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G.R. No.

148222 August 15, 2003

In the instant petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Pearl & Dean (Phil.) Inc.
(P & D) assails the May 22, 2001 decision1 of the Court of Appeals reversing the October 31, 1996 decision 2 of the
Regional Trial Court of Makati, Branch 133, in Civil Case No. 92-516 which declared private respondents Shoemart Inc.
(SMI) and North Edsa Marketing Inc. (NEMI) liable for infringement of trademark and copyright, and unfair competition.


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

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

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

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

Two years later, Metro Industrial Services, the company formerly contracted by Pearl and Dean to fabricate its display
units, offered to construct light boxes for Shoemart’s chain of stores. SMI approved the proposal and ten (10) light
boxes were subsequently fabricated by Metro Industrial for SMI. After its contract with Metro Industrial was terminated,
SMI engaged the services of EYD Rainbow Advertising Corporation to make the light boxes. Some 300 units were
fabricated in 1991. These were delivered on a staggered basis and installed at SM Megamall and SM City.
Sometime in 1989, Pearl and Dean, received reports that exact copies of its light boxes were installed at SM City and
in the fastfood section of SM Cubao. Upon investigation, Pearl and Dean found out that aside from the two (2) reported
SM branches, light boxes similar to those it manufactures were also installed in two (2) other SM stores. It further
discovered that defendant-appellant North Edsa Marketing Inc. (NEMI), through its marketing arm, Prime Spots
Marketing Services, was set up primarily to sell advertising space in lighted display units located in SMI’s different
branches. Pearl and Dean noted that NEMI is a sister company of SMI.

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

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

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

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

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

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

(1) to pay plaintiff the following damages:

(a) actual damages - ₱16,600,000.00, representing profits derived by defendants as a result of infringement of plaintiff’s
copyright from 1991 to 1992
(b) moral damages - ₱1,000.000.00
(c) exemplary damages - ₱1,000,000.00
(d) attorney’s fees - ₱1,000,000.00

(e) costs of suit;

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

(3) to deliver, under oath, to the National Library, all filler-posters using the trademark "Poster Ads", for destruction;

(4) to permanently refrain from infringing the copyright on plaintiff’s light boxes and its trademark "Poster Ads".

Defendants’ counterclaims are hereby ordered dismissed for lack of merit.


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

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

42. When a drawing is technical and depicts a utilitarian object, a copyright over the drawings like plaintiff-appellant’s
will not extend to the actual object. It has so been held under jurisprudence, of which the leading case is Baker vs.
Selden (101 U.S. 841 (1879). In that case, Selden had obtained a copyright protection for a book entitled "Selden’s
Condensed Ledger or Bookkeeping Simplified" which purported to explain a new system of bookkeeping. Included as
part of the book were blank forms and illustrations consisting of ruled lines and headings, specially designed for use
in connection with the system explained in the work. These forms showed the entire operation of a day or a week or
a month on a single page, or on two pages following each other. The defendant Baker then produced forms which
were similar to the forms illustrated in Selden’s copyrighted books. The Court held that exclusivity to the actual forms
is not extended by a copyright. The reason was that "to grant a monopoly in the underlying art when no examination
of its novelty has ever been made would be a surprise and a fraud upon the public; that is the province of letters
patent, not of copyright." And that is precisely the point. No doubt aware that its alleged original design would never
pass the rigorous examination of a patent application, plaintiff-appellant fought to foist a fraudulent monopoly on the
public by conveniently resorting to a copyright registration which merely employs a recordal system without the benefit
of an in-depth examination of novelty.
The principle in Baker vs. Selden was likewise applied in Muller vs. Triborough Bridge Authority [43 F. Supp. 298 (S.D.N.Y.
1942)]. In this case, Muller had obtained a copyright over an unpublished drawing entitled "Bridge Approach – the
drawing showed a novel bridge approach to unsnarl traffic congestion". The defendant constructed a bridge approach
which was alleged to be an infringement of the new design illustrated in plaintiff’s drawings. In this case it was held
that protection of the drawing does not extend to the unauthorized duplication of the object drawn because copyright
extends only to the description or expression of the object and not to the object itself. It does not prevent one from
using the drawings to construct the object portrayed in the drawing.

