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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 139300 March 14, 2001

AMIGO MANUFACTURING, INC., petitioner, vs. CLUETT PEABODY CO., INC., respondent. PANGANIBAN, J.: The findings of the Bureau of Patents that two trademarks are confusingly and deceptively similar to each other are binding upon the courts, absent any sufficient evidence to the contrary. In the present case, the Bureau considered the totality of the similarities between the two sets of marks and found that they were of such degree, number and quality as to give the overall impression that the two products are confusingly if not deceptively the same. Statement of the Case Petitioner Amigo Manufacturing Inc. challenges, under Rule 45 of the Rules of Court, the January 14, 1999 Resolution1 of the Court of Appeals (CA) in CA-GR SP No. 22792, which reversed, on reconsideration, its own September 29, 1998 Decision.2 The dispositive portion of the assailed Resolution reads as follows: "WHEREFORE, the Motion for Reconsideration is GRANTED, and the Decision dated September 29, 1998 REVERSED. Consequently, the decision rendered by the Director of Patents dated September 3, 1990 is hereby AFFIRMED." The Decision of the Director of Patents, referred to by the CA, disposed as follows: "WHEREFORE, the Petition is GRANTED. Consequently, Certificate of Registration No. SR-2206 issued to Respondent-Registrant [herein petitioner] is hereby cancelled. "Let the records of this case be remanded to the Patent/Trademark Registry and EDP Division for appropriate action in accordance with this Decision." Petitioner also seeks the reversal of the June 30, 1999 CA Resolution3 denying its own Motion for Reconsideration. The Facts The facts, which are undisputed, are summarized by the Court of Appeals in its original Decision, as follows: "The source of the controversy that precipitated the filing by [herein Respondent] Cluett Peabody Co., Inc. (a New York corporation) of the present case against [herein Petitioner] Amigo Manufacturing Inc. (a Philippine corporation) for cancellation of trademark is [respondent's] claim of exclusive ownership (as successor in interest of Great American Knitting Mills, Inc.) of the following trademark and devices, as used on men's socks: a) GOLD TOE, under Certificate of Registration No. 6797 dated September 22, 1958; b) DEVICE, representation of a sock and magnifying glass on the toe of a sock, under Certificate of Registration No. 13465 dated January 25, 1968; c) DEVICE, consisting of a 'plurality of gold colored lines arranged in parallel relation within a triangular area of toe of the stocking and spread from each other by lines of contrasting color of the major part of the stocking' under Certificate of Registration No. 13887 dated May 9, 1968; and d) LINENIZED, under Certificate of Registration No. 15440 dated April 13, 1970. On the other hand, [petitioner's] trademark and device 'GOLD TOP, Linenized for Extra Wear' has the dominant color 'white' at the center and a 'blackish brown' background with a magnified design of the sock's garter, and is labeled 'Amigo Manufacturing Inc., Mandaluyong, Metro Manila, Made in the Philippines'.

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In the Patent Office, this case was heard by no less than six Hearing Officers: Attys. Rodolfo Gilbang, Rustico Casia, M. Yadao, Fabian Rufina, Neptali Bulilan and Pausi Sapak. The last named officer drafted the decision under appeal which was in due court signed and issued by the Director of Patents (who never presided over any hearing) adversely against the respondent Amigo Manufacturing, Inc. as heretofore mentioned (supra, p.1). The decision pivots on two point: the application of the rule of idem sonans and the existence of a confusing similarity in appearance between two trademarks (Rollo, p. 33)."4 Ruling of the Court of Appeals In its assailed Resolution, the CA held as follows: "After a careful consideration of [respondent's] arguments and a re-appreciation of the records of this case. [w]e find [respondent's] motion for reconsideration meritorious. As shown by the records, and as correctly held by the Director of Patents, there is hardly any variance in the appearance of the marks 'GOLD TOP' and 'GOLD TOE' since both show a representation of a man's foot wearing a sock, and the marks are printed in identical lettering. Section 4(d) of R.A. No. 166 declares to be unregistrable, 'a mark which consists o[r] comprises a mark or trademark which so resembles a mark or tradename registered in the Philippines of tradename previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive the purchasers. [Petitioner]'s mark is a combination of the different registered marks owned by [respondent]. As held in Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990), the question is not whether the two articles are distinguishable by their label when set aside but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in confounding it with the original. As held by the Court in the same decision[,] '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.' Furthermore, [petitioner]'s mark is only registered with the Supplemental Registry which gives no right of exclusivity to the owner and cannot overturn the presumption of validity and exclusiv[ity] given to a registered mark. "Finally, the Philippines and the United States are parties to the Union Convention for the Protection of Industrial Property adopted in Paris on March 20, 1883, otherwise known as the Paris Convention. (Puma Sportschuhfabriken Rudolf Dassler K.G. v. Intermediate Appellate Court, 158 SCRA 233). [Respondent] is domiciled in the United States of America and is the lawful owner of several trademark registrations in the United States for the mark 'GOLD TOE'. xxx xxx x x x'

By virtue of the Philippines' membership to the Paris Union, trademark rights in favor of the [respondent] were created. The object of the Convention is to accord a national of a member nation extensive protection against infringement and other types of unfair competition. (Puma Sportschuhfabriken Rudolf Dassler K.G. v. Intermediate Appellate Court, 158 SCRA 233; La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373)"5 Hence, this Petition.6 Issues In its Memorandum,7 petitioner raises the following issues for the consideration of this Court: "I Whether or not the Court of Appeals overlooked that petitioner's trademark was used in commerce in the Philippines earlier than respondent's actual use of its trademarks, hence the Court of Appeals erred in affirming the Decision of the Director of Patents dated September 3, 1990. II Since the petitioner's actual use of its trademark was ahead of the respondent, whether or not the Court of Appeals erred in canceling the registration of petitioner's trademark instead of canceling the trademark of the respondent. III Whether or not the Court of Appeals erred in affirming the findings of the Director of Patents that petitioner's trademark [was] confusingly similar to respondent's trademarks.

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IV Whether or not the Court of Appeals erred in applying the Paris Convention in holding that respondent ha[d] an exclusive right to the trademark 'gold toe' without taking into consideration the absence of actual use in the Philippines."8 In the main, the Court will resolve three issues: (1) the date of actual use of the two trademarks; (2) their confusing similarities, and (3) the applicability of the Paris Convention. The Court's Ruling The Petition has no merit. First Issue: Dates of First Use of Trademark and Devices Petitioner claims that it started the actual use of the trademark "Gold Top and Device" in September 1956, while respondent began using the trademark "Gold Toe" only on May 15, 1962. It contends that the claim of respondent that it had been using the "Gold Toe" trademark at an earlier date was not substantiated. The latter's witnesses supposedly contradicted themselves as to the date of first actual use of their trademark, coming up with different dates such as 1952, 1947 and 1938. We do not agree. Based on the evidence presented, this Court concurs in the findings of the Bureau of Patents that respondent had actually used the trademark and the devices in question prior to petitioner's use of its own. During the hearing at the Bureau of Patents, respondent presented Bureau registrations indicating the dates of first use in the Philippines of the trademark and the devices as follows: a) March 16, 1954, Gold Toe; b) February 1, 1952, the Representation of a Sock and a Magnifying Glass; c) January 30, 1932, the Gold Toe Representation; and d) February 28, 1952, "Linenized." The registration of the above marks in favor of respondent constitutes prima facie evidence, which petitioner failed to overturn satisfactorily, of respondent's ownership of those marks, the dates of appropriation and the validity of other pertinent facts stated therein. Indeed, Section 20 of Republic Act 166 provides as follows: "Sec. 20. Certificate of registration prima facie evidence of validity. - A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein."9 Moreover, the validity of the Certificates of Registration was not questioned. Neither did petitioner present any evidence to indicate that they were fraudulently issued. Consequently, the claimed dates of respondent's first use of the marks are presumed valid. Clearly, they were ahead of petitioner's claimed date of first use of "Gold Top and Device" in 1958. Section 5-A of Republic Act No. 16610 states that an applicant for a trademark or trade name shall, among others, state the date of first use. The fact that the marks were indeed registered by respondent shows that it did use them on the date indicated in the Certificate of Registration. On the other hand, petitioner failed to present proof of the date of alleged first use of the trademark "Gold Top and Device". Thus, even assuming that respondent started using it only on May 15, 1962, we can make no finding that petitioner had started using it ahead of respondent. Furthermore, petitioner registered its trademark only with the supplemental register. In La Chemise Lacoste v. Fernandez,11 the Court held that registration with the supplemental register gives no presumption of ownership of the trademark. Said the Court: "The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3) registrant's exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after its issuance. Neither may it be the subject of interference proceedings. Registration [i]n the supplemental register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration because of some defects (conversely, defects which make a mark unregistrable on the principal register, yet do not bar them from the supplemental register.)' (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents, Apr. 30, 1968."

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As to the actual date of first use by respondent of the four marks it registered, the seeming confusion may have stemmed from the fact that the marks have different dates of first use. Clearly, however, these dates are indicated in the Certificates of Registration. In any case, absent any clear showing to the contrary, this Court accepts the finding of the Bureau of Patents that it was respondent which had prior use of its trademark, as shown in the various Certificates of Registration issued in its favor. Verily, administrative agencies' findings of fact in matters falling under their jurisdiction are generally accorded great respect, if not finality. Thus, the Court has held: "x x x. By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they 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. The findings of fact of an administrative agency must be respected 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 an 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 of sufficiency of evidence."12 Second Issue: Similarity of Trademarks Citing various differences between the two sets of marks, petitioner assails the finding of the director of patents that its trademark is confusingly similar to that of respondent. Petitioner points out that the director of patents erred in its application of the idem sonans rule, claiming that the two trademarks "Gold Toe" and "Gold Top" do not sound alike and are pronounced differently. It avers that since the words gold and toe are generic, respondent has no right to their exclusive use. The arguments of petitioner are incorrect. True, it would not be guilty of infringement on the basis alone of the similarity in the sound of petitioner's "Gold Top" with that of respondent's "Gold Toe." Admittedly, the pronunciations of the two do not, by themselves, create confusion. The Bureau of Patents, however, did not rely on the idem sonans test alone in arriving at its conclusion. This fact is shown in the following portion of its Decision: "As shown by the drawings and labels on file, the mark registered by Respondent-Registrant under Registration No. SR-2206 is a combination of the abovementioned trademarks registered separately by the petitioner in the Philippines and the United States. "With respect to the issue of confusing similarity between the marks of the petitioner and that of the respondent-registrant applying the tests of idem sonans, the mark 'GOLD TOP & DEVICE' is confusingly similar with the mark 'GOLD TOE'. The difference in sound occurs only in the final letter at the end of the marks. For the same reason, hardly is there any variance in their appearance. 'GOLD TOE' and 'GOLD TOP' are printed in identical lettering. Both show [a] representation of a man's foot wearing a sock. 'GOLD TOP' blatantly incorporates petitioner's 'LINENIZED' which by itself is a registered mark."13 The Bureau considered the drawings and the labels, the appearance of the labels, the lettering, and the representation of a man's foot wearing a sock. Obviously, its conclusion is based on the totality of the similarities between the parties' trademarks and not on their sounds alone. In Emerald Garment Manufacturing Corporation v. Court of Appeals,14 this Court stated that in determining whether trademarks are confusingly similar, jurisprudence has developed two kinds of tests, the Dominancy Test15and the Holistic Test.16 In its words: "In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals and other cases and the Holistic Test developed in Del Monte Corporation v. Court of Appeals and its proponent cases. As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. xxx xxx xxx

