CATERPILLAR, INC.

v SAMSON

November 9, 2016 (BERSAMIN)

Caterpillar is a foreign corporation engaged in the manufacture and distribution of footwear, clothing and
related items, among other. Its products are known for six core trademarks namely, “CATERPILLAR”, “CAT”,
“CATERPILLAR AND DESGN”, etc., all of which are alleged as internationally known. On the other hand, Samson,
doing business under the names and styles of Itti Shoes Corporation, Kolm’s Manufacturing Corporation and
Caterpillar Boutique and General Merchandise, is the proprietor of various retail outlets in the Philippines selling
footwear, bags, clothing, and related items under the trademark “CATERPILLAR”, registered in ’97 under Trademark
Registration No. 64705 issued by the Intellectual Property Office (IPO).

July 26, 2000, upon application of the NB, the RTC Branch 56, in Makati City issued Search Warrants Nos.
00-022 to 00-032, inclusive, all for unfair competition, to search the establishments owned, controlled and operated
by Samson. The implementation of the search warrant on July 27, 2000 led to the seizure of various products bearing
Caterpillar’s Core Marks.

Caterpillar filed against Samson several criminal complaints for unfair competition in the DOJ.

Additionally, on July 31, 2000, Caterpillar commenced a civil action against Samson and his business entities,
with the IPO as nominal party – for Unfair Competition, Damages and Cancellation of Trademark with Application
for Temporary Restraining Order TRO) and/or Writ of Preliminary Injunction in the RTC, Quezon City Branch.

The issue to be resolved in these consolidated cases are: ISSUE whether or not the CA committed a
reversible error in ruling that the trial court a quo did not commit grave abuse of discretion in suspending the criminal
proceedings on account of a prejudicial question.

To begin with, the Civil Case No. Q-00-41446, the civil case filed by Caterpillar in the RTC in Quezon City,
was for unfair competition, damages and cancellation of trademark, while Criminal Cases Nos. Q-02-108043-44 were
the criminal prosecution of Samson for unfair competition. A common element of all such cases for unfair
competition- civil and criminal- was fraud. Under Article 33 of the CC, the injured party in cases of fraud may bring
a civil action entirely separate and distinct from the criminal action, and such civil action shall proceed independently
of the criminal prosecution. In view of its being an independent civil action, Civil Case No. Q-00-41446 did not operate
as a prejudicial question that justified the suspension of the proceedings in Criminal Cases Nos. Q-02-108043-44.

Secondly, a civil action for damages and cancellation of trademark cannot be considered a prejudicial
question by which to suspend the proceedings in the criminal cases for unfair competition. A prejudicial question is
that which arises in a civil case the resolution of which is a logical antecedent of the issues to be determined in the
criminal case. It must appear not only that the civil case involves facts upon which the criminal action is based, but
also that the resolution of the issues raised in the civil action will necessarily be determinative of the criminal case.

The elements of a prejudicial question are provide in Section 7 of Rule 111, Rules of Court, to wit: (a) a
previously instituted civil action involves an issue similar to or intimately related to the issue raised in the subsequent
criminal action, and (b) the resolution of such issue determines whether or not the criminal action may proceed.

An examination of the nature of the two kinds of cases involved is necessary to determine whether a
prejudicial question existed.

An action for the cancellation of trademark like Civil Case No. Q-00-41446 is a remedy available to a person
who believes that he is or will be damaged by the registration of a mark. On the other hand, the criminal actions for
unfair competition (Criminal Cases Nos. Q-02-108043-44) involved the determination of whether or not Samson had
given his goods the general appearance of the goods of Caterpillar, with the intent to deceive the public or defraud
Caterpillar as his competitor. In the suit for the cancellation of trademark, the issue of lawful registration should
necessarily be determined, but registration was not a consideration necessary in unfair competition. Indeed, unfair
competition is committed if the effect of the act is “to pass off to the public the goods of one man as the goods of
another”; it is independent of registration. As fittingly put in R.F. & ALEXANDER & Co. v. ANG, “one may be declared
unfair competitor even if his competing trademark is registered.”

Clearly, the determination of the lawful ownership of the trademark in the civil action was not
determinative of whether or not the criminal actions for unfair competition shall proceed against Samson.