC-Naga to have even taken into
consideration an issue which respondent failed to raise in its motion to quash, as it did not involve a
question of jurisdiction over the subject matter. It is quite clear that the RTC-Naga had jurisdiction to
issue criminal processes such as a search warrant.

Moreover, the Court must again emphasize its previous admonition in Spouses Anunciacion v.
Bocanegra,17 that:

We likewise cannot approve the trial court's act of entertaining supplemental motions x x x which
raise grounds that are already deemed waived. To do so would encourage lawyers and litigants to
file piecemeal objections to a complaint in order to delay or frustrate the prosecution of the plaintiffs
cause of action.18
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated March 13,
2009, and the Resolution dated September 14, 2009 in CA-G.R. CV No. 80643 are REVERSED.
The Order dated February 21, 2003 issued by the Regional Trial Court of Naga, Camarines Sur,
Branch 24, denying respondent's motion to quash, is REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

MARIANO C. DEL CASTILLO* MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Footnotes

* Designated Acting Member in lieu of Associate Francis H. Jardeleza, per Special Order No.
1934 dated February 11, 2015.

1
Penned by Associate Justice Japar B. Dimaampao, with Associate Justices Rebecca De
Guia Salvador and Sixto C. Marella, Jr., concurring; rollo, pp. 54-65.
2
Id. at 67-70.

3
Sec. 168. Unfair Competition, Rights, Regulation and Remedies. -- 168.1. A person who
has identified in the mind of the public the goods he manufactures or deals in, his business
or services from those of others, whether or not a registered mark is employed, has a
property right in the goodwill of the said goods, business or services so identified, which will
be protected in the same manner as other property rights.

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

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

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

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

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

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

4
Sec. 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 (50,000) to Two hundred thousand pesos (200,000), shall be
imposed on any person who is found guilty of committing any of the acts mentioned in
Section 155, Section 168 and Subsection 169.1. (Arts. 188 and 189, Revised Penal Code)

5
SECTION 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler or seller who has successfully registered the marks of ownership in
accordance with the provisions of the next preceding section, to fill such bottles, boxes, kegs,
barrels, or other similar containers so marked or stamped, for the purpose of sale, or to sell,
dispose of, buy, or traffic in, or wantonly destroy the same, whether filled or not, or to use the
same for drinking vessels or glasses or for any other purpose than that registered by the
manufacturer, bottler or seller. Any violation of this section shall be punished by a fine or not
more than one hundred pesos or imprisonment of not more than thirty days or both.

6
Sec. 155. Remedies; Infringement. -- Any person who shall, without the consent of the
owner of the registered mark;

155.1. Use in commerce any reproduction, counterfeit, copy, or colourable imitation

of a registered mark or the same container or a dominant feature thereof in
connection with the sale, offering for sale, distribution, advertising of any goods or
services including other preparatory steps necessary to carry out the sale of any
goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive.

7
Supra.

8
Rollo, p. 21.

9
Spouses Anunciacion v. Bocanegra, 611 Phil. 705, 716-717 (2009).

10
Abuan v. People, 536 Phil. 672, 692 (2006); Garaygay v. People, 390 Phil. 586, 594
(2000); People v. Court of Appeals, G.R. No. 126379, June 26, 1998, 291 SCRA 400.

11
Supra.

12
Abuan v. People, supra note 10. (Emphasis ours)

13
CA Decision, rollo, p. 61. (Emphasis omitted)

14
G.R. No. 104879, May 6, 1994. 232 SCRA 249.

15
G.R. No. 161106 and G.R. No. 161266, January 13, 2014, 713 SCRA 18.

16
Id. at 36.

17
Supra note 9.

18
Id. at 717.
 THIRD DIVISION

G.R. No. 195549 September 3, 2014

WILLAWARE PRODUCTS CORPORATION, Petitioner,

vs.
JESICHRIS MANUFACTURING CORPORATION, Respondent.

DECISION

PERALTA, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to
set aside the Decision1 dated November 24, 2010 and Resolution2 dated February 10, 2011 of the
Court of Appeals (CA) in CA-G.R. CV No. 86744.

The facts, as found by the Regional Trial Court (RTC), are as follows:

[Respondent] Jesichris Manufacturing Company ([respondent] for short) filed this present complaint
for damages for unfair competition with prayer for permanent injunction to enjoin [petitioner]
Willaware Products Corporation ([petitioner] for short) from manufacturing and distributing plastic-
made automotive parts similar to those of [respondent].

[Respondent] alleged that it is a duly registeredpartnership engaged in the manufacture and

distribution of plastic and metal products, with principal office at No. 100 Mithi Street, Sampalukan,
Caloocan City. Since its registration in 1992, [respondent] has been manufacturing in its Caloocan
plant and distributing throughout the Philippines plastic-made automotive parts. [Petitioner], on the
other hand, which is engaged in the manufacture and distribution of kitchenware items made of
plastic and metal has its office near that of [respondent]. [Respondent] further alleged that in view of
the physical proximity of [petitioners] office to [respondents] office, and in view of the fact that some
of the [respondents] employeeshad transferred to [petitioner], [petitioner] had developed familiarity
with [respondents] products, especially its plastic-made automotive parts.

That sometime in November 2000, [respondent] discovered that [petitioner] had been manufacturing
and distributing the same automotive parts with exactly similar design, same material and colors but
was selling these products at a lower price as [respondents] plastic-made automotive parts and to
the same customers.

[Respondent] alleged that it had originated the use of plastic in place of rubber in the manufacture
ofautomotive underchassis parts such as spring eye bushing, stabilizer bushing, shock
absorberbushing, center bearing cushions, among others. [Petitioners] manufacture of the same
automotive parts with plastic materialwas taken from [respondents] idea of using plastic for
automotive parts. Also, [petitioner] deliberately copied [respondents] products all of which acts
constitute unfair competition, is and are contrary to law, morals, good customs and public policy and
have caused [respondent] damages in terms oflost and unrealizedprofits in the amount of TWO
MILLION PESOS as of the date of [respondents] complaint.

Furthermore, [petitioners] tortuous conduct compelled [respondent] to institute this action and
thereby to incur expenses in the way of attorneys fees and other litigation expenses in the amount
of FIVE HUNDRED THOUSAND PESOS (500,000.00).
In its Answer, [petitioner] denies all the allegations of the [respondent] except for the following facts:
that it is engaged in the manufacture and distribution of kitchenware items made of plastic and metal
and that theres physical proximity of [petitioners] office to [respondent]s office, and that someof
[respondents] employees had transferred to [petitioner] and that over the years [petitioner] had
developed familiarity with [respondents] products, especially its plastic made automotive parts.

As its Affirmative Defenses, [petitioner] claims that there can be no unfair competition as the plastic-
made automotive parts are mere reproductions of original parts and their construction and
composition merely conforms to the specificationsof the original parts of motor vehicles they intend
to replace. Thus, [respondent] cannot claim that it "originated" the use of plastic for these automotive
parts. Even assuming for the sake of argument that [respondent] indeed originated the use of these
plastic automotive parts, it still has no exclusive right to use, manufacture and sell these as it has no
patent over these products. Furthermore, [respondent] is not the only exclusive manufacturer of
these plastic-made automotive parts as there are other establishments which were already openly
selling them to the public.3

After trial on the merits, the RTC ruled in favor of respondent. It ruled that petitioner clearly invaded
the rights or interest of respondent by deliberately copying and performing acts amounting to unfair
competition. The RTC further opined that under the circumstances, in order for respondents
property rights to be preserved, petitioners acts of manufacturing similar plastic-made automotive
parts such as those of respondents and the selling of the sameproducts to respondents customers,
which it cultivated over the years, will have to be enjoined. The dispositive portion of the decision
reads:

WHEREFORE, premises considered, the court finds the defendant liable to plaintiff Two Million
(2,000,000.00) Pesos, as actual damages, One Hundred Thousand (100,000.00) Pesos as
attorneys fees and One Hundred Thousand (100,000.00) Pesos for exemplary damages. The
court hereby permanently [enjoins] defendant from manufacturing the plastic-made automotive parts
as those manufactured by plaintiffs.

SO ORDERED.4

Thus, petitioner appealed to the CA.

On appeal, petitioner asserts that ifthere is no intellectual property protecting a good belonging to
another,the copying thereof for production and selling does not add up to unfair competition as
competition is promoted by law to benefit consumers. Petitioner further contends that it did not lure
away respondents employees to get trade secrets. It points out that the plastic spare parts sold by
respondent are traded in the market and the copying of these can be done by simplybuying a
sample for a mold to be made.

Conversely, respondent averred that copyright and patent registrations are immaterial for an unfair
competition case to prosper under Article 28 of the Civil Code. It stresses that the characteristics of
unfair competition are present in the instant case as the parties are trade rivals and petitioners acts
are contrary to good conscience for deliberately copying its products and employing its former
employees.

In a Decision dated November 24,2010, the CA affirmed with modification the ruling of the RTC.
Relevant portions of said decision read:

Despite the evidence showing thatWillaware took dishonest steps in advancing its business interest
against Jesichris, however, the Court finds no basis for the award by the RTC of actual damages.
One is entitled to actual damages as one has duly proven. The testimony of Quejada, who was
engaged by Jesichris in 2001 to audit its business, only revealed that there was a discrepancy
between the sales of Jesichris from 2001 to 2002. No amount was mentioned. As for Exhibit "Q,"
which is a copy of the comparative income statement of Jesichris for 1999-2002, it shows the decline
of the sales in 2002 in comparison with those made in 2001 but it does not disclose if this pertains to
the subject automotive parts or to the other products of Jesichris like plates.

In any event, it was clearly shown that there was unfair competition on the part of Willaware that
prejudiced Jesichris. It is only proper that nominal damages be awarded in the amount of Two
Hundred Thousand Pesos (200,000.00) in order to recognize and vindicate Jesichris rights. The
RTCs award of attorneys fees and exemplary damages is also maintained.

xxxx

WHEREFORE, premises considered, the Decision dated April 15, 2003 of the Regional Trial Court
of Caloocan City, Branch 131, in Civil Case No. C-19771 is hereby MODIFIED. The award of Two
Million Pesos (2,000,000.00) actual damages is deleted and in its place, Two Hundred Thousand
Pesos nominal damages is awarded.

SO ORDERED.5

Dissatisfied, petitioner moved for reconsideration. However, the same was denied for lack of merit
by the CA in a Resolution dated February 10, 2011.

Hence, the present Petition for Review wherein petitioner raises the following issues for our
resolution:

(1) Whether or not there is unfair competition under human relations when the parties are not
competitors and there is actually no damage on the part of Jesichris?

(2) Consequently, if there is no unfair competition, should there be moral damages and
attorneys fees?

(3) Whether or not the addition of nominal damages is proper although no rights have been
established?

(4) If ever the right of Jesichris refersto its copyright on automotive parts, should it be
considered in the light of the said copyrights were considered to be void by no less than this
Honorable Court in SC GR No. 161295?

(5) If the right involved is "goodwill" then the issue is: whether or not Jesichris has
established "goodwill?"6

In essence, the issue for our resolution is: whether or not petitioner committed acts amounting to
unfair competition under Article 28 of the Civil Code.

Prefatorily, we would like to stress that the instant case falls under Article 28 of the Civil Code on
humanrelations, and not unfair competition under Republic Act No. 8293,7 as the present suit is a
damage suit and the products are not covered by patent registration. A fortiori, the existence of
patent registration is immaterial in the present case.
The concept of "unfair competition"under Article 28 is very much broader than that covered by
intellectual property laws. Under the present article, which follows the extended concept of "unfair
competition" in American jurisdictions, the term coverseven cases of discovery of trade secrets of a
competitor, bribery of his employees, misrepresentation of all kinds, interference with the fulfillment
of a competitors contracts, or any malicious interference with the latters business.8

With that settled, we now come to the issue of whether or not petitioner committed acts amounting
tounfair competition under Article 28 of the Civil Code.

We find the petition bereft of merit.

Article 28 of the Civil Code provides that "unfair competition in agricultural, commercial or industrial
enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust,
oppressive or high-handed method shall give rise to a right of action by the person who thereby
suffers damage."

From the foregoing, it is clear thatwhat is being sought to be prevented is not competitionper sebut
the use of unjust, oppressive or high- handed methods which may deprive others of a fair chance to
engage in business or to earn a living. Plainly,what the law prohibits is unfair competition and not
competition where the means usedare fair and legitimate.

In order to qualify the competition as "unfair," it must have two characteristics: (1) it must involve an
injury to a competitor or trade rival, and (2) it must involve acts which are characterized as "contrary
to good conscience," or "shocking to judicial sensibilities," or otherwise unlawful; in the language of
our law, these include force, intimidation, deceit, machination or any other unjust, oppressive or
high-handed method. The public injury or interest is a minor factor; the essence of the matter
appears to be a private wrong perpetrated by unconscionable means.9

Here, both characteristics are present.

First, both parties are competitors or trade rivals, both being engaged in the manufacture of plastic-
made automotive parts. Second, the acts of the petitioner were clearly "contrary to good conscience"
as petitioner admitted having employed respondents formeremployees, deliberately copied
respondents products and even went to the extent of selling these products to respondents
customers.10

To bolster this point, the CA correctly pointed out that petitioners hiring of the former employees of
respondent and petitioners act of copying the subject plastic parts of respondent were tantamount to
unfair competition, viz.:

The testimonies of the witnesses indicate that [petitioner] was in bad faith in competing with the
business of [respondent]. [Petitioners] acts can be characterized as executed with mischievous
1w phi 1

subtle calculation. To illustrate, in addition to the findings of the RTC, the Court observes that
[petitioner] is engaged in the production of plastic kitchenware previous to its manufacturing of
plasticautomotive spare parts, it engaged the services of the then mold setter and maintenance
operator of [respondent], De Guzman, while he was employed by the latter. De Guzman was hired
by [petitioner] in order to adjust its machinery since quality plastic automotive spare parts were not
being made. It baffles the Court why [petitioner] cannot rely onits own mold setter and maintenance
operator to remedy its problem. [Petitioners] engagement of De Guzman indicates that it is banking
on his experience gained from working for [respondent].
Another point we observe is that Yabut, who used to be a warehouse and delivery man of
[respondent], was fired because he was blamed of spying in favor of [petitioner]. Despite this
accusation, he did not get angry. Later on, he applied for and was hired by [petitioner] for the same
position he occupied with [respondent]. These sequence of events relating to his employment by
[petitioner] is suspect too like the situation with De Guzman.11

Thus, it is evident that petitioner isengaged in unfair competition as shown by his act of suddenly
shifting his business from manufacturing kitchenware to plastic-made automotive parts; his luring the
employees of the respondent to transfer to his employ and trying to discover the trade secrets of the
respondent.12

Moreover, when a person starts an opposing place of business, not for the sake of profit to himself,
but regardless of loss and for the sole purpose of driving his competitor out of business so that later
on he can take advantage of the effects of his malevolent purpose, he is guilty of wanton wrong.13 As
aptly observed by the courta quo, the testimony of petitioners witnesses indicate that it acted in bad
faith in competing with the business of respondent, to wit: [Petitioner], thru its General Manager,
William Salinas, Jr., admitted that it was never engaged in the business of plastic-made automotive
parts until recently, year 2000:

Atty. Bautista: The business name of Willaware Product Corporation is kitchenware, it is (sic) not?
Manufacturer of kitchenware and distributor ofkitchenware, is it not? Mr. Salinas: Yes, sir. Atty.
Bautista: And you said you have known the [respondent] Jesichris Manufacturing Co., you have
known it to be manufacturing plastic automotive products, is it not? Mr. Salinas: Yes, sir. Atty.
Bautista: In fact, you have been (sic) physically become familiar with these products, plastic
automotive products of Jesichris? Mr. Salinas: Yes, sir.

How [petitioner] was able to manufacture the same products, in terms of color, size, shape and
composition as those sold by Jesichris was due largely to the sudden transfer ofJesichris
employees to Willaware.

Atty. Bautista: Since when have you been familiar with Jesichris Manufacturing Company?

Mr. Salinas: Since they transferred there (sic) our place.

Atty. Bautista: And that was in what year? Mr. Salinas: Maybe four (4) years. I dont know the exact
date.

Atty. Bautista: And some of the employees of Jesichris Manufacturing Co. have transferred to your
company, is it not?

Mr. Salinas: Yes, sir.

Atty. Bautista: How many, more or less?

Mr. Salinas: More or less, three (3).

Atty. Bautista: And when, in what year or month did they transfer to you?

Mr. Salinas: First, November 1.

Atty. Bautista: Year 2000?

Mr. Salinas: Yes sir. And then the other maybe February, this year. And the other one, just one
month ago.

That [petitioner] was clearly outto take [respondent] out of business was buttressed by the testimony
of [petitioners] witness, Joel Torres:

Q: Are you familiar with the [petitioner], Willaware Product Corporation?

A: Yes, sir.

Q: Will you kindly inform this court where is the office of this Willaware Product Corporation (sic)?

A: At Mithi Street, Caloocan City, sir.

Q: And Mr. Witness, sometime second Saturday of January 2001, will you kindly inform this court
what unusual even (sic) transpired between you and Mr. Salinas on said date?

A: There was, sir.

Q: What is that?

A: Sir, I was walking at that time together with my wife going to the market and then I passed by the
place where they were having a drinking spree, sir.

Q: You mentioned they, who were they who were drinking at that time?

A: I know one Jun Molina, sir.

Q: And who else was there?

A: William Salinas, sir.

Q: And will you kindly inform us what happened when you spotted upon them drinking?

A: Jun Molina called me, sir.

Q: And what happened after that?

A: At that time, he offered mea glass of wine and before I was able to drink the wine, Mr. Salinas
uttered something, sir.

Q: And what were those words uttered by Mr. Salinas to you?

A: "O, ano naapektuhan na kayo sa ginaya (sic) ko sa inyo?"

Q: And what did you do after that, after hearing those words?

A: And he added these words, sir. "sabihin mo sa amo mo, dalawang taon na lang pababagsakin ko
na siya."
Q: Alright, hearing those words, will you kindly tell this court whom did you gather to be referred to
as your "amo"?

A: Mr. Jessie Ching, sir.14

In sum, petitioner is guilty of unfair competition under Article 28 of the Civil Code.

However, since the award of Two Million Pesos (2,000,000.00) in actual damages had been
deleted and in its place Two Hundred Thousand Pesos (200,000.00) in nominal damages is
awarded, the attorney's fees should concomitantly be modified and lowered to Fifty Thousand Pesos
(50,000.00).

WHEREFORE, the instant petition is DENIED. The Decision dated November 24, 2010 and
Resolution dated February 10, 2011 of the Court of Appeals in CA-G.R. CV No. 86744 are hereby
AFFIRMED with MODIFICATION that the award of attorney's fees be lowered to Fifty Thousand
Pesos (50,000.00).

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice

LUCAS P. BERSAMIN* MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

BIENVENIDO L. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairerson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ANTIONIO T. CARPIO
Acting Chief Justice
Footnotes

* Designated as Acting Member in lieu of Associate Justice Francis H. Jardeleza, per Special
Order No. 1777 dated September 1, 2014.

