DOCTRINE OF EQUIVALENTS

THIRD DIVISION

[G. R. No. 126627. August 14, 2003]

SMITH KLINE BECKMAN CORPORATION, petitioner, vs. THE HONORABLE COURT OF

APPEALS and TRYCO PHARMA CORPORATION, respondents.

DECISION

CARPIO-MORALES, J.:

Smith Kline Beckman Corporation (petitioner), a corporation existing by virtue of the laws of the
state of Pennsylvania, United States of America (U.S.) and licensed to do business in the
Philippines, filed on October 8, 1976, as assignee, before the Philippine Patent Office (now
Bureau of Patents, Trademarks and Technology Transfer) an application for patent over an
invention entitled Methods and Compositions for Producing Biphasic Parasiticide Activity Using
Methyl 5 Propylthio-2-Benzimidazole Carbamate. The application bore Serial No. 18989.

On September 24, 1981, Letters Patent No. 145611[1] for the aforesaid invention was issued to
petitioner for a term of seventeen (17) years.

The letters patent provides in its claims2[2] that the patented invention consisted of a new
compound named methyl 5 propylthio-2-benzimidazole carbamate and the methods or
compositions utilizing the compound as an active ingredient in fighting infections caused by
gastrointestinal parasites and lungworms in animals such as swine, sheep, cattle, goats, horses,
and even pet animals.

Tryco Pharma Corporation (private respondent) is a domestic corporation that manufactures,

distributes and sells veterinary products including Impregon, a drug that has Albendazole for its
active ingredient and is claimed to be effective against gastro-intestinal roundworms,
lungworms, tapeworms and fluke infestation in carabaos, cattle and goats.

Petitioner sued private respondent for infringement of patent and unfair competition before the
Caloocan City Regional Trial Court (RTC).3[3] It claimed that its patent covers or includes the
substance Albendazole such that private respondent, by manufacturing, selling, using, and
causing to be sold and used the drug Impregon without its authorization, infringed Claims 2, 3, 4,
7, 8 and 9 of Letters Patent No. 145614[4] as well as committed unfair competition under Article
189, paragraph 1 of the Revised Penal Code and Section 29 of Republic Act No. 166 (The
Trademark Law) for advertising and selling as its own the drug Impregon although the same
contained petitioners patented Albendazole.5[5]

On motion of petitioner, Branch 125 of the Caloocan RTC issued a temporary restraining order
against private respondent enjoining it from committing acts of patent infringement and unfair
competition.6[6] A writ of preliminary injunction was subsequently issued.7[7]

Private respondent in its Answer8[8] averred that Letters Patent No. 14561 does not cover the
substance Albendazole for nowhere in it does that word appear; that even if the patent were to
include Albendazole, such substance is unpatentable; that the Bureau of Food and Drugs allowed
it to manufacture and market Impregon with Albendazole as its known ingredient; that there is
no proof that it passed off in any way its veterinary products as those of petitioner; that Letters
Patent No. 14561 is null and void, the application for the issuance thereof having been filed
beyond the one year period from the filing of an application abroad for the same invention
covered thereby, in violation of Section 15 of Republic Act No. 165 (The Patent Law); and that
petitioner is not the registered patent holder.

Private respondent lodged a Counterclaim against petitioner for such amount of actual damages
as may be proven; P1,000,000.00 in moral damages; P300,000.00 in exemplary damages; and
P150,000.00 in attorneys fees.
Finding for private respondent, the trial court rendered a Decision dated July 23, 1991,9[9] the
dispositive portion of which reads:

WHEREFORE, in view of the foregoing, plaintiffs complaint should be, as it is hereby,

DISMISSED. The Writ of injunction issued in connection with the case is hereby ordered
DISSOLVED.

The Letters Patent No. 14561 issued by the then Philippine Patents Office is hereby declared null
and void for being in violation of Sections 7, 9 and 15 of the Patents Law.

Pursuant to Sec. 46 of the Patents Law, the Director of Bureau of Patents is hereby directed to
cancel Letters Patent No. 14561 issued to the plaintiff and to publish such cancellation in the
Official Gazette.

Defendant Tryco Pharmaceutical Corporation is hereby awarded P330,000.00 actual damages

and P100,000.00 attorneys fees as prayed for in its counterclaim but said amount awarded to
defendant is subject to the lien on correct payment of filing fees.

SO ORDERED. (Underscoring supplied)

On appeal, the Court of Appeals, by Decision of April 21, 1995,10[10] upheld the trial courts
finding that private respondent was not liable for any infringement of the patent of petitioner in
light of the latters failure to show that Albendazole is the same as the compound subject of
Letters Patent No. 14561. Noting petitioners admission of the issuance by the U.S. of a patent for
Albendazole in the name of Smith Kline and French Laboratories which was petitioners former
corporate name, the appellate court considered the U.S. patent as implying that Albendazole is
different from methyl 5 propylthio-2-benzimidazole carbamate. It likewise found that private
respondent was not guilty of deceiving the public by misrepresenting that Impregon is its
product.

The appellate court, however, declared that Letters Patent No. 14561 was not void as it sustained
petitioners explanation that Patent Application Serial No. 18989 which was filed on October 8,
1976 was a divisional application of Patent Application Serial No. 17280 filed on June 17, 1975
with the Philippine Patent Office, well within one year from petitioners filing on June 19, 1974
of its Foreign Application Priority Data No. 480,646 in the U.S. covering the same compound
subject of Patent Application Serial No. 17280.

Applying Section 17 of the Patent Law, the Court of Appeals thus ruled that Patent Application
Serial No. 18989 was deemed filed on June 17, 1995 or still within one year from the filing of a
patent application abroad in compliance with the one-year rule under Section 15 of the Patent
Law. And it rejected the submission that the compound in Letters Patent No. 14561 was not
patentable, citing the jurisprudentially established presumption that the Patent Offices
determination of patentability is correct. Finally, it ruled that petitioner established itself to be the
one and the same assignee of the patent notwithstanding changes in its corporate name. Thus the
appellate court disposed:

WHEREFORE, the judgment appealed from is AFFIRMED with the

MODIFICATION that the orders for the nullification of Letters Patent
No. 14561 and for its cancellation are deleted therefrom.

SO ORDERED.

Petitioners motion for reconsideration of the Court of Appeals decision having been denied11[11]
the present petition for review on certiorari12[12] was filed, assigning as errors the following:

I. THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT

ALBENDAZOLE, THE ACTIVE INGREDIENT IN TRYCOS IMPREGON DRUG, IS
INCLUDED IN PETITIONERS LETTERS PATENT NO. 14561, AND THAT
CONSEQUENTLY TRYCO IS ANSWERABLE FOR PATENT INFRINGEMENT.

II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING TO PRIVATE

RESPONDENT TRYCO PHARMA CORPORATION P330,000.00 ACTUAL DAMAGES
AND P100,000.00 ATTORNEYS FEES.

Petitioner argues that under the doctrine of equivalents for determining patent infringement,
Albendazole, the active ingredient it alleges was appropriated by private respondent for its drug
Impregon, is substantially the same as methyl 5 propylthio-2-benzimidazole carbamate covered
by its patent since both of them are meant to combat worm or parasite infestation in animals. It
cites the unrebutted testimony of its witness Dr. Godofredo C. Orinion (Dr. Orinion) that the
chemical formula in Letters Patent No. 14561 refers to the compound Albendazole. Petitioner
adds that the two substances substantially do the same function in substantially the same way to
achieve the same results, thereby making them truly identical. Petitioner thus submits that the
appellate court should have gone beyond the literal wordings used in Letters Patent No. 14561,
beyond merely applying the literal infringement test, for in spite of the fact that the word
Albendazole does not appear in petitioners letters patent, it has ably shown by evidence its
sameness with methyl 5 propylthio-2-benzimidazole carbamate.
Petitioner likewise points out that its application with the Philippine Patent Office on account of
which it was granted Letters Patent No. 14561 was merely a divisional application of a prior
application in the U. S. which granted a patent for Albendazole. Hence, petitioner concludes that
both methyl 5 propylthio-2-benzimidazole carbamate and the U.S.-patented Albendazole are
dependent on each other and mutually contribute to produce a single result, thereby making
Albendazole as much a part of Letters Patent No. 14561 as the other substance is.

Petitioner concedes in its Sur-Rejoinder13[13] that although methyl 5 propylthio-2-benzimidazole

carbamate is not identical with Albendazole, the former is an improvement or improved version
of the latter thereby making both substances still substantially the same.

With respect to the award of actual damages in favor of private respondent in the amount of
P330,000.00 representing lost profits, petitioner assails the same as highly speculative and
conjectural, hence, without basis. It assails too the award of P100,000.00 in attorneys fees as not
falling under any of the instances enumerated by law where recovery of attorneys fees is
allowed.

In its Comment,14[14] private respondent contends that application of the doctrine of equivalents
would not alter the outcome of the case, Albendazole and methyl 5 propylthio-2-benzimidazole
carbamate being two different compounds with different chemical and physical properties. It
stresses that the existence of a separate U.S. patent for Albendazole indicates that the same and
the compound in Letters Patent No. 14561 are different from each other; and that since it was on
account of a divisional application that the patent for methyl 5 propylthio-2-benzimidazole
carbamate was issued, then, by definition of a divisional application, such a compound is just one
of several independent inventions alongside Albendazole under petitioners original patent
application.

As has repeatedly been held, only questions of law may be raised in a petition for review on
certiorari before this Court. Unless the factual findings of the appellate court are mistaken,
absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to
the findings culled by the court of origin,15[15] this Court does not review them.

From an examination of the evidence on record, this Court finds nothing infirm in the appellate
courts conclusions with respect to the principal issue of whether private respondent committed
patent infringement to the prejudice of petitioner.
The burden of proof to substantiate a charge for patent infringement rests on the plaintiff.16[16] In
the case at bar, petitioners evidence consists primarily of its Letters Patent No. 14561, and the
testimony of Dr. Orinion, its general manager in the Philippines for its Animal Health Products
Division, by which it sought to show that its patent for the compound methyl 5 propylthio-2-
benzimidazole carbamate also covers the substance Albendazole.

From a reading of the 9 claims of Letters Patent No. 14561 in relation to the other portions
thereof, no mention is made of the compound Albendazole. All that the claims disclose are: the
covered invention, that is, the compound methyl 5 propylthio-2-benzimidazole carbamate; the
compounds being anthelmintic but nontoxic for animals or its ability to destroy parasites without
harming the host animals; and the patented methods, compositions or preparations involving the
compound to maximize its efficacy against certain kinds of parasites infecting specified animals.

When the language of its claims is clear and distinct, the patentee is bound thereby and may not
claim anything beyond them.17[17] And so are the courts bound which may not add to or detract
from the claims matters not expressed or necessarily implied, nor may they enlarge the patent
beyond the scope of that which the inventor claimed and the patent office allowed, even if the
patentee may have been entitled to something more than the words it had chosen would
include.18[18]

It bears stressing that the mere absence of the word Albendazole in Letters Patent No. 14561 is
not determinative of Albendazoles non-inclusion in the claims of the patent. While Albendazole
is admittedly a chemical compound that exists by a name different from that covered in
petitioners letters patent, the language of Letter Patent No. 14561 fails to yield anything at all
regarding Albendazole. And no extrinsic evidence had been adduced to prove that Albendazole
inheres in petitioners patent in spite of its omission therefrom or that the meaning of the claims
of the patent embraces the same.

While petitioner concedes that the mere literal wordings of its patent cannot establish private
respondents infringement, it urges this Court to apply the doctrine of equivalents.

The doctrine of equivalents provides that an infringement also takes place when a device
appropriates a prior invention by incorporating its innovative concept and, although with some
modification and change, performs substantially the same function in substantially the same way
to achieve substantially the same result.19[19] Yet again, a scrutiny of petitioners evidence fails to
convince this Court of the substantial sameness of petitioners patented compound and
Albendazole. While both compounds have the effect of neutralizing parasites in animals, identity
of result does not amount to infringement of patent unless Albendazole operates in substantially
the same way or by substantially the same means as the patented compound, even though it
performs the same function and achieves the same result.20[20] In other words, the principle or
mode of operation must be the same or substantially the same.21[21]

The doctrine of equivalents thus requires satisfaction of the function-means-and-result test, the
patentee having the burden to show that all three components of such equivalency test are
met.22[22]

As stated early on, petitioners evidence fails to explain how Albendazole is in every essential
detail identical to methyl 5 propylthio-2-benzimidazole carbamate. Apart from the fact that
Albendazole is an anthelmintic agent like methyl 5 propylthio-2-benzimidazole carbamate,
nothing more is asserted and accordingly substantiated regarding the method or means by which
Albendazole weeds out parasites in animals, thus giving no information on whether that method
is substantially the same as the manner by which petitioners compound works. The testimony of
Dr. Orinion lends no support to petitioners cause, he not having been presented or qualified as an
expert witness who has the knowledge or expertise on the matter of chemical compounds.

As for the concept of divisional applications proffered by petitioner, it comes into play when two
or more inventions are claimed in a single application but are of such a nature that a single patent
may not be issued for them.23[23] The applicant thus is required to divide, that is, to limit the
claims to whichever invention he may elect, whereas those inventions not elected may be made
the subject of separate applications which are called divisional applications.24[24] What this only
means is that petitioners methyl 5 propylthio-2-benzimidazole carbamate is an invention distinct
from the other inventions claimed in the original application divided out, Albendazole being one
of those other inventions. Otherwise, methyl 5 propylthio-2-benzimidazole carbamate would not
have been the subject of a divisional application if a single patent could have been issued for it as
well as Albendazole.

The foregoing discussions notwithstanding, this Court does not sustain the award of actual
damages and attorneys fees in favor of private respondent. The claimed actual damages of
P330,000.00 representing lost profits or revenues incurred by private respondent as a result of the
issuance of the injunction against it, computed at the rate of 30% of its alleged P100,000.00
monthly gross sales for eleven months, were supported by the testimonies of private respondents
President25[25] and Executive Vice-President that the average monthly sale of Impregon was
P100,000.00 and that sales plummeted to zero after the issuance of the injunction.26[26] While
indemnification for actual or compensatory damages covers not only the loss suffered (damnum
emergens) but also profits which the obligee failed to obtain (lucrum cessans or ganacias
frustradas), it is necessary to prove the actual amount of damages with a reasonable degree of
certainty based on competent proof and on the best evidence obtainable by the injured party.27[27]
The testimonies of private respondents officers are not the competent proof or best evidence
obtainable to establish its right to actual or compensatory damages for such damages also require
presentation of documentary evidence to substantiate a claim therefor.28[28]

In the same vein, this Court does not sustain the grant by the appellate court of attorneys fees to
private respondent anchored on Article 2208 (2) of the Civil Code, private respondent having
been allegedly forced to litigate as a result of petitioners suit. Even if a claimant is compelled to
litigate with third persons or to incur expenses to protect its rights, still attorneys fees may not be
awarded where no sufficient showing of bad faith could be reflected in a partys persistence in a
case other than an erroneous conviction of the righteousness of his cause.29[29] There exists no
evidence on record indicating that petitioner was moved by malice in suing private respondent.
This Court, however, grants private respondent temperate or moderate damages in the amount of
P20,000.00 which it finds reasonable under the circumstances, it having suffered some pecuniary
loss the amount of which cannot, from the nature of the case, be established with certainty.30[30]

WHEREFORE, the assailed decision of the Court of Appeals is hereby AFFIRMED with
MODIFICATION. The award of actual or compensatory damages and attorneys fees to private
respondent, Tryco Pharma Corporation, is DELETED; instead, it is hereby awarded the amount
of P20,000.00 as temperate or moderate damages.

SO ORDERED.

TRADEMARK INFRINGEMENT
 THIRD DIVISION

February 1, 2017

G.R. No. 188996

SERI SOMBOONSAKDIKUL, Petitioner

vs.
ORLANE S.A., Respondent

DECISION

JARDELEZA, J.:

Assailed in this petition is the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No.
105229 dated July 14, 2009 which affirmed the decision of the Director General of the
Intellectual Property Office (IPO) denying the application for the mark "LOLANE."

Facts

On September 23, 2003, petitioner Seri Somboonsakdikul (petitioner) filed an application for
registration2 of the mark LOLANE with the IPO for goods3 classified under Class 3 (personal
care products) of the International Classification of Goods and Services for the Purposes of the
Registration of Marks (International Classification of Goods).4 Orlane S.A. (respondent) filed an
opposition to petitioner's application, on the ground that the mark LOLANE was similar to
ORLANE in presentation, general appearance and pronunciation, and thus would amount to an
infringement of its mark.5 Respondent alleged that: (1) it was the rightful owner of the ORLANE
mark which was first used in 1948; (2) the mark was earlier registered in the Philippines on July
26, 1967 under Registration No. 129961 for the following goods:6

x x x perfumes, toilet water, face powders, lotions, essential oils, cosmetics, lotions for the hair,
dentrifices, eyebrow pencils, make-up creams, cosmetics & toilet preparations under Registration
No. 12996.7

and (3) on September 5, 2003, it filed another application for use of the trademark on its
additional products:

x x x toilet waters; revitalizing waters, perfumes, deodorants and body deodorants, anti-
perspiration toiletries; men and women perfume products for face care and body care; face, eye,
lips, nail, hand make-up products and make-up removal products, towels impregnated with
cosmetic lotions; tanning and instant tanning sunproducts, sunprotection products, (not for
medical use), after-suncosmetic products; cosmetic products; slimming cosmetic aids; toiletries;
lotions, shampoos and hair care products; shave and after shave products, shaving and hair
removing products; essential oils; toothpastes; toiletry, cosmetic and shaving kits for travel, filled
or fitted vanity-cases[.]8

Respondent adds that by promotion, worldwide registration, widespread and high standard use,
the mark had acquired distinction, goodwill, superior quality image and reputation and was now
well-known.9 Imputing bad faith on the petitioner, respondent claimed that LOLANE' s first
usage was only on August 19, 2003.10

In his answer,11 petitioner denied that the LOLANE mark was confusingly similar to the mark
ORLANE. He averred that he was the lawful owner of the mark LOLANE which he has used for
various personal care products sold worldwide. He alleged that the first worldwide use of the
mark was in Vietnam on July 4, 1995. Petitioner also alleged that he had continuously marketed
and advertised Class 3 products bearing LOLANE mark in the Philippines and in different parts
of the world and that as a result, the public had come to associate the mark with him as provider
of quality personal care products.12

Petitioner maintained that the marks were distinct and not confusingly similar either under the
dominancy test or the holistic test. The mark ORLANE was in plain block upper case letters
while the mark LOLANE was printed in stylized word with the second letter L and the letter A
co-joined. Furthermore, the similarity in one syllable would not automatically result in confusion
even if used in the same class of goods since his products always appear with Thai characters
while those of ORLANE always had the name Paris on it. The two marks are also pronounced
differently. Also, even if the two marks contained the word LANE it would not make them
confusingly similar since the IPO had previously allowed the co-existence of trademarks
containing the syllable "joy" or "book" and that he also had existing registrations and pending
applications for registration in other countries.13

The Bureau of Legal Affairs (BLA) rejected petitioner's application in a Decision14 dated
February 27, 2007, finding that respondent's application was filed, and its mark registered, much
earlier.15 The BLA ruled that there was likelihood of confusion based on the following
observations: (1) ORLANE and LOLANE both consisted of six letters with the same last four
letters - LANE; (2) both were used as label for similar products; (3) both marks were in two
syllables and that there was only a slight difference in the first syllable; and (4) both marks had
the same last syllable so that if these marks were read aloud, a sound of strong similarity would
be produced and such would likely deceive or cause confusion to the public as to the two
trademarks.16

Petitioner filed a motion for reconsideration but this was denied by the Director of the BLA on
May 7, 2007.17 The BLA ruled that the law did not require the marks to be so identical as to
produce actual error or mistake as the likelihood of confusion was enough. The BLA also found
that the dominant feature in both marks was the word LANE; and that the marks had a strong
visual and aural resemblance that could cause confusion to the buying public. This resemblance
was amplified by the relatedness of the goods.18

On appeal, the Director General of the IPO affirmed the Decision of the BLA Director. Despite
the difference in the first syllable, there was a strong visual and aural resemblance since the
marks had the same last four letters, i.e., LANE, and such word is pronounced in this jurisdiction
as in "pedestrian lane."19 Also, the mark ORLANE is a fanciful mark invented by the owner for
the sole purpose of functioning as a trademark and is highly distinctive. Thus, the fact that two or
more entities would accidentally adopt an identical or similar fanciful mark was too good to be
true especially when they dealt with the same goods or services.20 The Director General also
noted that foreign judgments invoked by petitioner for the grant of its application are not judicial
precedents.21

Thus, petitioner filed a petition for review22 before the CA arguing that there is no confusing
similarity between the two marks. Petitioner maintained that LANE is not the dominant feature
of the mark and that the dominancy test did not apply since the trademarks are only plain word
marks and the dominancy test presupposes that the marks involved are composite marks.23
Petitioner pointed out that the IPO had previously allowed the mark GIN LANE under
Registration No. 4-2004-006914 which also involved products under Class 3.24 While petitioner
admitted that foreign judgments are not judicial precedents, he argued that the IPO failed to
recognize relevant foreign judgments, i.e., the Australian Registrar of Trademarks and the IPO of
Singapore which ruled that there was no confusing similarity between the marks LOLANE and
ORLANE.25 Lastly, the Director General should have deferred to the findings of the Trademark
Examiner who made a substantive examination of the application for trademark registration, and
who is an expert in the field and is in the best position to determine whether there already exists
a registered mark or mark for registration. Since petitioner's application for registration of the
mark LOLANE proceeded to allowance and publication without any adverse citation of a prior
confusingly similar mark, this meant that the Trademark Examiner was of the view that LO
LANE was not confusingly similar to ORLANE.26

The CA Ruling

The CA denied the petition and held that there exists colorable imitation of respondent's mark by
LOLANE.27

The CA accorded due respect to the Decision of the Director General and ruled that there was
substantial evidence to support the IPO's findings of fact. Applying the dominancy test, the CA
ruled that LOLANE' s mark is confusingly or deceptively similar to ORLANE. There are
predominantly striking similarities in the two marks including LANE, with only a slight
difference in the first letters, thus the two marks would likely cause confusion to the eyes of the
public. The similarity is highlighted when the two marks are pronounced considering that both
are one word consisting of two syllables. The CA ruled that when pronounced, the two marks
produce similar sounds.28 The CA did not heed petitioner's contention that since the mark
ORLANE is of French origin, the same is pronounced as "ORLAN." Filipinos would invariably
pronounce it as "OR-LEYN."29 The CA also noted that the trademark ORLANE is a fanciful
name and petitioner was not able to explain why he chose the word LOLANE as trademark for
his personal care products. Thus, the only logical conclusion is that he would want to benefit
from the established reputation and goodwill of the ORLANE mark.30

The CA rejected petitioner's assertion that his products' cheaper price and low-income market
eliminates the likelihood of confusion. Low-income groups, and even those who usually
purchased ORLANE products despite the higher cost, may be led to believe that LOLANE
products are low-end personal care products also marketed by respondent.31

The CA upheld the applicability of the dominancy test in this case. According to the CA, the
dominancy test is already recognized and incorporated in Section 155.1 of Republic Act No.
8293 (RA 8293), otherwise known as the Intellectual Property Code of the Philippines.32 Citing
McDonald's Corporation v. MacJoy Fastfood Corporation,33 the CA ruled that the dominancy
test is also preferred over the holistic test. This is because the latter relies only on the visual
comparison between two trademarks, whereas the dominancy test relies not only on the visual,
but also on their aural and connotative comparisons, and their overall impressions created.34
Nonetheless, the CA stated that there is nothing in this jurisdiction dictating that the dominancy
test is applicable for composite marks.35

The CA was not swayed by the alleged favorable judgment by the IPO in the GIN LANE
application, ruling that in trademark cases, jurisprudential precedents should be applied only to a
case if they are specifically in point.36 It also did not consider the ruling of the IPOs in Australia,
South Africa, Thailand and Singapore which found no confusing similarity between the marks
LOLANE and ORLANE, stating that foreign judgments do not constitute judicial precedent in
this jurisdiction.37

Finally, the CA did not give merit to petitioner's contention that the Director General should
have deferred to the findings of the Trademark Examiner. According to the CA, the proceedings
before the Trademark Examiner are ex-parte,38 and his findings are merely prima facie.
Whatever his decision may be is still subject to review and/or appeal.39

The Petition40

Petitioner maintains that the CA erred in its interpretation of the dominancy test, when it ruled
that the dominant feature of the contending marks is the suffix "LANE."41 The CA failed to
consider that in determining the dominant portion of a mark, significant weight must be given to
whether the buyer would be more likely to remember and use one part of a mark as indicating the
origin of the goods.42 Thus, that part which will likely make the most impression on the ordinary
viewer will be treated as the dominant portion of conflicting marks and given greater weight in
the comparison.43

Petitioner argues that both LOLANE and ORLANE are plain word marks which are devoid of
features that will likely make the most impression on the ordinary viewer. If at all, the very word
marks themselves, LOLANE and ORLANE are each to be regarded as dominant features.44
Moreover, the suffix LANE is a weak mark, being "in common use by many other sellers in the
market. "45 Thus, LANE is also used in the marks SHELLANE and GIN LANE, the latter
covering goods under Class 3. Moreover, the two marks are aurally different since respondent's
products originate from France and is read as "OR-LAN" and not "OR-LEYN."46

Petitioner also claims that the CA completely disregarded the holistic test, thus ignoring the
dissimilarity of context between LOLANE and ORLANE. Assuming that the two marks produce
similar sounds when pronounced, the differences in marks in their entirety as they appear in their
respective product labels should still be the controlling factor in determining confusing
similarity.47

Besides, there has been no explicit declaration abandoning the holistic test.48 Thus, petitioner
urges us to go beyond the similarities in spelling and instead consider how the marks appear in
their respective labels, the dissimilarities in the size and shape of the containers, their color,
words appearing thereon and the general appearance,49 hence: (1) the commonality of the marks
ORLANE and LOLANE starts from and ends with the four-letter similarity-LANE and nothing
else;50 (2) ORLANE uses "safe" or conventional colors while LOLANE uses loud or
psychedelic colors and designs with Thai characters;51 and (3) ORLANE uses the term "Paris,"
indicating the source of origin of its products.52

Petitioner likewise claims that consumers will be more careful in their choice because the goods
in question are directly related to personal hygiene and have direct effects on their well-being,
health and safety.53 Moreover, with the huge price difference between ORLANE and LOLANE
products, relevant purchasers are less likely to be confused.54

Finally, petitioner notes that respondent has neither validly proven nor presented sufficient
evidence that the mark ORLANE is in actual commercial use in the Philippines. Respondent
failed to allege in any of its pleadings submitted to the IPO's BLA and the IPO Director General
the names of local outlets that products bearing the mark ORLANE are being marketed or sold to
the general consuming public.55

Respondent's Comment56

Respondent reiterates the decisions of the CA and the IPO.57 It maintains that ORLANE is
entitled to protection under RA 8293 since it is registered with the IPO with proof of actual
use.58 Respondent posits that it has established in the world59 and in the Philippines an image
and reputation for manufacturing and selling quality beauty products. Its products have been sold
in the market for 61 years and have been used in the Philippines since 1972.60 Thus, to allow
petitioner's application would unduly prejudice respondent's right over its registered
trademark.61 Lastly, respondent argues that decisions of administrative agencies such as the IPO
shall not be disturbed by the courts, absent any showing that the former have acted without or in
excess of their jurisdiction, or with grave abuse of discretion.62

Issue

We resolve the issue of whether there is confusing similarity between ORLANE and LOLANE
which would bar the registration of LOLANE before the IPO.

Our Ruling

We find that the CA erred when it affirmed the Decision of the IPO.

While it is an established rule in administrative law that the courts of justice should respect the
findings of fact of administrative agencies, the courts may not be bound by such findings of fact
when there is absolutely no evidence in support thereof or such evidence is clearly, manifestly
and patently insubstantial; and when there is a clear showing that the administrative agency acted
arbitrarily or with grave abuse of discretion or in a capricious and whimsical manner, such that
its action may amount to an excess or lack of jurisdiction.63 Moreover, when there is a showing
that the findings or conclusions, drawn from the same pieces of evidence, were arrived at
arbitrarily or in disregard of the evidence on record, they may be reviewed by the courts.64 Such
is the case here.

There is no colorable imitation between the marks LOLANE and ORLANE which would lead to
any likelihood of confusion to the ordinary purchasers.

A trademark is defined under Section 121.1 of RA 8293 as any visible sign capable of
distinguishing the goods. It is susceptible to registration if it is crafted fancifully or arbitrarily
and is capable of identifying and distinguishing the goods of one manufacturer or seller from
those of another.65 Thus, the mark must be distinctive.66 The registrability of a trademark is
governed by Section 123 of RA 8293. Section 123.1 provides:

Section 123. Registrability. -

123 .1. A mark cannot be registered if it:

xxx

d. Is identical with a registered mark belonging to a different proprietor or a mark with an earlier
filing or priority date, in respect of:

i. The same goods or services, or

ii. Closely related goods or services, or

iii. If it nearly resembles such a mark as to be likely to deceive or cause confusion;

e. Is identical with, or confusingly similar to, or constitutes a translation of a mark which is

considered by the competent authority of the Philippines to be well-known internationally and in
the Philippines, whether or not it is registered here, as being already the mark of a person other
than the applicant for registration, and used for identical or similar goods or services: Provided,
That in determining whether a mark is well-known, account shall be taken of the knowledge of
the relevant sector of the public, rather than of the public at large, including knowledge in the
Philippines which has been obtained as a result of the promotion of the mark;

xxx

In Mighty Corporation v. E. & J Gallo Winery,67 we laid down the

requirements for a finding of likelihood of confusion, thus:

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 defendant's 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 defendant's 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.

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 registrant's express or implied
consent and other fair and equitable considerations. (Citations omitted, emphasis
supplied.)68

While Mighty Corporation enumerates four requirements, the most essential requirement, to our
mind, for the determination of likelihood of confusion is the existence of resemblance between
the trademarks, i.e., colorable imitation. Absent any finding of its existence, there can be no
likelihood of confusion. Thus we held:

Whether a trademark causes confusion and is likely to deceive the public hinges on "colorable
imitation" which has been defined as "such similarity in form, content, words, sound, meaning,
special arrangement or general appearance of the trademark or trade name 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." (Citations omitted.)69

We had the same view in Emerald Garment Manufacturing Corporation v. Court of Appeals,70
where we stated:

Proceeding to the task at hand, the essential element of infringement is colorable imitation.
This term has been defined as "such a close or ingenious imitation as to be calculated to deceive
ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an
ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to
purchase the one supposing it to be the other."

Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that
all the details be literally copied. x x x (Citation omitted, emphasis supplied.)71

In determining colorable imitation, we have used either the dominancy test or the holistic or
totality test. The dominancy test considers the similarity of the prevalent or dominant features of
the competing trademarks that might cause confusion, mistake, and deception in the mind of the
purchasing public. More consideration is given on the aural and visual impressions created by
the marks on the buyers of goods, giving little weight to factors like process, quality, sales
outlets, and market segments.72 On the other hand, the holistic test considers the entirety of the
marks as applied to the products, including the labels and packaging, in determining confusing
similarity. The focus is not only on the predominant words but also on the other features
appearing on the labels.73
The CA's use of the dominancy test is in accord with our more recent ruling in UFC Philippines,
Inc. (now merged with Nutria-Asia, Inc. as the surviving entity) v. Barrio Fiesta Manufacturing
Corporation.74 In UFC Philippines, Inc., we relied on our declarations in McDonald's
Corporation v. L.C. Big Mak Burger, Inc.,75 Co Tiong Sa v. Director of Patents,76 and Societe
Des Produits Nestle, S.A. v. Court of Appeals77 that the dominancy test is more in line with the
basic rule in trademarks that confusing similarity is determined by the aural, visual and
connotative and overall impressions created by the marks. Thus, based on the dominancy test, we
ruled that there is no confusing similarity between "PAPA BOY & DEVICE" mark, and "PAPA
KETSARAP" and "PAPA BANANA CATSUP."

While there are no set rules as what constitutes a dominant feature with respect to trademarks
applied for registration, usually, what are taken into account are signs, color, design, peculiar
shape or name, or some special, easily remembered earmarks of the brand that readily attracts
and catches the attention of the ordinary consumer.78 In UFC Philippines, Inc., what we
considered as the dominant feature of the mark is the first word/figure that catches the eyes or
that part which appears prominently to the eyes and ears.79

However, while we agree with the CA's use of the dominancy test, we arrive at a different
conclusion. Based on the distinct visual and aural differences between LOLANE and ORLANE,
we find that there is no confusing similarity between the two marks.

The suffix LANE is not the dominant feature of petitioner's mark. Neither can it be considered as
the dominant feature of ORLANE which would make the two marks confusingly similar.

First, an examination of the appearance of the marks would show that there are noticeable
differences in the way they are written or printed as shown below:80

As correctly argued by petitioner in his answer before the BLA, there are visual differences
between LOLANE and ORLANE since the mark ORLANE is in plain block upper case letters
while the mark LOLANE was rendered in stylized word with the second letter L and the letter A
co-joined.81

Second, as to the aural aspect of the marks, LOLANE and ORLANE do not sound alike. Etepha
v. Director of Patents, et al.82 finds application in this case. In Etepha, we ruled that there is no
confusing similarity between PERTUSSIN and ATUSSIN. The Court considered among other
factors the aural differences between the two marks as follows:

5. As we take up Pertussin and Atussin once again, we cannot escape notice of the fact that the
two words do not sound alike-when pronounced. There is not much phonetic similarity between
the two. The Solicitor General well-observed that in Pertussin the pronunciation of tbe prefix
"Per", whether correct or incorrect, includes a combination of three letters
P, e and r; whereas, in Atussin the whole starts with the single letter A added to suffix
"tussin".1âwphi1 Appeals to the ear are dissimilar. And this, because in a word combination, the
part that comes first is the most pronounced. An expositor of the applicable rule here is the
decision in the Syrocol-Cheracol controversy. There, the ruling is that trademark Syrocol (a
cough medicine preparation) is not confusedly similar to trademark Cheracol (also a cough
medicine preparation). Reason: the two words "do not look or sound enough alike to justify a
holding of trademark infringement", and the "only similarity is in the last syllable, and that is not
uncommon in names given drug compounds". (Citation omitted, emphasis supplied.)83

Similar to Etepha, appeals to the ear in pronouncing ORLANE and LOLANE are dissimilar. The
first syllables of each mark, i.e., OR and LO do not sound alike, while the proper pronunciation
of the last syllable LANE-"LEYN" for LOLANE and "LAN" for ORLANE, being of French
origin, also differ. We take exception to the generalizing statement of the Director General,
which was affirmed by the CA, that Filipinos would invariably pronounce ORLANE as
"ORLEYN." This is another finding of fact which has no basis, and thus, justifies our reversal of
the decisions of the IPO Director General and the CA. While there is possible aural similarity
when certain sectors of the market would pronounce ORLANE as "ORLEYN," it is not also
impossible that some would also be aware of the proper pronunciation--especially since, as
respondent claims, its trademark ORLANE has been sold in the market for more than 60 years
and in the Philippines, for more than 40 years.84

Respondent failed to show proof that the suffix LANE has registered in the mind of consumers
that such suffix is exclusively or even predominantly associated with ORLANE products.
Notably and as correctly argued by petitioner, the IPO previously allowed the registration of the
mark GIN LANE for goods also falling under Class 3, i.e., perfume, cologne, skin care
preparations, hair care preparations and toiletries.85

We are mindful that in the earlier cases of Mighty Corporation and Emerald, despite a finding
that there is no colorable imitation, we still discussed the nature of the goods using the trademark
and whether the goods are identical, similar, competing or related. We need not belabor a similar
discussion here considering that the essential element in determining likelihood of confusion,
i.e., colorable imitation by LO LANE of the mark ORLANE, is absent in this case. Resemblance
between the marks is a separate requirement from, and must not be confused with, the
requirement of a similarity of the goods to which the trademarks are attached. In Great White
Shark Enterprises, Inc v. Caralde, Jr.,86 after we ruled that there was no confusing similarity
between Great White Shark's "GREG NORMAN LOGO" and Caralde's "SHARK & LOGO"
mark due to the visual and aural dissimilarities between the two marks, we deemed it
unnecessary to resolve whether Great White Shark's mark has gained recognition as a well-
known mark.

Finding that LOLANE is not a colorable imitation of ORLANE due to distinct visual and aural
differences using the dominancy test, we no longer find it necessary to discuss the contentions of
the petitioner as to the appearance of the marks together with the packaging, nature of the goods
represented by the marks and the price difference, as well as the applicability of foreign
judgments. We rule that the mark LOLANE is entitled to registration.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated July
14, 2009 is REVERSED and SET ASIDE. Petitioner's application of the mark LOLANE for
goods classified under Class 3 of the International Classification of Goods is GRANTED.

SO ORDERED.
 FIRST DIVISION

March 22, 2017

G.R. No. 186088

WILTON DY and/or PHILITES ELECTRONIC & LIGHTING PRODUCTS, Petitioner

vs
KONINKLIJKE PHILIPS ELECTRONICS, N.V., Respondent

DECISION

SERENO, CJ.:

This Petition for Review on Certiorari1 filed by petitioner Wilton Dy and/or Philites Electronic
& Lighting Products ("PHILITES") assails the Decision2 and Resolution3 of the Court of
Appeals (CA) in CA-G.R. SP No. 103350. The appellate court reversed and set aside the
Decision4 of the IPP Office of the Director General (IPP-DG), which affirmed the Decision5 of
the Intellectual Property Philippines Bureau of Legal Affairs (IPP-BLA) upholding petitioner's
trademark application.

THE ANTECEDENT FACTS

On 12 April 2000, petitioner PHILITES filed a trademark application (Application Serial

Number 4-2000-002937) covering its fluorescent bulb, incandescent light, starter and ballast.
After publication, respondent Koninklijke Philips Electronics, N .V. ("PHILIPS") filed a
Verified Notice of Opposition on 17 March 2006, alleging the following:

(a) The approval of Application Serial No. 4-2000-002937 is contrary to the following provisions
of Republic Act No. [RAJ 8293 or the Intellectual Property Code of the Philippines (IP Code):
Sections 123.l(d), (i) and (iii), 123.l(e), 147, and 168.

(b) The approval of Application Serial No. 4-2000-002937 will cause grave and irreparable
damage and injury to oppose.

(c) The use and registration of the applied for mark by [petitioner] will mislead the public as to
the origin, nature, quality, and characteristic of the goods on which it is affixed;

(d) [Petitioner's] application for registration is tantamount to fraud as it seeks to register and
obtain legal protection for an identical or confusingly similar mark that clearly infringes upon the
established rights of the [respondent] over its registered and internationally well-known mark.

(e) The registration of the trademark PHILITES & LETTER P DEVICE in the name of the
[petitioner] will violate the proprietary rights and interests, business reputation and goodwill of
the [respondent] over its trademark, considering that the distinctiveness of the trademark
PHILIPS will be diluted.
(t) The registration of the applied for mark will not only prejudice the Opposer, but will also
cause [petitioner] to unfairly profit commercially from the goodwill, fame and notoriety of
Opposer's trademark and reputation.

(g) [Petitioner's] registration and use of the applied for mark in connection with goods under
Class 11 will weaken the unique and distinctive significance of mark PHILIPS and will tarnish,
degrade or dilute the distinctive quality of Opposer's trademark and will result in the gradual
attenuation or whittling away of the value of Opposer's trademark, in violation of Opposer's
proprietary rights.6

On 8 August 2006, petitioner filed a Verified Answer, stating that its PHILITES & LETTER P
DEVICE trademark and respondent's PHILIPS have vast dissimilarities in terms of spelling,
sound and meaning.7

At the conclusion of the hearing, on 9 November 2006, IPP-BLA Director Estrellita Beltran-
Abelardo rendered a Decision8 denying the Opposition filed by respondent PHILIPS. The
dispositive portion of the Decision reads:

WHEREFORE, premises considered the OPPOSITION filed by Koninklijke Philips

Electronics, N.V. is hereby DENIED. Accordingly, Application Serial no. 4-2000-002937 filed
by Respondent-Applicant, Wilton Dy and/or Philites Electronic & Lighting Products on 12 April
2000 for the mark "PHILITES & LETTER P DEVICE" used on fluorescent bulb, incandescent
light starter, ballast under class 11, is as it is, hereby GRANTED.

Let the filewrapper of "PHILITES & LETTER P DEVICE," subject matter of this case together
with this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action.

SO ORDERED.

In upholding petitioner's trademark application, the IPP-BLA stated that assuming respondent's
mark was well-known in the Philippines, there should have been prior determination of whether
or not the mark under application for registration was "identical with, or confusingly similar to,
or constitutes a translation of such well-known mark in order that the owner of the well-known
mark can prevent its registration."9 From the evidence presented, the IPP-BLA concluded that
the PHILIPS and PHILITES marks were so unlike, both visually and aurally. It held that no
confusion was likely to occur, despite their contemporaneous use, based on the following
observations:
The Philips shield mark has four stars in different sizes located at the north east and south west
portions inside a circle within the shield. There are three wavy lines dissecting the middle of the
circle. None of these appear in the respondent's mark.

[Respondent] declares that the word Philips is the surname of the brothers who founded the
Philips company engaged in manufacturing and selling lighting products. [Petitioner] on the
other hand has testified that the word Philites is coined from the word 'Philippines' and 'lights,'
hence 'Philites.' This Bureau finds that there is no dictionary meaning to the [petitioner's] mark.
It is a coined and arbitrary word capable of appropriation as a trademark. x x x

Moreover, by mere pronouncing the two marks, the phonetic sounds produced when each mark
is uttered are not the same. The last syllable of respondent's mark is uttered in a long vowel
sound, while the last vowel of the opposer's mark is not.

x x x. This Bureau believes that opposer has no monopoly over the color or diameter or shape of
a light bulb or packaging shape unless registrations were secured to protect the same. The images
of the packages are reproduced below for reference.

x x x. For one, respondent adopts a yellow to light yellow dominant color while the oppose uses
an orange yellow hue. The mark "Philites" is printed in yellow with light blue background as
compared to the "Philips" mark typed in white against a black background.

It is fundamental in trademark jurisprudence that color alone, unless displayed in an arbitrary

design docs not function as a trademark.

Secondly, there appears to be other advertising slogans that appear in respondent's package such
as the words, "new", "prolong lite life", "E-coat finished" and "with additional 35% more than
ordinary". These phrases are absent in opposer's package. These phrases can be considered in the
nature of descriptive terms that can be appropriated by anyone.10
Upon appeal, the IPP-DG rendered a Decision11 on 16 April 2008, affirming the ruling of the
IPP-BLA as follows:

WHEREFORE, premises considered, that instant appeal is hereby DISMISSED for lack of
merit. Accordingly, Decision No. 2006-125 of the Director of the Bureau of Legal Affairs dated
09 November 2006, is hereby AFFIRMED.

Let a copy of this Decision as well as the trademark application and records be furnished and
returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the
Directors of the Bureau of Trademarks, the Administrative, Pinancial and Human Resources
Development Services Bureau, and the library of the Documentation, Information and
Technology Transfer Bureau be furnished a copy of this Decision for information, guidance and
records purposes.

SO ORDERED.

In so ruling, the IPP-DG noted that "[t]he dominant feature of the [respondent's] trademark is
'PHILIPS' while that of the [petitioner's] trademark is 'PHILITES.' While the first syllables of the
marks are identical - 'PHI' - the second syllables are not. The differences in the last syllable
accounted for the variance of the trademarks visually and aurally."12 Moreover, there were
"glaring differences and dissimilarities in the design and general appearance of the Philips shield
emblem mark and the letter 'P' of Philites mark."13 Thus, "even if the [petitioner's] products
bearing the trademark PHILIPS are placed side by side with other brands, the purchaser would
not be confused to pick up the [petitioner's] product if this is his choice or preference, unless the
resemblance in the appearance of the trademarks is so glaring which [it] is not in this case."14

As regards the issue of petitioner submitting a trademark drawing different from that used in the
packaging, the IPP-DG noted that this case involved an opposition to the registration of a mark,
while labels and packaging were technically not a part thereof.15 At best, respondent supposedly
had the remedy of filing a case for trademark infringement and/or unfair competition.16

Upon intermediate appellate review, the CA rendered a Decision 17 on 7 October 2008. The
dispositive portion herein reads:

WHEREFORE, premises considered, the Petition for Review is GRANTED. The Decision dated
16 April 2008 of the Director General of the Intellectual Property Office in Appeal No. 14-06-28;
IPC No. 14-2006- 00034 is REVERSED and SET ASIDE. The application for trademark
registration (Application Serial Number 4-2000-002937) of respondent Wilton Dy and/or Philites
Electronic & Lighting Products is DISMISSED. Costs against respondent.

SO ORDERED.

In so ruling, the CA reasoned that the "drawing of the trademark submitted by [petitioner] has a
different appearance from that of [petitioner's] actual wrapper or packaging that contain the light
bulbs, which We find confusingly similar with that of [respondent's] registered trademark and
packaging."18 Moreover, it found to be "self-serving [petitioner's] asseveration that the mark
'PHILITES' is a coined or arbitrary mark from the words 'Philippines' and 'lights.' Of all the
marks that [petitioner] could possibly think of for his light bulbs, it is odd that [petitioner] chose
a mark with the letters 'PHILI,' which are the same prevalent or dominant five letters found in
[respondent's] trademark 'PHILIPS' for the same products, light bulbs."19 Hence, the appellate
court concluded that petitioner had intended to ride on the long-established reputation and
goodwill of respondent's trademark.20

On 25 October 2008, petitioner filed a Motion for Reconsideration, which was denied in a
Resolution21 issued by the CA on 18 December 2008.

Hence, this petition.

Respondent filed its Comment22 on 23 June 2009, and petitioner filed its Reply23 on 10
November 2009.

THE ISSUES

From the foregoing, we reduce the issues to the following:

1. Whether or not respondent's mark is a registered and well-known mark in the Philippines; and

2. Whether or not the mark applied for by petitioner is identical or confusingly similar with that
of respondent.

OUR RULING

The Petition is bereft of merit.

A trademark is "any distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof, adopted and used by a manufacturer or merchant on his goods to identify
and distinguish them from those manufactured, sold, or dealt by othcrs."24 It is "intellectual
property deserving protection by law,"25 and "susceptible to registration if it is crafted fancifully
or arbitrarily and is capable of identifying and distinguishing the goods of one manufacturer or
seller from those of another."26

Section 122 of the Intellectual Property Code of the Philippines (IPC) provides that rights to a
mark shall be acquired through registration validly done in accordance with the provisions of this
law.27 Corollary to that rule, Section 123 provides which marks cannot be registered.

Respondent opposes petitioner's application on the ground that PHILITES' registration will
mislead the public over an identical or confusingly similar mark of PHILIPS, which is registered
and internationally well-known mark. Specifically, respondent invokes the following provisions
of Section 123:

Section 123. Registrability. - 123 .1. A mark cannot be registered if it:

xxx

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an
earlier filing or priority date, in respect of:

(i) The same goods or services, or

(ii) Closely related goods or services, or

(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion;

(e) Is identical with, or confusingly similar to, or constitutes a translation of a mark whid1 is
considered by the competent authority of the Philippines to be well-known internationally and in
the Philippines, whether or not it is registered here, as being already the mark of a person other
than the applicant for registration, and used for identical or similar goods or services: Provided,
That in determining whether a mark is well-known, account shall be taken of the knowledge of
the relevant sector of the public, rather than of the public at large, including knowledge in the
Philipines which has been obtained as a result of the promotion of the mark.28

Respondent's mark is a registered and well-known mark in the

Philippines

There is no question that respondent's mark PHILIPS is already a registered and well-known
mark in the Philippines.

As we have said in Fredco Manufacturing Corporation v. Harvard University,29 "[i]ndeed,

Section 123.l(e) of R.A. No. 8293 now categorically states that 'a mark which is considered by
the competent authority of the Philippines to be well-known internationally and in the
Philippines, whether or not it is registered here,' cannot be registered by another in the Ph iii
ppines. "30

Rule l00(a) of the Rules and Regulations on Trademarks, Service Marks, Tradenames and
Marked or Stamped Containers defines "competent authority" in the following manner:

(c) "Competent authority" for purposes of determining whether a mark is well-known, means the
Court, the Director General, the Director of the Bureau of Legal Affairs, or any administrative
agency or office vested with quasi-judicial or judicial jurisdiction to hear and adjudicate any
action to enforce the rights to a mark.

We thus affirm the following findings of the CA, inasmuch as the trademark of PHILIPS is a
registered and well-known mark, as held in the Supreme Court Decision in Philips Export B. V,
v. CA:31

Petitioner (PHILIPS) is the registered owner in the Philippines of the "PHILIPS" and "PHILIPS
SHIELD EMBLEM" trademarks, as shown by Certificates of Registration Nos. 42271 and
42270. The Philippine trademark registrations of petitioner's "PHILIPS" and "PHILIPS SHIELD
EMBLEM" are also evidenced by Certificates of Registration Nos. R- 1651, R-29134, R-1674,
and R-28981. The said registered trademarks "PHILIPS" and "PHILIPS SHIELD EMBLEM"
cover classes 7, 8, 9, 10, 11, 14, and 16. The assailed Decision itself states that "(T)he
Appellant's trademark is already registered and in use in the Philippines". It also appears that
worldwide, petitioner has thousands of trademark registrations x x x in various countries. As
found by the High Court in Philips Export B.V. vs Court of Appeals, PHILIPS is a trademark or
trade name which was registered as far back as 1922, and has acquired the status of a well-
known mark in the Philippines and internationally as well.32

Petitioner seeks to register a mark

nearly resembling that of respondent,
which may likely to deceive or cause
confusion among consumers.

Despite respondent's diversification to numerous and varied industries,33 the records show that
both parties are engaged in the same line of business: selling identical or similar goods such as
fluorescent bulbs, incandescent lights, starters and ballasts.

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the
dominancy test, and the holistic or totality test.34

On one hand, the dominancy test focuses on "the similarity of the prevalent or dominant features
of the competing trademarks that might cause confusion, mistake, and deception in the mind of
the purchasing public. Duplication or imitation is not necessary; neither is it required that the
mark sought to be registered suggests an effort to imitate. Given more consideration are the aural
and visual impressions created by the marks on the buyers of goods, giving little weight to
factors like prices, quality, sales outlets, and market segments. "35

On the other hand, the holistic or totality test necessitates a "consideration of the entirety of the
marks as applied to the products, including the labels and packaging, in determining confusing
similarity. The discerning eye of the observer must focus not only on the predominant words, but
also on the other features appearing on both labels so that the observer may draw conclusion on
whether one is confusingly similar to the other."361âwphi1

Applying the dominancy test to this case requires us to look only at the mark submitted by
petitioner in its application, while we give importance to the aural and visual impressions the
mark is likely to create in the minds of the buyers. We agree with the findings of the CA that the
mark "PHILITES" bears an uncanny resemblance or confusing similarity with respondent's mark
"PHILIPS," to wit:

Applying the dominancy test in the instant case, it shows the uncanny resemblance or confusing
similarity between the trademark applied for by respondent with that of petitioner's registered
trademark. An examination of the trademarks shows that their dominant or prevalent feature is
the five-letter "PHILI", "PHILIPS" for petitioner, and "PHILITES" for respondent. The marks
are confusingly similar with each other such that an ordinary purchaser can conclude an
association or relation between the marks. The consuming public does not have the luxury of
time to ruminate the phonetic sounds of the trademarks, to find out which one has a short or long
vowel sound. At bottom, the letters "PHILI'' visually catch the attention of the consuming public
and the use of respondent's trademark will likely deceive or cause confusion. Most importantly,
both trademarks are used in the sale of the same goods, which are light bulbs.37

The confusing similarity becomes even more prominent when we examine the entirety of the
marks used by petitioner and respondent, including the way the products are packaged. In using
the holistic test, we find that there is a confusing similarity between the registered marks
PHILIPS and PHILITES, and note that the mark petitioner seeks to register is vastly different
from that which it actually uses in the packaging of its products. We quote with approval the
findings of the CA as follows:

Applying the holistic test, entails a consideration of the entirety of the marks as applied to the
products, including the labels and packaging, in determining confusing similarity. A comparison
between petitioner's registered trademark "PHILIPS'' as used in the wrapper or packaging of its
light bulbs and that of respondent's applied for trademark "PHILITES" as depicted in the
container or actual wrapper/packaging of the latter's light bulbs will readily show that there is a
strong similitude and likeness between the two trademarks that will likely cause deception or
confusion to the purchasing public. The fact that the parties' wrapper or packaging reflects
negligible differences considering the use of a slightly different font and hue of the yellow is of
no moment because taken in their entirety, respondent's trademark "PHILITES" will likely cause
confusion or deception to the ordinary purchaser with a modicum of intelligence.38

WHEREFORE, in view of the foregoing, the Petition for Review on Certiorari is hereby
DENIED. The 7 October 2008 Decision and 18 December 2008 Resolution of the Court of
Appeals in CA-G.R. SP No. 103350 are hereby AFFIRMED.

SO ORDERED.
 FIRST DIVISION

G.R. No. 198889, January 20, 2016

UFC PHILIPPINES, INC. (NOW MERGED WITH NUTRI-ASIA, INC., WITH NUTRI-
ASIA, INC. AS THE SURVIVING ENTITY), Petitioner, v. FIESTA BARRIO
MANUFACTURING CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

For our disposition is a petition for review on certiorari under Rule 45 seeking to annul and set
aside the June 23, 2011 Decision1 and the October 4, 2011 Resolution2 of the Court of Appeals
in CA-G.R. SP No. 107570, which reversed and set aside the March 26, 2008 Decision3 of the
Bureau of Legal Affairs of the Intellectual Property Office (IPO-BLA) and the January 29, 2009
Decision4 of the Director General of the IPO. Petitioner Nutri-Asia, Inc. (petitioner) is a
corporation duly organized and existing under Philippine laws.5 It is the emergent entity in a
merger with UFC Philippines, Inc. that was completed on February 11, 2009.6 Respondent
Barrio Fiesta Manufacturing Corporation (respondent) is likewise a corporation organized and
existing under Philippine laws.

On April 4, 2002, respondent filed Application No. 4-2002-002757 for the mark "PAPA BOY &
DEVICE" for goods under Class 30, specifically for "lechon sauce."7 The Intellectual Property
Office (IPO) published said application for opposition in the IP Phil. e-Gazette released on
September 8, 2006. The mark appears as follows:

(Please see image G.R. No. 198889 pg. 2)

On December 11, 2006, petitioner filed with the IPO-BLA a Verified Notice of Opposition to the
above-mentioned application and alleged that:

1. The mark "PAPA" for use on banana catsup and other similar goods was first
used [in] 1954 by Neri Papa, and thus, was taken from his surname;

2. After using the mark "PAPA" for about twenty-seven (27) years, Neri Papa
subsequently assigned the mark "PAPA" to Hernan D. Reyes who, on September
17, 1981, filed an application to register said mark "PAPA" for use on banana
catsup, chili sauce, achara, banana chips, and instant ube powder;

3. On August 14, 1983, Hernan D. Reyes was issued Certificate of Registration No.
32416;

4. [Certificate of] Registration No. 32416 was subsequently assigned to the

following in successive fashion: Acres & Acres Food, Inc., Southeast Asia Food,
Inc., Heinz-UFC Philippines, Inc., and Opposer UFC Philippines, Inc.;
5. Last October 28, 2005, Heinz-UFC Philippines, Inc. filed Application Serial No.
4-2005-010788 which, in effect, is a re- registration of Registration No. 32416
which expired on August 11, 2003;

6. Hernan D. Reyes also filed on March 04, 1982 an application to register in the
Supplemental Register the "PAPA BANANA CATSUP Label";

7. On August 11, 1983, Hernan D. Reyes was issued Certificate of Registration No.
SR-6282 which was subsequently assigned to Acres & Acres Food, Inc.,
Southeast Asia Food, Inc., Heinz-UFC Philippines, Inc.;

8. After its expiration, Opposer filed on November 15, 2006 Trademark Application
Serial No. 4-2006-012346 for the re-registration of the "PAPA Label Design";

9. The mark "PAPA KETSARAP" for use on banana sauce falling under Class 30
was also registered in favor of Acres & Acres Food, Inc. under Registration No.
34681 issued on August 23, 1985 and renewed last August 23, 2005 by Heinz-
UFC Philippines, Inc. for ten (10) years;

10. On November 07, 2006, Registration No. 34681 was assigned to Opposer;

11. Opposer has not abandoned the use of the mark "PAPA" and the variations
thereof as Opposer has continued their use up to the present;

12. The mark "PAPA BOY & DEVICE" is identical to the mark "PAPA" owned by
Opposer and duly registered in its favor, particularly the dominant feature thereof;

13. [With the] dominant feature of respondent-applicant's mark "PAPA BOY &
DEVICE", which is Opposer's "PAPA" and the variations thereof, confusion and
deception is likely to result: The consuming public, particularly the unwary
customers, will be deceived, confused, and mistaken into believing that
respondent-applicant's goods come from Opposer or are authorized by Opposer to
Opposer's prejudice, which is particularly true considering that Opposer's sister
company, Southeast Asia Food, Inc., and its predecessors-in-interest have been
major manufacturers and distributors of lechon sauce and other table sauces since
1965 under its registered mark "Mang Tomas";

14. Respondent-applicant's mark "PAPA BOY & DEVICE" which nearly resembles
Opposer's mark "PAPA" and the variations thereof will impress upon the gullible
or unsuspecting public that it is the same or related to Opposer as to source
because its dominant part is the same as Opposer's mark and, thus, will likely be
mistaken to be the mark, or related to, or a derivative or variation of, Opposer's
mark;

15. The goods covered by respondent-applicant's application fall under Class 30, the
same Class under which Opposer's goods enumerated in its earlier issued
registrations;
 16. The test of dominancy is now explicitly incorporated into law in Section 155.1 of
the IP Code which defines infringement as the colorable imitation of a registered
mark or a dominant feature thereof, and is provided for by jurisprudence;

17. As a corporation also engaged in the food business, Respondent- applicant knew
and/or ought to know that Opposer and its predecessors-in-interest have been
using the mark "PAPA" and the variations thereof for the last fifty-two (52) years
while its sister company is engaged in the business of manufacturing and
distributing "lechon sauce" and other table sauces for the last forty-one (41) years;

18. The approval of the subject application will violate Opposer's right to the
exclusive use of its registered mark "PAPA" and the variations thereof per Section
13 8 of the IP Code;

19. The approval of the subject application has caused and will continue to cause
great and irreparable damage and injury to Opposer;

20. Respondent-applicant filed the subject application fraudulently and in bad faith;
and

21. Respondent-applicant is not entitled to register the subject mark in its favor.8

In its verified opposition before the IPO, petitioner contended that "PAPA BOY & DEVICE" is
confusingly similar with its "PAPA" marks inasmuch as the former incorporates the term
"PAPA," which is the dominant feature of petitioner's "PAPA" marks. Petitioner averred that
respondent's use of "PAPA BOY & DEVICE" mark for its lechon sauce product, if allowed,
would likely lead the consuming public to believe that said lechon sauce product originates from
or is authorized by petitioner, and that the "PAPA BOY & DEVICE" mark is a variation or
derivative of petitioner's "PAPA" marks. Petitioner argued that this was especially true
considering that petitioner's ketchup product and respondent's lechon sauce product are related
articles that fall under the same Class 30.9
chanroblesvirtuallawlibrary

Petitioner alleged that the registration of respondent's challenged mark was also likely to damage
the petitioner, considering that its former sister company, Southeast Asia Food, Inc., and the
latter's predecessors-in-interest, had been major manufacturers and distributors of lechon and
other table sauces since 1965, such as products employing the registered "Mang Tomas" mark.

