4.
The defendant corporation discontinued the use of and had withdrawn
PROSOURCE INTERNATIONAL VS HORPHAG RESEARCH MANAGEMENT
DECISION
NACHURA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Court of Appeals (CA) Decision [1] dated July 27, 2007 and
Resolution[2] dated October 15, 2007 in CA-G.R. CV No. 87556. The assailed decision
affirmed the Regional Trial Court (RTC)[3] Decision[4] dated January 16, 2006 and
Order[5] dated May 3, 2006 in Civil Case No. 68048; while the assailed resolution denied
petitioners motion for reconsideration.
The facts are as follows:
Respondent Horphag Research Management SA is a corporation duly organized and
existing under the laws of Switzerland and the owner[6] of trademark PYCNOGENOL, a food
supplement sold and distributed by Zuellig Pharma Corporation. Respondent later
discovered that petitioner Prosource International, Inc. was also distributing a similar food
supplement using the mark PCO-GENOLS since 1996.[7] This prompted respondent to
demand that petitioner cease and desist from using the aforesaid mark.[8]
Without notifying respondent, petitioner discontinued the use of, and withdrew from the
market, the products under the name PCO-GENOLS as of June 19, 2000. It, likewise,
changed its mark from PCO-GENOLS to PCO-PLUS.[9]
On August 22, 2000, respondent filed a Complaint [10] for Infringement of Trademark with
Prayer for Preliminary Injunction against petitioner, praying that the latter cease and desist
from using the brand PCO-GENOLS for being confusingly similar with respondents
trademark PYCNOGENOL. It, likewise, prayed for actual and nominal damages, as well as
attorneys fees.[11]
In its Answer,[12] petitioner contended that respondent could not file the infringement case
considering that the latter is not the registered owner of the trademark PYCNOGENOL, but
one Horphag Research Limited. It, likewise, claimed that the two marks were not confusingly
similar. Finally, it denied liability, since it discontinued the use of the mark prior to the
institution of the infringement case. Petitioner thus prayed for the dismissal of the
complaint. By way of counterclaim, petitioner prayed that respondent be directed to pay
exemplary damages and attorneys fees.[13]
During the pre-trial, the parties admitted the following:
1. Defendant [petitioner] is a corporation duly organized and existing
under the laws of the Republic of the Philippines with business address
at No. 7 Annapolis Street, Greenhills, San Juan, Metro Manila;
2. The trademark PYCNOGENOL of the plaintiff is duly registered with
the Intellectual Property Office but not with the Bureau of Food and Drug
(BFAD).
3. The defendants product PCO-GENOLS is duly registered with the
BFAD but not with the Intellectual Property Office (IPO).
from the market the products under the name of PCO-GENOLS as
of June 19, 2000, with its trademark changed from PCO-GENOLS to
PCO-PLUS.
5. Plaintiff corporation sent a demand letter to the defendant dated 02
June 2000.[14]
On January 16, 2006, the RTC decided in favor of respondent. It observed that
PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which appears to be
merely descriptive and thus open for trademark registration by combining it with other words.
The trial court, likewise, concluded that the marks, when read, sound similar, and thus
confusingly similar especially since they both refer to food supplements. The court added
that petitioners liability was not negated by its act of pulling out of the market the products
bearing the questioned mark since the fact remains that from 1996 until June 2000, petitioner
had infringed respondents product by using the trademark PCO-GENOLS. As respondent
manifested that it was no longer interested in recovering actual damages, petitioner was
made to answer only for attorneys fees amounting to P50,000.00.[15] For lack of sufficient
factual and legal basis, the court dismissed petitioners counterclaim. Petitioners motion for
reconsideration was likewise denied.
On appeal to the CA, petitioner failed to obtain a favorable decision. The appellate court
explained that under the Dominancy or the Holistic Test, PCO-GENOLS is deceptively
similar to PYCNOGENOL. It also found just and equitable the award of attorneys fees
especially since respondent was compelled to litigate. [16]
Hence, this petition, assigning the following errors:
I. THAT THE COURT OF APPEALS ERRED IN AFFRIMING
THE RULING OF THE LOWER [COURT] THAT
RESPONDENTS TRADEMARK P[YC]NOGENOLS (SIC)
WAS INFRINGED BY PETITIONERS PCO-GENOLS.
II. THAT THE COURT OF APPEALS ERRED IN AFFIRMING
THE AWARD OF ATTORNEYS FEES IN FAVOR OF
RESPONDENT HORPHAG RESEARCH MANAGEMENT S.A.
IN THE AMOUNT OF Php50,000.00.[17]
The petition is without merit.
It must be recalled that respondent filed a complaint for trademark infringement
against petitioner for the latters use of the mark PCO-GENOLS which the former claimed to
be confusingly similar to its trademark PYCNOGENOL. Petitioners use of the questioned
mark started in 1996 and ended in June 2000. The instant case should thus be decided in
light of the provisions of Republic Act (R.A.) No. 166 [18] for the acts committed until
December 31, 1997, and R.A. No. 8293[19] for those committed from January 1, 1998 until
June 19, 2000.