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

In fine, we cannot find SMI liable for infringing Pearl and Dean’s copyright over the technical drawings of the latter’s
advertising display units.

xxx xxx xxx

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

SEC. 20. Certification of registration prima facie evidence of validity .- A certificate of registration of a mark or trade-
name shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark or trade-
name, and of the registrant’s exclusive right to use the same in connection with the goods, business or services specified
in the certificate, subject to any conditions and limitations stated therein." (underscoring supplied)

The records show that on June 20, 1983, Pearl and Dean applied for the registration of the trademark "Poster Ads"
with the Bureau of Patents, Trademarks, and Technology Transfer. Said trademark was recorded in the Principal Register
on September 12, 1988 under Registration No. 41165 covering the following products: stationeries such as letterheads,
envelopes and calling cards and newsletters.

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

Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation
may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may
conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus
registration is not contemplated by our Trademark Law.
While we do not discount the striking similarity between Pearl and Dean’s registered trademark and defendants-
appellants’ "Poster Ads" design, as well as the parallel use by which said words were used in the parties’ respective
advertising copies, we cannot find defendants-appellants liable for infringement of trademark. "Poster Ads" was
registered by Pearl and Dean for specific use in its stationeries, in contrast to defendants-appellants who used the
same words in their advertising display units. Why Pearl and Dean limited the use of its trademark to stationeries is
simply beyond us. But, having already done so, it must stand by the consequence of the registration which it had

xxx xxx xxx

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

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

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

xxx xxx xxx

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

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






In resolving this very interesting case, we are challenged once again to put into proper perspective four main concerns
of intellectual property law — patents, copyrights, trademarks and unfair competition arising from infringement of any
of the first three. We shall focus then on the following issues:
(1) if the engineering or technical drawings of an advertising display unit (light box) are granted copyright protection
(copyright certificate of registration) by the National Library, is the light box depicted in such engineering drawings
ipso facto also protected by such copyright?

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

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


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

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

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

xxx xxx xxx

(O) Prints, pictorial illustrations, advertising copies, labels, tags, and box wraps;
xxx xxx xxx
Although petitioner’s copyright certificate was entitled "Advertising Display Units" (which depicted the box-type
electrical devices), its claim of copyright infringement cannot be sustained.

Copyright, in the strict sense of the term, is purely a statutory right. Being a mere statutory grant, the rights are limited
to what the statute confers. It may be obtained and enjoyed only with respect to the subjects and by the persons, and
on terms and conditions specified in the statute.7 Accordingly, it can cover only the works falling within the statutory
enumeration or description.8

P & D secured its copyright under the classification class "O" work. This being so, petitioner’s copyright protection
extended only to the technical drawings and not to the light box itself because the latter was not at all in the category
of "prints, pictorial illustrations, advertising copies, labels, tags and box wraps." Stated otherwise, even as we find that
P & D indeed owned a valid copyright, the same could have referred only to the technical drawings within the category
of "pictorial illustrations." It could not have possibly stretched out to include the underlying light box. The strict
application9 of the law’s enumeration in Section 2 prevents us from giving petitioner even a little leeway, that is, even
if its copyright certificate was entitled "Advertising Display Units." What the law does not include, it excludes, and for
the good reason: the light box was not a literary or artistic piece which could be copyrighted under the copyright law.
And no less clearly, neither could the lack of statutory authority to make the light box copyrightable be remedied by
the simplistic act of entitling the copyright certificate issued by the National Library as "Advertising Display Units."

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

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

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


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

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

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

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

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

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

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

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

There is no such scrutiny in the case of copyrights nor any notice published before its grant to the effect that a person
is claiming the creation of a work. The law confers the copyright from the moment of creation 20 and the copyright
certificate is issued upon registration with the National Library of a sworn ex-parte claim of creation.

Therefore, not having gone through the arduous examination for patents, the petitioner cannot exclude others from
the manufacture, sale or commercial use of the light boxes on the sole basis of its copyright certificate over the
technical drawings.
Stated otherwise, what petitioner seeks is exclusivity without any opportunity for the patent office (IPO) to scrutinize
the light box’s eligibility as a patentable invention. The irony here is that, had petitioner secured a patent instead, its
exclusivity would have been for 17 years only. But through the simplified procedure of copyright-registration with the
National Library — without undergoing the rigor of defending the patentability of its invention before the IPO and the
public — the petitioner would be protected for 50 years. This situation could not have been the intention of the law.

