Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 171053 October 15, 2007

SEHWANI, INCORPORATED and/or BENITA'S FRITES, INC., Petitioner,

vs.
IN-N-OUT BURGER, INC., Respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review assails the Decision1 of the Court of Appeals in CA-G.R. SP No. 88004
dated October 21, 2005, which affirmed the December 7, 2004 Order2 of Director General Emma
C. Francisco of the Intellectual Property Office (IPO), in Appeal No. 14-2004-0004 finding that
petitioners’ appeal was filed out of time, as well as the Resolution3 dated January 12, 2006
denying the motion for reconsideration.

Respondent IN-N-OUT Burger, Inc., a foreign corporation organized under the laws of California,
U.S.A., and not doing business in the Philippines, filed before the Bureau of Legal Affairs of the
IPO (BLA-IPO), an administrative complaint against petitioners Sehwani, Inc. and Benita’s Frites,
Inc. for violation of intellectual property rights, attorney’s fees and damages with prayer for the
issuance of a restraining order or writ of preliminary injunction.4

Respondent alleged that it is the owner of the tradename "IN-N-OUT" and trademarks "IN-N-OUT,"
"IN-N-OUT Burger & Arrow Design" and "IN-N-OUT Burger Logo," which are used in its business
since 1948 up to the present. These tradename and trademarks were registered in the United
States as well as in other parts of the world.5

On June 2, 1997, respondent applied with the IPO for the registration of its trademark "IN-N-OUT
Burger & Arrow Design" and servicemark "IN-N-OUT." In the course of its application, respondent
discovered that petitioner Sehwani, Inc. had obtained Trademark Registration No. 56666 for the
mark "IN N OUT" (THE INSIDE OF THE LETTER "O" FORMED LIKE A STAR) on December 17,
1993 without its authority.6 Respondent thus demanded that petitioner Sehwani, Inc. desist from
claiming ownership of the mark "IN-N-OUT" and to voluntarily cancel its Trademark Registration
No. 56666. Petitioner Sehwani, Inc. however refused to accede to the demand and even entered
into a Licensing Agreement granting its co-petitioner Benita’s Frites, Inc. license to use for a period
of five years the trademark "IN-N-OUT BURGER" in its restaurant in Pasig City.7 Hence,
respondent filed a complaint for violation of intellectual property rights.

In their answer with counterclaim, petitioners alleged that respondent lack the legal capacity to sue
because it was not doing business in the Philippines and that it has no cause of action because its
mark is not registered or used in the Philippines. Petitioner Sehwani, Inc. also claimed that as the
registered owner of the "IN-N-OUT" mark, it enjoys the presumption that the same was validly
acquired and that it has the exclusive right to use the mark. Moreover, petitioners argued that
other than the bare allegation of fraud in the registration of the mark, respondent failed to show the
existence of any of the grounds for cancellation thereof under Section 151 of Republic Act (R.A.)
No. 8293, otherwise known as The Intellectual Property Code of the Philippines.8

1
On December 22, 2003, Bureau Director Estrellita Beltran-Abelardo rendered Decision No. 2003-
02 finding that respondent has the legal capacity to sue and that it is the owner of the
internationally well-known trademarks; however, she held that petitioners are not guilty of unfair
competition, thus:

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 Benita’s
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 regard to mark "Double-
Double", considering that as earlier discussed, the mark has been approved by this Office for
publication and that as shown by the evidence, Complainant is the owner of the said mark,
Respondents are also ordered to permanently cease and desist from using the mark Double-
Double. NO COSTS.

SO ORDERED.9

Petitioners filed a motion for reconsideration10 insisting that respondent has no legal capacity to
sue, that no ground for cancellation was duly proven, and that the action is barred by laches; while
respondent moved for partial reconsideration11 assailing the finding that petitioners are not guilty of
unfair competition. Both, however, were denied in Resolution No. 2004-18 dated October 28,
200412 and Resolution No. 2005-05 dated April 25, 2005,13respectively.

On separate dates, the parties appealed to the Office of the Director General which rendered an
Order dated December 7, 2004,14 in Appeal No. 14-2004-0004, dismissing petitioners’ appeal for
being filed out of time, thus:

WHEREFORE, premises considered, the MOTION TO ADMIT COPY OF DECISION NO. 2003-02
is hereby granted. The instant appeal, however, is hereby DISMISSED for having been filed out of
time.15

Aggrieved, petitioners filed a petition before the Court of Appeals which was dismissed for lack of
merit. It held that the right to appeal is not a natural right or a part of due process, but a procedural
remedy of statutory origin, hence, its requirements must be strictly complied with. The appeal
being filed out of time, the December 22, 2003 Decision and the October 28, 2004 Orders of
Bureau Director Beltran-Abelardo are now final and executory.16

Meanwhile, respondent filed a Manifestation with the Court of Appeals that on December 23,
2005, Director General Adrian S. Cristobal, Jr. had rendered a Decision in Appeal 10-05-01 finding
petitioners guilty of unfair competition.17

Petitioners’ motion for reconsideration was denied; hence, the instant petition raising the following
issues:

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN UPHOLDING THE IPO

DIRECTOR GENERAL’S DISMISSAL OF APPEAL NO. 14-2004-0004 ON A MERE
TECHNICALITY.

SUBSTANTIAL JUSTICE WOULD BE BETTER SERVED IF THE COURT OF APPEALS

AND THE IPO DIRECTOR GENERAL ENTERTAINED PETITIONERS APPEAL AS THE
BUREAU OF LEGAL AFFAIR’S DECISION AND RESOLUTION (1) CANCELING
PETITIONER SEHWANI’S CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-
OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST

2
 FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY
TO LAW AND/OR NOT SUPPORTED BY EVIDENCE.18

Petitioners contend that the Court of Appeals erred when it dismissed the petition on mere
technicality which resulted in a miscarriage of justice and deprivation of intellectual property rights.
They claim that their counsel believed in good faith that Resolution No. 2004-18 dated October 28,
2004, denying the motion for reconsideration, was received only on November 3, 2004, thus, they
have until November 18, 2004 within which to file an appeal memorandum with the Office of the
Director General. They claim that they should not be prejudiced by their counsel’s mistake in
computing the period to appeal; besides, the same is understandable and excusable as their
counsel is a solo practitioner with only a handful of non-legal staff assisting him. They also
reiterate their position that respondent has no legal capacity to sue, that no ground for cancellation
was duly proven, and that the complaint is barred by laches, if not, by prescription. 19

The petition has no merit.

The Court has invariably ruled that perfection of an appeal within the statutory or reglementary
period is not only mandatory but also jurisdictional; failure to do so renders the questioned
decision/final order final and executory, and deprives the appellate court of jurisdiction to alter the
judgment or final order, much less to entertain the appeal.20True, this rule had been relaxed but
only in highly meritorious cases to prevent a grave injustice from being done. 21Such does not
obtain in this case.

Director General Francisco, as affirmed by the Court of Appeals, correctly held:

[T]hat the appeal must be dismissed outright. Section 2 of the Uniform Rules on Appeal (Office
Order no. 12, s. 2002) states that:

Section 2. Appeal to the Director General. – The decisions or final orders of the Bureau Director
shall become final and executory thirty (30) days after receipt of a copy thereof by the appellant or
appellants unless, within the same period, a motion for reconsideration is filed with the Bureau
Director or an appeal to the Director General has been perfected; Provided, that only one (1)
motion for reconsideration of the decision or order of the Bureau Director shall be allowed, and, in
case the motion for reconsideration is denied, the appellant or appellants has/have the balance of
the period prescribed above within which to file the appeal.

Considering that the Respondent-Appellants received a copy of the appealed Decision on 15

January 2004 and filed their MOTION FOR RECONSIDERATION on 30 January 2004, said
parties had a balance of 15 days from their receipt of the Resolution denying said motion within
which to file the APPEAL MEMORANDUM. Per records of the Bureau of Legal Affairs, the
Respondents-Appellants received a copy of the Resolution on 29 October 2004. Hence the
deadline for the filing of the APPEAL MEMORANDUM was on 13 November 2004. Since said date
fell on a Saturday, the appeal should have been filed on the ensuing working day, that is, 15
November 2004.

On this score, Section 5(c) of the Uniform Rules on Appeal provides:

Section 5. Action on the Appeal Memorandum – The Director General shall:

xxxx

c) Dismiss the appeal for being patently without merit, provided that the dismissal shall be outright
if the appeal is not filed within the prescribed period or for failure of the appellant to pay the
required fee within the period of appeal.22 (Underscoring supplied)
3
Petitioners’ allegation that they honestly believed that they received Resolution No. 2004-18 dated
October 28, 2004 on November 3, 2004 and not on October 29, 2004, as what appears on the
records of the BLA-IPO, is self-serving and unbelievable. The inadvertent computation of the
period for one to file a pleading is inexcusable, and has become an all too familiar and ready
excuse on the part of lawyers remiss in their bounden duty to comply with the mandatory
periods.23

This Court has always reminded the members of the legal profession that every case they handle
deserves full and undivided attention, diligence, skill and competence, regardless of its
importance.24 A lawyer has the responsibility of monitoring and keeping track of the period of time
left to file pleadings and to see to it that said pleadings are filed before the lapse of the period. If
he fails to do so, his client is bound by his conduct, negligence and mistakes. 25This responsibility
is imposed on all lawyers notwithstanding the presence or absence of staff assisting them in the
discharge thereof.

Thus, as correctly held by the Court of Appeals, petitioners’ belated filing of an appeal
memorandum rendered the December 22, 2003 Decision and the October 28, 2004 Order of
Bureau Director Beltran-Abelardo final and executory.

At this point, the Court could very well write finis to this petition. However, in disposing of the
instant case, we shall resolve the principal issues raised by petitioners.

Contrary to petitioners’ argument, respondent has the legal capacity to sue for the protection of its
trademarks, albeit it is not doing business in the Philippines. Section 160 in relation to Section 3 of
R.A. No. 8293, provides:

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.

Section 3 thereof provides:

SECTION 3. International Conventions and Reciprocity. — Any person who is a national or who is
domiciled or has a real and effective industrial establishment in a country which is a party to any
convention, treaty or agreement relating to intellectual property rights or the repression of unfair
competition, to which the Philippines is also a party, or extends reciprocal rights to nationals of the
Philippines by law, shall be entitled to benefits to the extent necessary to give effect to any
provision of such convention, treaty or reciprocal law, in addition to the rights to which any owner
of an intellectual property right is otherwise entitled by this Act.

Respondent anchors its causes of action under Articles 6bis and 8 of The Convention of Paris for
the Protection of Industrial Property, otherwise known as the Paris Convention, wherein both the
United States and the Philippines are signatories.26 The Articles read:

Article 6bis

(1) The countries of the Union undertake, ex officio 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
4
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.

x x x x.

Article 8

A tradename shall be protected in all countries of the Union without the obligation of filing or
registration whether or not it forms part of a trademark.

Article 6bis which governs the protection of well-known trademarks, is a self-executing provision
and does not require legislative enactment to give it effect in the member country. 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. The essential requirement under this Article 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. 27

The question of whether or not respondent’s trademarks are considered "well-known" is factual in
nature, involving as it does the appreciation of evidence adduced before the BLA-IPO. The settled
rule is that the factual findings of quasi-judicial agencies, like the IPO, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally accorded not only
respect, but, at times, even finality if such findings are supported by substantial evidence.28

Director Beltran-Abelardo found that:

Arguing mainly that it is the owner of an internationally well-known mark, complainant presented
its United States trademark registrations, namely: United States Trademark Registration No.
1,514,689 for the mark "IN-N-OUT Burger and Arrow Design" under class 25 dated November 29,
1988 for the shirts (Exhibit "L"); United States Trademark Registration No. 1,528,456 for the mark
"IN-N-OUT Burger and Arrow Design" under Class 29, 30, 32 and 42 dated March 7, 1989 for milk
and french-fried potatoes for consumption on or off the premises, for hamburger sandwiches,
cheeseburger sandwiches, hot coffee and milkshakes for consumption on or off the premises,
lemonade and softdrinks for consumption on and off the premises, restaurant services respectively
(Exhibit "M"); US Trademark Registration No. 1,101,638 for the mark "IN-N-OUT" under Class No.
30 dated September 5, 1978 for cheeseburgers, hamburgers, hot coffee and milkshake for
consumption on or off premises (Exhibit "N"); US Trademark Registration No. 1,085,163 "IN-N-
OUT" under Class 42 dated February 7, 1978 for Restaurant Services and carry-out restaurant
services (Exhibit "Q"). For its mark "Double-Double" it submitted Certificates of Registration of said
mark in several countries (Exhibits "MM" and submarkings).

xxxx

Moreover, complainant also cites our decision in Inter Pares Case No. 14-1998-00045 dated 12
September 2000, an opposition case involving the mark "IN-N-OUT" between IN-N-OUT Burger
(herein complainant) and Nestor SJ Bonjales where we ruled:

"And last but not the lease, the herein Opposer was able to prove substantially that its mark "IN-N-
OUT Burger and Arrow Design" is an internationally well known mark as evidenced by its
trademark registrations around the world and its comprehensive advertisements therein."

5
The nub of complainant’s reasoning is that the Intellectual Property Office as a competent
authority had declared in previous inter partes case that "IN-N-OUT Burger and Arrow Design" is
an internationally well known mark.

In the aforementioned case, we are inclined to favor the declaration of the mark "IN-N-OUT" as an
internationally well-known mark on the basis of "registrations in various countries around the world
and its comprehensive advertisements therein."

The Ongpin Memorandum dated 25 October 1983 which was the basis for the decision in the
previous inter partes case and which set the criteria for determining whether a mark is well known,
takes into consideration the extent of registration of a mark. Similarly, the implementing rules of
Republic Act 8293, specifically Section (e) Rule 102 Criteria for determining whether a mark is well
known, also takes into account the extent to which the mark has been registered in the world in
determining whether a mark is well known.

Likewise, as shown by the records of the instant case, Complainant submitted evidence consisting
of articles about "IN-N-OUT Burger" appearing in magazines, newspapers and print-out of what
appears to be printed representations of its internet website (www.innout.com) (Exhibits "CCC" to
"QQQ"), as well as object evidence consisting of videotapes of famous celebrities mentioning IN-
N-OUT burgers in the course of their interviews (Exhibits "EEEE" and "FFFF") showing a
tremendous following among celebrities.

The quality image and reputation acquired by the complainant’s IN-N-OUT mark is unmistakable.
With this, complainant’s mark have met other criteria set in the Implementing Rules of Republic
Act 8293, namely, ‘a’ and ‘d’ of Rule 102, to wit:

"Rule 102:

(a) the duration, extent and geographical area of any use of the mark, in particular, the duration,
extent and geographical area of any promotion of the mark, including publicity and the
presentation at fairs or exhibitions, of the goods and/or services to which the mark applies;

xxxx

(d) the quality image or reputation acquired by the mark"

Hence, on the basis of evidence presented consisting of worldwide registration of mark "IN-N-
OUT" almost all of which were issued earlier than the respondent’s date of filing of its application
and the subsequent registration of the mark "IN-N-OUT" in this Office, as well as the
advertisements therein by the complainant, this Office hereby affirms its earlier declaration that
indeed, the mark "IN-N-OUT BURGER LOGO" is an internally well-known mark.29

We find the foregoing findings and conclusions of Director Beltran-Abelardo fully substantiated by
the evidence on record and in accord with law.

The fact that respondent’s marks are neither registered nor used in the Philippines is of no
moment. The scope of protection initially afforded by Article 6 bis of the Paris Convention has been
expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-
Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly
and the Paris Union agreed to a nonbinding recommendation that a well-known mark should be
protected in a country even if the mark is neither registered nor used in that country. Part I, Article
2(3) thereof provides:

6
(3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for
determining whether a mark is a well-known mark:

(i) that the mark has been used in, or that the mark has been registered or that an
application for registration of the mark has been filed in or in respect of, the Member State;

(ii) that the mark is well known in, or that the mark has been registered or that an
application for registration of the mark has been filed in or in respect of, any jurisdiction
other than the Member State; or

(iii) that the mark is well known by the public at large in the Member State. (Underscoring
supplied)

Moreover, petitioners’ claim that no ground exists for the cancellation of their registration lacks
merit. Section 151(b) of RA 8293 provides:

SECTION 151. Cancellation. — 151.1. A petition to cancel a registration of a mark under this Act
may be filed with the Bureau of Legal Affairs by any person who believes that he is or will be
damaged by the registration of a mark under this Act as follows:

xxxx

(b) At any time, if the registered mark becomes the generic name for the goods or services, or a
portion thereof, for which it is registered, or has been abandoned, or its registration was obtained
fraudulently or contrary to the provisions of this Act, or if the registered mark is being used by, or
with the permission of, the registrant so as to misrepresent the source of the goods or services on
or in connection with which the mark is used. x x x.1âwphi1

The evidence on record shows that not only did the petitioners use the IN-N-OUT Burger
trademark for the name of their restaurant, but they also used identical or confusingly similar mark
for their hamburger wrappers and french-fries receptacles, thereby effectively misrepresenting the
source of the goods and services.30

Finally, petitioner’s contention that respondent is precluded from asserting its claim by laches, if
not by prescription, lacks basis. Section 151(b) of R.A. No. 8293 specifically provides that a
petition to cancel the registration of a mark which is registered contrary to the provisions thereof,
or which is used to misrepresent the source of the goods or services, may be filed at any time.
Moreover, laches may not prevail against a specific provision of law, since equity, which has been
defined as ‘justice outside legality’ is applied in the absence of and not against statutory law or
rules of procedure.31 Aside from the specific provisions of R.A. No. 8293, the Paris Convention
and the WIPO Joint Recommendation have the force and effect of law, for under Section 2, Article
II of the Constitution, the Philippines adopts the generally accepted principles of international law
as part of the law of the land. To rule otherwise would be to defeat the equitable consideration that
no one other than the owner of the well-known mark shall reap the fruits of an honestly established
goodwill.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 88004, dated October 21, 2005 and January 16, 2006, affirming the December 7,
2004 Order of Director General Emma C. Francisco, in Appeal No. 14-2004-0004, and denying the
motion for reconsideration, respectively, are AFFIRMED.