. . . . 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. [C. Neilman Brewing Co. v. 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

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involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Hanover Rubber Co., 107 F. 2d 588; x x x.) xxx xxx xxx

On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity." In the present case, a resort to either the Dominancy Test or the Holistic Test shows that colorable imitation exists between respondent's "Gold Toe" and petitioner's "Gold Top." A glance at petitioner's mark shows that it definitely has a lot of similarities and in fact looks like a combination of the trademark and devices that respondent has already registered; namely, "Gold Toe," the representation of a sock with a magnifying glass, the "Gold Toe" representation and "linenized." Admittedly, there are some minor differences between the two sets of marks. The similarities, however, are of such degree, number and quality that the overall impression given is that the two brands of socks are deceptively the same, or at least very similar to each another. An examination of the products in question shows that their dominant features are gold checkered lines against a predominantly black background and a representation of a sock with a magnifying glass. In addition, both products use the same type of lettering. Both also include a representation of a man's foot wearing a sock and the word "linenized" with arrows printed on the label. Lastly, the names of the brands are similar -- "Gold Top" and "Gold Toe." Moreover, it must also be considered that petitioner and respondent are engaged in the same line of business. Petitioner cannot therefore ignore the fact that, when compared, most of the features of its trademark are strikingly similar to those of respondent. In addition, these representations are at the same location, either in the sock itself or on the label. Petitioner presents no explanation why it chose those representations, considering that these were the exact symbols used in respondent's marks. Thus, the overall impression created is that the two products are deceptively and confusingly similar to each other. Clearly, petitioner violated the applicable trademark provisions during that time. Let it be remembered that duly registered trademarks are protected by law as intellectual properties and cannot be appropriated by others without violating the due process clause. An infringement of intellectual rights is no less vicious and condemnable as theft of material property, whether personal or real. Third Issue: The Paris Convention Petitioner claims that the Court of Appeals erred in applying the Paris Convention. Although respondent registered its trademark ahead, petitioner argues that the actual use of the said mark is necessary in order to be entitled to the protection of the rights acquired through registration. As already discussed, respondent registered its trademarks under the principal register, which means that the requirement of prior use had already been fulfilled. To emphasize, Section 5-A of Republic Act 166 requires the date of first use to be specified in the application for registration. Since the trademark was successfully registered, there exists a prima facie presumption of the correctness of the contents thereof, including the date of first use. Petitioner has failed to rebut this presumption. Thus, applicable is the Union Convention for the Protection of Industrial Property adopted in Paris on March 20, 1883, otherwise known as the Paris Convention, of which the Philippines and the United States are members. Respondent is domiciled in the United States and is the registered owner of the "Gold Toe" trademark. Hence, it is entitled to the protection of the Convention. A foreign-based trademark owner, whose country of domicile is a party to an international convention relating to protection of trademarks,17 is accorded protection against infringement or any unfair competition as provided in Section 37 of Republic Act 166, the Trademark Law which was the law in force at the time this case was instituted. In sum, petitioner has failed to show any reversible error on the part of the Court of Appeals. Hence, its Petition must fail. WHEREFORE, the Petition is hereby DENIED and the assailed Resolution AFFIRMED. Costs against petitioner. SO ORDERED. Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez JJ., concur.

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Footnotes Rollo, pp. 17-22; written by Justice Demetrio G. Demetria, with the concurrence of Justices Ramon A. Barcelona and Renato C. Dacudao.
1

Rollo, pp. 11-15; written by Justice Emeterio C. Cui, with the concurrence of Justices Ramon A. Barcelona and Demetrio G. Demetria.
2 3

Rollo, p. 36. CA Decision, pp. 2-3; rollo, pp. 12-13. Assailed Resolution, pp. 4-6; rollo, pp. 20-22.

This case was deemed submitted for resolution on April 17, 2000, upon receipt by this Court of respondent's Memorandum, signed by Attys. Editha R. Hechanova and Daphne Ruby B. Grasparil. Petitioner's Memorandum, signed by Atty. Arturo S. Santos, was received by the Court on February 24, 2000.
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Rollo, pp. 273-298. Petitioner's Memorandum, pp. 4-5; rollo, pp. 276-277.

This provision is substantially reproduced in Section 138 of RA 8293, otherwise known as "Intellectual Property Code of the Philippines."
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"Sec. 5. Requirements of the application. - The application for the registration of a mark or trade-name shall be in English or Spanish, or in the national language, with its corresponding English translation, and signed by the applicant, and shall include:
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(a) Sworn statement of the applicant's domicile and citizenship, the date of the applicant's first use of the mark or trade-name, the date of the applicant's first use of the mark or trade-name in commerce or business, the goods, business or services in connection with which the mark or trade-name is used and the mode or manner in which the mark is used in connection with such goods, business or services, and that the person making the application believes himself, or the firm, corporation or association on whose behalf he makes the verification, to be the owner of the mark or trade-name sought to be registered, that the mark or trade-name is in use in commerce or business, and that to the best of his knowledge, no person, firm, corporation or association has the right to use such mark or trade-name in commerce or business either in the identical form thereof or in such near resemblance thereto as might be calculated to deceive. x x x ." Under Section 124.2 of RA 8293, the applicant is now required to "file a declaration of actual use of the mark with evidence to that effect, as prescribed by the Regulations within three (3) years from the filing date of the application. x x x."
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129 SCRA 373, 393, May 21, 1984, per Gutierrez, J.

Villaflor v. CA, 280 SCRA 297, 329-330, October 9, 1997, per Panganiban, J. See also Bulilan v. Commission on Audit, 300 SCRA 445, December 22, 1998; Government Service Insurance System v. Court of Appeals, 296 SCRA 514, September 25, 1998; Prime Marine Services, Inc. v. National Labor Relations Commission, 297 SCRA 394, October 8, 1998.
12 13

Decision of the Bureau of Patents, p. 3; rollo, p. 85. 251 SCRA 600, 615-616, December 29, 1995, per Kapunan, J.

14

See Asia Brewery, Inc. v. Court of Appeals, 224 SCRA 437, July 5, 1993; Converse Rubber Corporation v. Universal Rubber Products, Inc., 147 SCRA 154, January 8, 1987.
15

See Del Monte Corporation v. Court of Appeals, 181 SCRA 410, January 25, 1990; Fruit of the Loom, Inc. v. Court of Appeals, 133 SCRA 405, November 29, 1984.
16 17

37 of RA 166 reads:

"Rights Sec. 37. Rights of foreign registrants. - Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to

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which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. No registration of a mark or trade-name in the Philippines by a person described in the preceding paragraph of this section shall be granted until such mark or trade-name has been registered in the country of origin of the applicant, unless the applicant alleges use in commerce. For the purposes of this section, the country of origin of the applicant is the country in which he has bona fide and effective industrial or commercial establishment, or if he has not such an establishment in the country in which he is domiciled, or if he has not a domicile in any of the countries described in the first paragraph of this section, the country of which he is a national. An application for registration of a mark or trade-name under the provisions of this Act filed by a person described in the first paragraph of this section who has previously duly filed an application for registration of the same mark or trade-name in one of the countries described in said paragraph shall be accorded the same force and effect as would be accorded to the same application if filed in the Philippines on the same date on which the application was first filed in such foreign country: Provided, That (a) The application in the Philippines is filed within six months from the date on which the applica[tion] was first filed in the foreign country; and within three months from the date of filing or within such time as the Director shall in his discretion grant, the applicant shall furnish a certified copy of the application for or registration in the country of origin of the applicant, together with a translation thereof into English, if not in the English language; (b) The application conforms as nearly as practicable to the requirements of this Act, but use in commerce need not be alleged: (c) The rights acquired by third parties before the date of the filing of the first application in the foreign country shall in no way be affected by a registration obtained [for] an application filed under this paragraph; and (d) Nothing in this paragraph shall entitle the owner of a registration granted under this section to sue for acts committed prior to the date on which his mark or trade-name was registered in this country unless the registration is based on use in commerce. The registration of a mark under the provisions of this section shall be independent of the registration in the country of origin and the duration, validity or transfer in the Philippines of such registration shall be governed by the provisions of this Act. Trade-names of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form parts of marks. Any person designated in the first paragraph of this section as entitled to the benefits and subject to the provisions of this Act shall be entitled to effective protection against unfair competition, and the remedies provided herein for infringement of marks and trade-names shall be available so far as they may be appropriate in repressing acts of unfair competition. Citizens or residents of the Philippines shall have the same benefits as are granted by this section to persons described in the first paragraph hereof." Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-48226 December 14, 1942

ANA L. ANG, petitioner, vs. TORIBIO TEODORO, respondent. Cirilo Lim for petitioner. Marcial P. Lichauco and Manuel M. Mejia for respondent.

OZAETA, J.: Petitioner has appealed to this Court by certiorari to reverse the judgment of the Court of Appeals reversing that of the Court of First Instance of Manila and directing the Director of Commerce to cancel the registration of the trademark "Ang Tibay" in favor of said petitioner, and perpetually enjoining the latter from using said trade-mark on goods manufactured and sold by her. Respondent Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, has continuously used "Ang Tibay," both as a trade-mark and as a trade-name, in the manufacture and sale of slippers, shoes, and indoor baseballs since 1910. He formally registered it as trade-mark on September 29, 1915, and as trade-name on January 3, 1933. The growth of his business is a thrilling epic of Filipino industry and business capacity. Starting in an obscure shop in 1910 with a modest capital of P210 but with tireless industry and unlimited perseverance, Toribio Teodoro, then an unknown young man making slippers with his own hands but now a prominent business magnate and manufacturer with a large factory operated with modern machinery by a great number of employees, has steadily grown with his business to which he has dedicated the best years of his life and which he has expanded to such proportions that his gross sales from 1918 to 1938 aggregated P8,787,025.65. His sales in 1937 amounted to P1,299,343.10 and in 1938, P1,133,165.77. His expenses for advertisement from 1919 to 1938 aggregated P210,641.56. Petitioner (defendant below) registered the same trade-mark "Ang Tibay" for pants and shirts on April 11, 1932, and established a factory for the manufacture of said articles in the year 1937. In the following year (1938) her gross sales amounted to P422,682.09. Neither the decision of the trial court nor that of the Court of Appeals shows how much petitioner has spent or advertisement. But respondent in his brief says that petitioner "was unable to prove that she had spent a single centavo advertising "Ang Tibay" shirts and pants prior to 1938. In that year she advertised the factory which she had just built and it was when this was brought to the attention of the appellee that he consulted his attorneys and eventually brought the present suit." The trial court (Judge Quirico Abeto) presiding absolved the defendant from the complaint, with costs against the plaintiff, on the grounds that the two trademarks are dissimilar and are used on different and non-competing goods; that there had been no exclusive use of the trade-mark by the plaintiff; and that there had been no fraud in the use of the said trade-mark by the defendant because the goods on which it is used are essentially different from those of the plaintiff. The second division of the Court of Appeals, composed of Justices Bengson, Padilla, Lopez Vito, Tuason, and Alex Reyes, with Justice Padilla as ponente, reversed that judgment, holding that by uninterrupted an exclusive use since 191 in the manufacture of slippers and shoes, respondent's trade-mark has acquired a secondary meaning; that the goods or articles on which the two trade-marks are used are similar or belong to the same class; and that the use by petitioner of said trade-mark constitutes a violation of sections 3 and 7 of Act No. 666. The defendant Director of Commerce did not appeal from the decision of the Court of Appeals. First. Counsel for the petitioner, in a well-written brief, makes a frontal sledge-hammer attack on the validity of respondent's trade-mark "Ang Tibay." He contends that the phrase "Ang Tibay" as employed by the respondent on the articles manufactured by him is a descriptive term because, "freely translate in English," it means "strong, durable, lasting." He invokes section 2 of Act No. 666, which provides that words or devices which related only to the name, quality, or description of the merchandise cannot be the subject of a trade-mark. He cites among others the case of Baxter vs. Zuazua (5 Phil., 16), which involved the trade-mark "Agua de Kananga" used on toilet water, and in which this Court held that the word "Kananga," which is the name of a well-known Philippine tree or its flower, could not be appropriated as a trade-mark any more than could the words "sugar," "tobacco," or "coffee." On the other hand, counsel for the respondent, in an equally well-prepared and exhaustive brief, contend that the words "Ang Tibay" are not descriptive but merely suggestive and may properly be regarded as fanciful or arbitrary in the legal sense. The cite several cases in which similar words have been sustained as valid trade-marks, such as "Holeproof" for hosiery, 1 "ideal for tooth brushes, 2 and "Fashionknit" for neckties and sweaters. 3 We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine whether they are a descriptive term, i.e., whether they relate to the quality or description of the merchandise to which respondent has applied them as a trade-mark. The word "ang" is a definite article meaning "the" in English. It is also used as an adverb, a contraction of the word "anong" (what or how). For instance, instead of saying, "Anong ganda!" ("How beautiful!"), we ordinarily say, "Ang ganda!" Tibay is a root word from which are derived the verb magpatibay (to strenghten; the nouns pagkamatibay (strength, durability), katibayan (proof, support, strength), katibay-tibayan (superior strength); and the adjectives matibay (strong, durable, lasting), napakatibay(very strong), kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang Tibay" is an exclamation denoting administration of strength or durability. For instance, one who tries hard but fails to break an object exclaims, "Ang tibay!" (How strong!") It may also be used in a sentence thus, "Ang tibay ng sapatos mo!" (How durable your shoes are!") The phrase "ang tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" to mean "durable shoes," but "matibay na sapatos" or "sapatos na matibay."