1
Penned by Associate Justice Fiorito S. Macalino, with Associate Justices Juan Q. Enriquez,
Jr. and Ramon M. Bato, Jr., concurring; rollo, pp. 128-135.

2
Id. at 145-146.

3
Id. at 38-39.

4
Id. at 45.

5
Id. at 134-135. (Emphasis in the original)

6
Id. at 14-15.

7
AN ACT PRESCRIBING THE INTELLECTUAL PROPERTY CODE AND ESTABLISHING
THE INTELLECTUAL PROPERTY OFFICE, PROVIDING FOR ITS POWERS AND
FUNCTIONS, AND FOR OTHER PURPOSES.

8
Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. 1, p.
117.

9
Id. at 116-117.

10
Rollo, p. 41.

11
Id. at 133-134.

12
Id. at 44.

13
Supranote 8.

14
Rollo, pp. 41-44. (Citations omitted)
 SECOND DIVISION

G.R. No. 170891 November 24, 2009

MANUEL C. ESPIRITU, JR., AUDIE LLONA, FREIDA F. ESPIRITU, CARLO F. ESPIRITU,

RAFAEL F. ESPIRITU, ROLANDO M. MIRABUNA, HERMILYN A. MIRABUNA, KIM ROLAND A.
MIRABUNA, KAYE ANN A. MIRABUNA, KEN RYAN A. MIRABUNA, JUANITO P. DE CASTRO,
GERONIMA A. ALMONITE and MANUEL C. DEE, who are the officers and directors of BICOL
GAS REFILLING PLANT CORPORATION, Petitioners,
vs.
PETRON CORPORATION and CARMEN J. DOLOIRAS, doing business under the name
"KRISTINA PATRICIA ENTERPRISES," Respondents.

DECISION

ABAD, J.:

This case is about the offense or offenses that arise from the reloading of the liquefied petroleum
gas cylinder container of one brand with the liquefied petroleum gas of another brand.

The Facts and the Case

Respondent Petron Corporation (Petron) sold and distributed liquefied petroleum gas (LPG) in
cylinder tanks that carried its trademark "Gasul."1 Respondent Carmen J. Doloiras owned and
operated Kristina Patricia Enterprises (KPE), the exclusive distributor of Gasul LPGs in the whole of
Sorsogon.2 Jose Nelson Doloiras (Jose) served as KPEs manager.

Bicol Gas Refilling Plant Corporation (Bicol Gas) was also in the business of selling and distributing
LPGs in Sorsogon but theirs carried the trademark "Bicol Savers Gas." Petitioner Audie Llona
managed Bicol Gas.

In the course of trade and competition, any given distributor of LPGs at times acquired possession of
LPG cylinder tanks belonging to other distributors operating in the same area. They called these
"captured cylinders." According to Jose, KPEs manager, in April 2001 Bicol Gas agreed with KPE
for the swapping of "captured cylinders" since one distributor could not refill captured cylinders with
its own brand of LPG. At one time, in the course of implementing this arrangement, KPEs Jose
visited the Bicol Gas refilling plant. While there, he noticed several Gasul tanks in Bicol Gas
possession. He requested a swap but Audie Llona of Bicol Gas replied that he first needed to ask
the permission of the Bicol Gas owners. That permission was given and they had a swap involving
around 30 Gasul tanks held by Bicol Gas in exchange for assorted tanks held by KPE.

KPEs Jose noticed, however, that Bicol Gas still had a number of Gasul tanks in its yard. He offered
to make a swap for these but Llona declined, saying the Bicol Gas owners wanted to send those
tanks to Batangas. Later Bicol Gas told Jose that it had no more Gasul tanks left in its possession.
Jose observed on almost a daily basis, however, that Bicol Gas trucks which plied the streets of the
province carried a load of Gasul tanks. He noted that KPEs volume of sales dropped significantly
from June to July 2001.

On August 4, 2001 KPEs Jose saw a particular Bicol Gas truck on the Maharlika Highway. While the
truck carried mostly Bicol Savers LPG tanks, it had on it one unsealed 50-kg Gasul tank and one 50-
kg Shellane tank. Jose followed the truck and when it stopped at a store, he asked the driver, Jun
Leorena, and the Bicol Gas sales representative, Jerome Misal, about the Gasul tank in their truck.
They said it was empty but, when Jose turned open its valve, he noted that it was not. Misal and
Leorena then admitted that the Gasul and Shellane tanks on their truck belonged to a customer who
had them filled up by Bicol Gas. Misal then mentioned that his manager was a certain Rolly
Mirabena.

Because of the above incident, KPE filed a complaint3 for violations of Republic Act (R.A.) 623
(illegally filling up registered cylinder tanks), as amended, and Sections 155 (infringement of trade
marks) and 169.1 (unfair competition) of the Intellectual Property Code (R.A. 8293). The complaint
charged the following: Jerome Misal, Jun Leorena, Rolly Mirabena, Audie Llona, and several John
and Jane Does, described as the directors, officers, and stockholders of Bicol Gas. These directors,
officers, and stockholders were eventually identified during the preliminary investigation.

Subsequently, the provincial prosecutor ruled that there was probable cause only for violation of R.A.
623 (unlawfully filling up registered tanks) and that only the four Bicol Gas employees, Mirabena,
Misal, Leorena, and petitioner Llona, could be charged. The charge against the other petitioners who
were the stockholders and directors of the company was dismissed.

Dissatisfied, Petron and KPE filed a petition for review with the Office of the Regional State
Prosecutor, Region V, which initially denied the petition but partially granted it on motion for
reconsideration. The Office of the Regional State Prosecutor ordered the filing of additional
informations against the four employees of Bicol Gas for unfair competition. It ruled, however, that
no case for trademark infringement was present. The Secretary of Justice denied the appeal of
Petron and KPE and their motion for reconsideration.

Undaunted, Petron and KPE filed a special civil action for certiorari with the Court of Appeals4 but the
Bicol Gas employees and stockholders concerned opposed it, assailing the inadequacy in its
certificate of non-forum shopping, given that only Atty. Joel Angelo C. Cruz signed it on behalf of
Petron. In its Decision5 dated October 17, 2005, the Court of Appeals ruled, however, that Atty.
Cruzs certification constituted sufficient compliance. As to the substantive aspect of the case, the
Court of Appeals reversed the Secretary of Justices ruling. It held that unfair competition does not
necessarily absorb trademark infringement. Consequently, the court ordered the filing of additional
charges of trademark infringement against the concerned Bicol Gas employees as well.

Since the Bicol Gas employees presumably acted under the direct order and control of its owners,
the Court of Appeals also ordered the inclusion of the stockholders of Bicol Gas in the various
charges, bringing to 16 the number of persons to be charged, now including petitioners Manuel C.
Espiritu, Jr., Freida F. Espiritu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn
A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. de
Castro, Geronima A. Almonite, and Manuel C. Dee (together with Audie Llona), collectively,
petitioners Espiritu, et al. The court denied the motion for reconsideration of these employees and
stockholders in its Resolution dated January 6, 2006, hence, the present petition for review6 before
this Court.

The Issues Presented

The petition presents the following issues:

1. Whether or not the certificate of non-forum shopping that accompanied the petition filed
with the Court of Appeals, signed only by Atty. Cruz on behalf of Petron, complied with what
the rules require;
 2. Whether or not the facts of the case warranted the filing of charges against the Bicol Gas
people for:

a) Filling up the LPG tanks registered to another manufacturer without the latters
consent in violation of R.A. 623, as amended;

b) Trademark infringement consisting in Bicol Gas use of a trademark that is

confusingly similar to Petrons registered "Gasul" trademark in violation of section
155 also of R.A. 8293; and

c) Unfair competition consisting in passing off Bicol Gas-produced LPGs for Petron-
produced Gasul LPG in violation of Section 168.3 of R.A. 8293.

The Courts Rulings

First. Petitioners Espiritu, et al. point out that the certificate of non-forum shopping that respondents
KPE and Petron attached to the petition they filed with the Court of Appeals was inadequate, having
been signed only by Petron, through Atty. Cruz.

But, while procedural requirements such as that of submittal of a certificate of non-forum shopping
cannot be totally disregarded, they may be deemed substantially complied with under justifiable
circumstances.7 One of these circumstances is where the petitioners filed a collective action in which
they share a common interest in its subject matter or raise a common cause of action. In such a
case, the certification by one of the petitioners may be deemed sufficient.8

Here, KPE and Petron shared a common cause of action against petitioners Espiritu, et al., namely,
the violation of their proprietary rights with respect to the use of Gasul tanks and trademark.
Furthermore, Atty. Cruz said in his certification that he was executing it "for and on behalf of the
Corporation, and co-petitioner Carmen J. Doloiras."9Thus, the object of the requirement to ensure
that a party takes no recourse to multiple forums was substantially achieved. Besides, the failure of
KPE to sign the certificate of non-forum shopping does not render the petition defective with respect
to Petron which signed it through Atty. Cruz.10 The Court of Appeals, therefore, acted correctly in
giving due course to the petition before it.

Second. The Court of Appeals held that under the facts of the case, there is probable cause that
petitioners Espiritu, et al. committed all three crimes: (a) illegally filling up an LPG tank registered to
Petron without the latters consent in violation of R.A. 623, as amended; (b) trademark infringement
which consists in Bicol Gas use of a trademark that is confusingly similar to Petrons registered
"Gasul" trademark in violation of Section 155 of R.A. 8293; and (c) unfair competition which consists
in petitioners Espiritu, et al. passing off Bicol Gas-produced LPGs for Petron-produced Gasul LPG in
violation of Section 168.3 of R.A. 8293.

Here, the complaint adduced at the preliminary investigation shows that the one 50-kg Petron Gasul
LPG tank found on the Bicol Gas truck "belonged to [a Bicol Gas] customer who had the same filled
up by BICOL GAS."11 In other words, the customer had that one Gasul LPG tank brought to Bicol
Gas for refilling and the latter obliged.

R.A. 623, as amended,12 punishes any person who, without the written consent of the manufacturer
or seller of gases contained in duly registered steel cylinders or tanks, fills the steel cylinder or tank,
for the purpose of sale, disposal or trafficking, other than the purpose for which the manufacturer or
seller registered the same. This was what happened in this case, assuming the allegations of KPEs
manager to be true. Bicol Gas employees filled up with their firms gas the tank registered to Petron
and bearing its mark without the latters written authority. Consequently, they may be prosecuted for
that offense.

But, as for the crime of trademark infringement, Section 155 of R.A. 8293 (in relation to Section
17013 ) provides that it is committed by any person who shall, without the consent of the owner of the
registered mark:

1. Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered

mark or the same container or a dominant feature thereof in connection with the sale,
offering for sale, distribution, advertising of any goods or services including other preparatory
steps necessary to carry out the sale of any goods or services on or in connection with which
such use is likely to cause confusion, or to cause mistake, or to deceive; or

2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature

thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used in commerce
upon or in connection with the sale, offering for sale, distribution, or advertising of goods or
services on or in connection with which such use is likely to cause confusion, or to cause
mistake, or to deceive.

KPE and Petron have to show that the alleged infringer, the responsible officers and staff of Bicol
Gas, used Petrons Gasul trademark or a confusingly similar trademark on Bicol Gas tanks with
intent to deceive the public and defraud its competitor as to what it is selling.14 Examples of this
would be the acts of an underground shoe manufacturer in Malabon producing "Nike" branded
rubber shoes or the acts of a local shirt company with no connection to La Coste, producing and
selling shirts that bear the stitched logos of an open-jawed alligator.

Here, however, the allegations in the complaint do not show that Bicol Gas painted on its own tanks
Petrons Gasul trademark or a confusingly similar version of the same to deceive its customers and
cheat Petron. Indeed, in this case, the one tank bearing the mark of Petron Gasul found in a truck
full of Bicol Gas tanks was a genuine Petron Gasul tank, more of a captured cylinder belonging to
competition. No proof has been shown that Bicol Gas has gone into the business of distributing
imitation Petron Gasul LPGs.

As to the charge of unfair competition, Section 168.3 (a) of R.A. 8293 (also in relation to Section
170) describes the acts constituting the offense as follows:

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

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

Essentially, what the law punishes is the act of giving ones goods the general appearance of the
goods of another, which would likely mislead the buyer into believing that such goods belong to the
latter. Examples of this would be the act of manufacturing or selling shirts bearing the logo of an
alligator, similar in design to the open-jawed alligator in La Coste shirts, except that the jaw of the
alligator in the former is closed, or the act of a producer or seller of tea bags with red tags showing
the shadow of a black dog when his competitor is producing or selling popular tea bags with red tags
showing the shadow of a black cat.

Here, there is no showing that Bicol Gas has been giving its LPG tanks the general appearance of
the tanks of Petrons Gasul. As already stated, the truckfull of Bicol Gas tanks that the KPE manager
arrested on a road in Sorsogon just happened to have mixed up with them one authentic Gasul tank
that belonged to Petron.

The only point left is the question of the liability of the stockholders and members of the board of
directors of Bicol Gas with respect to the charge of unlawfully filling up a steel cylinder or tank that
belonged to Petron. The Court of Appeals ruled that they should be charged along with the Bicol
Gas employees who were pointed to as directly involved in overt acts constituting the offense. 1avv phi 1

Bicol Gas is a corporation. As such, it is an entity separate and distinct from the persons of its
officers, directors, and stockholders. It has been held, however, that corporate officers or employees,
through whose act, default or omission the corporation commits a crime, may themselves be
individually held answerable for the crime.15

Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with Bicol
Gas, its manager, petitioner Audie Llona, claimed that he would be consulting with the owners of
Bicol Gas about it. Subsequently, Bicol Gas declined the offer to swap cylinders for the reason that
the owners wanted to send their captured cylinders to Batangas. The Court of Appeals seized on
this as evidence that the employees of Bicol Gas acted under the direct orders of its owners and that
"the owners of Bicol Gas have full control of the operations of the business."16

The "owners" of a corporate organization are its stockholders and they are to be distinguished from
its directors and officers. The petitioners here, with the exception of Audie Llona, are being charged
in their capacities as stockholders of Bicol Gas. But the Court of Appeals forgets that in a
corporation, the management of its business is generally vested in its board of directors, not its
stockholders.17 Stockholders are basically investors in a corporation. They do not have a hand in
running the day-to-day business operations of the corporation unless they are at the same time
directors or officers of the corporation. Before a stockholder may be held criminally liable for acts
committed by the corporation, therefore, it must be shown that he had knowledge of the criminal act
committed in the name of the corporation and that he took part in the same or gave his consent to its
commission, whether by action or inaction.

The finding of the Court of Appeals that the employees "could not have committed the crimes without
the consent, [abetment], permission, or participation of the owners of Bicol Gas"18 is a sweeping
speculation especially since, as demonstrated above, what was involved was just one Petron Gasul
tank found in a truck filled with Bicol Gas tanks. Although the KPE manager heard petitioner Llona
say that he was going to consult the owners of Bicol Gas regarding the offer to swap additional
captured cylinders, no indication was given as to which Bicol Gas stockholders Llona consulted. It
would be unfair to charge all the stockholders involved, some of whom were proved to be
minors.19 No evidence was presented establishing the names of the stockholders who were charged
with running the operations of Bicol Gas. The complaint even failed to allege who among the
stockholders sat in the board of directors of the company or served as its officers.

The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C. Espiritu, Jr.
as the registered owner of the truck that the KPE manager brought to the police for investigation
because that truck carried a tank of Petron Gasul. But the act that R.A. 623 punishes is the unlawful
filling up of registered tanks of another. It does not punish the act of transporting such tanks. And the
complaint did not allege that the truck owner connived with those responsible for filling up that Gasul
tank with Bicol Gas LPG.

WHEREFORE, the Court REVERSES and SETS ASIDE the Decision of the Court of Appeals in CA-
G.R. SP 87711 dated October 17, 2005 as well as its Resolution dated January 6, 2006, the
Resolutions of the Secretary of Justice dated March 11, 2004 and August 31, 2004, and the Order of
the Office of the Regional State Prosecutor, Region V, dated February 19, 2003. The Court
REINSTATES the Resolution of the Office of the Provincial Prosecutor of Sorsogon in I.S. 2001-
9231 (inadvertently referred in the Resolution itself as I.S. 2001-9234), dated February 26, 2002.
The names of petitioners Manuel C. Espiritu, Jr., Freida F. Espititu, Carlo F. Espiritu, Rafael F.
Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A.
Mirabuna, Ken Ryan A. Mirabuna, Juanito P. De Castro, Geronima A. Almonite and Manuel C. Dee
are ORDERED excluded from the charge.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice
Footnotes

1 The LPG cylinders and the trademark "Gasul" are registered under the name of Petron in
the Intellectual Property Office under Registration Nos. 142, 147, 57945 and 61920. CA rollo,
pp. 52-57.

2 As shown by a dealership agreement. Id. at 60-71.

3Docketed as I.S. 2001-9231 but was inadvertently referred to in subsequent documents

and proceedings as I.S. 2001-9234.

4 Docketed as CA-G.R. SP 87711.

5CA rollo, pp. 371-399. Penned by Associate Justice Renato C. Dacudao and concurred in
by Associate Justices Rodrigo V. Cosico and Lucas P. Bersamin (now a member of this
Court).

6 Under Rule 45 of the Rules of Court.

7Cavile v. Heirs of Cavile, 448 Phil. 302, 311 (2003); MC Engineering, Inc. v. National Labor
Relations Commission, 412 Phil. 614, 622-623 (2001).

8 San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 412.

9 CA rollo, p. 43.

See Toyota Motor Phils. Corp. Workers Association v. National Labor Relations
10

Commission, G.R. Nos. 158786 & 158789, October 19, 2007, 537 SCRA 171, 199.

11 Rollo, p. 54.

12Sec. 1. Persons engaged or licensed to engage in the manufacture, bottling, or selling of

soda water, mineral or aerated waters, cider, milk, cream or other lawful beverages in
bottles, boxes, casks, kegs, or barrels, and other similar containers, or in the manufacture,
compressing or selling of gases such as oxygen, acetylene, nitrogen, carbon dioxide,
ammonia, hydrogen, chloride, helium, sulphur dioxide, butane, propane, freon, methyl
chloride or similar gases contained in steel cylinders, tanks, flasks, accumulators or similar
containers, with their names or the names of their principals of products, or other marks of
ownership stamped or marked thereon, may register with the Philippines Patent Office a
description of the names or marks, and the purpose for which the containers so marked are
used by them, under the same conditions, rules, and regulations, made applicable by law or
regulation to the issuance of trademarks.

Sec. 2. It shall be unlawful for any person, without the written consent of the
manufacturer, bottler, or seller, who has successfully registered the marks of
ownership in accordance with the provisions of the next preceding section, to fill such
bottles, boxes, kegs, barrels, steel cylinders, tanks, flasks, accumulators, or other
similar containers so marked or stamped, for the purpose of sale, or to sell, dispose
 of, buy or traffic in, or wantonly destroy the same, whether filled or not to use the
same for drinking vessels or glasses or drain pipes, foundation pipes, for any other
purpose than that registered by the manufacturer, bottler or seller. Any violation of
this section shall be punished by a fine of not more than one thousand pesos or
imprisonment of not more than one year or both.

13 Sec. 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 (50,000) to Two hundred thousand pesos (200,000), shall be
imposed on any person who is found guilty of committing any of the acts mentioned in
Section 155, Section 168 and Subsection 169.1.

