G.R. No.

114508 November 19, 1999

PRIBHDAS J. MIRPURI, petitioner,

vs.
COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents.

PUNO, J.:

The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the
Philippines bound itself to honor and enforce in this country. As to whether or not the treaty affords
protection to a foreign corporation against a Philippine applicant for the registration of a similar
trademark is the principal issue in this case.

On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri,
filed an application with the Bureau of Patents for the registration of the trademark "Barbizon" for
use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and
selling these products under the firm name "L & BM Commercial" since March 3, 1970.

Private respondent Barbizon Corporation, a corporation organized and doing business under the
laws of New York, U.S.A., opposed the application. It claimed that:

The mark BARBIZON of respondent-applicant is confusingly similar to the

trademark BARBIZON which opposer owns and has not abandoned.

That opposer will be damaged by the registration of the mark BARBIZON and its
business reputation and goodwill will suffer great and irreparable injury.

That the respondent-applicant's use of the said mark BARBIZON which resembles
the trademark used and owned by opposer, constitutes an unlawful appropriation of
a mark previously used in the Philippines and not abandoned and therefore a
statutory violation of Section 4 (d) of Republic Act No. 166, as amended. 1

This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings,
the parties submitted the case for decision.

On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving
due course to Escobar's application, thus:

WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly,

Application Serial No. 19010 for the registration of the trademark BARBIZON, of
respondent Lolita R. Escobar, is given due course.

IT IS SO ORDERED. 2

This decision became final and on September 11, 1974, Lolita Escobar was issued a
certificate of registration for the trademark "Barbizon." The trademark was "for use in
"brassieres and lady's underwear garments like panties." 3

Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J.
Mirpuri who, under his firm name then, the "Bonito Enterprises," was the sole and exclusive
distributor of Escobar's "Barbizon" products.

In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the
trademark required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law.
Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration.
On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his
own application for registration of Escobar's trademark. Escobar later assigned her application to
herein petitioner and this application was opposed by private respondent. The case was docketed
as Inter Partes Case No. 2049 (IPC No. 2049).

In its opposition, private respondent alleged that:

(a) The Opposer has adopted the trademark BARBIZON (word), sometime in June
1933 and has then used it on various kinds of wearing apparel. On August 14, 1934,
Opposer obtained from the United States Patent Office a more recent registration of
the said mark under Certificate of Registration No. 316,161. On March 1, 1949,
Opposer obtained from the United States Patent Office a more recent registration for
the said trademark under Certificate of Registration No. 507,214, a copy of which is
herewith attached as Annex "A." Said Certificate of Registration covers the following
goods wearing apparel: robes, pajamas, lingerie, nightgowns and slips;

(b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON
and Bee design and used the said mark in various kinds of wearing apparel. On
March 15, 1977, Opposer secured from the United States Patent Office a registration
of the said mark under Certificate of Registration No. 1,061,277, a copy of which is
herein enclosed as Annex "B." The said Certificate of Registration covers the
following goods: robes, pajamas, lingerie, nightgowns and slips;

(c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and
a Representation of a Woman and thereafter used the said trademark on various
kinds of wearing apparel. Opposer obtained from the United States Patent Office
registration of the said mark on April 5, 1983 under Certificate of Registration No.
1,233,666 for the following goods: wearing apparel: robes, pajamas, nightgowns and
lingerie. A copy of the said certificate of registration is herewith enclosed as Annex
"C."

(d) All the above registrations are subsisting and in force and Opposer has not
abandoned the use of the said trademarks. In fact, Opposer, through a wholly-owned
Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing
the goods covered by said registrations and selling them to various countries,
thereby earning valuable foreign exchange for the country. As a result of
respondent-applicant's misappropriation of Opposer's BARBIZON trademark,
Philippine Lingerie Corporation is prevented from selling its goods in the local
market, to the damage and prejudice of Opposer and its wholly-owned subsidiary.

(e) The Opposer's goods bearing the trademark BARBIZON have been used in many
countries, including the Philippines, for at least 40 years and has enjoyed
international reputation and good will for their quality. To protect its registrations
in countries where the goods covered by the registrations are being sold, Opposer
has procured the registration of the trademark BARBIZON in the following
countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain,
Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece,
Guatemala, Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco,
Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South
Africa, Zambia, Egypt, and Iran, among others;

(f) To enhance its international reputation for quality goods and to further promote
goodwill over its name, marks and products, Opposer has extensively advertised its
products, trademarks and name in various publications which are circulated in the
United States and many countries around the world, including the Philippines;

(g) The trademark BARBIZON was fraudulently registered in the Philippines by one
Lolita R. Escobar under Registration No. 21920, issued on September 11, 1974, in
violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the
Trademark Law. Herein respondent applicant acquired by assignment the "rights"
 to the said mark previously registered by Lolita Escobar, hence respondent-
applicant's title is vitiated by the same fraud and criminal act. Besides, Certificate of
Registration No. 21920 has been cancelled for failure of either Lolita Escobar or
herein respondent-applicant, to seasonably file the statutory affidavit of use. By
applying for a re-registration of the mark BARBIZON subject of this opposition,
respondent-applicant seeks to perpetuate the fraud and criminal act committed by
Lolita Escobar.

(h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON
and Representation of a Woman trademarks qualify as well-known trademarks
entitled to protection under Article 6bis of the Convention of Paris for the Protection
of Industrial Property and further amplified by the Memorandum of the Minister of
Trade to the Honorable Director of Patents dated October 25, 1983 [sic], 4 Executive
Order No. 913 dated October 7, 1963 and the Memorandum of the Minister of Trade
and Industry to the Honorable Director of Patents dated October 25, 1983.

(i) The trademark applied for by respondent applicant is identical to Opposer's

BARBIZON trademark and constitutes the dominant part of Opposer's two other
marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a
Woman. The continued use by respondent-applicant of Opposer's trademark
BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial
and criminal piracy and if allowed registration will violate not only the Trademark
Law but also Article 189 of the Revised Penal Code and the commitment of the
Philippines to an international treaty. 5

Replying to private respondent's opposition, petitioner raised the defense of res judicata.