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From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-Mark Law but rather a fanciful or coined phrase which may properly and legally be appropriated as a trade-mark or trade-name. In this connection we do not fail to note that when the petitioner herself took the trouble and expense of securing the registration of these same words as a trademark of her products she or her attorney as well as the Director of Commerce was undoubtedly convinced that said words (Ang Tibay) were not a descriptive term and hence could be legally used and validly registered as a trade-mark. It seems stultifying and puerile for her now to contend otherwise, suggestive of the story of sour grapes. Counsel for the petitioner says that the function of a trade-mark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. That is correct, and we find that "Ang Tibay," as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before the petitioner adopted it as a trade-mark in her own business. Ang Tibay shoes and slippers are, by association, known throughout the Philippines as products of the Ang Tibay factory owned and operated by the respondent Toribio Teodoro. Second. In her second assignment of error petitioner contends that the Court of Appeals erred in holding that the words "Ang Tibay" had acquired a secondary meaning. In view of the conclusion we have reached upon the first assignment of error, it is unnecessary to apply here the doctrine of "secondary meaning" in trade-mark parlance. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article of the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. & C. Merriam Co. vs. Salfield, 198 F., 369, 373.) We have said that the phrase "Ang Tibay," being neither geographic nor descriptive, was originally capable of exclusive appropriation as a trade-mark. But were it not so, the application of the doctrine of secondary meaning made by the Court of Appeals could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. (Landers, Frary, and Clark vs. Universal Cooler Corporation, 85 F. [2d], 46.) Third. Petitioner's third assignment of error is, that the Court of Appeals erred in holding that pants and shirts are goods similar to shoes and slippers within the meaning of sections 3 and 7 of Act No. 666. She also contends under her fourth assignment of error (which we deem convenient to pass upon together with the third) that there can neither be infringement of trade-mark under section 3 nor unfair competition under section 7 through her use of the words "Ang Tibay" in connection with pants and shirts, because those articles do not belong to the same class of merchandise as shoes and slippers. The question raised by petitioner involve the scope and application of sections 3,7, 11, 13, and 20 of the TradeMark Law (Act No. 666.) Section 3 provides that "any person entitled to the exclusive use of a trade-mark to designate the origin or ownership of goods he has made or deals in, may recover damages in a civil actions from any person who has sold goods of a similar kind, bearing such trade-mark . . . The complaining party . . . may have a preliminary injunction, . . . and such injunction upon final hearing, if the complainant's property in the trade-mark and the defendant's violation thereof shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for damages to be rendered in the same cause." Section 7 provides that any person who, in selling his goods, shall give them the general appearance of the goods of another either in the wrapping of the packages, or in 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 the complainant, shall be guilty of unfair competition, and shall be liable to an action for damages and to an injunction, as in the cases of trade-mark infringement under section 3. Section 11 requires the applicant for registration of a trade-mark to state, among others, "the general class of merchandise to which the trade-mark claimed has been appropriated." Section 13 provides that no alleged trade-mark or trade name shall be registered which is identical with a registered or known trade-mark owned by another and appropriate to the same class of merchandise, or which to nearly resembles another person's lawful trade-mark or trade-name as to be likely to cause confusion or mistake in the mind of the public, or to deceive purchasers. And section 2 authorizes the Director of Commerce to establish classes of merchandise for the purpose of the registration of trade-marks and to determine the particular description of articles included in each class; it also provides that "an application for registration of a trade-mark shall be registered only for one class of articles and only for the particular description of articles mentioned in said application." We have underlined the key words used in the statute: "goods of a similar kin," "general class of merchandise," "same class of merchandise," "classes of merchandise," and "class of articles," because it is upon their implications that the result of the case hinges. These phrases, which refer to the same thing, have the same meaning as the phrase "merchandise of the same descriptive properties" used in the statutes and jurisprudence of other jurisdictions. The burden of petitioner's argument is that under sections 11 and 20 the registration by respondent of the trademark "Ang Tibay" for shoes and slippers is no safe-guard against its being used by petitioner for pants and shirts because the latter do not belong to the same class of merchandise or articles as the former; that she cannot be held guilty of infringement of trade-mark under section 3 because respondent's mark is not a valid trade-mark, nor has it acquired a secondary meaning; that pants and shirts do not possess the same descriptive properties as shoes and slippers; that neither can she be held guilty of unfair competition under section 7 because the use by her of the trade-mark "Ang Tibay" upon pants and shirts is not likely to mislead the general public as to their origin or ownership; and that there is now showing that she in unfairly or fraudulently using that mark "Ang Tibay" against the

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respondent. If we were interpreting the statute for the first time and in the first decade of the twentieth century, when it was enacted, and were to construe it strictly and literally, we might uphold petitioner's contentions. But law and jurisprudence must keep abreast with the progress of mankind, and the courts must breathe life into the statutes if they are to serve their purpose. Our Trade-mark Law, enacted nearly forty years ago, has grown in its implications and practical application, like a constitution, in virtue of the life continually breathed into it. It is not of merely local application; it has its counterpart in other jurisdictions of the civilized world from whose jurisprudence it has also received vitalizing nourishment. We have to apply this law as it has grown and not as it was born. Its growth or development abreast with that of sister statutes and jurisprudence in other jurisdictions is reflected in the following observation of a well-known author: This fundamental change in attitude first manifested itself in the year 1915-1917. Until about then, the courts had proceeded on the theory that the same trade-mark, used on un-like goods, could not cause confusion in trade and that, therefore, there could be no objection to the use and registration of a well-known mark by a third party for a different class of goods. Since 1916 however, a growing sentiment began to arise that in the selection of a famous mark by a third party, there was generally the hidden intention to "have a free ride" on the trade-mark owner's reputation and good will. (Derenberg, Trade-Mark Protection & Unfair Trading, 1936 edition, p. 409.) In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user. Although two noncompeting articles may be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trade-marks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods. Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that there can be unfair competition or unfair trading even if the goods are non-competing, and that such unfair trading can cause injury or damage to the first user of a given trade-mark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. Then noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably results. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a well-known trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark. As trade has developed and commercial changes have come about, the law of unfair competition has expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. The owner of a trade-mark or trade-name has a property right in which he is entitled to protection, since there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud. A few of the numerous cases in which the foregoing doctrines have been laid down in one form or another will now be cited: (1) In Teodoro Kalaw Ng Khe vs. Level Brothers Company (G.R. No. 46817), decided by this Court on April 18, 1941, the respondent company (plaintiff below) was granted injunctive relief against the use by the petitioner of the trade-mark "Lux" and "Lifebuoy" for hair pomade, they having been originally used by the respondent for soap; The Court held in effect that although said articles are noncompetitive, they are similar or belong to the same class. (2) In Lincoln Motor Co. vs. Lincoln Automobile Co. (44 F. [2d], 812), the manufacturer of the well-known Lincoln automobile was granted injunctive relief against the use of the word "Lincoln" by another company as part of its firm name. (3) The case of Aunt Jemima Mills Co. vs. Rigney & Co. (247 F., 407), involved the trade-mark "Aunt Jemima," originally used on flour, which the defendant attempted to use on syrup, and there the court held that the goods, though different, are so related as to fall within the mischief which equity should prevent. (4) In Tiffany & Co., vs. Tiffany Productions, Inc. (264 N.Y.S., 459; 23 Trade-mark Reporter, 183), the plaintiff, a jewelry concern, was granted injunctive relief against the defendant, a manufacturer of motion pictures, from using the name "Tiffany." Other famous cases cited on the margin, wherein the courts granted injunctive relief, involved the following trademarks or trade-names: "Kodak," for cameras and photographic supplies, against its use for bicycles. 4 "Penslar," for medicines and toilet articles, against its use for cigars; 5 "Rolls-Royce," for automobiles. against its use for radio tubes; 6 "Vogue," as the name of a magazine, against its use for hats; 7"Kotex," for sanitary napkins, against the use of "Rotex" for vaginal syringes; 8 "Sun-Maid," for raisins, against its use for flour; 9 "Yale," for locks and keys, against its use for electric flashlights; 10 and "Waterman," for fountain pens, against its use for razor blades. 11
lawphil.net

Against this array of famous cases, the industry of counsel for the petitioner has enabled him to cite on this point only the following cases: (1) Mohawk Milk Products vs. General Distilleries Corporation (95 F. [2d], 334), wherein the court held that gin and canned milk and cream do not belong to the same class; (2) Fawcett Publications, Inc.