A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof, adopted and used by a manufacturer or merchant on his goods to
identify and distinguish them from those manufactured, sold, or dealt by others. Inarguably,
a trademark deserves protection.[20]
 Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define
what constitutes trademark infringement, as follows:
Sec. 22. Infringement, what constitutes. Any person who shall
use, without the consent of the registrant, any reproduction, counterfeit,
copy or colorable imitation of any registered mark or tradename in
connection with the sale, offering for sale, or advertising of any goods,
business or services on or in connection with which such use is likely to
cause confusion or mistake or to deceive purchasers or others as to the
source or origin of such goods or services, or identity of such business;
or reproduce, counterfeit, copy of colorably imitate any such mark or
tradename and apply such reproduction, counterfeit, copy or colorable
imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used upon or in connection with such
goods, business, or services, shall be liable to a civil action by the
registrant for any or all of the remedies herein provided.
Sec. 155. Remedies; Infringement. Any person who shall,
without the consent of the owner of the registered mark:
155.1. Use in commerce any reproduction, counterfeit, copy, or
colorable imitation of a registered mark or the same container or a
dominant feature thereof in connection with the sale, offering for sale,
distribution, advertising of any goods or services including other
preparatory steps necessary to carry out the sale of any goods or
services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or
155.2. Reproduce, counterfeit, copy or colorably imitate a
registered mark or a dominant feature thereof and apply such
reproduction, counterfeit, copy or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to
be used in commerce upon or in connection with the sale, offering for
sale, distribution, or advertising of goods or services on or in connection
with which such use is likely to cause confusion, or to cause mistake, or
to deceive, shall be liable in a civil action for infringement by the registrant
for the remedies hereinafter set forth: Provided, That infringement takes
place at the moment any of the acts stated in Subsection 155.1 or this
subsection are committed regardless of whether there is actual sale of
goods or services using the infringing material.
In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20
thereof, the following constitute the elements of trademark infringement:
(a) A trademark actually used in commerce in the Philippines and
registered in the principal register of the Philippine Patent Office[;]
(b) [It] is used by another person in connection with the sale, offering for
sale, or advertising of any goods, business or services or in connection
with which such use is likely to cause confusion or mistake or to deceive
purchasers or others as to the source or origin of such goods or services,
or identity of such business; or such trademark is reproduced,
counterfeited, copied or colorably imitated by another person and such
reproduction, counterfeit, copy or colorable imitation is applied to labels,
signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods, business or
services as to likely cause confusion or mistake or to deceive
purchasers[;]
(c) [T]he trademark is used for identical or similar goods[;] and
(d) [S]uch act is done without the consent of the trademark registrant or
assignee.[21]
On the other hand, the elements of infringement under R.A. No. 8293 are as follows:
(1) The trademark being infringed is registered in the Intellectual Property Office;
however, in infringement of trade name, the same need not be registered;
(2) The trademark or trade name is reproduced, counterfeited, copied, or
colorably imitated by the infringer;
(3) The infringing mark or trade name is used in connection with the sale, offering
for sale, or advertising of any goods, business or services; or the infringing
mark or trade name is applied to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used upon or in connection with
such goods, business or services;
(4) The use or application of the infringing mark or trade name is likely to cause
confusion or mistake or to deceive purchasers or others as to the goods or
services themselves or as to the source or origin of such goods or services or
the identity of such business; and
(5) It is without the consent of the trademark or trade name owner or the assignee
thereof.[22]
In the foregoing enumeration, it is the element of likelihood of confusion that is the
gravamen of trademark infringement. But likelihood of confusion is a relative concept. The
particular, and sometimes peculiar, circumstances of each case are determinative of its
existence. Thus, in trademark infringement cases, precedents must be evaluated in the light
of each particular case.[23]
In determining similarity and likelihood of confusion, jurisprudence has developed
two tests: the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses
on the similarity of the prevalent features of the competing trademarks that might cause
confusion and deception, thus constituting infringement. [24] If the competing trademark
contains the main, essential and dominant features of another, and confusion or deception
is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it
necessary that the infringing label should suggest an effort to imitate. The question is
whether the use of the marks involved is likely to cause confusion or mistake in the mind of
the public or to deceive purchasers.[25] Courts will consider more the aural and visual
impressions created by the marks in the public mind, giving little weight to factors like prices,
quality, sales outlets, and market segments.[26]
In contrast, the Holistic Test entails a consideration of the entirety of the marks as
applied to the products, including the labels and packaging, in determining confusing
similarity.[27] The discerning eye of the observer must focus not only on the predominant
words but also on the other features appearing on both labels in order that the observer may
draw his conclusion whether one is confusingly similar to the other. [28]
 Art. 2208. In the absence of stipulation, attorneys fees and
The trial and appellate courts applied the Dominancy Test in determining whether expenses of litigation, other than judicial costs, cannot be recovered,
there was a confusing similarity between the marks PYCNOGENOL and PCO- except:
GENOL. Applying the test, the trial court found, and the CA affirmed, that:
1. When exemplary damages are awarded;
Both the word[s] PYCNOGENOL and PCO-GENOLS have the same
suffix GENOL which on evidence, appears to be merely descriptive and 2. When the defendants act or omission has compelled the
furnish no indication of the origin of the article and hence, open for plaintiff to litigate with third persons or to incur expenses
trademark registration by the plaintiff thru combination with another word to protect his interest;
or phrase such as PYCNOGENOL, Exhibits A to A-3. Furthermore,
although the letters Y between P and C, N between O and C and S after 3. In criminal cases of malicious prosecution against the
L are missing in the [petitioners] mark PCO-GENOLS, nevertheless, plaintiff;
when the two words are pronounced, the sound effects are confusingly
similar not to mention that they are both described by their manufacturers 4. In case of a clearly unfounded civil action or proceeding
as a food supplement and thus, identified as such by their public against the plaintiff;
consumers. And although there were dissimilarities in the trademark due
to the type of letters used as well as the size, color and design employed 5. Where the defendant acted in gross and evident bad faith
on their individual packages/bottles, still the close relationship of the in refusing to satisfy the plaintiffs plainly valid, just and
competing products name in sounds as they were pronounced, clearly demandable claim;
indicates that purchasers could be misled into believing that they are the
same and/or originates from a common source and manufacturer. [29] 6. In actions for legal support;

We find no cogent reason to depart from such conclusion.