In its Verified Answer, respondent argued that there is no likelihood of confusion between
petitioner's family of "PAPA" trademarks and respondent's "PAPA BOY & DEVICE"
trademark. Respondent raised affirmative defenses and we quote the relevant ones below:

3. Opposer cites several of its following marks in support of its opposition to the application but
an examination of said marks [reveals] that these have already expired and/or that no confusing
similarity exists x xx;

4. Assuming that the mark "PAPA KETSARAP" had been timely renewed on August 23, 2005
for "banana sauce" under Class 30, the same is not a hindrance to the successful registration of
the mark "PAPA BOY & DEVICE": Jurisprudence provides that a certificate of registration
confers upon the trademark owner the exclusive right to use its own symbol only to those goods
specified in the certificate subject to the conditions and limitations stated therein;

5. As a result, Opposer's right to use the mark "PAPAKETSARAP" is limited to the products
covered by its certificate of registration which is Class 30 for banana sauce;

6. Contrary to Opposer's belief, the dominant features of Respondent-applicant's mark "PAPA

BOY & DEVICE" are the words "PAPA BOY" and the representation of a smiling hog-like
character gesturing the thumbs-up sign and wearing a traditional Filipino hat and scarf while the
dominant feature of Opposer's mark "PAPA KETSARAP" are the words "Papa" and "Ketsarap",
not the word "Papa"; and the word "Ketsarap " is more prominently printed and displayed in the
foreground than the word "Papa" for which reasons opposer's reference to the Dominancy Test
fails;

7. Opposer's allegation that the registration of Respondent-applicant's mark "PAPA BOY &
DEVICE" will damage and prejudice the mark "MANG TOMAS" is irrelevant considering that
Opposer's basis for filing this opposition is the alleged confusing similarity between Respondent-
applicant's mark and Opposer's mark "PAPA KETSARAP", not the mark "MANG TOMAS";

8. Respondent-applicant's mark "PAPA BOY & DEVICE" is neither identical nor confusingly
similar to Opposer's mark "PAPA KETSARAP": Respondent-applicant's mark "PAPABOY &
DEVICE" is an arbitrary mark which differs in overall sound, spelling, meaning, style,
configuration, presentation, and appearance from Opposer's mark "PAPA KETSARAP";

9. The dissimilarities between the marks are so distinct, thus, confusion is very unlikely: While
Opposer's mark is a plain word mark, Respondent-applicant's mark "PAPA BOY & DEVICE" is
much more intricate and distinctive such as Opposer's mark not having the words "Lechon
Sauce" printed inside a blue ribbon-like device which is illustrated below the words "PAPA
BOY", Opposer's mark not having a prominent smiling hog-like character gesturing a thumbs-up
sign and wearing a Filipino hat and scarf stands beside the words "PAPA BOY", and Opposer's
mark not having the words "Barrio Fiesta" albeit conspicuously displayed above the mark, all
which leave no doubt in the consumer's mind on the product that he is purchasing;

10. Aside from the fact that Respondent-applicant's mark "PAPA BOY & DEVICE" is distinct
and different in appearance, spelling, sound, meaning, and style from Opposer's mark "PAPA
KETSARAP", the difference in the goods covered by both marks is obvious: Since the goods
covered by Respondent-applicant's mark is unrelated and non- competing to those covered by
Opposer's mark, the doctrine allowing the registrations of marks covering unrelated and non-
competing goods as enunciated by the Supreme Court is therefore applicable in this case;

11. Respondent-applicant's mark cannot be confusingly similar to Opposer's mark considering

that the products covered by these marks are different: While Respondent-applicant's mark
"PAPA BOY & DEVICE" covers lechon sauce under Class 30, Opposer's mark "PAPA
KETSARAP" covers banana sauce;
12. If a consumer is in the market for banana sauce, he will not buy lechon sauce and vice-versa
and as a result, the margin of error in the acquisition of one from the other is simply remote;

13. Respondent-applicant is the exclusive owner of the mark "PAPA BOY & DEVICE" for
lechon sauce under Class 30: The words "PAPA BOY" is a combination of the nickname of
Bonifacio Ongpauco who is one of Respondent-applicant's incorporators and founders- "BOY"-
and the word "PAPA" as Bonifacio Ongpauco's mother, Sixta P. Evangelista, had been fondly
known as "Mama Chit", making Respondent-applicant the prior adopter, user, and applicant of
the mark "PAPA BOY & DEVICE" in the Philippines;

14. To protect its ownership over the mark "PAPA BOY & DEVICE" considering that it is the
first to adopt and use said mark, Respondent-applicant applied for its registration under
Application Serial No. 4-2002-002757 for Class 30, and said application was found registrable
by the Examiner as a consequence of which the same was recommended for allowance after
undergoing a thorough process of examination, which recommendation was then approved by
the Director of the Bureau of Trademarks (BOT);

15. Respondent-applicant's mark "PAPA BOY & DEVICE" has been commercially used in the
Philippines;

16. Respondent-applicant's mark "PAPA BOY & DEVICE" has been promoted and advertised
for a considerable duration of time and over wide geographical areas: Respondent-applicant has
invested tremendous amount of resources in the promotion of its mark "PAPA BOY &
DEVICE" through various media including print publications and promotional materials;

17. The widespread local commercial use of the subject mark by Respondent-applicant to
distinguish and identify its various high-quality consumer products has earned Respondent-
applicant a well-deserved business reputation and goodwill;

18. Respondent-applicant's mark is distinctive and capable of identifying its goods and
distinguishing them from those offered for sale by others in the market including Opposer's
goods for which reason no confusion will result because Respondent-applicant's mark is for
lechon sauce while Opposer's mark is for banana sauce; and

19. The presence of a common prefix "PAPA" in the marks of both parties does not render said
marks identical or confusingly similar: Opposer cannot exclusively appropriate said prefix
considering that other marks such as "Papa Heinz Pizza", "Papa Heinz Sausage", "Papa Beaver",
"Papa Pop", "Pizza Papa John's & Design", "Papadoods", and "Papa in Wine and Device" are
valid and active.10
chanrobleslaw

Petitioner's mark and its variations appear as follows:

1. 1. "PAPA" under Registration No. 32416 for Class 29 goods;11

(Please see image G.R. No. 198889 page 7.)

 2. The mark "PAPA" as it appeared upon re-registration of Certificate No. 32416, under
Application No. 4-2005-010788 for Classes 29 and 30 goods;12

(Please see image G.R. No. 198889 page 7.)

3. "PAPA LABEL DESIGN" under Registration No. 4-2006-012364;13 and

(Please see image G.R. No. 198889 page 7.)

4. "PAPA KETSARAP" under Certificate of Registration No. 34681, for banana sauce
(Class 30).14

(Please see image G.R. No. 198889 page 8.)

PROCEEDINGS BEFORE THE INTELLECTUAL PROPERTY OFFICE

The case was referred to mediation but the parties failed to arrive at an amicable settlement. The
case was thus set for preliminary conference. Subsequently, the IPO-BLA directed the parties to
file their respective position papers and draft decisions.

The IPO-BLA rendered a Decision on March 26, 2008 sustaining petitioner's Opposition and
rejecting respondent's application for "PAPA BOY & DEVICE." The fallo of said decision reads
as follows:

WHEREFORE, the VERIFIED NOTICE OF OPPOSITION filed by UFC Philippines, Inc. is, as
it is hereby, SUSTAINED. Consequently, Application Serial No. 4-2002-002757 for the mark
"PAPA BOY & DEVICE" for lechon sauce under Class 30 filed on April 04, 2002 by Barrio
Fiesta Manufacturing Corporation, is, as it is hereby, REJECTED. Let the file wrapper of PAPA
BOY & Device subject matter of this case be forwarded to the Bureau of Trademarks (BOT) for
appropriate action in accordance with this Decision.15chanrobleslaw

Respondent filed an appeal before the IPO Director General, who found it unmeritorious, and
disposed of the case in the following manner:

WHEREFORE, the instant appeal is hereby DISMISSED. Let a copy of this Decision as well as
the trademark application and records be furnished and returned to the Director of the Bureau of
Legal Affairs for appropriate action. Further, let also the Director of the Bureau of Trademarks
and the library of the Documentation, Information and Technology Transfer Bureau be furnished
a copy of this Decision for information, guidance, and records purposes."16

DECISION OF THE COURT OF APPEALS

Respondent then filed a petition with the Court of Appeals, questioning the above decision of the
IPO Director General that affirmed the decision of the IPO Bureau of Legal Affairs Director,
which disallowed respondent's application for trademark registration. Respondent's arguments
before the Court of Appeals are quoted below:

A.

REGISTRATION NOS. 32416 AND 42005010788 ISSUED FOR THE "PAPA" MARK AND
REGISTRATION NOS. SR-6282 AND 42006012364 ISSUED FOR THE TRADEMARK
"PAPA BANANA CATSUP LABEL/PAPA LABEL DESIGN" SHOULD NOT BE USED AS
BASIS IN DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY.

B.

THERE IS NO CONFUSING SIMILARITY BETWEEN PETITIONER-APPLICANT'S "PAPA

BOY & DEVICE" AND RESPONDENT'S "PAPA KETSARAP" MARK.

C.

PETITIONER-APPLICANT IS ENTITLED TO THE REGISTRATION OF THE MARK

"PAPA BOY & DEVICE."

D.

THE OPPOSITION STATES NO CAUSE OF ACTION, AND HENCE, SHOULD BE

DENIED OUTRIGHT.17 chanrobleslaw

As regards the first ground, the Court of Appeals held:

Records show that respondent UFC has Certificates of Registration for the trademarks PAPA,
PAPA BANANA CATSUP label and PAPA KETSARAP. A closer look at the respective
Certificate[s] of Registration of the aforementioned marks, however, reveals that at the time the
trademark application of petitioner was published in the IPO e-Gazette on September 8, 2006,
the duration of the trademark registration of respondent over the marks PAPA and PAPA
BANANA CATSUP have already expired. On the other hand, the mark PAPA KETSARAP
was timely renewed by respondent as shown by the Certificate of Renewal of Registration
issued on September 1, 2006 by the Director of the Bureau of Trademarks.

Under R.A. No. 8293, as amended by R.A. No. 9150, the duration of a trademark registration is
10 years, renewable for periods of 10 years each renewal. The request for renewal must be made
within 6 months before or after the expiration of the registration. Respondent's PAPA mark was
not renewed within the period provided for under RA No. 8293. Its registered term ended on
August 11, 2003 but was reapplied for registration only on April 4, 2005. Meanwhile, the mark
PAPA BANANA CATSUP was registered by respondent only in the Supplemental Register,
hence, was not provided any protection, x x x. It is noted that the PAPA BANANA CATSUP
label was applied for registration on November 15, 2006, over three years after the expiration of
its registration in the Supplemental Register of the Philippine Patent Office on August 11, 2003.
Thus, while petitioner has a point that the marks PAPA and PAPA BANANA CATSUP
have already expired and the latter having been afforded no protection at all and should
not be juxtaposed with petitioner's trademark, respondent can still use the marks PAPA
KETSARAP and PAPA BANANA CATSUP, it appearing that the Intellectual Property
Office issued a Certificate of Registration No. 4-2006-012364 for the latter on April 30,
2007, to bar the registration of petitioner's "PAPA BOY & DEVICE" mark.18 (Emphases
supplied, citations omitted.)

Anent the second ground, the Court of Appeals ruled in the following manner:

After taking into account the aforementioned doctrines and the factual circumstances of
the case at bar, this Court, after considering the trademarks involved as a whole, is of the
view that petitioner's trademark "PAPA BOY & DEVICE" is not confusingly similar to
respondent's "PAPA KETSARAP" and "PAPA BANANA CATSUP" trademark.
Petitioner's trademark is "PAPA BOY" as a whole as opposed to respondent's "PAPA". Although
on its label the word "PAPA" is prominent, the trademark should be taken as a whole and not
piecemeal. The difference between the two marks are conspicuous and noticeable. While
respondent's products are both labeled as banana sauces, that of petitioner Barrio Fiesta is labeled
as lechon sauce.

Moreover, it appears on the label of petitioner's product that the said lechon sauce is
manufactured by Barrio Fiesta thus, clearly informing the public [of) the identity of the
manufacturer of the lechon sauce. As claimed by respondent, its products have been in
commercial use for decades. It is safe to assume then that the consumers are already aware that
"PAPA KETSARAP" and "PAPA BANANA CATSUP" are products of UFC and not of
petitioner or the other way around. In addition, as correctly pointed out by petitioner, if a
consumer is in the market for banana sauce, he will not buy lechon sauce and vice-versa because
aside from the fact that the labels of both parties' products contain the kind of sauce they are
marketing, the color of the products is visibly different. An ordinary consumer is familiar with
the fact that the color of a banana sauce is red while a lechon sauce is dark brown. There can be
no deception as both products are marketed in bottles making the distinction visible to the eye of
the consumer and the likelihood of acquiring a wrong sauce, remote. Even if the products are
placed side by side, the dissimilarities between the two marks are conspicuous, noticeable and
substantial enough to matter especially in the light of the following variables that must be
factored in.
Lastly, respondent avers that the word "PAPA" was coined after the surname of the person who
first created and made use of the mark. Admittedly, while "PAPA" is a surname, it is more
widely known as a term of endearment for one's father. Respondent cannot, therefore, claim
exclusive ownership over and singular use of [the] term. Petitioner was able to explain that it
adopted the word "PAPA" in parallel to the nickname of the founder of Barrio fiesta which is
"MAMA CHIT". "PAPA BOY" was derived from the nickname of one of the incorporators of
herein petitioner, a certain Bonifacio Ongpauco, son of Mama Chit.19(Emphasis ours, citation
omitted.)

THEORY OF PETITIONER

Thus, petitioner came to this Court, seeking the reversal of the questioned decision and
resolution of the Court of Appeals, and the reinstatement of the decision of the IPO Director
General affirming the decision of the IPO-BLA. Petitioner raises the following grounds:

I.

The court a quo erred in applying the "holistic test" to determine whether there is confusing
similarity between the contending marks, and in reversing the IPO-BLA and the Director
General's application of the "dominancy test."

II.

The court a quo erred in holding that there is no likelihood of confusion between the contending
marks given that the "PAPA BOY & DEVICE" mark is used on lechon sauce, as opposed to
ketchup products.

III.

The court a quo erred in holding that Petitioner cannot claim exclusive ownership and use of the
"PAPA" mark for its sauce products because "PAPA" is supposedly a common term of
endearment for one's father.20chanrobleslaw

Under the first ground, petitioner submitted the following arguments:

1. The findings of administrative agencies, if supported by substantial evidence, are

binding upon the courts.21

Petitioner alleges that the Court of Appeals should have respected the ruling of the IPO Director
General, which was consistent with the ruling of the IPO-BLA and supported by substantial
evidence, instead of substituting its findings of fact for those of the Director General and the
IPO-BLA.

2. The dominancy test should have been applied to determine if there is confusing
similarity between the competing marks.22

Petitioner points out that the Director General and the IPO-BLA found that the dominant feature
of the competing marks is the word "PAPA" and the minor additions to respondent's "PAPA
BOY & DEVICE" mark do not negate likelihood of confusion caused by the latter's use of the
dominant word "PAPA." Petitioner claims that even compared solely to petitioner's "PAPA
KETSARAP" mark (Registration No. 34681), which is conceded to have been timely renewed
and to have never expired, respondent's "PAPA BOY & DEVICE" would still create the
likelihood of confusion.23 chanroblesvirtuallawlibrary

According to petitioner, the Court of Appeals based its decision on Mead Johnson & Co. v.
N.V.J. Van Dorp, Ltd.,24 a case decided almost five decades ago, long before Republic Act No.
8293 or the 1998 Intellectual Property Code was enforced. Thus, the Court of Appeals
erroneously applied the holistic test since given the nature of the products bearing the competing
marks, the dominancy test should have been applied.

Petitioner claims that "[k]etchup and lechon sauce are common and inexpensive household
products that are sold in groceries and regularly encountered by the ordinary or common
purchaser who is not expected to examine, scrutinize, and compare the details of the competing
marks."25cralawred

Petitioner distinguishes this case from Mead Johnson and claims that the ordinary purchaser of
ketchup or lechon sauce is not likely to closely scrutinize each mark as a whole, for the latter is
"undiscerningly rash" and usually in a hurry, and cannot be expected to take note of the smiling
hog-like character or the blue ribbon-like device with the words "Lechon Sauce." Petitioner
argues that under the Intellectual Property Code, it is not necessary for one to colorably imitate
the competing trademark as a whole. It is sufficient that one imitates a "dominant feature" of the
mark to constitute trademark infringement.

Petitioner asserts that as the IPO-BLA and the Director General observed that the ordinary
purchaser is most likely to notice the words "PAPA BOY," which, in turn, may lead him to
believe that there is a connection between respondent's lechon sauce and petitioner's ketchup
products.

Under the second ground, petitioner argues that the Court of Appeals seemed to be unmindful
that two kinds of confusion may arise from the use of similar or colorable imitation marks, i.e.,
confusion of goods (product confusion) and confusion of business (source or origin confusion).
Petitioner claims that it is reasonable to assume that it may expand its business to producing
lechon sauce, inasmuch as it already produces food sauce products and its Articles of
Incorporation authorizes it to do so.
Petitioner alleges that the IPO-BLA recognized that confusion of business may arise from
respondent's use of its "PAPA BOY & DEVICE" mark for lechon sauce products, and that the
Director-General agreed with the IPO-BLA's findings on this issue.

Petitioner asserts that ketchup and lechon sauce are undeniably related goods; that they belong to
the same class, i.e., Class 30 of the Nice Classifications; that they serve practically the same
purpose, i.e., to spice up dishes; and that they are sold in similar bottles in the same shelves in
grocery stores. Petitioner argues that the Court of Appeals had absolutely no basis for stating that
a person who is out to buy ketchup is not likely to buy lechon sauce by mistake, as this analysis
allegedly only applies to "product confusion" and does not consider confusion of business.
Petitioner alleges that "[t]here equally is actionable confusion when a buyer purchases
Respondent's 'PAPA BOY' lechon sauce believing that the said product is related to or associated
with the famous 'PAPA KETSUP' makers." Petitioner further alleges that "it is reasonable and
likely for a consumer to believe that Respondent's 'PAPA BOY' lechon sauce originated from or
is otherwise connected with Petitioner's line of sauces" and that this is "the precise evil that
recognition of confusion of business seeks to prevent."26 chanroblesvirtuallawlibrary

Petitioner avers that "PAPA" is a well-known mark and that it has been in commercial use as
early as 1954 on banana ketchup and similar goods. The "PAPA" mark is also registered as a
trademark and in commercial use in other parts of the world such as the United States of
America and the Middle East. Petitioner claims that "[bjeing a trademark that is registered and
well-known both locally and internationally, Petitioner's 'PAPA' marks cannot be appropriated
by another person or entity not only with respect to goods similar to those with respect to which
it is registered, but also with respect to goods which are not similar to those for which the 'PAPA'
marks are registered."27 chanroblesvirtuallawlib rary

Under the third ground, petitioner claims that the fact that the word "PAPA" is a known term of
endearment for fathers does not preclude it from being used as a mark to identify goods.
Petitioner claims that their mark falls under a type of mark known as "arbitrary or fanciful
marks," which are "marks that bear no logical relation to the actual characteristics of the products
they represent," are "highly distinctive and valid," and "are entitled to the greatest
protection."28
chanroblesvirtuallawlibrary

Petitioner claims that the mark "PAPA" falls under this class of arbitrary marks, even if "PAPA"
is also a common term of endearment for one's father. Petitioner states that there is no logical
connection between one's father and food sauces, such as ketchup; thus, with respect to ketchup,
food sauces, and their related products, and for the purpose of identifying its products, petitioner
claims exclusive ownership of the term "PAPA" as an arbitrary mark.

Petitioner alleges that if respondent "has a good faith and proud desire to unmistakably and
distinctly identify its lechon sauce product out in the market, it should have coined a mark that
departs from and is distinguished from those of its competitors." Petitioner claims that
respondent, with full knowledge of the fame and the decades-long commercial use of petitioner's
"PAPA" marks, opted for "PAPA BOY & DEVICE," which obviously is just a "colorable
imitation."29
THEORY OF RESPONDENT

In its Comment,30 respondent claims that petitioner's marks have either expired and/or "that no
confusing similarity exists between them and respondent's "PAPA BOY & DEVICE' mark."
Respondent alleges that under Section 15 of Republic Act No. 166, a renewal application should
be filed within six months before the expiration of the period or within three months after such
expiration. Respondent avers that the expiration of the 20-year term for the "PAPA" mark under
Registration No. 32416 issued on August 11, 1983 was August 11, 2003. The sixth month before
August 11, 2003 was February 11, 2003 and the third month after August 11, 2003 was
November 11, 2003. Respondent claims that the application that petitioner filed on October 28,
2005 was almost two years late. Thus, it was not a renewal application, but could only be
considered a new application under the new Trademark Law, with the filing date reckoned on
October 28, 2005. The registrability of the mark under the new application was examined again,
and any certificate issued for the registration of "PAPA" could not have been a renewal
certificate.

As for petitioner's other mark "PAPA BANANA CATSUP LABEL," respondent claims that its
20-year term also expired on August 11, 2003 and that petitioner only filed its application for the
new "PAPA LABEL DESIGN" on November 15, 2006. Having been filed three years beyond
the renewal application deadline, petitioner was not able to renew its application on time, and
cannot claim a "continuous existence of its rights over the 'PAPA BANANA CATSUP
LABEL.'" Respondent claims that the two marks are different from each other and that the
registration of one is independent of the other. Respondent concludes that the certificate of
registration issued for "PAPA LABEL DESIGN" is "not and will never be a renewal
certificate."31
chanroblesvirtuallawlibrary

Respondent also avers as follows:

1.3. With regard to the two new registrations of petitioner namely: "PAPA" (Reg. No. 4-2005-
010788) and "PAPA LABEL DESIGN" (Reg. No. 4-2006-012364), these were filed on October
28, 2005 and November 15, 2006, respectively, under the Intellectual Property Code (RA 8293),
which follows the "first to file" rule, and were obviously filed later than respondent's "PAPA
BOY & DEVICE" mark filed on April 4, 2002. These new marks filed much later than the
opposed "PAPA BOY & DEVICE" mark cannot, therefore, be used as basis for the opposition
and should in fact, be denied outrightly.

xxxx

A search of the Online Trademark Database of Intellectual Property Office (IPO) will show that
only Registration No. 34681 issued for "PAPA KETSARAP" was properly renewed on August
23, 2005. x x x Clearly, the registrations of "PAPA" and "PAPA BANANA CATSUP LABEL"
marks under registration nos. 32416 and SR-6282 respectively, have already expired when
Petitioner filed its opposition proceeding against Respondent's trademark on December 11, 2006.
Having expired, and therefore, no longer legally existing, the "PAPA" and "PAPA BANANA
CATSUP LABEL" marks CANNOT BAR the registration of respondent's mark. To allow
petitioner's expired marks to prevent respondent's distinct "PAPA BOY & DEVICE" mark from
being registered would be the ultimate absurdity.32 chanrobleslaw

Respondent posits that the Court of Appeals did not err in reversing the decisions of the
administrative agencies, alleging that "[while] it is true that the general rule is that the factual
findings of administrative bodies deserve utmost respect when supported by evidence, the same
is subject to exceptions,"33 and that the Court of Appeals had justifiable reasons to disregard the
factual finding of the IPO. Here, the Court of Appeals wisely identified certain material facts that
were overlooked by the IPO-BLA and the IPO Director General which it opined, when correctly
appreciated, would alter the result of the case.

Respondent alleges that the IPO-BLA erroneously considered petitioner's marks "PAPA" and
"PAPA BANANA CATSUP LABEL" when it applied the dominancy test in determining
whether petitioner's marks are confusingly similar to those of respondent's mark "PAPA BOY &
DEVICE."

Respondent avers that the IPO-BLA absurdly took emphasis on the mark "PAPA" to arrive at its
decision and did not take into consideration that petitioner's mark was already expired when
respondent applied for the registration of its "PAPA BOY & DEVICE" mark. Respondent
compares its "PAPA BOY & DEVICE" with the only mark that respondent allegedly has,
"PAPA KETSARAP," and found no confusing similarity between the two.

We quote below respondent's discussion of its application of the dominancy test to the marks in
question:

Applying the Dominancy test, as correctly emphasized by the Court of Appeals, the dominant
feature in respondent's mark is "PAPA BOY" and not "PAPA". It can be gleaned from
respondent's mark that the word "PAPA" was written in the same font, style and color as the
word "BOY". There is also the presence of a "smiling hog-like character" which is positioned
very prominently, both in size and location in said mark, at glance (sic) even more dominant than
the word "PAPA BOY".

xxxx

On the other hand, the dominant feature in petitioner's mark is "KETSARAP", not "PAPA".
Even an ordinary examiner could observe that the word "KETSARAP" in petitioner's mark is
more prominently printed than the word "PAPA".

xxxx

In a dominancy test, the prominent feature of the competing trademarks must be similar to cause
confusion or deception, x x x.

Verily, respondent's dominant feature "PAPA BOY" and the smiling hog-like character and
petitioner's dominant feature "KETSARAP", being the word written in a larger font, are neither
confusing nor deceiving to the public. In fact, the differences between their dominant marks are
very noticeable and conspicuous to every purchaser.

Furthermore, the Supreme Court in Societe des Produits Nestle, S.A. v. Dy [641 Phil. 345],
applied the dominancy test by taking into account the aural effects of the words and letters
contained in the marks in determining the issue of confusing similarity. Obviously, petitioners'
"PAPA KETSARAP" mark does not in any way sounds (sic) like respondent's "PAPA BOY"
mark. The common prefix "PAPA" does not render the marks aurally the same. As discussed
above, the dominant feature in petitioner's mark is "KETSARAP" and the dominant feature in
respondent's mark is "PAPA BOY". Thus, the words "KETSARAP" and "PAPA BOY" in
petitioner's and respondent's respective marks are obviously different in sound, making "PAPA
BOY & DEVICE" even more distinct from petitioner's "PAPA KETSARAP" mark.35 chanrobleslaw

Using the holistic test, respondent further discusses the differences in the marks in this wise:

Even the use of the holistic test x x x takes into consideration the entirety of the marks in
question [to] be considered in resolving confusing similarity. The differences are again very
obvious. Respondent's mark has (1) the word "lechon sauce" printed inside a blue ribbon-like
device which is illustrated below the word "PAPA BOY"; (2) a prominent smiling hog-like
character gesturing a thumbs-up sign and wearing a Filipino hat and scarf stands beside the word
"PAPA BOY"; and the word "BARRIO FIESTA" conspicuously displayed above the said
trademark which leaves no doubt in the consumer's mind on the product that he or she is
purchasing. On the other hand, petitioner's mark is the word "PAPA" enclosed by a cloud on top
of the word "KETSARAP' enclosed by a geometrical figure.

xxxx

In the instant case, the respective marks are obviously different in color scheme, logo, spelling,
sound, meaning and connotation. Thus, yet again, under the holistic test there can be no
confusion or deception between these marks.

It also bears stressing that petitioner's "PAPA KETSARAP" mark covers "banana catsup" while
respondent's "PAPA BOY & DEVICE" covers "lechon sauce", thereby obliterating any
confusion of products of both marks as they travel different channels of trade. If a consumer is in
the market for banana catsup, he or she will not buy lechon sauce and vice-versa. As a result, the
margin of error in the acquisition of one for the other is simply remote. Lechon sauce which is
liver sauce is distinct from catsup extracted/ made from banana fruit. The flavor and taste of a
lechon sauce are far from those of a banana catsup. Lechon sauce is sauce for "lechon" while
banana catsup is apparently catsup made from banana.36 chanrobleslaw

Respondent also contends that "PAPA BOY & DEVICE" mark is not confusingly similar to
petitioner's trademark "PAPA KETSARAP" in terms of appearance, sound, spelling and
meaning. The difference in nature, usage, taste and appearance of products decreases the
possibility of deception among buyers.37 chanroblesvirtuallawlibrary

Respondent alleges that since petitioner merely included banana catsup as its product in its
certificate, it cannot claim any further right to the mark "PAPA KETSARAP" on products other
than banana catsup. Respondent also alleges that petitioner cannot raise "international notoriety
of the mark" for the first time on appeal and that there is no proof that petitioner's mark is
internationally well-known.38 chanroblesvirtuallawlibrary

Furthermore, respondent argues that petitioner cannot claim exclusive ownership over the use of
the word "PAPA," a term of endearment for one's father. Respondent points out that there are
several other valid and active marks owned by third parties which use the word "PAPA," even in
classes of goods similar to those of petitioner's. Respondent avers that petitioner's claim that its
"PAPA" mark is an arbitrary mark is belatedly raised in the instant petition, and cannot be
allowed because the "PAPA KETSARAP" mark would immediately bring the consuming public
to thinking that the product involved is catsup and the description of said catsup is "masarap"
(delicious) and due to the logical relation of the petitioner's mark to the actual product, it being
descriptive or generic, it is far from being arbitrary or fanciful.39
chanroblesvirtuallawlibrary

Lastly, respondent claims that the Court of Appeals correctly ruled that respondent's product
cannot be confused as originating from the petitioner. Since it clearly appears in the product label
of the respondent that it is manufactured by Barrio Fiesta, the public is dutifully informed of the
identity of the lechon sauce manufacturer. The Court of Appeals further took into account the
fact that petitioner's products have been in commercial use for decades.40 chanroblesvirtuallawlibrary

Petitioner, in its Reply41 to respondent's Comment, contends that respondent cannot invoke a
prior filing date for the "PAPA BOY" mark as against Petitioner's "PAPA" and "PAPA
BANANA CATSUP LABEL" marks, because the latter marks were still registered when
respondent applied for registration of its "PAPA BOY" mark. Thus, the IPO-BLA and Director
General correctly considered them in deciding whether the "PAPA BOY" mark should be
registered, using the "first to file" rule under Section 123.1(d) of Republic Act No. 8293, or the
Intellectual Property Code (IP Code).

Petitioner reiterates its argument that the Court of Appeals erred in applying the holistic test and
that the proper test under the circumstances is the dominancy test, which was correctly applied
by the IPO-BLA and the Director General.42

THIS COURT'S RULING

The petition has merit. We find that the Court of Appeals erred in applying the holistic test and
in reversing and setting aside the decision of the IPO-BLA and that of the IPO Director General,
both of which rejected respondent's application for the mark "PAPA BOY & DEVICE."

In Dermaline, Inc. v. Myra Pharmaceuticals, Inc.,43 we defined a trademark as "any distinctive

word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a
manufacturer or merchant on his goods to identify and distinguish them from those
manufactured, sold, or dealt by others." We held that a trademark is "an intellectual property
deserving protection by law."

The rights of the trademark owner are found in the Intellectual Property Code, which provides:
Section 147. Rights Conferred. - 147.1. The owner of a registered mark shall have the exclusive
right to prevent all third parties not having the owner's consent from using in the course of trade
identical or similar signs or containers for goods or services which are identical or similar to
those in respect of which the trademark is registered where such use would result in a likelihood
of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of
confusion shall be presumed.

Section 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person who has
identified in the mind of the public the goods he manufactures or deals in, his business or
services from those of others, whether or not a registered mark is employed, has a property right
in the goodwill of the said goods, business or services so identified, which will be protected in
the same manner as other property rights.

The guideline for courts in determining likelihood of confusion is found in A.M. No. 10-3-10-
SC, or the Rules of Procedure for Intellectual Property Rights Cases, Rule 18, which provides:

RULE 18

Evidence in Trademark Infringement and Unfair Competition Cases SECTION 1. Certificate of

Registration. — A certificate of registration of a mark shall be prima facie evidence of:

a) the validity of the registration; b) the registrant's ownership of the mark; and

c) the registrant's exclusive right to use the same in connection with the goods or services and
those that are related thereto specified in the certificate.

xxxx

SECTION 3. Presumption of Likelihood of Confusion. — Likelihood of confusion shall be

presumed in case an identical sign or mark is used for identical goods or services.