SO ORDERED.

7
CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

RUBEN T. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, it
is hereby certified that the conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

8
 Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

PEST MANAGEMENT G.R. NO. 156041

ASSOCIATION OF THE
PHILIPPINES (PMAP),
represented by its President, Present:
MANUEL J. CHAVEZ,
Petitioner, YNARES-SANTIAGO, J.,
(Chairperson)
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
CHICO-NAZARIO, and
NACHURA, JJ.

FERTILIZER AND PESTICIDE

AUTHORITY (FPA), SECRETARY
OF THE DEPARTMENT OF
AGRICULTURE, FPA OFFICER-
IN-CHARGE CESAR M. DRILON,
AND FPA DEPUTY DIRECTOR
DARIO C. SALUBARSE,
Respondents. Promulgated:
February 21, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari seeking to set aside the
Decision[1] of the Regional Trial Court of Quezon City, Branch 90 (RTC) dated November 5,
2002.
The case commenced upon petitioners filing of a Petition For Declaratory Relief With
Prayer For Issuance Of A Writ Of Preliminary Injunction And/Or Temporary Restraining
Order with the RTC on January 4, 2002. Petitioner, a non-stock corporation duly organized
and existing under the laws of the Philippines, is an association of pesticide handlers duly
licensed by respondent Fertilizer and Pesticide Authority (FPA). It questioned the validity of
Section 3.12 of the 1987 Pesticide Regulatory Policies and Implementing Guidelines, which
provides thus:

3.12 Protection of Proprietary Data

Data submitted to support the first full or conditional registration of a

pesticide active ingredient in the Philippines will be granted proprietary
9
 protection for a period of seven years from the date of such
registration. During this period subsequent registrants may rely on these data
only with third party authorization or otherwise must submit their own
data. After this period, all data may be freely cited in support of registration by
any applicant, provided convincing proof is submitted that the product being
registered is identical or substantially similar to any current registered pesticide, or
differs only in ways that would not significantly increase the risk of unreasonable
adverse effects.
Pesticides granted provisional registration under P.D. 1144 will be
considered first registered in 1977, the date of the Decree.

Pesticide products in which data is still under protection shall be referred to

as proprietary pesticides, and all others as commodity pesticides. (Emphasis
supplied)

Petitioner argued that the specific provision on the protection of the proprietary data
in FPAs Pesticide Regulatory Policies and Implementing Guidelines is unlawful for going
counter to the objectives of Presidential Decree No. 1144 (P.D. No. 1144); for exceeding the
limits of delegated authority; and for encroaching on the exclusive jurisdiction of the
Intellectual Property Office.

On November 5, 2002, the RTC dismissed the petition for declaratory relief for lack of
merit. The RTC held that the FPA did not exceed the limits of its delegated authority in
issuing the aforecited Section 3.12 of the Guidelines granting protection to proprietary data
x x x because the issuance of the aforecitedSection was a valid exercise of its power to
regulate, control and develop the pesticide industry under P.D. 1144[2] and the assailed
provision does not encroach on one of the functions of the Intellectual Properly Office
(IPO).[3]

Dissatisfied with the RTC Decision, petitioner resorted to filing this petition for
review on certiorari where the following issues are raised:

WHETHER OR NOT RESPONDENT FPA HAS ACTED BEYOND THE SCOPE

OF ITS DELEGATED POWER WHEN IT GRANTED A SEVEN-YEAR PROPRIETARY
PROTECTION TO DATA SUBMITTED TO SUPPORT THE FIRST FULL OR
CONDITIONAL REGISTRATION OF A PESTICIDE INGREDIENT IN THE
PHILIPPINES;

II

WHETHER OR NOT RESPONDENT FPA IS ENCROACHING ON THE

EXCLUSIVE JURISDICTION OF THE INTELLECTUAL PROPERTY OFFICE (IPO)
WHEN IT INCLUDED IN ITS PESTICIDE REGULATORY POLICIES AND
IMPLEMENTING GUIDELINES THE SUBJECT SEVEN-YEAR PROPRIETARY DATA
PROTECTION;

III
10
 WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION IS AN
UNLAWFUL RESTRAINT OF FREE TRADE;

IV

WHETHER OR NOT SAID PROPRIETARY DATA PROTECTION RUNS

COUNTER TO THE OBJECTIVES OF P.D. NO. 1144;

WHETHER OR NOT THE REGIONAL TRIAL COURT OF QUEZON CITY,

BRANCH 90, COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE
VALIDITY OF SECTION 3.12 OF THE PESTICIDE REGULATORY POLICIES AND
IMPLEMENTING GUIDELINES ISSUED BY RESPONDENT FPA.

Respondents, on the other hand, maintain that the provision on the protection of
proprietary data in the FPA's Pesticide Regulatory Policies and Implementing Guidelines is
valid and legal as it does not violate the objectives of P.D. No. 1144; the proprietary data are
a substantial asset which must be protected; the protection for a limited number of years does
not constitute unlawful restraint of free trade; and such provision does not encroach upon the
jurisdiction of the Intellectual Property Office.

Respondents expound that since under P.D. No. 1144, the FPA is mandated to
regulate, control and develop the pesticide industry, it was necessary to provide for such
protection of proprietary data, otherwise, pesticide handlers will proliferate to
the the detriment of the industry and the public since the inherent toxicity of pesticides are
hazardous and are potential environmental contaminants.

They also pointed out that the protection under the assailed Pesticide Regulatory
Policies and Implementing Guidelines is warranted, considering that the development of
proprietary data involves an investment of many years and large sums of money, thus, the
data generated by an applicant in support of his application for registration are owned and
proprietary to him. Moreover, since the protection accorded to the proprietary data is limited
in time, then such protection is reasonable and does not constitute unlawful restraint of trade.

Lastly, respondents emphasize that the provision on protection of proprietary data

does not usurp the functions of the Intellectual Property Office (IPO) since a patent and data
protection are two different matters. A patent prohibits all unlicensed making, using and
selling of a particular product, while data protection accorded by the FPA merely prevents
copying or unauthorized use of an applicant's data, but any other party may independently
generate and use his own data. It is further argued that under Republic Act No. 8293 (R.A.
No. 8293), the grant of power to the IPO to administer and implement State policies on
intellectual property is not exclusionary as the IPO is even allowed to coordinate with other
government agencies to formulate and implement plans and policies to strengthen the
protection of intellectual property rights.

The petition is devoid of merit.

11
 The law being implemented by the assailed Pesticide Regulatory Policies and
Implementing Guidelines is P.D. No. 1144, entitled Creating the Fertilizer and Pesticide
Authority and Abolishing the Fertilizer Industry Authority. As stated in the Preamble of said
decree, there is an urgent need to create a technically-oriented government authority
equipped with the required expertise to regulate, control and develop both the fertilizer and
the pesticide industries. (Underscoring supplied) The decree further provided as follows:

Section 6. Powers and Functions. The FPA shall have jurisdiction, over all existing
handlers of pesticides, fertilizers and other agricultural chemical inputs. The FPA
shall have the following powers and functions:

I. Common to Fertilizers, Pesticides and other Agricultural Chemicals

xxx

4. To promulgate rules and regulations for the registration and licensing of

handlers of these products, collect fees pertaining thereto, as well as the
renewal, suspension, revocation, or cancellation of such registration or
licenses and such other rules and regulations as may be necessary to
implement this Decree;

xxx

Section 7. Power to Issue Rules and Regulations to Implement Decree. The FPA is
hereby authorized to issue or promulgate rules and regulations to implement, and
carry out the purposes and provisions of this Decree.

Did the FPA go beyond its delegated power and undermine the objectives of P.D. No. 1144
by issuing regulations that provide for protection of proprietary data?The answer is in the
negative.

Under P.D. No. 1144, the FPA is given the broad power to issue rules and regulations to
implement and carry out the purposes and provisions of said decree, i.e., to regulate, control
and develop the pesticide industry. In furtherance of such ends, the FPA sees the protection
of proprietary data as one way of fulfilling its mandate. In Republic v. Sandiganbayan,[4] the
Court emphasized that:

x x x [t]he interpretation of an administrative government agency,

which is tasked to implement a statute is generally accorded great respect and
ordinarily controls the construction of the courts. The reason behind this rule
was explained in Nestle Philippines, Inc. vs. Court of Appeals in this wise:

The rationale for this rule relates not only to the emergence of the multifarious needs of
a modern or modernizing society and the establishment of diverse administrative agencies for
addressing and satisfying those needs; it also relates to the accumulation of experience and
growth of specialized capabilities by the administrative agency charged with implementing a
particular statute. In Asturias Sugar Central, Inc. vs. Commissioner of Customs, the Court
stressed that executive officials are presumed to have familiarized themselves with all the
12
 considerations pertinent to the meaning and purpose of the law, and to have formed an
independent, conscientious and competent expert opinion thereon. The courts give much
weight to the government agency officials charged with the implementation of the law,
their competence, expertness, experience and informed judgment, and the fact that they
frequently are the drafters of the law they interpret.

x x x.[5] [Emphasis supplied]

Verily, in this case, the Court acknowledges the experience and expertise of FPA
officials who are best qualified to formulate ways and means of ensuring the quality and
quantity of pesticides and handlers thereof that should enter the Philippine market, such as
giving limited protection to proprietary data submitted by applicants for registration. The
Court ascribes great value and will not disturb the FPA's determination that one way
of attaining the purposes of its charter is by granting such protection, specially where there is
nothing on record which shows that said administrative agency went beyond its delegated
powers.

Moreover, petitioner has not succeeded in convincing the Court that the provision in
question has legal infirmities.

There is no encroachment upon the powers of the IPO granted under R.A. No. 8293,
otherwise known as the Intellectual Property Code of the Philippines.Section 5 thereof
enumerates the functions of the IPO. Nowhere in said provision does it state nor can it be
inferred that the law intended the IPO to have the exclusive authority to protect or promote
intellectual property rights in the Philippines. On the contrary, paragraph (g) of said Section
even provides that the IPO shall [c]oordinate with other government agencies and the private
sector efforts to formulate and implement plans and policies to strengthen the protection of
intellectual property rights in the country. Clearly, R.A. No. 8293 recognizes that efforts to
fully protect intellectual property rights cannot be undertaken by the IPO alone. Other
agencies dealing with intellectual property rights are, therefore, not precluded from issuing
policies, guidelines and regulations to give protection to such rights.

There is also no evidence whatsoever to support petitioner's allegation that the grant of
protection to proprietary data would result in restraining free trade. Petitioner did not adduce
any reliable data to prove its bare allegation that the protection of proprietary data would
unduly restrict trade on pesticides. Furthermore, as held in Association of Philippine Coconut
Desiccators v. Philippine Coconut Authority,[6] despite the fact that our present Constitution
enshrines free enterprise as a policy, it nonetheless reserves to the government the power to
intervene whenever necessary to promote the general welfare. There can be no question that
the unregulated use or proliferation of pesticides would be hazardous to our
environment. Thus, in the aforecited case, the Court declared that free enterprise does not
call for removal of protective regulations.[7] More recently, in Coconut Oil Refiners
Association, Inc. v. Torres,[8] the Court held that [t]he mere fact that incentives and privileges
are granted to certain enterprises to the exclusion of others does not render the issuance
unconstitutional for espousing unfair competition. It must be clearly explained and proven by
competent evidence just exactly how such protective regulation would result in the restraint
of trade.
13
 In sum, the assailed provision in the 1987 Pesticide Regulatory Policies and
Implementing Guidelines granting protection to proprietary data is well within the authority
of the FPA to issue so as to carry out its purpose of controlling, regulating and developing
the pesticide industry.

WHEREFORE, the petition is DENIED. The Decision of the Regional Trial Court
of Quezon City, Branch 90, in SP. Civil Case No. Q-01-42790 is AFFIRMED.
SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

ROMEO J. CALLEJO, SR. MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

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

REYNATO S. PUNO
Chief Justice

14
 SECOND DIVISION
[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.
DECISION
DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] dated May 24, 1993 of the
Court of Appeals setting aside and declaring as null and void the Orders [2] 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 petitioners 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 petitioners
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 petitioners 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 Su products 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
15
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.

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.
16
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 petitioners complaint for final injunction and
damages. On October 22, 1993, the trial court rendered a Decision [7] 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 attorneys
fees. The petitioner duly appealed the said decision to the Court of Appeals.
On June 3, 1994, the Court of Appeals promulgated a Resolution [8] denying the petitioners
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:
I

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
FAILING TO RULE ON PETITIONERS MOTION TO DISMISS.
II

RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
REFUSING TO PROMPTLY RESOLVE PETITIONERS MOTION FOR
RECONSIDERATION.
III

IN DELAYING THE RESOLUTION OF PETITIONERS MOTION FOR

RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED
PETITIONERS RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED
PETITIONERS 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]
17
 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 petitioners 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 petitioners 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
18
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 Appeals[16], 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 plaintiffs
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-plaintiffs 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,
19
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. [17] With
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.
Finally, we rule that the Court of Appeals correctly denied the petitioners 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.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

20
 FIRST DIVISION
[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 Order of the Regional
[1]

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 Order which denied his
[2]

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
21
that since under Section 170 of R.A. No. 8293, the penalty of imprisonment for unfair
5

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. A motion for reconsideration thereof was likewise denied on August 5, 2003.
6

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

22
SEC. 239. Repeals. 239.1. All Acts and parts of Acts inconsistent herewith, more particularly
Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and
189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No.
285, as amended, are hereby repealed. (Emphasis added)

Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety,
otherwise, it would not have used the phrases parts of Acts and inconsistent herewith;
and it would have simply stated Republic Act No. 165, as amended; Republic Act No.
166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential
Decree No. 49, including Presidential Decree No. 285, as amended are hereby
repealed. It would have removed all doubts that said specific laws had been rendered
without force and effect. The use of the phrases parts of Acts and inconsistent herewith
only means that the repeal pertains only to provisions which are repugnant or not
susceptible of harmonization with R.A. No. 8293. Section 27 of R.A. No. 166, however,
7

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. 8

In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws conferring
9

jurisdiction over violations of intellectual property rights to the Regional Trial Court.
They should therefore prevail over R.A. No. 7691, which is a general law. Hence, 10

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, invoked by petitioner finds no application
11

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,
23
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. Under Rule 111, Section 3 of
12

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. Pursuant to Article 33 of the Civil Code,
13

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 admitted by private respondent also
14

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. Moreover, the Order dated August 9, 2002 denying his motion to
15

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

24
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.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

25
 THIRD DIVISION
[G.R. No. 154342. July 14, 2004]
MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO,
INC. petitioners, 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 decision [1] 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 reconsideration[4] and (c) the aforesaid Makati RTC
decision itself.
I.

The Factual Background

Respondent Gallo Winery is a foreign corporation not doing business in the

Philippines but organized and existing under the laws of the State of California, United
States of America (U.S.), where all its wineries are located. Gallo Winery produces
different kinds of wines and brandy products and sells them in many countries under
different registered trademarks, including the GALLO and ERNEST & JULIO GALLO
wine trademarks.
Respondent domestic corporation, Andresons, has been Gallo Winerys exclusive
wine importer and distributor in the Philippines since 1991, selling these products in its
own name and for its own account.[5]
Gallo Winerys GALLO wine trademark was registered in the principal register of the
Philippine Patent Office (now Intellectual Property Office) on November 16, 1971 under
Certificate of Registration No. 17021 which was renewed on November 16, 1991 for
another 20 years.[6] Gallo Winery also applied for registration of its ERNEST & JULIO
GALLO wine trademark on October 11, 1990 under Application Serial No. 901011-
00073599-PN but the records do not disclose if it was ever approved by the Director of
Patents.[7]
On the other hand, petitioners Mighty Corporation and La Campana and their sister
company, Tobacco Industries of the Philippines (Tobacco Industries), are engaged in
the cultivation, manufacture, distribution and sale of tobacco products for which they
have been using the GALLO cigarette trademark since 1973. [8]

26
 The Bureau of Internal Revenue (BIR) approved Tobacco Industries use of GALLO
100s cigarette mark on September 14, 1973 and GALLO filter cigarette mark on March
26, 1976, both for the manufacture and sale of its cigarette products. In 1976, Tobacco
Industries filed its manufacturers sworn statement as basis for BIRs collection of
specific tax on GALLO cigarettes.[9]
On February 5, 1974, Tobacco Industries applied for, but eventually did not pursue,
the registration of the GALLO cigarette trademark in the principal register of the then
Philippine Patent Office.[10]
In May 1984, Tobacco Industries assigned the GALLO cigarette trademark to La
Campana which, on July 16, 1985, applied for trademark registration in the Philippine
Patent Office.[11] On July 17, 1985, the National Library issued Certificate of Copyright
Registration No. 5834 for La Campanas lifetime copyright claim over GALLO cigarette
labels.[12]
Subsequently, La Campana authorized Mighty Corporation to manufacture and sell
cigarettes bearing the GALLO trademark.[13] BIR approved Mighty Corporations use of
GALLO 100s cigarette brand, under licensing agreement with Tobacco Industries, on
May 18, 1988, and GALLO SPECIAL MENTHOL 100s cigarette brand on April 3,
1989.[14]
Petitioners claim that GALLO cigarettes have been sold in the Philippines since
1973, initially by Tobacco Industries, then by La Campana and finally by Mighty
Corporation.[15]
On the other hand, although the GALLO wine trademark was registered in the
Philippines in 1971, respondents claim that they first introduced and sold the GALLO
and ERNEST & JULIO GALLO wines in the Philippines circa 1974 within the then U.S.
military facilities only. By 1979, they had expanded their Philippine market through
authorized distributors and independent outlets.[16]
Respondents claim that they first learned about the existence of GALLO cigarettes
in the latter part of 1992 when an Andresons employee saw such cigarettes on display
with GALLO wines in a Davao supermarket wine cellar section.[17] Forthwith,
respondents sent a demand letter to petitioners asking them to stop using the GALLO
trademark, to no avail.
II.