On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon
International." Petitioner registered the name with the Department of Trade and Industry (DTI) for
which a certificate of registration was issued in 1987.

Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for
cancellation of petitioner's business name.

On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of
registration, and declared private respondent the owner and prior user of the business name
"Barbizon International." Thus:

WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner
and prior user of the business name "BARBIZON INTERNATIONAL" under
Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the
name of respondent, is [sic] hereby ordered revoked and cancelled. . . . . 6

Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents.
On June 18, 1992, the Director rendered a decision declaring private respondent's opposition
barred by res judicata and giving due course to petitioner's application for registration, to wit:

WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby
DECLARED BARRED by res judicata and is hereby DISMISSED. Accordingly,
Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is
GIVEN DUE COURSE.

SO ORDERED. 7

Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415.
On April 30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686
was not barred by judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau
of Patents for further proceedings, viz:
 WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director
of Patents in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby
remanded to the Bureau of Patents for further proceedings, in accordance with this
pronouncement. No costs. 8

In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its
decision. 9 Hence, this recourse.

Before us, petitioner raises the following issues:

1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER

PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF,
CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF
PATENTS IS CONCERNED;

2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE

PRINCIPLE OF RES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S
OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE
TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF
REGISTRATION NO. 53920 ON NOVEMBER 16, 1992;

3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT ON THE MERITS"

REQUIRED A "HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE
EVIDENCE" AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE
ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING
TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF
"JUDGMENT ON THE MERITS" AS ONE OF THE REQUISITES TO CONSTITUTE RES
JUDICATA;

4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY

CANCELLING PETITIONER'S FIRM NAME "BARBIZON INTERNATIONAL" AND
WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN
EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049
HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE
BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE)
BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A.
166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE
DIRECTOR OF PATENTS. 10

Before ruling on the issues of the case, there is need for a brief background on the function and
historical development of trademarks and trademark law.

A "trademark" is defined under R.A. 166, the Trademark Law, as including "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. 11 This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the
Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods." 12 In
Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or
ownership of the goods to which it is affixed; to secure to him, who has been instrumental in
bringing into the market a superior article of merchandise, the fruit of his industry and skill; to
assure the public that they are procuring the genuine article; to prevent fraud and imposition; and
to protect the manufacturer against substitution and sale of an inferior and different article as his
product. 13

Modern authorities on trademark law view trademarks as performing three distinct functions: (1)
they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that
those articles come up to a certain standard of quality; and (3) they advertise the articles they
symbolize. 14
Symbols have been used to identify the ownership or origin of articles for several centuries. 15 As
early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in
southwestern Europe show bison with symbols on their flanks. 16 Archaeological discoveries of
ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones,
glassworks, bricks, etc. reveal some features which are thought to be marks or symbols. These
marks were affixed by the creator or maker of the article, or by public authorities as indicators for
the payment of tax, for disclosing state monopoly, or devices for the settlement of accounts between
an entrepreneur and his workmen. 17

In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace.
Fifteenth century England saw the compulsory use of identifying marks in certain trades. There
were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks
on paper, etc. 18 Every guild had its own mark and every master belonging to it had a special mark
of his own. The marks were not trademarks but police marks compulsorily imposed by the
sovereign to let the public know that the goods were not "foreign" goods smuggled into an area
where the guild had a monopoly, as well as to aid in tracing defective work or poor craftsmanship
to the artisan. 19 For a similar reason, merchants also used merchants' marks. Merchants dealt in
goods acquired from many sources and the marks enabled them to identify and reclaim their goods
upon recovery after shipwreck or piracy. 20

With constant use, the mark acquired popularity and became voluntarily adopted. It was not
intended to create or continue monopoly but to give the customer an index or guarantee of
quality. 21 It was in the late 18th century when the industrial revolution gave rise to mass
production and distribution of consumer goods that the mark became an important instrumentality
of trade and commerce. 22 By this time, trademarks did not merely identify the goods; they also
indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the
consuming public. 23 Eventually, they came to symbolize the goodwill and business reputation of
the owner of the product and became a property right protected by law. 24 The common law
developed the doctrine of trademarks and tradenames "to prevent a person from palming off his
goods as another's, from getting another's business or injuring his reputation by unfair means, and,
from defrauding the public." 25 Subsequently, England and the United States enacted national
legislation on trademarks as part of the law regulating unfair trade. 26 It became the right of the
trademark owner to exclude others from the use of his mark, or of a confusingly similar mark
where confusion resulted in diversion of trade or financial injury. At the same time, the trademark
served as a warning against the imitation or faking of products to prevent the imposition of fraud
upon the public. 27

Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective
agent for the actual creation and protection of goodwill. It imprints upon the public mind an
anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In
other words, the mark actually sells the goods. 28 The mark has become the "silent salesman," the
conduit through which direct contact between the trademark owner and the consumer is assured. It
has invaded popular culture in ways never anticipated that it has become a more convincing selling
point than even the quality of the article to which it refers. 29 In the last half century, the
unparalleled growth of industry and the rapid development of communications technology have
enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions
where the owner does not actually manufacture or sell the product itself. Goodwill is no longer
confined to the territory of actual market penetration; it extends to zones where the marked article
has been fixed in the public mind through advertising. 30 Whether in the print, broadcast or
electronic communications medium, particularly on the Internet, 31 advertising has paved the way
for growth and expansion of the product by creating and earning a reputation that crosses over
borders, virtually turning the whole world into one vast marketplace.