This is not the first time that the Court takes into account the aural effects of the
words and letters contained in the marks in determining the issue of confusing similarity.
In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al.,[30] cited in McDonalds
Corporation v. L.C. Big Mak Burger, Inc.,[31] the Court held:
The following random list of confusingly similar sounds in the
matter of trademarks, culled from Nims, Unfair Competition and Trade
Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and
LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop;
Jantzen and Jass-Sea; Silver Flash and Supper Flash; Cascarete and
Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and
Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon
Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities, as
coming within the purview of the idem sonans rule, Yusea and U-C-A,
Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up.
In Co Tiong vs. Director of Patents, this Court unequivocally said that
Celdura and Cordura are confusingly similar in sound; this Court held
in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an
infringement of the trademark Sapolin, as the sound of the two names is
almost the same.[32]
Finally, we reiterate that the issue of trademark infringement is factual, with both
the trial and appellate courts finding the allegations of infringement to be meritorious. As we
have consistently held, factual determinations of the trial court, concurred in by the CA, are
final and binding on this Court.[33] Hence, petitioner is liable for trademark infringement.
We, likewise, sustain the award of attorneys fees in favor of respondent. Article
2208 of the Civil Code enumerates the instances when attorneys fees are awarded, viz.:
7. In actions for the recovery of wages of household helpers,
laborers and skilled workers;
8. In actions for indemnity under workmens compensation
and employers liability laws;
9. In a separate civil action to recover civil liability arising
from a crime;
10. When at least double judicial costs are awarded;
11. In any other case where the court deems it just and
equitable that attorneys fees and expenses of litigation
should be recovered.
In all cases, the attorneys fees and expenses of litigation must
be reasonable.
As a rule, an award of attorneys fees should be deleted where the award of moral
and exemplary damages is not granted.[34] Nonetheless, attorneys fees may be awarded
where the court deems it just and equitable even if moral and exemplary damages are
unavailing.[35] In the instant case, we find no reversible error in the grant of attorneys fees by
the CA.
WHEREFORE, premises considered, the petition is DENIED for lack of
merit. The Court of Appeals Decision dated July 27, 2007 and its Resolution dated October
15, 2007 in CA-G.R. CV No. 87556 are AFFIRMED.
SO ORDERED.
MARVEX COMMERCIAL CO., INC., petitioner,
vs.
PETRA HAWPIA and CO., and THE DIRECTOR OF PATENTS, respondents.
Petra Hawpia & Co., a partnership duly organized under the laws of the Philippines and
doing business at 543 M. de Santos (Botica Divisoria), Manila (hereinafter referred to as the
applicant), on October 14, 1958 filed a petition for the registration of the trademark
"LIONPAS" used on medicated plaster, with the Philippine Patent Office, asserting its
continuous use in the Philippines since June 9, 1958. 1 The Marvex Commercial Co., Inc., a
corporation also duly organized under the laws of the Philippines (hereinafter referred to as
the oppositor), on July 24, 1959 filed an opposition thereto, alleging that the registration of
such trademark would violate its right to and interest in the trademark "SALONPAS" used
on another medicated plaster, which is registered in its name under Certificate of
Registration 5486, issued by the Director of Patents on September 29, 1956, and that both
trademarks when used on medicated plaster would mislead the public as they are
confusingly similar.
After due hearing, the Director of Patents in his decision of August 18, 1961 dismissed the
opposition and gave due course to the petition, stating in part that "confusion, mistake, or
deception among the purchasers will not likely and reasonably occur" when both trademarks
are applied to medicated plaster. The oppositor moved to have the decision reconsidered.
This motion was denied in a resolution of November 27, 1961. The oppositor then interposed
the present appeal.