The Legal Dispute

On March 12, 1993, respondents sued petitioners in the Makati RTC for trademark
and tradename infringement and unfair competition, with a prayer for damages and
preliminary injunction.
Respondents charged petitioners with violating Article 6bis of the Paris Convention
for the Protection of Industrial Property (Paris Convention)[18] and RA 166 (Trademark
Law),[19] specifically, Sections 22 and 23 (for trademark infringement),[20] 29 and
30[21] (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
27
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:

28
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.

29
 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.

30
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.

31
DISTINCTIONS BETWEEN
TRADEMARK INFRINGEMENT
AND UNFAIR COMPETITION

Although the laws on trademark infringement and unfair competition have a

common conception at their root, that is, a person shall not be permitted to
misrepresent his goods or his business as the goods or business of another, the law on
unfair competition is broader and more inclusive than the law on trademark
infringement. The latter is more limited but it recognizes a more exclusive right derived
from the trademark adoption and registration by the person whose goods or business is
first associated with it. The law on trademarks is thus a specialized subject distinct from
the law on unfair competition, although the two subjects are entwined with each other
and are dealt with together in the Trademark Law (now, both are covered by the IP
Code). Hence, even if one fails to establish his exclusive property right to a trademark,
he may still obtain relief on the ground of his competitors unfairness or fraud. Conduct
constitutes unfair competition if the effect is to pass off on the public the goods of one
man as the goods of another. It is not necessary that any particular means should be
used to this end.[44]
In Del Monte Corporation vs. Court of Appeals,[45] we distinguished trademark
infringement from unfair competition:
(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition
is the passing off of one's goods as those of another.
(2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair competition
fraudulent intent is essential.
(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the
action, whereas in unfair competition registration is not necessary.

Pertinent Provisions on Trademark

Infringement under the Paris
Convention and the Trademark Law

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

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

32
 (b) of a mark considered by the competent authority of the country of registration or
use[48] 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 Law[50] considers the trademark
registration certificate as prima facie evidence of the validity of the registration, the
registrants ownership and exclusive right to use the trademark in connection with the
goods, business or services as classified by the Director of Patents[51] and as specified
in the certificate, subject to the conditions and limitations stated therein. Sections 2 and
2-A[52] 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

33
commercial use in the Philippines. Following universal acquiescence and comity, in
case of domestic legal disputes on any conflicting provisions between the Paris
Convention (which is an international agreement) and the Trademark law (which is a
municipal law) the latter will prevail.[54]
Under both the Paris Convention and the Trademark Law, the protection of a
registered trademark is limited only to goods identical or similar to those in respect of
which such trademark is registered and only when there is likelihood of confusion.
Under both laws, the time element in commencing infringement cases is material in
ascertaining the registrants express or implied consent to anothers use of its trademark
or a colorable imitation thereof. This is why acquiescence, estoppel or laches may
defeat the registrants otherwise valid cause of action.
Hence, proof of all the elements of trademark infringement is a condition precedent
to any finding of liability.
THE ACTUAL COMMERCIAL USE IN THE
PHILIPPINES OF GALLO CIGARETTE
TRADEMARK PRECEDED THAT OF
GALLO WINE TRADEMARK.

By respondents own judicial admission, the GALLO wine trademark was registered
in the Philippines in November 1971 but the wine itself was first marketed and sold in
the country only in 1974 and only within the former U.S. military facilities, and outside
thereof, only in 1979. To prove commercial use of the GALLO wine trademark in the
Philippines, respondents presented sales invoice no. 29991 dated July 9, 1981
addressed to Conrad Company Inc., Makati, Philippines and sales invoice no. 85926
dated March 22, 1996 addressed to Andresons Global, Inc., Quezon City,
Philippines. Both invoices were for the sale and shipment of GALLO wines to the
Philippines during that period.[55] Nothing at all, however, was presented to evidence
the alleged sales of GALLO wines in the Philippines in 1974 or, for that matter, prior to
July 9, 1981.
On the other hand, by testimonial evidence supported by the BIR authorization
letters, forms and manufacturers sworn statement, it appears that petitioners and its
predecessor-in-interest, Tobacco Industries, have indeed been using and selling
GALLO cigarettes in the Philippines since 1973 or before July 9, 1981.[56]
In Emerald Garment Manufacturing Corporation vs. Court of Appeals,[57] we
reiterated our rulings in Pagasa Industrial Corporation vs. Court of Appeals,[58]Converse
Rubber Corporation vs. Universal Rubber Products, Inc.,[59] Sterling Products
International, Inc. vs. Farbenfabriken Bayer Aktiengesellschaft,[60] Kabushi Kaisha
Isetan vs. Intermediate Appellate Court,[61] and Philip Morris vs. Court of
Appeals,[62] giving utmost importance to the actual commercial use of a trademark in
the Philippines prior to its registration, notwithstanding the provisions of the Paris
Convention:

xxx xxx xxx

In addition to the foregoing, we are constrained to agree with petitioner's contention that private
respondent failed to prove prior actual commercial use of its LEE trademark in the
34
Philippines before filing its application for registration with the BPTTT and hence, has not
acquired ownership over said mark.

Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of
ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law
(R.A. No. 166) x x x

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

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

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

xxx xxx xxx

35
A rule widely accepted and firmly entrenched because it has come down through the years is
that actual use in commerce or business is a prerequisite in the acquisition of the right of
ownership over a trademark.

xxx xxx xxx

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

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

xxx xxx xxx

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

On the other hand, petitioner has sufficiently shown that it has been in the business of
selling jeans and other garments adopting its STYLISTIC MR. LEE trademark since
1975as 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.

36
 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
37
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).

38
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
39
 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 Appeals[76] and other
cases,[77] and

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals[78] 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,
40
words, designs and emblems used, the likelihood of deception of the mark or name's
tendency to confuse[82] and the commercial impression likely to be conveyed by the
trademarks if used in conjunction with the respective goods of the parties.[83]
Applying the Dominancy and Holistic Tests, we find that the dominant feature of the
GALLO cigarette trademark is the device of a large rooster facing left, outlined in black
against a gold background. The roosters color is either green or red green for GALLO
menthols and red for GALLO filters. Directly below the large rooster device is the word
GALLO. The rooster device is given prominence in the GALLO cigarette packs in terms
of size and location on the labels.[84]
The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it
has no relation at all to the product but was chosen merely as a trademark due to the
fondness for fighting cocks of the son of petitioners president. Furthermore, petitioners
adopted GALLO, the Spanish word for rooster, as a cigarette trademark to appeal to
one of their target markets, the sabungeros (cockfight aficionados).[85]
Also, as admitted by respondents themselves,[86] on the side of the GALLO
cigarette packs are the words MADE BY MIGHTY CORPORATION, thus clearly
informing the public as to the identity of the manufacturer of the cigarettes.
On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of
them, the labels are embellished with sketches of buildings and trees, vineyards or a
bunch of grapes while in a few, one or two small roosters facing right or facing each
other (atop the EJG crest, surrounded by leaves or ribbons), with additional designs in
green, red and yellow colors, appear as minor features thereof.[87] Directly below or
above these sketches is the entire printed name of the founder-owners, ERNEST &
JULIO GALLO or just their surname GALLO,[88] which appears in different fonts, sizes,
styles and labels, unlike petitioners uniform casque-font bold-lettered GALLO mark.
Moreover, on the labels of Gallo Winerys wines are printed the words VINTED AND
BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA.[89]
The many different features like color schemes, art works and other markings of
both products drown out the similarity between them the use of the word GALLO ― a
family surname for the Gallo Winerys wines and a Spanish word for rooster for
petitioners cigarettes.

WINES AND CIGARETTES ARE NOT

IDENTICAL, SIMILAR, COMPETING OR
RELATED GOODS

Confusion of goods is evident where the litigants are actually in competition; but
confusion of business may arise between non-competing interests as well.[90]
Thus, apart from the strict application of Section 20 of the Trademark Law and
Article 6bis of the Paris Convention which proscribe trademark infringement not only of
goods specified in the certificate of registration but also of identical or similar goods, we
have also uniformly recognized and applied the modern concept of related
goods.[91] Simply stated, when goods are so related that the public may be, or is

41
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 articles[98]

(e) the descriptive properties, physical attributes or essential characteristics with reference
to their form, composition, texture or quality

(f) the purpose of the goods[99]

(g) whether the article is bought for immediate consumption,[100] that is, day-to-day
household items[101]

(h) the fields of manufacture[102]

(i) the conditions under which the article is usually purchased[103] 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
42
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]

43
 Accordingly, the U.S. patent office and courts have consistently held that the mere
fact that goods are sold in one store under the same roof does not automatically mean
that buyers are likely to be confused as to the goods respective sources, connections
or sponsorships. The fact that different products are available in the same store is an
insufficient standard, in and of itself, to warrant a finding of likelihood of confusion.[114]
In this regard, we adopted the Director of Patents finding in Philippine Refining Co.,
Inc. vs. Ng Sam and the Director of Patents:[115]

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

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

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

The same is true in the present case. Wines and cigarettes are non-competing and
are totally unrelated products not likely to cause confusion vis--vis the goods or the
business of the petitioners and respondents.
Wines are bottled and consumed by drinking while cigarettes are packed in cartons
or packages and smoked. There is a whale of a difference between their descriptive
properties, physical attributes or essential characteristics like form, composition, texture
and quality.
GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines
are patronized by middle-to-high-income earners while GALLO cigarettes appeal only
to simple folks like farmers, fishermen, laborers and other low-income
workers.[116] Indeed, the big price difference of these two products is an important factor
in proving that they are in fact unrelated and that they travel in different channels of
trade. There is a distinct price segmentation based on vastly different social classes of
purchasers.[117]
GALLO cigarettes and GALLO wines are not sold through the same channels of
trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass off
their goods as imported or emanating from Gallo Winery. GALLO cigarettes are
distributed, marketed and sold through ambulant and sidewalk vendors, small
local sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis
Oriental, Pangasinan, Bohol, and Cebu.[118] On the other hand, GALLO wines are
imported, distributed and sold in the Philippines through Gallo Winerys exclusive
44
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
45
so.And, unlike the defendant in Dunhill, S & M Brands does not market bar accessories, or
liqueur related products, with its cigarettes. The advertising and promotional materials presented
a trial in this action demonstrate a complete lack of affiliation between the tobacco and liqueur
products bearing the marks here at issue.

xxx xxx xxx

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

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

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

THE GALLO WINE TRADEMARK IS NOT A

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

First, the records bear out that most of the trademark registrations took place in the
late 1980s and the 1990s, that is, after Tobacco Industries use of the GALLO cigarette
trademark in 1973 and petitioners use of the same mark in 1984.
GALLO wines and GALLO cigarettes are neither the same, identical, similar nor
related goods, a requisite element under both the Trademark Law and the Paris
Convention.
Second, the GALLO trademark cannot be considered a strong and distinct mark in
the Philippines. Respondents do not dispute the documentary evidence that aside from
Gallo Winerys GALLO trademark registration, the Bureau of Patents, Trademarks and
Technology Transfer also issued on September 4, 1992 Certificate of Registration No.
53356 under the Principal Register approving Productos Alimenticios Gallo, S.As April
46
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).
47
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;

48
(c) Any person who shall make any false statement in the course of trade or who shall commit
any other act contrary to good faith of a nature calculated to discredit the goods, business or
services of another.

The universal test question is whether the public is likely to be deceived. Nothing
less than conduct tending to pass off one mans goods or business as that of another
constitutes unfair competition. Actual or probable deception and confusion on the part
of customers by reason of defendants practices must always appear.[125] On this score,
we find that petitioners never attempted to pass off their cigarettes as those of
respondents. There is no evidence of bad faith or fraud imputable to petitioners in using
their GALLO cigarette mark.
All told, after applying all the tests provided by the governing laws as well as those
recognized by jurisprudence, we conclude that petitioners are not liable for trademark
infringement, unfair competition or damages.
WHEREFORE, finding the petition for review meritorious, the same is hereby
GRANTED. The questioned decision and resolution of the Court of Appeals in CA-G.R.
CV No. 65175 and the November 26, 1998 decision and the June 24, 1999 order of the
Regional Trial Court of Makati, Branch 57 in Civil Case No. 93-850 are hereby
REVERSED and SET ASIDE and the complaint against petitioners DISMISSED.
Costs against respondents.
SO ORDERED.
Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur.
Carpio-Morales, J., no part.

49
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

ASIA BREWERY, INC., petitioner,

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

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

Roco, Bunag, Kapunan Law Office for private respondent.

GRIÑO-AQUINO, J.:

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

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

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

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

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

50
 (2) The defendant Asia Brewery Inc. is hereby ordered to render an accounting and
pay the San Miguel Corporation double any and all the payments derived by
defendant from operations of its business and the sale of goods bearing the mark
"Beer Pale Pilsen" estimated at approximately Five Million Pesos (P5,000,000.00); to
recall all its products bearing the mark "Beer Pale Pilsen" from its retailers and
deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and
advertisements bearing the infringing mark and all plates, molds, materials and other
means of making the same to the Court authorized to execute this judgment for
destruction.

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

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

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

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

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

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

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

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

In due time, ABI appealed to this Court by a petition for certiorari under Rule 45 of the Rules of
Court. The lone issue in this appeal is whether ABI infringes SMC's trademark: San Miguel Pale
Pilsen with Rectangular Hops and Malt Design, and thereby commits unfair competition against
the latter. It is a factual issue (Phil. Nut Industry Inc. v. Standard Brands Inc., 65 SCRA 575) and
51
as a general rule, the findings of the Court of Appeals upon factual questions are conclusive and
ought not to be disturbed by us. However, there are exceptions to this general rule, and they are:

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

conjectures;

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

(3) Where there is grave abuse of discretion;

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

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

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

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

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

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

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

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

Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil.
100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what
constitutes infringement:

Sec. 22. Infringement, what constitutes. — Any person who shall use, without the
consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of
any registered mark or trade-name in connection with the sale, offering for sale, or
advertising of any goods, business or services on or in connection with which such
use is likely to cause confusion or mistake or to deceive purchasers or others as to
52
 the source or origin of such goods or services, or identity of such business; or
reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and
apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used upon
or in connection with such goods, business or services, shall be liable to a civil action
by the registrant for any or all of the remedies herein provided. (Emphasis supplied.)

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

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

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

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

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

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

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

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

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

Does ABI's BEER PALE PILSEN label or "design" infringe upon SMC's SAN MIGUEL PALE
PILSEN WITH RECTANGULAR MALT AND HOPS DESIGN? The answer is "No."

Infringement is determined by the "test of dominancy" rather than by differences or variations in

the details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director
of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-
217 (1956), thus:

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

determined by the test of dominancy. Similarity in size, form and color, while
53
 relevant, is not conclusive. If the competing trademark contains the main or essential
or dominant features of another, and confusion and deception is likely to result,
infringement takes place. Duplication or imitation is not necessary; nor it is
necessary that the infringing label should suggest an effort to imitate. [C. Neilman
Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead
Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of
trademarks is whether the use of the marks involved would be likely to cause
confusion or mistakes in the mind of the public or deceive purchasers. (Auburn
Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . . .) (Emphasis
supplied.)

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

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

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

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

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

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

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

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

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

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

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

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

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

54
(4) On the back of ABI's bottle is printed in big, bold letters, under a row of flower buds and leaves,
its copyrighted slogan:

"BEER NA BEER!"

Whereas SMC's bottle carries no slogan.

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

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

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

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

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

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

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

xxx xxx xxx

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

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

The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part
of its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words
as "evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be
appropriated by any single manufacturer of these food products, for no other reason than that he
was the first to use them in his registered trademark. In Masso Hermanos, S.A. vs. Director of
Patents, 94 Phil. 136, 139 (1953), it was held that a dealer in shoes cannot register "Leather
Shoes" as his trademark because that would be merely descriptive and it would be unjust to
deprive other dealers in leather shoes of the right to use the same words with reference to their
merchandise. No one may appropriate generic or descriptive words. They belong to the public
domain (Ong Ai Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]):
55
 A word or a combination of words which is merely descriptive of an article of trade, or
of its composition, characteristics, or qualities, cannot be appropriated and protected
as a trademark to the exclusion of its use by others. . . . inasmuch as all persons
have an equal right to produce and vend similar articles, they also have the right to
describe them properly and to use any appropriate language or words for that
purpose, and no person can appropriate to himself exclusively any word or
expression, properly descriptive of the article, its qualities, ingredients or
characteristics, and thus limit other persons in the use of language appropriate to the
description of their manufactures, the right to the use of such language being
common to all. This rule excluding descriptive terms has also been held to apply to
trade-names. As to whether words employed fall within this prohibition, it is said that
the true test is not whether they are exhaustively descriptive of the article
designated, but whether in themselves, and as they are commonly used by those
who understand their meaning, they are reasonably indicative and descriptive of the
thing intended. If they are thus descriptive, and not arbitrary, they cannot be
appropriated from general use and become the exclusive property of anyone. (52
Am. Jur. 542-543.)

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

. . . . A descriptive word may be admittedly distinctive, especially if the user is the

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

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

The fact that BEER PALE PILSEN like SAN MIGUEL PALE PILSEN is bottled in amber-colored
steinie bottles of 320 ml. capacity and is also advertised in print, broadcast, and television media,
does not necessarily constitute unfair competition.

Unfair competition is the employment of deception or any other means contrary to good faith by
which a person shall pass off the goods manufactured by him or in which he deals, or his
business, or services, for those of another who has already established goodwill for his similar
goods, business or services, or any acts calculated to produce the same result. (Sec. 29, Republic
Act No. 166, as amended.) The law further enumerates the more common ways of committing
unfair competition, thus:

Sec. 29. . . .

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

(a) Any person, who in selling his goods shall give them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words
thereon, or in any other feature of their appearance, which would be likely to
56
 influence purchasers to believe that the goods offered are those of a manufacturer or
dealer other than the actual manufacturer or dealer, or who otherwise clothes the
goods with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any
vendor engaged in selling such goods with a like purpose.

