Air Philippines Corp. v. Pennswell Inc.

G.R. No. 172835, December 13, 2007

Chico-Nazario, J.

DOCTRINE
Rule 27 sets an unequivocal proviso that the documents, papers, books,
accounts, letters, photographs, objects or tangible things that may be produced
and inspected should not be privileged.

FACTS
Pennswell, a company engaged in manufacturing and selling industrial chmicals,
sold to Air Philippines Corporation (Airphil) products amounting to P450,000.
Airphil refused to pay the consideration thus Pennswell instituted an action
against Airphil. Airphil, in it’s answer, contended that Pennswell committed a
fraud in their last transaction by agreeing to deliver products from a new line but
in truth and in fact delivered old line products. Airphil further allege that the
fraudulent intent was there when Pennswell altered the label of the products to
make it appear that those delivered were products from new line. According to
Airphil, it was defrauded of P600,000 from that transaction.

During the trial, Ariphil filed a motion to compel Pennswell to give a detailed list of
ingredients of the chemicals sold to them. Pennswell immediately opposed the
motion contending that the manufacturing of these chemicals are trade secret
thus it may not be forced to disclose the same. RTC initially granted the motion
but later on reversed itself. On appeal to CA, CA agreed with Pennswell that the
merchandise are trade secret thus may not be subjected compulsory disclosure

ISSUE: Whether Pennswell may be compelled to disclose their products.

HELD
No. The products information sought to be disclosed are covered by exception of
being trade secret. there is substantial basis for respondent to seek protection of
the law for its proprietary rights over the detailed chemical composition of its
products.

Rule 27 sets an unequivocal proviso that the documents, papers, books,

accounts, letters, photographs, objects or tangible things that may be produced
and inspected should not be privileged. Section 24 of Rule 130 draws the types
of disqualification by reason of privileged communication, to wit: … (c) Trade
secret.

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

known only to its owner and those of his employees to whom it is necessary to
confide it. The definition also extends to a secret formula or process not
patented, but known only to certain individuals using it in compounding some
article of trade having a commercial value.
The chemical composition, formulation, and ingredients of special lubricants
requested by Air Philippines formed part of the trade secrets of Pennswell.
Because of public policy, trade secrets are privileged and the rules providing for
the production and inspection of books and papers do not authorize their
production in a court of law.