The issues stated by the Director of Patents in his decision are the same ones now tendered
by the oppositor for resolution, namely, (1) Is the applicant the owner of the trademark
"LIONPAS"?; (2) Should the application be rejected on the ground that the applicant made
false representations in placing the phrase "Reg. Phil. Pat. Off." below the trademark
"LIONPAS" on its cartons?, and (3) Is the trademark "LIONPAS" confusingly similar to the
trademark "SALONPAS"?
We do not consider the second issue of any importance; we will thus proceed to resolve the
first and third issues.
Is the applicant the owner of the trademark "LIONPAS?"
Under sections 2 and 2-A of the Trade Mark Law, as amended, the right to register
trademarks, tradenames and service marks by any person, corporation, partnership or
association domiciled in the Philippines or in any foreign country, is based on ownership,
and the burden is upon the applicant to prove such ownership (Operators, Inc. vs. The
Director of Patents, et al., L-17901, Oct. 29, 1965).
The Director of Patents found, on the strength of exhibits 5 and 6 for the applicant, that the
latter has "satisfactorily shown" its ownership of the trademark sought to be registered.
Exhibit 5 is a letter dated June 20, 1958, sent by "OSAKA BOEKI KAISHA, LTD." to the
applicant which tends to show that the former, for a $1 consideration, has assigned, ceded,
and conveyed all its "rights, interests and goodwill in the tradename LIONPAS Medicated
Plaster . . ." in favor of the latter. Exhibit 6 is a joint "SWORN STATEMENT" which appears
to have been executed by the presidents of "OSAKA BOEKI KAISHA, LTD." and "ASUNARO
PHARMACEUTICAL INDUSTRY CO.", and tends to confirm the contents of exhibit 5.
A careful scrutiny of exh. 5 will reveal, however, that the sender of the letter, "OSAKA BOEKI
KAISHA LTD.", and which appears to be the seller, is merely a representative of the
manufacturer "ASUNARO PHARMACEUTICAL INDUSTRY CO." There is no proof that as
such representative, the former has been authorized by the latter to sell the trademark in
question. Moreover, exh. 5 on its face appears to have been signed only by someone whose
position in the company's "Sundries Dept." is not described; the signature is not legible. It is
even contradicted by exh. 6. While exh. 5 shows that "OSAKA BOEKI KAISHA, LTD." is a
representative of "ASUNARO PHARMACEUTICAL INDUSTRY CO."; exh. 6 asserts that the
former is not a representative of the latter, but that it is the owner of the trademark
"LIONPAS" (par. 2, exh. 6). At all events, neither averment can be accorded the weight of
an assignment of ownership of the trademark in question under the Trade Mark Law. Exh. 5
is not acknowledged. Exh. 6 does not bear the acknowledgment contemplated by the
aforesaid law, particularly by the last paragraph of section 37 and paragraph 2 of section 31
of R.A. 166, as amended, which provide as follows:
The registration of a mark under the provisions of this section shall be independent
of the registration in the country of origin and the duration, validity or transfer in the
Philippines of such registration shall be governed by the provisions of this Act.
(Sec. 37, last par.) (Emphasis ours)
The assignment must be in writing, acknowledged before a notary public or other
officer authorized to administer oaths or perform other notarial acts and certified
under the hand and official seal of the notary or other officer. (Sec. 31, par. 2)
In this case, although a sheet of paper is attached to exh. 6, on which is typewritten a
certification that the signatures of the presidents of the two named companies (referring to
the signatures in exh. 6) "have been duly written by themselves", this sheet is unmarked,
unpaged, unsigned, undated and unsealed. We have thumbed the record in quest of any
definitive evidence that it is a correct translation of the Japanese characters found on another
unmarked and unpaged sheet, and have found none.
It follows from the above disquisition that exhs. 5 and 6 are legally insufficient to prove that
the applicant is the owner of the trademark in question.
As a matter of fact, the other evidence on record conclusively belies the import of exh. 6.
Thus exh. A states that the applicant is merely the "exclusive distributor" in the Philippines
of the "LIONPAS" penetrative plaster; exh. A-1 describes the applicant as the "Philippine
sole distributor" of "LIONPAS"; exh. B simply states that "LIONPAS" is "manufactured
exclusively for Petra Hawpia & Co. for distribution in the Philippines."
Not being the owner of the trademark "LIONPAS" but being merely an importer and/or
distributor of the said penetrative plaster, the applicant is not entitled under the law to register
it in its name (Operators, Inc. vs. Director of Patents, supra).
Upon the third issue, the applicant preliminarily asserts that there is no justification for this
Court to disturb any finding made by the Director of Patents on appeal. This assertion is not
tenable. Although the Director of Patents is the official vested by law with the power to
administer the registration of trademarks and tradenames, his opinion on the matter of
similarity or dissimilarity of trademarks and tradenames is not conclusive upon this Court
which may pass upon such determination.