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

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

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

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

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

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

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

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

features. Even if purely functional elements are slavishly copied, the resemblance
will not support an action for unfair competition, and the first user cannot claim
secondary meaning protection. Nor can the first user predicate his claim to protection
57
 on the argument that his business was established in reliance on any such
unpatented nonfunctional feature, even "at large expenditure of money." (Callman
Unfair Competition, Trademarks and Monopolies, Sec. 19.33 [4th Ed.].) (Petition for
Review, p. 28.)

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

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

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

In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where two competing tea products were both
labelled as Formosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of
conventional color, both with labels containing designs drawn in green ink and Chinese characters
written in red ink, one label showing a double-decked jar in the center, the other, a flower pot, this
court found that the resemblances between the designs were not sufficient to mislead the ordinary
intelligent buyer, hence, there was no unfair competition. The Court held:

. . . . In order that there may be deception of the buying public in the sense
necessary to constitute unfair competition, it is necessary to suppose a public
accustomed to buy, and therefore to some extent familiar with, the goods in
question. The test of fraudulent simulation is to be found in the likelihood of the
deception of persons in some measure acquainted with an established design and
desirous of purchasing the commodity with which that design has been associated.
The test is not found in the deception, or possibility of the deception, of the person
who knows nothing about the design which has been counterfeited, and who must
be indifferent as between that and the other. The simulation, in order to be
objectionable, must be such as appears likely to mislead the ordinarily intelligent
buyer who has a need to supply and is familiar with the article that he seeks to
purchase.

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

58
SMC claims that the "trade dress" of BEER PALE PILSEN is "confusingly similar" to its SAN
MIGUEL PALE PILSEN because both are bottled in 320 ml. steinie type, amber-colored bottles
with white rectangular labels.

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

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

The record does not bear out SMC's apprehension that BEER PALE PILSEN is being passed off
as SAN MIGUEL PALE PILSEN. This is unlikely to happen for consumers or buyers of beer
generally order their beer by brand. As pointed out by ABI's counsel, in supermarkets and tiendas,
beer is ordered by brand, and the customer surrenders his empty replacement bottles or pays a
deposit to guarantee the return of the empties. If his empties are SAN MIGUEL PALE PILSEN, he
will get SAN MIGUEL PALE PILSEN as replacement. In sari-sari stores, beer is also ordered from
the tindera by brand. The same is true in restaurants, pubs and beer gardens — beer is ordered
from the waiters by brand. (Op. cit. page 50.)

Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer
market for the past hundred years, those who have been drinking no other beer but SAN MIGUEL
PALE PILSEN these many years certainly know their beer too well to be deceived by a newcomer
in the market. If they gravitate to ABI's cheaper beer, it will not be because they are confused or
deceived, but because they find the competing product to their taste.

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

. . . to determine whether a trademark has been infringed, we must consider the

mark as a whole and not as dissected. If the buyer is deceived, it is attributable to
the marks as a totality, not usually to any part of it.

That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases
of infringement and unfair competition, the courts should "take into consideration several factors
which would affect its conclusion, to wit: the age, training and education of the usual purchaser,
the nature and cost of the article, whether the article is bought for immediate consumption and
also the conditions under which it is usually purchased" (181 SCRA 410, 418-419).
59
The Del Monte case involved catsup, a common household item which is bought off the store
shelves by housewives and house help who, if they are illiterate and cannot identify the product by
name or brand, would very likely identify it by mere recollection of its appearance. Since the
competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del Monte bottles for its
catsup (despite the warning embossed on the bottles: "Del Monte Corporation. Not to be refilled.")
but also used labels which were "a colorable imitation" of Del Monte's label, we held that there was
infringement of Del Monte's trademark and unfair competition by Sunshine.

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

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

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

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

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

SO ORDERED.

Narvasa, C.J., Bidin, Regalado, Romero, Nocon, Bellosillo and Melo, JJ., concur.

Feliciano, J., took no part.

Separate Opinions

CRUZ, J., dissenting:

The present ponencia stresses the specific similarities and differences of the two products to
support the conclusion that there is no infringement of trade marks or unfair competition. That test
was rejected in my own ponencia in Del Monte Corporation vs. Court of Appeals, 181 SCRA 410,
concurred in by Justices Narvasa, Gancayco, Griño-Aquino and Medialdea, where we declared:

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
60
 the lower courts have been so preoccupied 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. 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 labels when
set aside by side but whether the general confusion made by the article upon the eye
of the casual purchaser who is unsuspicious and off his guard, is such as to likely
result in his confounding it with the original. As observed in several cases, the
general impression of the ordinary purchaser, buying under the normally prevalent
conditions in trade and giving the attention such purchasers usually give in buying
that class of goods, is the touchstone.

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. The
buyer having in mind the mark/label of the respondent must rely upon his memory of
the petitioner's mark. 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. The
court therefore should be guided by its first impression, 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.

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. 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. Well 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.

For the above reasons, and the other arguments stated in Del Monte, I dissent.

# Separate Opinions

CRUZ, J., dissenting:

61
The present ponencia stresses the specific similarities and differences of the two products to
support the conclusion that there is no infringement of trade marks or unfair competition. That test
was rejected in my own ponencia in Del Monte Corporation vs. Court of Appeals, 181 SCRA 410,
concurred in by Justices Narvasa, Gancayco, Griño-Aquino and Medialdea, where we declared:

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 preoccupied 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. 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 labels when
set aside by side but whether the general confusion made by the article upon the eye
of the casual purchaser who is unsuspicious and off his guard, is such as to likely
result in his confounding it with the original. As observed in several cases, the
general impression of the ordinary purchaser, buying under the normally prevalent
conditions in trade and giving the attention such purchasers usually give in buying
that class of goods, is the touchstone.

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. The
buyer having in mind the mark/label of the respondent must rely upon his memory of
the petitioner's mark. 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. The
court therefore should be guided by its first impression, 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.

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. 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. Well 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.

For the above reasons, and the other arguments stated in Del Monte, I dissent.

62
 FIRST DIVISION
MCDONALDS CORPORATION and G.R. No. 143993
MCGEORGE FOOD INDUSTRIES, INC.,

Petitioners,

Present:

Davide, Jr., C.J.,

Chairman,

- versus - Quisumbing,

Ynares-Santiago,

Carpio, and

Azcuna, JJ.

L.C. BIG MAK BURGER, INC.,

FRANCIS B. DY, EDNA A. DY,

RENE B. DY, WILLIAM B. DY,

JESUS AYCARDO, ARACELI Promulgated:

AYCARDO, and GRACE HUERTO,
Respondents. August 18, 2004

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

DECISION
CARPIO, J.:

The Case
[1]
This is a petition for review of the Decision dated 26 November 1999 of the Court of
Appeals[2] finding respondent L.C. Big Mak Burger, Inc. not liable for trademark
infringement and unfair competition and ordering petitioners to pay
respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying
reconsideration. The Court of Appeals Decision reversed the 5 September 1994
Decision[3] of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big
Mak Burger, Inc. liable for trademark infringement and unfair competition.

The Facts
Petitioner McDonalds Corporation (McDonalds) is a corporation organized under the
laws of Delaware, United States. McDonalds operates, by itself or through its franchisees, a

63
global chain of fast-food restaurants. McDonalds[4] owns a family of marks[5] including the
Big Mac mark for its double-decker hamburger sandwich.[6] McDonalds registered this
trademark with the United States Trademark Registry on 16 October 1979.[7] Based on this
Home Registration, McDonalds applied for the registration of the same mark in
the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology
(PBPTT), now the Intellectual Property Office (IPO). Pending approval of its application,
McDonalds introduced its Big Mac hamburger sandwiches in the Philippine market in
September 1981. On 18 July 1985, the PBPTT allowed registration of the Big Mac mark in
the Principal Register based on its Home Registration in the United States.

Like its other marks, McDonalds displays the Big Mac mark in items[8] and
paraphernalia[9] in its restaurants, and in its outdoor and indoor signages. From 1982 to
1990, McDonalds spent P10.5 million in advertisement for Big Mac hamburger sandwiches
alone.[10]
Petitioner McGeorge Food Industries (petitioner McGeorge), a domestic corporation,
is McDonalds Philippine franchisee.[11]
Respondent L.C. Big Mak Burger, Inc. (respondent corporation) is a domestic
corporation which operates fast-food outlets and snack vans in Metro Manila and nearby
provinces.[12] Respondent corporations menu includes hamburger sandwiches and other
food items.[13] Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus
Aycardo, Araceli Aycardo, and Grace Huerto (private respondents) are the incorporators,
stockholders and directors of respondent corporation.[14]

On 21 October 1988, respondent corporation applied with the PBPTT

for the registration of the Big Mak mark for its hamburger sandwiches. McDonalds opposed
respondent corporations application on the ground that Big Mak was a colorable imitation
of its registered Big Mac mark for the same food products. McDonalds also informed
respondent Francis Dy (respondent Dy), the chairman of the Board of Directors of
respondent corporation, of its exclusive right to the Big Mac mark and requested him
to desist from using the Big Mac mark or any similar mark.

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

64
In their Answer, respondents admitted that they have been using the name Big Mak Burger
for their fast-food business. Respondents claimed, however, that McDonalds does not have
an exclusive right to the Big Mac mark or to any other similar mark. Respondents point out
that the Isaiyas Group of Corporations (Isaiyas Group) registered the same mark for
hamburger sandwiches with the PBPTT on 31 March 1979. One Rodolfo Topacio (Topacio)
similarly registered the same mark on 24 June 1983, prior to McDonalds registration on 18
July 1985. Alternatively, respondents claimed that they are not liable for trademark
infringement or for unfair competition, as the Big Mak mark they sought to register does
not constitute a colorable imitation of the Big Mac mark. Respondents asserted that they
did not fraudulently pass off their hamburger sandwiches as those of petitioners Big Mac
hamburgers.[17] Respondents sought damages in their counterclaim.

In their Reply, petitioners denied respondents claim that McDonalds is not the exclusive
owner of the Big Mac mark. Petitioners asserted that while the Isaiyas Group and Topacio
did register the Big Mac mark ahead of McDonalds, the Isaiyas Group did so only in the
Supplemental Register of the PBPTT and such registration does not
provide any protection. McDonalds disclosed that it had acquired Topacios rights to his
registration in a Deed of Assignment dated 18 May 1981.[18]

The Trial Courts Ruling

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

Undeniably, the mark B[ig] M[ac] is a registered trademark for plaintiff

McDonalds, and as such, it is entitled [to] protection against infringement.

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

65
 xxxx

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

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

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more
inclusive than the law concerning the infringement of trademark, which is
of more limitedrange, but within its narrower range recognizes a more exclusive
right derived by the adoption and registration of the trademark by the person
whose goods or services are first associated therewith. xxx Notwithstanding the
66
distinction between an action for trademark infringement and an action for unfair
competition, however, the law extends substantially the same relief to the injured
party for both cases. (See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the
goods of one man as the goods of another. The choice of B[ig] M[ak] as tradename by defendant
corporation is not merely for sentimental reasons but was clearly made to take advantage of the
reputation, popularity and the established goodwill of plaintiff McDonalds. For, as stated in Section
29, a person is guilty of unfair competition who in selling his goods shall give them the general
appearance, of goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words thereon, or
in anyother 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 actualmanufacturer or
dealer. Thus, plaintiffs have established their valid cause of action against the defendants for
trademark infringement and unfair competition and for damages.[19]

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonalds

Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big
Mak Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case on [16 August

1990] is made permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay

plaintiffs actual damages in the amount of P400,000.00, exemplary damages in
the amount ofP100,000.00, and attorneys fees and expenses of litigation in
the amount of P100,000.00;

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

Respondents appealed to the Court of Appeals.

67
 The Ruling of the Court of Appeals

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

Plaintiffs-appellees in the instant case would like to impress on this Court

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

xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation
exists. As the definition dictates, it is not sufficient that a similarity exists
in both names, but that more importantly, the over-all presentation, or in their
essential, substantive and distinctive parts is such as would likely MISLEAD or
CONFUSE persons in the ordinary course of purchasing the genuine
article. A careful comparison of the way the trademark B[ig] M[ac] is being used
by plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by
defendants-appellants, would readily reveal that no confusion could take place, or
that the ordinary purchasers would be misled by it. As pointed out by defendants-
appellants, the plaintiffs-appellees trademark is used to designate only one
product, a double decker sandwich sold in a Styrofoam box with the McDonalds
logo. On the other hand, what the defendants-appellants corporation is using is
not a trademark for its food product but a business or corporate name. They use
the business name L.C. Big Mak Burger, Inc. in their restaurant business which
serves diversified food items such as siopao, noodles, pizza, and sandwiches such
as hotdog, ham, fish burger and hamburger. Secondly, defendants-appellants
68
corporate or business name appearing in the food packages and signages are
written in silhouette red-orange letters with the b and m in upper case letters.
Above the words Big Mak are the upper case letter L.C.. Below the words Big Mak
are the words Burger, Inc. spelled out in upper case letters. Furthermore, said
corporate or business name appearing in such food packages and signages is
always accompanied by the company mascot, a young chubby boy named Maky
who wears a red T-shirt with the upper case m appearing therein and a blue lower
garment. Finally, the defendants-appellants food packages are made of plastic
material.

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of
the product and the manner that the tradename Big Mak is being used and presented to the
public. As earlier noted, there are glaring dissimilarities between plaintiffs-appellees trademark and
defendants-appellants corporate name. Plaintiffs-appellees product carrying the trademark B[ig]
M[ac] is a double decker sandwich (depicted in the tray mat containing photographs of the various
food products xxx sold in a Styrofoam box with the McDonalds logo and trademark in red, bl[o]ck
capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants
comparable food products. In order to buy a Big Mac, a customer needs to visit an air-conditioned
McDonalds restaurant usually located in a nearby commercial center, advertised and identified by its
logo - the umbrella M, and its mascot Ronald McDonald. A typical McDonalds restaurant boasts of a
playground for kids, a second floor to accommodate additional customers, a drive-thru to allow
customers with cars to make orders without alighting from their vehicles, the interiors of the
building are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying a B[ig]
M[ac], it is necessary to specify it by its trademark. Thus, a customer needs to look for a McDonalds
and enter it first before he can find a hamburger sandwich which carry the mark Big Mac. On the
other hand, defendants-appellants sell their goods through snack vans xxxx

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

We likewise find the same untenable.

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

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

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

defendants-appellants deliberately tried to pass off the goods manufactured by them for those of
plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants
69
 corporate name with the plaintiffs-appellees trademark is not sufficient evidence to conclude unfair
competition. Defendants-appellants explained that the name M[ak] in their corporate name was
derived from both the first names of the mother and father of defendant Francis Dy, whose names
are Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad
faith on the part of defendants-appellants. It is a settled rule that the law always presumes good
faith such that any person who seeks to be awarded damages due to acts of another has the burden
of proving that the latter acted in bad faith or with ill motive. [21]

Petitioners sought reconsideration of the Court of Appeals Decision but the appellate
court denied their motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS
CORPORATE NAME L.C. BIG MAK BURGER, INC. IS NOT A COLORABLE
IMITATION OF THE MCDONALDS TRADEMARK BIG MAC, SUCH COLORABLE
IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT.

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

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

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

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN
THE MARK BIG MAK AND THE WORD MARK BIG MAC AS AN INDICATION OF RESPONDENTS
INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.[22]

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

In their Comment to the petition, respondents question the propriety of this petition as
it allegedly raises only questions of fact. On the merits, respondents contend that the Court of

70
Appeals committed no reversible error in finding them not liable for trademark infringement
and unfair competition and in ordering petitioners to pay damages.

The Issues
The issues are:

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

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

The Courts Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are

Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this
Court a petition for review under Section 1 of Rule 45 (Section 1)[24]raising only questions of
law. A question of law exists when the doubt or difference arises on what the law is on a
certain state of facts. There is a question of fact when the doubt or difference arises on the
truth or falsity of the alleged facts. [25]

Here, petitioners raise questions of fact and law in assailing the Court of Appeals findings
on respondent corporations non-liability for trademark infringement and unfair
competition. Ordinarily, the Court can deny due course to such a petition. In view, however,
of the contradictory findings of fact of the RTC and Court of Appeals, the Court opts to
accept the petition, this being one of the recognized exceptions to Section 1.[26] We took a
similar course of action in Asia Brewery, Inc. v. Court of Appeals[27] which also involved a
suit for trademark infringement and unfair competition in which the trial court and the
Court of Appeals arrived at conflicting findings.

71
 On the Manner Respondents Used
Big Mak in their Business

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

The contention has merit.