SECTION 4. Likelihood of Confusion in Other Cases. — In determining whether one trademark

is confusingly similar to or is a colorable imitation of another, the court must consider 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. Visual,
aural, connotative comparisons and overall impressions engendered by the marks in controversy
as they are encountered in the realities of the marketplace must be taken into account. Where
there are both similarities and differences in the marks, these must be weighed against one
another to see which predominates.

In determining likelihood of confusion between marks used on non-identical goods or services,

several factors may be taken into account, such as, but not limited to:

a) the strength of plaintiff s mark;

b) the degree of similarity between the plaintiffs and the defendant's marks;

c) the proximity of the products or services;

d) the likelihood that the plaintiff will bridge the gap;

e) evidence of actual confusion;

f) the defendant's good faith in adopting the mark;

g) the quality of defendant's product or service; and/or h) the sophistication of the buyers.

"Colorable imitation" denotes such a close or ingenious imitation as to be calculated to deceive

ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser
giving such attention as a purchaser usually gives, as to cause him to purchase the one supposing
it to be the other.

SECTION 5. Determination of Similar and Dissimilar Goods or Services. — Goods or services

may not be considered as being similar or dissimilar to each other on the ground that, in any
registration or publication by the Office, they appear in different classes of the Nice
Classification.

In this case, the findings of fact of the highly technical agency, the Intellectual Property Office,
which has the expertise in this field, should have been given great weight by the Court of
Appeals. As we held in Berris Agricultural Co., Inc. v. Abyadang44:

R.A. No. 8293 defines a "mark" as 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. It also defines a "collective mark" as any visible sign designated as such in
the application for registration and capable of distinguishing the origin or any other common
characteristic, including the quality of goods or services of different enterprises which use the
sign under the control of the registered owner of the collective mark.

On the other hand, R.A. No. 166 defines a "trademark" as any distinctive word, name, symbol,
emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or
merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt
by another. A trademark, being a special property, is afforded protection by law. But for one to
enjoy this legal protection, legal protection ownership of the trademark should rightly be
established.

The ownership of a trademark is acquired by its registration and its actual use by the
manufacturer or distributor of the goods made available to the purchasing public. Section 122 of
R.A.. No. 8293 provides that the rights in a mark shall be acquired by means of its valid
registration with the IPO. A certificate of registration of a mark, once issued, constitutes prima
facie evidence of the validity of the registration, of the registrant's ownership of the mark, and of
the registrant's exclusive right to use the same in connection with the goods or services and those
that are related thereto specified in the certificate. R.A. No. 8293, however, requires the applicant
for registration or the registrant to file a declaration of actual use (DAU) of the mark, with
evidence to that effect, within three (3) years from the filing of the application for registration;
otherwise, the application shall be refused or the mark shall be removed from the register. In
other words, the prima facie presumption brought about by the registration of a mark may be
challenged and overcome, in an appropriate action, by proof of the nullity of the registration or
of non-use of the mark, except when excused. Moreover, the presumption may likewise be
defeated by evidence of prior use by another person, i.e., it will controvert a claim of legal
appropriation or of ownership based on registration by a subsequent user. This is because a
trademark is a creation of use and belongs to one who first used it in trade or commerce.

The determination of priority of use of a mark is a question of fact. Adoption of the mark alone
does not suffice. One may make advertisements, issue circulars, distribute price lists on certain
goods, but these alone will not inure to the claim of ownership of the mark until the goods
bearing the mark are sold to the public in the market. Accordingly, receipts, sales invoices, and
testimonies of witnesses as customers, or orders of buyers, best prove the actual use of a mark in
trade and commerce during a certain period of time.

xxxx

Verily, the protection of trademarks as intellectual property is intended not only to preserve the
goodwill and reputation of the business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as consumers against confusion on
these goods. On this matter of particular concern, administrative agencies, such as the IPO,
by reason of their special knowledge and expertise over matters falling under their
jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact
in that regard are generally accorded great respect, if not finality by the courts, as long as
they are supported by substantial evidence, even if such evidence might not be
overwhelming or even preponderant. It is not the task of the appellate court to weigh once
more the evidence submitted before the administrative body and to substitute its own
judgment for that of the administrative agency in respect to sufficiency of evidence.
(Emphasis added, citations omitted.)

In trademark controversies, each case must be scrutinized according to its peculiar

circumstances, such that jurisprudential precedents should only be made to apply if they are
specifically in point.45 The cases discussed below are mentioned only for purposes of lifting the
applicable doctrines, laws, and concepts, but not for their factual circumstances, because of the
uniqueness of each case in controversies such as this one.

There are two tests used in jurisprudence to determine likelihood of confusion, namely the
dominancy test used by the IPO, and the holistic test adopted by the Court of Appeals. In
Skechers, U.S.A., Inc. v. Inter Pacific Industrial Trading Corp.,46 we held:

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to
cause confusion. In determining similarity and likelihood of confusion, jurisprudence has
developed tests — the Dominancy Test and the Holistic or Totality Test. The Dominancy Test
focuses on the similarity of the prevalent or dominant features of the competing trademarks that
might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication
or imitation is not necessary; neither is it required that the mark sought to be registered suggests
an effort to imitate. Given more consideration are the aural and visual impressions created by the
marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and
market segments.

xxxx

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily
prudent purchaser would be induced to purchase one product in the belief that he was purchasing
the other; and (2) confusion of business (source or origin confusion), where, although the goods
of the parties are different, the product, the mark of which registration is applied for by one
party, is such as might reasonably be assumed to originate with the registrant of an earlier
product, and the public would then be deceived either into that belief or into the belief that there
is some connection between the two parties, though inexistent.

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S"
by respondent in its Strong rubber shoes infringes on the mark already registered by petitioner
with the IPO. While it is undisputed that petitioner's stylized "S" is within an oval design, to this
Court's mind, the dominant feature of the trademark is the stylized "S," as it is precisely the
stylized "S" which catches the eye of the purchaser. Thus, even if respondent did not use an oval
design, the mere fact that it used the same stylized "S", the same being the dominant feature of
petitioner's trademark, already constitutes infringement under the Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly
be considered as highly identifiable to the products of petitioner alone. The CA even supported
its conclusion by stating that the letter "S" has been used in so many existing trademarks, the
most popular of which is the trademark "S" enclosed by an inverted triangle, which the CA says
is identifiable to Superman. Such reasoning, however, misses the entire point, which is that
respondent had used a stylized "S," which is the same stylized "S" which petitioner has a registered
trademark for. The letter "S" used in the Superman logo, on the other hand, has a block-like tip
on the upper portion and a round elongated tip on the lower portion. Accordingly, the
comparison made by the CA of the letter "S" used in the Superman trademark with petitioner's
stylized "S" is not appropriate to the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based
on the font and the size of the lettering, the stylized "S" utilized by respondent is the very same
stylized "S" used by petitioner; a stylized "S" which is unique and distinguishes petitioner's
trademark. Indubitably, the likelihood of confusion is present as purchasers will associate the
respondent's use of the stylized "S" as having been authorized by petitioner or that respondent's
product is connected with petitioner's business.

XXXX
While there may be dissimilarities between the appearances of the shoes, to this Court's mind
such dissimilarities do not outweigh the stark and blatant similarities in their general features, x x
x.

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the
holistic test, ruled that there was no colorable imitation, when it cannot be any more clear and
apparent to this Court that there is colorable imitation. The dissimilarities between the shoes are
too trifling and frivolous that it is indubitable that respondent's products will cause confusion and
mistake in the eyes of the public. Respondent's shoes may not be an exact replica of petitioner's
shoes, but the features and overall design are so similar and alike that confusion is highly likely.

xxxx

Neither can the difference in price be a complete defense in trademark infringement. In

McDonald's Corporation v. L.C. Big Mak Burger, Inc., this Court held:

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 lead to 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). x x x.

Indeed, the registered trademark owner may use its 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 purchasing public might be mistaken in
thinking that petitioner had ventured into a lower market segment such that it is not
inconceivable for the public to think that Strong or Strong Sport Trail might be associated or
connected with petitioner's brand, which scenario is plausible especially since both petitioner and
respondent manufacture rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the
goodwill and reputation of the business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as consumers against confusion on
these goods. While respondent's shoes contain some dissimilarities with petitioner's shoes, this
Court cannot close its eye to the fact that for all intents and purpose, respondent had deliberately
attempted to copy petitioner's mark and overall design and features of the shoes. Let it be
remembered, that defendants in cases of infringement do not normally copy but only make
colorable changes. 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. (Citations omitted.)

The Court discussed the concept of confusion of business in the case of Societe Des Produits
Nestle, S.A. v. Dy, Jr.,47 as quoted below:
Among the elements, the element of likelihood of confusion is the gravamen of trademark
infringement. There are two types of confusion in trademark infringement: confusion of goods
and confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer
Aktiengesellschaft, the Court distinguished the two types of confusion:

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." In which case, "defendant's goods are then bought as the plaintiffs, and the
poorer quality of the former reflects adversely on the plaintiffs reputation." The other is the
confusion of business: "Here though the goods of the parties are different, the defendant's 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."

There are two tests to determine likelihood of confusion: the dominancy test and holistic test.
The dominancy test focuses on the similarity of the main, prevalent or essential features of the
competing trademarks that might cause confusion. Infringement takes place when the competing
trademark contains the essential features of another. Imitation or an effort to imitate is
unnecessary. The question is whether the use of the marks is likely to cause confusion or deceive
purchasers.

xxxx

In cases involving trademark infringement, no set of rules can be deduced. Each case must be
decided on its own merits. Jurisprudential precedents must be studied in the light of the facts of
each particular case. In McDonald's Corporation v. MacJoy Fastfood Corporation, the Court
held:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no set rules can be deduced because each case must be decided on its merits. In such
cases, even more than in any other litigation, precedent must be studied in the light of the facts of
the particular case. That is the reason why in trademark cases, jurisprudential precedents should
be applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable.
In recent cases with similar factual milieus, the Court has consistently applied the dominancy
test, x x x.

xxxx

In McDonald's Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy
test in holding that "MACJOY" is confusingly similar to "MCDONALD'S." The Court held:

While we agree with the CA's detailed enumeration of differences between the two (2)
competing trademarks herein involved, we believe that the holistic test is not the one applicable
in this case, the dominancy test being the one more suitable. In recent cases with a similar factual
milieu as here, the Court has consistently used and applied the dominancy test in determining
confusing similarity or likelihood of confusion between competing trademarks.

xxxx

Applying the dominancy test to the instant case, the Court finds that herein petitioner's
"MCDONALD'S" and respondent's "MACJOY" marks are confusingly similar with each other
that an ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Me" and/or
"Mac" as dominant features, x x x.

For sure, it is the prefix "Me," and abbreviation of "Mac," which visually and aurally catches the
attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way
as did "McDonalds," "Mac Fries," "Me Spaghetti," "McDo," "Big Mac" and the rest of the
MCDONALD'S marks which all use the prefixes Me and/or Mac.

Besides and most importantly, both trademarks are used in the sale of fastfood products.
Indisputably, the respondent's trademark application for the "MACJOY & DEVICE" trademark
covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried
chicken, chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioner's trademark
registration for the MCDONALD'S marks in the Philippines covers goods which are similar if
not identical to those covered by the respondent's application.

In McDonald's Corporation v. L.C. Big Mak Burger, Inc., the Court applied the dominancy test
in holding that "BIG MAK" is confusingly similar to "BIG MAC." The Court held:

This Court x x x 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. 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, the Court ruled:

x x x 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; x x x)

xxxx

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

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results
in likelihood of confusion. First, "Big Mak" sounds exactly the 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 "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 Societe Des Produits Nestle, S.A. v. Court of Appeals, the Court applied the dominancy test in
holding that "FLAVOR MASTER" is confusingly similar to "MASTER ROAST" and
"MASTER BLEND." The Court held:

While this Court agrees with the Court of Appeals' detailed enumeration of differences between
the respective trademarks of the two coffee products, this Court cannot agree that totality test is
the one applicable in this case. Rather, this Court believes that the dominancy test is more
suitable to this case in light of its peculiar factual milieu.

Moreover, the 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. The totality or holistic
test only relies on visual comparison between two trademarks whereas the dominancy test relies
not only on the visual but also on the aural and connotative comparisons and overall impressions
between the two trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held
that:

xxxx

The scope of protection afforded to registered trademark owners is not limited to

protection from infringers with identical goods. The scope of protection extends to
protection from infringers with related goods, and to market areas that are the normal
expansion of business of the registered trademark owners. Section 138 of R.A. No. 8293
states:

Certificates of Registration. — A certificate of registration of a mark shall be prima facie

evidence of validity of the registration, the registrant's ownership of the mark, and of the
registrant's exclusive right to use the same in connection with the goods or services and those
that are related thereto specified in the certificate, x x x.

In Mighty Corporation v. E. & J. Gallo Winery, the Court held that, "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." In that case, the Court enumerated factors in
determining whether goods are related: (1) classification of the goods; (2) nature of the goods;
(3) descriptive properties, physical attributes or essential characteristics of the goods, with
reference to their form, composition, texture or quality; and (4) style of distribution and
marketing of the goods, including how the goods are displayed and sold.

xxxx

xxx. However, as the registered owner of the "NAN" mark, Nestle should be free to use its
mark on similar products, in different segments of the market, and at different price levels.
In McDonald's Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of
protection afforded to registered trademark owners extends to market areas that are the normal
expansion of business:

xxxx

Even respondent's use of the "Big Mak" mark on non-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 lead to 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 sq; 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). (Emphases supplied, citations omitted.)

Again, this Court discussed the dominancy test and confusion of business in Dermaline, Inc. v.
Myra Pharmaceuticals, Inc.,48 and we quote:

The Dominancy Test focuses on the similarity of the prevalent features of the competing
trademarks that might cause confusion or deception. It is applied when the trademark sought to
be registered contains the main, essential and dominant features of the earlier registered
trademark, and confusion or deception is likely to result. Duplication or imitation is not even
required; neither is it necessary that the label of the applied mark for registration should suggest
an effort to imitate. The important issue is whether the use of the marks involved would likely
cause confusion or mistake in the mind of or deceive the ordinary purchaser, or one who is
accustomed to buy, and therefore to some extent familiar with, the goods in question. Given
greater consideration are 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. The
test of dominancy is now explicitly incorporated into law in Section 155.1 of R.A. No. 8293
which provides —

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a

registered mark or the same container or a dominant feature thereof in connection with the sale,
offering for sale, distribution, advertising of any goods or services including other preparatory
steps necessary to carry out the sale of any goods or services on or in connection with which
such use is likely to cause confusion, or to cause mistake, or to deceive x x x.

xxxx

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily
prudent purchaser would be induced to purchase one product in the belief that he was purchasing
the other; and (2) confusion of business (source or origin confusion), where, although the goods
of the parties are different, the product, the mark of which registration is applied for by one
party, is such as might reasonably be assumed to originate with the registrant of an earlier
product, and the public would then be deceived either into that belief or into the belief that there
is some connection between the two parties, though inexistent.

xxxx

We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there
are no set rules that can be deduced as what constitutes a dominant feature with respect to
trademarks applied for registration; usually, what are taken into account are signs, color, design,
peculiar shape or name, or some special, easily remembered earmarks of the brand that readily
attracts and catches the attention of the ordinary consumer.

xxxx

Further, Dermaline's stance that its product belongs to a separate and different classification from
Myra's products with the registered trademark does not eradicate the possibility of mistake on the
part of the purchasing public to associate the former with the latter, especially considering that
both classifications pertain to treatments for the skin.

Indeed, the registered trademark owner may use its 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 is cognizant that the registered
trademark owner enjoys protection in product and market areas that are the normal potential
expansion of his business. Thus, we have held —

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 lead to 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).

Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra,
such that, considering the current proliferation of health and beauty products in the market, the
purchasers would likely be misled that Myra has already expanded its business through
Dermaline from merely carrying pharmaceutical topical applications for the skin to health and
beauty services.

Verily, when one applies for the registration of a trademark or label which is almost the same or
that very closely resembles one already used and registered by another, the application should be
rejected and dismissed outright, even without any opposition on the part of the owner and user of
a previously registered label or trademark. This is intended not only to avoid confusion on the
part of the public, but also to protect an already used and registered trademark and an established
goodwill. (Citations omitted.)

Section 123. l(d) of the IP Code provides:

A mark cannot be registered if it:

xxxx

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an
earlier filing or priority date, in respect of:

i. The same goods or services, or

ii. Closely related goods or services, or

iii. If it nearly resembles such a mark as to be likely to deceive or cause confusion[.]

A scrutiny of petitioner's and respondent's respective marks would show that the IPO-BLA and
the IPO Director General correctly found the word "PAPA" as the dominant feature of
petitioner's mark "PAPA KETSARAP." Contrary to respondent's contention, "KETSARAP"
cannot be the dominant feature of the mark as it is merely descriptive of the product.
Furthermore, it is the "PAPA" mark that has been in commercial use for decades and has
established awareness and goodwill among consumers.

We likewise agree with the IPO-BLA that the word "PAPA" is also the dominant feature of
respondent's "PAPA BOY & DEVICE" mark subject of the application, such that "the word
'PAPA' is written on top of and before the other words such that it is the first word/figure that
catches the eyes."49 Furthermore, as the IPO Director General put it, the part of respondent's
mark which appears prominently to the eyes and ears is the phrase "PAPA BOY" and that is
what a purchaser of respondent's product would immediately recall, not the smiling hog.

We quote the relevant portion of the IPO-BLA decision on this point below:

A careful examination of Opposer's and Respondent-applicant's respective marks shows that the
word "PAPA" is the dominant feature: In Opposer's marks, the word "PAPA" is either the mark
by itself or the predominant word considering its stylized font and the conspicuous placement of
the word "PAPA" before the other words. In Respondent-applicant's mark, the word "PAPA" is
written on top of and before the other words such that it is the first word figure that catches the
eyes. The visual and aural impressions created by such dominant word "PAPA" at the least is
that the respective goods of the parties originated from the other, or that one party has permitted
or has been given license to the other to use the word "PAPA" for the other party's product, or
that there is a relation/connection between the two parties when, in fact, there is none. This is
especially true considering that the products of both parties belong to the same class and are
closely related: Catsup and lechon sauce or liver sauce are both gravy-like condiments used to
spice up dishes. Thus, confusion of goods and of business may likely result.

Under the Dominancy Test, the dominant features of the competing marks are considered in
determining whether these competing marks are confusingly similar. Greater weight is given to
the similarity of the appearance of the products arising from the adoption of the dominant
features of the registered mark, disregarding minor differences. The visual, aural, connotative,
and overall comparisons and impressions engendered by the marks in controversy as they are
encountered in the realities of the marketplace are the main considerations (McDonald's
Corporation, et al., v. L. C. Big Mak Burger, Inc., et al., G. R. No. 143993, August 18, 2004;
Societe Des Produits Nestle, S. A." et al. v. Court of Appeals, et al., G. R. No. 112012, April 4,
2001). 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. (Lim Hoa v. Director of
Patents, 100 Phil. 214 [1956]); Co Tiong Sa v. Director of Patents, et al., G. R. No. L-5378, May
24, 1954). Duplication or imitation is not necessary; nor is it necessary that the infringing label
should suggest an effort to imitate (Lim Hoa v. Director of Patents, supra, and Co Liong Sa v.
Director of Patents, supra). Actual confusion is not required: Only likelihood of confusion on
the part of the buying public is necessary so as to render two marks confusingly similar so as to
deny the registration of the junior mark (Sterling Products International, Inc. v. Farbenfabriken
Bayer Aktiengesellschaft, 137 Phil. 838 [1969]).

As to the first issue of whether PAPA BOY is confusingly similar to Opposer's PAPA mark, this
Bureau rules in the affirmative.

The records bear the following:

1. Registration No. 32416 issued for the mark "PAPA" under Class 29 goods was deemed
expired as of February 11, 2004 (Exhibit "A" attached to the VERIFIED NOTICE OF
OPPOSITION). Application Serial No. 4- 2005-010788 was filed on October 28, 2005 for the
same mark "PAPA" for Class 30 goods and Registration No. 42005010788 was issued on March
19,2007;

2. Opposer was issued for the mark "PAPA BANANA CATSUP LABEL" on August 11, 1983
Registration No. SR-6282 for Class 30 goods in the Supplemental Register, which registration
expired in 2003. Application Serial No. 4-2006-012364 was filed for the mark "PAPA LABEL
DESIGN" for Class 30 goods on November 15, 2006, and Registration No. 42006012364 was
issued on April 30, 2007; and

3. Lastly, Registration No. 34681 for the mark "PAPA KETSARAP" for Class 30 goods was
issued on August 23, 1985 and was renewed on August 23, 2005.

Though Respondent-applicant was first to file the subject application on April 04, 2002 vis-a-vis
the mark "PAPA" the filing date of which is reckoned on October 28, 2005, and the mark "PAPA
LABEL DESIGN" the filing date of which is reckoned on November 15, 2006, Opposer was
able to secure a registration for the mark "PAPA KETSARAP" on August 23, 1985 considering
that Opposer was the prior registrant and that its renewal application timely filed on August 23,
2005.

xxxx

Pursuant to [Section 123.l(d) of the IP Code], the application for registration of the subject mark
cannot be allowed considering that Opposer was earlier registrant of the marks PAPA and PAPA
KETSARAP which registrations were timely renewed upon its expiration. Respondent-
applicant's mark "PAPA BOY & DEVICE" is confusingly similar to Opposer's mark "PAPA
KETSARAP" and is applied to goods that are related to Opposer's goods, but Opposer's mark
"PAPA KETSARAP" was registered on August 23, 1985 per Certificate of Registration No.
34681, which registration was renewed for a period of 10 years counted from August 23, 2005
per Certificate of Renewal of Registration No. 34681 issued on August 23, 2005. To repeat,
Opposer has already registered a mark which Respondent-applicant's mark nearly resembles as to
likely deceive or cause confusion as to origin and which is applied to goods to which respondent-
applicant's goods under Class 30 are closely related.

Section 138 of the IP Code provides that a certificate of registration of a mark is prima facie
evidence of the validity of the registration, the registrant's ownership of the mark, and of the
registrant's exclusive right to use the same in connection with the goods and those that are related
thereto specified in the certificate.

We agree that respondent's mark cannot be registered. Respondent's mark is related to a product,
lechon sauce, an everyday all-purpose condiment and sauce, that is not subjected to great
scrutiny and care by the casual purchaser, who knows from regular visits to the grocery store
under what aisle to find it, in which bottle it is contained, and approximately how much it costs.
Since petitioner's product, catsup, is also a household product found on the same grocery aisle, in
similar packaging, the public could think that petitioner had expanded its product mix to include
lechon sauce, and that the "PAPA BOY" lechon sauce is now part of the "PAPA" family of
sauces, which is not unlikely considering the nature of business that petitioner is in. Thus, if
allowed registration, confusion of business may set in, and petitioner's hard-earned goodwill may
be associated to the newer product introduced by respondent, all because of the use of the
dominant feature of petitioner's mark on respondent's mark, which is the word "PAPA." The
words "Barrio Fiesta" are not included in the mark, and although printed on the label of
respondent's lechon sauce packaging, still do not remove the impression that "PAPA BOY" is a
product owned by the manufacturer of "PAPA" catsup, by virtue of the use of the dominant
feature. It is possible that petitioner could expand its business to include lechon sauce, and that
would be well within petitioner's rights, but the existence of a "PAPA BOY" lechon sauce would
already eliminate this possibility and deprive petitioner of its rights as an owner of a valid mark
included in the Intellectual Property Code.

The Court of Appeals likewise erred in finding that "PAPA," being a common term of
endearment for one's father, is a word over which petitioner could not claim exclusive use and
ownership. The Merriam-Webster dictionary defines "Papa" simply as "a person's father." True,
a person's father has no logical connection with catsup products, and that precisely makes
"PAPA" as an arbitrary mark capable of being registered, as it is distinctive, coming from a
family name that started the brand several decades ago. What was registered was not the word
"Papa" as defined in the dictionary, but the word "Papa" as the last name of the original owner of
the brand. In fact, being part of several of petitioner's marks, there is no question that the IPO has
found "PAPA" to be a registrable mark.

Respondent had an infinite field of words and combinations of words to choose from to coin a
mark for its lechon sauce. While its claim as to the origin of the term "PAPA BOY" is plausible,
it is not a strong enough claim to overrule the rights of the owner of an existing and valid mark.
Furthermore, this Court cannot equitably allow respondent to profit by the name and reputation
carefully built by petitioner without running afoul of the basic demands of fair play.51

WHEREFORE, we hereby GRANT the petition. We SET ASIDE the June 23, 2011 Decision
and the October 4, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 107570, and
REINSTATE the March 26, 2008 Decision of the Bureau of Legal Affairs of the Intellectual
Property Office (IPO-BLA) and the January 29, 2009 Decision of the Director General of the
IPO.
SO ORDERED.
UNFAIR COMPETITION

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 190706 July 21, 2014

SHANG PROPERTIES REALTY CORPORATION (formerly THE SHANG GRAND
TOWER CORPORATION) and SHANG PROPERTIES, INC. (formerly EDSA
PROPERTIES HOLDINGS, INC.), Petitioners,
vs.
ST. FRANCIS DEVELOPMENT CORPORATION, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 is the Decision2 dated December 18, 2009 of
the Court of Appeals (CA) in CA-G.R. SP No. 105425 which affirmed with modification the
Decision3 dated September 3, 2008 of the Intellectual Property Office (IPO) Director-General.
The CA: (a) affirmed the denial of the application for registration of the mark "ST. FRANCIS
TOWERS" filed by petitioners Shang Properties Realty Corporation and Shang Properties, Inc.
(petitioners); ( b) found petitioners to have committed unfair competition for using the marks
"THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE"; (c) ordered
petitioners to cease and desist from using "ST. FRANCIS" singly or as part of a composite mark;
and (d) ordered petitioners to jointly and severally pay respondent St. Francis Square
Development Corporation (respondent) a fine in the amount of ₱200,000.00.

The Facts

Respondent – a domestic corporation engaged in the real estate business and the developer of the
St. Francis Square Commercial Center, built sometime in 1992, located at Ortigas Center,
Mandaluyong City, Metro Manila (Ortigas Center)4 – filed separate complaints against
petitioners before the IPO - Bureau of Legal Affairs (BLA), namely: (a) an intellectual property
violation case for unfair competition, false or fraudulent declaration, and damages arising from
petitioners’ use and filing of applications for the registration of the marks "THE ST. FRANCIS
TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE," docketed as IPV Case No. 10-
2005-00030 (IPV Case); and (b) an inter partes case opposing the petitioners’ application for
registration of the mark "THE ST. FRANCIS TOWERS" for use relative to the latter’s business,
particularly the construction of permanent buildings or structures for residential and office
purposes, docketed as Inter PartesCase No. 14-2006-00098 (St. Francis Towers IP Case); and (c)
an inter partes case opposing the petitioners’ application for registration of the mark "THE ST.
FRANCIS SHANGRI-LA PLACE," docketed as IPC No. 14-2007-00218 (St. Francis Shangri-
La IP Case).5

In its complaints, respondent alleged that it has used the mark "ST. FRANCIS" to identify its
numerous property development projects located at Ortigas Center, such as the aforementioned
St. Francis Square Commercial Center, a shopping mall called the "St. Francis Square," and a
mixed-use realty project plan thatincludes the St. Francis Towers. Respondent added that as a
result of its continuous use of the mark "ST. FRANCIS" in its real estate business,it has gained
substantial goodwill with the public that consumers and traders closely identify the said mark
with its property development projects. Accordingly, respondent claimed that petitioners could
not have the mark "THE ST. FRANCIS TOWERS" registered in their names, and that
petitioners’ use of the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS
SHANGRI-LA PLACE" in their own real estate development projects constitutes unfair
competition as well as false or fraudulent declaration.6

Petitioners denied committing unfair competition and false or fraudulent declaration, maintaining
that they could register the mark "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS
SHANGRI-LA PLACE" under their names. They contended that respondent is barred from
claiming ownership and exclusive use ofthe mark "ST. FRANCIS" because the same is
geographically descriptive ofthe goods or services for which it is intended to be used.7 This is
because respondent’s as well as petitioners’ real estate development projects are locatedalong the
streets bearing the name "St. Francis," particularly, St. FrancisAvenue and St. Francis Street
(now known as Bank Drive),8 both within the vicinity of the Ortigas Center.

The BLA Rulings

On December 19, 2006, the BLA rendered a Decision9 in the IPV Case, and found that
petitioners committed acts of unfair competition against respondent by its use of the mark "THE
ST. FRANCIS TOWERS" but not with its use of the mark "THE ST. FRANCIS SHANGRI-LA
PLACE." It, however, refused to award damages in the latter’s favor, considering that there was
no evidence presented to substantiate the amount of damages it suffered due to the former’s acts.
The BLA found that "ST. FRANCIS," being a name of a Catholic saint, may be considered as an
arbitrary mark capable of registration when used in real estate development projects as the name
has no direct connection or significance when used in association with real estate. The BLA
neither deemed "ST. FRANCIS" as a geographically descriptive mark, opiningthat there is no
specific lifestyle, aura, quality or characteristic that the real estate projects possess except for the
fact that they are located along St. Francis Avenueand St. Francis Street (now known as Bank
Drive), Ortigas Center. In this light, the BLA found that while respondent’s use of the mark "ST.
FRANCIS" has not attained exclusivity considering that there are other real estate development
projects bearing the name "St. Francis" in other areas,10 it must nevertheless be pointed out that
respondent has been known to be the only real estate firm to transact business using such name
within the Ortigas Center vicinity. Accordingly, the BLA considered respondent to have gained
goodwill and reputation for its mark, which therefore entitles it to protection against the use by
other persons, at least, to those doing business within the Ortigas Center.11

Meanwhile, on March 28, 2007, the BLA rendered a Decision12 in the St. Francis Towers IP
Case, denying petitioners’ application for registration of the mark "THE ST. FRANCIS
TOWERS." Excluding the word "TOWERS" in view of petitioners’ disclaimer thereof, the BLA
ruled that petitioners cannot register the mark "THE ST. FRANCIS" since it is confusingly
similar to respondent’s"ST. FRANCIS" marks which are registered with the Department of
Trade and Industry(DTI). It held that respondent had a better right over the use of the mark "ST.
FRANCIS" because of the latter’s appropriation and continuous usage thereof for a long period
of time.13 A little over a year after, or on March 31, 2008, the BLA then rendered a Decision14
in the St. Francis Shangri-La IP Case, allowing petitioners’ application for registration of the
mark "THE ST. FRANCIS SHANGRI-LA PLACE." It found that respondent cannot preclude
petitioners from using the mark "ST. FRANCIS" as the records show that the former’s use
thereof had not been attended with exclusivity. More importantly, it found that petitioners had
adequately appended the word "Shangri-La" to its composite mark to distinguish it from that of
respondent, in which case, the former had removed any likelihood of confusion that may arise
from the contemporaneous use by both parties of the mark "ST. FRANCIS."