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vs. Popular Mechanics Co. (80 F. [2d], 194), wherein the court held that the words "Popular Mechanics" used as the title of a magazine and duly registered as a trade-mark were not infringed by defendant's use of the words "Modern Mechanics and Inventions" on a competitive magazine, because the word "mechanics" is merely a descriptive name; and (3) Oxford Book Co. vs. College Entrance Book Co. (98 F. [2d], 688), wherein the plaintiff unsuccessfully attempted to enjoin the defendant from using the word "Visualized" in connection with history books, the court holding that said word is merely descriptive. These cases cites and relied upon by petitioner are obviously of no decisive application to the case at bar. We think reasonable men may not disagree that shoes and shirts are not as unrelated as fountain pens and razor blades, for instance. The mere relation or association of the articles is not controlling. As may readily be noted from what we have heretofore said, the proprietary connotation that a trade-mark or trade-name has acquired is of more paramount consideration. The Court of Appeals found in this case that by uninterrupted and exclusive use since 1910 of respondent's registered trade-mark on slippers and shoes manufactured by him, it has come to indicate the origin and ownership of said goods. It is certainly not farfetched to surmise that the selection by petitioner of the same trade-mark for pants and shirts was motivated by a desire to get a free ride on the reputation and selling power it has acquired at the hands of the respondent. As observed in another case, 12 the field from which a person may select a trade-mark is practically unlimited, and hence there is no excuse for impinging upon or even closely approaching the mark of a business rival. In the unlimited field of choice, what could have been petitioner's purpose in selecting "Ang Tibay" if not for its fame? Lastly, in her fifth assignment of error petitioner seems to make a frantic effort to retain the use of the mark "Ang Tibay." Her counsel suggests that instead of enjoining her from using it, she may be required to state in her labels affixed to her products the inscription: "Not manufactured by Toribio Teodoro." We think such practice would be unethical and unworthy of a reputable businessman. To the suggestion of petitioner, respondent may say, not without justice though with a tinge of bitterness: "Why offer a perpetual apology or explanation as to the origin of your products in order to use my trade-mark instead of creating one of your own?" On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of another but builds one of his own. The judgment of the Court of Appeals is affirmed, with costs against the petitioner in the three instances. So ordered. Yulo, C.J., Moran, Paras and Bocobo, JJ., concur.

Footnotes 1 Holeproof Hosiery Co. vs. Wallach Bros. (167 F., 373). 2 Hughes vs. Smith Co. (205 F., 302). 3 Franklin Knitting Mills vs. Fashionit Sweater Mills (297 F., 247). 4 Eastman Co. vs. Kodak Cycle Co. (15 R. P C., 105). 5 Peninsular Chemical Co. vs. Levinson (247 f., 658). 6 Wall vs. Rolls-Royce of America (4 F. [2d], 333). 7 Vogue Co. vs. Thompson-Hudson Co. (300 F., 509). 8 Kotex Co. vs. McArthur (45 F. [2d], 256). 9 Sun-Maid Raisin Growers of California vs. American Grocer Co. (40 F. [2d], 116). 10 Yale Electric Corporation vs. Robertson and The Yale & Towne Co. (21 F. [2d], 467); affirmed in 26 F. [2d], 9722. 11 L. E. Waterman Co. vs. Benjamin Gordon (8F. Supp., 351; 24 Trade-mark Reporter, 347); affirmed in 72 F. [2d], 272. 12 Kassman & Kessner, Inc., vs. Rosenberg Bros. Co. (10 F. [2d], 904).

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Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 103543 July 5, 1993 ASIA BREWERY, INC., petitioner, vs. THE HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents. Abad Santos & Associates and Sycip, Salazar, Hernandez & Gatmaitan for petitioner. Roco, Bunag, Kapunan Law Office for private respondent.

GRIO-AQUINO, J.: On September 15, 1988, San Miguel Corporation (SMC) filed a complaint against Asia Brewery Inc. (ABI) for infringement of trademark and unfair competition on account of the latter's BEER PALE PILSEN or BEER NA BEER product which has been competing with SMC's SAN MIGUEL PALE PILSEN for a share of the local beer market. (San Miguel Corporation vs. Asia Brewery Inc., Civ. Case. No. 56390, RTC Branch 166, Pasig, Metro Manila.). On August 27, 1990, a decision was rendered by the trial Court, presided over by Judge Jesus O. Bersamira, dismissing SMC's complaint because ABI "has not committed trademark infringement or unfair competition against" SMC (p. 189, Rollo). SMC appealed to the Court of Appeals (C.A.-G.R. CV No. 28104). On September 30, 1991, the Court of Appeals (Sixth Division composed of Justice Jose C. Campos, Jr., chairman and ponente, and Justices Venancio D. Aldecoa Jr. and Filemon H. Mendoza, as members) reversed the trial court. The dispositive part of the decision reads as follows: In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows: (1) The defendant Asia Brewery Inc. its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer is the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant. (2) The defendant Asia Brewery Inc. is hereby ordered to render an accounting and pay the San Miguel Corporation double any and all the payments derived by defendant from operations of its business and the sale of goods bearing the mark "Beer Pale Pilsen" estimated at approximately Five Million Pesos (P5,000,000.00); to recall all its products bearing the mark "Beer Pale Pilsen" from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction. (3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P5,000,000.00) by way of exemplary damages. (4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs to this suit. (p. 90, Rollo.)

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Upon a motion for reconsideration filed by ABI, the above dispositive part of the decision, was modified by the separate opinions of the Special Sixth Division 1 so that it should read thus: In the light of the foregoing analysis and under the plain language of the applicable rule and principle on the matter, We find the defendant Asia Brewery Incorporated GUILTY of infringement of trademark and unfair competition. The decision of the trial court is hereby REVERSED, and a new judgment entered in favor of the plaintiff and against the defendant as follows: (1) The defendant Asia Brewery Inc., its officers, agents, servants and employees are hereby permanently enjoined and restrained from manufacturing, putting up, selling, advertising, offering or announcing for sale, or supplying Beer Pale Pilsen, or any similar preparation, manufacture or beer in bottles and under labels substantially identical with or like the said bottles and labels of plaintiff San Miguel Corporation employed for that purpose, or substantially identical with or like the bottles and labels now employed by the defendant for that purpose, or in bottles or under labels which are calculated to deceive purchasers and consumers into the belief that the beer if the product of the plaintiff or which will enable others to substitute, sell or palm off the said beer of the defendant as and for the beer of the plaintiff-complainant.
(2) The defendant Asia Brewery Inc. is hereby ordered 2 to recall all its products bearing the mark Beer Pale Pilsen from its retailers and deliver these as well as all labels, signs, prints, packages, wrappers, receptacles and advertisements bearing the infringing mark and all plates, molds, materials and other means of making the same to the Court authorized to execute this judgment for destruction.

(3) The defendant is hereby ordered to pay plaintiff the sum of Two Million Pesos (P2,000,000.00) as moral damages and Half a Million Pesos (P500,000.00) by way of exemplary damages. (4) The defendant is further ordered to pay the plaintiff attorney's fees in the amount of P250,000.00 plus costs of this suit. In due time, ABI appealed to this Court by a petition for certiorari under Rule 45 of the Rules of Court. The lone issue in this appeal is whether ABI infringes SMC's trademark: San Miguel Pale Pilsen with Rectangular Hops and Malt Design, and thereby commits unfair competition against the latter. It is a factual issue (Phil. Nut Industry Inc. v. Standard Brands Inc., 65 SCRA 575) and as a general rule, the findings of the Court of Appeals upon factual questions are conclusive and ought not to be disturbed by us. However, there are exceptions to this general rule, and they are: (1) When the conclusion is grounded entirely on speculation, surmises and conjectures; (2) When the inference of the Court of Appeals from its findings of fact is manifestly mistaken, absurd and impossible; (3) Where there is grave abuse of discretion; (4) When the judgment is based on a misapprehension of facts; (5) When the appellate court, in making its findings, went beyond the issues of the case, and the same are contrary to the admissions of both the appellant and the appellee; (6) When the findings of said court are contrary to those of the trial court; (7) When the findings are without citation of specific evidence on which they are based; (8) When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents; and (9) When the findings of facts of the Court of Appeals are premised on the absence of evidence and are contradicted on record. (Reynolds Philippine Corporation vs. Court of Appeals, 169 SCRA 220, 223 citing, Mendoza vs. Court of Appeals, 156 SCRA 597; Manlapaz vs. Court of Appeals, 147 SCRA 238; Sacay vs. Sandiganbayan, 142 SCRA 593, 609; Guita vs. CA, 139 SCRA 576; Casanayan vs. Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing Corp. vs. IAC, 166 SCRA 458 [citing Tolentino vs. De Jesus, 56 SCRA 167; Carolina Industries, Inc. vs. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero vs. CA, 102 SCRA 817; and Moran, Jr. vs. CA, 133 SCRA 88].) Under any of these exceptions, the Court has to review the evidence in order to arrive at the correct findings based on the record (Roman Catholic Bishop of Malolos, Inc. vs. IAC, 191 SCRA 411, 420.) Where findings of the Court of

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Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. (Cruz vs. CA, 129 SCRA 222, 227.) The present case is one of the exceptions because there is no concurrence between the trial court and the Court of Appeals on the lone factual issue of whether ABI, by manufacturing and selling its BEER PALE PILSEN in amber colored steinie bottles of 320 ml. capacity with a white painted rectangular label has committed trademark infringement and unfair competition against SMC. Infringement of trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil. 100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes infringement: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied.) This definition implies that only registered trade marks, trade names and service marks are protected against infringement or unauthorized use by another or others. The use of someone else's registered trademark, trade name or service mark is unauthorized, hence, actionable, if it is done "without the consent of the registrant." (Ibid.) The registered trademark of SMC for its pale pilsen beer is: San Miguel Pale Pilsen With Rectangular Hops and Malt Design. (Philippine Bureau of Patents, Trademarks and Technology Transfer Trademark Certificate of Registration No. 36103, dated 23 Oct. 1986, (p. 174, Rollo.) As described by the trial court in its decision (Page 177, Rollo): . . . . a rectangular design [is] bordered by what appears to be minute grains arranged in rows of three in which there appear in each corner hop designs. At the top is a phrase written in small print "Reg. Phil. Pat. Off." and at the bottom "Net Contents: 320 Ml." The dominant feature is the phrase "San Miguel" written horizontally at the upper portion. Below are the words "Pale Pilsen" written diagonally across the middle of the rectangular design. In between is a coat of arms and the phrase "Expertly Brewed." The "S" in "San" and the "M" of "Miguel," "P" of "Pale" and "Pilsen" are written in Gothic letters with fine strokes of serifs, the kind that first appeared in the 1780s in England and used for printing German as distinguished from Roman and Italic. Below "Pale Pilsen" is the statement "And Bottled by" (first line, "San Miguel Brewery" (second line), and "Philippines" (third line). (p. 177, Rollo; Emphasis supplied.) On the other hand, ABI's trademark, as described by the trial court, consists of: . . . a rectangular design bordered by what appear to be buds of flowers with leaves. The dominant feature is "Beer" written across the upper portion of the rectangular design. The phrase "Pale Pilsen" appears immediately below in smaller block letters. To the left is a hop design and to the right, written in small prints, is the phrase "Net Contents 320 ml." Immediately below "Pale Pilsen" is the statement written in three lines "Especially brewed and bottled by" (first line), "Asia Brewery Incorporated" (second line), and "Philippines" (third line), (p. 177, Rollo; Emphasis supplied.) Does ABI's BEER PALE PILSEN label or "design" infringe upon SMC's SAN MIGUEL PALE PILSEN WITH RECTANGULAR MALT AND HOPS DESIGN? The answer is "No." Infringement is determined by the "test of dominancy" rather than by differences or variations in the details of one trademark and of another. The rule was formulated in Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa vs. Director of Patents, 100 Phil. 214, 216-217 (1956), thus: It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing

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Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC) 180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; . . . .) (Emphasis supplied.) In Forbes, Munn & Co. (Ltd.) vs. Ang San To, 40 Phil. 272, 275, the test was similarity or "resemblance between the two (trademarks) such as would be likely to cause the one mark to be mistaken for the other. . . . [But] this is not such similitude as amounts to identity." In Phil. Nut Industry Inc. vs. Standard Brands Inc., 65 SCRA 575, the court was more specific: the test is "similarity in the dominant features of the trademarks." What are the dominant features of the competing trademarks before us? There is hardly any dispute that the dominant feature of SMC's trademark is the name of the product: SAN MIGUEL PALE PILSEN, written in white Gothic letters with elaborate serifs at the beginning and end of the letters "S" and "M" on an amber background across the upper portion of the rectangular design. On the other hand, the dominant feature of ABI's trademark is the name: BEER PALE PILSEN, with the word "Beer" written in large amber letters, larger than any of the letters found in the SMC label. The trial court perceptively observed that the word "BEER" does not appear in SMC's trademark, just as the words "SAN MIGUEL" do not appear in ABI's trademark. Hence, there is absolutely no similarity in the dominant features of both trademarks. Neither in sound, spelling or appearance can BEER PALE PILSEN be said to be confusingly similar to SAN MIGUEL PALE PILSEN. No one who purchases BEER PALE PILSEN can possibly be deceived that it is SAN MIGUEL PALE PILSEN. No evidence whatsoever was presented by SMC proving otherwise. Besides the dissimilarity in their names, the following other dissimilarities in the trade dress or appearance of the competing products abound: (1) The SAN MIGUEL PALE PILSEN bottle has a slender tapered neck. The BEER PALE PILSEN bottle has a fat, bulging neck. (2) The words "pale pilsen" on SMC's label are printed in bold and laced letters along a diagonal band, whereas the words "pale pilsen" on ABI's bottle are half the size and printed in slender block letters on a straight horizontalband. (See Exhibit "8-a".). (3) The names of the manufacturers are prominently printed on their respective bottles. SAN MIGUEL PALE PILSEN is "Bottled by the San Miguel Brewery, Philippines," whereas BEER PALE PILSEN is "Especially brewed and bottled by Asia Brewery Incorporated, Philippines." (4) On the back of ABI's bottle is printed in big, bold letters, under a row of flower buds and leaves, its copyrighted slogan: "BEER NA BEER!" Whereas SMC's bottle carries no slogan. (5) The back of the SAN MIGUEL PALE PILSEN bottle carries the SMC logo, whereas the BEER PALE PILSEN bottle has no logo. (6) The SAN MIGUEL PALE PILSEN bottle cap is stamped with a coat of arms and the words "San Miguel Brewery Philippines" encircling the same. The BEER PALE PILSEN bottle cap is stamped with the name "BEER" in the center, surrounded by the words "Asia Brewery Incorporated Philippines." (7) Finally, there is a substantial price difference between BEER PALE PILSEN (currently at P4.25 per bottle) and SAN MIGUEL PALE PILSEN (currently at P7.00 per bottle). One who pays only P4.25 for a bottle of beer cannot expect to receive San Miguel Pale Pilsen from the storekeeper or bartender.

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The fact that the words pale pilsen are part of ABI's trademark does not constitute an infringement of SMC's trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are generic words descriptive of the color ("pale"), of a type of beer ("pilsen"), which is a light bohemian beer with a strong hops flavor that originated in the City of Pilsen in Czechoslovakia and became famous in the Middle Ages. (Webster's Third New International Dictionary of the English Language, Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam Co., [c] 1976, page 1716.) "Pilsen" is a "primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166, as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable and not appropriable by any beer manufacturer. The Trademark Law provides: Sec. 4. . . .. The owner of trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same [on the principal register], unless it: xxx xxx xxx (e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant isprimarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname." (Emphasis supplied.) The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if they are part of its registered trademark: SAN MIGUEL PALE PILSEN, any more than such descriptive words as "evaporated milk," "tomato ketchup," "cheddar cheese," "corn flakes" and "cooking oil" may be appropriated by any single manufacturer of these food products, for no other reason than that he was the first to use them in his registered trademark. InMasso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136, 139 (1953), it was held that a dealer in shoes cannot register "Leather Shoes" as his trademark because that would be merely descriptive and it would be unjust to deprive other dealers in leather shoes of the right to use the same words with reference to their merchandise. No one may appropriate generic or descriptive words. They belong to the public domain (Ong Ai Gui vs. Director of Patents, 96 Phil. 673, 676 [1955]): A word or a combination of words which is merely descriptive of an article of trade, or of its composition, characteristics, or qualities, cannot be appropriated and protected as a trademark to the exclusion of its use by others. . . . inasmuch as all persons have an equal right to produce and vend similar articles, they also have the right to describe them properly and to use any appropriate language or words for that purpose, and no person can appropriate to himself exclusively any word or expression, properly descriptive of the article, its qualities, ingredients or characteristics, and thus limit other persons in the use of language appropriate to the description of their manufactures, the right to the use of such language being common to all. This rule excluding descriptive terms has also been held to apply to trade-names. As to whether words employed fall within this prohibition, it is said that the true test is not whether they are exhaustively descriptive of the article designated, but whether in themselves, and as they are commonly used by those who understand their meaning, they are reasonably indicative and descriptive of the thing intended. If they are thus descriptive, and not arbitrary, they cannot be appropriated from general use and become the exclusive property of anyone. (52 Am. Jur. 542-543.) . . . . Others may use the same or similar descriptive word in connection with their own wares, provided they take proper steps to prevent the public being deceived. (Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E. [2d] 598.) . . . . A descriptive word may be admittedly distinctive, especially if the user is the first creator of the article. It will, however, be denied protection, not because it lacks distinctiveness, but rather because others are equally entitled to its use. (2 Callman. Unfair Competition and Trademarks, pp. 869-870.)" (Emphasis supplied.) The circumstance that the manufacturer of BEER PALE PILSEN, Asia Brewery Incorporated, has printed its name all over the bottle of its beer product: on the label, on the back of the bottle, as well as on the bottle cap, disproves SMC's charge that ABI dishonestly and fraudulently intends to palm off its BEER PALE PILSEN as SMC's product. In view of the visible differences between the two products, the Court believes it is quite unlikely that a customer of average intelligence would mistake a bottle of BEER PALE PILSEN for SAN MIGUEL PALE PILSEN. The fact that BEER PALE PILSEN like SAN MIGUEL PALE PILSEN is bottled in amber-colored steinie bottles of 320 ml. capacity and is also advertised in print, broadcast, and television media, does not necessarily constitute unfair competition. Unfair competition is the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or services, for those of another

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who has already established goodwill for his similar goods, business or services, or any acts calculated to produce the same result. (Sec. 29, Republic Act No. 166, as amended.) The law further enumerates the more common ways of committing unfair competition, thus: Sec. 29. . . . In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose. (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. In this case, the question to be determined is whether ABI is using a name or mark for its beer that has previously come to designate SMC's beer, or whether ABI is passing off its BEER PALE PILSEN as SMC's SAN MIGUEL PALE PILSEN. . . ..The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of the customers by reason of defendant's practices must always appear. (Shell Co., of the Philippines, Ltd. vs. Insular Petroleum Refining Co. Ltd. et al., 120 Phil. 434, 439.) The use of ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN bottle, is not unlawful. As pointed out by ABI's counsel, SMC did not invent but merely borrowed the steinie bottle from abroad and it claims neither patent nor trademark protection for that bottle shape and design. (See rollo, page 55.) The Cerveza Especial and the Efes Pale Pilsen use the "steinie" bottle. (See Exhibits 57-D, 57-E.) The trial court found no infringement of SMC's bottle The court agrees with defendant that there is no infringement of plaintiff's bottle, firstly, because according to plaintiff's witness Deogracias Villadolid, it is a standard type of bottle called steinie, and to witness Jose Antonio Garcia, it is not a San Miguel Corporation design but a design originally developed in the United States by the Glass Container Manufacturer's Institute and therefore lacks exclusivity. Secondly, the shape was never registered as a trademark. Exhibit "C" is not a registration of a beer bottle design required under Rep. Act 165 but the registration of the name and other marks of ownership stamped on containers as required by Rep. Act 623. Thirdly, the neck of defendant's bottle is much larger and has a distinct bulge in its uppermost part. (p. 186, Rollo.) The petitioner's contention that bottle size, shape and color may not be the exclusive property of any one beer manufacturer is well taken. SMC's being the first to use the steinie bottle does not give SMC a vested right to use it to the exclusion of everyone else. Being of functional or common use, and not the exclusive invention of any one, it is available to all who might need to use it within the industry. Nobody can acquire any exclusive right to market articles supplying simple human needs in containers or wrappers of the general form, size and character commonly and immediately used in marketing such articles (Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, 194-195.) . . . protection against imitation should be properly confined to nonfunctional features. Even if purely functional elements are slavishly copied, the resemblance will not support an action for unfair competition, and the first user cannot claim secondary meaning protection. Nor can the first user predicate his claim to protection on the argument that his business was established in reliance on any such unpatented nonfunctional feature, even "at large expenditure of money." (Callman Unfair Competition, Trademarks and Monopolies, Sec. 19.33 [4th Ed.].) (Petition for Review, p. 28.) ABI does not use SMC's steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat bulging neck to differentiate it from SMC's bottle. The amber color is a functional feature of the beer bottle. As

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pointed out by ABI, all bottled beer produced in the Philippines is contained and sold in amber-colored bottles because amber is the most effective color in preventing transmission of light and provides the maximum protection to beer. As was ruled in California Crushed Fruit Corporation vs. Taylor B. and Candy Co., 38 F2d 885, a merchant cannot be enjoined from using a type or color of bottle where the same has the useful purpose of protecting the contents from the deleterious effects of light rays. Moreover, no one may have a monopoly of any color. Not only beer, but most medicines, whether in liquid or tablet form, are sold in amber-colored bottles. That the ABI bottle has a 320 ml. capacity is not due to a desire to imitate SMC's bottle because that bottle capacity is the standard prescribed under Metrication Circular No. 778, dated 4 December 1979, of the Department of Trade, Metric System Board. With regard to the white label of both beer bottles, ABI explained that it used the color white for its label because white presents the strongest contrast to the amber color of ABI's bottle; it is also the most economical to use on labels, and the easiest to "bake" in the furnace (p. 16, TSN of September 20, 1988). No one can have a monopoly of the color amber for bottles, nor of white for labels, nor of the rectangular shape which is the usual configuration of labels. Needless to say, the shape of the bottle and of the label is unimportant. What is all important is the name of the product written on the label of the bottle for that is how one beer may be distinguished form the others. In Dy Buncio v. Tan Tiao Bok, 42 Phil. 190, 196-197, where two competing tea products were both labelled as Formosan tea, both sold in 5-ounce packages made of ordinary wrapping paper of conventional color, both with labels containing designs drawn in green ink and Chinese characters written in red ink, one label showing a doubledecked jar in the center, the other, a flower pot, this court found that the resemblances between the designs were not sufficient to mislead the ordinary intelligent buyer, hence, there was no unfair competition. The Court held: . . . . In order that there may be deception of the buying public in the sense necessary to constitute unfair competition, it is necessary to suppose a public accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or possibility of the deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent as between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinarily intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase. The main thrust of SMC's complaint if not infringement of its trademark, but unfair competition arising form the allegedly "confusing similarity" in the general appearance or trade dress of ABI's BEER PALE PILSEN beside SMC's SAN MIGUEL PALE PILSEN (p. 209, Rollo) SMC claims that the "trade dress" of BEER PALE PILSEN is "confusingly similar" to its SAN MIGUEL PALE PILSEN because both are bottled in 320 ml. steinie type, amber-colored bottles with white rectangular labels. However, when as in this case, the names of the competing products are clearly different and their respective sources are prominently printed on the label and on other parts of the bottle, mere similarity in the shape and size of the container and label, does not constitute unfair competition. The steinie bottle is a standard bottle for beer and is universally used. SMC did not invent it nor patent it. The fact that SMC's bottle is registered under R.A. No. 623 (as amended by RA 5700, An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and Other Similar Containers) simply prohibits manufacturers of other foodstuffs from the unauthorized use of SMC's bottles by refilling these with their products. It was not uncommon then for products such as patis (fish sauce) and toyo (soy sauce) to be sold in recycled SAN MIGUEL PALE PILSEN bottles. Registration of SMC's beer bottles did not give SMC a patent on the steinie or on bottles of similar size, shape or color. Most containers are standardized because they are usually made by the same manufacturer. Milk, whether in powdered or liquid form, is sold in uniform tin cans. The same can be said of the standard ketchup or vinegar bottle with its familiar elongated neck. Many other grocery items such as coffee, mayonnaise, pickles and peanut butter are sold in standard glass jars. The manufacturers of these foodstuffs have equal right to use these standards tins, bottles and jars for their products. Only their respective labels distinguish them from each other. Just as no milk producer may sue the others for unfair competition because they sell their milk in the same size and shape of milk can which he uses, neither may SMC claim unfair competition arising from the fact that ABI's BEER PALE PILSEN is sold, like SMC's SAN MIGUEL PALE PILSEN in amber steinie bottles. The record does not bear out SMC's apprehension that BEER PALE PILSEN is being passed off as SAN MIGUEL PALE PILSEN. This is unlikely to happen for consumers or buyers of beer generally order their beer by brand. As pointed out by ABI's counsel, in supermarkets and tiendas, beer is ordered by brand, and the customer surrenders his empty replacement bottles or pays a deposit to guarantee the return of the empties. If his empties are SAN MIGUEL PALE PILSEN, he will get SAN MIGUEL PALE PILSEN as replacement. In sari-sari stores, beer is also ordered from the tindera by brand. The same is true in restaurants, pubs and beer gardens beer is ordered from the waiters by brand. (Op. cit. page 50.)