The evidence presented during the hearings on petitioners motion for the issuance of a writ
of preliminary injunction shows that the plastic wrappings and plastic bags used by
respondents for their hamburger sandwiches bore the words Big Mak. The other
descriptive words burger and 100% pure beef were set in smaller type, along with the
locations of branches.[28] Respondents cash invoices simply refer to their hamburger
sandwiches as Big Mak.[29] It is respondents snack vans that carry the words L.C. Big Mak
Burger, Inc.[30]
It was only during the trial that respondents presented in evidence the plastic wrappers and
bags for their hamburger sandwiches relied on by the Court of Appeals.[31] Respondents
plastic wrappers and bags were identical with those petitioners presented during the
hearings for the injunctive writ except that the letters L.C. and the words Burger, Inc. in
respondents evidence were added above and below the words Big Mak, respectively. Since
petitioners complaint was based on facts existing before and during the hearings on the
injunctive writ, the facts established during those hearings are the proper factual bases for
the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

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

Infringement, what constitutes. Any person who [1] shall use, without the consent
of the registrant, any reproduction, counterfeit, copy or colorable imitation
of anyregistered 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
72
 business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark
or trade-name and apply such reproduction, counterfeit, copy, or colorable
imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used upon or in connection with such goods,
business or services, shall be liable to a civil action by the registrant for any or all
of the remedies herein provided.[33]

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

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

On the Validity of the Big MacMark

and McDonalds Ownership of such Mark

A mark is valid if it is distinctive and thus not barred from registration under Section 4[36] of
RA 166 (Section 4). However, once registered, not only the marks validity but also the
registrants ownership of the mark is prima facie presumed.[37]
Respondents contend that of the two words in the Big Mac mark, it is only the word
Mac that is valid because the word Big is generic and descriptive (proscribed under Section
4[e]), and thus incapable of exclusive appropriation.[38]
The contention has no merit. The Big Mac mark, which should be treated in its entirety and
not dissected word for word,[39] is neither generic nor descriptive. Generic marks are
commonly used as the name or description of a kind of goods,[40] such as Lite for beer[41] or
Chocolate Fudge for chocolate soda drink.[42]Descriptive marks, on the other hand, convey
the characteristics, functions, qualities or ingredients of a product to one who has never
seen it or does not know it exists,[43] such as Arthriticare for arthritis medication.[44] On the
contrary, Big Mac falls under the class of fanciful or arbitrary marks as it bears no logical
73
relation to the actual characteristics of the product it represents.[45] As such, it is highly
distinctive and thus valid. Significantly, the trademark Little Debbie for snack cakes was
found arbitrary or fanciful.[46]
The Court also finds that petitioners have duly established McDonalds exclusive
ownership of the Big Mac mark. Although Topacio and the Isaiyas Group registered the Big
Mac mark ahead of McDonalds, Topacio, as petitioners disclosed, had already assigned his
rights to McDonalds. The Isaiyas Group, on the other hand, registered its trademark only in
the Supplemental Register. A mark which is not registered in the Principal Register, and
thus not distinctive, has no real protection.[47] Indeed, we have held that registration in the
Supplemental Register is not even a prima facie evidence of the validity of the registrants
exclusive right to use the mark on the goods specified in the certificate.[48]

On Types of Confusion

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

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

Under Act No. 666,[50] the first trademark law, infringement was limited to confusion of
goods only, when the infringing mark is used on goods of a similar kind. [51] Thus, no relief
was afforded to the party whose registered mark or its colorable imitation is used on
different although related goods. To remedy this situation, Congress enacted RA 166 on 20
June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the
requirement in question and expanded its scope to include such use of the mark or its
colorable imitation that is likely to result in confusion on the

74
source or origin of such goods or services, or identity of such business. [52] Thus, while there
is confusion of goods when the products are competing, confusion of business exists when
the products are non-competing but related enough to produce confusion of affiliation.[53]

On Whether Confusion of Goods and

Confusion of Business are Applicable

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

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

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

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

1.10. For some period of time, and without the consent of plaintiff
McDonalds nor its licensee/franchisee, plaintiff McGeorge, and in clear violation
of plaintiffs exclusive right to use and/or appropriate the McDonalds marks,
defendant Big Mak Burger acting through individual defendants, has been
operating Big Mak Burger, a fast food restaurant business dealing in the sale of
hamburger and cheeseburger sandwiches, french fries and other food products,
and has caused to be printed on the wrapper ofdefendants food products and
incorporated in its signages the name Big Mak Burger, which is confusingly similar
to and/or is a colorable imitation of the plaintiff McDonalds mark B[ig] M[ac],
75
 xxx. Defendant Big Mak Burger has thus unjustly created the impression that its
business is approved and sponsored by, or affiliated with, plaintiffs. xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and
infringe upon the property rights of plaintiffs McDonalds and McGeorge as the real owner and
rightful proprietor, and the licensee/franchisee, respectively, of the McDonalds marks, and which are
likely to have caused confusion or deceived the public as to the true source, sponsorship or
affiliation of defendants food products and restaurant business, plaintiffs have suffered and
continue to suffer actualdamages in the form of injury to their business reputation and goodwill, and
of the dilution of the distinctive quality of the McDonalds marks, in particular, the mark B[ig]
M[ac].[55] (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same
food product that petitioners sell using the Big Mac mark. Thus, trademark infringement
through confusion of business is also a proper issue in this case.

Respondents assert that their Big Mak hamburgers cater mainly to the low-income
group while petitioners Big Mac hamburgers cater to the middle and upper income
groups. Even if this is true, the likelihood of confusion of business remains, since the low-
income group might be led to believe that the Big Mak hamburgers are the low-end
hamburgers marketed by petitioners. After all, petitioners have the exclusive right to use
the Big Mac mark. On the other hand,respondents would benefit by associating their low-
end hamburgers, through the use of the Big Mak mark, with petitioners high-end Big Mac
hamburgers, leading to likelihood of confusion in the identity of business.
Respondents further claim that petitioners use the Big Mac mark only on petitioners
double-decker hamburgers, while respondents use the Big Mak mark on hamburgers and
other products like siopao, noodles and pizza. Respondents also point out that petitioners
sell their Big Mac double-deckers in a styrofoam box with the McDonalds logo and
trademark in red, block letters at a price more expensive than the hamburgers of
respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers
and plastic bags. Respondents further point out that petitioners restaurants are air-
conditioned buildings with drive-thru service, compared to respondents mobile vans.

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

76
hamburger food products cannot excuse their infringement of petitioners registered mark,
otherwise registered marks will lose their protection under the law.
The registered trademark owner may use his mark on the same or similar products,
in different segments of the market, and at different price levels depending on variations of
the products for specific segments of the market. The Court has recognized that the
registered trademark owner enjoys protection in product and market areas that are
the normal potential expansion of his business. Thus, the Court has declared:

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

On Whether Respondents Use of the Big Mak

Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the

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

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

77
 Respondents now vigorously argue that the Court of Appeals application of the
holistic test to this case is correct and in accord with prevailing jurisprudence.

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

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,[60] the Court ruled:
xxx It has been consistently held that the question of infringement of a trademark is to
be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not
conclusive. If the competing trademark contains the main or essential or dominant features of
another, and confusion and deception is likely to result, infringement takes place. Duplication or
imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to
imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White
Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks
is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind
of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d
588; xxx) (Emphasis supplied.)

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

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

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

78
 Applying the dominancy test, the Court finds that respondents use of the Big Mak
mark results in likelihood of confusion. First, Big Mak sounds exactlythe same as Big
Mac. Second, the first word in Big Mak is exactly the same as the first word in Big
Mac. Third, the first two letters in Mak are the same as the first two letters in Mac. Fourth,
the last letter in Mak while a k sounds the same as c when the word Mak is
pronounced. Fifth, in Filipino, the letter k replaces c in spelling, thus Caloocan is spelled
Kalookan.

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

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

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

The following random list of confusingly similar sounds in the matter of

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

79
Certainly, Big Mac and Big Mak for hamburgers create even greater confusion, not only
aurally but also visually.
Indeed, a person cannot distinguish Big Mac from Big Mak by their sound. When one
hears a Big Mac or Big Mak hamburger advertisement over the radio, one would not know
whether the Mac or Mak ends with a c or a k.

Petitioners aggressive promotion of the Big Mac mark, as borne by their

advertisement expenses, has built goodwill and reputation for such mark making it one of
the easily recognizable marks in the market today. This increases the likelihood that
consumers will mistakenly associate petitioners hamburgers and business with those of
respondents.

Respondents inability to explain sufficiently how and why they came to choose Big Mak for
their hamburger sandwiches indicates their intent to imitate petitioners Big Mac mark.
Contrary to the Court of Appeals finding, respondents claim that their Big Mak mark was
inspired by the first names of respondent Dys mother (Maxima) and father (Kimsoy) is not
credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a

more creative choice for a corporate name by using the names of his parents,
especially since he was allegedly driven by sentimental reasons. For one, he could
have put his fathers name ahead of his mothers, as is usually done in this
patriarchal society, and derived letters from said names in that order. Or, he could
have taken an equal number of letters (i.e., two) from each name, as is the more
usual thing done. Surely, the more plausible reason behind Respondents choice of
the word M[ak], especially when taken in conjunction with the word B[ig], was
their intent to take advantage of Petitioners xxx B[ig] M[ac] trademark, with
their alleged sentiment-focused explanation merely thought of as a
convenient, albeit unavailing, excuse or defense for such an unfair choice of
name.[67]

Absent proof that respondents adoption of the Big Mak mark was due to honest
mistake or was fortuitous,[68] the inescapable conclusion is that respondents adopted the

80
Big Mak mark to ride on the coattails of the more established Big Mac mark.[69] This saves
respondents much of the expense in advertising to create market recognition of their mark
and hamburgers.[70]

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

On the Lack of Proof of

Actual Confusion

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

On the Issue of Unfair Competition

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

xxxx

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

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

(a) Any person, who in selling his goods shall give them the general appearance
of goods of another manufacturer or dealer, either as to the goods
themselves or in the wrapping of the packages in which they are contained, or
the devices or words thereon, or in any feature of their appearance, which would
be likely to influence purchasers to believe that the goods offered are those of a
81
 manufacturer or dealer, other than the actual manufacturer or dealer, or who
otherwise clothes the goods with such appearance as shall deceive the public and
defraud another of his legitimate trade, or any subsequent vendor of such goods
or any agent of any vendor engaged in selling such goods with a like purpose;

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

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

The essential elements of an action for unfair competition are (1) confusing similarity
in the general appearance of the goods, and (2) intent to deceive the public and defraud a
competitor.[74] The confusing similarity may or may not result from similarity in the marks,
but may result from other external factors in the packaging or presentation of the
goods. The intent to deceive and defraud may be inferred from the similarity of the
appearance of the goods as offered for sale to the public.[75] Actual fraudulent intent need
not be shown.[76]
Unfair competition is broader than trademark infringement and includes passing off
goods with or without trademark infringement. Trademark infringement is a form of unfair
competition.[77] Trademark infringement constitutes unfair competition when there is not
merely likelihood of confusion, but also actual or probable deception on the public because
of the general appearance of the goods. There can be trademark infringement without
unfair competition as when the infringer discloses on the labels containing the mark that he
manufactures the goods, thus preventing the public from being deceived that the goods
originate from the trademark owner.[78]

To support their claim of unfair competition, petitioners allege that respondents

fraudulently passed off their hamburgers as Big Mac hamburgers. Petitioners add that
respondents fraudulent intent can be inferred from the similarity of the marks in
question.[79]

Passing off (or palming off) takes place where the defendant, by imitative devices on
the general appearance of the goods, misleads prospective purchasers into buying his
merchandise under the impression that they are buying that of his competitors.[80] Thus, the
82
defendant gives his goods the general appearance of the goods of his competitor with the
intention of deceiving the public that the goods are those of his competitor.

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

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

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

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

Section 29(a) also provides that the defendant gives his goods the general
appearance of goods of another manufacturer. Respondents goods are hamburgers which
are also the goods of petitioners. If respondents sold egg sandwiches only instead
of hamburger sandwiches, their use of the Big Mak mark would not give their goods the
general appearance of petitioners Big Mac hamburgers. In such case, there is only
trademark infringement but no unfair competition. However, since respondents chose to
83
apply the Big Mak mark on hamburgers, just like petitioners use of the Big Mac mark on
hamburgers, respondents have obviously clothed their goods with the general appearance
of petitioners goods.

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

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

The Remedies Available to Petitioners

Under Section 23[83] (Section 23) in relation to Section 29 of RA 166, a plaintiff who
successfully maintains trademark infringement and unfair competition claims is entitled to
injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16
August 1990 (made permanent in its Decision of 5 September 1994) and in ordering the
payment of P400,000 actual damages in favor of petitioners. The injunctive writ is
indispensable to prevent further acts of infringement by respondent
corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of
respondent corporations gross sales for three (1988-1989 and 1991) of the six years (1984-
1990) respondents have used the Big Mak mark.[84]

The RTC also did not err in awarding exemplary damages by way of correction for the
public good[85] in view of the finding of unfair competition where intent to deceive the
public is essential. The award of attorneys fees and expenses of litigation is also in order.[86]
84
 WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26
November 1999 of the Court of Appeals and its Resolution dated 11 July 2000
and REINSTATE the Decision dated 5 September 1994 of the Regional Trial Court of Makati,
Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement
and unfair competition.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice
WE CONCUR:

HILARIO G. DAVIDE, JR.

Chief Justice
Chairman

LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION

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

HILARIO G. DAVIDE, JR.

Chief Justice

85
 Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION

PHILIP MORRIS, INC., BENSON & G.R. No. 158589

HEDGES (CANADA), INC., and
FABRIQUES DE TABAC REUNIES,
S.A., (now known as PHILIP Present:
MORRIS PRODUCTS S.A.),

Petitioners, PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,

CORONA,
- versus - AZCUNA, and

GARCIA, JJ.

FORTUNE TOBACCO
CORPORATION,
Promulgated:
Respondent.

June 27, 2006

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

DECISION

GARCIA, J.:

Via this petition for review under Rule 45 of the Rules of Court, herein petitioners
Philip Morris, Inc., Benson & Hedges (Canada) Inc., and Fabriques de Tabac
Reunies, S.A. (now Philip Morris Products S.A.) seek the reversal and setting aside
of the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 66619, to
wit:
1. Decision dated January 21, 2003[1] affirming an earlier decision of the Regional
Trial Court of Pasig City, Branch 166, in its Civil Case No. 47374, which
dismissed the complaint for trademark infringement and damages thereat
86
 commenced by the petitioners against respondent Fortune Tobacco
Corporation; and

2. Resolution dated May 30, 2003[2] denying petitioners motion for

reconsideration.

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

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

In the Complaint xxx with prayer for the issuance of a preliminary injunction,
[petitioners] alleged that they are foreign corporations not doing business in
the Philippinesand are suing on an isolated transaction. xxx they averred that the
countries in which they are domiciled grant xxx to corporate or juristic persons of
the Philippines the privilege to bring action for infringement, xxx without need of
a license to do business in those countries. [Petitioners] likewise manifested
[being registered owners of the trademark MARK VII and MARK TEN for cigarettes
as evidenced by the corresponding certificates of registration and an applicant for
the registration of the trademark LARK MILDS]. xxx. [Petitioners] claimed that
they have registered the aforementioned trademarks in their respective countries

87
of origin and that, by virtue of the long and extensive usage of the same, these
trademarks have already gained international fame and acceptance. Imputing bad
faith on the part of the [respondent], petitioners claimed that the [respondent],
without any previous consent from any of the [petitioners], manufactured and
sold cigarettes bearing the identical and/or confusingly similar trademark MARK
xxx Accordingly, they argued that [respondents] use of the trademark MARK in its
cigarette products have caused and is likely to cause confusion or mistake, or
would deceive purchasers and the public in general into buying these products
under the impression and mistaken belief that they are buying
[petitioners] products.

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

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

xxx xxx xxx.

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

xxx xxx xxx

88
 After the termination of the trial on the merits xxx trial court rendered
its Decision xxx dated November 3, 1999 dismissing the complaint and
counterclaim after making a finding that the [respondent] did not commit
trademark infringement against the [petitioners]. Resolving first the issue of
whether or not [petitioners] have capacity to institute the instant action, the trial
court opined that [petitioners] failure to present evidence to support their
allegation that their respective countries indeed grant Philippine corporations
reciprocal or similar privileges by law xxx justifies the dismissal of the complaint
xxx. It added that the testimonies of [petitioners] witnesses xxx essentially
declared that [petitioners] are in fact doing business in the Philippines, but
[petitioners] failed to establish that they are doing so in accordance with the legal
requirement of first securing a license. Hence, the court declared that
[petitioners] are barred from maintaining any action in Philippine courts pursuant
to Section 133 of the Corporation Code.

The issue of whether or not there was infringement of the [petitioners]

trademarks by the [respondent] was likewise answered xxx in the negative. It
expounded that in order for a name, symbol or device to constitute a trademark,
it must, either by itself or by association, point distinctly to the origin or
ownership of the article to which it is applied and be of such nature as to permit
an exclusive appropriation by one person. Applying such principle to the instant
case, the trial court was of the opinion that the words MARK, TEN, LARK and the
Roman Numerals VII, either alone or in combination of each other do not by
themselves or by association point distinctly to the origin or ownership of the
cigarettes to which they refer, such that the buying public could not be deceived
into believing that [respondents] MARK cigarettes originated either from the USA,
Canada, or Switzerland.

Emphasizing that the test in an infringement case is the likelihood of confusion or

deception, the trial court stated that the general rule is that an infringement
exists if the resemblance is so close that it deceives or is likely to deceive a
customer exercising ordinary caution in his dealings and induces him to purchase
the goods of one manufacturer in the belief that they are those of
another. xxx. The trial court ruled that the [petitioners] failed to pass these tests
as it neither presented witnesses or purchasers attesting that they have bought
[respondents] product believing that they bought [petitioners] MARK VII, MARK
TEN or LARK, and have also failed to introduce in evidence a specific magazine or
89
 periodical circulated locally, which promotes and popularizes their products in the
Philippines. It, moreover, elucidated that the words consisting of the trademarks
allegedly infringed by [respondent] failed to show that they have acquired a
secondary meaning as to identify them as [petitioners] products. Hence, the court
ruled that the [petitioners] cannot avail themselves of the doctrine of secondary
meaning.

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

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

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

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

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

90
trademark infringement against petitioners by its use of the mark MARK for its
cigarettes, hence liable for damages.
In its Comment,[5] respondent, aside from asserting the correctness of the CAs
finding on its liability for trademark infringement and damages, also puts in issue
the propriety of the petition as it allegedly raises questions of fact.
The petition is bereft of merit.
Dealing first with the procedural matter interposed by respondent, we find
that the petition raises both questions of fact and law contrary to the prescription
against raising factual questions in a petition for review on certiorari filed before the
Court. A question of law exists when the doubt or difference arises as to what the
law is on a certain state of facts; there is a question of fact when the doubt or
difference arises as to the truth or falsity of alleged facts.[6]

Indeed, the Court is not the proper venue to consider factual issues as it is not
a trier of facts.[7] Unless the factual findings of the appellate court are mistaken,
absurd, speculative, conflicting, tainted with grave abuse of discretion, or contrary
to the findings culled by the court of origin,[8] we will not disturb them.