14 McDonalds Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 439 (2004).

15Ching v. Secretary of Justice, G.R. No. 164317, February 6, 2006, 481 SCRA 609, 635-
636.

16 CA rollo, pp. 396-397.

17 Section 23, P.D. 902-A.

18 CA rollo, p. 397.

19As shown by certified true copies of birth certificates of Carlo F. Espiritu, Rafael F. Espiritu,
Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, and Ken Ryan A. Mirabuna. Rollo, pp. 492-
496.
 THIRD DIVISION

G.R. No. 162311 December 4, 2008

LEVI STRAUSS (PHILS.), INC., petitioner,

vs.
TONY LIM, respondent.

DECISION

REYES, R.T., J.:

THE remedy of a party desiring to elevate to the appellate court an adverse resolution of the
Secretary of Justice is a petition for certiorari under Rule 65. A Rule 43 petition for review is a wrong
mode of appeal.1

During preliminary investigation, the prosecutor is vested with authority and discretion to determine if
there is sufficient evidence to justify the filing of an information. If he finds probable cause to indict
the respondent for a criminal offense, it is his duty to file the corresponding information in court.
However, it is equally his duty not to prosecute when after an investigation, the evidence adduced is
not sufficient to establish a prima facie case.2

Before the Court is a petition for review on certiorari3 of the Decision4 and Resolution5 of the Court of
Appeals (CA), affirming the resolutions of the Department of Justice (DOJ) finding that there is no
probable cause to indict respondent Tony Lim, a.k.a. Antonio Guevarra, for unfair competition.

The Facts

Petitioner Levi Strauss (Phils.), Inc. is a duly-registered domestic corporation. It is a wholly-owned

subsidiary of Levi Strauss & Co. (LS & Co.) a Delaware, USA company.

In 1972, LS & Co. granted petitioner a non-exclusive license to use its registered trademarks and
trade names6 for the manufacture and sale of various garment products, primarily pants, jackets, and
shirts, in the Philippines.7Presently, it is the only company that has authority to manufacture,
distribute, and sell products bearing the LEVIS trademarks or to use such trademarks in the
Philippines. These trademarks are registered in over 130 countries, including the Philippines,8 and
were first used in commerce in the Philippines in 1946.9

Sometime in 1995, petitioner lodged a complaint10 before the Inter-Agency Committee on Intellectual
Property Rights, alleging that a certain establishment in Metro Manila was manufacturing garments
using colorable imitations of the LEVIS trademarks.11 Thus, surveillance was conducted on the
premises of respondent Tony Lim, doing business under the name Vogue Traders Clothing
Company.12 The investigation revealed that respondent was engaged in the manufacture, sale, and
distribution of products similar to those of petitioner and under the brand name "LIVES."13

On December 13, 1995, operatives of the Philippine National Police (PNP) Criminal Investigation
Unit14 served search warrants15 on respondents premises at 1042 and 1082 Carmen Planas Street,
Tondo, Manila. As a result, several items16 were seized from the premises.17

The PNP Criminal Investigation Command (PNP CIC) then filed a complaint18 against respondent
before the DOJ for unfair competition19 under the old Article 189 of the Revised Penal Code, prior to
its repeal by Section 239 of Republic Act (RA) No. 8293.20 The PNP CIC claimed that a "confusing
similarity" could be noted between petitioners LEVIs jeans and respondents LIVES denim jeans
and pants.

In his counter-affidavit,21 respondent alleged, among others, that (1) his products bearing the LIVES
brand name are not fake LEVIS garments; (2) "LIVES" is a registered trademark,22 while the patch
pocket design for "LIVES" pants has copyright registration,23 thus conferring legal protection on his
own intellectual property rights, which stand on equal footing as "LEVIS"; (3) confusing similarity, the
central issue in the trademark cancellation proceedings24 lodged by petitioner, is a prejudicial
question that complainant, the police, and the court that issued the search warrants cannot
determine without denial of due process or encroachment on the jurisdiction of the agencies
concerned; and (4) his goods are not clothed with an appearance which is likely to deceive the
ordinary purchaser exercising ordinary care.25

In its reply-affidavit, petitioner maintained that there is likelihood of confusion between the competing
products because: (1) a slavish imitation of petitioners "arcuate" trademark has been stitched on the
backpocket of "LIVES" jeans; (2) the appearance of the mark "105" on respondents product is
obviously a play on petitioners "501" trademark; (3) the appearance of the word/phrase "LIVES"
and "LIVES ORIGINAL JEANS" is confusingly similar to petitioners "LEVIS" trademark; (4) a red
tab, made of fabric, attached at the left seam of the right backpocket of petitioners standard five-
pocket jeans, also appears at the same place on "LIVES" jeans; (5) the patch used on "LIVES"
jeans (depicting three men on each side attempting to pull apart a pair of jeans) obviously thrives on
petitioners own patch showing two horses being whipped by two men in an attempt to tear apart a
pair of jeans; and (6) "LEVIS" jeans are packaged and sold with carton tickets, which are slavishly
copied by respondent in his own carton ticket bearing the marks "LIVES," "105," the horse mark,
and basic features of petitioners ticket designs, such as two red arrows curving and pointing
outward, the arcuate stitching pattern, and a rectangular portion with intricate border orientation.26

DOJ Rulings

On October 8, 1996, Prosecution Attorney Florencio D. Dela Cruz recommended the dismissal27 of
the complaint. The prosecutor agreed with respondent that his products are not clothed with an
appearance which is likely to deceive the ordinary purchaser exercising ordinary care. The
recommendation was approved by Assistant Chief State Prosecutor Lualhati R. Buenafe.

On appeal, then DOJ Secretary Teofisto Guingona affirmed the prosecutors dismissal of the
complaint on January 9, 1998.28 Prescinding from the basic rule that to be found guilty of unfair
competition, a person shall, by imitation or any unfair device, induce the public to believe that his
goods are those of another, Secretary Guingona stated:

In the case at bar, complainant has not shown that anyone was actually deceived by
respondent. Respondents product, which bears the trademark LIVEs, has an
entirely different spelling and meaning with the trademark owned by complainant which is
LEVIs. Complainants trademark comes from a Jewish name while that of respondent is
merely an adjective word. Both, when read and pronounced, would resonate different
sounds. While respondents "LIVEs" trademark may appear similar, such could not have
been intended by the respondent to deceive since he had the same registered with the
appropriate government agencies. Granting arguendo, that respondents trademark or
products possessed similar characteristics with the trademark and products of complainant,
on that score alone, without evidence or proof that such was a device of respondent to
deceive the public to the damage of complainant no unfair competition is committed.29
On February 13, 1998, petitioner filed a motion for reconsideration of Secretary Guingonas
resolution, alleging, among others, that only a likelihood of confusion is required to sustain a charge
of unfair competition. It also submitted the results of a consumer survey30 involving a comparison of
petitioners and respondents products.

On June 5, 1998, Justice Secretary Silvestre Bello III, Guingonas successor, granted petitioners
motion and directed the filing of an information against respondent.31

WHEREFORE, our resolution dated 9 January 1998 is hereby reversed and set aside. You
are directed to file an information for unfair competition under Article 189 of the Revised
Penal Code, as amended, against respondent Tony Lim. Report the action taken thereon
within ten (10) days from receipt hereof.32

Secretary Bello reasoned that under Article 189 of the Revised Penal Code, as amended, exact
similarity of the competing products is not required. However, Justice Guingonas resolution
incorrectly dwelt on the specific differences in the details of the products.33 Secretary Bellos own
factual findings revealed:

x x x [I]t is not difficult to discern that respondent gave his products the general appearance
as that of the product of the complainant. This was established by the respondents use of
the complainants arcuate backpocket design trademark; the 105 mark which apparently is a
spin-off of the 501 mark of the complainant; the patch which was clearly patterned after that
of the complainants two horse patch design trademark; the red tab on the right backpocket;
the wordings which were crafted to look similar with the Levis trademark of the complainant;
and even the packaging. In appropriating himself the general appearance of the product of
the complainant, the respondent clearly intended to deceive the buying public. Verily, any
person who shall employ deception or any other means contrary to good faith by which he
shall pass of the goods manufactured by him or in which he deals, or his business, or
services for those of the one having established good will shall guilty of unfair competition.

Respondents registration of his trademark can not afford him any remedy. Unfair competition may
still be prosecuted despite such registration.34 (Citation omitted)

Respondent then filed his own motion for reconsideration of the Bello resolution. On May 7, 1999,
new DOJ Secretary Serafin Cuevas granted respondents motion and ordered the dismissal of the
charges against him.35

CA Disposition

Dissatisfied with the DOJ rulings, petitioner sought recourse with the CA via a petition for review
under Rule 43 of the 1997 Rules of Civil Procedure. On October 17, 2003, the appellate court
affirmed the dismissal of the unfair competition complaint.

WHEREFORE, premises considered, the petition for review is DENIED and is accordingly
DISMISSED for lack of merit.

SO ORDERED.36

The CA pointed out that to determine the likelihood of confusion, mistake or deception, all relevant
factors and circumstances should be taken into consideration, such as the circumstances under
which the goods are sold, the class of purchasers, and the actual occurrence or absence of
confusion.37

Thus, the existence of some similarities between LIVES jeans and LEVIS garments would not ipso
facto equate to fraudulent intent on the part of respondent. The CA noted that respondent used
affirmative and precautionary distinguishing features in his products for differentiation. The appellate
court considered the spelling and pronunciation of the marks; the difference in the designs of the
back pockets; the dissimilarity between the carton tickets; and the pricing and sale of petitioners
products in upscale exclusive specialty shops. The CA also disregarded the theory of post-sale
confusion propounded by petitioner, relying instead on the view that the probability of deception
must be determined at the point of sale.38

Issues

Petitioner submits that the CA committed the following errors:

I.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT ACTUAL CONFUSION IS

NECESSARYTO SUSTAIN A CHARGE OF UNFAIR COMPETITION, AND THAT THERE
MUST BE DIRECT EVIDENCE OR PROOF OF INTENT TO DECEIVE THE PUBLIC.

II.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS LIVES

JEANS DO NOT UNFAIRLY COMPETE WITH LEVIS JEANS AND/OR THAT THERE IS
NO POSSIBILITY THAT THE FORMER WILL BE CONFUSED FOR THE LATTER,
CONSIDERING THAT RESPONDENTS LIVES JEANS BLATANTLY COPY OR
COLORABLY IMITATE NO LESS THAN SIX (6) TRADEMARKS OF LEVIS JEANS.

III.

THE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE EVIDENCE ON

RECORD, CONSISTING OF THE SCIENTIFICALLY CONDUCTED MARKET SURVEY
AND THE AFFIDAVIT OF THE EXPERT WITNESS ON THE RESULTS THEREOF, WHICH
SHOW THAT RESPONDENTS LIVES JEANS ARE, IN FACT, BEING CONFUSED FOR
LEVIS JEANS.

IV.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE ISSUE OF

CONFUSION SHOULD ONLY BE DETERMINED AT THE POINT OF SALE.

V.

THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO DIRECT THE SECRETARY

OF JUSTICE TO CAUSE THE FILING OF THE APPROPRIATE INFORMATION IN COURT
AGAINST THE RESPONDENT.39(Underscoring supplied)

Our Ruling
In essence, petitioner asks this Court to determine if probable cause exists to charge respondent
with the crime of unfair competition under Article 189(1) of the Revised Penal Code, prior to its
repeal by Section 239 of RA No. 8293.

However, that is a factual issue40 the resolution of which is improper in a Rule 45 petition.41 The only
legal issue left for the Court to determine is whether the issue of confusion should be determined
only at the point of sale.

Nonetheless, there is sufficient reason for this Court to dismiss this petition merely by looking at the
procedural avenue petitioner used to have the DOJ resolutions reviewed by the CA.

Petitioner filed with the CA a petition for review under Rule 43 of the 1997 Rules of Civil
Procedure.42 Rule 43 governs all appeals from [the Court of Tax Appeals and] quasi-judicial bodies
to the CA. Its Section 1 provides:

Section 1. Scope. This Rule shall apply to appeals from [judgments or final orders of the
Court of Tax Appeals and from] awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among
these agencies are the Civil Service Commission, Central Board of Assessment Appeals,
Securities and Exchange Commission, Office of the President, Land Registration Authority,
Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and
Technology Transfer, National Electrification Administration, Energy Regulatory Board,
National Telecommunications Commission, Department of Agrarian Reform under Republic
Act No. 6657, Government Service Insurance System, Employees Compensation
Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic
Energy Commission, Board of Investments, Construction Industry Arbitration Commission,
and voluntary arbitrators authorized by law.43

Clearly, the DOJ is not one of the agencies enumerated in Section 1 of Rule 43 whose awards,
judgments, final orders, or resolutions may be appealed to the CA.

The Court has consistently ruled that the filing with the CA of a petition for review under Rule
43 to question the Justice Secretarys resolution regarding the determination of probable cause is an
improper remedy.44

Under the 1993 Revised Rules on Appeals from Resolutions in Preliminary Investigations or
Reinvestigations,45 the resolution of the investigating prosecutor is subject to appeal to the Justice
Secretary46 who, under the Revised Administrative Code, exercises the power of control and
supervision over said Investigating Prosecutor; and who may affirm, nullify, reverse, or modify the
ruling of such prosecutor.47 If the appeal is dismissed, and after the subsequent motion for
reconsideration is resolved, a party has no more appeal or other remedy available in the ordinary
course of law.48 Thus, the Resolution of the Justice Secretary affirming, modifying or reversing the
resolution of the Investigating Prosecutor is final.49

There being no more appeal or other remedy available in the ordinary course of law, the remedy of
the aggrieved party is to file a petition for certiorari under Rule 65. Thus, while the CA may review
the resolution of the Justice Secretary, it may do so only in a petition for certiorari under Rule 65 of
the 1997 Rules of Civil Procedure, solely on the ground that the Secretary of Justice committed
grave abuse of discretion amounting to excess or lack of jurisdiction.50

Verily, when respondent filed a petition for review under Rule 43 instead of a petition
for certiorari under Rule 65, the CA should have dismissed it outright. However, the appellate court
chose to determine if DOJ Secretaries Guingona and Cuevas correctly determined the absence of
probable cause.

Now, even if We brush aside technicalities and consider the petition for review filed with the CA as
one under Rule 65, the petition must fail just the same.

While the resolution of the Justice Secretary may be reviewed by the Court, it is not
empowered to substitute its judgment for that of the executive branch when there is no grave
abuse of discretion.51

Courts are without power to directly decide matters over which full discretionary authority has been
delegated to the legislative or executive branch of the government.52 The determination of probable
cause is one such matter because that authority has been given to the executive branch, through the
DOJ.53

It bears stressing that the main function of a government prosecutor is to determine the existence of
probable cause and to file the corresponding information should he find it to be so. 54 Thus, the
decision whether or not to dismiss the criminal complaint against respondent is necessarily
dependent on the sound discretion of the investigating prosecutor and ultimately, that of the
Secretary of Justice.55

A prosecutor, by the nature of his office, is under no compulsion to file a particular criminal
information where he is not convinced that he has evidence to prop up its averments, or that the
evidence at hand points to a different conclusion. This is not to discount the possibility of the
commission of abuses on the part of the prosecutor. But this Court must recognize that a prosecutor
should not be unduly compelled to work against his conviction. Although the power and prerogative
of the prosecutor to determine whether or not the evidence at hand is sufficient to form a reasonable
belief that a person committed an offense is not absolute but subject to judicial review, it would be
embarrassing for him to be compelled to prosecute a case when he is in no position to do so,
because in his opinion he does not have the necessary evidence to secure a conviction, or he is not
convinced of the merits of the case.56

In finding that respondents goods were not clothed with an appearance which is likely to deceive the
ordinary purchaser exercising ordinary care, the investigating prosecutor exercised the discretion
lodged in him by law. He found that:

First, the LIVES mark of the respondents goods is spelled and pronounced differently from
the LEVIS mark of the complainant.

Second, the backpocket design allegedly copied by the respondent from the registered
arcuate design of the complainant, appears to be different in view of the longer curved arms
that stretch deep downward to a point of convergence where the stitches form a rectangle.
The arcuate design for complainant LEVIs jeans form a diamond instead. And assuming
arguendo that there is similarity in the design of backpockets between the respondents
goods and that of the complainant, this alone does not establish that respondents jeans
were intended to copy the complainants goods and pass them off as the latters products as
this design is simple and may not be said to be strikingly distinct absent the other LEVIS
trademark such as the prints on the button, rivets, tags and the like. x x x Further, the
presence of accessories bearing Levis trademark was not established as there were no
such accessories seized from the respondent and instead genuine LIVES hangtags, button
and patches were confiscated during the search of latters premises.
 Second, the design of the patches attached to the backpockets of the respondents goods
depicts three men on either side of a pair of jeans attempting to pull apart said jeans, while
the goods manufactured by complainant with patches also attached at the right backpockets
depicts two horses being whipped by two men in an attempt to tear apart a pair of jeans. It is
very clear therefore that the design of the backpocket patches by the respondent is different
from that of the complainant, in the former the men were trying to pull apart the pants while in
the latter horses are the ones doing the job. Obviously, there is a great difference between a
man and a horse and this will naturally not escape the eyes of an ordinary purchaser.

Third, the manner by which Levis jeans are packed and sold with carton tickets attached to
the products cannot be appropriated solely by complainant to the exclusion of all other
manufacturers of same class. It frequently happens that goods of a particular class are
labeled by all manufacturer[s] in a common manner. In cases of that sort, no manufacturer
may appropriate for himself the method of labeling or packaging [of] his merchandise and
then enjoin other merchants from using it. x x x.

Fourth, evidence shows that there is a copyright registration issued by the National Library
over the backpocket design of the respondent. And this copyright registration gives the
respondent the right to use the same in his goods x x x.57

The determination of probable cause is part of the discretion granted to the investigating prosecutor
and ultimately, the Secretary of Justice. Courts are not empowered to substitute their own judgment
for that of the executive branch.58

The courts duty in an appropriate case is confined to a determination of whether the assailed
executive or judicial determination of probable cause was done without or in excess of jurisdiction or
with grave abuse of discretion amounting to want of jurisdiction.59 For grave abuse of discretion to
prosper as a ground for certiorari, it must be demonstrated that the lower court or tribunal has
exercised its power in an arbitrary and despotic manner, by reason of passion or personal hostility,
and it must be patent and gross as would amount to an evasion or to a unilateral refusal to perform
the duty enjoined or to act in contemplation of law.60

In the case at bar, no grave abuse of discretion on the part of the DOJ was shown. Petitioner merely
harps on the error committed by the DOJ and the CA in arriving at their factual finding that there is
no confusing similarity between petitioners and respondents products. While it is possible that the
investigating prosecutor and Secretaries Guingona and Cuevas erroneously exercised their
discretion when they found that unfair competition was not committed, this by itself does not render
their acts amenable to correction and annulment by the extraordinary remedy of certiorari. There
must be a showing of grave abuse of discretion amounting to lack or excess of jurisdiction.61

We are disinclined to find that grave of abuse of discretion was committed when records
show that the finding of no probable cause is supported by the evidence, law, and
jurisprudence.