The "SALONPAS" mark is not before this Court. Our meticulous examination of the entire
record has failed to yield a sample of such mark. We have therefore proceeded to analyze
the two marks, vis-a-vis each other, on the basis of what we can derive from the record for
a comparative study. And our conclusion, in disagreement with that of the Director of
Patents, is not based on a comparison of the appearance, form, style, shape, size or format
of the trademarks, which we can not make because, as we have already observed, the
"SALONPAS" mark is not before us, but on a comparison of the spelling, sound and
pronunciation of the two words.
It is our considered view that the trademarks "SALONPAS" and "LIONPAS" are confusingly
similar in sound.
Both these words have the same suffix, "PAS", which is used to denote a plaster that
adheres to the body with curative powers. "Pas, being merely descriptive, furnishes no
indication of the origin of the article and therefore is open for appropriation by anyone
(Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the
subject of a trademark by combination with another word or phrase.
Two letters of "SALONPAS" are missing in "LIONPAS"; the first letter a and the letter s. Be
that as it may, when the two words are pronounced, the sound effects are confusingly similar.
And where goods are advertised over the radio, similarity in sound is of especial significance
(Co Tiong Sa vs. Director of Patents, 95 Phil. 1 citing Nims, The Law of Unfair Competition
and Trademarks, 4th ed., vol. 2, pp. 678-679). "The importance of this rule is emphasized
by the increase of radio advertising in which we are deprived of help of our eyes and must
depend entirely on the ear" (Operators, Inc. vs. Director of Patents, supra).
The following random list of confusingly similar sounds in the matter of trademarks, culled
from Nims, Unfair Competition and Trade Marks, 1947, vol. 1, will reinforce our view that
"SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop";
"Jantzen" and "Jazz-Sea"; "Silver Flash" and "Supper-Flash"; "Cascarete" and "Celborite";
"Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe"
and "Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book
"TradeMark Law and Practice", pp. 419-421, cites, as coming within the purview of
the idem sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and
"Seven-Up" and "Lemon-Up". In Co Tiong vs. Director of Patents, this Court unequivocally
said that "Celdura" and "Cordura" are confusingly similar in sound; this Court held in Sapolin
Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark
"Sapolin", as the sound of the two names is almost the same.
In the case at bar, "SALONPAS" and "LIONPAS", when spoken, sound very much alike.
Similarity of sound is sufficient ground for this Court to rule that the two marks are confusingly
similar when applied to merchandise of the same descriptive properties (see Celanese
Corporation of America vs. E. I. Du Pont, 154 F. 2d. 146, 148).
The registration of "LIONPAS" cannot therefore be given due course.
ACCORDINGLY, the decision of the respondent Director of Patents is set aside, and the
petition below of the respondent Petra Hawpia & Co. is hereby dismissed, at the cost of the
latter respondent.
PRO LINE SPORTS CENTER, INC., and QUESTOR CORPORATION, petitioners, vs.
COURT OF APPEALS, UNIVERSAL ATHLETICS INDUSTRIAL PRODUCTS, INC., and
MONICO SEHWANI, respondents
This case calls for a revisit of the demesne of malicious prosecution and its implications.
This petition stemmed from a criminal case for unfair competition filed by Pro Line
Sports Center, Inc. (PRO LINE) and Questor Corporation (QUESTOR) against Monico
Sehwani, president of Universal Athletics and Industrial Products, Inc. (UNIVERSAL). In that
case Sehwani was exonerated. As a retaliatory move, Sehwani and UNIVERSAL filed a civil
case for damages against PRO LINE and QUESTOR for what they perceived as the wrongful
and malicious filing of the criminal action for unfair competition against them.
But first, the dramatis personae. By virtue of its merger with A.G. Spalding Bros., Inc.,
on 31 December 1971,[1] petitioner QUESTOR, a US-based corporation, became the owner
of the trademark "Spalding" appearing in sporting goods, implements and apparatuses. Co-
petitioner PRO LINE, a domestic corporation, is the exclusive distributor of "Spalding" sports
products in the Philippines.[2] Respondent UNIVERSAL, on the other hand, is a domestic
corporation engaged in the sale and manufacture of sporting goods while co-respondent
Monico Sehwani is impleaded in his capacity as president of the corporation.
On 11 February 1981, or sixteen years ago, Edwin Dy Buncio, General Manager of
PRO LINE, sent a letter-complaint to the National Bureau of Investigation (NBI) regarding
the alleged manufacture of fake "Spalding" balls by UNIVERSAL. On 23 February 1981 the
NBI applied for a search warrant with the then Court of First Instance, Br. 23, Pasig, Rizal,
then presided over by Judge Rizalina Bonifacio Vera. On that same day Judge Vera issued
Search Warrant No. 2-81 authorizing the search of the premises of UNIVERSAL in Pasig. In
the course of the search, some 1,200 basketballs and volleyballs marked "Spalding" were
seized and confiscated by the NBI. Three (3) days later, on motion of the NBI, Judge Vera
issued another order, this time to seal and padlock the molds, rubber mixer, boiler and other
instruments at UNIVERSAL's factory. All these were used to manufacture the fake
"Spalding" products, but were simply too heavy to be removed from the premises and
brought under the actual physical custody of the court. However, on 28 April 1981, on motion
of UNIVERSAL, Judge Vera ordered the lifting of the seal and padlock on the machineries,
prompting the People of the Philippines, the NBI, together with PRO LINE and QUESTOR,
to file with the Court of Appeals a joint petition for certiorari and prohibition with preliminary
injunction (CA G.R. No. 12413) seeking the annulment of the order of 28 April 1981. On 18
May 1981, the appellate court issued a temporary restraining order enjoining Judge Vera
from implementing her latest order.