It is petitioners posture, however, that their contentions should

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

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

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

A trademark is any distinctive word, name, symbol, emblem, sign, or device,

or any combination thereof adopted and used by a manufacturer or merchant on his
goods to identify and distinguish them from those manufactured, sold, or dealt in by
91
others.[11] Inarguably, a trademark deserves protection. For, as Mr. Justice
Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:[12]
The protection of trademarks is the laws recognition of the psychological
function of symbols. If it is true that we live by symbols, it is no less true that we
purchase goods by them. A trade-mark is a merchandising short-cut which
induces a purchaser to select what he wants, or what he has been led to believe
what he wants. The owner of a mark exploits this human propensity by making
every effort to impregnate the atmosphere of the market with the drawing power
of a congenial symbol. Whatever the means employed, the aim is the same - to
convey through the mark, in the minds of potential customers, the desirability of
the commodity upon which it appears. Once this is attained, the trade-mark
owner has something of value. If another poaches upon the commercial
magnetism of the symbol he has created, the owner can obtain legal redress.

It is thus understandable for petitioners to invoke in this recourse their

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

In support of their contention respecting their right of action, petitioners

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

In any event, petitioners point out that there is actual use of their trademarks
in the Philippines as evidenced by the certificates of registration of their trademarks.
The marks MARK TEN and LARK were registered on the basis of actual use in
accordance with Sections 2-A[13]and 5(a)[14] of R.A. No. 166, as amended, providing
for a 2-month pre-registration use in local commerce and trade while the
registration of MARK VII was on the basis of registration in the foreign country of
origin pursuant to Section 37 of the same law wherein it is explicitly provided that
prior use in commerce need not be alleged.[15]

92
 Besides, petitioners argue that their not doing business in the Philippines, if
that be the case, does not mean that cigarettes bearing their trademarks are not
available and sold locally. Citing Converse Rubber Corporation v. Universal Rubber
Products, Inc.,[16] petitioners state that such availability and sale may be effected
through the acts of importers and distributors.
Finally, petitioners would press on their entitlement to protection even in the
absence of actual use of trademarks in the country in view of the Philippines
adherence to the Trade Related Aspects of Intellectual Property Rights or the TRIPS
Agreement and the enactment of R.A. No. 8293, or the Intellectual Property Code
(hereinafter the IP Code), both of which provide that the fame of a trademark may
be acquired through promotion or advertising with no explicit requirement of actual
use in local trade or commerce.

Before discussing petitioners claimed entitlement to enforce trademark rights

in the Philippines, it must be emphasized that their standing to sue in Philippine
courts had been recognized, and rightly so, by the CA. It ought to be pointed out,
however, that the appellate court qualified its holding with a statement,
following G.R. No. 91332, entitled Philip Morris, Inc., et al. v. The Court of Appeals
and Fortune Tobacco Corporation,[17] that such right to sue does not necessarily
mean protection of their registered marks in the absence of actual use in
the Philippines.
Thus clarified, what petitioners now harp about is their entitlement to
protection on the strength of registration of their trademarks in
the Philippines.

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

Admittedly, the registration of a trademark gives the registrant,

such as petitioners, advantages denied non-registrants or ordinary users, like
respondent. But while petitioners enjoy the statutory presumptions arising from
such registration,[19] i.e., as to the validity of the registration, ownership and the
exclusive right to use the registered marks, they may not successfully sue on the
basis alone of their respective certificates of registration of trademarks. For,
petitioners are still foreign corporations. As such, they ought, as a condition to
availment of the rights and privileges vis--vis their trademarks in this country, to
show proof that, on top of Philippine registration, their country grants
substantially similar rights and privileges to Filipino citizens pursuant to
Section 21-A[20] of R.A. No. 166.
In Leviton Industries v. Salvador,[21] the Court further held that the
aforementioned reciprocity requirement is a condition sine qua non to filing a suit by
93
a foreign corporation which, unless alleged in the complaint, would justify dismissal
thereof, a mere allegation that the suit is being pursued under Section 21-A of R.A.
No. 166 not being sufficient. In a subsequent case,[22] however, the Court held that
where the complainant is a national of a Paris Convention- adhering country, its
allegation that it is suing under said Section 21-A would suffice, because the
reciprocal agreement between the two countries is embodied and supplied by the
Paris Convention which, being considered part of Philippine municipal laws, can be
taken judicial notice of in infringement suits.[23]

As well, the fact that their respective home countries, namely, the United
States, Switzerland and Canada, are, together with the Philippines, members of the
Paris Union does not automatically entitle petitioners to the protection of their
trademarks in this country absent actual use of the marks in local commerce
and trade.
True, the Philippines adherence to the Paris Convention[24] effectively obligates the
country to honor and enforce its provisions[25] as regards the protection of industrial
property of foreign nationals in this country. However, any protection accorded has
to be made subject to the limitations of Philippine laws.[26] Hence, despite Article 2
of the Paris Convention which substantially provides that (1) nationals of member-
countries shall have in this country rights specially provided by the Convention as
are consistent with Philippine laws, and enjoy the privileges that Philippine laws now
grant or may hereafter grant to its nationals, and (2) while no domicile requirement
in the country where protection is claimed shall be required of persons entitled to
the benefits of the Union for the enjoyment of any industrial property
rights,[27] foreign nationals must still observe and comply with the conditions
imposed by Philippine law on its nationals.

Considering that R.A. No. 166, as amended, specifically Sections 2[28] and 2-
A[29] thereof, mandates actual use of the marks and/or emblems in local commerce
and trade before they may be registered and ownership thereof acquired, the
petitioners cannot, therefore, dispense with the element of actual use. Their being
nationals of member-countries of the Paris Union does not alter the legal situation.
In Emerald Garment Mfg. Corporation v. Court of Appeals,[30] the Court
reiterated its rulings in Sterling Products International, Inc. v. Farbenfabriken Bayer
Aktiengesellschaft,[31] Kabushi Kaisha Isetan v. Intermediate Appellate
Court,[32] and Philip Morris v. Court of Appeals and Fortune Tobacco
Corporation[33] on the importance of actual commercial use of a trademark in
the Philippines notwithstanding the Paris Convention:

94
 The provisions of the 1965 Paris Convention relied upon by private
respondent and Sec. 21-A of the Trademark Law were sufficiently expounded
upon and qualified in the recent case of Philip Morris, Inc., et. al. vs. Court of
Appeals:

xxx xxx xxx

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

xxx xxx xxx

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

Contrary to what petitioners suggest, the registration of trademark cannot be

deemed conclusive as to the actual use of such trademark in local commerce. As it
were, registration does not confer upon the registrant an absolute right to the
registered mark. The certificate of registration merely constitutes prima
facie evidence that the registrant is the owner of the registered mark. Evidence of
non-usage of the mark rebuts the presumption of trademark ownership,[34] as what
happened here when petitioners no less admitted not doing business in this
country.[35]
Most importantly, we stress that registration in the Philippines of trademarks
does not ipso facto convey an absolute right or exclusive ownership thereof. To
95
borrow from Shangri-La International Hotel Management, Ltd. v. Development
Group of Companies, Inc.[36] trademark is a creation of use and, therefore, actual
use is a pre-requisite to exclusive ownership; registration is only an administrative
confirmation of the existence of the right of ownership of the mark, but does not
perfect such right; actual use thereof is the perfecting ingredient.[37]
Petitioners reliance on Converse Rubber Corporation[38] is quite misplaced,
that case being cast in a different factual milieu. There, we ruled that a foreign
owner of a Philippine trademark, albeit not licensed to do, and not so engaged in,
business in the Philippines, may actually earn reputation or goodwill for its goods in
the country. But unlike in the instant case, evidence of actual sales of Converse
rubber shoes, such as sales invoices, receipts and the testimony of a legitimate
trader, was presented in Converse.
This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the
infringement complaint herein having been filed in August 1982 and tried under the
aegis of R.A. No. 166, as amended. The IP Code, however, took effect only
on January 1, 1998 without a provision as to its retroactivity.[39] In the same vein,
the TRIPS Agreement was inexistent when the suit for infringement was filed,
the Philippines having adhered thereto only on December 16, 1994.

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

This brings us to the principal issue of infringement.

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

infringement, as follows:

Sec. 22. Infringement, what constitutes. Any person who shall use, without the
consent of the registrant, any reproduction, counterfeit, copy or colorable
imitation of any registered mark or tradename in connection with the sale,
offering for sale, or advertising of any goods, business or services on or in
connection with which such use is likely to cause confusion or mistake or to
deceive purchasers or others as to the source or origin of such goods or services,
or identity of such business; or reproduce, counterfeit, copy of color ably imitate
any such mark or tradename and apply such reproduction, counterfeit, copy or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
96
 advertisements intended to be used upon or in connection with such goods,
business, or services, shall be liable to a civil action by the registrant for any or all
of the remedies herein provided.

Petitioners would insist on their thesis of infringement since respondents mark

MARK for cigarettes is confusingly or deceptively
similar withtheir duly registered MARK VII, MARK TEN and LARK marks likewise for
cigarettes. To them, the word MARK would likely cause confusion in the trade, or
deceive purchasers, particularly as to the source or origin of respondents cigarettes.

The likelihood of confusion is the gravamen of trademark infringement.[40] But

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

In determining similarity and likelihood of confusion,

jurisprudence has developed two tests: the dominancy test and
the holistic test. The dominancy test
[42] [43]
sets sight on the similarity of the prevalent
features of the competing trademarks that might cause confusion and deception,
thus constitutes infringement. Under this norm, the question at issue turns on
whether the use of the marks involved would be likely to cause confusion or mistake
in the mind of the public or deceive purchasers.[44]
In contrast, the holistic test[45] entails a consideration of the entirety of the
marks as applied to the products, including the labels and packaging, in determining
confusing similarity.

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

For one, as rightly concluded by the CA after comparing the trademarks

involved in their entirety as they appear on the products,[46] the striking
dissimilarities are significant enough to warn any purchaser that one is different
from the other. Indeed, although the perceived offending word MARK is itself
prominent in petitioners trademarks MARK VII and MARK TEN, the entire marking
system should be considered as a whole and not dissected, because a discerning
97
eye would focus not only on the predominant word but also on the other features
appearing in the labels. Only then would such discerning observer draw his
conclusion whether one mark would be confusingly similar to the other and whether
or not sufficient differences existed between the marks.[47]

This said, the CA then, in finding that respondents goods cannot be mistaken
as any of the three cigarette brands of the petitioners, correctly relied on the holistic
test.
But, even if the dominancy test were to be used, as urged by the petitioners,
but bearing in mind that a trademark serves as a tool to point out distinctly the
origin or ownership of the goods to which it is affixed,[48] the likelihood of confusion
tantamount to infringement appears to be farfetched. The reason for the origin
and/or ownership angle is that unless the words or devices do so point out the
origin or ownership, the person who first adopted them cannot be injured by any
appropriation or imitation of them by others, nor can the public be deceived.[49]

Since the word MARK, be it alone or in combination with the word TEN and
the Roman numeral VII, does not point to the origin or ownership of the cigarettes
to which they apply, the local buying public could not possibly be confused or
deceived that respondents MARK is the product of petitioners and/or originated
from the U.S.A., Canada or Switzerland. And lest it be overlooked, no actual
commercial use of petitioners marks in local commerce was proven. There can thus
be no occasion for the public in this country, unfamiliar in the first place with
petitioners marks, to be confused.

For another, a comparison of the trademarks as they appear on the goods is

just one of the appreciable circumstances in determining likelihood of confusion. Del
Monte Corp. v. CA[50] dealt with another, where we instructed to give due regard to
the ordinary purchaser, thus:

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

98
 When we spoke of an ordinary purchaser, the reference was not to the
completely unwary customer but to the ordinarily intelligent buyer considering the
type of product involved.[51]
It cannot be over-emphasized that the products involved are addicting
cigarettes purchased mainly by those who are already predisposed to a certain
brand. Accordingly, the ordinary buyer thereof would be all too familiar with his
brand and discriminating as well. We, thus, concur with the CA when it held, citing a
definition found in Dy Buncio v. Tan Tiao Bok,[52] that the ordinary purchaser in this
case means one accustomed to buy, and therefore to some extent familiar with, the
goods in question.

Pressing on with their contention respecting the commission of trademark

infringement, petitioners finally point to Section 22 of R.A. No. 166, as amended. As
argued, actual use of trademarks in local commerce is, under said section, not a
requisite before an aggrieved trademark owner can restrain the use of his
trademark upon goods manufactured or dealt in by another, it being sufficient that
he had registered the trademark or trade-name with the IP Office. In fine,
petitioners submit that respondent is liable for infringement,
having manufactured and sold cigarettes with the trademark MARK which, as it
were, are identical and/or confusingly similar with their duly registered trademarks
MARK VII, MARK TEN and LARK.

This Court is not persuaded.

In Mighty Corporation v. E & J Gallo Winery,[53] the Court held that the
following constitute the elements of trademark infringement in accordance not only
with Section 22 of R.A. No. 166, as amended, but also Sections 2, 2-A, 9-A[54] and
20 thereof:

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

(b) is used by another person in connection with the sale, offering for sale, or
advertising of any goods, business or services or in connection with which such
use is likely to cause confusion or mistake or to deceive purchasers or others as to
99
 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.

As already found herein, while petitioners have registered

the trademarks MARK VII, MARK TEN and LARK for cigarettes in the Philippines,
prior actual commercial use thereof had not been proven. In fact, petitioners judicial
admission of not doing business in this country effectively belies any pretension to
the contrary.

Likewise, we note that petitioners even failed to support their claim that their
respective marks are well-known and/or have acquired goodwill in the Philippines so
as to be entitled to protection even without actual use in this country in accordance
with Article 6bis[55] of the Paris Convention. As correctly found by the CA, affirming
that of the trial court:

xxx the records are bereft of evidence to establish that the appellants
[petitioners] products are indeed well-known in the Philippines, either through
actual sale of the product or through different forms of advertising. This finding is
supported by the fact that appellants admit in their Complaint that they are not
doing business in the Philippines, hence, admitting that their products are not
being sold in the local market. We likewise see no cogent reason to disturb the
trial courts finding that the appellants failed to establish that their products are
widely known by local purchasers as (n)o specific magazine or periodical
published in the Philippines, or in other countries but circulated locally have been
presented by the appellants during trial. The appellants also were not able to
show the length of time or the extent of the promotion or advertisement made to
popularize their products in the Philippines.[56]

Last, but not least, we must reiterate that the

issue of trademark infringement is factual, with both the trial and appellate courts
having peremptorily found allegations of infringement on the part of respondent to
100
be without basis. As we said time and time again, factual determinations of the trial
court, concurred in by the CA, are final and binding on this Court.[57]

For lack of convincing proof on the part of the petitioners of actual use of their
registered trademarks prior to respondents use of its mark and for petitioners failure
to demonstrate confusing similarity between said trademarks, the dismissal of their
basic complaint for infringement and the concomitant plea for damages must be
affirmed. The law, the surrounding circumstances and the equities of the situation
call for this disposition.
WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed
decision and resolution of the Court of Appeals are AFFIRMED.

Costs against the petitioners.

SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairperson

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Associate Justice

ADOLFO S. AZCUNA

Associate Justice

101
 ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

REYNATO S. PUNO

Associate Justice

Chairperson, Second Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified
that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court.

ARTEMIO V. PANGANIBAN

Chief Justice

102
 THIRD DIVISION

SUMMERVILLE GENERAL G. R. No. 158767

MERCHANDISING CO.,
Petitioner,
Present:

- versus - YNARES-SANTIAGO,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO, and

HON. COURT OF APPEALS, HON. JUDGE NACHURA, JJ.

ANTONIO EUGENIO, CHANG YU SHUI
and JULIET LOPEZ,

Respondents.
Promulgated:

June 26, 2007

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

DECISION

CHICO-NAZARIO, J.:

The Case
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, as
amended, seeking to set aside the 13 March 2003 Decision[1] and 18 June
2003 Resolution[2] of the Court of Appeals in CA-G.R. SP No. 73799. The Court of Appeals in
its assailed Decision upheld the 10 June 2002 Order[3] of the Regional Trial Court (RTC) of
the City of Manila, Branch 24, in Criminal Case No. 02-2623-26, partially granting
the Motion to Quash Search Warrant No. 02-2625 filed by herein private respondents,
namely Lilian D. Rosales, Marivic Lim, Andy Tang, Chang Yu Shui, Huang Tsung Lian, Ramon
Cheng, Diana Lusuan and Mary Chong Victor Uy; and the 18 October 2002 Order,[4] likewise
of the RTC, denying the Motion for Reconsideration thereof.

This case stemmed from a letter-complaint[5] by Ang Tiam Chay (Ang), President and
General Manager of petitioner Summerville General Merchandising Co. (Summerville),
alleging the illegal proliferation of fake Royal brand playing cards filed with the office of the

103
Director, Criminal Investigation and Detection Group (CIDG) of the Philippine National
Police (PNP).
The Facts
As synthesized from the records of the case, the facts are:

Petitioner Summerville is a corporation engaged in the business of trading, retailing

and exporting/importing a variety of merchandise.[6] It is a holder of a Deed of
Assignment[7] executed in its favor by one Norma C. Gabriel, owner/holder of several
copyrights and patents over the Royal playing cards, Royal brand playing cards case, design
for the case and packaging of a deck of Royal playing cards.[8]

Ang, President and General Manager of petitioner Summerville, personally appeared

at the office of the Criminal Investigation and Detective Division (CIDD) of the CIDG, PNP, in
Camp Crame, Quezon City, to personally complain and file a letter-complaint against
several persons or establishments engaged in the unauthorized manufacturing, distribution
and sale of Royal brand playing cards, the design and mark of which are claimed to have
been duly patented/copyrighted and registered. Specifically, complainant Ang alleged that
the aforesaid actions were violative of Sec. 155[9] in relation to Sec. 170,[10]both of Republic
Act No. 8293,[11] otherwise known as the Intellectual Property Code of
the Philippines. Among the establishments identified to be manufacturing and selling
playing cards using petitioner Summervilles patented Joker design and plastic container was
Arotech International Corporation, owned by private respondents Chang Yu Shui, Juliet B.
Lopes (a.k.a. Veronica Lopez), and several John Does.

In consideration of the aforementioned letter-complaint, on 18 January 2002, P/INSP.