This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that
"Barbizon" products have been sold in the Philippines since 1970. Petitioner developed this market
by working long hours and spending considerable sums of money on advertisements and
promotion of the trademark and its products. Now, almost thirty years later, private respondent, a
foreign corporation, "swaggers into the country like a conquering hero," usurps the trademark and
invades petitioner's market. 32 Justice and fairness dictate that private respondent be prevented
from appropriating what is not its own. Legally, at the same time, private respondent is barred from
questioning petitioner's ownership of the trademark because of res judicata. 33
Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or
matter settled by judgment. 34 In res judicata, the judgment in the first action is considered
conclusive as to every matter offered and received therein, as to any other admissible matter which
might have been offered for that purpose, and all other matters that could have been adjudged
therein. 35 Res judicata is an absolute bar to a subsequent action for the same cause; and its
requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be
one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject
matter and parties; (d) there must be between the first and second actions, identity of parties, of
subject matter and of causes of action. 36

The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner.
Both claim that all the four elements of res judicata have been complied with: that the judgment in
IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over the
subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of
a hearing was immaterial because substantial issues were raised by the parties and passed upon by
the Director of Patents. 37

The decision in IPC No. 686 reads as follows:

xxx xxx xxx.

Neither party took testimony nor adduced documentary evidence. They submitted
the case for decision based on the pleadings which, together with the pertinent
records, have all been carefully considered.

Accordingly, the only issue for my disposition is whether or not the herein opposer
would probably be damaged by the registration of the trademark BARBIZON sought
by the respondent-applicant on the ground that it so resembles the trademark
BARBIZON allegedly used and owned by the former to be "likely to cause confusion,
mistake or to deceive purchasers."

On record, there can be no doubt that respondent-applicant's sought-to-be-

registered trademark BARBIZON is similar, in fact obviously identical, to opposer's
alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable
but very negligible difference lies in their respective appearances or manner of
presentation. Respondent-applicant's trademark is in bold letters (set against a
black background), while that of the opposer is offered in stylish script letters.

It is opposer's assertion that its trademark BARBIZON has been used in trade or
commerce in the Philippines prior to the date of application for the registration of
the identical mark BARBIZON by the respondent-applicant. However, the allegation
of facts in opposer's verified notice of opposition is devoid of such material
information. In fact, a reading of the text of said verified opposition reveals an
apparent, if not deliberate, omission of the date (or year) when opposer's alleged
trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2,
Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained
whether opposer's alleged use of the trademark BARBIZON could be prior to the use
of the identical mark by the herein respondent-applicant, since the opposer
attempted neither to substantiate its claim of use in local commerce with any proof
or evidence. Instead, the opposer submitted the case for decision based merely on
the pleadings.

On the other hand, respondent-applicant asserted in her amended application for

registration that she first used the trademark BARBIZON for brassiere (or
"brasseire") and ladies underwear garments and panties as early as March 3, 1970.
Be that as it may, there being no testimony taken as to said date of first use,
respondent-applicant will be limited to the filing date, June 15, 1970, of her
application as the date of first use (Rule 173, Rules of Practice in Trademark Cases).
 From the foregoing, I conclude that the opposer has not made out a case of probable
damage by the registration of the respondent-applicant's mark BARBIZON.

WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly,

Application Serial No. 19010, for the registration of the trademark BARBIZON of
respondent Lolita R. Escobar, is given due course.38

The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals
to rule that it was not. A judgment is on the merits when it determines the rights and liabilities of
the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections. 39 It
is not necessary that a trial should have been conducted. If the court's judgment is general, and not
based on any technical defect or objection, and the parties had a full legal opportunity to be heard
on their respective claims and contentions, it is on the merits although there was no actual hearing
or arguments on the facts of the case. 40 In the case at bar, the Director of Patents did not dismiss
private respondent's opposition on a sheer technicality. Although no hearing was conducted, both
parties filed their respective pleadings and were given opportunity to present evidence. They,
however, waived their right to do so and submitted the case for decision based on their pleadings.
The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on
the issue of prior use, which goes into the very substance of the relief sought by the parties. Since
private respondent failed to prove prior use of its trademark, Escobar's claim of first use was
upheld.

The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC
No. 686 and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the
same parties and the same subject matter, and have identical causes of action.

Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter.
Petitioner herein is the assignee of Escobar while private respondent is the same American
corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private
respondent counter-argues, however, that the two cases do not have identical causes of action. New
causes of action were allegedly introduced in IPC No. 2049, such as the prior use and registration of
the trademark in the United States and other countries worldwide, prior use in the Philippines, and
the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private
respondent also cited protection of the trademark under the Convention of Paris for the Protection
of Industrial Property, specifically Article 6bis thereof, and the implementation of Article 6bis by
two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and
Industry to the Director of Patents, as well as Executive Order (E.O.) No. 913.

The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris
Convention, is a multilateral treaty that seeks to protect industrial property consisting of patents,
utility models, industrial designs, trademarks, service marks, trade names and indications of source
or appellations of origin, and at the same time aims to repress unfair competition. 41 The
Convention is essentially a compact among various countries which, as members of the Union, have
pledged to accord to citizens of the other member countries trademark and other rights
comparable to those accorded their own citizens by their domestic laws for an effective protection
against unfair competition. 42 In short, foreign nationals are to be given the same treatment in each
of the member countries as that country makes available to its own citizens. 43 Nationals of the
various member nations are thus assured of a certain minimum of international protection of their
industrial property. 44

The Convention was first signed by eleven countries in Paris on March 20, 1883. 45 It underwent
several revisions at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in
1934, at Lisbon in 1958, 46 and at Stockholm in 1967. Both the Philippines and the United States of
America, herein private respondent's country, are signatories to the Convention. The United States
acceded on May 30, 1887 while the Philippines, through its Senate, concurred on May 10,
1965. 47 The Philippines' adhesion became effective on September 27, 1965, 48 and from this date,
the country obligated itself to honor and enforce the provisions of the Convention. 49

In the case at bar, private respondent anchors its cause of action on the first paragraph of Article
6bis of the Paris Convention which reads as follows:
 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, an imitation, or a 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 this 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. 50

This Article governs protection of well-known trademarks. Under the first paragraph, each
country of the Union bound itself to undertake to refuse or cancel the registration, and
prohibit the use of a trademark which is a reproduction, imitation or translation, or any
essential part of which trademark constitutes a reproduction, liable to create confusion, of a
mark considered by the competent authority of the country where protection is sought, to
be well-known in the country as being already the mark of a person entitled to the benefits
of the Convention, and used for identical or similar goods.

Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51 It is a self-
executing provision and does not require legislative enactment to give it effect in the member
country. 52 It may be applied directly by the tribunals and officials of each member country by the
mere publication or proclamation of the Convention, after its ratification according to the public
law of each state and the order for its execution. 53

The essential requirement under Article 6bis is that the trademark to be protected must be "well-
known" in the country where protection is sought. The power to determine whether a trademark is
well-known lies in the "competent authority of the country of registration or use." This competent
authority would be either the registering authority if it has the power to decide this, or the courts of
the country in question if the issue comes before a court. 54

Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of
Trade issued a Memorandum to the Director of Patents. The Minister ordered the Director that:

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. 55

Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum
to the Director of Patents, viz:

Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the
rule-making and adjudicatory powers of the Minister of Trade and Industry and
provides inter alia, that "such rule-making and adjudicatory powers should be
revitalized in order that the Minister of Trade and Industry can . . . apply more swift
and effective solutions and remedies to old and new problems . . . such as
infringement of internationally-known tradenames and trademarks . . ." and in view
of the decision of the Intermediate Appellate Court in the case of LA CHEMISE
LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP NO. 13359 (17) June
1983] 56 which affirms the validity of the MEMORANDUM of then Minister Luis R.
Villafuerte dated 20 November 1980 confirming our obligations under the PARIS
CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the
Republic of the Philippines is a signatory, you are hereby directed to implement
measures necessary to effect compliance with our obligations under said
Convention in general, and, more specifically, to honor our commitment under
Section 6bis 57 thereof, as follows:

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 partecases,
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 date of such
registration;

(d) that the trademark has long been established and

obtained goodwill and 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.

4. The Philippine Patent Office shall give due course to the

Opposition in cases already or hereafter filed against the registration
of trademarks entitled to protection of Section 6bisof said PARIS
CONVENTION as outlined above, by remanding applications filed by
one not entitled to such protection for final disallowance by the
Examination Division.

5. All pending applications for Philippine registration of signature

and other world-famous trademarks filed by applicants other than
their original owners or users shall be rejected forthwith. Where
such applicants have already obtained registration contrary to the
abovementioned PARIS CONVENTION and/or Philippine Law, they
shall be directed to surrender their Certificates of Registration to the
Philippine Patent Office for immediate cancellation proceedings.

xxx xxx xxx. 58

In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all
pending applications for Philippine registration of signature and other world-famous trademarks
by applicants other than their original owners or users. The Minister enumerated several
internationally-known trademarks and ordered the Director of Patents to require Philippine
registrants of such marks to surrender their certificates of registration.

In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known
trademarks but laid down guidelines for the Director of Patents to observe in determining whether
a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of
the Paris Convention. This was to be established through Philippine Patent Office procedures
in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent
Office was ordered to refuse applications for, or cancel the registration of, trademarks which
constitute a reproduction, translation or imitation of a trademark owned by a person who is a
citizen of a member of the Union. All pending applications for registration of world-famous
trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin
Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then
President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of
Trade and Industry for the effective protection of consumers and the application of swift solutions
to problems in trade and industry. 59

Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984
landmark case of La Chemise Lacoste, S.A. v. Fernandez. 60 This court ruled therein that under the
provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the
"competent authority" to determine whether a trademark is well-known in this country. 61

The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the
Paris Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in
1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris
Convention. Article 6bis was already in effect five years before the first case was instituted. Private
respondent, however, did not cite the protection of Article 6bis, neither did it mention the Paris
Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention
and the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin
Memorandum were invoked by private respondent.

The Solicitor General argues that the issue of whether the protection of Article 6bis of the
Convention and the two Memoranda is barred by res judicata has already been answered
in Wolverine Worldwide, Inc. v. Court of
Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent
Office a petition for cancellation of the registration certificate of private respondent, a Filipino
citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the
registrant of the internationally-known trademark in the United States and other countries, and
cited protection under the Paris Convention and the Ongpin Memorandum. The petition was
dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's
predecessor-in-interest filed two petitions for cancellation of the same trademark against
respondent's predecessor-in-interest. The Patent Office dismissed the petitions, ordered the
cancellation of registration of petitioner's trademark, and gave due course to respondent's
application for registration. This decision was sustained by the Court of Appeals, which decision
was not elevated to us and became final and
executory. 63

Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark
Law, its subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and
E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said
Memorandum and E.O. did not grant a new cause of action because it did "not amend the
Trademark Law," . . . "nor did it indicate a new policy with respect to the registration in the
Philippines of world-famous trademarks." 64 This conclusion was based on the finding that
Wolverine's two previous petitions and subsequent petition dealt with the same issue of ownership
of the trademark. 65 In other words, since the first and second cases involved the same issue of
ownership, then the first case was a bar to the second case.

In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No.
686. Private respondent's opposition therein was merely anchored on:

(a) "confusing similarity" of its trademark with that of Escobar's;

(b) that the registration of Escobar's similar trademark will cause damage to private
respondent's business reputation and goodwill; and

(c) that Escobar's use of the trademark amounts to an unlawful appropriation of a

mark previously used in the Philippines which act is penalized under Section 4 (d)
of the Trademark Law.

In IPC No. 2049, private respondent's opposition set forth several issues summarized as
follows:

(a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products
such as robes, pajamas, lingerie, nightgowns and slips;

(b) that the trademark "BARBIZON" was registered with the United States Patent
Office in 1934 and 1949; and that variations of the same trademark, i.e.,
"BARBIZON" with Bee design and "BARBIZON" with the representation of a woman
were also registered with the U.S. Patent Office in 1961 and 1976;

(c) that these marks have been in use in the Philippines and in many countries all
over the world for over forty years. "Barbizon" products have been advertised in
international publications and the marks registered in 36 countries worldwide;

(d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based
on fraud; and this fraudulent registration was cancelled in 1979, stripping Escobar
of whatsoever right she had to the said mark;

(e) Private respondent's trademark is entitled to protection as a well-known mark

under Article 6bis of the Paris Convention, Executive Order No. 913, and the two
Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of
Trade and Industry to the Director of Patents;
 (f) Escobar's trademark is identical to private respondent's and its use on the same
class of goods as the latter's amounts to a violation of the Trademark Law and
Article 189 of the Revised Penal Code.

IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use
of the trademark in the United States and other countries, and the international recognition
and reputation of the trademark established by extensive use and advertisement of private
respondent's products for over forty years here and abroad. These are different from the
issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have
been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only.
Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word
and symbol "Barbizon," 66 as the first and registered user of the mark attached to its
products which have been sold and advertised worldwide for a considerable number of
years prior to petitioner's first application for registration of her trademark in the
Philippines. Indeed, these are substantial allegations that raised new issues and necessarily
gave private respondent a new cause of action. Res judicata does not apply to rights, claims
or demands, although growing out of the same subject matter, which constitute separate or
distinct causes of action and were not put in issue in the former action. 67

Respondent corporation also introduced in the second case a fact that did not exist at the time the
first case was filed and terminated. The cancellation of petitioner's certificate of registration for
failure to file the affidavit of use arose only after IPC No. 686. It did not and could not have occurred
in the first case, and this gave respondent another cause to oppose the second application. Res
judicata extends only to facts and conditions as they existed at the time judgment was rendered and
to the legal rights and relations of the parties fixed by the facts so determined. 68 When new facts or
conditions intervene before the second suit, furnishing a new basis for the claims and defenses of
the parties, the issues are no longer the same, and the former judgment cannot be pleaded as a bar
to the subsequent action. 69

It is also noted that the oppositions in the first and second cases are based on different laws. The
opposition in IPC No. 686 was based on specific provisions of the Trademark Law, i.e., Section 4
(d) 70 on confusing similarity of trademarks and Section 8 71 on the requisite damage to file an
opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris
Convention, particularly Article 6bis thereof, E.O. No. 913 and the two Memoranda of the Minister of
Trade and Industry. This opposition also invoked Article 189 of the Revised Penal Code which is a
statute totally different from the Trademark Law. 72 Causes of action which are distinct and
independent from each other, although arising out of the same contract, transaction, or state of
facts, may be sued on separately, recovery on one being no bar to subsequent actions on
others. 73 The mere fact that the same relief is sought in the subsequent action will not render the
judgment in the prior action operative as res judicata, such as where the two actions are based on
different statutes. 74 Res judicata therefore does not apply to the instant case and respondent Court
of Appeals did not err in so ruling.

Intellectual and industrial property rights cases are not simple property cases. Trademarks deal
with the psychological function of symbols and the effect of these symbols on the public at
large. 75 Trademarks play a significant role in communication, commerce and trade, and serve
valuable and interrelated business functions, both nationally and internationally. For this reason, all
agreements concerning industrial property, like those on trademarks and tradenames, are
intimately connected with economic development. 76 Industrial property encourages investments in
new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. They
speed up transfer of technology and industrialization, and thereby bring about social and economic
progress. 77 These advantages have been acknowledged by the Philippine government itself. The
Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial
property system is vital to the development of domestic and creative activity, facilitates transfer of
technology, it attracts foreign investments, and ensures market access for our products." 78 The
Intellectual Property Code took effect on January 1, 1998 and by its express provision, 79 repealed
the Trademark Law, 80 the Patent Law, 81 Articles 188 and 189 of the Revised Penal Code, the
Decree on Intellectual Property, 82 and the Decree on Compulsory Reprinting of Foreign
Textbooks. 83 The Code was enacted to strengthen the intellectual and industrial property system in
the Philippines as mandated by the country's accession to the Agreement Establishing the World
Trade Organization (WTO). 84
The WTO is a common institutional framework for the conduct of trade relations among its
members in matters related to the multilateral and plurilateral trade agreements annexed to the
WTO Agreement. 85 The WTO framework ensures a "single undertaking approach" to the
administration and operation of all agreements and arrangements attached to the WTO Agreement.
Among those annexed is the Agreement on Trade-Related Aspects of Intellectual Property Rights or
TRIPs. 86 Members to this Agreement "desire to reduce distortions and impediments to
international trade, taking into account the need to promote effective and adequate protection of
intellectual property rights, and to ensure that measures and procedures to enforce intellectual
property rights do not themselves become barriers to legitimate trade." To fulfill these objectives,
the members have agreed to adhere to minimum standards of protection set by several
Conventions. 87 These Conventions are: the Berne Convention for the Protection of Literary and
Artistic Works (1971), the Rome Convention or the International Convention for the Protection of
Performers, Producers of Phonograms and Broadcasting Organisations, the Treaty on Intellectual
Property in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm
on July 14, 1967. 88

A major proportion of international trade depends on the protection of intellectual property

rights. 89 Since the late 1970's, the unauthorized counterfeiting of industrial property and
trademarked products has had a considerable adverse impact on domestic and international trade
revenues. 90 The TRIPs Agreement seeks to grant adequate protection of intellectual property rights
by creating a favorable economic environment to encourage the inflow of foreign investments, and
strengthening the multi-lateral trading system to bring about economic, cultural and technological
independence. 91

The Philippines and the United States of America have acceded to the WTO Agreement. This
Agreement has revolutionized international business and economic relations among states, and has
propelled the world towards trade liberalization and economic globalization. 92 Protectionism and
isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a
new era of global economic cooperation, reflecting the widespread desire to operate in a fairer and
more open multilateral trading system." 93 Conformably, the State must reaffirm its commitment to
the global community and take part in evolving a new international economic order at the dawn of
the new millenium.

IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals
in CA-G.R. SP No. 28415 are affirmed.