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Considering further that SAN MIGUEL PALE PILSEN has virtually monopolized the domestic beer market for the past hundred years, those who have been drinking no other beer but SAN MIGUEL PALE PILSEN these many years certainly know their beer too well to be deceived by a newcomer in the market. If they gravitate to ABI's cheaper beer, it will not be because they are confused or deceived, but because they find the competing product to their taste. Our decision in this case will not diminish our ruling in "Del Monte Corporation vs. Court of Appeals and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, 3 that: . . . to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. That ruling may not apply to all kinds of products. The Court itself cautioned that in resolving cases of infringement and unfair competition, the courts should "take into consideration several factors which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased" (181 SCRA 410, 418-419). The Del Monte case involved catsup, a common household item which is bought off the store shelves by housewives and house help who, if they are illiterate and cannot identify the product by name or brand, would very likely identify it by mere recollection of its appearance. Since the competitor, Sunshine Sauce Mfg. Industries, not only used recycled Del Monte bottles for its catsup (despite the warning embossed on the bottles: "Del Monte Corporation. Not to be refilled.") but also used labels which were "a colorable imitation" of Del Monte's label, we held that there was infringement of Del Monte's trademark and unfair competition by Sunshine. Our ruling in Del Monte would not apply to beer which is not usually picked from a store shelf but ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant. Moreover, SMC's brand or trademark: "SAN MIGUEL PALE PILSEN" is not infringed by ABI's mark: "BEER NA BEER" or "BEER PALE PILSEN." ABI makes its own bottle with a bulging neck to differentiate it from SMC's bottle, and prints ABI's name in three (3) places on said bottle (front, back and bottle cap) to prove that it has no intention to pass of its "BEER" as "SAN MIGUEL." There is no confusing similarity between the competing beers for the name of one is "SAN MIGUEL" while the competitor is plain "BEER" and the points of dissimilarity between the two outnumber their points of similarity. Petitioner ABI has neither infringed SMC's trademark nor committed unfair competition with the latter's SAN MIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes with the latter in the open market, that competition is neither unfair nor fraudulent. Hence, we must deny SMC's prayer to suppress it. WHEREFORE, finding the petition for review meritorious, the same is hereby granted. The decision and resolution of the Court of Appeals in CA-G.R. CV No. 28104 are hereby set aside and that of the trial court is REINSTATED and AFFIRMED. Costs against the private respondent. SO ORDERED. Narvasa, C.J., Bidin, Regalado, Romero, Nocon, Bellosillo and Melo, JJ., concur. Feliciano, J., took no part.

Separate Opinions

CRUZ, J., dissenting: The present ponencia stresses the specific similarities and differences of the two products to support the conclusion that there is no infringement of trade marks or unfair competition. That test was rejected in my ownponencia in Del

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Monte Corporation vs. Court of Appeals, 181 SCRA 410, concurred in by Justices Narvasa, Gancayco, GrioAquino and Medialdea, where we declared: While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their labels when set aside by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone. It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. The court therefore should be guided by its first impression, for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. For the above reasons, and the other arguments stated in Del Monte, I dissent.

Separate Opinions

CRUZ, J., dissenting: The present ponencia stresses the specific similarities and differences of the two products to support the conclusion that there is no infringement of trade marks or unfair competition. That test was rejected in my ownponencia in Del Monte Corporation vs. Court of Appeals, 181 SCRA 410, concurred in by Justices Narvasa, Gancayco, GrioAquino and Medialdea, where we declared: While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off

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hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their labels when set aside by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods, is the touchstone. It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. The court therefore should be guided by its first impression, for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. For the above reasons, and the other arguments stated in Del Monte, I dissent.

Footnotes 1 Composed of Justice Jose C. Campos, Jr. as chairman, and Justices Ricardo Francisco, fully concurring, Ricardo Pronove, partly concurring, Filemon H. Mendoza and Oscar Herrera, both dissenting. Justice Aldecoa, who had written a separate dissenting opinion, retired before a resolution on the motion for reconsideration was promulgated. He was substituted by Justice Oscar M. Herrera. 2 This portion of Justice Campos' original decision ordering ABI to render an accounting to SMC and pay estimated damages of P5,000,000.00 did not carry enough votes to become a decision as only Justice Ricardo Francisco concurred fully with him. Justice Ricardo Pronove, although concurring partially with Justice Campos' decision, excepted from the portion ordering an accounting and payment of P5 million damages. 3 Cited in Justice R. Francisco's concurring opinion, p. 107, Rollo. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-53672 May 31, 1982 BATA INDUSTRIES, LTD., petitioner, vs. THE HONORABLE COURT OF APPEALS; TIBURCIO S. EVALLE, DIRECTOR OF PATENTS, NEW OLYMPIAN RUBBER PRODUCTS CO., INC., respondents. RESOLUTION ABAD SANTOS, J.:

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On October 27, 1980, the petition in this case was denied for lack of merit. Petitioner moved to reconsider and as required, private respondent submitted comments. A hearing on the motion for reconsideration was held on June 7, 1982. This is Our resolution on the motion for reconsideration. In Inter Partes Case No. 654 of the Philippine Patent Office, New Olympian Rubber Products Co., Inc. sought the registration of the mark BATA for casual rubber shoes. It alleged that it has used the mark since July 1, 1970. Registration was opposed by Bata Industries, Ltd., a Canadian corporation, which alleged that it owns and has not abandoned the trademark BATA. Stipulated by the parties were the following: 1. Bata Industries, Ltd. has no license to do business in the Philippines; 2. It is not presently selling footwear under the trademark BATA in the Philippines; and 3. It has no licensing agreement with any local entity or firm to sell its products in the Philippines. Evidence received by the Philippine Patent Office showed that Bata shoes made by Gerbec and Hrdina of Czechoslovakia were sold in the Philippines prior to World War II. Some shoes made by Bata of Canada were perhaps also sold in the Philippines until 1948. However, the trademark BATA was never registered in the Philippines by any foreign entity. Under the circumstances, it was concluded that "opposer has, to all intents and purposes, technically abandoned its trademark BATA in the Philippines." Upon the other hand, the Philippine Patent Office found that New Olympian Rubber Products Co., Inc.: ... has overwhelmingly and convincingly established its right to the trademark BATA and consequently, its use and registration in its favor. There is no gainsaying the truth that the respondent has spent a considerable amount of money and effort in popularizing the trademark BATA for shoes in the Philippines through the advertising media since it was lawfully used in commerce on July 1, 1970. It can not be denied, therefore, that it is the respondentapplicant's expense that created the enormous goodwill of the trademark BATA in the Philippines and not the opposer as claimed in its opposition to the registration of the BATA mark by the respondent. Additionally, on evidence of record, having also secured (three) copyright registrations for the word BATA, respondent-applicant's right to claim ownership of the trademark BATA in the Philippines, which it claims to be a Tagalog word which literally means "a little child" (Exh. 5), is all the more fortified. The Philippine Patent Office dismissed the opposition and ordered the registration of the trademark BATA in favor of the domestic corporation. Appeal from the decision of the Philippine Patent Office was made to the Court of Appeals by Bata Industries, Ltd. In a decision penned by Justice Justiniano P. Cortez dated August 9, 1979, with Justices Mariano Serrano and Jose B. Jimenez concurring, the PPO decision was reversed. A motion for reconsideration filed by New Olympian Rubber Products Co., Inc. was denied on October 17, 1979, by the same justices. However, in a resolution on a second motion for reconsideration penned by Justice Hugo E. Gutierrez who is now a member of this Court, to which Justices Corazon J. Agrava and Rodolfo A. Nocon concurred (with the former filing a separate opinion), the decision of August 9, 1979, was set aside and that of the Director of Patents was affirmed. In addition to points of law, Bata Industries, Ltd. questions "the circumstances surrounding the issuance of the questioned resolutions of the respondent Court of Appeals." In effect, it insinuates that there was something wrong when a new set of justices rendered a completely different decision. It should be stated that there is nothing wrong and unusual when a decision is reconsidered. This is so when the reconsideration is made by a division composed of the same justices who rendered the decision but much more so when the reconsideration is made by a different set of justices as happened in this case. Obviously, the new set of justices would have a fresh perspective unencumbered by the views expressed in the decision sought to be reconsidered. Nor should it be a cause for wonder why Justices Gutierrez, Agrava and Nocon had replaced the original justices. Justice Cortez resigned to become a candidate for the governorship of Cagayan (he was elected), while Justices Serrano and Jimenez retired upon reaching the age of 65. On the merits, the extended resolution penned by Justice Gutierrez does not have to be fortified by Us. We agree with Mr. Justice Gutierrez when he says:

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We are satisfied from the evidence that any slight goodwill generated by the Czechoslovakian product during the Commonwealth years was completely abandoned and lost in the more than 35 years that have passed since the liberation of Manila from the Japanese troops. The applicant-appellee has reproduced excerpts from the testimonies of the opposer-appellant's witnesses to prove that the opposer-appellant was never a user of the trademark BATA either before or after the war, that the appellant is not the successor-in-interest of Gerbec and Hrdina who were not is representatives or agents, and could not have passed any rights to the appellant, that there was no privity of interest between the Czechoslovakian owner and the Canadian appellant and that the Czechoslovakian trademark has been abandoned in Czechoslovakia. We agree with the applicant-appellee that more than substantial evidence supports the findings and conclusions of the Director of Patents. The appellant has no Philippine goodwill that would be damaged by the registration of the mark in the appellee's favor. We agree with the decision of the Director of Patents which sustains, on the basis of clear and convincing evidence, the right of the appellee to the registration and protection of its industrial property, the BATA trademark. WHEREFORE, the motion for reconsideration is hereby denied for lack of merit. No special pronouncement as to costs. SO ORDERED. Barredo (Chairman), Aquino, Guerrero, De Castro and Escolin, JJ., concur. Concepcion, Jr., J., is on leave. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 183404 October 13, 2010