Meanwhile, on 26 February 1981, PRO LINE and QUESTOR filed a criminal complaint
for unfair competition against respondent Monico Sehwani together with Robert, Kisnu, Arjan
and Sawtri, all surnamed Sehwani, and Arcadio del los Reyes before the Provincial Fiscal
of Rizal (I. S. No. 81-2040). The complaint was dropped on 24 June 1981 for the reason that
it was doubtful whether QUESTOR had indeed acquired the registration rights over the mark
"Spalding" from A. G. Spalding Bros., Inc., and complainants failed to adduce an actual
receipt for the sale of "Spalding" balls by UNIVERSAL.[3]
On 9 July 1981 a petition for review seeking reversal of the dismissal of the complaint
was filed with the Ministry of Justice. While this was pending, the Court of Appeals rendered
judgment on 4 August 1981 in CA G.R. No. 12413 affirming the order of Judge Vera which
lifted the seal and padlock on the machineries of UNIVERSAL. The People, NBI, PRO LINE
and QUESTOR challenged the decision of the appellate court before this Court in G.R. No.
57814. On 31 August 1981 we issued a temporary restraining order against the Court of
Appeals vis-a-vis the aforesaid decision.
In connection with the criminal complaint for unfair competition, the Minister of Justice
issued on 10 September 1981 a Resolution overturning the earlier dismissal of the complaint
and ordered the Provincial Fiscal of Rizal to file an Information for unfair competition against
Monico Sehwani. The Information was accordingly filed on 29 December 1981 with then
Court of First Instance of Rizal, docketed as Crim. Case No. 45284, and raffled to Br. 21
presided over by Judge Gregorio Pineda.
Sehwani pleaded not guilty to the charge. But, while he admitted to having
manufactured "Spalding" basketballs and volleyballs, he nevertheless stressed that this was
only for the purpose of complying with the requirement of trademark registration with the
Philippine Patent Office. He cited Chapter 1, Rule 43, of the Rules of Practice on Trademark
Cases, which requires that the mark applied for be used on applicant's goods for at least
sixty (60) days prior to the filing of the trademark application and that the applicant must
show substantial investment in the use of the mark. He also disclosed that UNIVERSAL
applied for registration with the Patent Office on 20 February 1981.
After the prosecution rested its case, Sehwani filed a demurrer to evidence arguing
that the act of selling the manufactured goods was an essential and constitutive element of
the crime of unfair competition under Art. 189 of the Revised Penal Code, and the
prosecution was not able to prove that he sold the products. In its Order of 12 January 1981
the trial court granted the demurrer and dismissed the charge against Sehwani.
PRO LINE and QUESTOR impugned before us in G.R. No. 63055 the dismissal of the
criminal case. In our Resolution of 2 March 1983 we consolidated G.R. No. 63055 with G.R.
No. 57814 earlier filed. On 20 April 1983 we dismissed the petition in G.R. No. 63055 finding
that the dismissal by the trial court of Crim. Case No. 45284 was based on the merits of the
case which amounted to an acquittal of Sehwani. Considering that the issue raised in G.R.
No. 58714 had already been rendered moot and academic by the dismissal of Crim. Case
No. 45284 and the fact that the petition in G.R. No. 63055 seeking a review of such dismissal
had also been denied, the Court likewise dismissed the petition in G.R. No. 58714. The
dismissal became final and executory with the entry of judgment made on 10 August 1983.
Thereafter, UNIVERSAL and Sehwani filed a civil case for damages with the Regional
Trial Court of Pasig[4] charging that PRO LINE and QUESTOR maliciously and without legal
basis committed the following acts to their damage and prejudice: (a) procuring the issuance
by the Pasig trial court of Search Warrant No. 2-81 authorizing the NBI to raid the premises
of UNIVERSAL; (b) procuring an order from the same court authorizing the sealing and
padlocking of UNIVERSAL's machineries and equipment resulting in the paralyzation and
virtual closure of its operations; (c) securing a temporary restraining order from the Court of
Appeals to prevent the implementation of the trial court's order of 28 April 1981 which
authorized the lifting of the seal and padlock on the subject machineries and equipment to
allow UNIVERSAL to resume operations; (d) securing a temporary restraining order from the
High Tribunal against the Court of Appeals and charging the latter with grave abuse of
discretion for holding that the order of 28 April 1981 was judiciously issued, thus prolonging
the continued closure of UNIVERSAL's business; (e) initiating the criminal prosecution of
Monico Sehwani for unfair competition under Art. 189 of the Penal Code; and, (g) appealing
the order of acquittal in Crim. Case No. 45284 directly to the Supreme Court with no other
purpose than to delay the proceedings of the case and prolong the wrongful invasion of
UNIVERSAL's rights and interests.