SO ORDERED.
G.R. Nos. 160054-55 July 21, 2004

MANOLO P. SAMSON, petitioner,

vs.
HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge, Regional Trial Court of
Quezon City, Branch 90, PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for certiorari is the March 26, 2003 Order1 of the Regional Trial Court of
Quezon City, Branch 90, which denied petitioners (1) motion to quash the information; and (2)
motion for reconsideration of the August 9, 2002 Order denying his motion to suspend the
arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. Petitioner also
questioned its August 5, 2003 Order2 which denied his motion for reconsideration.

The undisputed facts show that on March 7, 2002, two informations for unfair competition under
Section 168.3 (a), in relation to Section 170, of the Intellectual Property Code (Republic Act No.
8293), similarly worded save for the dates and places of commission, were filed against petitioner
Manolo P. Samson, the registered owner of ITTI Shoes. The accusatory portion of said informations
read:

That on or about the first week of November 1999 and sometime prior or subsequent
thereto, in Quezon City, Philippines, and within the jurisdiction of this Honorable Court,
above-named accused, owner/proprietor of ITTI Shoes/Mano Shoes Manufactuirng
Corporation located at Robinsons Galleria, EDSA corner Ortigas Avenue, Quezon City, 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: "CATERPILLAR", "CAT", "CATERPILLAR & DESIGN", "CAT AND DESIGN",
"WALKING MACHINES" and "TRACK-TYPE TRACTOR & DESIGN."

CONTRARY TO LAW.3

On April 19, 2002, petitioner filed a motion to suspend arraignment and other proceedings in view
of the existence of an alleged prejudicial question involved in Civil Case No. Q-00-41446 for unfair
competition pending with the same branch; and also in view of the pendency of a petition for
review filed with the Secretary of Justice assailing the Chief State Prosecutors resolution finding
probable cause to charge petitioner with unfair competition. In an Order dated August 9, 2002, the
trial court denied the motion to suspend arraignment and other proceedings.

On August 20, 2002, petitioner filed a twin motion to quash the informations and motion for
reconsideration of the order denying motion to suspend, this time challenging the jurisdiction of
the trial court over the offense charged. He contended that since under Section 170 of R.A. No. 8293,
the penalty4 of imprisonment for unfair competition does not exceed six years, the offense is
cognizable by the Municipal Trial Courts and not by the Regional Trial Court, per R.A. No. 7691.

In its assailed March 26, 2003 Order, the trial court denied petitioners twin motions.6 A motion for
reconsideration thereof was likewise denied on August 5, 2003.
Hence, the instant petition alleging that respondent Judge gravely abused its discretion in issuing
the assailed orders.

The issues posed for resolution are (1) Which court has jurisdiction over criminal and civil cases
for violation of intellectual property rights? (2) Did the respondent Judge gravely abuse his
discretion in refusing to suspend the arraignment and other proceedings in Criminal Case Nos. Q-
02-108043-44 on the ground of (a) the existence of a prejudicial question; and (b) the pendency
of a petition for review with the Secretary of Justice on the finding of probable cause for unfair
competition?

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 (P50,000.00) to Two hundred thousand pesos (P200,000.00),
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 Designation of Origin
and False Description or Representation], hereof shall be brought before the Court of First
Instance.

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. 8293.6 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.7

In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws8 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.9 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 P50,000.00 to
P200,000.00.

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,10 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.

Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial
question. In his petition, he prayed for the reversal of the March 26, 2003 order which sustained the
denial of his motion to suspend arraignment and other proceedings in Criminal Case Nos. Q-02-
108043-44. For unknown reasons, however, he made no discussion in support of said prayer in his
petition and reply to comment. Neither did he attach a copy of the complaint in Civil Case No. Q-00-
41446 nor quote the pertinent portion thereof to prove the existence of a prejudicial question.

At any rate, there is no prejudicial question if the civil and the criminal action can, according to law,
proceed independently of each other.11 Under Rule 111, Section 3 of the Revised Rules on Criminal
Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the independent
civil action may be brought by the offended party. It shall proceed independently of the criminal
action and shall require only a preponderance of evidence.

In the case at bar, the common element in the acts constituting unfair competition under Section
168 of R.A. No. 8293 is fraud.12 Pursuant to Article 33 of the Civil Code, in cases of
defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct
from the criminal action, may be brought by the injured party. Hence, Civil Case No. Q-00-41446,
which as admitted13 by private respondent also relate to unfair competition, is an independent
civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question
that will justify the suspension of the criminal cases at bar.

Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure provides

SEC. 11. Suspension of arraignment. Upon motion by the proper party, the arraignment
shall be suspended in the following cases

xxxxxxxxx

(c) A petition for review of the resolution of the prosecutor is pending at either the
Department of Justice, or the Office of the President; Provided, that the period of suspension
shall not exceed sixty (60) days counted from the filing of the petition with the reviewing
office.
While the pendency of a petition for review is a ground for suspension of the arraignment, the
aforecited provision limits the deferment of the arraignment to a period of 60 days reckoned from
the filing of the petition with the reviewing office. It follows, therefore, that after the expiration of
said period, the trial court is bound to arraign the accused or to deny the motion to defer
arraignment.

In the instant case, petitioner failed to establish that respondent Judge abused his discretion in
denying his motion to suspend. His pleadings and annexes submitted before the Court do not show
the date of filing of the petition for review with the Secretary of Justice.14 Moreover, the Order
dated August 9, 2002 denying his motion to suspend was not appended to the petition. He thus
failed to discharge the burden of proving that he was entitled to a suspension of his arraignment
and that the questioned orders are contrary to Section 11 (c), Rule 116 of the Revised Rules on
Criminal Procedure. Indeed, the age-old but familiar rule is that he who alleges must prove his
allegations.

In sum, the dismissal of the petition is proper considering that petitioner has not established that
the trial court committed grave abuse of discretion. So also, his failure to attach documents relevant
to his allegations warrants the dismissal of the petition, pursuant to Section 3, Rule 46 of the Rules
of Civil Procedure, which states:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements.

The petition shall contain the full names and actual addresses of all the petitioners and
respondents, a concise statement of the matters involved, the factual background of the
case, and the grounds relied upon for the relief prayed for.