In the oft-cited case of Baker vs. Selden21 , the United States Supreme Court held that only the expression of an idea
is protected by copyright, not the idea itself. In that case, the plaintiff held the copyright of a book which expounded
on a new accounting system he had developed. The publication illustrated blank forms of ledgers utilized in such a
system. The defendant reproduced forms similar to those illustrated in the plaintiff’s copyrighted book. The US Supreme
Court ruled that:

"There is no doubt that a work on the subject of book-keeping, though only explanatory of well known systems, may
be the subject of a copyright; but, then, it is claimed only as a book. x x x. But there is a clear distinction between the
books, as such, and the art, which it is, intended to illustrate. The mere statement of the proposition is so evident that
it requires hardly any argument to support it. The same distinction may be predicated of every other art as well as that
of bookkeeping. A treatise on the composition and use of medicines, be they old or new; on the construction and use
of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or on the mode
of drawing lines to produce the effect of perspective, would be the subject of copyright; but no one would contend
that the copyright of the treatise would give the exclusive right to the art or manufacture described therein. The
copyright of the book, if not pirated from other works, would be valid without regard to the novelty or want of novelty
of its subject matter. The novelty of the art or thing described or explained has nothing to do with the validity of the
copyright. To give to the author of the book an exclusive property in the art described therein, when no
examination of its novelty has ever been officially made, would be a surprise and a fraud upon the public. That
is the province of letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture
must be subjected to the examination of the Patent Office before an exclusive right therein can be obtained; and
a patent from the government can only secure it.

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

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

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

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


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

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

Assuming arguendo that "Poster Ads" could validly qualify as a trademark, the failure of P & D to secure a trademark
registration for specific use on the light boxes meant that there could not have been any trademark infringement since
registration was an essential element thereof.1âwphi1


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

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

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

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

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

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

G.R. No. 115758 March 19, 2002

ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, petitioner, vs. HON.
CHAY, respondents.


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

The facts of the case are as follows:

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

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

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

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

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


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

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.


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

The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents in
contempt of court for publishing advertisements notifying the public of the promulgation of the assailed decision of
the appellate court and stating that genuine Chin Chun Su products could be obtained only from Summerville General
Merchandising and Co.
In the meantime, the trial court went on to hear petitioner's complaint for final injunction and damages. On October
22, 1993, the trial court rendered a 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 attorney's fees. The petitioner
duly appealed the said decision to the Court of Appeals.

On June 3, 1994, the Court of Appeals promulgated a Resolution 8 denying the petitioner's motions for reconsideration
and for contempt of court in CA-G.R. SP No. 27803.

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


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

We rule in favor of the respondents.

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

In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the ground that she is
entitled to the use of the trademark on Chin Chun Su and its container based on her copyright and patent over the
same. We first find it appropriate to rule on whether the copyright and patent over the name and container of a beauty
cream product would entitle the registrant to the use and ownership over the same to the exclusion of others.

Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one
another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of
an enterprise and shall include a stamped or marked container of goods. 12 In relation thereto, a trade name means the
name or designation identifying or distinguishing an enterprise.13 Meanwhile, the scope of a copyright is confined to
literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the
moment of their creation.14 Patentable inventions, on the other hand, refer to any technical solution of a problem in
any field of human activity which is new, involves an inventive step and is industrially applicable.15

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

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

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

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

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

The petitioner likewise contends that the appellate court unduly delayed the resolution of her motion for
reconsideration. But we find that petitioner contributed to this delay when she filed successive contentious motions in
the same proceeding, the last of which was on October 27, 1993, necessitating counter-manifestations from private
respondents with the last one being filed on November 9, 1993. Nonetheless, it is well-settled that non-observance of
the period for deciding cases or their incidents does not render such judgments ineffective or void. 17With respect to
the purported damages she suffered due to the alleged delay in resolving her motion for reconsideration, we find that
the said issue has likewise been rendered moot and academic by our ruling that she has no right over the trademark
and, consequently, to the issuance of a writ of preliminary injunction.1âwphi1.nêt

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

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 24, 1993 and
June 3, 1994, respectively, are hereby AFFIRMED. With costs against the petitioner. SO ORDERED.
G.R. No. 172835 December 13, 2007

Petitioner Air Philippines Corporation seeks, via the instant Petition for Review under Rule 45 of the Rules of Court, the
nullification of the 16 February 2006 Decision 1 and the 25 May 2006 Resolution2 of the Court of Appeals in CA-G.R. SP
No. 86329, which affirmed the Order3 dated 30 June 2004 of the Regional Trial Court (RTC), Makati City, Branch 64, in
Civil Case No. 00-561.

Petitioner Air Philippines Corporation is a domestic corporation engaged in the business of air transportation services.
On the other hand, respondent Pennswell, Inc. was organized to engage in the business of manufacturing and selling
industrial chemicals, solvents, and special lubricants.