Both parties appealed the decision in the IPV Case, while petitioners appealed the decision in the
St. Francis Towers IP Case. Due to the identity of the parties and issues involved, the IPO
Director-General ordered the consolidation of the separate appeals.15 Records are, however,
bereft of any showing that the decision in the St. Francis Shangri-La IP Casewas appealed by
either party and, thus, is deemed to have lapsed into finality.

The IPO Director-General Ruling

In a Decision16 dated September 3, 2008, then IPO Director-General Adrian S. Cristobal, Jr.
affirmedthe rulings of the BLA that: (a) petitioners cannot register the mark "THEST. FRANCIS
TOWERS"; and (b) petitioners are not guilty of unfair competition in its use of the mark "THE
ST. FRANCIS SHANGRI-LA PLACE." However, the IPO DirectorGeneral reversed the BLA’s
findingthat petitioners committed unfair competition through their use of the mark "THE ST.
FRANCIS TOWERS," thus dismissing such charge. He foundthat respondent could not be
entitled to the exclusive use of the mark "ST. FRANCIS," even at least to the locality where it
conducts its business, because it is a geographically descriptive mark, considering that it was
petitioners’ as well as respondent’s intention to use the mark "ST. FRANCIS"in order to identify,
or at least associate, their real estate development projects/businesses with the place or location
where they are situated/conducted, particularly, St. Francis Avenue and St. Francis Street (now
known as Bank Drive), Ortigas Center. He further opined that respondent’s registration of the
name "ST. FRANCIS" with the DTI is irrelevant since what should be controlling are the
trademark registrations with the IPO itself.17 Also, the IPO Director-General held that since the
parties are both engaged in the real estate business, it would be "hard to imagine that a
prospective buyer will be enticed to buy, rent or purchase [petitioners’] goods or
servicesbelieving that this is owned by [respondent] simply because of the name ‘ST.
FRANCIS.’ The prospective buyer would necessarily discuss things with the representatives of
[petitioners] and would readily know that this does not belong to [respondent]."18

Disagreeing solely with the IPO Director-General’s ruling on the issue of unfair competition (the
bone of contention in the IPV Case), respondent elevated the sameto the CA.

In contrast, records do not show that either party appealed the IPO Director-General’s ruling on
the issue ofthe registrability of the mark "THE ST. FRANCIS TOWERS" (the bone of
contention in the St. Francis Towers IP Case). As such, said pronouncement isalso deemed to
have lapsed into finality.

The CA Ruling

In a Decision19 dated December 18, 2009, the CA found petitioners guilty of unfair competition
not only withrespect to their use of the mark "THE ST. FRANCIS TOWERS" but alsoof the
mark "THE ST. FRANCIS SHANGRI-LA PLACE." Accordingly, itordered petitioners to cease
and desist from using "ST. FRANCIS" singly or as part of a composite mark, as well as to jointly
and severally pay respondent a fine in the amount of ₱200,000.00.

The CA did not adhere to the IPO Director-General’s finding that the mark "ST. FRANCIS" is
geographically descriptive, and ruled that respondent – which has exclusively and continuously
used the mark "ST. FRANCIS" for more than a decade, and,hence, gained substantial goodwill
and reputation thereby – is very muchentitled to be protected against the indiscriminate usage by
other companies of the trademark/name it has so painstakingly tried to establish and maintain.
Further, the CA stated that even on the assumption that "ST. FRANCIS" was indeed a
geographically descriptive mark, adequateprotection must still begiven to respondent pursuant to
the Doctrine of Secondary Meaning.20

Dissatisfied, petitioners filed the present petition.

The Issue Before the Court

With the decisions in both Inter PartesCases having lapsed into finality, the sole issue thus left
for the Court’s resolution is whether or not petitioners are guilty of unfair competition in using
the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE."

The Court’s Ruling

The petition is meritorious.

Section 168 of Republic Act No. 8293,21 otherwise known as the "Intellectual Property Code of
the Philippines" (IP Code), provides for the rules and regulations on unfair competition.

To begin, Section 168.1 qualifies who is entitled to protection against unfair competition. It
states that "[a]person who has identified in the mind of the public the goods he manufacturesor
deals in, his business or services from those of others, whether or not a registered mark is
employed, has a property right in the goodwill of the said goods, business or services so
identified, which will be protected inthe same manner as other property rights."

Section 168.2proceeds to the core of the provision, describing forthwith who may be found
guilty of and subject to an action of unfair competition – that is, "[a]ny person who shall 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
x x x."

Without limiting its generality, Section 168.3goes on to specify examples of acts which are
considered as constitutive of unfair competition, viz.:

168.3. In particular, and without in any way limiting the scope of protection against unfair
competition, the following shall be deemed guilty of unfair competition:
 (a) Any person who is selling his goods and gives 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
ofsuch 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 service 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.

Finally, Section 168.4 dwells on a matter of procedure by stating that the "[t]he remedies
provided by Sections 156,22 157,23 and 16124 shall apply mutatis mutandis."

The statutory attribution of the unfair competition concept is wellsupplemented by

jurisprudential pronouncements. In the recent case of Republic Gas Corporation v. Petron
Corporation,25 the Court has echoed the classic definition of the term which is "‘the passing off
(or palming off) or attempting to pass off upon the public of the goods or business of one person
as the goods or business of another with the end and probable effect of deceiving the public.’
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. [In other words], the defendant gives his
goods the general appearance of the goods of his competitor with the intention of deceiving the
publicthat the goods are those of his competitor."26 The "true test" of unfair competition has thus
been "whether the acts of the defendant have the intent of deceiving or are calculated to deceive
the ordinary buyer making his purchases under the ordinary conditions of theparticular trade to
which the controversy relates." Based on the foregoing, it is therefore essential to prove the
existence of fraud, or the intent to deceive, actual or probable,27 determined through a judicious
scrutiny of the factual circumstances attendant to a particular case.28

Here, the Court finds the element of fraud to be wanting; hence, there can be no unfair
competition. The CA’scontrary conclusion was faultily premised on its impression that
respondenthad the right to the exclusive use of the mark "ST. FRANCIS," for which the latter
had purportedly established considerable goodwill. What the CA appears to have disregarded or
been mistaken in its disquisition, however, is the geographicallydescriptive nature of the mark
"ST. FRANCIS" which thus bars its exclusive appropriability, unless a secondary meaning is
acquired. As deftly explained in the U.S. case of Great Southern Bank v. First Southern Bank:29
"[d]escriptive geographical terms are inthe ‘public domain’ in the sense that every seller should
have the right to inform customers of the geographical origin of his goods. A ‘geographically
descriptive term’ is any noun or adjective that designates geographical location and would tend
to be regarded by buyers as descriptive of the geographic location of origin of the goods or
services. A geographically descriptive term can indicate any geographic location on earth, such
as continents, nations, regions, states, cities, streets and addresses, areas of cities, rivers, and any
other location referred to by a recognized name. In order to determine whether or not the
geographic term in question is descriptively used, the following question is relevant: (1) Is the
mark the name of the place or region from which the goods actually come? If the answer is yes,
then the geographic term is probably used in a descriptive sense, and secondary meaning is
required for protection."30

In Burke-Parsons-Bowlby Corporation v. Appalachian Log Homes, Inc.,31 it was held that

secondary meaningis established when a descriptive mark no longer causes the public to
associate the goods with a particular place, but to associate the goods with a particular source.In
other words, it is not enough that a geographically-descriptive mark partakes of the name of a
place known generally to the public to be denied registration as it is also necessary to show that
the public would make a goods/place association – that is, to believe that the goods for which the
mark is sought to be registered originatein that place.1âwphi1 To hold sucha belief, it is
necessary, of course, that the purchasers perceive the mark as a place name, from which the
question of obscurity or remoteness then comes to the fore.32 The more a geographical area is
obscure and remote, it becomes less likely that the public shall have a goods/place association
with such area and thus, the mark may not be deemed as geographically descriptive. However,
where there is no genuine issue that the geographical significance of a term is its primary
significanceand where the geographical place is neither obscure nor remote, a public association
of the goods with the place may ordinarily be presumed from the fact that the applicant’s own
goods come from the geographical place named in the mark.33

Under Section 123.234 of the IP Code, specific requirements have to be met in order to conclude
that a geographically-descriptive mark has acquired secondary meaning, to wit: (a) the secondary
meaning must have arisen as a result of substantial commercial use of a mark in the Philippines;
(b) such use must result in the distinctiveness of the mark insofar as the goods or theproducts are
concerned; and (c) proof of substantially exclusive and continuous commercial use in the
Philippines for five (5) years beforethe date on which the claim of distinctiveness is made.
Unless secondary meaning has been established, a geographically-descriptive mark, dueto its
general public domain classification, is perceptibly disqualified from trademark registration.
Section 123.1(j) of the IP Code states this rule as follows:

SEC. 123. Registrability. –

123.1 A mark cannot be registered if it:

xxxx

(j) Consists exclusively of signs orof indications that may serve in trade to designate the kind,
quality, quantity, intended purpose, value, geographical origin, time or production of the goods
or rendering of the services, or other characteristics of the goods or services; (Emphasis
supplied) x x x x
Cognizant of the foregoing, the Court disagrees with the CA that petitioners committed unfair
competition due to the mistaken notion that petitioner had established goodwill for the mark "ST.
FRANCIS" precisely because said circumstance, by and of itself, does not equateto fraud under
the parameters of Section 168 of the IP Code as above-cited. In fact, the records are bereft of any
showing thatpetitioners gave their goods/services the general appearance that it was respondent
which was offering the same to the public. Neither did petitioners employ any means to induce
the public towards a false belief that it was offering respondent’s goods/services. Nor did
petitioners make any false statement or commit acts tending to discredit the goods/services
offered by respondent. Accordingly, the element of fraud which is the core of unfair competition
had not been established.

Besides, respondent was not able toprove its compliance with the requirements stated in Section
123.2 of the IP Code to be able to conclude that it acquired a secondary meaning – and, thereby,
an exclusive right – to the "ST. FRANCIS" mark, which is, as the IPO Director-General
correctly pointed out, geographically-descriptive of the location in which its realty developments
have been built, i.e., St. Francis Avenue and St. Francis Street (now known as "Bank Drive").
Verily, records would reveal that while it is true that respondent had been using the mark "ST.
FRANCIS" since 1992, its use thereof has been merely confined to its realty projects within the
Ortigas Center, as specifically mentioned.As its use of the mark is clearly limited to a certain
locality, it cannot be said thatthere was substantial commercial use of the same recognizedall
throughout the country. Neither is there any showing of a mental recognition in buyers’ and
potential buyers’ minds that products connected with the mark "ST. FRANCIS" are associated
with the same source35 – that is, the enterprise of respondent. Thus, absent any showing that
there exists a clear goods/service-association between the realty projects located in the aforesaid
area and herein respondent as the developer thereof, the latter cannot besaid to have acquired a
secondary meaning as to its use of the "ST. FRANCIS" mark.

In fact, even on the assumption that secondary meaning had been acquired, said finding only
accords respondents protectional qualification under Section 168.1 of the IP Code as above
quoted. Again, this does not automatically trigger the concurrence of the fraud element required
under Section 168.2 of the IP Code, as exemplified by the acts mentioned in Section 168.3 of the
same. Ultimately, as earlier stated, there can be no unfair competition without this element. In
this respect, considering too the notoriety of the Shangri-La brand in the real estate industry
which dilutes petitioners' propensity to merely ride on respondent's goodwill, the more
reasonable conclusion is that the former's use of the marks "THE ST. FRANCIS TOWERS" and
"THE ST. FRANCIS SHANGRI-LA PLACE" was meant only to identify, or at least associate,
their real estate project/s with its geographical location. As aptly observed by the IPO
DirectorGeneral:36

In the case at hand, the parties are business competitors engaged in real estate or property
development, providing goods and services directly connected thereto. The "goods" or
"products" or "services" are real estate and the goods and the services attached to it or directly
related to it, like sale or lease of condominium units, offices, and commercial spaces, such as
restaurants, and other businesses. For these kinds of goods or services there can be no description
of its geographical origin as precise and accurate as that of the name of the place where they are
situated. (Emphasis and underscoring supplied)
Hence, for all the reasons above-discussed, the Court hereby grants the instant petition, and, thus,
exonerates petitioners from the charge of unfair competition in the IPV Case. As the decisions in
the Inter Partes Cases were not appealed, the registrability issues resolved therein are hereby
deemed to have attained finality and, therefore, are now executory.

WHEREFORE, the petition is GRANTED. The Decision dated December 18, 2009 of the Court
of Appeals in CA-G.R. SP No. 105425 is hereby REVERSED and SET ASIDE. Accordingly,
the Decision dated September 3, 2008 of the Intellectual Property Office-Director General is
REINSTATED.

SO ORDERED.

Republic of the Philippines

Supreme Court

Baguio City
 SECOND DIVISION

SUPERIOR COMMERCIAL G.R. No. 169974

ENTERPRISES, INC.,

Petitioner,
Present:

- versus - CARPIO, J., Chairperson,

BRION,

DEL CASTILLO,

ABAD, and

KUNNAN ENTERPRISES LTD. PEREZ, JJ.

AND SPORTS CONCEPT &
DISTRIBUTOR, INC.,

Respondents. -- - Promulgated:

April 20, 2010

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

DECISION

BRION, J.:
 We review in this petition for review on certiorari31[1] the (1) decision32[2]
of the Court of Appeals (CA) in CA-G.R. CV No. 60777 that reversed the ruling of
the Regional Trial Court of Quezon City, Branch 85 (RTC),33[3] and dismissed the
petitioner Superior Commercial Enterprises, Inc.s (SUPERIOR) complaint for
trademark infringement and unfair competition (with prayer for preliminary
injunction) against the respondents Kunnan Enterprises Ltd. (KUNNAN) and Sports
Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA resolution34[4]
that denied SUPERIORs subsequent motion for reconsideration. The RTC decision
that the CA reversed found the respondents liable for trademark infringement and
unfair competition, and ordered them to pay SUPERIOR P2,000,000.00 in damages,
P500,000.00 as attorneys fees, and costs of the suit.

THE FACTUAL ANTECEDENTS

 On February 23, 1993, SUPERIOR35[5] filed a complaint for trademark
infringement and unfair competition with preliminary injunction against
KUNNAN36[6] and SPORTS CONCEPT37[7] with the RTC, docketed as Civil
Case No. Q-93014888.

In support of its complaint, SUPERIOR first claimed to be the owner of the

trademarks, trading styles, company names and business names38[8]
KENNEX,39[9] KENNEX & DEVICE,40[10] PRO KENNEX41[11] and PRO-
KENNEX (disputed trademarks).42[12] Second, it also asserted its prior use of these
trademarks, presenting as evidence of ownership the Principal and Supplemental
Registrations of these trademarks in its name. Third, SUPERIOR also alleged that it
extensively sold and advertised sporting goods and products covered by its
trademark registrations. Finally, SUPERIOR presented as evidence of its ownership
of the disputed trademarks the preambular clause of the Distributorship Agreement
dated October 1, 1982 (Distributorship Agreement) it executed with KUNNAN,
which states:

Whereas, KUNNAN intends to acquire the ownership of KENNEX

trademark registered by the [sic] Superior in the Philippines. Whereas, the [sic]
Superior is desirous of having been appointed [sic] as the sole distributor by
KUNNAN in the territory of the Philippines. [Emphasis supplied.]43[13]

In its defense, KUNNAN disputed SUPERIORs claim of ownership and

maintained that SUPERIOR as mere distributor from October 6, 1982 until
December 31, 1991 fraudulently registered the trademarks in its name.
KUNNAN alleged that it was incorporated in 1972, under the name KENNEX
Sports Corporation for the purpose of manufacturing and selling sportswear and
sports equipment; it commercially marketed its products in different countries,
including the Philippines since 1972.44[14] It created and first used PRO KENNEX,
derived from its original corporate name, as a distinctive trademark for its products
in 1976. KUNNAN also alleged that it registered the PRO KENNEX trademark not
only in the Philippines but also in 31 other countries, and widely promoted the
KENNEX and PRO KENNEX trademarks through worldwide advertisements in
print media and sponsorships of known tennis players.

On October 1, 1982, after the expiration of its initial distributorship agreement

with another company,45[15] KUNNAN appointed SUPERIOR as its exclusive
distributor in the Philippines under a Distributorship Agreement whose pertinent
provisions state:46[16]

Whereas, KUNNAN intends to acquire ownership of KENNEX trademark

registered by the Superior in the Philippines. Whereas, the Superior is desirous
of having been appointed [sic] as the sole distributor by KUNNAN in the
territory of the Philippines.

Now, therefore, the parties hereto agree as follows:

1. KUNNAN in accordance with this Agreement, will appoint the sole

distributorship right to Superior in the Philippines, and this Agreement
could be renewed with the consent of both parties upon the time of expiration.

2. The Superior, in accordance with this Agreement, shall assign the

ownership of KENNEX trademark, under the registration of Patent
Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of
its ten (10) years contract of distributorship, and it is required that the
ownership of the said trademark shall be genuine, complete as a whole and
without any defects.
 3. KUNNAN will guarantee to the Superior that no other third parties will be
permitted to supply the KENNEX PRODUCTS in the Philippines except only
to the Superior. If KUNNAN violates this stipulation, the transfer of the
KENNEX trademark shall be null and void.

4. If there is a necessity, the Superior will be appointed, for the protection of

interest of both parties, as the agent in the Philippines with full power to
exercise and granted the power of attorney, to pursue any case of Pirating,
Infringement and Counterfeiting the [sic] KENNEX trade mark in the
Philippine territory.

5. The Superior will be granted from [sic] KUNNANs approval before making
and selling any KENNEX products made in the Philippines and the other
countries, and if this is the situation, KUNNAN is entitled to have a royalty of
5%-8% of FOB as the right.

6. Without KUNNANs permission, the Superior cannot procure other goods

supply under KENNEX brand of which are not available to supply [sic] by
KUNNAN. However, in connection with the sporting goods, it is permitted that
the Superior can procure them under KENNEX brand of which are not available
to be supplied by KUNNAN. [Emphasis supplied.]

Even though this Agreement clearly stated that SUPERIOR was obligated to
assign the ownership of the KENNEX trademark to KUNNAN, the latter claimed
that the Certificate of Registration for the KENNEX trademark remained with
SUPERIOR because Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIORs
President and General Manager, misled KUNNANs officers into believing that
KUNNAN was not qualified to hold the same due to the many requirements set by
the Philippine Patent Office that KUNNAN could not meet.47[17] KUNNAN
further asserted that SUPERIOR deceived it into assigning its applications for
registration of the PRO KENNEX trademark in favor of SUPERIOR, through an
Assignment Agreement dated June 14, 1983 whose pertinent provisions state:48[18]

1. In consideration of the distributorship relationship between KUNNAN and

Superior, KUNNAN, who is the seller in the distributorship relationship, agrees to
assign the following trademark applications owned by itself in the Philippines
to Superior who is the buyer in the distributorship relationship.

Trademark Application Number Class

PROKENNEX 49999 28

PROKENNEX 49998 25

PROKENNEX 49997 18

2. Superior shall acknowledge that KUNNAN is still the real and truthful
owner of the abovementioned trademarks, and shall agree that it will not use
the right of the abovementioned trademarks to do anything which is
unfavourable or harmful to KUNNAN.

3. Superior agrees that it will return back the abovementioned

trademarks to KUNNAN without hesitation at the request of KUNNAN at any
time. KUNNAN agrees that the cost for the concerned assignment of the
abovementioned trademarks shall be compensated by KUNNAN.

4. Superior agrees that the abovementioned trademarks when requested by

KUNNAN shall be clean and without any incumbency.
 5. Superior agrees that after the assignment of the abovementioned
trademarks, it shall have no right to reassign or license the said trademarks to any
other parties except KUNNAN. [Emphasis supplied]

Prior to and during the pendency of the infringement and unfair

competition case before the RTC, KUNNAN filed with the now defunct Bureau
of Patents, Trademarks and Technology Transfer49[19] separate Petitions for
the Cancellation of Registration Trademark Nos. 41032, SR 6663, 40326, 39254,
4730 and 49998, docketed as Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813
and 3814, as well as Opposition to Application Serial Nos. 84565 and 84566,
docketed as Inter Partes Cases Nos. 4101 and 4102 (Consolidated Petitions for
Cancellation) involving the KENNEX and PRO KENNEX trademarks.50[20] In
essence, KUNNAN filed the Petition for Cancellation and Opposition on the ground
that SUPERIOR fraudulently registered and appropriated the disputed trademarks;
as mere distributor and not as lawful owner, it obtained the registrations and
assignments of the disputed trademarks in violation of the terms of the
Distributorship Agreement and Sections 2-A and 17 of Republic Act No. 166, as
amended.51[21]
 On December 3, 1991, upon the termination of its distributorship agreement
with SUPERIOR, KUNNAN appointed SPORTS CONCEPT as its new distributor.
Subsequently, KUNNAN also caused the publication of a Notice and Warning in the
Manila Bulletins January 29, 1993 issue, stating that (1) it is the owner of the
disputed trademarks; (2) it terminated its Distributorship Agreement with
SUPERIOR; and (3) it appointed SPORTS CONCEPT as its exclusive distributor.
This notice prompted SUPERIOR to file its Complaint for Infringement of
Trademark and Unfair Competition with Preliminary Injunction against
KUNNAN.52[22]

The RTC Ruling

On March 31, 1998, the RTC issued its decision53[23] holding KUNNAN
liable for trademark infringement and unfair competition. The RTC also issued a
writ of preliminary injunction enjoining KUNNAN and SPORTS CONCEPT from
using the disputed trademarks.

The RTC found that SUPERIOR sufficiently proved that it was the first user
and owner of the disputed trademarks in the Philippines, based on the findings of the
Director of Patents in Inter Partes Case No. 1709 and 1734 that SUPERIOR was
rightfully entitled to register the mark KENNEX as user and owner thereof. It also
considered the Whereas clause of the Distributorship Agreement, which
categorically stated that KUNNAN intends to acquire ownership of [the] KENNEX
trademark registered by SUPERIOR in the Philippines. According to the RTC, this
clause amounts to KUNNANs express recognition of SUPERIORs ownership of the
KENNEX trademarks.54[24]

KUNNAN and SPORTS CONCEPT appealed the RTCs decision to the CA

where the appeal was docketed as CA-G.R. CV No. 60777. KUNNAN maintained
that SUPERIOR was merely its distributor and could not be the owner of the
disputed trademarks. SUPERIOR, for its part, claimed ownership based on its prior
use and numerous valid registrations.

Intervening Developments:

The IPO and CA Rulings

In the course of its appeal to the CA, KUNNAN filed on December 19, 2003
a Manifestation and Motion praying that the decision of the Bureau of Legal
Affairs (BLA) of the Intellectual Property Office (IPO), dated October 30, 2003,
in the Consolidated Petitions for Cancellation be made of record and be
considered by the CA in resolving the case.55[25] The BLA ruled in this decision

In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and

convincingly established its rights to the mark PRO KENNEX. It was proven that
actual use by Respondent-Registrant is not in the concept of an owner but as a mere
distributor (Exhibits I, S to S-1, P and P-1 and Q and Q-2) and as enunciated in the
case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50 SCRA 406, a mere distributor
of a product bearing a trademark, even if permitted to use said trademark has no
right to and cannot register the said trademark.

WHEREFORE, there being sufficient evidence to prove that the

Petitioner-Opposer (KUNNAN) is the prior user and owner of the trademark PRO-
KENNEX, the consolidated Petitions for Cancellation and the Notices of
Opposition are hereby GRANTED. Consequently, the trademark PRO-KENNEX
bearing Registration Nos. 41032, 40326, 39254, 4730, 49998 for the mark PRO-
KENNEX issued in favor of Superior Commercial Enterprises, Inc., herein
Respondent-Registrant under the Principal Register and SR No. 6663 are hereby
CANCELLED. Accordingly, trademark application Nos. 84565 and 84566,
likewise for the registration of the mark PRO-KENNEX are hereby REJECTED.

Let the file wrappers of PRO-KENNEX subject matter of these cases be

forwarded to the Administrative Finance and Human Resources Development
Services Bureau (AFHRDSB) for appropriate action in accordance with this
Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for
information and update of its record.56[26]

On February 4, 2005, KUNNAN again filed another Manifestation requesting

that the IPO Director Generals decision on appeal dated December 8, 2004,
denying SUPERIORs appeal, be given weight in the disposition of the case.57[27]
The dispositive portion of the decision reads:58[28]

WHEREFORE, premises considered, there is no cogent reason to disturb

Decision No. 2003-35 dated 30 October 2003 rendered by the Director of the
Bureau of Legal Affairs. Accordingly, the instant appeal is DENIED and the
appealed decision is hereby AFFIRMED.

We take judicial notice that SUPERIOR questioned the IPO Director Generals
ruling before the Court of Appeals on a petition for review under Rule 43 of the
Rules of Court, docketed as CAG.R. SP No. 87928 (Registration Cancellation
Case). On August 30, 2007, the CA rendered its decision dismissing SUPERIORs
petition.59[29] On December 3, 2007, the CA decision was declared final and
executory and entry of judgment was accordingly made. Hence, SUPERIORs
registration of the disputed trademarks now stands effectively cancelled.

The CA Ruling

On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777,
reversing and setting aside the RTCs decision of March 31, 1998.60[30] It dismissed
SUPERIORs Complaint for Infringement of Trademark and Unfair Competition
with Preliminary Injunction on the ground that SUPERIOR failed to establish by
preponderance of evidence its claim of ownership over the KENNEX and PRO
KENNEX trademarks. The CA found the Certificates of Principal and Supplemental
Registrations and the whereas clause of the Distributorship Agreement insufficient
to support SUPERIORs claim of ownership over the disputed trademarks.

The CA stressed that SUPERIORs possession of the aforementioned

Certificates of Principal Registration does not conclusively establish its ownership
of the disputed trademarks as dominion over trademarks is not acquired by the fact
of registration alone;61[31] at best, registration merely raises a presumption of
ownership that can be rebutted by contrary evidence.62[32] The CA further
emphasized that the Certificates of Supplemental Registration issued in
SUPERIORs name do not even enjoy the presumption of ownership accorded to
registration in the principal register; it does not amount to a prima facie evidence of
the validity of registration or of the registrants exclusive right to use the trademarks
in connection with the goods, business, or services specified in the certificate.63[33]
 In contrast with the failure of SUPERIORs evidence, the CA found that
KUNNAN presented sufficient evidence to rebut SUPERIORs presumption of
ownership over the trademarks. KUNNAN established that SUPERIOR, far from
being the rightful owner of the disputed trademarks, was merely KUNNANs
exclusive distributor. This conclusion was based on three pieces of evidence that, to
the CA, clearly established that SUPERIOR had no proprietary interest over the
disputed trademarks.

First, the CA found that the Distributorship Agreement, considered in its

entirety, positively confirmed that SUPERIOR sought to be the KUNNANs
exclusive distributor. The CA based this conclusion on the following provisions of
the Distributorship Agreement:

(1) that SUPERIOR was desirous of [being] appointed as the sole distributor by
KUNNAN in the territory of the Philippines;

(2) that KUNNAN will appoint the sole distributorship right to Superior in the
Philippines; and

(3) that no third parties will be permitted to supply KENNEX PRODUCTS in the
Philippines except only to Superior.

The CA thus emphasized that the RTC erred in unduly relying on the first
whereas clause, which states that KUNNAN intends to acquire ownership of [the]
KENNEX trademark registered by SUPERIOR in the Philippines without
considering the entirety of the Distributorship Agreement indicating that
SUPERIOR had been merely appointed by KUNNAN as its distributor.
 Second, the CA also noted that SUPERIOR made the express undertaking in
the Assignment Agreement to acknowledge that KUNNAN is still the real and
truthful owner of the [PRO KENNEX] trademarks, and that it shall agree that it will
not use the right of the abovementioned trademarks to do anything which is
unfavourable or harmful to KUNNAN. To the CA, these provisions are clearly
inconsistent with SUPERIORs claim of ownership of the disputed trademarks. The
CA also observed that although the Assignment Agreement was a private document,
its authenticity and due execution was proven by the similarity of Mr. Tan Bon
Diongs signature in the Distributorship Agreement and the Assignment Agreement.

Third, the CA also took note of SUPERIORs Letter dated November 12, 1986
addressed to Brig. Gen. Jose Almonte, identifying itself as the sole and exclusive
licensee and distributor in the Philippines of all its KENNEX and PRO-KENNEX
products. Attached to the letter was an agreement with KUNNAN, identifying the
latter as the foreign manufacturer of all KENNEX products. The CA concluded that
in this letter, SUPERIOR acknowledged its status as a distributor in its dealings with
KUNNAN, and even in its transactions with third persons.

Based on these reasons, the CA ruled that SUPERIOR was a mere distributor
and had no right to the registration of the disputed trademarks since the right to
register a trademark is based on ownership. Citing Section 4 of Republic Act No.
16664[34] and established jurisprudence,65[35] the CA held that SUPERIOR as an
exclusive distributor did not acquire any proprietary interest in the principals
(KUNNANs) trademark.

The CA denied SUPERIORs motion for reconsideration for lack of merit in

its Resolution dated October 4, 2005.

THE PETITION

In the present petition, SUPERIOR raises the following issues:

I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
HOLDING THAT PETITIONER SUPERIOR IS NOT THE TRUE
AND RIGHTFUL OWNER OF THE TRADEMARKS KENNEX
AND PRO-KENNEX IN THE PHILIPPINES

II.
 WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN HOLDING THAT PETITIONER SUPERIOR IS A MERE
DISTRIBUTOR OF RESPONDENT KUNNAN IN THE
PHILIPPINES

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS

ERRED IN REVERSING AND SETTING ASIDE THE DECISION
OF THE REGIONAL TRIAL COURT OF QUEZON CITY IN CIVIL
CASE NO. Q-93-14888, LIFTING THE PRELIMINARY
INJUNCTION ISSUED AGAINST RESPONDENTS KUNNAN
AND SPORTS CONCEPT AND DISMISSING THE COMPLAINT
FOR INFRINGEMENT OF TRADEMARK AND UNFAIR
COMPETITION WITH PRELIMINARY INJUNCTION

THE COURTS RULING

We do not find the petition meritorious.