Generally, unfair competition consists in employing deception or any other means contrary to good
faith by which any person shall pass off the goods manufactured by him or in which he deals, or his
business, or services for those of the one having established goodwill, or committing any acts
calculated to produce such result.62

The elements of unfair competition under Article 189(1)63 of the Revised Penal Code are:
 (a) That the offender gives his goods the general appearance of the goods of another
manufacturer or dealer;

(b) That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping
of their packages, or in the (3) device or words therein, or in (4) any other feature of their
appearance;

(c) That the offender offers to sell or sells those goods or gives other persons a chance or
opportunity to do the same with a like purpose; and

(d) That there is actual intent to deceive the public or defraud a competitor.64

All these elements must be proven.65 In finding that probable cause for unfair competition does not
exist, the investigating prosecutor and Secretaries Guingona and Cuevas arrived at the same
conclusion that there is insufficient evidence to prove all the elements of the crime that would allow
them to secure a conviction.

Secretary Guingona discounted the element of actual intent to deceive by taking into consideration
the differences in spelling, meaning, and phonetics between "LIVES" and "LEVIS," as well as the
fact that respondent had registered his own mark.66 While it is true that there may be unfair
competition even if the competing mark is registered in the Intellectual Property Office, it is equally
true that the same may show prima facie good faith.67 Indeed, registration does not negate unfair
competition where the goods are packed or offered for sale and passed off as those of
complainant.68 However, the marks registration, coupled with the stark differences between the
competing marks, negate the existence of actual intent to deceive, in this particular case.

For his part, Justice Cuevas failed to find the possibility of confusion and of intent to deceive the
public, relying on Emerald Garment Manufacturing Corporation v. Court of Appeals.69 In Emerald, the
Court explained that since maong pants or jeans are not inexpensive, the casual buyer is more
cautious and discerning and would prefer to mull over his purchase, making confusion and deception
less likely.

We cannot subscribe to petitioners stance that Emerald Garment cannot apply because there was
only one point of comparison, i.e., "LEE" as it appears in Emerald Garments "STYLISTIC MR. LEE."
Emerald Garment is instructive in explaining the attitude of the buyer when it comes to products that
are not inexpensive, such as jeans. In fact, the Emerald Garment rationale is supported by Del
Monte Corporation v. Court of Appeals,70 where the Court explained that the attitude of the
purchaser is determined by the cost of the goods. There is no reason not to apply the rationale in
those cases here even if only by analogy.

The rule laid down in Emerald Garment and Del Monte is consistent with Asia Brewery, Inc. v. Court
of Appeals,71where the Court held that in resolving cases of infringement and unfair competition, the
courts should take into consideration several factors which would affect its conclusion, to wit: the
age, training and education of the usual purchaser, the nature and cost of the article, whether the
article is bought for immediate consumption and also the conditions under which it is usually
purchased.72

Petitioner argues that the element of intent to deceive may be inferred from the similarity of the
goods or their appearance.73 The argument is specious on two fronts. First, where the similarity in
the appearance of the goods as packed and offered for sale is so striking, intent to deceive may be
inferred.74 However, as found by the investigating prosecutor and the DOJ Secretaries, striking
similarity between the competing goods is not present.
Second, the confusing similarity of the goods was precisely in issue during the preliminary
investigation. As such, the element of intent to deceive could not arise without the investigating
prosecutors or the DOJ Secretarys finding that such confusing similarity exists. Since confusing
similarity was not found, the element of fraud or deception could not be inferred.

We cannot sustain Secretary Bellos opinion that to establish probable cause, "it is enough that the
respondent gave to his product the general appearance of the product"75 of petitioner. It bears
stressing that that is only one element of unfair competition. All others must be shown to exist. More
importantly, the likelihood of confusion exists not only if there is confusing similarity. It should also be
likely to cause confusion or mistake or deceive purchasers.76 Thus, the CA correctly ruled that the
mere fact that some resemblance can be pointed out between the marks used does not in itself
prove unfair competition.77 To reiterate, the resemblance must be such as is likely to deceive the
ordinary purchaser exercising ordinary care.78

The consumer survey alone does not equate to actual confusion. We note that the survey was made
by showing the interviewees actual samples of petitioners and respondents respective
products, approximately five feet away from them. From that distance, they were asked to identify
the jeans brand and state the reasons for thinking so.79This method discounted the possibility that
the ordinary intelligent buyer would be able to closely scrutinize, and even fit, the jeans to determine
if they were "LEVIS" or not. It also ignored that a consumer would consider the price of the
competing goods when choosing a brand of jeans. It is undisputed that "LIVES" jeans are priced
much lower than "LEVIS."

The Courts observations in Emerald Garment are illuminating on this score:

First, the products involved in the case at bar are, in the main, various kinds of jeans. x x x
Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to
be more cautious and discriminating in and would prefer to mull over his purchase.
Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals,
we noted that:

Among these, what essentially determines the attitudes of the purchaser,

specifically his inclination to be cautious, is the cost of the goods. To be sure, a
person who buys a box of candies will not exercise as much care as one who buys
an expensive watch. As a general rule, an ordinary buyer does not exercise as much
prudence in buying an article for which he pays a few centavos as he does in
purchasing a more valuable thing. Expensive and valuable items are normally
bought only after deliberate, comparative and analytical investigation. But mass
products, low priced articles in wide use, and matters of everyday purchase requiring
frequent replacement are bought by the casual consumer without great
care.80 (Emphasis supplied)

We find no reason to go beyond the point of sale to determine if there is probable cause for unfair
competition. The CA observations along this line are worth restating:

We also find no basis to give weight to petitioners contention that the "post sale confusion"
that might be triggered by the perceived similarities between the two products must be
considered in the action for unfair competition against respondent.

No inflexible rule can be laid down as to what will constitute unfair competition. Each case is,
in the measure, a law unto itself. Unfair competition is always a question of fact. The
question to be determined in every case is whether or not, as a matter of fact, the name or
 mark used by the defendant has previously come to indicate and designate plaintiffs goods,
or, to state it in another way, whether defendant, as a matter of fact, is, by his conduct,
passing off defendants goods as plaintiffs goods or his business as plaintiffs business. The
universal test question is whether the public is likely to be deceived.

In the case before us, we are of the view that the probability of deception must be tested at
the point of sale since it is at this point that the ordinary purchaser mulls upon the product
and is likely to buy the same under the belief that he is buying another. The test of fraudulent
simulation is to be found in the likelihood of deception, or the possibility of 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.81

In sum, absent a grave abuse of discretion on the part of the executive branch tasked with the
determination of probable cause during preliminary investigation, We cannot nullify acts done in the
exercise of the executive officers discretion. Otherwise, We shall violate the principle that the
purpose of a preliminary investigation is to secure the innocent against hasty, malicious and
oppressive prosecution, and to protect him from an open and public accusation of crime, from the
trouble, expense and anxiety of a public trial, and also to protect the State from useless and
expensive trials.82

WHEREFORE, the petition is DENIED and the appealed Decision of the Court of
Appeals AFFIRMED.

SO ORDERED.

RUBEN T. REYES
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
 CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1 Alcaraz v. Gonzalez, G.R. No. 164715, September 20, 2006, 502 SCRA 518.

2 Monfort III v. Salvatierra, G.R. No. 168301, March 5, 2007, 517 SCRA 447, 459-460.

3 Under Rule 45 of the 1997 Rules of Civil Procedure.

4Rollo, pp. 95-103. Dated October 17, 2003. Penned by Associate Justice Eubulo G.
Verzola, with Associate Justices Remedios Salazar-Fernando and Edgardo F. Sundiam,
concurring.

5 Id. at 105-106. Dated February 20, 2004.

6 LS & Co.s registered trademarks and trade names in the Philippines are as follows:

1. "Levis" issued on August 10, 1982, renewed on August 10, 2002.

2. "Levi Strauss & Co." issued on March 21, 1978.

3. "Arcuate Stitching Design" issued on October 8, 1973, renewed on October 8,

1993.

4. "Two Horse Design" issued on February 12, 1974, renewed on February 12, 1994.

5. "Two Horse Patch" issued on December 27, 1988.

6. "Two Horse Label with Patterned Arcuate Design" issued on October 9, 1985.

7. "Tab Design" issued on May 12, 1976, renewed on May 12, 1996.
 8. "Composite Mark (Arcuate, Tab, Two Horse Patch)" issued on December 12,
1988.

9. "501" issued on March 3, 1989.

10. "Levis Salmon Ticket & Design" issued on February 13, 1976, renewed on
February 13, 1996.

11. "Levis and Device" issued on May 22, 1981, renewed on May 22, 2001.

7 Rollo, pp. 25-26.

8 Id. at 29.

9 Id. at 30.

10 Id. at 307, 341. Dated November 22, 1995.

11 Id. at 9.

12 Id. at 31.

13 CA rollo, pp. 71-72.

14 Now the Criminal Investigation and Detection Group (CIDG).

15Search Warrant No. 95-757 dated December 12, 1995 in People v. Tony Lim of Vogue
Traders Clothing Company, 1082 Carmen Planas Street, Tondo, Manila, and Search
Warrant No. 95-758 dated December 12, 1995 in People v. Tony Lim of Vogue Traders
Clothing Company, 1042 Carmen Planas Street, Tondo, Manila, both issued by Judge
Antonio I. de Castro, Regional Trial Court of Manila, Branch 3.

16Pursuant to Search Warrant No. 95-757 implemented at 1082 Carmen Planas Street,
Tondo Manila:

100 Sacks of Lives pants (20 pants/sack);

1 Box containing 500 sets of Lives buttons;

12 Sacks of Lives Hangtags (2,000/sack);

2 Sewing Machines; and

2 Riveter Machines.

Pursuant to Search Warrant No. 95-758 implemented at 1042 Carmen Planas Street,
Tondo Manila:

151 pcs. of unfinished pants with arcuate design;

 160 pcs. of finished Westside jeans with arcuate design;

725 pcs. of Lives Patches;

520 pcs. of Lives Buttons;

900 pcs. of Lives Rivets;

261 pcs. of back pocket with arcuate design;

1 Singer Sewing Machine with SN-U4884707342;

1 Singer Sewing Machine with SN-U86400783;

1 Juki Sewing Machine with SN-A555-59278;

1 Juki Sewing Machine with SN-A555-2-24344;

1 Juki Sewing Machine with SN-A227-03839;

1 Juki Sewing Machine with SN-D555-38961; and

1 Riveter.

17 Rollo, pp. 222-223.

18 Through a letter dated December 28, 1995.

19 Entitled PNP-CIS/Levi Strauss (Phils.), Inc. v. Tony Lim, docketed as I.S. No. 95-799.

20 The Intellectual Property Code of the Philippines. Effective January 1, 1998.

21 Rollo, pp. 282-285.

22Under Certificate of Registration No. 53918 dated November 16, 1992 (Principal Register,
Bureau of Patents, Trademarks and Technology Transfer) and SR 8868 dated November 3,
1992 (Supplemental Register, same office).

23Covered by Certificate of Copyright Registration No. I-3838 dated September 25, 1991
issued by the National Library.

24IPC Case Nos. 4216 and 4217, Bureau of Patents, Trademarks, and Technology Transfer;
and Civil Case No. 96-76944, RTC Manila, Branch 50.

25 Rollo, pp. 282-283.

26 Id. at 294-295.

27 Id. at 222-226.
28 CA rollo, pp. 4-7. Resolution No. 052, Series of 1998.

29 Id. at 73-74.

30 Rollo, pp. 375-404.

31 Id. at 358-360.

32 Id. at 450.

33 Id. at 449.

34 Id. at 450.

35 CA rollo, pp. 8-12.

36 Rollo, p. 15.

37 Id. at 13.

38 Id. at 14-15.

39 Id. at 47.

40Asia Brewery, Inc. v. Court of Appeals, G.R. No. 103543, July 5, 1993, 224 SCRA 437,
443.

41See Cosmos Bottling Corporation v. National Labor Relations Commission, G.R. No.
146397, July 1, 2003, 405 SCRA 258.

42 CA rollo, p. 19.

43As amended by Section 11 of Republic Act No. 9282 entitled "An Act Expanding the
Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate
Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose
Certain Sections or Republic Act No. 1125, As Amended, Otherwise Known as the Law
Creating the Court of Tax Appeals, and for Other Purposes." Approved on March 30, 2004.

44Alcaraz v. Gonzalez, supra note 1, at 529; Orosa v. Roa, G.R. No. 140423, July 14, 2006,
495 SCRA 22; Santos v. Go, G.R. No. 156081, October 19, 2005, 473 SCRA 350, 361.

45 Now the 2000 National Prosecution Service Rules on Appeals.

46Filadams Pharma, Inc. v. Court of Appeals, G.R. No. 132422, March 30, 2004, 426 SCRA
460, 466-467.

47 Alcaraz v. Gonzalez, supra note 1, at 529.

48 See Filadams Pharma, Inc. v. Court of Appeals, supra note 46.

49 Alcaraz v. Gonzalez, supra note 1, at 529.

50 Id.

51 Public Utilities Department v. Guingona, Jr., 417 Phil. 798, 805 (2001).

52 Id.

53 See Buan v. Matugas, G.R. No. 161179, August 7, 2007, 529 SCRA 263, 270.

54 R.R. Paredes v. Calilung, G.R. No. 156055, March 5, 2007, 517 SCRA 369, 395.

55 Alcaraz v. Gonzalez, supra note 1, at 529.

56 R.R. Paredes v. Calilung, supra at 395-396.

57 Rollo, pp. 224-225.

58 Alcaraz v. Gonzalez, supra note 1, at 529.

First Womens Credit Corporation v. Baybay, G.R. No. 166888, January 31, 2007, 513
59

SCRA 637, 644-645.

R.R. Paredes v. Calilung, supra note 54, at 397, citing Sarigumba v. Sandiganbayan, G.R.
60

Nos. 154239-41, February 16, 2005, 451 SCRA 533, 549.

61 See R.R. Paredes v. Calilung, supra note 54, at 396-397.

62 Reyes, L., The Revised Penal Code, Book II, 13th ed., p. 264.

63Art. 189. Unfair competition, fraudulent registration of trade-mark, trade-name or service

mark, fraudulent designation of origin, and false description. The penalty provided in the
next proceeding article shall be imposed upon:

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

64Sony Computer Entertainment, Inc. v. Supergreen, Incorporated, G.R. No. 161823, March
22, 2007, 518 SCRA 750, 757; NBI-Microsoft Corporation v. Hwang, G.R. No. 147043, June
21, 2005, 460 SCRA 428, 445, citing L. Reyes, The Revised Penal Code, Vol. II, 15th ed., p.
282.
 Mendoza-Arce v. Office of the Ombudsman (Visayas), G.R. No. 149148, April 5, 2002, 380
65

SCRA 325, 336.

66 CA rollo, p. 73.

67Agpalo, The Law on Trademark, Infringement and Unfair Competition, 2000 ed., pp. 189-
190, citing R.F. Alexander & Co. v. Ang, 97 Phil. 157 (1955); Parke Davis & Co. v. Kim Foo &
Co., 60 Phil. 928 (1934).

68 Id.

69 G.R. No. 100098, December 29, 1995, 251 SCRA 600.

70
G.R. No. 78325, January 25, 1990, 181 SCRA 410.

71 G.R. No. 103543, July 5, 1993, 224 SCRA 437.

72 Id. at 455.

73 Rollo, pp. 51-52.

74See note 67, at 190, citing Rueda Hermanos & Co. v. Felix Paglinawan & Co., 33 Phil. 196
(1916); U.S. v. Gaw Chiong, 23 Phil. 138 (1912); Inchausti & Co. v. Song Fo & Co., 21 Phil.
278 (1912).

75 CA rollo, p. 459.

76See Societe Des Produits Nestl, S.A. v. Court of Appeals, G.R. No. 112012, April 4,
2001, 356 SCRA 207, 215.

77 Rollo, p. 100.

Pro Line Sports Center, Inc. v. Court of Appeals, G.R. No. 118192, October 23, 1997, 281
78

SCRA 162, 173.

79 Id. at 380.

80 Emerald Garment Manufacturing Corporation v. Court of Appeals, supra note 69.

81
Rollo, pp. 101-102.

82 R.R. Paredes v. Calilung, supra note 54, at 395.

 SECOND DIVISION

G.R. No. 154491 November 14, 2008

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

vs.
QUINTIN J. GOMEZ, a.k.a. "KIT" GOMEZ and DANILO E. GALICIA, a.k.a.
"DANNY GALICIA",respondents.

DECISION

BRION, J.:

Is the hoarding of a competitor's product containers punishable as unfair

competition under the Intellectual Property Code (IP Code, Republic Act No.
8293) that would entitle the aggrieved party to a search warrant against the
hoarder? This is the issue we grapple with in this petition for review
on certiorari involving two rival multinational softdrink giants; petitioner Coca-
Cola Bottlers, Phils., Inc. (Coca-Cola) accuses Pepsi Cola Products Phils.,
Inc. (Pepsi), represented by the respondents, of hoarding empty Coke bottles
in bad faith to discredit its business and to sabotage its operation in
Bicolandia.

BACKGROUND

The facts, as culled from the records, are summarized below.

On July 2, 2001, Coca-Cola applied for a search warrant against Pepsi for
hoarding Coke empty bottles in Pepsi's yard in Concepcion Grande, Naga
City, an act allegedly penalized as unfair competition under the IP Code.
Coca-Cola claimed that the bottles must be confiscated to preclude their
illegal use, destruction or concealment by the respondents.1 In support of the
application, Coca-Cola submitted the sworn statements of three witnesses:
Naga plant representative Arnel John Ponce said he was informed that one of
their plant security guards had gained access into the Pepsi compound and
had seen empty Coke bottles; acting plant security officer Ylano A.
Regaspi said he investigated reports that Pepsi was hoarding large quantities
of Coke bottles by requesting their security guard to enter the Pepsi plant and
he was informed by the security guard that Pepsi hoarded several Coke
bottles; security guard Edwin Lirio stated that he entered Pepsi's yard on July
2, 2001 at 4 p.m. and saw empty Coke bottles inside Pepsi shells or cases.2
Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo of Naga City,
after taking the joint deposition of the witnesses, issued Search Warrant No.
2001-013 to seize 2,500 Litro and 3,000 eight and 12 ounces empty Coke
bottles at Pepsi's Naga yard for violation of Section 168.3 (c) of the IP
Code.4 The local police seized and brought to the MTC's custody 2,464 Litro
and 4,036 eight and 12 ounces empty Coke bottles, 205 Pepsi shells for Litro,
and 168 Pepsi shells for smaller (eight and 12 ounces) empty Coke bottles,
and later filed with the Office of the City Prosecutor of Naga a complaint
against two Pepsi officers for violation of Section 168.3 (c) in relation to
Section 170 of the IP Code.5The named respondents, also the respondents in
this petition, were Pepsi regional sales manager Danilo E. Galicia (Galicia)
and its Naga general manager Quintin J. Gomez, Jr. (Gomez).