BERRIS AGRICULTURAL CO., INC., Petitioner, vs. NORVY ABYADANG, Respondent. DECISION NACHURA, J.: This petition for review1 on certiorari under Rule 45 of the Rules of Court seeks the reversal of the Decision dated April 14, 20082 and the Resolution dated June 18, 20083 of the Court of Appeals (CA) in CA-G.R. SP No. 99928. The antecedents On January 16, 2004, respondent Norvy A. Abyadang (Abyadang), proprietor of NS Northern Organic Fertilizer, with address at No. 43 Lower QM, Baguio City, filed with the Intellectual Property Office (IPO) a trademark application for the mark "NS D-10 PLUS" for use in connection with Fungicide (Class 5) with active ingredient 80% Mancozeb. The application, under Application Serial No. 4-2004-00450, was given due course and was published in the IPO eGazette for opposition on July 28, 2005. On August 17, 2005, petitioner Berris Agricultural Co., Inc. (Berris), with business address in Barangay Masiit, Calauan, Laguna, filed with the IPO Bureau of Legal Affairs (IPO-BLA) a Verified Notice of Opposition4 against the mark under application allegedly because "NS D-10 PLUS" is similar and/or confusingly similar to its registered trademark "D-10 80 WP," also used for Fungicide (Class 5) with active ingredient 80% Mancozeb. The opposition was docketed as IPC No. 14-2005-00099. After an exchange of pleadings, on April 28, 2006, Director Estrellita Beltran-Abelardo (Director Abelardo) of the IPO-BLA issued Decision No. 2006-245 (BLA decision), the dispositive portion of which reads WHEREFORE, viewed in the light of all the foregoing, this Bureau finds and so holds that Respondent-Applicants mark "NS D-10 PLUS" is confusingly similar to the Opposers mark and as such, the opposition is hereby SUSTAINED. Consequently, trademark application bearing Serial No. 4-2004-00450 for the mark "NS D-10 PLUS" filed on January 16, 2004 by Norvy A. Ab[yada]ng covering the goods fungicide under Class 5 of the International Classification of goods is, as it is hereby, REJECTED.

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Let the filewrapper of the trademark "NS D-10 PLUS" subject matter under consideration be forwarded to the Administrative, Financial and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Order with a copy to be furnished the Bureau of Trademark (BOT) for information and to update its records. SO ORDERED.6 Abyadang filed a motion for reconsideration, and Berris, in turn, filed its opposition to the motion. On August 2, 2006, Director Abelardo issued Resolution No. 2006-09(D)7 (BLA resolution), denying the motion for reconsideration and disposing as follows IN VIEW OF THE FOREGOING, the Motion for Reconsideration filed by the Respondent-Applicant is hereby DENIED FOR LACK OF MERIT. Consequently, Decision No. 2006-24 dated April 28, 2006 STANDS. Let the filewrapper of the trademark "NS D-10 PLUS" subject matter under consideration be forwarded to the Bureau of Trademarks for appropriate action in accordance with this Resolution. SO ORDERED.8 Aggrieved, Abyadang filed an appeal on August 22, 2006 with the Office of the Director General, Intellectual Property Philippines (IPPDG), docketed as Appeal No. 14-06-13. With the filing of the parties respective memoranda, Director General Adrian S. Cristobal, Jr. of the IPPDG rendered a decision dated July 20, 2007,9 ruling as follows Wherefore, premises considered[,] the appeal is hereby DENIED. Accordingly, the appealed Decision of the Director 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, Financial 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.10 Undeterred, Abyadang filed a petition for review11 before the CA. In its Decision dated April 14, 2008, the CA reversed the IPPDG decision. It held In sum, the petition should be granted due to the following reasons: 1) petitioners mark "NS D-10 PLUS" is not confusingly similar with respondents trademark "D-10 80 WP"; 2) respondent failed to establish its ownership of the mark "D-10 80 WP" and 3) respondents trademark registration for "D-10 80 WP" may be cancelled in the present case to avoid multiplicity of suits. WHEREFORE, the petition is GRANTED. The decision dated July 20, 2007 of the IPO Director General in Appeal No. 14-06-13 (IPC No. 14-2005-00099) is REVERSED and SET ASIDE, and a new one is entered giving due course to petitioners application for registration of the mark "NS D-10 PLUS," and canceling respondents trademark registration for "D-10 80 WP." SO ORDERED.12 Berris filed a Motion for Reconsideration, but in its June 18, 2008 Resolution, the CA denied the motion for lack of merit. Hence, this petition anchored on the following arguments I. The Honorable Court of Appeals finding that there exists no confusing similarity between Petitioners and respondents marks is based on misapprehension of facts, surmise and conjecture and not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court]. II. The Honorable Court of Appeals Decision reversing and setting aside the technical findings of the Intellectual Property Office even without a finding or, at the very least, an allegation of grave abuse of discretion on the part of said agency is not in accord with law and earlier pronouncements of this Honorable Court [Supreme Court]. III. The Honorable Court of Appeals Decision ordering the cancellation of herein Petitioners duly registered and validly existing trademark in the absence of a properly filed Petition for Cancellation before the Intellectual Property

25
Office is not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court].13 The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 829314 (Intellectual Property Code of the Philippines), specifically Sections 121 to 170 thereof. It took effect on January 1, 1998. Prior to its effectivity, the applicable law was R.A. No. 166,15 as amended. Interestingly, R.A. No. 8293 did not expressly repeal in its entirety R.A. No. 166, but merely provided in Section 239.116 that Acts and parts of Acts inconsistent with it were repealed. In other words, only in the instances where a substantial and irreconcilable conflict is found between the provisions of R.A. No. 8293 and of R.A. No. 166 would the provisions of the latter be deemed repealed. 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. 17 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.18 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.19 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 12220 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 registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate.21 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.22 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.23 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.24 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.25 In the instant case, both parties have submitted proof to support their claim of ownership of their respective trademarks. Culled from the records, Berris, as oppositor to Abyadangs application for registration of his trademark, presented the following evidence: (1) its trademark application dated November 29, 200226 with Application No. 4-20020010272; (2) its IPO certificate of registration dated October 25, 2004,27 with Registration No. 4-2002-010272 and July 8, 2004 as the date of registration; (3) a photocopy of its packaging28 bearing the mark "D-10 80 WP"; (4) photocopies of its sales invoices and official receipts;29 and (5) its notarized DAU dated April 23, 2003,30 stating that the mark was first used on June 20, 2002, and indicating that, as proof of actual use, copies of official receipts or sales invoices of goods using the mark were attached as Annex "B." On the other hand, Abyadangs proofs consisted of the following: (1) a photocopy of the packaging31 for his marketed fungicide bearing mark "NS D-10 PLUS"; (2) Abyadangs Affidavit dated February 14, 2006,32 stating among others that the mark "NS D-10 PLUS" was his own creation derived from: N for Norvy, his name; S for Soledad, his wifes name; D the first letter for December, his birth month; 10 for October, the 10th month of the year, the month of his business name registration; and PLUS to connote superior quality; that when he applied for registration, there was nobody applying for a mark similar to "NS D-10 PLUS"; that he did not know of the existence of Berris or any of its products; that "D-10" could not have been associated with Berris because the latter never engaged in any commercial activity to sell "D-10 80 WP" fungicide in the local market; and that he could not have copied Berris mark because he registered his packaging with the Fertilizer and Pesticide Authority (FPA) ahead of Berris; (3) Certification dated December 19, 200533 issued by the FPA, stating that "NS D-10 PLUS" is owned and distributed by NS Northern Organic Fertilizer, registered with the FPA since May 26, 2003, and had been in the

26
market since July 30, 2003; (4) Certification dated October 11, 200534 issued by the FPA, stating that, per monitoring among dealers in Region I and in the Cordillera Administrative Region registered with its office, the Regional Officer neither encountered the fungicide with mark "D-10 80 WP" nor did the FPA provincial officers from the same area receive any report as to the presence or sale of Berris product; (5) Certification dated March 14, 200635 issued by the FPA, certifying that all pesticides must be registered with the said office pursuant to Section 936 of Presidential Decree (P.D.) No. 114437 and Section 1, Article II of FPA Rules and Regulations No. 1, Series of 1977; (6) Certification dated March 16, 200638 issued by the FPA, certifying that the pesticide "D-10 80 WP" was registered by Berris on November 12, 2004; and (7) receipts from Sunrise Farm Supply39 in La Trinidad, Benguet of the sale of Abyadangs goods referred to as "D-10" and "D-10+." Based on their proffered pieces of evidence, both Berris and Abyadang claim to be the prior user of their respective marks. We rule in favor of Berris. Berris was able to establish that it was using its mark "D-10 80 WP" since June 20, 2002, even before it filed for its registration with the IPO on November 29, 2002, as shown by its DAU which was under oath and notarized, bearing the stamp of the Bureau of Trademarks of the IPO on April 25, 2003,40 and which stated that it had an attachment as Annex "B" sales invoices and official receipts of goods bearing the mark. Indeed, the DAU, being a notarized document, especially when received in due course by the IPO, is evidence of the facts it stated and has the presumption of regularity, entitled to full faith and credit upon its face. Thus, the burden of proof to overcome the presumption of authenticity and due execution lies on the party contesting it, and the rebutting evidence should be clear, strong, and convincing as to preclude all controversy as to the falsity of the certificate.41 What is more, the DAU is buttressed by the Certification dated April 21, 200642 issued by the Bureau of Trademarks that Berris mark is still valid and existing. Hence, we cannot subscribe to the contention of Abyadang that Berris DAU is fraudulent based only on his assumption that Berris could not have legally used the mark in the sale of its goods way back in June 2002 because it registered the product with the FPA only on November 12, 2004. As correctly held by the IPPDG in its decision on Abyadangs appeal, the question of whether or not Berris violated P.D. No. 1144, because it sold its product without prior registration with the FPA, is a distinct and separate matter from the jurisdiction and concern of the IPO. Thus, even a determination of violation by Berris of P.D. No. 1144 would not controvert the fact that it did submit evidence that it had used the mark "D-10 80 WP" earlier than its FPA registration in 2004. Furthermore, even the FPA Certification dated October 11, 2005, stating that the office had neither encountered nor received reports about the sale of the fungicide "D-10 80 WP" within Region I and the Cordillera Administrative Region, could not negate the fact that Berris was selling its product using that mark in 2002, especially considering that it first traded its goods in Calauan, Laguna, where its business office is located, as stated in the DAU. Therefore, Berris, as prior user and prior registrant, is the owner of the mark "D-10 80 WP." As such, Berris has in its favor the rights conferred by Section 147 of R.A. No. 8293, which provides Sec. 147. Rights Conferred. 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owners 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. 147.2. The exclusive right of the owner of a well-known mark defined in Subsection 123.1(e) which is registered in the Philippines, shall extend to goods and services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided, further, That the interests of the owner of the registered mark are likely to be damaged by such use. Now, we confront the question, "Is Abyadangs mark NS D-10 PLUS confusingly similar to that of Berris D-10 80 WP such that the latter can rightfully prevent the IPO registration of the former?" We answer in the affirmative. According to Section 123.1(d) of R.A. No. 8293, a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor with an earlier filing or priority date, with respect to: (1) the same goods or services; (2) closely related goods or services; or (3) near resemblance of such mark as to likely deceive or cause confusion.