On various dates, respondent delivered and sold to petitioner sundry goods in trade, covered by Sales Invoices No.
8846,4 9105,5 8962,6 and 8963,7 which correspond to Purchase Orders No. 6433, 6684, 6634 and 6633, respectively.
Under the contracts, petitioner’s total outstanding obligation amounted to ₱449,864.98 with interest at 14% per annum
until the amount would be fully paid. For failure of the petitioner to comply with its obligation under said contracts,
respondent filed a Complaint8 for a Sum of Money on 28 April 2000 with the RTC.

In its Answer,9 petitioner contended that its refusal to pay was not without valid and justifiable reasons. In particular,
petitioner alleged that it was defrauded in the amount of ₱592,000.00 by respondent for its previous sale of four items,
covered by Purchase Order No. 6626. Said items were misrepresented by respondent as belonging to a new line, but
were in truth and in fact, identical with products petitioner had previously purchased from respondent. Petitioner
asserted that it was deceived by respondent which merely altered the names and labels of such goods. Petitioner
specifically identified the items in question, as follows:

Label/Description Item No. Amount P.O. Date

1. a. Anti-Friction Fluid MPL-800 153,941.40 5714 05/20/99

b. Excellent Rust Corrosion (fake) MPL-008 155,496.00 5888 06/20/99

2. a. Contact Grease COG #2 115,236.00 5540 04/26/99

b. Connector Grease (fake) CG 230,519.52 6327 08/05/99

3. a. Trixohtropic Grease EPC 81,876.96 4582 01/29/99

b. Di-Electric Strength Protective EPC#2 81,876.96 5446 04/21/99
Coating (fake)

4. a. Dry Lubricant ASC-EP 87,346.52 5712 05/20/99

b. Anti-Seize Compound (fake) ASC-EP 124,108.10 4763 & 02/16/99 &
2000 5890 06/24/99
According to petitioner, respondent’s products, namely Excellent Rust Corrosion, Connector Grease, Electric Strength
Protective Coating, and Anti-Seize Compound, are identical with its Anti-Friction Fluid, Contact Grease, Thixohtropic
Grease, and Dry Lubricant, respectively. Petitioner asseverated that had respondent been forthright about the identical
character of the products, it would not have purchased the items complained of. Moreover, petitioner alleged that
when the purported fraud was discovered, a conference was held between petitioner and respondent on 13 January
2000, whereby the parties agreed that respondent would return to petitioner the amount it previously paid. However,
petitioner was surprised when it received a letter from the respondent, demanding payment of the amount of
₱449,864.94, which later became the subject of respondent’s Complaint for Collection of a Sum of Money against

During the pendency of the trial, petitioner filed a Motion to Compel 10 respondent to give a detailed list of the
ingredients and chemical components of the following products, to wit: (a) Contact Grease and Connector Grease; (b)
Thixohtropic Grease and Di-Electric Strength Protective Coating; and (c) Dry Lubricant and Anti-Seize Compound.11 It
appears that petitioner had earlier requested the Philippine Institute of Pure and Applied Chemistry (PIPAC) for the
latter to conduct a comparison of respondent’s goods.

On 15 March 2004, the RTC rendered an Order granting the petitioner’s motion. It disposed, thus:

The Court directs [herein respondent] Pennswell, Inc. to give [herein petitioner] Air Philippines Corporation[,] a detailed
list of the ingredients or chemical components of the following chemical products:

a. Contact Grease to be compared with Connector Grease;

b. Thixohtropic Grease to be compared with Di-Electric Strength Protective Coating; and

c. Dry Lubricant to be compared with Anti-Seize Compound[.]

[Respondent] Pennswell, Inc. is given fifteen (15) days from receipt of this Order to submit to [petitioner] Air Philippines
Corporation the chemical components of all the above-mentioned products for chemical comparison/analysis.12

Respondent sought reconsideration of the foregoing Order, contending that it cannot be compelled to disclose the
chemical components sought because the matter is confidential. It argued that what petitioner endeavored to inquire
upon constituted a trade secret which respondent cannot be forced to divulge. Respondent maintained that its products
are specialized lubricants, and if their components were revealed, its business competitors may easily imitate and
market the same types of products, in violation of its proprietary rights and to its serious damage and prejudice.