In their counter-affidavits, Galicia and Gomez claimed that the bottles came
from various Pepsi retailers and wholesalers who included them in their return
to make up for shortages of empty Pepsi bottles; they had no way of
ascertaining beforehand the return of empty Coke bottles as they simply
received what had been delivered; the presence of the bottles in their yard
was not intentional nor deliberate; Ponce and Regaspi's statements are
hearsay as they had no personal knowledge of the alleged crime; there is no
mention in the IP Code of the crime of possession of empty bottles; and that
the ambiguity of the law, which has a penal nature, must be construed strictly
against the State and liberally in their favor. Pepsi security guards Eduardo E.
Miral and Rene Acebuche executed a joint affidavit stating that per their
logbook, Lirio did not visit or enter the plant premises in the afternoon of July
2, 2001.

The respondents also filed motions for the return of their shells and to quash
the search warrant. They contended that no probable cause existed to justify
the issuance of the search warrant; the facts charged do not constitute an
offense; and their Naga plant was in urgent need of the shells.

Coca-Cola opposed the motions as the shells were part of the evidence of the
crime, arguing that Pepsi used the shells in hoarding the bottles. It insisted
that the issuance of warrant was based on probable cause for unfair
competition under the IP Code, and that the respondents violated R.A. 623,
the law regulating the use of stamped or marked bottles, boxes, and other
similar containers.

THE MTC RULINGS

On September 19, 2001, the MTC issued the first assailed order 6 denying the
twin motions. It explained there was an exhaustive examination of the
applicant and its witnesses through searching questions and that the Pepsi
shells are prima facie evidence that the bottles were placed there by the
respondents.

In their motion for reconsideration, the respondents argued for the quashal of
the warrant as the MTC did not conduct a probing and exhaustive
examination; the applicant and its witnesses had no personal knowledge of
facts surrounding the hoarding; the court failed to order the return of the
"borrowed" shells; there was no crime involved; the warrant was issued based
on hearsay evidence; and the seizure of the shells was illegal because they
were not included in the warrant.

On November 14, 2001, the MTC denied the motion for reconsideration in the
second assailed order,7 explaining that the issue of whether there was unfair
competition can only be resolved during trial.

The respondents responded by filing a petition for certiorari under Rule 65 of

the Revised Rules of Court before the Regional Trial Court (RTC) of Naga
City on the ground that the subject search warrant was issued without
probable cause and that the empty shells were neither mentioned in the
warrant nor the objects of the perceived crime.

THE RTC RULINGS

On May 8, 2002, the RTC voided the warrant for lack of probable cause and
the non-commission of the crime of unfair competition, even as it implied that
other laws may have been violated by the respondents. The RTC, though,
found no grave abuse of discretion on the part of the issuing MTC
judge.8 Thus,

Accordingly, as prayed for, Search Warrant No. 2001-02 issued by the

Honorable Judge Julian C. Ocampo III on July 2, 2001 is ANNULLED
and SET ASIDE. The Orders issued by the Pairing Judge of Br. 1,
MTCC of Naga City dated September 19, 2001 and November 14, 2001
are also declared VOID and SET ASIDE. The City Prosecutor of Naga
City and SPO1 Ernesto Paredes are directed to return to the Petitioner
the properties seized by virtue of Search Warrant No. 2001-02. No
costs.

SO ORDERED.9
In a motion for reconsideration, which the RTC denied on July 12, 2002, the
petitioner stressed that the decision of the RTC was contradictory because it
absolved Judge Ocampo of grave abuse of discretion in issuing the search
warrant, but at the same time nullified the issued warrant. The MTC should
have dismissed the petition when it found out that Judge Ocampo did not
commit any grave abuse of discretion.

Bypassing the Court of Appeals, the petitioner asks us through this petition for
review on certiorariunder Rule 45 of the Rules of Court to reverse the decision
of the RTC. Essentially, the petition raises questions against the RTC's
nullification of the warrant when it found no grave abuse of discretion
committed by the issuing judge.

THE PETITION and

THE PARTIES' POSITIONS

In its petition, the petitioner insists the RTC should have dismissed the
respondents' petition for certiorari because it found no grave abuse of
discretion by the MTC in issuing the search warrant. The petitioner further
argues that the IP Code was enacted into law to remedy various forms of
unfair competition accompanying globalization as well as to replace the inutile
provision of unfair competition under Article 189 of the Revised Penal Code.
Section 168.3(c) of the IP Code does not limit the scope of protection on the
particular acts enumerated as it expands the meaning of unfair competition to
include "other acts contrary to good faith of a nature calculated to discredit the
goods, business or services of another." The inherent element of unfair
competition is fraud or deceit, and that hoarding of large quantities of a
competitor's empty bottles is necessarily characterized by bad faith. It claims
that its Bicol bottling operation was prejudiced by the respondents' hoarding
and destruction of its empty bottles.

The petitioner also argues that the quashal of the search warrant was
improper because it complied with all the essential requisites of a valid
warrant. The empty bottles were concealed in Pepsi shells to prevent
discovery while they were systematically being destroyed to hamper the
petitioner's bottling operation and to undermine the capability of its bottling
operations in Bicol.

The respondents counter-argue that although Judge Ocampo conducted his

own examination, he gravely erred and abused his discretion when he ignored
the rule on the need of sufficient evidence to establish probable cause;
satisfactory and convincing evidence is essential to hold them guilty of unfair
competition; the hoarding of empty Coke bottles did not cause actual or
probable deception and confusion on the part of the general public; the
alleged criminal acts do not show conduct aimed at deceiving the public; there
was no attempt to use the empty bottles or pass them off as the respondents'
goods.

The respondents also argue that the IP Code does not criminalize bottle
hoarding, as the acts penalized must always involve fraud and deceit. The
hoarding does not make them liable for unfair competition as there was no
deception or fraud on the end-users.

THE ISSUE

Based on the parties' positions, the basic issue submitted to us for resolution
is whether the Naga MTC was correct in issuing Search Warrant No. 2001-01
for the seizure of the empty Coke bottles from Pepsi's yard for probable
violation of Section 168.3 (c) of the IP Code. This basic issue involves two
sub-issues, namely, the substantive issue of whether the application for
search warrant effectively charged an offense, i.e., a violation of Section 168.3
(c) of the IP Code; and the procedural issue of whether the MTC observed the
procedures required by the Rules of Court in the issuance of search warrants.

OUR RULING

We resolve to deny the petition for lack of merit.

We clarify at the outset that while we agree with the RTC decision, our
agreement is more in the result than in the reasons that supported it. The
decision is correct in nullifying the search warrant because it was issued on an
invalid substantive basis - the acts imputed on the respondents do not violate
Section 168.3 (c) of the IP Code. For this reason, we deny the present
petition.

The issuance of a search warrant10 against a personal property11 is governed

by Rule 126 of the Revised Rules of Court whose relevant sections state:

Section 4. Requisites for issuing search warrant. - A search warrant

shall not issue except upon probable cause in connection with one
specific offense to be determined personally by the judge after
examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be
 searched and the things to be seized which may be anywhere in the
Philippines.

Section 5. Examination of complainant; record. - The judge must, before

issuing the warrant, personally examine in the form of searching
questions and answers, in writing and under oath, the complainant
and the witnesses he may produce on facts personally known to them
and attach to the record their sworn statements together with the
affidavits submitted.

Section 6. Issuance and form of search warrant. - If the judge is

satisfied of the existence of facts upon which the application is based or
that there is probable cause to believe that they exist, he shall issue the
warrant, which must be substantially in the form prescribed by these
Rules. [Emphasis supplied]

To paraphrase this rule, a search warrant may be issued only if there is

probable cause in connection with a specific offense alleged in an application
based on the personal knowledge of the applicant and his or her witnesses.
This is the substantive requirement in the issuance of a search warrant.
Procedurally, the determination of probable cause is a personal task of the
judge before whom the application for search warrant is filed, as he has to
examine under oath or affirmation the applicant and his or her witnesses in
the form of "searching questions and answers" in writing and under oath. The
warrant, if issued, must particularly describe the place to be searched and the
things to be seized.

We paraphrase these requirements to stress that they have substantive and

procedural aspects. Apparently, the RTC recognized this dual nature of the
requirements and, hence, treated them separately; it approved of the way the
MTC handled the procedural aspects of the issuance of the search warrant
but found its action on the substantive aspect wanting. It therefore resolved to
nullify the warrant, without however expressly declaring that the MTC gravely
abused its discretion when it issued the warrant applied for. The RTC's error,
however, is in the form rather than the substance of the decision as the
nullification of the issued warrant for the reason the RTC gave was equivalent
to the declaration that grave abuse of discretion was committed. In fact, we so
rule as the discussions below will show.

Jurisprudence teaches us that probable cause, as a condition for the issuance

of a search warrant, is such reasons supported by facts and circumstances as
will warrant a cautious man in the belief that his action and the means taken in
prosecuting it are legally just and proper. Probable cause requires facts and
circumstances that would lead a reasonably prudent man to believe that an
offense has been committed and the objects sought in connection with that
offense are in the place to be searched.12 Implicit in this statement is the
recognition that an underlying offense must, in the first place, exist. In other
words, the acts alleged, taken together, must constitute an offense and that
these acts are imputable to an offender in relation with whom a search
warrant is applied for.

In the context of the present case, the question is whether the act charged -
alleged to be hoarding of empty Coke bottles - constitutes an offense under
Section 168.3 (c) of the IP Code. Section 168 in its entirety states:

SECTION 168. Unfair Competition, Rights, Regulation and Remedies. -

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

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

168.3. In particular, and without in any way limiting the scope of

protection against unfair competition, the following shall be deemed
guilty of unfair competition:

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

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

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

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

The petitioner theorizes that the above section does not limit the scope of
protection on the particular acts enumerated as it expands the meaning of
unfair competition to include "other acts contrary to good faith of a nature
calculated to discredit the goods, business or services of another." Allegedly,
the respondents' hoarding of Coca Cola empty bottles is one such act.

We do not agree with the petitioner's expansive interpretation of Section 168.3

(c).

"Unfair competition," previously defined in Philippine jurisprudence in relation

with R.A. No. 166 and Articles 188 and 189 of the Revised Penal Code, is
now covered by Section 168 of the IP Code as this Code has expressly
repealed R.A. No. 165 and R.A. No. 166, and Articles 188 and 189 of the
Revised Penal Code.

Articles 168.1 and 168.2, as quoted above, provide the concept and general
rule on the definition of unfair competition. The law does not thereby
cover every unfair act committed in the course of business; it covers only acts
characterized by "deception or any other means contrary to good faith" in
the passing off of goods and services as those of another who has
established goodwill in relation with these goods or services, or any other act
calculated to produce the same result.

What unfair competition is, is further particularized under Section 168.3 when
it provides specifics of what unfair competition is "without in any way limiting
the scope of protection against unfair competition." Part of these particulars is
provided under Section 168.3(c) which provides the general "catch-all" phrase
that the petitioner cites. Under this phrase, a person shall be guilty of unfair
competition "who shall commit any other act contrary to good faith of a nature
calculated to discredit the goods, business or services of another."

From jurisprudence, unfair competition has been defined as the passing off (or
palming off) or attempting to pass off upon the public the goods or business of
one person as the goods or business of another with the end and probable
effect of deceiving the public. It formulated the "true test" of unfair competition:
whether the acts of defendant are such as are calculated to deceive the
ordinary buyer making his purchases under the ordinary conditions which
prevail in the particular trade to which the controversy relates.13 One of the
essential requisites in an action to restrain unfair competition is proof of fraud;
the intent to deceive must be shown before the right to recover can
exist.14 The advent of the IP Code has not significantly changed these rulings
as they are fully in accord with what Section 168 of the Code in its entirety
provides. Deception, passing off and fraud upon the public are still the key
elements that must be present for unfair competition to exist.

The act alleged to violate the petitioner's rights under Section 168.3 (c) is
hoarding which we gather to be the collection of the petitioner's empty bottles
so that they can be withdrawn from circulation and thus impede the circulation
of the petitioner's bottled products. This, according to the petitioner, is an act
contrary to good faith - a conclusion that, if true, is indeed an unfair act on the
part of the respondents. The critical question, however, is not the intrinsic
unfairness of the act of hoarding; what is critical for purposes of Section 168.3
(c) is to determine if the hoarding, as charged, "is of a nature calculated to
discredit the goods, business or services" of the petitioner.

We hold that it is not. Hoarding as defined by the petitioner is not even an act
within the contemplation of the IP Code.

The petitioner's cited basis is a provision of the IP Code, a set of rules that
refer to a very specific subject - intellectual property. Aside from the IP Code's
actual substantive contents (which relate specifically to patents, licensing,
trademarks, trade names, service marks, copyrights, and the protection and
infringement of the intellectual properties that these protective measures
embody), the coverage and intent of the Code is expressly reflected in its
"Declaration of State Policy" which states:

Section 2. Declaration of State Policy. - The State recognizes that an

effective intellectual and industrial property system is vital to the
 development of domestic and creative activity, facilitates transfer of
technology, attracts foreign investments, and ensures market access for
our products. It shall protect and secure the exclusive rights of
scientists, inventors, artists and other gifted citizens to their intellectual
property and creations, particularly when beneficial to the people, for
such periods as provided in this Act.

The use of intellectual property bears a social function. To this end, the
State shall promote the diffusion of knowledge and information for the
promotion of national development and progress and the common good.

It is also the policy of the State to streamline administrative procedures

of registering patents, trademarks and copyright, to liberalize the
registration on the transfer of technology, and to enhance the
enforcement of intellectual property rights in the Philippines. (n)

"Intellectual property rights" have furthermore been defined under Section 4 of

the Code to consist of: a) Copyright and Related Rights; b) Trademarks and
Service Marks; c) Geographic Indications; d) IndustrialDesigns; e) Patents; f)
Layout-Designs (Topographies) of Integrated Circuits; and g)Protection of
Undisclosed Information.

Given the IP Code's specific focus, a first test that should be made when a
question arises on whether a matter is covered by the Code is to ask if it
refers to an intellectual property as defined in the Code. If it does not, then
coverage by the Code may be negated.

A second test, if a disputed matter does not expressly refer to an intellectual

property right as defined above, is whether it falls under the general "unfair
competition" concept and definition under Sections 168.1 and 168.2 of the
Code. The question then is whether there is "deception" or any other similar
act in "passing off" of goods or services to be those of another who enjoys
established goodwill.

Separately from these tests is the application of the principles of statutory

construction giving particular attention, not so much to the focus of the IP
Code generally, but to the terms of Section 168 in particular. Under the
principle of "noscitur a sociis," when a particular word or phrase is ambiguous
in itself or is equally susceptible of various meanings, its correct construction
may be made clear and specific by considering the company of words in
which it is found or with which it is associated.15
As basis for this interpretative analysis, we note that Section 168.1 speaks of
a person who has earned goodwill with respect to his goods and services and
who is entitled to protection under the Code, with or without a registered
mark. Section 168.2, as previously discussed, refers to the general definition
of unfair competition. Section 168.3, on the other hand, refers to the specific
instances of unfair competition, with Section 168.1 referring to the sale of
goods given the appearance of the goods of another; Section 168.2, to the
inducement of belief that his or her goods or services are that of another who
has earned goodwill; while the disputed Section 168.3 being a "catch all"
clause whose coverage the parties now dispute.

Under all the above approaches, we conclude that the "hoarding" - as defined
and charged by the petitioner - does not fall within the coverage of the IP
Code and of Section 168 in particular. It does not relate to any patent,
trademark, trade name or service mark that the respondents have invaded,
intruded into or used without proper authority from the petitioner. Nor are the
respondents alleged to be fraudulently "passing off" their products or services
as those of the petitioner. The respondents are not also alleged to be
undertaking any representation or misrepresentation that would confuse or
tend to confuse the goods of the petitioner with those of the respondents,
or vice versa. What in fact the petitioner alleges is an act foreign to the Code,
to the concepts it embodies and to the acts it regulates; as alleged, hoarding
inflicts unfairness by seeking to limit the opposition's sales by depriving it of
the bottles it can use for these sales.

In this light, hoarding for purposes of destruction is closer to what another law
- R.A. No. 623 - covers, to wit:

SECTION 1. Persons engaged or licensed to engage in the

manufacture, bottling or selling of soda water, mineral or aerated
waters, cider, milk, cream, or other lawful beverages in bottles, boxes,
casks, kegs, or barrels, and other similar containers, with their names or
the names of their principals or products, or other marks of ownership
stamped or marked thereon, may register with the Philippine Patent
Office a description of the names or are used by them, under the same
conditions, rules, and regulations, made applicable by law or regulation
to the issuance of trademarks.

SECTION 2. It shall be unlawful for any person, without the written

consent of the manufacturer, bottler or seller who has successfully
registered the marks of ownership in accordance with the provisions of
the next preceding section, to fill such bottles, boxes, kegs, barrels,
 or other similar containers so marked or stamped, for the purpose
of sale, or to sell, dispose of, buy, or traffic in, or wantonly destroy
the same, whether filled or not, or to use the same for drinking
vessels or glasses or for any other purpose than that registered by
the manufacturer, bottler or seller. Any violation of this section shall
be punished by a fine or not more than one hundred pesos or
imprisonment of not more than thirty days or both.

As its coverage is defined under Section 1, the Act appears to be a measure

that may overlap or be affected by the provisions of Part II of the IP Code on
"The Law on Trademarks, Service Marks and Trade Names." What is certain
is that the IP Code has not expressly repealed this Act. The Act appears, too,
to have specific reference to a special type of registrants - the manufacturers,
bottlers or sellers of soda water, mineral or aerated waters, cider, milk, cream,
or other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other
similar containers - who are given special protection with respect to the
containers they use. In this sense, it is in fact a law of specific coverage and
application, compared with the general terms and application of the IP Code.
Thus, under its Section 2, it speaks specifically of unlawful use of containers
and even of the unlawfulness of their wanton destruction - a matter that
escapes the IP Code's generalities unless linked with the concepts of
"deception" and "passing off" as discussed above.

Unfortunately, the Act is not the law in issue in the present case and one that
the parties did not consider at all in the search warrant application. The
petitioner in fact could not have cited it in its search warrant application since
the "one specific offense" that the law allows and which the petitioner used
was Section 168.3 (c). If it serves any purpose at all in our discussions, it is to
show that the underlying factual situation of the present case is in fact covered
by another law, not by the IP Code that the petitioner cites. Viewed in this
light, the lack of probable cause to support the disputed search warrant at
once becomes apparent.

Where, as in this case, the imputed acts do not violate the cited offense, the
ruling of this Court penned by Mr. Justice Bellosillo is particularly instructive:

In the issuance of search warrants, the Rules of Court requires a finding

of probable cause in connection with one specific offense to be
determined personally by the judge after examination of the complainant
and the witnesses he may produce, and particularly describing the place
to be searched and the things to be seized. Hence, since there is no
crime to speak of, the search warrant does not even begin to fulfill
 these stringent requirements and is therefore defective on its face.
The nullity of the warrant renders moot and academic the other issues
raised in petitioners' Motion to Quash and Motion for Reconsideration.
Since the assailed search warrant is null and void, all property seized by
virtue thereof should be returned to petitioners in accordance with
established jurisprudence.16

Based on the foregoing, we conclude that the RTC correctly ruled that the
petitioner's search warrant should properly be quashed for the petitioner's
failure to show that the acts imputed to the respondents do not violate the
cited offense. There could not have been any probable cause to support the
issuance of a search warrant because no crime in the first place was
effectively charged. This conclusion renders unnecessary any further
discussion on whether the search warrant application properly alleged that the
imputed act of holding Coke empties was in fact a "hoarding" in bad faith
aimed to prejudice the petitioner's operations, or whether the MTC duly
complied with the procedural requirements for the issuance of a search
warrant under Rule 126 of the Rules of Court.