Defendants PRO LINE and QUESTOR denied all the allegations in the complaint and
filed a counterclaim for damages based mainly on the unauthorized and illegal manufacture
by UNIVERSAL of athletic balls bearing the trademark "Spalding."
The trial court granted the claim of UNIVERSAL declaring that the series of acts
complained of were "instituted with improper, malicious, capricious motives and without
sufficient justification." It ordered PRO LINE and QUESTOR jointly and severally to pay
UNIVERSAL and Sehwani P676,000.00 as actual and compensatory
damages, P250,000.00 as moral damages, P250,000.00 as exemplary
damages.[5] and P50,000.00 as attorney's fees. The trial court at the same time dismissed
the counterclaim of PRO LINE and QUESTOR.
The Court of Appeals affirmed the decision of the lower court but reduced the amount
of moral damages to P150,000.00 and exemplary damages to P100,000.00.
Two (2) issues are raised before us: (a) whether private respondents Sehwani and
UNIVERSAL are entitled to recover damages for the alleged wrongful recourse to court
proceedings by petitioners PRO LINE and QUESTOR; and, (b) whether petitioners'
counterclaim should be sustained.
PRO LINE and QUESTOR cannot be adjudged liable for damages for the alleged
unfounded suit. The complainants were unable to prove two (2) essential elements of the
crime of malicious prosecution, namely, absence of probable cause and legal malice on the
part of petitioners.
UNIVERSAL failed to show that the filing of Crim. Case No. 45284 was bereft of
probable cause. Probable cause is the existence of such facts and circumstances as would
excite the belief in a reasonable mind, acting on the facts within the knowledge of the
prosecutor, that the person charged was guilty of the crime for which he was prosecuted. [6] In
the case before us, then Minister of Justice Ricardo C. Puno found probable cause when he
reversed the Provincial Fiscal who initially dismissed the complaint and directed him instead
to file the corresponding Information for unfair competition against private respondents
herein.[7] The relevant portions of the directive are quoted hereunder:
The intent on the part of Universal Sports to deceive the public and to defraud a competitor
by the use of the trademark "Spalding" on basketballs and volleyballs seems apparent. As
President of Universal and as Vice President of the Association of Sporting Goods
Manufacturers, Monico Sehwani should have known of the prior registration of the trademark
"Spalding" on basketballs and volleyballs when he filed the application for registration of the
same trademark on February 20, 1981, in behalf of Universal, with the Philippine Patent
Office. He was even notified by the Patent Office through counsel on March 9, 1981, that
"Spalding" was duly registered with said office in connection with sporting goods, implements
and apparatus by A.G. Spalding & Bros., Inc. of the U.S.A.
That Universal has been selling these allegedly misbranded "Spalding" balls has been
controverted by the firms allegedly selling the goods. However, there is sufficient proof that
Universal manufactured balls with the trademark "Spalding" as admitted by Monico himself
and as shown by the goods confiscated by virtue of the search warrant.
Jurisprudence abounds to the effect that either a seller or a manufacturer of imitation goods
may be liable for violation of Section 29 of Rep. Act No. 166 (Alexander v. Sy Bok, 97 Phil.
57). This is substantially the same rule obtaining in statutes and judicial construction since
1903 when Act No. 666 was approved (Finlay Fleming vs. Ong Tan Chuan, 26 Phil.
579) x x x x[8]
 The existence of probable cause for unfair competition by UNIVERSAL is derivable
from the facts and circumstances of the case. The affidavit of Graciano Lacanaria, a former
employee of UNIVERSAL, attesting to the illegal sale and manufacture of "Spalding" balls
and seized "Spalding" products and instruments from UNIVERSAL's factory was
sufficient prima facie evidence to warrant the prosecution of private respondents. That a
corporation other than the certified owner of the trademark is engaged in the unauthorized
manufacture of products bearing the same trademark engenders a reasonable belief that a
criminal offense for unfair competition is being committed.
Petitioners PRO LINE and QUESTOR could not have been moved by legal malice in
instituting the criminal complaint for unfair competition which led to the filing of the
Information against Sehwani. Malice is an inexcusable intent to injure, oppress, vex, annoy
or humiliate. We cannot conclude that petitioners were impelled solely by a desire to inflict
needless and unjustified vexation and injury on UNIVERSAL's business interests. A resort
to judicial processes is not per se evidence of ill will upon which a claim for damages may
be based. A contrary rule would discourage peaceful recourse to the courts of justice and
induce resort to methods less than legal, and perhaps even violent.[9]
We are more disposed, under the circumstances, to hold that PRO LINE as the
authorized agent of QUESTOR exercised sound judgment in taking the necessary legal
steps to safeguard the interest of its principal with respect to the trademark in question. If
the process resulted in the closure and padlocking of UNIVERSAL's factory and the
cessation of its business operations, these were unavoidable consequences of petitioners'
valid and lawful exercise of their right. One who makes use of his own legal right does no
injury.Qui jure suo utitur nullum damnum facit. If damage results from a person's exercising
his legal rights, it is damnum absque injuria.[10]
Admittedly, UNIVERSAL incurred expenses and other costs in defending itself from
the accusation. But, as Chief Justice Fernando would put it, "the expenses and annoyance
of litigation form part of the social burden of living in a society which seeks to attain social
control through law."[11] Thus we see no cogent reason for the award of damages, exorbitant
as it may seem, in favor of UNIVERSAL. To do so would be to arbitrarily impose a penalty
on petitioners' right to litigate.