The RTC gave credence to respondent’s reasoning, and reversed itself. It issued an Order dated 30 June 2004, finding
that the chemical components are respondent’s trade secrets and are privileged in character. A priori, it rationalized:

The Supreme Court held in the case of Chavez vs. Presidential Commission on Good Government, 299 SCRA 744, p.
764, that "the drafters of the Constitution also unequivocally affirmed that aside from national security matters and
intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws)
as well as banking transactions (pursuant to the Secrecy of Bank Deposit Act) are also exempted from compulsory
Trade secrets may not be the subject of compulsory disclosure. By reason of [their] confidential and privileged character,
ingredients or chemical components of the products ordered by this Court to be disclosed constitute trade secrets lest
[herein respondent] would eventually be exposed to unwarranted business competition with others who may imitate
and market the same kinds of products in violation of [respondent’s] proprietary rights. Being privileged, the detailed
list of ingredients or chemical components may not be the subject of mode of discovery under Rule 27, Section 1 of
the Rules of Court, which expressly makes privileged information an exception from its coverage. 13

Alleging grave abuse of discretion on the part of the RTC, petitioner filed a Petition for Certiorari under Rule 65 of the
Rules of Court with the Court of Appeals, which denied the Petition and affirmed the Order dated 30 June 2004 of the

The Court of Appeals ruled that to compel respondent to reveal in detail the list of ingredients of its lubricants is to
disregard respondent’s rights over its trade secrets. It was categorical in declaring that the chemical formulation of
respondent’s products and their ingredients are embraced within the meaning of "trade secrets." In disallowing the
disclosure, the Court of Appeals expounded, thus:

The Supreme Court in Garcia v. Board of Investments (177 SCRA 374 [1989]) held that trade secrets and confidential,
commercial and financial information are exempt from public scrutiny. This is reiterated in Chavez v. Presidential
Commission on Good Government (299 SCRA 744 [1998]) where the Supreme Court enumerated the kinds of
information and transactions that are recognized as restrictions on or privileges against compulsory disclosure. There,
the Supreme Court explicitly stated that:

"The drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence
information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as
banking transactions (pursuant to the Secrecy of Bank Deposits Act) re also exempt from compulsory disclosure."

It is thus clear from the foregoing that a party cannot be compelled to produce, release or disclose documents, papers,
or any object which are considered trade secrets.

In the instant case, petitioner [Air Philippines Corporation] would have [respondent] Pennswell produce a detailed list
of ingredients or composition of the latter’s lubricant products so that a chemical comparison and analysis thereof can
be obtained. On this note, We believe and so hold that the ingredients or composition of [respondent] Pennswell’s
lubricants are trade secrets which it cannot be compelled to disclose.

[Respondent] Pennswell has a proprietary or economic right over the ingredients or components of its lubricant
products. The formulation thereof is not known to the general public and is peculiar only to [respondent] Pennswell.
The legitimate and economic interests of business enterprises in protecting their manufacturing and business secrets
are well-recognized in our system.

[Respondent] Pennswell has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other
confidential programs and information against the public. Otherwise, such information can be illegally and unfairly
utilized by business competitors who, through their access to [respondent] Pennswell’s business secrets, may use the
same for their own private gain and to the irreparable prejudice of the latter.

In the case before Us, the alleged trade secrets have a factual basis, i.e., it comprises of the ingredients and formulation
of [respondent] Pennswell’s lubricant products which are unknown to the public and peculiar only to Pennswell.

All told, We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public
respondent Judge in finding that the detailed list of ingredients or composition of the subject lubricant products which
petitioner [Air Philippines Corporation] seeks to be disclosed are trade secrets of [respondent] Pennswell; hence,
privileged against compulsory disclosure.14

Petitioner’s Motion for Reconsideration was denied.

Unyielding, petitioner brought the instant Petition before us, on the sole issue of:


Petitioner seeks to convince this Court that it has a right to obtain the chemical composition and ingredients of
respondent’s products to conduct a comparative analysis of its products. Petitioner assails the conclusion reached by
the Court of Appeals that the matters are trade secrets which are protected by law and beyond public scrutiny. Relying
on Section 1, Rule 27 of the Rules of Court, petitioner argues that the use of modes of discovery operates with desirable
flexibility under the discretionary control of the trial court. Furthermore, petitioner posits that its request is not done
in bad faith or in any manner as to annoy, embarrass, or oppress respondent.

A trade secret is defined as a plan or process, tool, mechanism or compound known only to its owner and those of
his employees to whom it is necessary to confide it. 16 The definition also extends to a secret formula or process not
patented, but known only to certain individuals using it in compounding some article of trade having a commercial
value.17 A trade secret may consist of any formula, pattern, device, or compilation of information that: (1) is used in
one's business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess
the information.18 Generally, a trade secret is a process or device intended for continuous use in the operation of the
business, for example, a machine or formula, but can be a price list or catalogue or specialized customer list.19 It is
indubitable that trade secrets constitute proprietary rights. The inventor, discoverer, or possessor of a trade secret or
similar innovation has rights therein which may be treated as property, and ordinarily an injunction will be granted to
prevent the disclosure of the trade secret by one who obtained the information "in confidence" or through a
"confidential relationship."20 American jurisprudence has utilized the following factors 21 to determine if an information
is a trade secret, to wit:

(1) the extent to which the information is known outside of the employer's business;

(2) the extent to which the information is known by employees and others involved in the business;

(3) the extent of measures taken by the employer to guard the secrecy of the information;
(4) the value of the information to the employer and to competitors;

(5) the amount of effort or money expended by the company in developing the information; and

(6) the extent to which the information could be easily or readily obtained through an independent source. 22

In Cocoland Development Corporation v. National Labor Relations Commission,23 the issue was the legality of an
employee’s termination on the ground of unauthorized disclosure of trade secrets. The Court laid down the rule that
any determination by management as to the confidential nature of technologies, processes, formulae or other so-called
trade secrets must have a substantial factual basis which can pass judicial scrutiny. The Court rejected the employer’s
naked contention that its own determination as to what constitutes a trade secret should be binding and conclusive
upon the NLRC. As a caveat, the Court said that to rule otherwise would be to permit an employer to label almost
anything a trade secret, and thereby create a weapon with which he/it may arbitrarily dismiss an employee on the
pretext that the latter somehow disclosed a trade secret, even if in fact there be none at all to speak of. 24 Hence, in
Cocoland, the parameters in the determination of trade secrets were set to be such substantial factual basis that can
withstand judicial scrutiny.

The chemical composition, formulation, and ingredients of respondent’s special lubricants are trade secrets within the
contemplation of the law. Respondent was established to engage in the business of general manufacturing and selling
of, and to deal in, distribute, sell or otherwise dispose of goods, wares, merchandise, products, including but not limited
to industrial chemicals, solvents, lubricants, acids, alkalies, salts, paints, oils, varnishes, colors, pigments and similar
preparations, among others. It is unmistakable to our minds that the manufacture and production of respondent’s
products proceed from a formulation of a secret list of ingredients. In the creation of its lubricants, respondent
expended efforts, skills, research, and resources. What it had achieved by virtue of its investments may not be wrested
from respondent on the mere pretext that it is necessary for petitioner’s defense against a collection for a sum of
money. By and large, the value of the information to respondent is crystal clear. The ingredients constitute the very
fabric of respondent’s production and business. No doubt, the information is also valuable to respondent’s competitors.
To compel its disclosure is to cripple respondent’s business, and to place it at an undue disadvantage. If the chemical
composition of respondent’s lubricants are opened to public scrutiny, it will stand to lose the backbone on which its
business is founded. This would result in nothing less than the probable demise of respondent’s business. Respondent’s
proprietary interest over the ingredients which it had developed and expended money and effort on is incontrovertible.
Our conclusion is that the detailed ingredients sought to be revealed have a commercial value to respondent. Not only
do we acknowledge the fact that the information grants it a competitive advantage; we also find that there is clearly a
glaring intent on the part of respondent to keep the information confidential and not available to the prying public.

We now take a look at Section 1, Rule 27 of the Rules of Court, which permits parties to inspect documents or things
upon a showing of good cause before the court in which an action is pending. Its entire provision reads:

SECTION 1. Motion for production or inspection order. – Upon motion of any party showing good cause therefore, the
court in which an action is pending may (a) order any party to produce and permit the inspection and copying or
photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters,
photographs, objects or tangible things, not privileged, which constitute or contain evidence material to any matter
involved in the action and which are in his possession, custody or control; or (b) order any party to permit entry upon
designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or
photographing the property or any designated relevant object or operation thereon. The order shall specify the time,
place and manner of making the inspection and taking copies and photographs, and may prescribe such terms and
conditions as are just.

A more than cursory glance at the above text would show that the production or inspection of documents or things
as a mode of discovery sanctioned by the Rules of Court may be availed of by any party upon a showing of good
cause therefor before the court in which an action is pending. The court may order any party: a) to produce and permit
the inspection and copying or photographing of any designated documents, papers, books, accounts, letters,
photographs, objects or tangible things, which are not privileged;25 which constitute or contain evidence material to
any matter involved in the action; and which are in his possession, custody or control; or b) to permit entry upon
designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or
photographing the property or any designated relevant object or operation thereon.

Rule 27 sets an unequivocal proviso that the documents, papers, books, accounts, letters, photographs, objects or
tangible things that may be produced and inspected should not be privileged. 26 The documents must not be privileged
against disclosure.27 On the ground of public policy, the rules providing for production and inspection of books and
papers do not authorize the production or inspection of privileged matter; that is, books and papers which, because
of their confidential and privileged character, could not be received in evidence. 28 Such a condition is in addition to
the requisite that the items be specifically described, and must constitute or contain evidence material to any matter
involved in the action and which are in the party’s possession, custody or control.