On the Issue of Trademark Infringement

We first consider the effect of the final and executory decision in the
Registration Cancellation Case on the present case. This decision - rendered after
the CA decision for trademark infringement and unfair competition in CA-G.R.
CV No. 60777 (root of the present case) - states:

As to whether respondent Kunnan was able to overcome the presumption

of ownership in favor of Superior, the former sufficiently established the
fraudulent registration of the questioned trademarks by Superior. The Certificates
of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal
Register) for the KENNEX trademark were fraudulently obtained by petitioner
Superior. Even before PROKENNEX products were imported by Superior into
the Philippines, the same already enjoyed popularity in various countries and had
been distributed worldwide, particularly among the sports and tennis enthusiasts
since 1976. Riding on the said popularity, Superior caused the registration thereof
in the Philippines under its name when it knew fully well that it did not own nor
did it manufacture the PROKENNEX products. Superior claimed ownership of
the subject marks and failed to disclose in its application with the IPO that it was
merely a distributor of KENNEX and PROKENNEX products in the Philippines.

While Superior accepted the obligation to assign Certificates of

Registration Nos. SR-4730 and 33487 to Kunnan in exchange for the appointment
by the latter as its exclusive distributor, Superior however breached its obligation
and failed to assign the same to Kunnan. In a letter dated 13 February 1987,
Superior, through Mr. Tan Bon Diong, misrepresented to Kunnan that the latter
cannot own trademarks in the Philippines. Thus, Kunnan was misled into
assigning to Superior its (Kunnans) own application for the disputed trademarks.
In the same assignment document, however. Superior was bound to ensure that
the PROKENNEX trademarks under Registration Nos. 40326, 39254, and 49998
shall be returned to Kunnan clean and without any incumbency when requested
by the latter.

In fine, We see no error in the decision of the Director General of the IPO
which affirmed the decision of the Director of the Bureau of Legal Affairs
canceling the registration of the questioned marks in the name of petitioner
Superior and denying its new application for registration, upon a finding that
Superior is not the rightful owner of the subject marks.

WHEREFORE, the foregoing considered, the petition is DISMISSED.

The CA decided that the registration of the KENNEX and PRO
KENNEX trademarks should be cancelled because SUPERIOR was not the
owner of, and could not in the first place have validly registered these
trademarks. Thus, as of the finality of the CA decision on December 3, 2007,
these trademark registrations were effectively cancelled and SUPERIOR was no
longer the registrant of the disputed trademarks.

Section 22 of Republic Act No. 166, as amended (RA 166),66[36] the law
applicable to this case, defines trademark infringement as follows:

Section 22. Infringement, what constitutes. Any person who [1] 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 the source or origin of such goods or services, or identity
of such 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. [Emphasis supplied]

Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a
case for infringement. Corollary to this, Section 19 of RA 166 provides that any
right conferred upon the registrant under the provisions of RA 16667[37]
terminates when the judgment or order of cancellation has become final, viz:
Section 19. Cancellation of registration. - If the Director finds that a case for
cancellation has been made out he shall order the cancellation of the registration.
The order shall not become effective until the period for appeal has elapsed, or if
appeal is taken, until the judgment on appeal becomes final. When the order or
judgment becomes final, any right conferred by such registration upon the
 registrant or any person in interest of record shall terminate. Notice of
cancellation shall be published in the Official Gazette. [Emphasis supplied.]

Thus, we have previously held that the cancellation of registration of a

trademark has the effect of depriving the registrant of protection from infringement
from the moment judgment or order of cancellation has become final.68[38]

In the present case, by operation of law, specifically Section 19 of RA 166,

the trademark infringement aspect of SUPERIORs case has been rendered moot
and academic in view of the finality of the decision in the Registration
Cancellation Case. In short, SUPERIOR is left without any cause of action for
trademark infringement since the cancellation of registration of a trademark
deprived it of protection from infringement from the moment judgment or order of
cancellation became final. To be sure, in a trademark infringement, title to the
trademark is indispensable to a valid cause of action and such title is shown by its
certificate of registration.69[39] With its certificates of registration over the
disputed trademarks effectively cancelled with finality, SUPERIORs case for
trademark infringement lost its legal basis and no longer presented a valid cause of
action.

Even assuming that SUPERIORs case for trademark infringement had not
been rendered moot and academic, there can be no infringement committed by
KUNNAN who was adjudged with finality to be the rightful owner of the disputed
trademarks in the Registration Cancellation Case. Even prior to the cancellation of
the registration of the disputed trademarks, SUPERIOR as a mere distributor and
not the owner cannot assert any protection from trademark infringement as it had
no right in the first place to the registration of the disputed trademarks. In fact,
jurisprudence holds that in the absence of any inequitable conduct on the part of
the manufacturer, an exclusive distributor who employs the trademark of the
manufacturer does not acquire proprietary rights of the manufacturer, and a
registration of the trademark by the distributor as such belongs to the
manufacturer, provided the fiduciary relationship does not terminate before
application for registration is filed.70[40] Thus, the CA in the Registration
Cancellation Case correctly held:

As a mere distributor, petitioner Superior undoubtedly had no right to

register the questioned mark in its name. Well-entrenched in our jurisdiction is the
rule that the right to register a trademark should be based on ownership. When the
applicant is not the owner of the trademark being applied for, he has no right to
apply for the registration of the same. Under the Trademark Law, only the owner
of the trademark, trade name or service mark used to distinguish his goods,
business or service from the goods, business or service of others is entitled to
register the same. An exclusive distributor does not acquire any proprietary
interest in the principals trademark and cannot register it in his own name unless it
is has been validly assigned to him.

In addition, we also note that the doctrine of res judicata bars SUPERIORs
present case for trademark infringement. The doctrine of res judicata embraces
two (2) concepts: the first is "bar by prior judgment" under paragraph (b) of Rule
39, Section 47, and the second is "conclusiveness of judgment" under paragraph (c)
thereof.
 In the present case, the second concept conclusiveness of judgment applies.
Under the concept of res judicata by conclusiveness of judgment, a final
judgment or decree on the merits by a court of competent jurisdiction is conclusive
of the rights of the parties or their privies in all later suits on points and matters
determined in the former suit.71[41] Stated differently, facts and issues actually
and directly resolved in a former suit cannot again be raised in any future case
between the same parties, even if the latter suit may involve a different cause of
action.72[42] This second branch of the principle of res judicata bars the re-
litigation of particular facts or issues in another litigation between the same parties
on a different claim or cause of action.73[43]

Because the Registration Cancellation Case and the present case involve the
same parties, litigating with respect to and disputing the same trademarks, we are
bound to examine how one case would affect the other. In the present case, even if
the causes of action of the Registration Cancellation Case (the cancellation of
trademark registration) differs from that of the present case (the improper or
unauthorized use of trademarks), the final judgment in the Registration
Cancellation Case is nevertheless conclusive on the particular facts and issues that
are determinative of the present case.
 To establish trademark infringement, the following elements must be
proven: (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.74[44]

Based on these elements, we find it immediately obvious that the second

element the plaintiffs ownership of the mark was what the Registration
Cancellation Case decided with finality. On this element depended the validity of
the registrations that, on their own, only gave rise to the presumption of, but was
not conclusive on, the issue of ownership.75[45]
In no uncertain terms, the appellate court in the Registration Cancellation
Case ruled that SUPERIOR was a mere distributor and could not have been
the owner, and was thus an invalid registrant of the disputed trademarks.
Significantly, these are the exact terms of the ruling the CA arrived at in the
present petition now under our review. Thus, whether with one or the other, the
ruling on the issue of ownership of the trademarks is the same. Given, however, the
final and executory ruling in the Registration Cancellation Case on the issue of
ownership that binds us and the parties, any further discussion and review of the
issue of ownership although the current CA ruling is legally correct and can stand
on its own merits becomes a pointless academic discussion.

On the Issue of Unfair Competition

 Our review of the records shows that the neither the RTC nor the CA made
any factual findings with respect to the issue of unfair competition. In its Complaint,
SUPERIOR alleged that:76[46]

17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises,
Ltd., is intending to appoint the defendant Sports Concept and Distributors, Inc. as
its alleged distributor for sportswear and sporting goods bearing the trademark
PRO-KENNEX. For this reason, on January 20, 1993, the plaintiff, through
counsel, wrote the defendant Sports Concept and Distributors Inc. advising said
defendant that the trademark PRO-KENNEX was registered and owned by the
plaintiff herein.

18. The above information was affirmed by an announcement made by the

defendants in The Manila Bulletin issue of January 29, 1993, informing the public
that defendant Kunnan Enterprises, Ltd. has appointed the defendant Sports
Concept and Distributors, Inc. as its alleged distributor of sportswear and sporting
goods and equipment bearing the trademarks KENNEX and PRO-KENNEX which
trademarks are owned by and registered in the name of plaintiff herein as alleged
hereinabove.

xxxx

27. The acts of defendants, as previously complained herein, were designed to and
are of the nature so as to create confusion with the commercial activities of plaintiff
in the Philippines and is liable to mislead the public as to the nature and suitability
for their purposes of plaintiffs business and the defendants acts are likely to
discredit the commercial activities and future growth of plaintiffs business.
 From jurisprudence, unfair competition has been defined as the passing off
(or palming off) or attempting to pass off upon the public of the goods or business
of one person as the goods or business of another with the end and probable effect
of deceiving the public. The essential elements of unfair competition77[47] are (1)
confusing similarity in the general appearance of the goods; and (2) intent to deceive
the public and defraud a competitor.78[48]

Jurisprudence also formulated the following true test of unfair competition:

whether the acts of the defendant have the intent of deceiving or are calculated to
deceive the ordinary buyer making his purchases under the ordinary conditions of
the particular trade to which the controversy relates. One of the essential requisites
in an action to restrain unfair competition is proof of fraud; the intent to deceive,
actual or probable must be shown before the right to recover can exist.79[49]
 In the present case, no evidence exists showing that KUNNAN ever attempted
to pass off the goods it sold (i.e. sportswear, sporting goods and equipment) as those
of SUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to
KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to
adduce any evidence to show that KUNNAN by the above-cited acts intended to
deceive the public as to the identity of the goods sold or of the manufacturer of the
goods sold. In McDonalds Corporation v. L.C. Big Mak Burger, Inc.,80[50] we held
that there can be trademark infringement without unfair competition such 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. In this case, no issue of confusion arises
because the same manufactured products are sold; only the ownership of the
trademarks is at issue. Furthermore, KUNNANs January 29, 1993 notice by its terms
prevents the public from being deceived that the goods originated from SUPERIOR
since the notice clearly indicated that KUNNAN is the manufacturer of the goods
bearing the trademarks KENNEX and PRO KENNEX. This notice states in
full:81[51]

NOTICE AND WARNING

Kunnan Enterprises Ltd. is the owner and first user of the internationally-
renowned trademarks KENNEX and PRO KENNEX for sportswear and sporting
goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks
 KENNEX and PRO KENNEX in the industrial property offices of at least 31
countries worldwide where KUNNAN Enterprises Ltd. has been selling its
sportswear and sporting goods and equipment bearing the KENNEX and PRO
KENNEX trademarks.

Kunnan Enterprises Ltd. further informs the public that it had terminated
its Distributorship Agreement with Superior Commercial Enterprises, Inc. on
December 31, 1991. As a result, Superior Commercial Enterprises, Inc. is no
longer authorized to sell sportswear and sporting goods and equipment
manufactured by Kunnan Enterprises Ltd. and bearing the trademarks
KENNEX and PRO KENNEX.

xxxx

In its place, KUNNAN has appointed SPORTS CONCEPT AND

DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and
sporting goods and equipment bearing the trademarks KENNEX and PRO
KENNEX. The public is advised to buy sporting goods and equipment
bearing these trademarks only from SPORTS CONCEPT AND
DISTRIBUTORS, INC. to ensure that the products they are buying are
manufactured by Kunnan Enterprises Ltd. [Emphasis supplied.]

Finally, with the established ruling that KUNNAN is the rightful owner of
the trademarks of the goods that SUPERIOR asserts are being unfairly sold by
KUNNAN under trademarks registered in SUPERIORs name, the latter is left with
no effective right to make a claim. In other words, with the CAs final ruling in the
Registration Cancellation Case, SUPERIORs case no longer presents a valid cause
of action. For this reason, the unfair competition aspect of the SUPERIORs case
likewise falls.

WHEREFORE, premises considered, we DENY Superior Commercial

Enterprises, Inc.s petition for review on certiorari for lack of merit. Cost against
petitioner Superior Commercial Enterprises, Inc.
 SO ORDERED.

COPYRIGHT INFRINGEMENT

SECOND DIVISION

G.R. No. 195956, March 11, 2015

ABS-CBN CORPORATION, Petitioner, v. FELIPE GOZON, GILBERTO R. DUAVIT,

JR., MARISSA L. FLORES, JESSICA A. SOHO, GRACE DELA PEÑA-REYES, JOHN
OLIVER T. MANALASTAS, JOHN DOES AND JANE DOES, Respondents.

DECISION

LEONEN, J.:
The main issue in this case is whether there is probable cause to charge respondents with
infringement under Republic Act No. 8293, otherwise known as the Intellectual Property Code.
The resolution of this issue requires clarification of the concept of "copyrightable material" in
relation to material that is rebroadcast live as a news story. We are also asked to rule on whether
criminal prosecution for infringement of copyrightable material, such as live rebroadcast, can be
negated by good faith.

ABS-CBN Corporation (ABS-CBN) filed the Petition for Review on Certiorari1 to assail the
November 9, 2010 Decision2 and the March 3, 2011 Resolution3 of the Court of Appeals. The
Court of Appeals reinstated the Department of Justice Resolution dated August 1, 2005 that
ordered the withdrawal of the Information finding probable cause for respondents' violation of
Sections 1774 and 2115 of the Intellectual Property Code.6 Respondents are officers and
employees of GMA Network, Inc. (GMA-7). They are: Felipe Gozon (Gozon), GMA-7
President; Gilberto R. Duavit, Jr. (Duavit, Jr.), Executive Vice-President; Marissa L. Flores
(Flores), Vice-President for News and Public Affairs; Jessica A. Soho (Soho), Director for News;
Grace Déla Peña-Reyes (Dela Peña-Reyes), Head of News and Public Affairs; John Oliver
Manalastas '(Manalastas), Program Manager; and others.

The controversy arose from GMA-7's news coverage on the homecoming of Filipino overseas
worker and hostage victim Angelo dela Cruz on July 22, 2004. As summarized by the Court of
Appeals: chanroblesvirtuallawlibrary

Overseas Filipino worker Angelo dela Cruz was kidnapped by Iraqi militants and as a condition
for his release, a demand was made for the withdrawal of Filipino troops in Iraq. After
negotiations, he was released by his captors and was scheduled to return to the country in the
afternoon of 22 July 2004. Occasioned by said homecoming and the public interest it generated,
both . . . GMA Network, Inc. . . . and [petitioner] made their respective broadcasts and coverage
of the live event.7
ABS-CBN "conducted live audio-video coverage of and broadcasted the arrival of Angelo dela
Cruz at the Ninoy Aquino International Airport (NAIA) and the subsequent press conference."8
ABS-CBN allowed Reuters Television Service (Reuters) to air the footages it had taken earlier
under a special embargo agreement.9

ABS-CBN alleged that under the special embargo agreement, any of the footages it took would
be for the "use of Renter's international subscribers only, and shall be considered and treated by
Reuters under 'embargo' against use by other subscribers in the Philippines. . . . [N]o other
Philippine subscriber of Reuters would be allowed to use ABS-CBN footage without the latter's
consent."10

GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes, and Manalastas are
connected, "assigned and stationed news reporters and technical men at the NAIA for its live
broadcast and non-live news coverage of the arrival of dela Cruz."11 GMA-7 subscribes to both
Reuters and Cable News Network (CNN). It received a live video feed of the coverage of Angelo
dela Cruz's arrival from Reuters.12

GMA-7 immediately carried the live newsfeed in its program "Flash Report," together with its
live broadcast.13 Allegedly, GMA-7 did not receive any notice or was not aware that Reuters was
airing footages of ABS-CBN.14 GMA-7's news control room staff saw neither the "No Access
Philippines" notice nor a notice that the video feed was under embargo in favor of ABS-CBN.15

On August 13, 2004, ABS-CBN filed the Complaint for copyright infringement under Sections
17716 and 21117 of the Intellectual Property Code.18

On December 3, 2004, Assistant City Prosecutor Dindo Venturanza issued the Resolution19
finding probable cause to indict Dela Peña-Reyes and Manalastas.20 Consequently, the
Information21 for violation of the Intellectual Property Code was filed on December 17, 2004. It
reads:
chanroblesvirtuallawlibrary

That on or about the 22nd of July 2004, in Quezon City, Philippines, the above-named accused,
conspiring together, confederating with and mutually helping each other, being the Head of
News Operations and the Program Manager, respectively, for the News and Public Affairs
Department of GMA Network, Inc., did then and there, willfully, unlawfully and feloniously use
and broadcast the footage of the arrival of Angelo [d]ela Cruz at the Ninoy Aquino International
Airport of which ABS-CBN holds the exclusive ownership and copyright by then and there
using, airing, and broadcasting the said footage in its news program "FLASH REPORT" without
first obtaining the consent or authority of said copyright owner, to their damage and prejudice.

Contrary to law.22
On January 4, 2005, respondents filed the Petition for Review before the Department of Justice.23
In the Resolution (Gonzalez Resolution) dated August 1, 2005, Department of Justice Secretary
Raul M. Gonzalez (Secretary Gonzalez) ruled in favor of respondents and held that good faith
may be raised as a defense in the case.24 The dispositive portion of the Resolution reads: chanroblesvirtuallawlibrary

WHEREFORE, THE PETITION FOR REVIEW FILED BY GMA-7 in I.S. No. 04-10458 is
considered meritorious and is hereby GRANTED. This case is hereby Dismissed, the resolution
of the City Prosecutor of Quezon City is hereby reversed and the same is ordered to withdraw the
information if any and report action taken to this office within ten (10) days.25 (Emphasis in the
original)
Both parties moved for reconsideration of the Gonzalez Resolution.26

Meanwhile, on January 19, 2005, the trial court granted the Motion to Suspend Proceedings filed
earlier by Dela Peña-Reyes and Manalastas.27 The trial court Order reads: chanroblesvirtuallawlibr ary

Perusing the motion, the court finds that a petition for review was filed with the Department of
Justice on January 5, 2005 as confirmed by the public prosecutor. Under Section 11 (c), Rule 116
of the Rules of Criminal Procedure, once a petition for review is filed with the Department of
Justice, a suspension of the criminal proceedings may be allowed by the court.

Accordingly, to allow the Department of Justice the opportunity to act on said petition for
review, let the proceedings on this case be suspended for a period of sixty (60) days counted
from January 5, 2005, the date the petition was filed with the Department of Justice. The
arraignment of the accused on February 1, 2005 is accordingly cancelled. Let the arraignment be
rescheduled to March 8, 2005 at 8:30 a.m. The accused through counsel are notified in open
court.

SO ORDERED.28
On June 29, 2010, Department of Justice Acting Secretary Alberto C. Agra (Secretary Agra)
issued the Resolution (Agra Resolution) that reversed the Gonzalez Resolution and found
probable cause to charge Dela Peña-Reyes and Manalastas for violation of the Intellectual
Property Code.29 Secretary Agra also found probable cause to indict Gozon, Duavit, Jr., Flores,
and Soho for the same violation.30 He ruled that: chanroblesvirtuallawlib rary

[w]hile good faith may be a defense in copyright infringement, the same is a disputable
presumption that must be proven in a full-blown trial. Disputable presumptions may be
contradicted and overcome by other evidence. Thus, a full-blown trial is the proper venue where
facts, issues and laws are evaluated and considered. The very purpose of trial is to allow a party
to present evidence to overcome the disputable presumptions involved.31
The dispositive portion of the Agra Resolution provides: chanroblesvirtuallawlibrary

WHEREFORE, premises considered:

(a) The Motion for Reconsideration filed by appellees ABS-CBN Broadcasting Corporation
(ABS-CBN) of our Resolution promulgated on August 1, 2005 (Resolution No. 364, Series of
2005) and the Petition for Review filed by complainant-appellant ABS-CBN in I.S. No. 04-
10458 on April 10, 2006, are GRANTED and the City Prosecutor of Quezon City is hereby
ordered to file the necessary Information for violation of Section 177 and 211 of Republic Act
No. 8293 against GMA-7. Felipe L. Gozon, Gilberto R. Duavit, Jr., Marissa L. Flores, Jessica A.
Soho, Grace Dela Pena-Reyes, John Oliver T. Manalastas[.]

SO ORDERED.32 (Emphasis in the original)

Respondents assailed the Agra Resolution through the Petition for Certiorari with prayer for
issuance of a temporary restraining order and/or Writ of Preliminary Injunction on September 2,
2010 before the Court of Appeals. In the Resolution dated September 13, 2010, the Court of
Appeals granted the temporary restraining order preventing the Department of Justice from
enforcing the Agra Resolution.33

On November 9, 2010, the Court of Appeals rendered the Decision granting the Petition and
reversing and setting aside the Agra Resolution.34 The Court of Appeals held that Secretary Agra
committed errors of jurisdiction in issuing the assailed Resolution. Resolving the issue of
copyright infringement, the Court of Appeals said: chanroblesvirtuallawlibrary

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. However, it is an admitted fact
that petitioner GMA had only aired a five (5) second footage of the disputed live video feed that
it had received from Reuters and CNN as a subscriber. Indeed, petitioners had no notice of the
right of ownership of private respondent over the same. Without notice of the "No Access
Philippines" restriction of the live video feed, petitioner cannot he faulted for airing a live video
feed from Reuters and CNN.

Verily, as aptly opined by Secretary Gonzalez in his earlier Resolution, the act of petitioners in
airing the five (5) second footage was undeniably attended by good faith and it thus serves to
exculpate them from criminal liability under the Code. While the Intellectual Properly Code is a
special law, and thus generally categorized as malum prohibitum, it bears to stress that the
provisions of the Code itself do not ipso facto penalize a person or entity for copyright
infringement by the mere fact that one had used a copyrighted work or material.

Certainly so, in the exercise of one's moral and economic or copyrights, the very provisions of
Part IV of the Intellectual Property Code provide for the scope and limitations on copyright
protection under Section 184 and in fact permit fair use of copyrighted work under Section 185.
With the aforesaid statutory limitations on one's economic and copyrights and the allowable
instances where the other persons can legally use a copyrighted work, criminal culpability clearly
attaches only when the infringement had been knowingly and intentionally committed.35
(Emphasis supplied)
The dispositive portion of the Decision reads: chanroblesvirtuallawlibrary

WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the
assailed Resolution dated 29 June 2010 REVERSED and SET ASIDE. Accordingly, the earlier
Resolution dated 1 August 2005, which ordered the withdrawal of the Information filed, if any,
against the petitioners for violation of Sections 177 and 211 of the Intellectual Property Code, is
hereby REINSTATED. No costs.

SO ORDERED.36 (Emphasis in the original)

ABS-CBN's Motion for Reconsideration was denied.37 It then filed its Petition for Review before
this court assailing the Decision and Resolution of the Court of Appeals.38

The issues for this court's consideration are:

First, whether Secretary Agra committed errors of jurisdiction in the Resolution dated June 29,
2010 and, therefore, whether a petition for certiorari was the proper remedy in assailing that
Resolution;

Second, whether news footage is copyrightable under the law;

Third, whether there was fair use of the broadcast material;

Fourth, whether lack of knowledge that a material is copyrighted is a defense against copyright
infringement;

Fifth, whether good faith is a defense in a criminal prosecution for violation of the Intellectual
Property Code; and

Lastly, whether the Court of Appeals was correct in overturning Secretary Agra's finding of
probable cause. cralawlawlibrary

The trial court granted respondents' Motion to Suspend Proceedings and deferred respondents
Dela Peña-Reyes and Manalastas' arraignment for 60 days in view of the Petition for Review
filed before the Department of Justice.
Rule 116, Section 11 (c) of the Rules of Criminal Procedure allows the suspension of the
accused's arraignment in certain circumstances only: c hanroblesvirtuallawlibrary

SEC. 11. Suspension of arraignment.-Upon motion by the proper party, the arraignment shall be
suspended in the following cases:

(a) The accused appears to be suffering from an unsound mental condition which effectively
renders him unable to fully understand the charge against him and to plead intelligently
thereto. In such case, the court shall order his mental examination and, if necessary, his
confinement for such purpose;

(b) There exists a prejudicial question; and

(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. (12a) (Emphasis
supplied)
In Samson v. Daway,39 this court acknowledged the applicability of Rule 116, Section (c) in a
criminal prosecution for infringement under the Intellectual Property Code. However, this court
emphasized the limits of the order of deferment under the Rule:

While the pendency of a petition for review is a ground for suspension of the arraignment, the . .
. 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.40

We clarify that the suspension of the arraignment should always be within the limits allowed by
law. In Crespo v. Judge Mogul,41 this court outlined the effects of filing an information before
the trial court, which includes initiating a criminal action and giving this court "authority to hear
and determine the case":42 ChanRoblesVir tualawlibrary

The preliminary investigation conducted by the fiscal for the purpose of determining whether a
prima facie case exists warranting the prosecution of the accused is terminated upon the filing of
the information in the proper court. In turn, as above stated, the filing of said information sets in
motion the criminal action against the accused in Court. Should the fiscal find it proper to
conduct a reinvestigation of the case, at such stage, the permission of the Court must be secured.
After such reinvestigation the finding and recommendations of the fiscal should be submitted to
the Court for appropriate action. While it is true that the fiscal has the quasi judicial discretion to
determine whether or not a criminal case should be filed in court or not, once the case had
already been brought to Court whatever disposition the fiscal may feel should be proper in the
case thereafter should be addressed for the consideration of the Court, the only qualification is
that the action of the Court must not impair the substantial rights of the accused or the right of
the People to due process of law.

Whether the accused had been arraigned or not and whether it was due to a reinvestigation by
the fiscal or a review by the Secretary of Justice whereby a motion to dismiss was submitted to
the Court, the Court in the exercise of its discretion may grant the motion or deny it and require
that the trial on the merits proceed for the proper determination of the case.

However, one may ask, if the trial court refuses to grant the motion to dismiss filed by the fiscal
upon the directive of the Secretary of Justice will there not be a vacuum in the prosecution? A
state prosecutor to handle the case cannot possibly be designated by the Secretary of Justice who
does not believe that there is a basis for prosecution nor can the fiscal be expected to handle the
prosecution of the case thereby defying the superior order of the Secretary of Justice.

The answer is simple. The role of the fiscal or prosecutor as We all know is to see that justice is
done and not necessarily to secure the conviction of the person accused before the Courts. Thus,
in spite of his opinion to the contrary, it is the duty of the fiscal to proceed with the presentation
of evidence of the prosecution to the Court to enable the Court to arrive at its own independent
judgment as to whether the accused should be convicted or acquitted. The fiscal should not shirk
from the responsibility of appearing for the People of the Philippines even under such
circumstances much less should he abandon the prosecution of the case leaving it to the hands of
a private prosecutor for then the entire proceedings will be null and void. The least that the fiscal
should do is to continue to appear for the prosecution although he may turn over the presentation
of the evidence to the private prosecutor but still under his direction and control.

The rule therefore in this jurisdiction is that once a complaint or information is filed in Court
any disposition of the case as to its dismissal or the conviction or acquittal of the accused rests
in the sound discretion of the Court. Although the fiscal retains the direction and control of the
prosecution of criminal cases even while the case is already in Court he cannot impose his
opinion on the trial court. The Court is the best and sole judge on what to do with the case before
it. The determination of the case is within its exclusive jurisdiction and competence. A motion to
dismiss the case filed by the fiscal should be addressed to the Court who has the option to grant
or deny the same. It does not matter if this is done before or after the arraignment of the accused
or that the motion was filed after a reinvestigation or upon instructions of the Secretary of Justice
who reviewed the records of the investigation.43 (Emphasis supplied, citations omitted)
The doctrine in Crespo was reiterated in Mayor Balindong v. Court of Appeals,44 where this
court reminded the Department of Justice Secretary to refrain from entertaining petitions for
review when the case is already pending with this court: chanroblesvirtuallawlibrary

[I]n order to avoid a situation where the opinion of the Secretary of Justice who reviewed the
action of the fiscal may be disregarded by the trial court, the Secretary of Justice should, as far as
practicable, refrain from entertaining a petition for review or appeal from the action of the fiscal,
when the complaint or information has already been filed in the Court. The matter should be left
entirely for the determination of the Court.45
The trial court should have proceeded with respondents Dela Peña-Reyes and Manalastas'
arraignment after the 60-day period from the filing of the Petition for Review before the
Department of Justice on March 8, 2005. It was only on September 13, 2010 that the temporary
restraining order was issued by the Court of Appeals. The trial court erred when it did not act on
the criminal case during the interim period. It had full control and direction of the case. As Judge
Mogul reasoned in denying the motion to dismiss in Crespo, failure to proceed with the
arraignment "disregards the requirements of due process [and] erodes the Court's independence
and integrity."46
 II

According to ABS-CBN, the Court of Appeals erred in finding that: a motion for reconsideration
was not necessary before a petition for certiorari could be filed; the Department of Justice
Secretary committed errors of jurisdiction since the Agra Resolution was issued within its
authority and in accordance with settled laws and jurisprudence; and respondents were not liable
for copyright infringement.