WHEREFORE, we hereby DENY the petition for lack of merit. Accordingly, we

confirm that Search Warrant No. 2001-01, issued by the Municipal Trial Court,
Branch 1, Naga City, is NULL and VOID. Costs against the petitioner.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

*LEONARDO A. QUISUMBING
Acting Chief Justice

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice
 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairperson's Attestation, it is hereby certified that the conclusions in the
above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Court's Division.

LEONARDO A. QUISUMBING
Acting Chief Justice

Footnotes

* Acting Chief Justice.

1
See Paragraph 3 of the Application; records, p. 96.
2
Id., pp. 98-101.
3
Id., pp. 108-109.
4
Sec. 168. Unfair Competition, Rights, Regulations and Remedies. -

xxx xxx xxx

Sec. 168.3: In particular, and without in any way limiting the scope
of protection against unfair competition, the following shall be
deemed guilty of unfair competition:

xxx

(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 service of another.
5
Sec. 170. Penalties. - Independent of the civil and administrative
sanctions imposed by law, a criminal penalty of imprisonment from two
years to five 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, Section 168 and Subsection 169.1.
6
Penned by Pairing Judge Irma Isidora M. Boncodin, MTC, Branch 1,
Naga; records, p. 23.
7
Penned by Acting Presiding Judge Jose P. Nacional, MTC, Branch 1,
Naga; id, p. 22.
8
Decision penned by Judge Ramon A. Cruz, RTC, Branch 21; id., pp.
202-211.
9
Id., p. 210.
10
Rule 126, Section 1. Search warrant defined. - A search warrant is an
order in writing issued in the name of the People of the Philippines,
signed by a judge and directed to a peace officer, commanding him to
search for personal property described therein and bring it before the
court.
11
Rule 126, Section 3. Personal property to be seized. - A search
warrant may be issued for the search and seizure of personal property:

(a) Subject of the offense;

(b) Stolen or embezzled and other proceeds or fruits of the offense; or

(c) Used or intended to be used as the means of committing an offense.

12
La Chemise Lacoste, S. A. v. Judge Fernandez, G.R. Nos. 63796-97,
May 21, 1984, 129 SCRA 373.
13
Alhambra Cigar & Cigarette Manufacturing Co v. Mojica, 27 Phil. 266
(1914).
14
Compania General de Tabacos de Filipinas v. Alhambra Cigar &
Cigarette Manufacturing Co., 33 Phil. 485 (1916).
15
Agpalo, Statutory Construction, 3rd (1995) Ed., at p. 159, citing Co
Kim Chan v. Valdez Tan Keh, 75 Phil 371, and Soriano v.
Sandiganbayan, G.R. No. 65952, July 1, 1984, among others.
16
Supra note 12, pp. 705-706.
 SECOND DIVISION

G.R. No. 202423 January 28, 2013

CHESTER UYCO, WINSTON UYCHIYONG, and CHERRY C. UYCO-ONG, Petitioners,

vs.
VICENTE LO, Respondent.

RESOLUTION

BRION, J.:

We resolve the motion for reconsideration1 dated October 22, 2012 filed by petitioners Chester Uyco,
Winston Uychiyong and Cherry C. Uyco-Ong to set aside the Resolution2 dated September 12, 2012
of this Court, which affirmed the decision3 dated March 9, 2012 and the resolution4 dated June 21,
2012 of the Court of Appeals (CA) in CA-G.R. SP No. 111964. The CA affirmed the resolution5 dated
September 1, 2008 of the Department of Justice (DOJ). Both the CA and the DOJ found probable
cause to charge the petitioners with false designation of origin, in violation of Section 169.1, in
relation with Section 170, of Republic Act No. (RA) 8293, otherwise known as the "Intellectual
Property Code of the Philippines."6

The disputed marks in this case are the "HIPOLITO & SEA HORSE & TRIANGULAR DEVICE,"
"FAMA," and other related marks, service marks and trade names of Casa Hipolito S.A. Portugal
appearing in kerosene burners. Respondent Vicente Lo and Philippine Burners Manufacturing
Corporation (PBMC) filed a complaint against the officers of Wintrade Industrial SalesCorporation
(Wintrade), including petitioners Chester Uyco, Winston Uychiyong and Cherry Uyco-Ong, and of
National Hardware, including Mario Sy Chua, for violation of Section 169.1, in relation to Section
170, of RA 8293.

Lo claimed in his complaint that Gasirel-Industria de Comercio e Componentes para Gass, Lda.
(Gasirel), the owner of the disputed marks, executed a deed of assignment transferring these marks
in his favor, to be used in all countries except for those in Europe and America.7 In a test buy, Lo
purchased from National Hardware kerosene burners with the subject marks and the designations
"Made in Portugal" and "Original Portugal" in the wrappers. These products were manufactured by
Wintrade. Lo claimed that as the assignee for the trademarks, he had not authorized Wintrade to use
these marks, nor had Casa Hipolito S.A. Portugal. While a prior authority was given to Wintrades
predecessor-in-interest, Wonder Project & Development Corporation (Wonder), Casa Hipolito S.A.
Portugal had already revoked this authority through a letter of cancellation dated May 31, 1993.8 The
kerosene burners manufactured by Wintrade have caused confusion, mistake and deception on the
part of the buying public. Lo stated that the real and genuine burners are those manufactured by its
agent, PBMC.

In their Answer, the petitioners stated that they are the officers of Wintrade which owns the subject
trademarks and their variants. To prove this assertion, they submitted as evidence the certificates of
registration with the Intellectual Property Office. They alleged that Gasirel, not Lo, was the real party-
in-interest. They allegedly derived their authority to use the marks from Casa Hipolito S.A. Portugal
through Wonder, their predecessor-in-interest. Moreover, PBMC had already ceased to be a
corporation and, thus, the licensing agreement between PBMC and Lo could not be given effect,
particularly because the agreement was not notarized and did not contain the provisions required by
Section 87 of RA 8293. The petitioners pointed out that Lo failed to sufficiently prove that the burners
bought from National Hardware were those that they manufactured. But at the same time, they also
argued that the marks "Made in Portugal" and "Original Portugal" are merely descriptive and refer to
the source of the design and the history of manufacture.

In a separate Answer, Chua admitted that he had dealt with Wintrade for several years and had sold
its products. He had not been aware that Wintrade had lost the authority to manufacture, distribute,
and deal with products containing the subject marks, and he was never informed of Wintrades loss
of authority. Thus, he could have not been part of any conspiracy.

After the preliminary investigation, the Chief State Prosecutor found probable cause to indict the
petitioners for violation of Section 169.1, in relation with Section 170, of RA 8293. This law punishes
any person who uses in commerce any false designation of origin which is likely to cause confusion
or mistake as to the origin of the product. The law seeks to protect the public; thus, even if Lo does
not have the legal capacity to sue, the State can still prosecute the petitioners to prevent damage
and prejudice to the public.

On appeal, the DOJ issued a resolution affirming the finding of probable case. It gave credence to
Los assertion that he is the proper assignee of the subject marks. More importantly, it took note of
the petitioners admission that they used the words "Made in Portugal" when in fact, these products
were made in the Philippines. Had they intended to refer to the source of the design or the history of
the manufacture, they should have explicitly said so in their packaging. It then concluded that the
petitioners defenses would be better ventilated during the trial and that the admissions of the
petitioners make up a sufficient basis for probable cause.

The CA found no grave abuse of discretion on the part of the DOJ and affirmed the DOJs ruling.

When the petitioners filed their petition before us, we denied the petition for failure to sufficiently
show any reversible error in the assailed judgment to warrant the exercise of the Courts
discretionary power.

We find no reversible error on the part of the CA and the DOJ to merit reconsideration. The
petitioners reiterate their argument that the products bought during the test buy bearing the
trademarks in question were not manufactured by, or in any way connected with, the petitioners
and/or Wintrade. They also allege that the words "Made in Portugal" and "Original Portugal" refer to
the origin of the design and not to the origin of the goods.

The petitioners again try to convince the Court that they have not manufactured the products bearing
the marks "Made in Portugal" and "Original Portugal" that were bought during the test buy. However,
their own admission and the statement given by Chua bear considerable weight.

The admission in the petitioners Joint Affidavit is not in any way hypothetical, as they would have us
believe. They narrate incidents that have happened. They refer to Wintrades former association with
Casa Hipolito S.A. Portugal; to their decision to produce the burners in the Philippines; to their use of
the disputed marks; and to their justification for their use. It reads as follows:

24. As earlier mentioned, the predecessor-in-interest of Wintrade was the former exclusive licensee
of Casa Hipolito SA of Portugal since the 1970s, and that Wintrade purchased all the rights on the
said trademarks prior to the closure of said company. Indeed, the burners sold by Wintrade used to
be imported from Portugal, but Wintrade later on discovered the possibility of obtaining these
burners from other sources or of manufacturing the same in the Philippines.

Wintrades decision to procure these burners from sources other than Portugal is certainly its
management prerogative. The presence of the words "made in Portugal" and "original Portugal" on
the wrappings of the burners and on the burners themselves which are manufactured by Wintrade is
an allusion to the fact that the origin of the design of said burners can be traced back to Casa
Hipolito SA of Portugal, and that the history of the manufacture of said burners are rooted in
Portugal. These words were not intended to deceive or cause mistake and confusion in the minds of
the buying public.9

Chua, the owner of National Hardware the place where the test buy was conducted admits that
Wintrade has been furnishing it with kerosene burners with the markings "Made in Portugal" for the
past 20 years, to wit:

5. I hereby manifests (sic) that I had been dealing with Wintrade Industrial Sales Corporation
(WINTRADE for brevity) for around 20 years now by buying products from it. I am not however
aware that WINTRADE was no longer authorized to deal, distribute or sell kerosene burner bearing
the mark HIPOLITO and SEA HORSE Device, with markings "Made in Portugal" on the wrapper as I
was never informed of such by WINTRADE nor was ever made aware of any notices posted in the
newspapers informing me of such fact. Had I been informed, I would have surely stopped dealing
with WINTRADE.10 1wphi 1

Thus, the evidence shows that petitioners, who are officers of Wintrade, placed the words "Made in
Portugal" and "Original Portugal" with the disputed marks knowing fully well because of their
previous dealings with the Portuguese company that these were the marks used in the products
of Casa Hipolito S.A. Portugal. More importantly, the products that Wintrade sold were admittedly
produced in the Philippines, with no authority from Casa Hipolito S.A. Portugal. The law on
trademarks and trade names precisely precludes a person from profiting from the business
reputation built by another and from deceiving the public as to the origins of products. These facts
support the consistent findings of the State Prosecutor, the DOJ and the CA that probable cause
exists to charge the petitioners with false designation of origin. The fact that the evidence did not
come from Lo, but had been given by the petitioners, is of no significance.

The argument that the words "Made in Portugal" and "Original Portugal" refer to the origin of the
design and not to the origin of the goods does not negate the finding of probable cause; at the same
time, it is an argument that the petitioners are not barred by this Resolution from raising as a
defense during the hearing of the case.

WHEREFORE, premises considered, we hereby DENY the motion for reconsideration for lack of
merit.

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice
 ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, it
is hereby certified that the conclusions in the above Resolution had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1
Rollo, pp. 453-463.

2 Id. at 451-452.

3 Id. at 46-60.

4 Id. at 63-64.

5 Id. at 256-263.

6 Sections 169.1 and 170 of RA 8293 read:

Section 169. False Designations of Origin; False Description or Representation. -

169.1. Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or device, or
any combination thereof, or any false designation of origin, false or misleading
description of fact, or false or misleading representation of fact, which:

(a) Is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation,

connection, or association of such person with another person, or as to the origin,
sponsorship, or approval of his or her goods, services, or commercial activities by
another person; or
 (b) In commercial advertising or promotion, misrepresents the nature, characteristics,
qualities, or geographic origin of his or her or another person's goods, services, or
commercial activities, shall be liable to a civil action for damages and injunction
provided in Sections 156 and 157 of this Act by any person who believes that he or
she is or is likely to be damaged by such act.

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 (50,000) to Two hundred
thousand pesos (200,000), shall be imposed on any person who is found guilty of
committing any of the acts mentioned in Section 155, Section 168 and Subsection
169.1. (Arts. 188 and 189, Revised Penal Code)

7 Rollo, p. 47.

8 Id. at 47-48.

9 Id. at 199.

10 Id. at 228.
 THIRD DIVISION

G.R. No. 188526 November 11, 2013

CENTURY CHINESE MEDICINE CO., MING SENG CHINESE DRUGSTORE, XIANG JIAN
CHINESE DRUG STORE, TEK SAN CHINESE DRUG STORE, SIM SIM CHINESE DRUG STORE,
BAN SHIONG TAY CHINESE DRUG STORE and/or WILCENDO TAN MENDEZ, SHUANG YING
CHINESE DRUGSTORE, and BACLARAN CHINESE DRUG STORE, Petitioners,
vs.
PEOPLE OF THE PHILIPPINES and LING NA LAU, Respondents.

DECISION

PERALTA, J.:

Before us is a petition for review on certiorari which seeks to reverse and set aside the
Decision1 dated March 31, 2009 of the Court of Appeals in CA-G.R. CV No. 88952 and the
Resolution2 dated July 2, 2009, which denied reconsideration thereof. The CA reversed the
Order3 dated September 25, 2006 of the Regional Trial Court (RTC), Branch 143, Makati City,
quashing Search Warrants Nos. 05-030, 05-033, 05-038, 05-022, 05-023, 05-025, 05-042 and 05-
043, and the Order4 dated March 7, 2007 denying reconsideration thereof.

The antecedent facts are as follows:

Respondent Ling Na Lau, doing business under the name and style Worldwide Pharmacy,5 is the
sole distributor and registered trademark owner of TOP GEL T.G. & DEVICE OF A LEAF papaya
whitening soap as shown by Certificate of Registration 4-2000-009881 issued to her by the
Intellectual Property Office (IPO) for a period of ten years from August 24, 2003.6 On November 7,
2005, her representative, Ping Na Lau, (Ping) wrote a letter7addressed to National Bureau of
Investigation (NBI) Director Reynaldo Wycoco, through Atty. Jose Justo Yap and Agent Joseph G.
Furing (Agent Furing), requesting assistance for an investigation on several drugstores which were
selling counterfeit whitening papaya soaps bearing the general appearance of their products.

Agent Furing was assigned to the case and he executed an affidavit8 stating that: he conducted his
own investigation, and on November 9 and 10, 2005, he, together with Junayd Esmael (Esmael),
were able to buy whitening soaps bearing the trademark "TOP-GEL", "T.G." & "DEVICE OF A LEAF"
with corresponding receipts from a list of drugstores which included herein petitioners Century
Chinese Medicine Co., Min Seng Chinese Drugstore, Xiang Jiang Chinese Drug Store, Tek San
Chinese Drug Store, Sim Sim Chinese Drug Store, Ban Shiong Tay Drugstore, Shuang Ying
Chinese Drugstore, and Baclaran Chinese Drug Store; while conducting the investigation and test
buys, he was able to confirm Ping's complaint to be true as he personally saw commercial quantities
of whitening soap bearing the said trademarks being displayed and offered for sale at the said
drugstores; he and Esmael took the purchased items to the NBI, and Ping, as the authorized
representative and expert of Worldwide Pharmacy in determining counterfeit and unauthorized
reproductions of its products, personally examined the purchased samples, and issued a
Certification9 dated November 18, 2005 wherein he confirmed that, indeed, the whitening soaps
bearing the trademarks "TOP-GEL", "T.G." & "DEVICE OF A LEAF" from the subject drugstores
were counterfeit.

Esmael also executed an affidavit10 corroborating Agent Furing's statement. Ping's affidavit11 stated
that upon his personal examination of the whitening soaps purchased from petitioners bearing the
subject trademark, he found that the whitening soaps were different from the genuine quality of their
original whitening soaps with the trademarks "TOP-GEL", "T.G." & "DEVICE OF A LEAF" and
certified that they were all counterfeit.

On November 21, 2005, Agent Furing applied for the issuance of search warrants before the
Regional Trial Court (RTC), Branch 143, Makati City, against petitioners and other establishments
for violations of Sections 168 and 155, both in relation to Section 170 of Republic Act (RA) No. 8293,
otherwise known as the Intellectual Property Code of the Philippines. Section 168, in relation to
Section 170, penalizes unfair competition; while Section 155, in relation to Section 170, punishes
trademark infringement.

On November 23, 2005, after conducting searching questions upon Agent Furing and his witnesses,
the RTC granted the applications and issued Search Warrants Nos. 05-030, 05-033, and 05-038 for
unfair competition and Search Warrants Nos. 05-022, 05-023, 05-025, 05-042 and 05-043 for
trademark infringement against petitioners.

On December 5, 2005, Agent Furing filed his Consolidated Return of Search Warrants.12

On December 8, 2005, petitioners collectively filed their Motion to Quash13 the Search Warrants
contending that their issuances violated the rule against forum shopping; that Benjamin Yu (Yu) is
the sole owner and distributor of the product known as "TOP-GEL"; and there was a prejudicial
question posed in Civil Case No. 05-54747 entitled Zenna Chemical Industry v. Ling Na Lau, et al.,
pending in Branch 93 of the RTC of Quezon City, which is a case filed by Yu against respondent for
damages due to infringement of trademark/tradename, unfair competition with prayer for the
immediate issuance of a temporary restraining order and/or preliminary prohibitory injunction.

On January 9, 2006, respondent filed her Comment/Opposition14 thereto arguing the non-existence
of forum shopping; that Yu is not a party- respondent in these cases and the pendency of the civil
case filed by him is immaterial and irrelevant; and that Yu cannot be considered the sole owner and
distributor of "TOP GEL T.G. & DEVICE OF A LEAF." The motion was then submitted for resolution
in an Order dated January 30, 2006. During the pendency of the case, respondent, on April 20,
2006, filed a Submission15 in relation to the Motion to Quash attaching an Order16 dated March 21,
2006 of the IPO in IPV Case No. 10-2005-00001 filed by respondent against Yu, doing business
under the name and style of MCA Manufacturing and Heidi S. Cua, proprietor of South Ocean
Chinese Drug Stores for trademark infringement and/or unfair competition and damages with prayer
for preliminary injunction. The Order approved therein the parties' Joint Motion To Approve
Compromise Agreement filed on March 8, 2006. We quote in its entirety the Order as follows:

The Compromise Agreement between the herein complainant and respondents provides as follows:

1. Respondents acknowledge the exclusive right of Complainant over the trademark TOP
GEL T.G. & DEVICE OF A LEAF for use on papaya whitening soap as registered under
Registration No. 4-2000-009881 issued on August 24, 2003.