It shall be filed in seven (7) clearly legible copies together with proof of service thereof on
the respondent with the original copy intended for the court indicated as such by the
petitioner, and shall be accompanied by a clearly legible duplicate original or certified
true copy of the judgment, order, resolution, or ruling subject thereof, such material
portions of the record as are referred to therein, and other documents relevant or
pertinent thereto.

xxxxxxxxx

The failure of the petitioner to comply with any of the foregoing requirements shall
be sufficient ground for the dismissal of the petition. (Emphasis added)

WHEREFORE, in view of all the foregoing, the petition is dismissed.

SO ORDERED.
G.R. No. 154342 July 14, 2004

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

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

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.
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.1wphi1

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.
G.R. No. 115758 March 19, 2002

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

DE LEON, JR., J.:

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

The facts of the case are as follows:

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

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

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

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

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

SO ORDERED.3

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

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

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

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

SO ORDERED.5

In granting the petition, the appellate court ruled that:

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

xxx xxx xxx

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

"Registration in the Supplemental Register, therefore, serves as notice that the

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

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

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

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

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

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

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON
PETITIONER'S MOTION TO DISMISS.

II

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY
RESOLVE PETITIONER'S MOTION FOR RECONSIDERATION.

III

IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR RECONSIDERATION, THE

HONORABLE COURT OF APPEALS DENIED PETITIONER'S RIGHT TO SEEK TIMELY
APPELLATE RELIEF AND VIOLATED PETITIONER'S RIGHT TO DUE PROCESS.

IV

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE
RESPONDENTS IN CONTEMPT.9

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

We rule in favor of the respondents.

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

In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the
ground that she is entitled to the use of the trademark on Chin Chun Su and its container based on
her copyright and patent over the same. We first find it appropriate to rule on whether the
copyright and patent over the name and container of a beauty cream product would entitle the
registrant to the use and ownership over the same to the exclusion of others.
Trademark, copyright and patents are different intellectual property rights that cannot be
interchanged with one another. A trademark is any visible sign capable of distinguishing the goods
(trademark) or services (service mark) of an enterprise and shall include a stamped or marked
container of goods.12 In relation thereto, a trade name means the name or designation identifying or
distinguishing an enterprise.13 Meanwhile, the scope of a copyright is confined to literary and
artistic works which are original intellectual creations in the literary and artistic domain protected
from the moment of their creation.14 Patentable inventions, on the other hand, refer to any technical
solution of a problem in any field of human activity which is new, involves an inventive step and is
industrially applicable.15

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

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

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

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

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

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

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

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

SO ORDERED.
G.R. No. 148222 August 15, 2003

PEARL & DEAN (PHIL.), INCORPORATED, Petitioner,

vs.
SHOEMART, INCORPORATED, and NORTH EDSA MARKETING, INCORPORATED, Respondents.

CORONA, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl
& Dean (Phil.) Inc. (P & D) assails the May 22, 2001 decision1 of the Court of Appeals reversing the
October 31, 1996 decision2 of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-
516 which declared private respondents Shoemart Inc. (SMI) and North Edsa Marketing Inc.
(NEMI) liable for infringement of trademark and copyright, and unfair competition.

FACTUAL ANTECEDENTS

The May 22, 2001 decision of the Court of Appeals3 contained a summary of this dispute:

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

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

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

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

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

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

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

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

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

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

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

(1) to pay plaintiff the following damages:

(a) actual damages - 16,600,000.00,

representing profits
derived by defendants
as a result of infringe-
ment of plaintiffs copyright
from 1991 to 1992

(b) moral damages - 1,000.000.00

(c) exemplary damages - 1,000,000.00

(d) attorneys fees - 1,000,000.00

plus

(e) costs of suit;

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

(3) to deliver, under oath, to the National Library, all filler-posters using the trademark
"Poster Ads", for destruction; and
 (4) to permanently refrain from infringing the copyright on plaintiffs light boxes and its
trademark "Poster Ads".

Defendants counterclaims are hereby ordered dismissed for lack of merit.

SO ORDERED.4

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

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

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

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

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

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

xxx xxx xxx

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

SEC. 20. Certification of registration prima facie evidence of validity.- A certificate of registration of a
mark or trade-name shall be prima facie evidence of the validity of the registration, the registrants
ownership of the mark or trade-name, and of the registrants exclusive right to use the same in
connection with the goods, business or services specified in the certificate, subject to any conditions
and limitations stated therein." (underscoring supplied)
The records show that on June 20, 1983, Pearl and Dean applied for the registration of the
trademark "Poster Ads" with the Bureau of Patents, Trademarks, and Technology Transfer. Said
trademark was recorded in the Principal Register on September 12, 1988 under Registration No.
41165 covering the following products: stationeries such as letterheads, envelopes and calling
cards and newsletters.

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

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

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

xxx xxx xxx

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

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

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

xxx xxx xxx

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

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

A. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO COPYRIGHT

INFRINGEMENT WAS COMMITTED BY RESPONDENTS SM AND NEMI;

B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NO INFRINGEMENT OF

PEARL & DEANS TRADEMARK "POSTER ADS" WAS COMMITTED BY RESPONDENTS SM
AND NEMI;

C. THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE AWARD OF THE

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

D. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENTS SM

AND NEMI LIABLE TO PEARL & DEAN FOR ACTUAL, MORAL & EXEMPLARY DAMAGES,
ATTORNEYS FEES AND COSTS OF SUIT.6

ISSUES

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

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

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

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

ON THE ISSUE OF COPYRIGHT INFRINGEMENT

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

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

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

xxx xxx xxx

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

xxx xxx xxx

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

Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant,
the rights are limited to what the statute confers. It may be obtained and enjoyed only with respect
to the subjects and by the persons, and on terms and conditions specified in the
statute.7 Accordingly, it can cover only the works falling within the statutory enumeration or
description.8
P & D secured its copyright under the classification class "O" work. This being so, petitioners
copyright protection extended only to the technical drawings and not to the light box itself because
the latter was not at all in the category of "prints, pictorial illustrations, advertising copies, labels,
tags and box wraps." Stated otherwise, even as we find that P & D indeed owned a valid copyright,
the same could have referred only to the technical drawings within the category of "pictorial
illustrations." It could not have possibly stretched out to include the underlying light box. The strict
application9 of the laws enumeration in Section 2 prevents us from giving petitioner even a little
leeway, that is, even if its copyright certificate was entitled "Advertising Display Units." What the
law does not include, it excludes, and for the good reason: the light box was not a literary or artistic
piece which could be copyrighted under the copyright law. And no less clearly, neither could the
lack of statutory authority to make the light box copyrightable be remedied by the simplistic act of
entitling the copyright certificate issued by the National Library as "Advertising Display Units."