Section 2429 of Rule 130 draws the types of disqualification by reason of privileged communication, to wit: (a)
communication between husband and wife; (b) communication between attorney and client; (c) communication
between physician and patient; (d) communication between priest and penitent; and (e) public officers and public
interest. There are, however, other privileged matters that are not mentioned by Rule 130. Among them are the
following: (a) editors may not be compelled to disclose the source of published news; (b) voters may not be compelled
to disclose for whom they voted; (c) trade secrets; (d) information contained in tax census returns; and (d) bank
deposits. 30

We, thus, rule against the petitioner. We affirm the ruling of the Court of Appeals which upheld the finding of the RTC
that there is substantial basis for respondent to seek protection of the law for its proprietary rights over the detailed
chemical composition of its products.

That trade secrets are of a privileged nature is beyond quibble. The protection that this jurisdiction affords to trade
secrets is evident in our laws. The Interim Rules of Procedure on Government Rehabilitation, effective 15 December
2000, which applies to: (1) petitions for rehabilitation filed by corporations, partnerships, and associations pursuant to
Presidential Decree No. 902-A,31 as amended; and (2) cases for rehabilitation transferred from the Securities and
Exchange Commission to the RTCs pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation
Code, expressly provides that the court may issue an order to protect trade secrets or other confidential research,
development, or commercial information belonging to the debtor.32 Moreover, the Securities Regulation Code is explicit
that the Securities and Exchange Commission is not required or authorized to require the revelation of trade secrets
or processes in any application, report or document filed with the Commission. 33 This confidentiality is made paramount
as a limitation to the right of any member of the general public, upon request, to have access to all information filed
with the Commission.34

Furthermore, the Revised Penal Code endows a cloak of protection to trade secrets under the following articles:

Art. 291. Revealing secrets with abuse of office. — The penalty of arresto mayor and a fine not exceeding 500 pesos
shall be imposed upon any manager, employee or servant who, in such capacity, shall learn the secrets of his principal
or master and shall reveal such secrets.

Art. 292. Revelation of industrial secrets. — The penalty of prision correccional in its minimum and medium periods
and a fine not exceeding 500 pesos shall be imposed upon the person in charge, employee or workman of any
manufacturing or industrial establishment who, to the prejudice of the owner thereof, shall reveal the secrets of the
industry of
the latter.

Similarly, Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, has a restrictive
provision on trade secrets, penalizing the revelation thereof by internal revenue officers or employees, to wit:

SECTION 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person who causes or procures an officer or
employee of the Bureau of Internal Revenue to divulge any confidential information regarding the business, income or
inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, and which
it is unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not provided by law,
any income, profit, loss or expenditure appearing in any income tax return, shall be punished by a fine of not more
than two thousand pesos (₱2,000), or suffer imprisonment of not less than six (6) months nor more than five (5) years,
or both.

Republic Act No. 6969, or the Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990, enacted to
implement the policy of the state to regulate, restrict or prohibit the importation, manufacture, processing, sale,
distribution, use and disposal of chemical substances and mixtures that present unreasonable risk and/or injury to
health or the environment, also contains a provision that limits the right of the public to have access to records,
reports or information concerning chemical substances and mixtures including safety data submitted and data
on emission or discharge into the environment, if the matter is confidential such that it would divulge trade
secrets, production or sales figures; or methods, production or processes unique to such manufacturer, processor
or distributor; or would otherwise tend to affect adversely the competitive position of such manufacturer,
processor or distributor.35

Clearly, in accordance with our statutory laws, this Court has declared that intellectual and industrial property rights
cases are not simple property cases.36 Without limiting such industrial property rights to trademarks and trade names,
this Court has ruled that all agreements concerning intellectual property are intimately connected with economic
development.37 The protection of industrial property encourages investments in new ideas and inventions and
stimulates creative efforts for the satisfaction of human needs. It speeds up transfer of technology and industrialization,
and thereby bring about social and economic progress.38 Verily, the protection of industrial secrets is inextricably linked
to the advancement of our economy and fosters healthy competition in trade.