2. Respondents acknowledge the appointment by Zenna Chemical Industry Co., Ltd. of

Complainant as the exclusive Philippine distributor of its products under the tradename and
trademark TOP GEL MCA & MCA DEVICE (A SQUARE DEVICE CONSISTING OF A
STYLIZED REPRESENTATION OF A LETTER "M" ISSUED " OVER THE LETTER "CA") as
registered under Registration No. 4-1996-109957 issued on November 17, 2000, as well as
the assignment by Zenna Chemical Industry Co., Ltd. to Complainant of said mark for use on
papaya whitening soap.
 3. Respondents admit having used the tradename and trademark aforesaid but after having
realized that Complainant is the legitimate assignee of TOP GEL MCA & MCA DEVICE and
the registered owner of TOP GEL T.G. & DEVICE OF A LEAF, now undertake to voluntarily
cease and desist from using the aforesaid tradename and trademark and further undertake
not to manufacture, sell, distribute, and otherwise compete with Complainant, now and at
anytime in the future, any papaya whitening soap using or bearing a mark or name identical
or confusingly similar to, or constituting a colorable imitation of, the tradename and
trademark TOP GEL MCA & MCA DEVICE and/or TOP GEL T.G. & DEVICE OF A LEAF as
registered and described above.

4. Respondents further undertake to withdraw and/or dismiss their counterclaim and petition
to cancel and/or revoke Registration No. 4-2000-009881 issued to Complainant.
Respondents also further undertake to pull out within 45 days from approval of the
Compromise Agreement all their products bearing a mark or name identical or confusingly
similar to, or constituting a colorable imitation of, the tradename and trademark TOP GEL
MCA & MCA DEVICE and/or TOP GEL T.G. & DEVICE OF A LEAF, from the market
nationwide.

5. Respondents finally agree and undertake to pay Complainant liquidated damages in the
amount of FIVE HUNDRED THOUSAND (Php500,000.00) PESOS for every breach or
violation of any of the foregoing undertakings which complainant may enforce by securing a
writ of execution from this Office, under this case.

6. Complainant, on the other hand, agrees to waive all her claim for damages against
Respondents as alleged in her complaint filed in the Intellectual Property Office only.

7. The Parties hereby agree to submit this Compromise Agreement for Approval of this
Office and pray for issuance of a decision on the basis thereof.

Finding the Compromise Agreement to have been duly executed and signed by the parties and/or
their representatives/counsels and the terms and conditions thereof to be in conformity with the law,
morals, good customs, public order and public policy, the same is hereby APPROVED. Accordingly,
the above-entitled case is DISMISSED as all issues raised concerning herein parties have been
rendered MOOT AND ACADEMIC.

SO ORDERED.17

On September 25, 2006, the RTC issued its Order18 sustaining the Motion to Quash the Search
Warrants, the dispositive portion of which reads as follows:

WHEREFORE, finding that the issuance of the questioned search warrants were not supported by
probable cause, the Motion to Quash is GRANTED. Search warrants nos. 05-030, 05-033, 05-038,
05-022, 05-023, 05-025, 05-042, 05-043 are ordered lifted and recalled.

The NBI Officers who effected the search warrants are hereby ordered to return the seized items to
herein respondents within ten (10) days from receipt of this Order.

So Ordered.19

In quashing the search warrants, the RTC applied the Rules on Search and Seizure for Civil Action
in Infringement of Intellectual Property Rights.20 It found the existence of a prejudicial question which
was pending before Branch 93 of RTC Quezon City, docketed as Civil Case No. 05-54747, on the
determination as to who between respondent and Yu is the rightful holder of the intellectual property
right over the trademark TOP GEL T.G. & DEVICE OF A LEAF; and there was also a case for
trademark infringement and/or unfair competition filed by respondent against Yu before the IPO
which was pending at the time of the application for the search warrants. It is clear, therefore, that at
the time of the filing of the application for the search warrants, there is yet no determination of the
alleged right of respondent over the subject trademark/tradename. Also, the RTC found that
petitioners relied heavily on Yu's representation that he is the sole owner/distributor of the Top Gel
whitening soap, as the latter even presented Registration No. 4-1996-109957 from the IPO for a
term of 20 years from November 17, 2000 covering the same product. There too was the notarized
certification from Zenna Chemical Industry of Taiwan, owner of Top Gel MCA, with the caveat that
the sale, production or representation of any imitated products under its trademark and tradename
shall be dealt with appropriate legal action.

The RTC further said that in the determination of probable cause, the court must necessarily resolve
whether or not an offense exists to justify the issuance of a search warrant or the quashal of the one
already issued. In this case, respondent failed to prove the existence of probable cause, which
warranted the quashal of the questioned search warrants.

On November 13, 2006, respondent filed an Urgent Motion to Hold in Abeyance the Release of
Seized Evidence.21

Respondent filed a motion for reconsideration, which the RTC denied in its Order22 dated March 7,
2007.

Respondent then filed her appeal with the CA. After respondent filed her appellant's brief and
petitioners their appellee's brief, the case was submitted for decision.

On March 31, 2009, the CA rendered its assailed Decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING

the appeal filed in this case and SETTING ASIDE the Order dated March 7, 2007 issued by Branch
143 of the Regional Trial Court of the National Capital Judicial Region stationed in Makati City in the
case involving Search Warrants Nos. 05-030, 05-033, 05-038, 05-022, 05-023, 05-025, 05-042, 05-
043.23

In reversing the RTC's quashal of the search warrants, the CA found that the search warrants were
applied for and issued for violations of Sections 155 and 168, in relation to Section 170, of the
Intellectual Property Code and that the applications for the search warrants were in anticipation of
criminal actions which are to be instituted against petitioners; thus, Rule 126 of the Rules of Criminal
Procedure was applicable. It also ruled that the basis for the applications for issuance of the search
warrants on grounds of trademarks infringement and unfair competition was the trademark TOP GEL
T.G. & DEVICE OF A LEAF; that respondent was the registered owner of the said trademark, which
gave her the right to enforce and protect her intellectual property rights over it by seeking assistance
from the NBI.

The CA did not agree with the RTC that there existed a prejudicial question, since Civil Case No. 05-
54747 was already dismissed on June 10, 2005, i.e., long before the search warrants subject of this
appeal were applied for; and that Yu's motion for reconsideration was denied on September 15,
2005 with no appeal having been filed thereon as evidenced by the Certificate of Finality issued by
the said court.
Petitioners' motion for reconsideration was denied by the CA in a Resolution dated July 2, 2009.
Hence, this petition filed by petitioners raising the issue that:

(A) THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN
REVERSING THE FINDINGS OF THE REGIONAL TRIAL COURT AND HELD THAT THE
LATTER APPLIED THE RULES ON SEARCH AND SEIZURE IN CIVIL ACTIONS FOR
INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.24

(B) THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION WHEN
IT BASED ITS RULING ON THE ARGUMENT WHICH WAS BROUGHT UP FOR THE
FIRST TIME IN RESPONDENT LING NA LAU'S APPELLANT'S BRIEF.25

Petitioners contend that the products seized from their respective stores cannot be the subject of the
search warrants and seizure as those Top Gel products are not fruits of any crime, infringed product
nor intended to be used in any crime; that they are legitimate distributors who are authorized to sell
the same, since those genuine top gel products bore the original trademark/tradename of TOP GEL
MCA, owned and distributed by Yu. Petitioners also claim that despite the RTC's order to release the
seized TOP GEL products, not one had been returned; that one or two samples from each
petitioners' drugstore would have sufficed in case there is a need to present them in a criminal
prosecution, and that confiscation of thousands of these products was an overkill.

Petitioners also argue that the issue that the RTC erred in applying the rules on search and seizure
in anticipation of a civil action was never raised in the RTC.

The issue for resolution is whether or not the CA erred in reversing the RTC's quashal of the
assailed search warrants.

We find no merit in the petition.

The applications for the issuance of the assailed search warrants were for violations of Sections 155
and 168, both in relation to Section 170 of Republic Act (RA) No. 8293, otherwise known as the
Intellectual Property Code of the Philippines. Section 155, in relation to Section 170, punishes
trademark infringement; while Section 168, in relation to Section 170, penalizes unfair competition,
to wit:

Sec 155. Remedies; Infringement. Any person who shall, without the consent of the owner of the
registered mark:

155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

While

Sec. 168. Unfair Competition, Rights, Regulation and Remedies.

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

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

And

SEC. 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 (50,000.00) to Two hundred thousand pesos (200,000.00) shall be imposed on
any person who is found guilty of committing any of the acts mentioned in Section 155
[Infringement], Section 168 [Unfair Competition] and Subsection 169.1 [False Designation of Origin
and False Description or Representation].

Thus, we agree with the CA that A.M. No. 02-1-06-SC, which provides for the Rules on the Issuance
of the Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights, is not
applicable in this case as the search warrants were not applied based thereon, but in anticipation of
criminal actions for violation of intellectual property rights under RA 8293. It was established that
respondent had asked the NBI for assistance to conduct investigation and search warrant
implementation for possible apprehension of several drugstore owners selling imitation or counterfeit
TOP GEL T.G. & DEVICE OF A LEAF papaya whitening soap. Also, in his affidavit to support his
application for the issuance of the search warrants, NBI Agent Furing stated that "the items to be
seized will be used as relevant evidence in the criminal actions that are likely to be instituted."
Hence, Rule 126 of the Rules of Criminal Procedure applies.

Rule 126 of the Revised Rules of Court, which governs the issuance of the assailed Search
Warrants, provides, to wit:

SEC. 3. Personal property to be seized. - A search warrant may be issued for the search and
seizure of personal property:

(a) Subject of the offense;

(b) Stolen or embezzled and other proceeds or fruits of the offense; or

(c) Used or intended to be used as the means of committing an offense.

SEC. 4. Requisites for issuing search warrant. - A search warrant shall not issue except upon
probable cause in connection with one specific offense to be determined personally by the judge
after examination under oath or affirmation of the complainant and the witnesses he may produce,
and particularly describing the place to be searched and the things to be seized which may be
anywhere in the Philippines.
SEC. 5. Examination of complainant; record. - The judge must, before issuing the warrant,
personally examine in the form of searching questions and answers, in writing and under oath, the
complainant and the witnesses he may produce on facts personally known to them and attach to the
record their sworn statements together with the affidavits submitted.

A core requisite before a warrant shall validly issue is the existence of a probable cause, meaning
"the existence of such facts and circumstances which would lead a reasonably discreet and prudent
man to believe that an offense has been committed and that the objects sought in connection with
the offense are in the place to be searched."26And when the law speaks of facts, the reference is to
facts, data or information personally known to the applicant and the witnesses he may present.
Absent the element of personal knowledge by the applicant or his witnesses of the facts upon which
the issuance of a search warrant may be justified, the warrant is deemed not based on probable
cause and is a nullity, its issuance being, in legal contemplation, arbitrary.27 The determination of
probable cause does not call for the application of rules and standards of proof that a judgment of
conviction requires after trial on the merits.28 As implied by the words themselves, "probable cause"
is concerned with probability, not absolute or even moral certainty. The prosecution need not present
at this stage proof beyond reasonable doubt. The standards of judgment are those of a reasonably
prudent man,29 not the exacting calibrations of a judge after a full-blown trial.30

The RTC quashed the search warrants, saying that (1) there exists a prejudicial question pending
before Branch 93 of the RTC of Quezon City, docketed as Civil Case No. 05-54747, i.e., the
determination as to who between respondent and Yu is the rightful holder of the intellectual property
right over the trademark TOP GEL T.G. & DEVICE OF A LEAF; and there was also a case for
trademark infringement and/or unfair competition filed by respondent against Yu pending before the
IPO, docketed as IPV Case No. 10-2005-00001; and (2) Yu's representation that he is the sole
distributor of the Top Gel whitening soap, as the latter even presented Registration No. 4-1996-
109957 issued by the IPO to Zenna Chemical Industry as the registered owner of the trademark
TOP GEL MCA & DEVICE MCA for a term of 20 years from November 17, 2000 covering the same
product.

We do not agree. We affirm the CA's reversal of the RTC Order quashing the search warrants.

The affidavits of NBI Agent Furing and his witnesses, Esmael and Ling, clearly showed that they are
seeking protection for the trademark "TOP GEL T.G. and DEVICE OF A LEAF" registered to
respondent under Certificate of Registration 4-2000-009881 issued by the IPO on August 24, 2003,
and no other. While petitioners claim that the product they are distributing was owned by Yu with the
trademark TOP GEL MCA and MCA DEVISE under Certificate of Registration 4-1996-109957, it was
different from the trademark TOP GEL T.G. and DEVICE OF A LEAF subject of the application. We
agree with the CA's finding in this wise:

x x x It bears stressing that the basis for the applications for issuances of the search warrants on
grounds of trademark infringement and unfair competition is the trademark TOP GEL T.G. &
DEVICE OF A LEAF. Private complainant-appellant was issued a Certificate of Registration No. 4-
2000-009881 of said trademark on August 24, 2003 by the Intellectual Property Office, and is thus
considered the lawful holder of the said trademark. Being the registrant and the holder of the same,
private complainant-appellant had the authority to enforce and protect her intellectual property rights
over it. This prompted her to request for assistance from the agents of the NBI, who thereafter
conducted a series of investigation, test buys and inspection regarding the alleged trademark
infringement by herein respondents-appellees. Subsequently, Ping Na Lau, private complainant-
appellants representative, issued a certification with the finding that the examined goods were
counterfeit. This prompted the NBI agents to apply for the issuances of search warrants against the
respondents-appellees. Said applications for the search warrants were granted after by Judge
Laguilles after examining under oath the applicant Agent Furing of the NBI and his witnesses Ping
Na Lau and Junayd R. Ismael.

Based on the foregoing, it is clear that the requisites for the issuance of the search warrants had
been complied with and that there is probable cause to believe that an offense had been committed
and that the objects sought in connection with the offense were in the places to be searched. The
offense pertains to the alleged violations committed by respondents-appellees upon the intellectual
property rights of herein private complainant-appellant, as holder of the trademark TOP GEL T.G. &
DEVICE OF A LEAF under Certificate of Registration No. 4-2000-009881, issued on August 24,
2003 by the Intellectual Property Office.31

Notably, at the time the applications for the issuance of the search warrants were filed on November
21, 2005, as the CA correctly found, Civil Case No. Q-05-54747, which the RTC found to be where a
prejudicial question was raised, was already dismissed on June 10, 2005,32 because of the pendency
of a case involving the same issues and parties before the IPO. Yu's motion for reconsideration was
denied in an Order33 dated September 15, 2005. In fact, a Certificate of Finality34 was issued by the
RTC on January 4, 2007.

Moreover, the IPO case for trademark infringement and unfair competition and damages with prayer
for preliminary injunction filed by respondent against Yu and Heidi Cua, docketed as IPV Case No.
10-2005-00001, would not also be a basis for quashing the warrants. In fact, prior to the
1avv phi 1

applications for the issuance of the assailed search warrants on November 21, 2005, the IPO had
issued an Order35 dated October 20, 2005 granting a writ of preliminary injunction against Yu and
Cua, the dispositive portion of which reads:

WHEREFORE, the WRIT OF PRELIMINARY INJUNCTION is hereby issued against Respondent,

Benjamin Yu, doing business under the name and style of MCA Manufacturing and Heidi S. Cua,
Proprietor of South Ocean Chinese Drug Store, and their agents, representatives, dealers and
distributors and all persons acting in their behalf, to cease and desist using the trademark "TOP GEL
T.G. & DEVICE OF A LEAF" or any colorable imitation thereof on Papaya whitening soaps they
manufacture, sell, and/or offer for sale, and otherwise, from packing their Papaya Whitening Soaps
in boxes with the same general appearance as those of complainant's boxes within a period of
NINETY (90) DAYS, effective upon the receipt of respondent of the copy of the COMPLIANCE filed
with this Office by the Complainant stating that it has posted a CASH BOND in the amount of ONE
HUNDRED THOUSAND PESOS (Php100,000.00) together with the corresponding Official Receipt
Number and date thereof. Consequently, complainant is directed to inform this Office of actual date
of receipt by Respondent of the aforementioned COMPLIANCE.36

To inform the public of the issuance of the writ of preliminary injunction, respondent's counsel had
the dispositive portion of the Order published in The Philippine Star newspaper on October 30,
2005.37 Thus, it was clearly stated that Yu, doing business under the name and style of MCA
Manufacturing, his agents, representatives, dealers and distributors and all persons acting in his
behalf, were to cease and desist from using the trademark "TOP GEL & DEVICE OF A LEAF" or any
colorable imitation thereof on Papaya Whitening soaps they manufacture, sell and/or offer for sale.
Petitioners, who admitted having derived their TOP GEL products from Yu, are, therefore, notified of
such injunction and were enjoined from selling the same.

Notwithstanding, at the time of the application of the search warrants on November 21, 2005, and
while the injunction was in effect, petitioners were still selling the alleged counterfeit products
bearing the trademark TOP GEL T.G. & DEVICE OF A LEAF. There exists a probable cause for
violation of respondent's intellectual property rights, which entitles her as the registered owner of the
trademark TOP GEL and DEVICE OF A LEAF to be protected by the issuance of the search
warrants.

More importantly, during the pendency of petitioners' motion to quash in the RTC, respondent
submitted the Order dated March 8, 2006 of the IPO in IPV Case No. 10-2005-00001, where the writ
of preliminary injunction was earlier issued, approving the compromise agreement entered into by
respondent with Yu and Cua where it was stated, among others, that:

1. Respondents acknowledge the exclusive right of Complainant over the trademark TOP
GEL T.G. & DEVICE OF A LEAF for use on papaya whitening soap as registered under
Registration No. 4-2000-009881 issued on August 24, 2003.

2. Respondents acknowledge the appointment by Zenna Chemical Industry Co., Ltd. of

Complainant as the exclusive Philippine distributor of its products under the tradename and
trademark TOP GEL MCA & MCA DEVICE (A SQUARE DEVICE CONSISTING OF A
STYLIZED REPRESENTATION OF A LETTER "M" OVER THE LETTER "CA") as registered
under Registration No 4-1996-109957 issued on November 17, 2000, as well as the
assignment by Zenna Chemical Industry Co., Ltd. to Complainant of said mark for use on
papaya whitening soap.

3. Respondents admit having used the tradename and trademark aforesaid, but after having
realized that Complainant is the legitimate assignee of TOP GEL MCA & MCA DEVICE and
the registered owner of TOP GEL T.G. & DEVICE OF A LEAF, now undertake to voluntarily
cease and desist from using the aforesaid tradename and trademark, and further undertake
not to manufacture, sell and distribute and otherwise compete with complainant, now and at
anytime in the future, any papaya whitening soap using or bearing a mark or name identical
or confusingly similar to, or constituting a colorable imitation of the tradename and trademark
TOP GEL MCA & MCA DEVICE and/or TOP GEL T.G. & DEVICE OF A LEAF as registered
and described above.38

Hence, it appears that there is no more controversy as to who is the rightful holder of the trademark
TOP GEL T.G. & DEVICE OF A LEAF. Therefore, respondent, as owner of such registered
trademark has the right to the issuance of the search warrants.

Anent petitioners' claim that one or two samples of the Top Gel products from each of them, instead
of confiscating thousands of the products, would have sufficed for the purpose of an anticipated
criminal action, citing our ruling in Summerville General Merchandising Co. v. Court of Appeals,39 is
not meritorious.

We do not agree.