Romualdo B. Cruz, Team Leader, TM III-CIDD-CIDG, PNP, applied for a search warrant
against private respondents, particularly Lilian D. Rosales, Marivic Lim, Andy Tang, Chang Yu
Shui, Huang Tsung Lian, Ramon Cheng, Diana Lusuan, Mary Chong and Victor Uy, all of
Arotech International Corporation. In the Application for Search
Warrant, hereinbelow quoted in full, P/INSP. Cruz alleged:

That he has personal knowledge and verily believed that Chang Yu Shui, Huang Tsung Liang,
Ramon Cheng, Diana Lusuan and Mary Chong, all Incorporators of AROTECH International
Corporation of #90 J.P. Bautista St., Caloocan City, has (sic) in their possession and has (sic) in their
control the following property/ies described below to wit:

Crown brand playing cards using copyright plastic container and joker of
Royal, Machine used in manufacturing plastic container and joker of Royal; Clich
of Royal joker and casing; other materials being used in the manufacturing of fake
Royal copyright joker and plastic container; L-300 van w/ Plate No. WJC 133 used

104
 in the delivery of playing cards. Which they are keeping and concealing in the
premise above described.

That the herein undersigned has verified the report and found it to be fact and
has therefore reasons to believe that a SEARCH WARRANT should be issued to
enable the undersigned to take possession and bring to this Court the following
described property/ies.

a. Crown brand playing cards using copyright plastic container

and joker of Royal

b. Machine used in manufacturing plastic container and joker of

Royal

c. Clich of Royal Joker and Plastic casing

d. Other materials, being used in the manufacture of fake Royal

copyright Joker and Plastic container

e. L-300 van (White) w/Plate No. WJC 133 in the delivery of

playing cards.

WHEREFORE, the undersigned prays to this Honorable Court to issue a

Search Warrant, authorizing him and his agents or any Peace Officer to search the
premises described in this application and to seize and bring to this Honorable
Court the persons and personal property/ies above described to be dealt with as
the law directs.[12]

On 18 January 2002, the Acting Presiding Judge of RTC-Manila, Branch 1, Hon.

Antonio M. Eugenio, Jr. issued a search warrant, i.e., Search Warrant No. 02-2625, after
finding probable cause to believe that:

x x x [A] Violation of Sec. 155 in relation to Section 170, RA 8293 has been
committed or is being committed and that there are good and sufficient reasons
to believe that Chang Yu Shui; Huang Tsung Liang; Ramon Cheng; Diana Lusuan
and Mary Chong of Arotech Intl. Corp. of #90 J.P. Bautista St., Caloocan
105
 City have (sic) in their possession, control and custody at the stated address, as
per description below and attached sketch, the following:

A) Crown brand playing cards using copyright plastic container

and joker of Royal

B) Machine used in manufacturing plastic container and joker of

Royal

C) Clich of Royal Joker and Plastic casing

D) Other materials being used in the manufacture of fake Royal

copyright Joker and Plastic container

E) L 300 van (white) w/ Plate No. WJC 133 used in the delivery of
playing cards[13]

Pursuant thereto, elements of the CIDD-CIDG conducted a raid of the premises of

Arotech International Corporation at #90 J.P. Bautista St., CaloocanCity. Per the raiding
teams report, specifically, Compliance/Return of Search Warrant,[14] the following were
seized:

a) 910 boxes containing 144 pieces of Crown brand playing cards using copyright/trademark plastic
container and Joker of Royal brand;
b) 3 printing machines;
c) 203 boxes of Crown brand playing cards (finished product);
d) 521 Crown playing card sheets (unfinished product); and
e) 7,000 pieces plastic container.[15]

Thereafter, the record of the foregoing incident was forwarded to the City Prosecutor
of Caloocan City for the filing of the appropriate criminal charges.[16]

In the interim, in an Order dated 31 January 2002, the RTC-Manila, Branch 1, directed
that the custody of the seized items be turned over to Petitioner Summerville, subject to
the condition that the key to the said warehouse be turned over to the Deputy Sheriff of
the court.

On 4 February 2002, private respondents filed with the RTC-Manila, Branch 1,

a Verified Omnibus Motion[17] essentially praying for the 1) reconsideration of the 31

106
January 2002 Order; 2) quashal of Search Warrant No. 02-2625; 3) return of the seized
properties; and 4) declaration that the items seized are inadmissible in evidence against the
movants.

The foregoing motion was grounded on the arguments that 1) there was no offense
or subject of the offense to speak of, because the Joker found on the Crown brand playing
cards, as well as the plastic containers, was registered and licensed in the name of Arotech
International Corporation; 2) there was no basis for the finding of probable cause for
infringement or the violation of Sec. 155, in relation to Sec. 170 of Republic Act No. 8293
since the playing cards seized were those of the Crown brand and not of the Royal brand;
and 3) what was issued was a general search warrant as said warrant failed to describe the
things to be seized with particularity.

In an Opposition[18] dated 18 March 2002, petitioner Summerville maintained that

the embossed name Arotech International Corporation on the plastic container of Crown
brand playing cards is of no moment; that except for said embossed mark, the plastic
container is similarly deceiving in all respects with the container case[19] of Royal brand
playing cards. Moreover, it insisted that private respondents were still liable for unfair
competition and patent even though they were the holder of an earlier issued certificate
bearing Copyright Registration No. 1-97-247,[20] for their failure to make use of their
registered container case design. In other words, it is its contention that the design of the
container or case that comes with the Crown brand playing cards is that of petitioner
Summerville, and not the one registered and licensed in private respondents name.

The trial court conducted a clarificatory hearing and required the parties to submit
their respective position papers.

On 10 June 2004, the RTC-Manila, Branch 24,[21] issued an Order[22] partially granting
the omnibus motion. It ordered that the seized Crown brand playing cards and the three
printing machines be released and returned to private respondents; hence, only the
containers of the playing cards were left in the custody of the petitioner
Summerville. According to the trial court, from a perusal of both parties container cases x x
x,[23] it would appear that they are practically the same in all aspects with the exception of
the brand name ARO TECH etched in the dorsal portion of respondents container x x x.[24]

Further, it ratiocinated that:

At any rate, since what is violative of private complainants intellectual property right is
limited to the plastic container case, only the said item should have been the subject of the warrant
and seized by the enforcement team.

ACCORDINGLY, the Motion to Quash filed by respondents is partially granted with respect to
the playing cards and the three (3) printing machines.[25]

107
 The Motion for Reconsideration and the Partial Motion for Reconsideration of
petitioner Summerville and private respondents respectively, were denied by the trial court in
an Order[26] dated 18 October 2002.

Undaunted, petitioner Summerville filed with the Court of Appeals a Petition

for Certiorari[27] under Rule 65 of the Rules of Court, as amended. Said petition imputed
grave abuse of discretion, amounting to lack or excess of jurisdiction, to the trial court when
the latter 1) ordered the release of the Crown brand playing cards and the three printing
machines; and 2) denied the Motion for Reconsideration of the assailed order. Petitioner
Summerville justified the inclusion of the Crown brand playing cards in the search and
seizure order by claiming that the playing cards were part and parcel of the plastic
containers, the design of which is claimed by it. The seizure of the Crown brand playing
cards was necessary to demonstrate how said cards were masquerading as Royal brand
playing cards, thus, allegedly violating petitioners intellectual property rights. But, with the
release of the Crown brand playing cards, petitioner Summerville concluded that it would not
be able to present sufficient evidence for Unfair Competition against private respondents
considering that the playing cards with their container cases are the very instruments of
Unfair Competition.[28]

In a Decision[29] promulgated on 13 March 2003, the Court of Appeals dismissed the

aforementioned petition, the fallo of which reads:

WHEREFORE, finding no grave abuse of discretion on the part of the public

respondent, the petition is hereby DENIED and ordered DISMISSED.

In an extended Resolution[30] dated 18 June 2003, the Court of Appeals denied

petitioner Summervilles Motion for Reconsideration[31] and Supplemental Motion for
Reconsideration.[32]

The Issues

Hence, this Petition for Review on Certiorari under Rule 45 of the Rules of Court, as
amended, predicated on the following issues:[33]

I.

WHETHER THE SEIZED PLAYING CARDS INSIDE THE INFRINGING PLASTIC

CONTAINER CASES MAY LEGALLY BE CONSIDERED SUBJECT OF THE OFFENSE
FOR INFRINGEMENT AND UNFAIR COMPETITION, AND HENCE MAY BE
SUBJECT TO SEIZURE UNDER A SEARCH WARRANT UNDER SECTION 3, RULE
126 OF THE 2000 RULES OF CRIMINAL PROCEDURE;

II.

WHETHER THE TRIAL COURT TRANSGRESSED THE RIGHT OF THE PETITIONER

TO DUE PROCESS OF LAW IN QUASHING THE SEARCH WARRANT AND
ORDERING THE RETURN OF THE PLAYING CARDS INSIDE THE INFRINGING
108
 PLASTIC CONTAINER CASES AND THE THREE PRINTING MACHINES USED IN
MANUFACTURING THE INFRINING PLASTIC CONTAINERS BY MAKING
ARBITRARY FACTUAL FINDINGS WITHOUT RECEPTION OF EVIDENCE ON THE
DISPUTED ISSUES OF FACTS..

The Courts Ruling

At the core of the subject controversy is the issue respecting the propriety of the
release and return of the seized Crown brand playing cards and the printing machines.

In dismissing the petition, the Court of Appeals articulated that:

Records reveal that the application for a Search Warrant sought for the seizure of,
among others, Crown brand playing cards using copyright plastic container and joker of
Royal, Machine used in manufacturing plastic container and joker of Royal; Clich of Royal
joker and casing; other materials being used in the manufacturing of fake Royal copyright
joker and plastic container. x x x

xxxx

Certainly, the seized Crown playing cards are not the subject of the offense, fruits of
the offense or used or intended to be used as means of committing an offense. Said seized
Crown playing cards are genuine and the trademark is registered and owned by private
respondents. There is no reason to justify their seizure just because the same are inside the
alleged infringed plastic container case.

Petitioners allegation of the indivisibility of the Crown playing cards and the alleged
infringed plastic container case is absurd. To assent to the said theory will be tantamount to
taking of ones property without due process of law. Under the circumstances of the case, the
law permits the seizure of a personal property if the same is the subject of the offense, fruit of
the offense, or used or about to be used in committing an offense. Insofar as the Crown
playing cards are concerned, the private respondents are very much entitled to the recovery of
the same.

x x x x.

In the matter of the three (3) printing machines seized, there was no grave abuse of
discretion in quashing the warrant insofar as these machines are concerned. x x x.

The use of the printing machines in the manufacture or printing of fake Joker, is
unsubstantiated. Since the private respondents are engaged in the printing and manufacture of
Crown playing cards, it is only normal and expected that printing machines be found in their
possession. x x x

xxxx

The facts presented in the application of the search warrant of the printing machines
character in the offense of unfair competition, is wanting. This is obviously the absence of
personal knowledge on the part of the applicant regarding the use of the printing machines in
the commission of the offense. Competent proof of the printing machines use in the

109
 commission of the offense, must be made in order to ascertain probable cause.[34] (Citation
omitted.) [Emphasis supplied.]

Additionally, in denying petitioner Summervilles motions for reconsideration, the

appellate court had this to say, viz:

Petitioner alleges that the individuality of Crown Playing Cards is subsumed or lost in
the identity of petitioners Royal plastic container.

Petitioner should be reminded that the matter of who owns the design of the contested
plastic container manufactured or used by private respondents, (sic) is still the subject of
inquiry before the lower court. Hence, petitioner can not (sic) prematurely claim ownership
over the said plastic container.

As stated in this Courts decision, the subject matter complained of is the plastic
container and not the Crown Playing Cards belonging to private respondents. Public
respondent correctly ordered the release of the said cards.

xxxx

WHEREFORE, premises considered, the Motion for Reconsideration and

Supplemental Motion for Reconsideration are DENIED for lack of merit.[35]

Pending the disposition of this case, private respondents filed a Motion to

Dismiss[36] on the ground that the RTC-Caloocan City Branch 123, in an Order[37] dated 10
December 2004, provisionally dismissed Criminal Case No. C-67456, the main case filed
against private respondents for the prosecution of the trademark infringement, for failure
to prosecute.[38] Petitioner Summerville, in its Comment,[39] does not controvert such
dismissal, or deny the finality of such dismissal; thus, it may be reasonably concluded that
the dismissal of the criminal complaint for trademark infringement against private
respondents had become final, and no other criminal case is pending or has been filed
pursuant to Search Warrant No. 02-2625. Furthermore, there is no record of any civil case
having been filed in connection with the seized articles. Since there is no pending criminal
or civil case in connection with the articles seized, the return of the said articles to private
respondents are but a matter of course.

Be that as it may, despite such dismissal, which has rendered moot or academic the
core issue of the subject petition, the matter of whether or not the RTC-Manila, Branch 24
acted with grave abuse of discretion amounting to lack or excess of discretion when it
partially granted the motion to quash the Warrants of Search and Seizure and released the
Crown brand playing cards as well as the three printing machines seized, needs to be
addressed.

In assailing the decision of the Court of Appeals, petitioner Summerville contends

that:
110
 The Crown (brand) playing cards encased and wrapped inside the Royal
plastic container cases intended to be passed off as Royal (brand) playing cards
are the subject of the offense of infringement of the registered trademark of the
petitioner inasmuch as using such packages or wrappers intended for commerce
or in connection with the sale x x x is likely to cause confusion, or to cause mistake
or to deceive (sic) which is a criminal offense under section 155.2 in relation to
Section 170 of RA 8293.

The intention of the private respondents to pass off their merchandise as

Royal (brand) Playing Cards and not as Crown (brand) Playing Cards is very evident
in the fact that when inside the Royal (brand) plastic container, the Crown (brand)
Playing Cards are to be mistaken by the buying public as Royal (brand) Playing
Cards likewise belonging to petitioner.

Such deception in passing off their goods for those of the petitioner who
has established a goodwill renders the private respondents criminally liable for
unfair competition under Section 168.2 and 168.3 (a) (in relation to Sec.) 170 of
RA 8293.[40]

In contrast, private respondents assert that the use of the term Registered Mark in
Sec. 155 of Republic Act No. 8293 specifically requires that only owners of registered marks
can sue for infringement of trademarks.[41] Petitioner Summerville, however, has yet to
produce evidence to buttress its claim in order to sustain the issued search warrant.[42] With
respect to the allegation of the crime of copyright infringement, private respondents aver
that petitioner failed to establish an essential element of the said crime, i.e.,
goodwill.[43] They claim that no iota of evidence was ever presented to show that the Royal
brand plastic container has already acquired goodwill in accordance with current
jurisprudence.[44]

The petition has no merit.

Petitioner Summervilles assertion that the Crown brand playing cards are subject of
the offense is erroneous, bearing in mind the distinctive circumstances of this case, i.e., that
111
private respondents are the owners of the registered Crown brand. The articles seized
hundreds of Crown brand playing cards, among other articles had little, if any, evidentiary
value for the criminal action of trademark infringement relating to the use of the plastic
containers, which petitioner Summerville filed before the RTC-Caloocan City, Branch 123; or
even one for unfair competition also respecting the use of such plastic containers.

In the case at bar, petitioner Summerville does not dispute that the design and/or
mark of the Crown brand playing cards is owned by private respondents. In fact, there is no
allegation that the design and/or mark of such Crown brand playing cards is a reproduction,
counterfeit, copy, or colorable imitation of another registered mark legally owned by
another; hence, no crime of trademark infringement appears to have been committed or
perpetrated to warrant the inference that the Crown brand playing cards are subject of the
offense as contemplated by Sec. 4 of Rule 126 of the Rules of Court. All the more telling is
the contention of petitioner Summerville that it is the plastic container/case and its
marking that bear the reproduction, counterfeit, copy, or colorable imitation of its
registered mark. In other words, it is the design of the plastic container/case that is alleged
to have been utilized by private respondents to deceive the public into believing that their
Crown brand playing cards are the same as those manufactured by petitioner Summerville.

As succinctly put by the Court of Appeals:

Certainly, the seized Crown playing cards are not the subject of the offense, fruits of
the offense or used or intended to be used as means of committing an offense. Said seized
Crown playing cards are genuine and the trademark is registered and owned by private
respondents. There is no reason to justify their seizure just because the same are inside the
alleged infringed plastic container case.[45]

Furthermore, assuming for the sake of argument that the Crown brand playing cards
can be considered subject of the offense, a sample or two are more than enough to retain,
should there have been a need to examine them along with the plastic
container/case. There was no need to hold the hundreds of articles seized. It is alleged in
the Affidavits executed pursuant to the application for the search warrant that as part of
the investigation conducted by the CIDD-CIDG, PNP, sample purchases were made. Said
samples, therefore, are fairly sufficient to represent the hundreds of articles that were
seized.

More to the point, during the presentation of the seized Crown brand playing cards
at trial, the prosecution need not present each and every seized pack of playing cards in
order to show or prove the point that Crown brand playing cards bear the reproduction,
112
counterfeit, copy, or colorable imitation of petitioner Summervilles mark the rest would
just be surplus to requirement. The trial court will not allow the presentation of superfluous
evidence. Given the availability of actual samples, there was no need for the court to take
custody of the countless articles seized.

With respect to the release of the three printing machines, the foregoing arguments
equally hold true. This Court finds no error in the actions of the trial court. The record of
the case is bereft of any finding as to the use of the printing machines in the production of
the subject plastic containers. Absent any connection between the two, no amount of
intellectual calisthenics will substantiate portraying the printing machines as subject of the
offense, fruit of the offense or used or intended to be used as means of committing an
offense.

All things considered, it should be noted that there is no law prohibiting the trial
court from returning the articles seized before a case is actually filed in court and even
before the final determination by the prosecutor or the DOJ of whether a case should be
filed in court. It is true that in most cases, the release of the articles seized would be
unjustified. However, in the case at bar, the return of the playing cards and the printing
machines would better serve the purposes of justice and expediency.