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

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

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

ON THE ISSUE OF PATENT INFRINGEMENT

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

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

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

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

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

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

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

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

There is no such scrutiny in the case of copyrights nor any notice published before its grant to the
effect that a person is claiming the creation of a work. The law confers the copyright from the
moment of creation20 and the copyright certificate is issued upon registration with the National
Library of a sworn ex-parte claim of creation.

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

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

In the oft-cited case of Baker vs. Selden21 , the United States Supreme Court held that only the
expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the
copyright of a book which expounded on a new accounting system he had developed. The
publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced
forms similar to those illustrated in the plaintiffs copyrighted book. The US Supreme Court ruled
that:
"There is no doubt that a work on the subject of book-keeping, though only explanatory of well
known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x. But
there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate.
The mere statement of the proposition is so evident that it requires hardly any argument to support
it. The same distinction may be predicated of every other art as well as that of bookkeeping. A
treatise on the composition and use of medicines, be they old or new; on the construction and use of
ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or
on the mode of drawing lines to produce the effect of perspective, would be the subject of
copyright; but no one would contend that the copyright of the treatise would give the exclusive
right to the art or manufacture described therein. The copyright of the book, if not pirated from
other works, would be valid without regard to the novelty or want of novelty of its subject matter.
The novelty of the art or thing described or explained has nothing to do with the validity of the
copyright. To give to the author of the book an exclusive property in the art described
therein, when no examination of its novelty has ever been officially made, would be
a surprise and a fraud upon the public. That is the province of letters patent, not of
copyright. The claim to an invention of discovery of an art or manufacture must be subjected
to the examination of the Patent Office before an exclusive right therein can be obtained; and
a patent from the government can only secure it.

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

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

xxx

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

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

ON THE ISSUE OF TRADEMARK INFRINGEMENT

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

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

Assuming arguendo that "Poster Ads" could validly qualify as a trademark, the failure of P & D to
secure a trademark registration for specific use on the light boxes meant that there could not have
been any trademark infringement since registration was an essential element thereof.1wphi1

ON THE ISSUE OF UNFAIR COMPETITION

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

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

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

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

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

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

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

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

PHIL PHARMAWEALTH, INC., Petitioner,

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

DECISION

PERALTA, J.:

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

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

xxxx

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

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

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

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

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

xxxx

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

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

x x x x4
Respondents prayed for permanent injunction, damages and the forfeiture and impounding of the
alleged infringing products. They also asked for the issuance of a temporary restraining order and a
preliminary injunction that would prevent herein petitioner, its agents, representatives and assigns,
from importing, distributing, selling or offering the subject product for sale to any entity in the
Philippines.

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

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

Respondents filed a Motion for Reconsideration but the same was also denied by the BLA-IPO in a
Resolution8dated January 23, 2004.

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

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

On August 24, 2004, the RTC of Makati City issued an Order10 directing the issuance of a temporary
restraining order conditioned upon respondents' filing of a bond.

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

Meanwhile, on November 16, 2004, petitioner filed a Motion to Dismiss12 the petition filed with the
CA on the ground of forum shopping, contending that the case filed with the RTC has the same
objective as the petition filed with the CA, which is to obtain an injunction prohibiting petitioner
from importing, distributing and selling Sulbactam Ampicillin products.

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

On February 7, 2005, petitioner again filed a Motion to Dismiss15 the case for being moot and
academic, contending that respondents' patent had already lapsed. In the same manner, petitioner
also moved for the reconsideration of the temporary restraining order issued by the CA on the same
basis that the patent right sought to be protected has been extinguished due to the lapse of the
patent license and on the ground that the CA has no jurisdiction to review the order of the BLA-IPO
as said jurisdiction is vested by law in the Office of the Director General of the IPO.
On April 11, 2005, the CA rendered its presently assailed Resolution denying the Motion to Dismiss,
dated November 16, 2004, and the motion for reconsideration, as well as Motion to Dismiss, both
dated February 7, 2005.

Hence, the present petition raising the following issues:

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

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

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

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

The Court agrees.

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

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

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

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

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

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

(b) That the commission, continuance or non-performance of the act or acts complained of
during the litigation would probably work injustice to the applicant; or
 (c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is
procuring or suffering to be done, some act or acts probably in violation of the rights of the
applicant respecting the subject of the action or proceeding, and tending to render the
judgment ineffectual.

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

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

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

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

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

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

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

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

This Court has held that:

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

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

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

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

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

The Court agrees.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(a) at least 1,000,000.00 as actual damages;

(b) 700,000.00 as attorney's fees and litigation expenses;

(d) 1,000,000.00 as exemplary damages; and

(d) costs of this suit.

(iii) ordering the condemnation, seizure or forfeiture of respondent's infringing

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

(iv) making the injunction permanent.32

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

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

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

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

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

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

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

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

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

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

(c) After trial, render judgment:

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

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

(i) at least 3,000,000.00 as actual damages;

 (ii) 500,000.00 as attorney's fees and 1,000,000.00 as litigation expenses;

(iii) 3,000,000.00 as exemplary damages; and

(iv) costs of this suit.

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

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

(4) making the injunction permanent.33

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

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

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

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

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

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

SO ORDERED.