Jurisprudence has consistently acknowledged the private character of trade secrets.1âwphi1 There is a privilege not to
disclose one’s trade secrets.39 Foremost, this Court has declared that trade secrets and banking transactions are among
the recognized restrictions to the right of the people to information as embodied in the Constitution. 40 We said that
the drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence
information, trade or industrial secrets (pursuant to the Intellectual Property Code and other related laws) as well as
banking transactions (pursuant to the Secrecy of Bank Deposits Act), are also exempted from compulsory disclosure. 41

Significantly, our cases on labor are replete with examples of a protectionist stance towards the trade secrets of
employers. For instance, this Court upheld the validity of the policy of a pharmaceutical company prohibiting its
employees from marrying employees of any competitor company, on the rationalization that the company has a right
to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and
information from competitors.42 Notably, it was in a labor-related case that this Court made a stark ruling on the proper
determination of trade secrets.

In the case at bar, petitioner cannot rely on Section 7743 of Republic Act 7394, or the Consumer Act of the Philippines,
in order to compel respondent to reveal the chemical components of its products. While it is true that all consumer
products domestically sold, whether manufactured locally or imported, shall indicate their general make or active
ingredients in their respective labels of packaging, the law does not apply to respondent. Respondent’s specialized
lubricants -- namely, Contact Grease, Connector Grease, Thixohtropic Grease, Di-Electric Strength Protective Coating,
Dry Lubricant and Anti-Seize Compound -- are not consumer products. "Consumer products," as it is defined in Article
4(q),44 refers to goods, services and credits, debts or obligations which are primarily for personal, family, household or
agricultural purposes, which shall include, but not be limited to, food, drugs, cosmetics, and devices. This is not the
nature of respondent’s products. Its products are not intended for personal, family, household or agricultural purposes.
Rather, they are for industrial use, specifically for the use of aircraft propellers and engines.

Petitioner’s argument that Republic Act No. 8203, or the Special Law on Counterfeit Drugs, requires the disclosure of
the active ingredients of a drug is also on faulty ground. 45 Respondent’s products are outside the scope of the cited
law. They do not come within the purview of a drug 46 which, as defined therein, refers to any chemical compound or
biological substance, other than food, that is intended for use in the treatment, prevention or diagnosis of disease in
man or animals. Again, such are not the characteristics of respondent’s products.

What is clear from the factual findings of the RTC and the Court of Appeals is that the chemical formulation of
respondent’s products is not known to the general public and is unique only to it. Both courts uniformly ruled that
these ingredients are not within the knowledge of the public. Since such factual findings are generally not reviewable
by this Court, it is not duty-bound to analyze and weigh all over again the evidence already considered in the
proceedings below.47 We need not delve into the factual bases of such findings as questions of fact are beyond the
pale of Rule 45 of the Rules of Court. Factual findings of the trial court when affirmed by the Court of Appeals, are
binding and conclusive on the Supreme Court.48

We do not find merit or applicability in petitioner’s invocation of Section 12 49 of the Toxic Substances and Hazardous
and Nuclear Wastes Control Act of 1990, which grants the public access to records, reports or information concerning
chemical substances and mixtures, including safety data submitted, and data on emission or discharge into the
environment. To reiterate, Section 1250 of said Act deems as confidential matters, which may not be made public,
those that would divulge trade secrets, including production or sales figures or methods; production or processes
unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive
position of such manufacturer, processor or distributor. It is true that under the same Act, the Department of
Environment and Natural Resources may release information; however, the clear import of the law is that said authority
is limited by the right to confidentiality of the manufacturer, processor or distributor, which information may be released
only to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis
or treatment of a person exposed to the chemical substance or mixture. The right to confidentiality is recognized by
said Act as primordial. Petitioner has not made the slightest attempt to show that these circumstances are availing in
the case at bar.

Indeed, the privilege is not absolute; the trial court may compel disclosure where it is indispensable for doing
justice.51 We do not, however, find reason to except respondent’s trade secrets from the application of the rule on
privilege. The revelation of respondent’s trade secrets serves no better purpose to the disposition of the main case
pending with the RTC, which is on the collection of a sum of money. As can be gleaned from the facts, petitioner
received respondent’s goods in trade in the normal course of business. To be sure, there are defenses under the laws
of contracts and sales available to petitioner. On the other hand, the greater interest of justice ought to favor
respondent as the holder of trade secrets. If we were to weigh the conflicting interests between the parties, we rule in
favor of the greater interest of respondent. Trade secrets should receive greater protection from discovery, because
they derive economic value from being generally unknown and not readily ascertainable by the public. 52 To the mind
of this Court, petitioner was not able to show a compelling reason for us to lift the veil of confidentiality which shields
respondent’s trade secrets.

WHEREFORE, the Petition is DENIED. The Decision dated 16 February 2006, and the Resolution dated 25 May 2006,
of the Court of Appeals in CA-G.R. SP No. 86329 are AFFIRMED. No costs.