There exists a constitutional safeguard against unreasonable searches and

seizures,[46] which refers to the immunity of ones person from interference by the
government, included in which is his residence, his papers and other possessions.[47] The
Constitution, however, does not provide a blanket prohibition against all searches and
seizures; rather, the fundamental protection accorded by the search and seizure clause is
that, between persons and the police, there must stand the protective authority of a
magistrate clothed with the power to issue or refuse such search warrant.[48] Yet, the
responsibilities of the magistrate do not end with the granting of the warrant, but extends
to the custody of the articles seized.[49] In exercising custody over these articles, the
property rights of the owner should be balanced with the social need to preserve evidence,
which will be used in the prosecution of a case.[50]

In the present petition, the criminal action for the prosecution of the crime of
trademark infringement has already been dismissed. Thus, the RTC-Manila, Branch 24,
would have been left with the custody of depreciable items. More importantly, the Crown
brand playing cards would have been non-essential if presented as evidence for the following
reasons: 1) private respondents have already admitted that they are the owners of the Crown
brand, which made use of the plastic containers in dispute; 2) petitioner Summerville does
not deny private respondents ownership of the Crown brand; and 3) what is in dispute is the
113
design of plastic containers/cases of playing cards and not the playing cards per se. Actual
samples of the impugned plastic containers/cases of Crown brand playing cards are already
in the possession of the trial court. Where the articles seized have already been found not to
be the subject of the offense and the purpose of presenting them as evidence is no longer
served, there is no justification for severely curtailing the rights of a person to his property.

By and large, in ordering the return of the articles seized, the RTC-Manila, Branch 24,
merely exercised its discretion in determining from the circumstances of the case what
constitutes a reasonable and an unreasonable search and seizure. The belief that to value
the privacy of home and person and to afford its constitutional protection against the long
reach of the government are no less than to value human dignity; and this privacy must not
be disturbed except in the overriding social need, and then only under the stringent
procedural rules.[51]

WHEREFORE, premises considered, the instant petition is hereby DENIED. The

assailed 13 March 2003 Decision and 18 June 2003 Resolution both of the Court of Appeals
in CA-G.R. SP No. 73799, are hereby AFFIRMED. Costs against petitioner Summerville
General Merchandising Company.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson
MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA
Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
114
Associate Justice

Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby
certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice

115
 INTELLECTUAL PROPERTY LAW

A. UST GOLDEN NOTES 2011

INTELLECTUAL PROPERTY LAW

B. CASES ON INTELLECTUAL PROPERTY LAW

1. SEHWANI, INCORPORATED vs. IN-N-OUT BURGER, INC.,
G.R. No. 171053 October 15, 2007

2. PEST MANAGEMENT ASSOCIATION OF THE PHILIPPINES (PMAP), vs FERTILIZER AND

PESTICIDE AUTHORITY (FPA), G.R. NO. 156041, February 21, 2007

3. ELIDAD C. KHO vs. HON. COURT OF APPEALS

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

4. MANOLO P. SAMSON vs. HON. REYNALDO B. DAWAY

[G.R. Nos. 160054-55. July 21, 2004]

5. VENANCIO SAMBAR vs. LEVI STRAUSS & CO

[G.R. No. 132604. March 6, 2002]

6. MIGHTY CORPORATION and LA CAMPANA FABRICA DE TABACO, INC. vs. E. & J. GALLO
WINERY and THE ANDRESONS GROUP, INC. [G.R. No. 154342. July 14, 2004]

7. ASIA BREWERY, INC. vs. THE HON. COURT OF APPEALS

G.R. No. 103543 July 5, 1993

8. MCDONALDS CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., vs

L.C. BIG MAK BURGER, INC., G.R. No. 143993 August 18, 2004

9. PHILIP MORRIS, INC., BENSON vs FORTUNE TOBACCO CORPORATION

G.R. No. 158589, June 27, 2006

10. SUMMERVILLE GENERAL vs HON. COURT OF APPEALS

G. R. No. 158767 June 26, 2007

116
 [G.R. No. 132604. March 6, 2002]

VENANCIO SAMBAR, doing business under the name and style of CVS Garment
Enterprises, petitioner, vs. LEVI STRAUSS & CO., and LEVI STRAUSS
(PHIL.), INC., respondents.

DECISION
QUISUMBING, J.:

This petition for review on certiorari prays for the reversal of the decision dated January 30,
1998, of the Court of Appeals in CA-G.R. CV No. 51553. That decision affirmed the decision in
Civil Case No. 88-2220 of the Regional Trial Court, Branch 66, Makati City, making permanent
the writ of preliminary injunction, ordering CVS Garment and Industrial Company (CVSGIC)
and petitioner Venancio Sambar to pay private respondents jointly and solidarily the sum
of P50,000 as temperate and nominal damages, P10,000 as exemplary damages, and P25,000 as
attorneys fees and litigation costs, and ordering the Director of the National Library to cancel
Copyright Registration No. 1-1998 in the name of Venancio Sambar.
The facts are as follows:
On September 28, 1987, private respondents, through a letter from their legal officer,
demanded that CVS Garment Enterprises (CVSGE) desist from using their stitched arcuate
design on the Europress jeans which CVSGE advertised in the Manila Bulletin.
Atty. Benjamin Gruba, counsel of CVSGE, replied that the arcuate design on the back
pockets of Europress jeans was different from the design on the back pockets of Levis jeans. He
further asserted that his client had a copyright on the design it was using.
Thereafter, private respondents filed a complaint against Sambar, doing business under the
name and style of CVSGE. Private respondents also impleaded the Director of the National
Library. Summons was sent to Sambar in his business address at 161-B Iriga corner Retiro, La
Loma, Quezon City.
Atty. Gruba claimed that he erroneously received the original summons as he mistook it as
addressed to his client, CVSGIC. He returned the summons and the pleadings and manifested in
court that CVSGE, which was formerly doing business in the premises, already stopped
operation and CVSGIC took over CVSGEs occupation of the premises. He also claimed he did
not know the whereabouts of Sambar, the alleged owner of CVSGE.
Thereafter, private respondents amended their complaint to include CVSGIC. When private
respondents learned the whereabouts of Sambar and CVSGE, the case was revived.
Private respondents alleged in their complaint that Levi Strauss and Co. (LS&Co.), an
internationally known clothing manufacturer, owns the arcuate design trademark which was
registered under U.S. Trademark Registration No. 404, 248 on November 16, 1943, and in the
Principal Register of trademarks with the Philippine Patent Office under Certificate of
Registration No. 20240 issued on October 8, 1973; that through a Trademark Technical Data
and Technical Assistance Agreement with Levi Strauss (Phil.) Inc. (LSPI) in 1972, LS&Co.
granted LSPI a non-exclusive license to use the arcuate trademark in its manufacture and sale of
Levis pants, jackets and shirts in the Philippines; that in 1983, LS&Co. also appointed LSPI as
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its agent and attorney-in-fact to protect its trademark in the Philippines; and that sometime in
1987, CVSGIC and Venancio Sambar, without the consent and authority of private respondents
and in infringement and unfair competition, sold and advertised, and despite demands to cease
and desist, continued to manufacture, sell and advertise denim pants under the brand name
Europress with back pockets bearing a design similar to the arcuate trademark of private
respondents, thereby causing confusion on the buying public, prejudicial to private respondents
goodwill and property right.
In its answer, CVSGIC admitted it manufactured, sold and advertised and was still
manufacturing and selling denim pants under the brand name of Europress, bearing a back
pocket design of two double arcs meeting in the middle. However, it denied that there was
infringement or unfair competition because the display rooms of department stores where Levis
and Europress jeans were sold, were distinctively segregated by billboards and other modes of
advertisement. CVSGIC avers that the public would not be confused on the ownership of such
known trademark as Levis, Jag, Europress, etc.. Also, CVSGIC claimed that it had its own
original arcuate design, as evidenced by Copyright Registration No. 1-1998, which was very
different and distinct from Levis design. CVSGIC prayed for actual, moral and exemplary
damages by way of counterclaim.
Petitioner Venancio Sambar filed a separate answer. He denied he was connected with
CVSGIC. He admitted that Copyright Registration No. 1-1998 was issued to him, but he denied
using it. He also said he did not authorize anyone to use the copyrighted design. He
counterclaimed for moral and exemplary damages and payment of attorneys fees.
After hearing, the trial court issued a writ of preliminary injunction enjoining CVSGIC and
petitioner from manufacturing, advertising and selling pants with the arcuate design on their
back pockets. CVSGIC and petitioner did not appear during the October 13 and 27, 1993
hearings, when they were to present evidence. Consequently, the trial court ruled that they
waived their right to present evidence.
On May 3, 1995, the trial court rendered its decision. The dispositive portion reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) making the writ of preliminary injunction permanent;

b) ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay
the plaintiffs jointly and solidarily the sum of P50,000.00 as temperate and nominal damages,
the sum of P10,000.00 as exemplary damages, and the sum of P25,000.00 as attorneys fees and
litigation expenses and to pay the costs.

SO ORDERED.[1]

Private respondents moved for a reconsideration praying for the cancellation of petitioners
copyright registration. The trial court granted reconsideration in its July 14, 1995 order, thus:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) making the writ of preliminary injunction permanent;

118
b) ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay
the plaintiffs jointly and solidarily the sum of P50,000.00 as temperate and nominal damages,
the sum of P10,000.00 as exemplary damages, and the sum of P25,000.00 as attorneys fees and
litigation expenses and to pay the costs;

c) ordering the Director of the National Library to cancel the Copyright Registration No. 1-1998
issued in the name of Venancio Sambar.[2]

Petitioner appealed to the Court of Appeals which on January 30, 1998 decided in favor of
private respondents as follows:

WHEREFORE, the judgment appealed from is AFFIRMED in toto.

SO ORDERED.[3]

In this instant petition, petitioner avers that the Court of Appeals erred in:
I. ...RULING THAT THERE WAS AN INFRINGEMENT OF RESPONDENTS ARCUATE MARK.
II. ...RULING THAT PETITIONER IS JOINTLY AND SOLIDARILY LIABLE WITH CVS GARMENTS
INDUSTRIAL CORPORATION FOR INFRINGEMENT OF RESPONDENTS ARCUATE MARK.
III. ...IN ORDERING, THERE BEING NO INFRINGEMENT OR UNFAIR COMPETITION, THE
AWARD OF DAMAGES AND CANCELLATION OF COPYRIGHT REGISTRATION NO. 1-1998
ISSUED IN THE NAME OF PETITIONER.[4]

Briefly, we are asked to resolve the following issues:

1. Did petitioner infringe on private respondents arcuate design?
2. Must we hold petitioner solidarily liable with CVS Garments Industrial Corporation?
3. Are private respondents entitled to nominal, temperate and exemplary damages and
cancellation of petitioners copyright?
On the first issue, petitioner claims that he did not infringe on private respondents arcuate
design because there was no colorable imitation which deceived or confused the public. He
cites Emerald Garment Manufacturing Corporation vs. Court of Appeals, G.R. No. 100098, 251
SCRA 600 (1995), as authority. He disagreed with the Court of Appeals that there were
confusing similarities between Levis and Europress arcuate designs, despite the trial courts
observation of differences in them. Petitioner maintains that although the backpocket designs
had similarities, the public was not confused because Levis jeans had other marks not found in
Europress jeans. Further, he says Levis long history and popularity made its trademark easily
identifiable by the public.
In its comment, private respondents aver that the Court of Appeals did not err in ruling that
there was infringement in this case. The backpocket design of Europress jeans, a double arc
intersecting in the middle was the same as Levis mark, also a double arc intersecting at the
center. Although the trial court found differences in the two designs, these differences were not
noticeable. Further, private respondents said, infringement of trademark did not require exact
similarity. Colorable imitation enough to cause confusion among the public, was sufficient for a
trademark to be infringed. Private respondents explained that in a market research they
conducted with 600 respondents, the result showed that the public was confused by Europress
trademark vis the Levis trademark.
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 We find that the first issue raised by petitioner is factual. The basic rule is that factual
questions are beyond the province of this Court in a petition for review. Although there are
exceptions to this rule, this case is not one of them. [5] Hence, we find no reason to disturb the
findings of the Court of Appeals that Europress use of the arcuate design was an infringement of
the Levis design.
On the second issue, petitioner claims that private respondents did not show that he was
connected with CVSGIC, nor did they prove his specific acts of infringement to make him liable
for damages. Again, this is a factual matter and factual findings of the trial court, concurred in
by the Court of Appeals, are final and binding on this Court. [6] Both the courts below found that
petitioner had a copyright over Europress arcuate design and that he consented to the use of said
design by CVSGIC. We are bound by this finding, especially in the absence of a showing that it
was tainted with arbitrariness or palpable error.[7] It must be stressed that it was immaterial
whether or not petitioner was connected with CVSGIC. What is relevant is that petitioner had a
copyright over the design and that he allowed the use of the same by CVSGIC.
Petitioner also contends that the Court of Appeals erred when it said that he had the burden
to prove that he was not connected with CVSGIC and that he did not authorize anyone to use his
copyrighted design. According to petitioner, these are important elements of private respondents
cause of action against him, hence, private respondents had the ultimate burden of proof.
Pertinent is Section 1, Rule 131 of the Rules of Court[8] which provides that the burden of
proof is the duty of a party to prove the truth of his claim or defense, or any fact in issue by the
amount of evidence required by law. In civil cases, the burden of proof may be on either the
plaintiff or the defendant. It is on the latter, if in his answer he alleges an affirmative defense,
which is not a denial of an essential ingredient in the plaintiffs cause of action, but is one which,
if established, will be a good defense i.e., an avoidance of the claim, which prima facie, the
plaintiff already has because of the defendants own admissions in the pleadings. [9]
Petitioners defense in this case was an affirmative defense. He did not deny that private
respondents owned the arcuate trademark nor that CVSGIC used on its products a similar
arcuate design. What he averred was that although he owned the copyright on the Europress
arcuate design, he did not allow CVSGIC to use it. He also said he was not connected with
CVSGIC. These were not alleged by private respondents in their pleadings, and petitioner
therefore had the burden to prove these.
Lastly, are private respondents entitled to nominal, temperate and exemplary damages and
cancellation of petitioners copyright?
Petitioner insists that he had not infringed on the arcuate trademark, hence, there was no
basis for nominal and temperate damages. Also, an award of nominal damages precludes an
award of temperate damages. He cites Ventanilla vs. Centeno, G.R. No. L-14333, 1 SCRA 215
(1961) on this. Thus, he contends, assuming arguendo that there was infringement, the Court of
Appeals still erred in awarding both nominal and temperate damages.
Petitioner likewise said that the grant of exemplary damages was inconsistent with the trial
courts finding that the design of Europress jeans was not similar to Levis design and that no
pecuniary loss was suffered by respondents to entitle them to such damages.
Lastly, petitioner maintains that as Europress arcuate design is not a copy of that of Levis,
citing the trial courts findings that although there are similarities, there are also differences in the
two designs, cancellation of his copyright was not justified.
120
 On this matter, private respondents assert that the lower courts found that there was
infringement and Levis was entitled to damages based on Sections 22 and 23 of RA No. 166
otherwise known as the Trade Mark Law,[10] as amended, which was the law then
governing. Said sections define infringement and prescribe the remedies therefor. Further,
private respondents aver it was misleading for petitioner to claim that the trial court ruled that
private respondents did not suffer pecuniary loss, suggesting that the award of damages was
improper. According to the private respondents, the trial court did not make any such ruling. It
simply stated that there was no evidence that Levis had suffered decline in its sales because of
the use of the arcuate design by Europress jeans. They offer that while there may be no direct
proof that they suffered a decline in sales, damages may still be measured based on a reasonable
percentage of the gross sales of the respondents, pursuant to Section 23 of the Trademark law. [11]
Finally, regarding the cancellation of petitioners copyright, private respondents deny that the
trial court ruled that the arcuate design of Europress jeans was not the same as Levis arcuate
design jeans. On the contrary, the trial court expressly ruled that there was similarity. The
cancellation of petitioners copyright was justified because petitioners copyright can not prevail
over respondents registration in the Principal Register of Bureau of Patents, Trademarks, and
Technology Transfer. According to private respondents, the essence of copyright registration is
originality and a copied design is inherently non-copyrightable. They insist that registration does
not confer originality upon a copycat version of a prior design.
From the foregoing discussion, it is clear that the matters raised by petitioner in relation to
the last issue are purely factual, except the matter of nominal and temperate damages.Petitioner
claims that damages are not due private respondents and his copyright should not be cancelled
because he had not infringed on Levis trademark. Both the trial court and the Court of Appeals
found there was infringement. Thus, the award of damages and cancellation of petitioners
copyright are appropriate.[12] Award of damages is clearly provided in Section 23,[13] while
cancellation of petitioners copyright finds basis on the fact that the design was a mere copy of
that of private respondents trademark. To be entitled to copyright, the thing being copyrighted
must be original, created by the author through his own skill, labor and judgment, without
directly copying or evasively imitating the work of another.[14]
However, we agree with petitioner that it was error for the Court of Appeals to affirm the
award of nominal damages combined with temperate damages[15] by the Regional Trial Court of
Makati. What respondents are entitled to is an award for temperate damages, not nominal
damages. For although the exact amount of damage or loss can not be determined with
reasonable certainty, the fact that there was infringement means they suffered losses for which
they are entitled to moderate damages.[16] We find that the award of P50,000.00 as temperate
damages fair and reasonable, considering the circumstances herein as well as the global
coverage and reputation of private respondents Levi Strauss & Company and Levi Strauss
(Phil.), Inc.
WHEREFORE, the decision dated January 30, 1998, of the Court of Appeals, in CA-G.R.
CV No. 51553 AFFIRMING the judgment of the Regional Trial Court of Makati, Branch 66,
dated July 14, 1995, is hereby MODIFIED so that nominal damages are deleted but the amount
of P50,000 is hereby awarded only as TEMPERATE DAMAGES. In all other respects, said
judgment is hereby AFFIRMED, to wit:
a) the writ of preliminary injunction is made permanent;

121
b) the defendants CVS Garment and Industrial Company and Venancio Sambar are ordered also to pay the
plaintiffs jointly and solidarily the sum of P10,000.00 as exemplary damages, and the sum of P25,000.00
as attorneys fees and litigation expenses, and to pay the costs; and
c) the Director of the National Library is ordered to cancel the Copyright Registration No. 1-1998 issued in
the name of Venancio Sambar.

SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

122