In its assailed Decision, the Court of Appeals found that respondents committed a procedural
error when they failed to file a motion for reconsideration before filing the Petition for Certiorari.
However, the Court of Appeals held that a motion for reconsideration was unnecessary since the
Agra Resolution was a patent nullity and it would have been useless under the circumstances: chanroblesvirtuallawlibrary

Given that a reading of the assailed Resolution and the instant records readily reveals errors -of
jurisdiction on the part of respondent Secretary, direct judicial recourse is warranted under the
circumstances. Aside from the fact that said Resolution is a patent nullity having been issued in
grave abuse of discretion amounting to lack or excess of jurisdiction, the filing of a motion for
reconsideration is evidently useless on account of the fact that the issues and arguments before
this Court have already been duly raised and accordingly delved into by respondent Secretary in
his disposition of the petition a quo.47 (Emphasis in the original)
In Elma v. Jacobi,48 this court ruled that a petition for certiorari under Rule 65 of the Rules of
Court is proper when assailing adverse resolutions of the Department of Justice stemming from
the determination of probable cause.49 However, grave abuse of discretion must be alleged.50

In Sanrio Company Limited v. Lim,51 this court stressed the prosecutor's role in determining
probable cause. Judicial review will only lie when it is shown that the prosecutor acted with
grave abuse of discretion amounting to lack or excess of jurisdiction: chanroblesvirtuallawlibrary

A prosecutor alone determines the sufficiency of evidence that will establish probable cause
justifying the filing of a criminal information against the respondent. By way of exception,
however, judicial review is allowed where respondent has clearly established that the prosecutor
committed grave abuse of discretion. Otherwise stated, such review is appropriate only when the
prosecutor has exercised his discretion in an arbitrary, capricious, whimsical or despotic manner
by reason of passion or personal hostility, patent and gross enough to amount to an evasion of a
positive duty or virtual refusal to perform a duty enjoined by law.52 (Citations omitted)
Grave abuse of discretion refers to:chanroblesvirtuallawlibrary

such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The
abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility and must be so patent and gross as to amount
to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at
all in contemplation of law.53
Resorting to certiorari requires that there be there be "no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law[,]"54 such as a motion for reconsideration.
Generally, "a motion for reconsideration is a condition sine qua non before a petition for
certiorari may lie, its purpose being to grant an opportunity for the [tribunal or officer] to correct
any error attributed to it by a re-examination of the legal and factual circumstances of the case."55
However, exceptions to the rule exist: chanroblesvirtuallawlibrary

(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court; (c) where there is an
urgent necessity for the resolution of the question and any further delay would prejudice the
interests of the Government or of the petitioner or the subject matter of the action is perishable;
(d) where, under the circumstances, a motion for reconsideration would be useless; (e) where
petitioner was deprived of due process and there is extreme urgency for relief; (f) where, in a
criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial
Court is improbable; (g) where the proceedings in the lower court are a nullity for lack of due
process; (h) where the proceedings was ex parte or in which the petitioner had no opportunity to
object; and (i) where the issue raised is one purely of law or where public interest is involved.56
(Emphasis in the original, citations omitted)
As argued by respondents, "[a] second motion for reconsideration would have been useless and
futile since the Department] [of] J[ustice] had already passed upon the same issues twice."57
Equally pressing under the circumstances was the need to resolve the matter, as the Information's
filing would lead to respondents' imminent arrest.58

Moreover, Department of Justice Department Circular No. 70 dated July 3, 2000, or the 2000
NPS Rules on Appeal, provides that no second motion for reconsideration of the Department of
Justice Secretary's resolution shall be entertained: chanrobles virtuallawlibrary

SECTION 13. Motion for reconsideration. The aggrieved party may file a motion for
reconsideration within a non-extendible period of ten (10) days from receipt of the resolution on
appeal, furnishing the adverse party and the Prosecution Office concerned with copies thereof
and submitting proof of such service. No second or further motion for reconsideration shall be
entertained.
The Agra Resolution was the result of respondents' Motion for Reconsideration assailing the
Gonzalez Resolution. To file a motion for reconsideration of the Agra Resolution would be
superfluous. Respondents were, therefore, correct in filing the Petition for Certiorari of the Agra
Resolution before the Court of Appeals. cralawlawlibrary

III

The Court of Appeals ruled that Secretary Agra committed errors of jurisdiction, which then
required the grant of the writ of certiorari: chanroblesvirtuallawlibrary

So viewed, by ordering the filing of information without proof that probable cause exists to
charge petitioners with a crime, respondent Secretary clearly committed an error of jurisdiction
thus warranting the issuance of the writ of certiorari. Surely, probable cause cannot be had when
the very provisions of the statute exculpates criminal liability in cases classified as fair use of
copyrighted materials. The fact that they admittedly used the Reuters live video feed is not, as a
matter of course, tantamount to copyright infringement that would justify the filing of an
information against the petitioners.59
Error of jurisdiction must be distinguished from error of judgment:

A line must be drawn between errors of judgment and errors of jurisdiction. An error of
judgment is one which the court may commit in the exercise of its jurisdiction. An error of
jurisdiction renders an order or judgment void or voidable. Errors of jurisdiction are reviewable
on certiorari; errors of judgment, only by appeal.60

In People v. Hon. Sandiganbayan61: chanroblesvirtuallawlibrary

An error of judgment is one which the court may commit in the exercise of its jurisdiction. An
error of jurisdiction is one where the act complained of was issued by the court without or in
excess of jurisdiction, or with grave abuse of discretion, which is tantamount to lack or in excess
of jurisdiction and which error is correctible only by the extraordinary writ of certiorari.
Certiorari will not be issued to cure errors of the trial court in its appreciation of the evidence of
the parties, or its conclusions anchored on the said findings and its conclusions of law.62
(Emphasis supplied)
This court has adopted a deferential attitude towards review of the executive's finding of
probable cause.63 This is based "not only upon the respect for the investigatory and
[prosecutorial] powers granted by the Constitution to the executive department but upon
practicality as well."64 Review of the Department of Justice Secretary's decision or resolution
will be allowed only when grave abuse of discretion is alleged: chanrobles virtuallawlibrary

The full discretionary authority to determine probable cause in a preliminary investigation to

ascertain sufficient ground for the filing of information rests with the executive branch. Hence,
judicial review of the resolution of the Secretary of Justice is limited to a determination whether
there has been a grave abuse of discretion amounting to lack or excess of jurisdiction. Courts
cannot substitute the executive branch's judgment.

. . . .

It is only where the decision of the Justice Secretary is tainted with grave abuse of discretion
amounting to lack or excess of jurisdiction that the Court of Appeals may take cognizance of the
case in a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The Court
of Appeals decision may then be appealed to this Court by way of a petition for review on
certiorari.65 (Emphasis supplied, citations omitted)
In this case, it must be shown that Secretary Agra exceeded his authority when he reversed the
findings of Secretary Gonzalez. This court must determine whether there is probable cause to file
an information for copyright infringement under the Intellectual Property Code. cralawlawlibrary

IV

Probable cause pertains to "such facts as are sufficient to engender a well-founded belief that a
crime has been committed and that respondent is probably guilty thereof." 66 Preliminary
investigation is the inquiry or proceeding to determine whether there is probable cause.67

In Webb v. De Leon,68 this court ruled that determination of probable cause during preliminary
investigation does not require trial-like evaluation of evidence since existence of probable cause
does not equate to guilt:chanroblesvirtuallawlibrary

It ought to be emphasized that in determining probable cause, the average man weighs facts and
circumstances without resorting to the calibrations of our technical rules of evidence of which his
knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men
have an abundance.

. . . .

. . . A finding of probable cause merely binds over the suspect to stand trial. It is not a
pronouncement of guilt.69
In Reyes v. Pearlbank Securities, Inc.,70 finding probable cause is not equivalent to finding with
moral certainty that the accused committed the crime:

A finding of probable cause needs only to rest on evidence showing that more likely than not a
crime has been committed by the suspects. It need not be based on clear and convincing evidence
of guilt, not on evidence establishing guilt beyond reasonable doubt, and definitely not on
evidence establishing absolute certainty of guilt. In determining probable cause, the average man
weighs facts and circumstances without resorting to the calibrations of the rules of evidence of
which he has no technical knowledge. He relies on common sense.71

During preliminary investigation, a public prosecutor does not adjudicate on the parties' rights,
obligations, or liabilities.72

In the recent case of Estrada v. Office of the Ombudsman, et al,73 we reiterated Webb on the
determination of probable cause during preliminary investigation and traced the history of
probable cause as borrowed from American jurisprudence: chanroblesv irtuallawlibrary

The purpose in determining probable cause is to make sure that the courts are not clogged with
weak cases that will only be dismissed, as well as to spare a person from the travails of a
needless prosecution.

. . . .

. . . In the United States, from where we borrowed the concept of probable cause, the prevailing
definition of probable cause is this:chanroblesvirtuallawlibrary

In dealing with probable cause, however, as the very name implies, we deal with probabilities.
These are not technical; they are the factual and practical considerations of everyday life on
which reasonable and prudent men, not legal technicians, act. The standard of proof is
accordingly correlative to what must be proved.

"The substance of all the definitions" of probable cause "is a reasonable ground for belief of
guilt." McCarthy v. De Armit, 99 Pa. St. 63, 69, quoted with approval in the Carroll opinion. 267
U. S. at 161. And this "means less than evidence which would justify condemnation" or
conviction, as Marshall, C. J., said for the Court more than a century ago in Locke v. United
States, 7 Cranch 339, 348. Since Marshall's time, at any rate, it has come to mean more than bare
suspicion: Probable cause exists where "the facts and circumstances within their [the officers']
knowledge and of which they had reasonably trustworthy information [are] sufficient in
themselves to warrant a man of reasonable caution in the belief that" an offense has been or is
being committed. Carroll v. United States, 267 U. S. 132, 162.

These long-prevailing standards seek to safeguard citizens from rash and unreasonable
interferences with privacy and from unfounded charges of crime. They also seek to give fair
leeway for enforcing the law in the community's protection. Because many situations which
confront officers in the course of executing their duties are more or less ambiguous, room must
be allowed for some mistakes on their part. But the mistakes must be those of reasonable men,
acting on facts leading sensibly to their conclusions of probability. The rule of probable cause is
a practical, nontechnical conception affording the best compromise that has been found for
accommodating these often opposing interests. Requiring more would unduly hamper law
enforcement. To allow less would be to leave law-abiding citizens at the mercy of the officers'
whim or caprice.
In the Philippines, there are four instances in the Revised Rules of Criminal Procedure where
probable cause is needed to be established:

(1) In Sections 1 and 3 of Rule 112: By the investigating officer, to determine whether
there is sufficient ground to engender a well-founded belief that a crime has been
committed and the respondent is probably guilty thereof, and should be held for trial.
A preliminary investigation is required before the filing of a complaint or information
for an offense where the penalty prescribed by law is at least four years, two months
and one day without regard to the fine;

(2) In Sections 6 and 9 of Rule 112: By the judge, to determine whether a warrant of arrest
or a commitment order, if the accused has already been arrested, shall be issued and
that there is a necessity of placing the respondent under immediate custody in order not
to frustrate the ends of justice;

(3) In Section 5(b) of Rule 113: By a peace officer or a private person making a
warrantless arrest when an offense has just been committed, and he has probable cause
to believe based on personal knowledge of facts or circumstances that the person to be
arrested has committed it; and

(4) In Section 4 of Rule 126: By the judge, to determine whether a search warrant shall be
issued, and only upon probable cause in connection with one specific offense to be
determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to
be searched and the things to be seized which may be anywhere in the
Philippines.

In all these instances, the evidence necessary to establish probable cause is based only on the
likelihood, or probability, of guilt.74
Estrada also highlighted that a "[preliminary investigation is not part of the criminal action. It is
merely preparatory and may even be disposed of in certain situations."75

To determine whether there is probable cause that respondents committed copyright

infringement, a review of the elements of the crime, including the existing facts, is required. cralawlawlibrary

V
ABS-CBN claims that news footage is subject to copyright and prohibited use of copyrighted
material is punishable under the Intellectual Property Code. It argues that the new footage is not
a "newsworthy event" but "merely an account of the arrival of Angelo dela Cruz in the
Philippines — the latter being the newsworthy event":76 ChanRoblesV irtualawlibrary

To be clear, it is the event itself or the arrival of Angelo dela Cruz which is not copyrightable
because that is the newsworthy event. However, any footage created from the event itself, in this
case the arrival of Angelo dela Cruz, are intellectual creations which are copyrightable. Thus, the
footage created by ABS-CBN during the arrival of Angelo dela Cruz, which includes the
statements of Dindo Amparo, are copyrightable and protected by the laws on copyright.77
On the other hand, respondents argue that ABS-CBN's news footage of Angelo dela Cruz's
arrival is not copyrightable or subject to protection: chanroblesvirtuallawlibrary

Certainly, the arrival of Angelo [d]ela Cruz, which aroused public attention and the
consciousness of the Filipino people with regard to their countrymen, OFWs working in foreign
countries and how the Philippine government responds to the issues concerning them, is "news".
There is no ingenuity or inventiveness added in the said news footage. The video footage of this
"news" is not copyrightable by any legal standard as facts of everyday life depicted in the news
and items of press information is part of the public domain.78 (Emphasis in the original)
The news footage is copyrightable.

The Intellectual Property Code is clear about the rights afforded to authors of various kinds of
work. Under the Code, "works are protected by the sole fact of their creation, irrespective of
their mode or form of expression, as well as of their content, quality and purpose."79 These
include "[audio-visual works and cinematographic works and works produced by a process
analogous to cinematography or any process for making audiovisual recordings."80

Contrary to the old copyright law,81 the Intellectual Property Code does not require registration
of the work to fully recover in an infringement suit. Nevertheless, both copyright laws provide
that copyright for a work is acquired by an intellectual creator from the moment of creation.82

It is true that under Section 175 of the Intellectual Property Code, "news of the day and other
miscellaneous facts having the character of mere items of press information" are considered
unprotected subject matter.83 However, the Code does not state that expression of the news of
the day, particularly when it underwent a creative process, is not entitled to protection.

An idea or event must be distinguished from the expression of that idea or event. An idea has
been likened to a ghost in that it "must be spoken to a little before it will explain itself."84 It is a
concept that has eluded exact legal definition.85 To get a better grasp of the idea/expression
dichotomy, the etymology of the term "idea" is traced: chanroblesvirtuallawlibrary

The word "idea" is derived from a Greek term, meaning "a form, the look or appearance of a
thing as opposed to its reality, from idein, to see." In the Timaeus, Plato saw ideas as eternal
paradigms, independent objects to which the divine demiurge looks as patterns in forming the
world. This was later modified to the religious conception of ideas as the thoughts of God. "It is
not a very long step to extend the term 'idea' to cover patterns, blueprints, or plans in anyone's
mind, not only in God's." The word entered the French and English vernacular in the 1600s and
possessed two meanings. The first was the Platonic meaning of a perfect exemplar or paradigm.
The second, which probably has its origin with Descartes, is of a mental concept or image or,
more broadly, any object of the mind when it is active. Objects of thought may exist
independently. The sun exists (probably) before and after you think of it. But it is also possible to
think of things that have never existed, such as a unicorn or Pegasus. John Locke defined ideas
very comprehensively, to include: all objects of the mind. Language was a way of translating the
invisible, hidden ideas that make up a person's thoughts into the external, perceptible world of
articulate sounds and visible written symbols that others can understand.86 (Citations omitted)
There is no one legal definition of "idea" in this jurisdiction. The term "idea" is mentioned only
once in the Intellectual Property Code.87 In Joaquin, Jr. v. Drilon,88 a television format (i.e., a
dating show format) is not copyrightable under Section 2 of Presidential Decree No. 49;89 it is a
mere concept: chanroblesvirtuallawlibrary

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to
concepts. The copyright does not extend to an idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in which it is described,
explained, illustrated, or embodied in such work. Thus, the new INTELLECTUAL PROPERTY
CODE OF THE PHILIPPINES provides: chanroblesv irtuallawlibrary

SEC. 175. Unprotected Subject Matter.—Notwithstanding the provisions of Sections 172 and
173, no protection shall extend, under this law, to any idea, procedure, system, method or
operation, concept, principle, discovery or mere data as such, even if they are expressed,
explained, illustrated or embodied in a work; news of the day and other miscellaneous facts
having the character of mere items of press information; or any official text of a legislative,
administrative or legal nature, as well as any official translation thereof.
What then is the subject matter of petitioners' copyright? This Court is of the opinion that
petitioner BJPFs copyright covers audio-visual recordings of each episode of Rhoda and Me, as
falling within the class of works mentioned in P.D. 49, §2(M), to wit: chanroblesvirtuallaw library

Cinematographic works and works produced by a process analogous to cinematography or any

process for making audio-visual recordings;
The copyright does not extend to the general concept or format of its dating game show.
Accordingly, by the very nature of the subject of petitioner BJPI's copyright, the investigating
prosecutor should have the opportunity to compare the videotapes of the two shows.

Mere description by words of the general format of the two dating game shows is insufficient;
the presentation of the master videotape in evidence was indispensable to the determination of
the existence of probable cause. As aptly observed by respondent Secretary of Justice:

A television show includes more than mere words can describe because it involves a whole
spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be
found by merely describing the general copyright/format of both dating game shows90 (Emphasis
supplied, citations omitted)
Ideas can be either abstract or concrete.91 It is the concrete ideas that are generally referred to as
expression:chanroblesvirtuallawlibrary

The words "abstract" and "concrete" arise in many cases dealing with the idea/expression
distinction. The Nichols court, for example, found that the defendant's film did not infringe the
plaintiffs play because it was "too generalized an abstraction from what plaintiff wrote . . . only a
part of her ideas." In Eichel v. Marcin, the court said that authors may exploit facts, experiences,
field of thought, and general ideas found in another's work, "provided they do not substantially
copy a concrete form, in which the circumstances and ideas have been developed, arranged, and
put into shape." Judge Hand, in National Comics Publications, Inc. v. Fawcett Publications, Inc.
said that "no one infringes, unless he descends so far into what is concrete as to invade. . .
'expression.'"

These cases seem to be distinguishing "abstract" ideas from "concrete" tangible embodiments of
these abstractions that may be termed expression. However, if the concrete form of a work
means more than the literal expression contained within it, it is difficult to determine what is
meant by "concrete." Webster's New Twentieth Century Dictionary of the English Language
provides several meanings for the word concrete. These include: "having a material, perceptible
existence; of, belonging to, or characterized by things or events that can be perceived by the
senses; real; actual;" and "referring to a particular; specific, not general or abstract."92
In Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,93 this court, citing the
American case of Baker v. Selden, distinguished copyright from patents and illustrated how an
idea or concept is different from the expression of that idea:chanroblesvirtuallaw library

In the oft-cited case of Baker vs. Selden, 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 plaintiffs copyrighted book. The US Supreme
Court ruled that:chanroblesvirtuallawlibrary

"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 ii. 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
hook 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."94 (Emphasis supplied)
News or the event itself is not copyrightable. However, an event can be captured and presented
in a specific medium. As recognized by this court in Joaquin, television "involves a whole
spectrum of visuals and effects, video and audio."95 News coverage in television involves
framing shots, using images, graphics, and sound effects. It involves creative process and
originality. Television news footage is an expression of the news.

In the United States, a line of cases dwelt on the possibility of television newscasts to be
copyrighted.97 Most of these cases focused on private individuals' sale or resale of tapes of news
broadcasts. Conflicting decisions were rendered by its courts. Noteworthy, however, is the
District Court's pronouncement in Pacific & Southern Co. v. Duncan,98 which involves a News
Monitoring Service's videotaping and sale of WXIA-TVs news broadcasts: chanroblesvirtuallaw library

It is axiomatic that copyright protection does not extend to news "events" or the facts or ideas
which are the subject of news reports. Miller v. Universal City Studios, Inc., 650 F.2d 1365,
1368 (5th Cir. 1981); Wainwright Securities, Inc. v. Wall Street Transcript Corp., 558 F.2d 91,
95 (2d Cir. 1977), cert, denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978). But it is
equally well-settled that copyright protection does extend to the reports themselves, as
distinguished from the substance of the information contained in the reports. Wainwright, 558
F.2d at 95; International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed.
211 (1918); see Chicago Record-Herald Co. v. Tribune Assn., 275 F. 797 (7th Cir.1921); 1
Nimmer on Copyright § 2.11[B] (1983). Copyright protects the manner of expression of news
reports, "the particular form or collocation of words in which the writer has communicated it"
International News Service, 248 U.S. at 234, 39 S.Ct. at 70. Such protection extends to electronic
news reports as well as written reports. See 17 U.S.C. § 102(a) (5), (6), and (7); see also Iowa
State University Research Foundations, Inc. v. American Broadcasting Cos., 621 F.2d 57, 61 (2d
Cir. 1980)." (Emphasis supplied)
The idea/expression dichotomy has long been subject to debate in the field of copyright law.
Abolishing the dichotomy has been proposed, in that non-protectibility of ideas should be re-
examined, if not stricken, from decisions and the law: chanroblesvirtuallawlibrary

If the underlying purpose of the copyright law is the dual one expressed by Lord Mansfield, the
only excuse for the continuance of the idea-expression test as a judicial standard for determining
protectibility would be that it was or could be a truly useful method of determining the proper
balance between the creator's right to profit from his work and the public's right that the
"progress of the arts not be retarded."

. . . [A]s used in the present-day context[,] the dichotomy has little or no relationship to the
policy which it should effectuate. Indeed, all too often the sweeping language of the courts
regarding the nonprotectibility of ideas gives the impression that this is of itself a policy of the
law, instead of merely a clumsy and outdated tool to achieve a much more basic end.100
The idea/expression dichotomy is a complex matter if one is trying to determine whether a
certain material is a copy of another.101 This dichotomy would be more relevant in determining,
for instance, whether a stage play was an infringement of an author's book involving the same
characters and setting. In this case, however, respondents admitted that the material under review
— which is the subject of the controversy — is an exact copy of the original. Respondents did
not subject ABS-CBN's footage to any editing of their own. The news footage did not undergo
any transformation where there is a need to track elements of the original.

Having established the protectible nature of news footage, we now discuss the concomitant rights
accorded to authors. The authors of a work are granted several rights in relation to it, including
copyright or economic rights: chanroblesvirtuallawlibrary

SECTION 177. Copyright or Economic Rights. — Subject to the provisions of Chapter VIII,
copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent
the following acts:chanroblesvirtuallawlibrary

177.1. Reproduction of the work or substantial portion of the work;

177.2. Dramatization, translation, adaptation, abridgment, arrangement or other transformation

of the work;

177.3. The first public distribution of the original and each copy of the work by sale or other
forms of transfer of ownership;
177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work
embodied in a sound recording, a computer program, a compilation of data and other
materials or a musical work in graphic form, irrespective of the ownership of the original
or the copy which is the subject of the rental; (n)

177.5. Public display of the original or a copy of the work;

177.6. Public performance of the work; and

177.7. Other communication to the public of the work. (Sec. 5, P. D. No. 49a) (Emphasis
supplied)
Under Section 211 of the Intellectual Property Code, broadcasting organizations are granted a
more specific set of rights called related or neighboring rights: chanroblesvirtuallawlibrary

SECTION 211. Scope of Right. — Subject to the provisions of Section 212, broadcasting
organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the
following acts:
211.1. The rebroadcasting of their broadcasts;

211.2. The recording in any manner, including the making of films or the use of video tape, of
their broadcasts for the purpose of communication to the public of television broadcasts
of the same; and

211.3. The use of such records for fresh transmissions or for fresh recording. (Sec. 52, P.D. No.
49) (Emphasis supplied)
Section 212 of the Code provides:

CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:
chanroblesvirtuallawlibrary

212.1. The use by a natural person exclusively for his own personal purposes;

212.2. Using short excerpts for reporting current events;

212.3. Use solely for the purpose of teaching or for scientific research; and

212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D. No.
49a)
The Code defines what broadcasting is and who broadcasting organizations include: chanroblesvirtuallawlibrary

202.7. "Broadcasting" means the transmission by wireless means for the public reception of
sounds or of images or of representations thereof; such transmission by satellite is also
"broadcasting" where the means for decrypting are provided to the public by the broadcasting
organization or with its consent;
202.8. "Broadcasting organization" shall include a natural person or a juridical entity duly
authorized to engage in broadcasting[.]
Developments in technology, including the process of preserving once ephemeral works and
disseminating them, resulted in the need to provide a new kind of protection as distinguished
from copyright.102 The designation "neighboring rights" was abbreviated from the phrase "rights
neighboring to copyright."103 Neighboring or related rights are of equal importance with
copyright as established in the different conventions covering both kinds of rights.104

Several treaties deal with neighboring or related rights of copyright.105 The most prominent of
these is the "International Convention for the Protection of Performers, Producers of Phonograms
and Broadcasting Organizations" (Rome Convention).106

The Rome Convention protects the rights of broadcasting organizations in relation to their
broadcasts. Article XIII of the Rome Convention enumerates the minimum rights accorded to
broadcasting organizations: chanroblesvirtuallawlibrary

Article 13
Minimum Rights for Broadcasting Organizations

Broadcasting organisations shall enjoy the right to authorize or prohibit:

(a) the rebroadcasting of their broadcasts;

(b) the fixation of their broadcasts;

(c) the reproduction:

(i) of fixations, made without their consent, of their broadcasts;

(ii) of fixations, made in accordance with the provisions of Article 15, of their broadcasts,
if the reproduction is made for purposes different from those referred to in those
provisions;

(d) the communication to the public of their television broadcasts if such communication is
made in places accessible to the public against payment of an entrance fee; it shall be a
matter for the domestic law of the State where protection of this right is claimed to
determine the conditions under which it may be exercised.
With regard to the neighboring rights of a broadcasting organization in this jurisdiction, this
court has discussed the difference between broadcasting and rebroadcasting: chanroblesvirtuallawlibrary

Section 202.7 of the IP Code defines broadcasting as "the transmission by wireless means for
the public reception of sounds or of images or of representations thereof; such transmission by
satellite is also 'broadcasting' where the means for decrypting are provided to the public by the
broadcasting organization or with its consent."

On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for
the Protection of Performers, Producers of Phonograms and Broadcasting Organizations,
otherwise known as the 1961 Rome Convention, of which the Republic of the Philippines is a
signatory, is "the simultaneous broadcasting by one broadcasting organization of the broadcast of
another broadcasting organization."

. . . .

Under the Rome Convention, rebroadcasting is "the simultaneous broadcasting by one

broadcasting organization of the broadcast of another broadcasting organization." The Working
Paper prepared by the Secretariat of the Standing Committee on Copyright and Related Rights
defines broadcasting organizations as "entities that take the financial and editorial responsibility
for the selection and arrangement of, and investment in, the transmitted content."107 (Emphasis in
the original, citations omitted)
Broadcasting organizations are entitled to several rights and to the protection of these rights
under the Intellectual Property Code. Respondents' argument that the subject news footage is not
copyrightable is erroneous. The Court of Appeals, in its assailed Decision, correctly recognized
the existence of ABS-CBN's copyright over the news footage: chanroblesvirtuallawlibrary

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement.108
News as expressed in a video footage is entitled to copyright protection. Broadcasting
organizations have not only copyright on but also neighboring rights over their
broadcasts. Copyrightability of a work is different from fair use of a work for purposes of news
reporting. cralawlawlibrary

VI

ABS-CBN assails the Court of Appeals' ruling that the footage shown by GMA-7 falls under the
scope of Section 212.2 and 212.4 of the Intellectual Property Code: chanroblesvirtuallawlibrary

The evidence on record, as well as the discussions above, show that the footage used by
[respondents] could hardly be characterized as a short excerpt, as it was aired over one and a half
minutes.

Furthermore, the footage used does not fall under the contemplation of Section 212.2 of the
Intellectual Property Code. A plain reading of the provision would reveal that copyrighted
material referred to in Section 212 are short portions of an artist's performance under Section
203, or a producer's sound recordings under Sections 208 and 209. Section 212 does not refer to
actual use of video footage of another as its own.

. . . .

The Angelo dela Cruz footage does not fall under the rule on Section 212.4 of the Intellectual
Property Code on fair use of the broadcast.

In determining fair use, several factors are considered, including the nature of the copyrighted
work, and the amount and substantiality of the person used in relation to the copyrighted work as
a whole.
In the business of television news reporting, the nature of the copyrighted work or the video
footages, are such that, footage created, must be a novelty to be a good report. Thus, when the . .
. Angelo dela Cruz footage was used by [respondents], the novelty of the footage was clearly
affected.

Moreover, given that a substantial portion of the Angelo dela Cruz footage was utilized by
GMA-7 for its own, its use can hardly be classified as fair use.

Hence, [respondents] could not be considered as having used the Angelo dela Cruz [footage]
following the provisions on fair use.

It is also worthy to note that the Honorable Court of Appeals seem to contradict itself when it
relied on the provisions of fair use in its assailed rulings considering that it found that the Angelo
dela Cruz footage is not copyrightable, given that the fair use presupposes an existing copyright.
Thus, it is apparent that the findings of the Honorable Court of Appeals are erroneous and based
on wrong assumptions.109 (Underscoring in the original)
On the other hand, respondents counter that GMA-7's use of ABS-CBN's news footage falls
under fair use as defined in the Intellectual Property Code. Respondents, citing the Court of
Appeals Decision, argue that a strong statutory defense negates any finding of probable cause
under the same statute. The Intellectual Property Code provides that fair use negates
infringement.

Respondents point out that upon seeing ABS-CBN's reporter Dindo Amparo on the footage,
GMA-7 immediately shut off the broadcast. Only five (5) seconds passed before the footage was
cut. They argue that this shows that GMA-7 had no prior knowledge of ABS-CBN's ownership
of the footage or was notified of it. They claim that the Angelo dela Cruz footage is considered a
short excerpt of an event's "news" footage and is covered by fair use.111

Copyright protection is not absolute.112 The Intellectual Property Code provides the limitations
on copyright:

CHAPTER VIII
LIMITATIONS ON COPYRIGHT

Section 184. Limitations on Copyright. - 184.1. Notwithstanding the provisions of Chapter V, the
following acts shall not constitute infringement of copyright:

. . . .

184.2. The provisions of this section shall be interpreted in such a way as to allow the work to be
used in a manner which does not conflict with the normal exploitation of the work and does not
unreasonably prejudice the right holder's legitimate interests.

. . . . cralawlawlibrary
 CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:

. . . .

212.2. Using short excerpts for reporting current events;

212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D. No.
49a) (Emphasis supplied)
The determination of what constitutes fair use depends on several factors. Section 185 of the
Intellectual Property Code states:

SECTION 185. Fair Use of a Copyrighted Work. —

185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching
including multiple copies for classroom use, scholarship, research, and similar purposes is not an
infringement of copyright. ... In determining whether the use made of a work in any particular
case is fair use, the factors to be considered shall include:
chanroblesvirtuallawlibrary

a. The purpose and character of the use, including whether such use is of a
commercial nature or is for non-profit educational purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to the
copyrighted work as a whole; and
d. The effect of the use upon the potential market for or value of the
copyrighted work.

Respondents allege that the news footage was only five (5) seconds long, thus falling under fair
use. ABS-CBN belies this contention and argues that the footage aired for two (2) minutes and
40 seconds.113 According to the Court of Appeals, the parties admitted that only five (5) seconds
of the news footage was broadcasted by GMA-7.114

This court defined fair use as "a privilege to use the copyrighted material in a reasonable manner
without the consent of the copyright owner or as copying the theme or ideas rather than their
expression."115 Fair use is an exception to the copyright owner's monopoly of the use of the work
to avoid stifling "the very creativity which that law is designed to foster."116

Determining fair use requires application of the four-factor test. Section 185 of the Intellectual
Property Code lists four (4) factors to determine if there was fair use of a copyrighted work:

a. The purpose and character of the use, including whether such use is of a
commercial nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

 c. The amount and substantiality of the portion used in relation to the copyrighted
work as a whole; and

d. The effect of the use upon the potential market for or value of the copyrighted
work.

First, the purpose and character of the use of the copyrighted material must fall under those listed
in Section 185, thus: "criticism, comment, news reporting, teaching including multiple copies for
classroom use, scholarship, research, and similar purposes."117 The purpose and character
requirement is important in view of copyright's goal to promote creativity and encourage creation
of works. Hence, commercial use of the copyrighted work can be weighed against fair use.