The factual milieu of the two cases are different. In Summerville, the object of the violation of
Summerville's intellectual property rights, as assignee of Royal playing cards and Royal brand
playing cards case, was limited to the design of Summerville's Royal plastic container case which
encased and wrapped the Crown brand playing cards. In the application for the search warrant
which the RTC subsequently issued, one of the items to be seized were the Crown brand playing
cards using the copyright plastic and Joker of Royal brand. Thus, numerous boxes containing Crown
playing cards were seized and upon the RTC's instruction were turned over to Summerville, subject
to the condition that the key to the said warehouse be turned over to the court sheriff. Respondents
moved for the quashal of the search warrant and for the return of the seized properties. The RTC
partially granted the motion by ordering the release of the seized Crown brand playing cards and the
printing machines; thus, only the Royal plastic container cases of the playing cards were left in the
custody of Summerville. The CA sustained the RTC order. On petition with us, we affirmed the CA.
We found therein that the Crown brand playing cards are not the subject of the offense as they are
genuine and the Crown trademark was registered to therein respondents names; that it was the
design of the plastic container/case that is alleged to have been utilized by respondents to deceive
the public into believing that the Crown brand playing cards are the same as those manufactured by
Summerville. We then said that assuming that the Crown playing cards could be considered subject
of the offense, a sample or two are more than enough to retain should there have been a need to
examine them along with the plastic container/case; and that there was no need to hold the
hundreds of articles seized. We said so in the context that since what was in dispute was the design
of the Royal plastic cases/containers of playing cards and not the playing card per se, a small
number of Crown brand playing cards would suffice to examine them with the Royal plastic
cases/containers. And the return of the playing cards would better serve the purposes of justice and
expediency. However, in this case, the object of the violation of respondent's intellectual property
right is the alleged counterfeit TOP GEL T.G. & DEVICE OF A LEAF papaya whitening soap being
sold by petitioners, so there is a need to confiscate all these articles to protect respondent's right as
the registered owner of such trademark.

Petitioners next contend that the CA's ruling on the applicability of Rule 126 of the Rules of Court
that the search warrants were issued in anticipation of a criminal action was only based on
respondent's claim which was only brought for the first time in her appellant's brief.

We are not persuaded.

We find worth quoting respondent's argument addressing this issue in its Comment, thus:

In the assailed Decision, the Court of Appeals found that the Rule correctly applicable to the subject
search warrants was Rule 126 of the Rules of Court. Petitioners fault the appellate court for ruling
that the Regional Trial Court incorrectly applied the Rules on Search and Seizure in Civil Actions for
Infringement of Intellectual Property Rights on the basis of an argument that private respondent
brought up for the first time in her Appellant's Brief.

A cursory perusal of the Appellant's Brief shows that the following issues/errors were raised, that: (1)
the Honorable Trial Court erred in holding that the "Rules on Search and Seizure for Infringement of
Intellectual Property Rights" apply to the search warrants at bar; (2) x x x.

It must be remembered that there was no trial on the merits to speak of in the trial court, and the
matter of the application of the wrong set of Rules only arose in the Order dated 25th September
2006 which sustained the Motion to Quash. A thorough examination of the Appellee's Brief filed by
petitioners (respondents-appellees in the Court of Appeals) reveals, however, that petitioners
NEVER assailed the first issue/error on the ground that the same was raised for the first time on
appeal. It is only now, after the appellate court rendered a Decision and Resolution unfavorable to
them, that petitioners questioned the alleged procedural error. Petitioners should now be considered
in estoppel to question the same.40

Indeed, perusing the appellee's (herein petitioners) brief filed with the CA, the matter of the non-
applicability of the rules on search and seizure in civil action for infringement of intellectual property
rights was never objected as being raised for the first time. On the contrary, petitioners had squarely
faced respondent's argument in this wise:

Appellant (herein respondent) contends that the rule (SC Adm. Memo 1-06, No. 02-1-06, Rule on
Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights) does [not] apply
to the search warrants in the [case] at bar, for the reason that the search warrants themselves reveal
that the same were applied for and issued for violations of "Section 155 in relation to Section 170 of
RA 8293" and violations of "Section 168 in relation to Section 170 of RA 8293," and that a perusal of
the records would show that there is no mention of a civil action or anticipation thereof, upon which
the search warrants are applied for.

Appellees (herein petitioners) cannot agree with the contention of the appellant. Complainant NBI
1wphi1

Agent Joseph G. Furing, who applied for the search warrants, violated the very rule on search and
seizure for infringement of Intellectual Property Rights. The search warrants applied for by the
complainants cannot be considered a criminal action. There was no criminal case yet to speak of
when complainants applied for issuance of the search warrants. There is distinction here because
the search applied for is civil in nature and no criminal case had been filed. The complaint is an
afterthought after the respondents-appellees filed their Motion to Quash Search Warrant before the
Regional Trial Court of Manila, Branch 24. The grounds enumerated in the rule must be complied
with in order to protect the constitutional mandate that "no person shall be deprived of life liberty or
property without due process of law nor shall any person be denied the equal protection of the law."
Clearly, the application of the search warrants for violation of unfair competition and infringement is
in the nature of a civil action.41

WHEREFORE, the petition for review is DENIED. The Decision dated March 31, 2009 and the
Resolution dated July 2, 2009 of the Court of Appeals, in CA-G.R. CV No. 88952, are hereby
AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ROBERTO A. ABAD JOSE CATRAL MENDOZA

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13 Article VIII of the Constitution and the Division Chairperson s Attestation, I
certify that the conclusions in the above I Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1
Penned by Associate Justice Isaias Dicdican , with Associate Justices Bienvenido L. Reyes
(now a member of this Court) and Marlene Gonzales-Sison, concurring; rollo, pp. 46-62.

2
Id. at 9-14.

3
Per Judge Zenaida T. Galapate-Laguilles; rollo, pp. 66-71.

4
Records, Vol. III, pp. 732-736.

5
Records, Vol. II, p. 275.

6
Records, Vol. I, pp. 97-98.

7
Id. at 75.

8
Id. at 73-74.

9
Records, Vol. I, pp. 83-84.

10
Id. at 96.

11
Id. at 88-89.

12
Id. at 172-175.

13
Records, Vol. II, pp. 239-259.

14
Id. at 611-620.

15
Id. at 624-628.

16
Per Bureau of Legal Affairs Director Estrellita Beltran- Abelardo; id. at 629-632.

17
Id. at 631-632. (Emphasis in the original)

18
Rollo, pp. 66-71

19
Id. at 71.
 SECTION 6. Grounds for the issuance of the order. - Before the Order can be issued, the
20

evidence proffered by the applicant and personally evaluated by the judge must show that:

(a) he is the right holder or his duly authorized representative;

(b) there is probable cause to believe that the applicant's right is being infringed or
that such infringement is imminent and there is a prima facie case for final relief
against the alleged infringing defendant or expected adverse party;

(c) damage, potential or actual, likely to be caused to the applicant is irreparable;

(d) there is demonstrable risk of evidence that the alleged infringing defendant or
expected adverse party may destroy, hide or remove the documents or articles
before any application inter partes can be made; and

(e) the documents and articles to be seized constitute evidence of the alleged
infringing defendant's or expected adverse party's infringing activity or that they
infringe upon the intellectual property right of the applicant or that they are used or
intended to be used as means of infringing the applicant's intellectual property right.

21
Records, Vol. III, pp. 639-644.

22
Id. at 733-737.

23
Rollo, p. 62. (Emphasis in the original)

24
Id. at 32.

25
Id. at 39.

26
Sony Music Entertainment (Phils.), Inc. v. Espaol, 493 Phil. 507, 517 (2005), citing People
v. Aruta, G.R. No. 120915, April 3, 1998, 288 SCRA 626.

Id., citing Columbia Pictures, Inc. v. Court of Appeals, 329 Phil. 875, 918 (1996), citing 79
27

CJS, Search and Seizures, Section 74, 862.

28
Microsoft Corporation v. Maxicorp, Inc., 481 Phil. 550, 566 (2004).

29
Id. at 566-567, citing People v. Sy Juco, 64 Phil. 667 (1937).

30
Id. at 567.

31
Rollo, pp 60-61.

32
Records, Vol. III, pp. 670-671; per Judge Apolinario D. Bruselas, Jr.

33
Id. at 672; per pairing Judge Samuel H. Gaerlan.

Id. at 731; per Atty. Cecilia L. Cuevas-Torrijos, Clerk of Court of RTC, Branch 93, Quezon
34

City.
35
Id. at 674-681; per Hearing Officer Adoracion R. Umipig, Bureau of Legal Affairs, concurred
in by Director Estrellita Beltran-Abelardo.

36
Id. at 681.

37
Id. at 682.

38
Records, Vol. II, pp. 631-632.

39
G.R. No. 158767, June 26, 2007, 525 SCRA 602.

40
Rollo, p. 154.

41
CA rollo, pp. 116-117.
 SECOND DIVISION

G.R. No. 161693 June 28, 2005

MANOLO P. SAMSON, petitioner,

vs.
HON. VICTORIANO B. CABANOS, In his capacity as Acting Presiding Judge, Regional Trial
Court of Antipolo City, Branch 71,
PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents.

DECISION

PUNO, J.:

Petitioner Manolo P. Samson seeks the reversal of the orders dated January 22, 2003 and
November 17, 2003 issued by Presiding Judge Felix S. Caballes and Acting Presiding Judge
Victoriano B. Cabanos, respectively, of the Regional Trial Court (RTC) of Antipolo City, Branch 71, in
relation to Criminal Case No. 02-23183. The assailed orders denied petitioners motion to quash the
information for unfair competition filed against him before said court.1Petitioner also prayed that a
temporary restraining order and/or preliminary injunction be issued to enjoin respondent judge from
further proceeding with Criminal Case No. 02-23183 until the resolution of the instant petition. The
Court issued a temporary restraining order on February 18, 2004.2

The background facts: Petitioner was charged with the crime of unfair competition before the RTC of
Antipolo City in an Information that states:

The undersigned Senior State Prosecutor of the Department of Justice hereby accuses MANOLO P.
SAMSON for violation of Sec. 168.3 (a) in relation to Secs. 123.1 (e), 131.3 and 170 of RA 8293
otherwise known as the Intellectual Property Code of the Philippines, committed as follows:

That on or about the first week of November 1999 and sometime prior or subsequent thereto, in
Cainta, Rizal, Philippines, and within the jurisdiction of this Honorable Court, above-named accused,
owner/proprietor of ITTI Shoes Corporation located at F.P. Felix Avenue, Cainta, Rizal, did then and
there willfully, unlawfully and feloniously distribute, sell and/or offer for sale CATERPILLAR products
such as footwear, garments, clothing, bags, accessories and paraphernalia which are closely
identical to and/or colorable imitations of the authentic Caterpillar products and likewise using
trademarks, symbols and/or designs as would cause confusion, mistake or deception on the part of
the buying public to the damage and prejudice of CATERPILLAR, INC., the prior adopter, user and
owner of the following internationally famous marks: "CATERPILLAR", "CAT", "CATERPILLAR",
"CAT", "CATERPILLAR & DESIGN", "CAT AND DESIGN", "WALKING MACHINES" and "TRACK-
TYPE TRACTOR & DESIGN".

CONTRARY TO LAW.3

Petitioner moved to quash the information on the ground that the court has no jurisdiction over the
offense charged in the Information. He argued that Section 170 of Republic Act (R.A.) No.
82934 provides that the penalty for violation of Section 168 thereof is imprisonment from two (2) to
five (5) years and a fine ranging from fifty thousand pesos (50,000.00) to two hundred thousand
pesos (200,000.00), and R.A. No. 76915 amending Batas Pambansa (B.P.) Blg. 1296 vested the
Metropolitan Trial Courts (MTC) exclusive original jurisdiction over all offenses punishable with
imprisonment not exceeding six (6) years irrespective of the amount of the fine.7 Presiding Judge
Felix S. Caballes denied the motion for lack of merit in his order dated January 22, 2003.8 Petitioner
filed a motion for reconsideration which was likewise denied by Acting Presiding Judge Victoriano B.
Cabanos.9

Petitioner filed the instant petition for certiorari before this Court on pure question of law:

Whether or not the respondent Regional Trial Court has jurisdiction over the offenses charged in the
subject information where the penalty therein range from two (2) years to five (5) years, pursuant to
Section 170 of R.A. 8293, in the light of the enactment of Republic Act No. 7691, amending B.P. Blg.
129, which vests exclusive original jurisdiction on the Metropolitan Trial Courts over all offenses
punishable with "imprisonment not exceeding six (6) years irrespective of the amount of fine", in
relation to Section 163 of R.A. No. 8293.10

Petitioner reiterates his argument before the trial court in support of his motion to quash. He
contends that Section 170 of R.A. No. 8293 provides that the penalty to be imposed upon any
person guilty of violation of Section 168 of the law is "imprisonment from two (2) to five (5) years and
a fine ranging from fifty thousand pesos (50,000.00) to two hundred thousand pesos
(200,000.00)." Under Section 2 of R.A. No. 7691, amending Section 32 of B.P. 129, the MTC shall
exercise exclusive original jurisdiction over all offenses punishable with imprisonment not exceeding
six (6) years irrespective of the fine. As petitioner is charged with an offense penalized by
imprisonment not exceeding six (6) years, the jurisdiction to try the case lies with the MTC and not
the RTC. In addition, petitioner submits that the old Trademark Law, R.A. No. 166, conferring
jurisdiction on the Courts of First Instance (now RTC) over complaints for unfair competition, has
been repealed by Section 239 of R.A. No. 8293. He cites the Courts decision in Mirpuri vs. Court
of Appeals.11

The petition must be dismissed.

It appears that petitioner had already raised the same issue and argument before this Court in the
case of Samson vs. Daway,12 decided on July 21, 2004. That case involved exactly the same facts
and issue as in this case, except that the information for unfair competition against petitioner was
filed before the RTC of Quezon City. We held in that case:

The issues posed for resolution are - (1) Which court has jurisdiction over criminal and civil cases for
violation of intellectual property rights? xxx

Under Section 170 of R.A. No. 8293, which took effect on January 1, 1998, the criminal penalty for
infringement of registered marks, unfair competition, false designation of origin and false description
or representation, is imprisonment from 2 to 5 years and a fine ranging from Fifty Thousand Pesos to
Two Hundred Thousand Pesos, to wit:

SEC. 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 (50,000.00) to Two hundred thousand pesos (200,000.00) shall be imposed on
any person who is found guilty of committing any of the acts mentioned in Section 155
[Infringement], Section 168 [Unfair Competition] and Section 169.1 [False Designation of Origin and
False Description or Representation].

Corollarily, Section 163 of the same Code states that actions (including criminal and civil) under
Sections 150, 155, 164, 166, 167, 168 and 169 shall be brought before the proper courts with
appropriate jurisdiction under existing laws, thus -
SEC. 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. (Emphasis
supplied)

The existing law referred to in the foregoing provision is Section 27 of R.A. No. 166 (The Trademark
Law) which provides that jurisdiction over cases for infringement of registered marks, unfair
competition, false designation of origin and false description or representation, is lodged with the
Court of First Instance (now Regional Trial Court) -

SEC. 27. Jurisdiction of Court of First Instance. - All actions under this Chapter [V - Infringement]
and Chapters VI [Unfair Competition] and VII [False Designatiion of Origin and False Description or
Representation], hereof shall be brought before the Court of First Instance. 1avvphi1.net

We find no merit in the claim of petitioner that R.A. No. 166 was expressly repealed by R.A. No.
8293. The repealing clause of R.A. No. 8293, reads -

SEC. 239. Repeals. - 239.1. All Acts and parts of Acts inconsistent herewith, more particularly
Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of
the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as
amended, are hereby repealed. (Emphasis added)

Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety, otherwise, it
would not have used the phrases "parts of Acts" and "inconsistent herewith;" and it would have
simply stated "Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles
188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree
No. 285, as amended are hereby repealed." It would have removed all doubts that said specific laws
had been rendered without force and effect. The use of the phrases "parts of Acts" and "inconsistent
herewith" only means that the repeal pertains only to provisions which are repugnant or not
susceptible of harmonization with R.A. No. 8293. Section 27 of R.A. No. 166, however, is consistent
and in harmony with Section 163 of R.A. No. 8293. Had R.A. No. 8293 intended to vest jurisdiction
over violations of intellectual property rights with the Metropolitan Trial Courts, it would have
expressly stated so under Section 163 thereof.

Moreover, the settled rule in statutory construction is that in case of conflict between a general law
and a special law, the latter must prevail. Jurisdiction conferred by a special law to Regional Trial
Courts must prevail over that granted by a general law to Municipal Trial Courts.

In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws conferring jurisdiction over
violations of intellectual property rights to the Regional Trial Court. They should therefore prevail
over R.A. No. 7691, which is a general law. Hence, jurisdiction over the instant criminal case for
unfair competition is properly lodged with the Regional Trial Court even if the penalty therefor is
imprisonment of less than 6 years, or from 2 to 5 years and a fine ranging from 50,000.00 to
200,000.00.

In fact, to implement and ensure the speedy disposition of cases involving violations of intellectual
property rights under R.A. No. 8293, the Court issued A.M. No. 02-1-11-SC dated February 19, 2002
designating certain Regional Trial Courts as Intellectual Property Courts. On June 17, 2003, the
Court further issued a Resolution consolidating jurisdiction to hear and decide Intellectual Property
Code and Securities and Exchange Commission cases in specific Regional Trial Courts designated
as Special Commercial Courts.
The case of Mirpuri v. Court of Appeals, invoked by petitioner finds no application in the present
case. Nowhere in Mirpuri did we state that Section 27 of R.A. No. 166 was repealed by R.A. No.
8293. Neither did we make a categorical ruling therein that jurisdiction over cases for violation of
intellectual property rights is lodged with the Municipal Trial Courts. The passing remark in Mirpuri on
the repeal of R.A. No. 166 by R.A. No. 8293 was merely a backgrounder to the enactment of the
present Intellectual Property Code and cannot thus be construed as a jurisdictional pronouncement
in cases for violation of intellectual property rights.

The foregoing ruling is the law of the case and thus lays to rest the issue posed by petitioner. We
see no reason in this case to deviate therefrom. It is a basic legal principle that whatever is once
irrevocably established as the controlling legal rule or decision between the same parties in the case
continues to be the law of the case, whether correct on general principles or not, so long as the facts
on which such decision was predicated continue to be the facts of the case before the court.13

IN VIEW WHEREOF, the petition is DISMISSED. The temporary restraining order issued by this
Court on February 18, 2004 is hereby LIFTED.

SO ORDERED.

Austria-Martinez, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

Footnotes

1 Rollo, pp. 23-25.

2 Rollo, pp. 116-118.

3 Rollo, pp. 26-27.

4 Intellectual Property Code of the Philippines.

5An Act Expanding the Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts.

6 Judiciary Reorganization Act of 1980.

7 Rollo, pp. 29-32.

8 Rollo, pp. 23-24.

9 Rollo, p. 25.

10 Rollo, pp. 5-6.

11 318 SCRA 516 (1999).

12 434 SCRA 612 (2004).

13 Cucueco vs. Court of Appeals, et al., G.R. No. 139278, October 25, 2004.