The criminal complaint for unfair competition, including all other legal remedies
incidental thereto, was initiated by petitioners in their honest belief that the charge was
meritorious. For indeed it was. The law brands business practices which are unfair, unjust
or deceitful not only as contrary to public policy but also as inimical to private interests.In the
instant case, we find quite aberrant Sehwani's reason for the manufacture of 1,200
"Spalding" balls, i.e., the pending application for trademark registration of UNIVERSAL with
the Patent Office, when viewed in the light of his admission that the application for
registration with the Patent Office was filed on 20 February 1981, a good nine (9) days after
the goods were confiscated by the NBI. This apparently was an afterthought but nonetheless
too late a remedy. Be that as it may, what is essential for registrability is proof of actual use
in commerce for at least sixty (60) days and not the capability to manufacture and distribute
samples of the product to clients.
Arguably, respondents' act may constitute unfair competition even if the element of
selling has not been proved. To hold that the act of selling is an indispensable element of
the crime of unfair competition is illogical because if the law punishes the seller of imitation
goods, then with more reason should the law penalize the manufacturer. In U. S. v.
Manuel,[12] the Court ruled that the test of unfair competition is whether certain goods have
been intentionally clothed with an appearance which is likely to deceive the ordinary
purchasers exercising ordinary care. In this case, it was observed by the Minister of Justice
that the manufacture of the "Spalding" balls was obviously done to deceive would-be
buyers. The projected sale would have pushed through were it not for the timely seizure of
the goods made by the NBI. That there was intent to sell or distribute the product to the
public cannot also be disputed given the number of goods manufactured and the nature of
the machinery and other equipment installed in the factory.
We nonetheless affirm the dismissal of petitioners' counterclaim for damages. A
counterclaim partakes of the nature of a complaint and/or a cause of action against the
plaintiffs.[13] It is in itself a distinct and independent cause of action, so that when properly
stated as such, the defendant becomes, in respect to the matter stated by him, an actor, and
there are two simultaneous actions pending between the same parties, where each is at the
same time both a plaintiff and defendant.[14] A counterclaim stands on the same footing and
is to be tested by the same rules, as if it were an independent action. [15]
Petitioners' counterclaim for damages based on the illegal and unauthorized
manufacture of "Spalding" balls certainly constitutes an independent cause of action which
can be the subject of a separate complaint for damages against UNIVERSAL. However, this
separate civil action cannot anymore be pursued as it is already barred by res judicata, the
judgment in the criminal case (against Sehwani) involving both the criminal and civil aspects
of the case for unfair competition.[16] To recall, petitioners PRO LINE and QUESTOR, upon
whose initiative the criminal action for unfair competition against respondent UNIVERSAL
was filed, did not institute a separate civil action for damages nor reserve their right to do
so. Thus the civil aspect for damages was deemed instituted in the criminal case. No better
manifestation of the intent of petitioners to recover damages in the criminal case can be
expressed than their active participation in the prosecution of the civil aspect of the criminal
case through the intervention of their private prosecutor. Obviously, such intervention could
only be for the purpose of recovering damages or indemnity because the offended party is
not entitled to represent the People of the Philippines in the prosecution of a public
offense.[17] Section 16, Rule 110, of the Rules of Court requires that the intervention of the
offended party in the criminal action can be made only if he has not waived the civil action
nor expressly reserved his right to institute it separately. [18] In an acquittal on the ground that
an essential element of the crime was not proved, it is fundamental that the accused cannot
be held criminally nor civilly liable for the offense. Although Art. 28 of the New Civil
Code[19] authorizes the filing of a civil action separate and distinct from the criminal
proceedings, the right of petitioners to institute the same is not unfettered. Civil liability
arising from the crime is deemed instituted and determined in the criminal proceedings
where the offended party did not waive nor reserve his right to institute it separately. [20] This
is why we now hold that the final judgment rendered therein constitutes a bar to the present
counterclaim for damages based upon the same cause. [21]
WHEREFORE, the petition is partly GRANTED. The decision of respondent Court of
Appeals is MODIFIED by deleting the award in favor of private respondents UNIVERSAL
and Monico Sehwani of actual, moral and exemplary damages as well as attorney's fees.
The dismissal of petitioners' counterclaim is AFFIRMED. No pronouncement as to
costs.
SO ORDERED.