The "transformative test" is generally used in reviewing the purpose and character of the usage of
the copyrighted work.118 This court must look into whether the copy of the work adds "new
expression, meaning or message" to transform it into something else.119 "Meta-use" can also
occur without necessarily transforming the copyrighted work used.120

Second, the nature of the copyrighted work is significant in deciding whether its use was fair. If
the nature of the work is more factual than creative, then fair use will be weighed in favor of the
user.

Third, the amount and substantiality of the portion used is important to determine whether usage
falls under fair use. An exact reproduction of a copyrighted work, compared to a small portion of
it, can result in the conclusion that its use is not fair. There may also be cases where, though the
entirety of the copyrighted work is used without consent, its purpose determines that the usage is
still fair.121 For example, a parody using a substantial amount of copyrighted work may be
permissible as fair use as opposed to a copy of a work produced purely for economic gain.

Lastly, the effect of the use on the copyrighted work's market is also weighed for or against the
user. If this court finds that the use had or will have a negative impact on the copyrighted work's
market, then the use is deemed unfair.

The structure and nature of broadcasting as a business requires assigned values for each second
of broadcast or airtime. In most cases, broadcasting organizations generate revenue through sale
of time or timeslots to advertisers, which, in turn, is based on market share: 122
ChanRoblesVirtualawlibrary

Once a news broadcast has been transmitted, the broadcast becomes relatively worthless to the
station. In the case of the aerial broadcasters, advertising sales generate most of the profits
derived from news reports. Advertising rates are, in turn, governed by market share. Market
share is determined by the number of people watching a show at any particular time, relative to
total viewers at that time. News is by nature time-limited, and so re-broadcasts are generally of
little worth because they draw few viewers. Newscasts compete for market share by presenting
their news in an appealing format that will capture a loyal audience. Hence, the primary reason
for copyrighting newscasts by broadcasters would seem to be to prevent competing stations from
rebroadcasting current news from the station with the best coverage of a particular news item,
thus misappropriating a portion of the market share.

Of course, in the real world there are exceptions to this perfect economic view. However, there
are also many caveats with these exceptions. A common exception is that some stations
rebroadcast the news of others. The caveat is that generally, the two stations are not competing
for market share. CNN, for example, often makes news stories available to local broadcasters.
First, the local broadcaster is often not affiliated with a network (hence its need for more
comprehensive programming), confining any possible competition to a small geographical area.
Second, the local broadcaster is not in competition with CNN. Individuals who do not have cable
TV (or a satellite dish with decoder) cannot receive CNN; therefore there is no competition. . . .
Third, CNN sells the right of rebroadcast to the local stations. Ted Turner, owner of CNN, does
not have First Amendment freedom of access argument foremost on his mind. (Else he would
give everyone free cable TV so everyone could get CNN.) He is in the business for a profit.
Giving away resources does not a profit make.123 (Emphasis supplied)
The high value afforded to limited time periods is also seen in other media. In social media site
Instagram, users are allowed to post up to only 15 seconds of video.124 In short-video sharing
website Vine,125 users are allowed a shorter period of six (6) seconds per post. The mobile
application 1 Second Everyday takes it further by capturing and stitching one (1) second of video
footage taken daily over a span of a certain period.126

Whether the alleged five-second footage may be considered fair use is a matter of defense. We
emphasize that the case involves determination of probable cause at the preliminary investigation
stage. Raising the defense of fair use does not automatically mean that no infringement was
committed. The investigating prosecutor has full discretion to evaluate the facts, allegations, and
evidence during preliminary investigation. Defenses raised during preliminary investigation are
subject to further proof and evaluation before the trial court. Given the insufficiency of available
evidence, determination of whether the Angelo dela Cruz footage is subject to fair use is better
left to the trial court where the proceedings are currently pending.

GMA-7's rebroadcast of ABS-CBN's news footage without the latter's consent is not an issue.
The mere act of rebroadcasting without authority from the owner of the broadcast gives rise to
the probability that a crime was committed under the Intellectual Property Code. cralawlawlibrary

VII

Respondents cannot invoke the defense of good faith to argue that no probable cause exists.

Respondents argue that copyright infringement is malum in se, in that "[c]opying alone is not
what is being prohibited, but its injurious effect which consists in the lifting from the copyright
owners' film or materials, that were the result of the latter's creativity, work and productions and
without authority, reproduced, sold and circulated for commercial use to the detriment of the
latter."127

Infringement under the Intellectual Property Code is malum prohibitum. The Intellectual
Property Code is a special law. Copyright is a statutory creation: chanroblesvirtuallawlibrary

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent
right granted by the statute, and not simply a pre-existing right regulated by the statute. Being a
statutory grant, the rights are only such as the statute confers, and may be obtained and enjoyed
only with respect to the subjects and by the persons, and on terms and conditions specified in the
statute.128
The general rule is that acts punished under a special law are malum prohibitum.129 "An act
which is declared malum prohibitum, malice or criminal intent is completely immaterial."130

In contrast, crimes mala in se concern inherently immoral acts: chanroblesvirtuallaw library

Not every criminal act, however, involves moral turpitude. It is for this reason that "as to what
crime involves moral turpitude, is for the Supreme Court to determine". In resolving the
foregoing question, the Court is guided by one of the general rules that crimes mala in se involve
moral turpitude, while crimes mala prohibita do not, the rationale of which was set forth in "Zari
v. Flores" to wit:
chanroblesvirtuallawlibrary

It (moral turpitude) implies something immoral in itself, regardless of the fact that it is
punishable by law or not. It must not be merely mala prohibita, but the act itself must be
inherently immoral. The doing of the act itself, and not its prohibition by statute fixes the moral
turpitude. Moral turpitude does not, however, include such acts as are not of themselves immoral
but whose illegality lies in their being positively prohibited. (Emphasis supplied)
[These] guidelines nonetheless proved short of providing a clear-cut solution, for in International
Rice Research Institute v. NLRC, the Court admitted that it cannot always be ascertained whether
moral turpitude does or does not exist by merely classifying a crime as malum in se or as malum
prohibitum. There are crimes which are mala in se and yet but rarely involve moral turpitude and
there are crimes which involve moral turpitude and are mala prohibita only. In the final analysis,
whether or not a crime involves moral turpitude is ultimately a question of fact and frequently
depends on all the circumstances surrounding the violation of the statue.131 (Emphasis in the
original)
"Implicit in the concept of mala in se is that of mens rea."132Mens rea is defined as "the
nonphysical element which, combined with the act of the accused, makes up the crime charged.
Most frequently it is the criminal intent, or the guilty mind[.]"133

Crimes mala in se presuppose that the person who did the felonious act had criminal intent to do
so, while crimes mala prohibita do not require knowledge or criminal intent: chanroblesvirtuallawlibrary

In the case of mala in se it is necessary, to constitute a punishable offense, for the person doing
the act to have knowledge of the nature of his act and to have a criminal intent; in the case of
mala prohibita, unless such words as "knowingly" and "willfully" are contained in the statute,
neither knowledge nor criminal intent is necessary. In other words, a person morally quite
innocent and with every intention of being a law-abiding citizen becomes a criminal, and liable
to criminal penaltes, if he does an act prohibited by these statutes.134 (Emphasis supplied)
Hence, "[i]ntent to commit the crime and intent to perpetrate the act must be distinguished. A
person may not have consciously intended to commit a crime; but he did intend to commit an act,
and that act is, by the very nature of things, the crime itself[.]"135 When an act is prohibited by a
special law, it is considered injurious to public welfare, and the performance of the prohibited act
is the crime itself.136

Volition, or intent to commit the act, is different from criminal intent. Volition or voluntariness
refers to knowledge of the act being done. On the other hand, criminal intent — which is
different from motive, or the moving power for the commission of the crime137 — refers to the
state of mind beyond voluntariness. It is this intent that is being punished by crimes mala in se.

Unlike other jurisdictions that require intent for a criminal prosecution of copyright
infringement, the Philippines does not statutorily support good faith as a defense. Other
jurisdictions provide in their intellectual property codes or relevant laws that mens rea, whether
express or implied, is an element of criminal copyright infringement.138

In Canada, criminal offenses are categorized under three (3) kinds: "the full mens rea offence,
meaning the accused's actual or subjective state of mind has to be proved; strict liability offences
where no mens rea has to be proved but the accused can avoid liability if he can prove he took all
reasonable steps to avoid the particular event; [and] absolute liability offences where Parliament
has made it clear that guilt follows proof of the prescribed act only."139 Because of the use of the
word "knowingly" in Canada's Copyright Act, it has been held that copyright infringement is a
full mens rea offense.140

In the United States, willful intent is required for criminal copyright infringement.141 Before the
passage of the No Electronic Theft Act, "civil copyright infringements were violations of
criminal copyright laws only if a defendant willfully infringed a copyright 'for purposes of
commercial advantage or private financial gain.'"142 However, the No Electronic Theft Act now
allows criminal copyright infringement without the requirement of commercial gain. The
infringing act may or may not be for profit.143

There is a difference, however, between the required liability in civil copyright infringement and
that in criminal copyright infringement in the United States. Civil copyright infringement does
not require culpability and employs a strict liability regime144 where "lack of intention to infringe
is not a defense to an action for infringement."145

In the Philippines, the Intellectual Property Code, as amended, provides for the prosecution of
criminal actions for the following violations of intellectual property rights: Repetition of
Infringement of Patent (Section 84); Utility Model (Section 108); Industrial Design (Section
119); Trademark Infringement (Section 155 in relation to Section 170); Unfair Competition
(Section 168 in relation to Section 170); False Designations of Origin, False Description or
Representation (Section 169.1 in relation to Section 170); infringement of copyright, moral
rights, performers' rights, producers' rights, and broadcasting rights (Section 177, 193, 203, 208
and 211 in relation to Section 217); and other violations of intellectual property rights as may be
defined by law.

The Intellectual Property Code requires strict liability for copyright infringement whether for a
civil action or a criminal prosecution; it does not require mens rea or culpa:146ChanRoblesVirtualawlibrary

SECTION 216. Remedies for Infringement. —

216.1. Any person infringing a right protected under this law shall be liable:

a. To an injunction restraining such infringement. The court may also order

the defendant to desist from an infringement, among others, to prevent the
 entry into the channels of commerce of imported goods that involve an
infringement, immediately after customs clearance of such goods.

b. Pay to the copyright proprietor or his assigns or heirs such actual damages,
including legal costs and other expenses, as he may have incurred due to
the infringement as well as the profits the infringer may have made due to
such infringement, and in proving profits the plaintiff shall be required to
prove sales only and the defendant shall be required to prove every
element of cost which he claims, or, in lieu of actual damages and profits,
such damages which to the court shall appear to be just and shall not be
regarded as penalty.

c. Deliver under oath, for impounding during the pendency of the action,
upon such terms and conditions as the court may prescribe, sales invoices
and other documents evidencing sales, all articles and their packaging
alleged to infringe a copyright and implements for making them.

d. Deliver under oath for destruction without any compensation all infringing
copies or devices, as well as all plates, molds, or other means for making
such infringing copies as the court may order.

e. Such other terms and conditions, including the payment of moral and
exemplary damages, which the court may deem proper, wise and equitable
and the destruction of infringing copies of the work even in the event of
acquittal in a criminal case.

216.2. In an infringement action, the court shall also have the power to order the seizure and
impounding of any article which may serve as evidence in the court proceedings. (Sec. 28. P.D.
No. 49a)

SECTION 217, Criminal Penalties. —

217.1. Any person infringing any right secured by provisions of Part IV of this Act or aiding or
abetting such infringement shall be guilty of a crime punishable by:

a. Imprisonment of one (1) year to three (3) years plus a fine ranging from
Fifty thousand pesos (P50,000) to One hundred fifty thousand pesos
(P150,000) for the first offense.

b. Imprisonment of three (3) years and one (1) day to six (6) years plus a fine
ranging from One hundred fifty thousand pesos (P150,000) to Five
hundred thousand pesos (P500,000) for the second offense.

c. Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine
ranging from Five hundred thousand pesos (P500,000) to One million five
hundred thousand pesos (P1,500,000) for the third and subsequent
offenses.
 d. In all cases, subsidiary imprisonment in cases of insolvency.

217.2. In determining the number of years of imprisonment and the amount of fine, the court
shall consider the value of the infringing materials that the defendant has produced or
manufactured and the damage that the copyright owner has suffered by reason of the
infringement.

217.3. Any person who at the time when copyright subsists in a work has in his possession an
article which he knows, or ought to know, to be an infringing copy of the work for the purpose
of:

a. Selling, letting for hire, or by way of trade offering or exposing for sale, or
hire, the article;

b. Distributing the article for purpose of trade, or for any other purpose to an
extent that will prejudice the rights of the copyright owner in the work; or

c. Trade exhibit of the article in public, shall be guilty of an offense and shall
be liable on conviction to imprisonment and fine as above mentioned.
(Sec. 29, P.D. No. 49a) (Emphasis supplied)

The law is clear. Inasmuch as there is wisdom in prioritizing the flow and exchange of ideas as
opposed to rewarding the creator, it is the plain reading of the law in conjunction with the actions
of the legislature to which we defer. We have continuously "recognized the power of the
legislature . . . to forbid certain acts in a limited class of cases and to make their commission
criminal without regard to the intent of the doer. Such legislative enactments are based on the
experience that repressive measures which depend for their efficiency upon proof of the dealer's
knowledge or of his intent are of little use and rarely accomplish their purposes."147

Respondents argue that live broadcast of news requires a different treatment in terms of good
faith, intent, and knowledge to commit infringement. To argue this point, they rely on the
differences of the media used in Habana et al. v. Robles, Columbia Pictures v. Court of Appeals,
and this case:chanroblesvirtuallawlibrary

Petitioner ABS-CBN argues that lack of notice that the Angelo dela Cruz was under embargo is
not a defense in copyright infringement and cites the case of Columbia Pictures vs. Court of
Appeals and Habana et al. vs. Robles (310 SCRA 511). However, these cases refer to film and
literary work where obviously there is "copying" from an existing material so that the copier
knew that he is copying from an existing material not owned by him. But, how could respondents
know that what they are "copying was not [theirs]" when they were not copying but merely
receiving live video feed from Reuters and CNN which they aired? What they knew and what
they aired was the Reuters live video feed and the CNN feed which GMA-7 is authorized to
carry in its news broadcast, it being a subscriber of these companies[.]

It is apt to stress that the subject of the alleged copyright infringement is not a film or literary
work but live broadcast of news footage. In a film or literary work, the infringer is confronted
face to face with the material he is allegedly copying and therefore knows, or is presumed to
know, that what he is copying is owned by another. Upon the other hand, in live broadcast, the
alleged infringer is not confronted with the fact that the material he airs or re-broadcasts is
owned by another, and therefore, he cannot be charged of knowledge of ownership of the
material by another. This specially obtains in the Angelo dela Cruz news footage which GMA-7
received from Reuters and CNN. Reuters and CNN were beaming live videos from the coverage
which GMA-7 received as a subscriber and, in the exercise of its rights as a subscriber, GMA-7
picked up the live video and simultaneously re-broadcast it. In simultaneously broadcasting the
live video footage of Reuters, GMA-7 did not copy the video footage of petitioner ABS-
CBN[.]148 (Emphasis in the original)
Respondents' arguments must fail.

Respondents are involved and experienced in the broadcasting business. They knew that there
would be consequences in carrying A.BS-CBN's footage in their broadcast. That is why GMA-7
allegedly cut the feed from Reuters upon seeing ABS-CBN's logo and reporter. To admit a
different treatment for broadcasts would mean abandonment of a broadcasting organization's
minimum rights, including copyright on the broadcast material and the right against unauthorized
re broadcast of copyrighted material. The nature of broadcast technology is precisely why
related or neighboring rights were created and developed. Carving out an exception for live
broadcasts would go against our commitments under relevant international treaties and
agreements, which provide for the same minimum rights.149

Contrary to respondents' assertion, this court in Habana,150 reiterating the ruling in Columbia
Pictures,151 ruled that lack of knowledge of infringement is not a valid defense. Habana and
Columbia Pictures may have different factual scenarios from this case, but their rulings on
copyright infringement are analogous. In Habana, petitioners were the authors and copyright
owners of English textbooks and workbooks. The case was anchored on the protection of literary
and artistic creations such as books. In Columbia Pictures, video tapes of copyrighted films were
the subject of the copyright infringement suit.

In Habana, knowledge of the infringement is presumed when the infringer commits the
prohibited act:chanroblesvirtuallawlibrary

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore
its gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a
private domain owned and occupied by the owner of the copyright, and, therefore, protected by
law, and infringement of copyright, or piracy, which is a synonymous term in this connection,
consists in the doing by any person, without the consent of the owner of the copyright, of
anything the sole right to do which is conferred by statute on the owner of the copyright.

. . . .

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such
cases, did not know whether or not he was infringing any copyright; he at least knew that what
he was copying was not his, and he copied at his peril.

. . . .

In cases of infringement, copying alone is not what is prohibited. The copying must produce an
"injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners'
book materials that were the result of the latter's research work and compilation and
misrepresented them as her own. She circulated the book DEP for commercial use and did not
acknowledge petitioners as her source.152 (Emphasis supplied)
Habana and Columbia Pictures did not require knowledge of the infringement to constitute a
violation of the copyright. One does not need to know that he or she is copying a work without
consent to violate copyright law. Notice of fact of the embargo from Reuters or CNN is not
material to find probable cause that respondents committed infringement. Knowledge of
infringement is only material when the person is charged of aiding and abetting a copyright
infringement under Section 217 of the Intellectual Property Code.153

We look at the purpose of copyright in relation to criminal prosecutions requiring willfulness: chanroblesvirtuallawlibrary

Most importantly, in defining the contours of what it means to willfully infringe copyright for
purposes of criminal liability, the courts should remember the ultimate aim of copyright.
Copyright is not primarily about providing the strongest possible protection for copyright owners
so that they have the highest possible incentive to create more works. The control given to
copyright owners is only a means to an end: the promotion of knowledge and learning.
Achieving that underlying goal of copyright law also requires access to copyrighted works and it
requires permitting certain kinds of uses of copyrighted works without the permission of the
copyright owner. While a particular defendant may appear to be deserving of criminal sanctions,
the standard for determining willfulness should be set with reference to the larger goals of
copyright embodied in the Constitution and the history of copyright in this country.154
In addition, "[t]he essence of intellectual piracy should be essayed in conceptual terms in order to
underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a
trespass on a private domain owned and occupied by the owner of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a synonymous term in this
connection, consists in the doing by any person, without the consent of the owner of the
copyright, of anything the sole right to do which is conferred by statute on the owner of the
copyright."155

Intellectual property rights, such as copyright and the neighboring right against rebroadcasting,
establish an artificial and limited monopoly to reward creativity. Without these legally
enforceable rights, creators will have extreme difficulty recovering their costs and capturing the
surplus or profit of their works as reflected in their markets. This, in turn, is based on the theory
that the possibility of gain due to creative work creates an incentive which may improve
efficiency or simply enhance consumer welfare or utility. More creativity redounds to the public
good.

These, however, depend on the certainty of enforcement. Creativity, by its very nature, is
vulnerable to the free rider problem. It is easily replicated despite the costs to and efforts of the
original creator. The more useful the creation is in the market, the greater the propensity that it
will be copied. The most creative and inventive individuals are usually those who are unable to
recover on their creations.

Arguments against strict liability presuppose that the Philippines has a social, historical, and
economic climate similar to those of Western jurisdictions. As it stands, there is a current need to
strengthen intellectual property protection.

Thus, unless clearly provided in the law, offenses involving infringement of copyright
protections should be considered malum prohibitum. It is the act of infringement, not the intent,
which causes the damage. To require or assume the need to prove intent defeats the purpose of
intellectual property protection.

Nevertheless, proof beyond reasonable doubt is still the standard for criminal prosecutions under
the Intellectual Property Code.cralawlawlibrary

VIII

Respondents argue that GMA-7's officers and employees cannot be held liable for infringement
under the Intellectual Property Code since it does not expressly provide direct liability of the
corporate officers. They explain that "(i) a corporation may be charged and prosecuted for a
crime where the penalty is fine or both imprisonment and fine, and if found guilty, may be fined;
or (ii) a corporation may commit a crime but if the statute prescribes the penalty therefore to be
suffered by the corporate officers, directors or employees or other persons, the latter shall be
responsible for the offense."156

Section 217 of the Intellectual Property Code states that "any person" may be found guilty of
infringement. It also imposes the penalty of both imprisonment and fine: chanroblesvirtuallawlibrary

Section 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions
of Part IV of this Act or aiding or abetting such infringement shall be guilty of a crime
punishable by:
(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand
pesos (P50,000) to One hundred fifty thousand pesos (P150,000) for the first offense.

(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from
One hundred fifty thousand pesos (P150,000) to Five hundred thousand pesos (P500,000)
for the second offense.

(c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from five
hundred thousand pesos (P500,000) to One million five hundred thousand pesos
(P1,500,000) for the third and subsequent offenses.

(d) In all cases, subsidiary imprisonment in cases of insolvency. (Emphasis supplied)

Corporations have separate and distinct personalities from their officers or directors.157 This
court has ruled that corporate officers and/or agents may be held individually liable for a crime
committed under the Intellectual Property Code:158 ChanRoblesVir tualawlibrary

Petitioners, being corporate officers and/or directors, through whose act, default or omission the
corporation commits a crime, may themselves be individually held answerable for the crime. . . .
The existence of the corporate entity does not shield from prosecution the corporate agent who
knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners cannot
hide behind the cloak of the separate corporate personality of the corporation to escape criminal
liability. A corporate officer cannot protect himself behind a corporation where he is the actual,
present and efficient actor.159
However, the criminal liability of a. corporation's officers or employees stems from their active
participation in the commission of the wrongful act: chanroblesvirtuallawlibrary

The principle applies whether or not the crime requires the consciousness of wrongdoing. It
applies to those corporate agents who themselves commit the crime and to those, who, by virtue
of their managerial positions or other similar relation to the corporation, could be deemed
responsible for its commission, if by virtue of their relationship to the corporation, they had the
power to prevent the act. Moreover, all parties active in promoting a crime, whether agents or
not, are principals. Whether such officers or employees are benefited by their delictual acts is
not a touchstone of their criminal liability. Benefit is not an operative fact. 160 (Emphasis
supplied)
An accused's participation in criminal acts involving violations of intellectual property rights is
the subject of allegation and proof. The showing that the accused did the acts or contributed in a
meaningful way in the commission of the infringements is certainly different from the argument
of lack of intent or good faith. Active participation requires a showing of overt physical acts or
intention to commit such acts. Intent or good faith, on the other hand, are inferences from acts
proven to have been or not been committed.

We find that the Department of Justice committed grave abuse of discretion when it resolved to
file the Information against respondents despite lack of proof of their actual participation in the
alleged crime.

Ordering the inclusion of respondents Gozon, GMA-7 President; Duavit, Jr., Executive Vice-
President; Flores, Vice-President for News and Public Affairs; and Soho, Director for News, as
respondents, Secretary Agra overturned the City Prosecutor's finding that only respondents Dela
Peña-Reyes and Manalastas are responsible for the crime charged due to their duties.161 The
Agra Resolution reads: chanroblesv irtuallawlibrary

Thus, from the very nature of the offense and the penalty involved, it is necessary that GMA-7's
directors, officers, employees or other officers thereof responsible for the offense shall be
charged and penalized for violation of the Sections 177 and 211 of Republic Act No. 8293. In
their complaint for libel, respondents Felipe L Gozon, Gilberto R. Duavit, Jr., Marissa L. Flores,
Jessica A. Soho, Grace Dela Pena-Reyes, John Oliver T. Manalastas felt they were aggrieved
because they were "in charge of the management, operations and production of news and public
affairs programs of the network" (GMA-7). This is clearly an admission on respondents' part. Of
course, respondents may argue they have no intention to infringe the copyright of ABS-CBN;
that they acted in good faith; and that they did not directly cause the airing of the subject footage,
but again this is preliminary investigation and what is required is simply probable cause. Besides,
these contentions can best be addressed in the course of trial.162 (Citation omitted)
In contrast, the Office of the City Prosecutor, in the Resolution dated December 3, 2004, found
that respondents Gozon, Duavit, Jr., Flores, and Soho did not have active participation in the
commission of the crime charged: chanrobles virtuallawlibrary

This Office, however, does not subscribe to the view that respondents Atty. Felipe Gozon,
Gilberto Duavit, Marissa Flores and Jessica Soho should be held liable for the said offense.
Complainant failed to present clear and convincing evidence that the said respondents conspired
with Reyes and Manalastas. No evidence was adduced to prove that these respondents had an
active participation in the actual commission of the copyright infringement or they exercised
their moral ascendancy over Reyes and Manalastas in airing the said footage. It must be stressed
that, conspiracy must be established by positive and conclusive evidence. It must be shown to
exist as clearly and convincingly as the commission of the offense itself.163 (Emphasis supplied,
citations omitted)
The City Prosecutor found respondents Dela Peña-Reyes and Manalastas liable due to the nature
of their work and responsibilities. He found that: chanroblesvirtuallawlibrary

[t]his Office however finds respondents Grace Déla Peña-Reyes and John Oliver T. Manalastas
liable for copyright infringement penalized under Republic Act No. 8293. It is undisputed that
complainant ABS-CBN holds the exclusive ownership and copyright over the "Angelo [d]ela
Cruz news footage". Hence, any airing and re-broadcast of the said footage without any consent
and authority from ABS-CBN will be held as an infringement and violation of the intellectual
property rights of the latter. Respondents Grace Dela Peña-Reyes as the Head of the News
Operation and John Oliver T. Manalastas as the Program Manager cannot escape liability since
the news control room was under their direct control and supervision. Clearly, they must have
been aware that the said footage coming from Reuters or CNN has a "No Access Philippines"
advisory or embargo thus cannot be re-broadcast. We find no merit to the defense of ignorance
interposed by the respondents. It is simply contrary to human experience and logic that
experienced employees of an established broadcasting network would be remiss in their duty in
ascertaining if the said footage has an embargo.164 (Emphasis supplied)
We agree with the findings as to respondents Dela Peña-Reyes and Manalastas. Both respondents
committed acts that promoted infringement of ABS-CBN's footage. We note that embargoes are
common occurrences in and between news agencies and/or broadcast organizations.165 Under its
Operations Guide, Reuters has two (2) types of embargoes: transmission embargo and
publication embargo.166 Under ABS-CBN's service contract with Reuters, Reuters will embargo
any content contributed by ABS-CBN from other broadcast subscribers within the same
geographical location:chanroblesvirtuallawlibrary

4a. Contributed Content

You agree to supply us at our request with news and sports news stones broadcast on the Client
Service of up to three (3) minutes each for use in our Services on a non-exclusive basis and at a
cost of US$300.00 (Three Hundred United States Dollars) per story. In respect of such items we
agree to embargo them against use by other broadcast subscribers in the Territory and confirm
we will observe all other conditions of usage regarding Contributed Content, as specified in
Section 2.5 of the Reuters Business Principles for Television Services. For the purposes of
clarification, any geographical restriction imposed by you on your use of Contributed Content
will not prevent us or our clients from including such Contributed Content in online transmission
services including the internet. We acknowledge Contributed Content is your copyright and we
will not acquire any intellectual property rights in the Contributed Content.167 (Emphasis
supplied)
Respondents Dela Peña-Reyes and Manalastas merely denied receiving the advisory sent by
Reuters to its clients, including GMA-7. As in the records, the advisory reads: chanroblesvirtuallawlibrary

ADVISORY - - +++LIVE COVER PLANS+++

PHILIPPINES: HOSTAGE RETURN
* *ATTENTION ALL CLIENTS**

PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER PLANNED FOR THURSDAY,

JULY 22:

. . . .

SOURCE: ABS-CBN
TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES.168
There is probable cause that respondents Dela Peña-Reyes and Manalastas directly committed
copyright infringement of ABS-CBN's news footage to warrant piercing of the corporate veil.
They are responsible in airing the embargoed Angelo dela Cruz footage. They could have
prevented the act of infringement had they been diligent in their functions as Head of News
Operations and Program Manager.

Secretary Agra, however, committed grave abuse of discretion when he ordered the filing of the
Information against all respondents despite the erroneous piercing of the corporate veil.
Respondents Gozon, Duavit, Jr., Flores, and Soho cannot be held liable for the criminal liability
of the corporation.

Mere membership in the Board or being President per se does not mean knowledge, approval,
and participation in the act alleged as criminal. There must be a showing of active participation,
not simply a constructive one.

Under principles of criminal law, the principals of a crime are those "who take a direct part in the
execution of the act; [t]hose who directly force or induce others to commit it; [or] [t]hose who
cooperate in the commission of the offense by another act without which it would not have been
accomplished."169 There is conspiracy "when two or more persons come to an agreement
concerning the commission of a felony and decide to commit it":170 ChanRoblesVirtualawlibrary

Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of
conspiracy must be proven beyond reasonable doubt. While conspiracy need not be established
by direct evidence, for it may be inferred from the conduct of the accused before, during and
after the commission of the crime, all taken together, however, the evidence must be strong
enough to show the community of criminal design. For conspiracy to exist, it is essential that
there must be a conscious design to commit an offense. Conspiracy is the product of
intentionality on the part of the cohorts.

It is necessary that a conspirator should have performed some overt act as a direct or indirect
contribution to the execution of the crime committed. The overt act may consist of active
participation in the actual commission of the crime itself or it may consist of moral assistance to
his co-conspirators by being present at the commission of the crime or by exerting moral
ascendancy over the other co-conspirators[.] 171 (Emphasis supplied, citations omitted)
In sum, the trial court erred in failing to resume the proceedings after the designated period. The
Court of Appeals erred when it held that Secretary Agra committed errors of jurisdiction despite
its own pronouncement that ABS-CBN is the owner of the copyright on the news footage. News
should be differentiated from expression of the news, particularly when the issue involves
rebroadcast of news footage. The Court of Appeals also erroneously held that good faith, as. well
as lack of knowledge of infringement, is a defense against criminal prosecution for copyright and
neighboring rights infringement. In its current form, the Intellectual Property Code is malum
prohibitum and prescribes a strict liability for copyright infringement. Good faith, lack of
knowledge of the copyright, or lack of intent to infringe is not a defense against copyright
infringement. Copyright, however, is subject to the rules of fair use and will be judged on a case-
to-case basis. Finding probable cause includes a determination of the defendant's active
participation, particularly when the corporate veil is pierced in cases involving a corporation's
criminal liability.cralawred

WHEREFORE, the Petition is partially GRANTED. The Department of Justice Resolution

dated June 29, 2010 ordering the filing of the Information is hereby REINSTATED as to
respondents Grace Dela Peña-Reyes and John Oliver T. Manalastas. Branch 93 of the Regional
Trial Court of Quezon City is directed to continue with the proceedings in Criminal Case No. Q-
04-131533.

SO ORDERED. chanroble