27
In determining similarity and likelihood of confusion, jurisprudence has developed teststhe 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. 43 In contrast, 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.44 Comparing Berris mark "D-10 80 WP" with Abyadangs mark "NS D-10 PLUS," as appearing on their respective packages, one cannot but notice that both have a common component which is "D-10." On Berris package, the "D10" is written with a bigger font than the "80 WP." Admittedly, the "D-10" is the dominant feature of the mark. The "D-10," being at the beginning of the mark, is what is most remembered of it. Although, it appears in Berris certificate of registration in the same font size as the "80 WP," its dominancy in the "D-10 80 WP" mark stands since the difference in the form does not alter its distinctive character.45 Applying the Dominancy Test, it cannot be gainsaid that Abyadangs "NS D-10 PLUS" is similar to Berris "D-10 80 WP," that confusion or mistake is more likely to occur. Undeniably, both marks pertain to the same type of goods fungicide with 80% Mancozeb as an active ingredient and used for the same group of fruits, crops, vegetables, and ornamental plants, using the same dosage and manner of application. They also belong to the same classification of goods under R.A. No. 8293. Both depictions of "D-10," as found in both marks, are similar in size, such that this portion is what catches the eye of the purchaser. Undeniably, the likelihood of confusion is present. This likelihood of confusion and mistake is made more manifest when the Holistic Test is applied, taking into consideration the packaging, for both use the same type of material (foil type) and have identical color schemes (red, green, and white); and the marks are both predominantly red in color, with the same phrase "BROAD SPECTRUM FUNGICIDE" written underneath.
1awphi1

Considering these striking similarities, predominantly the "D-10," the buyers of both products, mainly farmers, may be misled into thinking that "NS D-10 PLUS" could be an upgraded formulation of the "D-10 80 WP." Moreover, notwithstanding the finding of the IPPDG that the "D-10" is a fanciful component of the trademark, created for the sole purpose of functioning as a trademark, and does not give the name, quality, or description of the product for which it is used, nor does it describe the place of origin, such that the degree of exclusiveness given to the mark is closely restricted,46 and considering its challenge by Abyadang with respect to the meaning he has given to it, what remains is the fact that Berris is the owner of the mark "D-10 80 WP," inclusive of its dominant feature "D10," as established by its prior use, and prior registration with the IPO. Therefore, Berris properly opposed and the IPO correctly rejected Abyadangs application for registration of the mark "NS D-10 PLUS." 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.47 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.48 Inasmuch as the ownership of the mark "D-10 80 WP" fittingly belongs to Berris, and because the same should not have been cancelled by the CA, we consider it proper not to belabor anymore the issue of whether cancellation of a registered mark may be done absent a petition for cancellation. WHEREFORE, the petition is GRANTED. The assailed Decision dated April 14, 2008 and Resolution dated June 18, 2008 of the Court of Appeals in CA-G.R. SP No. 99928 are REVERSED and SET ASIDE. Accordingly, the Decision No. 2006-24 dated April 28, 2006 and the Resolution No. 2006-09(D) dated August 2, 2006 in IPC No. 142005-00099, and the Decision dated July 20, 2007 in Appeal No. 14-06-13 are REINSTATED. Costs against respondent. SO ORDERED. ANTONIO EDUARDO B. NACHURA** Associate Justice Acting Chairperson

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WE CONCUR: PRESBITERO J. VELASCO, JR.* Associate Justice TERESITA J. LEONARDO-DE CASTRO*** Associate Justice JOSE CATRAL MENDOZA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO EDUARDO B. NACHURA Associate Justice Acting Chairperson, Second Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Acting Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Chief Justice ARTURO D. BRION**** Associate Justice

Footnotes Additional member in lieu of Associate Justice Antonio T. Carpio per Special Order No. 897 dated September 28, 2010.
* **

In lieu of Associate Justice Antonio T. Carpio per Special Order No. 898 dated September 28, 2010.

Additional member in lieu of Associate Justice Roberto A. Abad per Special Order No. 905 dated October 5, 2010.
***

Additional member in lieu of Associate Justice Diosdado M. Peralta per Special Order No. 904 dated October 5, 2010.
**** 1

Rollo, pp. 9-36.

Penned by Associate Justice Hakim S. Abdulwahid, with Associate Justices Rodrigo V. Cosico and Mariflor Punzalan-Castillo, concurring; id. at 63-75.
2 3

Id. at 101-102. Id. at 104-117. Id. at 118-124. Id. at 124. Id. at 125-126. Id. at 126. Id. at 127-135. Id. at 134-135.

10

29
11

Id. at 37-61. Id. at 74. Id. at 15.

12

13

An Act Prescribing the Intellectual Property Code and Establishing the Intellectual Property Office, Providing for Its Powers and Functions, and for Other Purposes.
14

An Act to Provide for the Registration and Protection of Trademarks, Trade Names and Service Marks, Defining Unfair Competition and False Marking and Providing Remedies Against the Same, and for Other Purposes.
15 16

Sec. 239. Repeals.

239.1. All Acts and parts of Acts inconsistent herewith, more particularly Republic Act No. 165, as Amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are hereby repealed.
17

Sec. 121.1. Sec. 12.2. Sec. 38.

18

19

Sec. 122. How Marks are Acquired.The rights in a mark shall be acquired through registration made validly in accordance with the provisions of this law.
20 21

R.A. No. 8293, Sec. 138. R.A. No. 8293, Sec. 124.2. Sec. 152. Non-use of a Mark When Excused.

22

23

152.1. Non-use of a mark may be excused if caused by circumstances arising independently of the will of the trademark owner. Lack of funds shall not excuse non-use of a mark. Agpalo, R.E. The Law on Trademark, Infringement and Unfair Competition, 1st Ed. (2000), pp. 8-11, citing Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214 (1969) and Chung Te v. Ng Kian Giab, 18 SCRA 747 (1966).
24 25

Agpalo, R.E. The Law on Trademark, Infringement and Unfair Competition, 1st Ed. (2000), pp. 11-12. CA rollo, pp. 149-150. Id. at 69. Id. at 68. Id. at 72-73. Id. at 193-194. Id. at 151-152. Rollo, pp. 304-306. Id. at 307. Id. at 303. CA rollo, p. 205.

26

27

28

29

30

31

32

33

34

35

Sec. 9. Registration and Licensing.No pesticides, fertilizer, or other agricultural chemical shall be exported, imported, manufactured, formulated, stored, distributed, sold or offered for sale, transported,
36

30
delivered for transportation or used unless it has been duly registered with the FPA or covered by a numbered provisional permit issued by FPA for use in accordance with the conditions as stipulated in the permit. Separate registrations shall be required for each active ingredient and its possible formulations in the case of pesticides or for each fertilizer grade in the case of fertilizer.
37

Creating The Fertilizer and Pesticide Authority and Abolishing The Fertilizer Industry Authority. CA rollo, p. 204. Id. at 70-71. Id. at 14.

38

39

40

Gutierrez v. Mendoza-Plaza, G.R. No. 185477, December 4, 2009, 607 SCRA 807, 816-817; Calma v. Santos, G.R. No. 161027, June 22, 2009, 590 SCRA 359, 371.
41 42

CA rollo, pp. 64, 66.

Prosource International, Inc. v. Horphag Research Management SA, G.R. No. 180073, November 25, 2009, 605 SCRA 523, 531; McDonalds Corporation v. MacJoy Fastfood Corporation, G.R. No. 166115, February 2, 2007, 514 SCRA 95, 106; McDonalds Corporation v. L.C. Big Mak Burger, Inc., 480 Phil. 402, 434 (2004).
43

Id.; Philip Morris, Inc. v. Fortune Tobacco Corporation, G.R. No. 158589, June 27, 2006, 493 SCRA 333, 357.
44 45

R.A. No. 8293, Sec. 152.2.

Sec. 152.2. The use of the mark in a form different from the form in which it is registered, which does not alter its distinctive character, shall not be a ground for cancellation or removal of the mark and shall not diminish the protection granted to the mark. Agpalo, supra note 25, citing Philippine Refining Co., Inc. v. Ng Sam, 115 SCRA 472, 476 (1982); Romero v. Maiden Form Brassiere, 10 SCRA 556, 561 (1964); and Masso Hermanos, S.A. v. Director of Patents, 94 Phil. 136, 138-139 (1953).
46

McDonalds Corporation v. MacJoy Fastfood Corporation, supra note 44, at 114, citing Faberge Inc. v. Intermediate Appellate Court, 215 SCRA 316, 320 (1992); and Chuanchow Soy & Canning Co. v. Dir. of Patents and Villapania, 108 Phil. 833, 836 (1960).
47 48

Amigo Manufacturing, Inc. v. Cluett Peabody Co., Inc., 406 Phil. 905, 916 (2001). Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 120900

July 20, 2000

CANON KABUSHIKI KAISHA, petitioner, vs. COURT OF APPEALS and NSR RUBBER CORPORATION, respondents. GONZAGA-REYES, J.: Before us is a petition for review that seeks to set aside the Decision1 dated February 21, 1995 of the Court of Appeals in CA-GR SP No. 30203, entitled "Canon Kabushiki Kaisha vs. NSR Rubber Corporation" and its Resolution dated June 27, 1995 denying the motion for reconsideration of herein petitioner Canon Kabushiki Kaisha (petitioner). On January 15, 1985, private respondent NSR Rubber Corporation (private respondent) filed an application for registration of the mark CANON for sandals in the Bureau of Patents, Trademarks, and Technology Transfer (BPTTT). A Verified Notice of Opposition was filed by petitioner, a foreign corporation duly organized and existing under the laws of Japan, alleging that it will be damaged by the registration of the trademark CANON in the name of private respondent. The case was docketed as Inter Partes Case No. 3043.

31
Petitioner moved to declare private respondent in default for its failure to file its answer within the prescribed period. The BPTTT then declared private respondent in default and allowed petitioner to present its evidence ex-parte. Based on the records, the evidence presented by petitioner consisted of its certificates of registration for the mark CANON in various countries covering goods belonging to class 2 (paints, chemical products, toner, and dye stuff). Petitioner also submitted in evidence its Philippine Trademark Registration No. 39398, showing its ownership over the trademark CANON also under class 2. On November 10, 1992, the BPTTT issued its decision dismissing the opposition of petitioner and giving due course to private respondent's application for the registration of the trademark CANON. On February 16, 1993, petitioner appealed the decision of the BPTTT with public respondent Court of Appeals that eventually affirmed the decision of BPTTT. Hence, this petition for review. Petitioner anchors this instant petition on these grounds: A) PETITIONER IS ENTITLED TO EXCLUSIVE USE OF THE MARK CANON BECAUSE IT IS ITS TRADEMARK AND IS USED ALSO FOR FOOTWEAR. B) TO ALLOW PRIVATE RESPONDENT TO REGISTER CANON FOR FOOTWEAR IS TO PREVENT PETITIONER FROM USING CANON FOR VARIOUS KINDS OF FOOTWEAR, WHEN IN FACT, PETITIONER HAS EARLIER USED SAID MARK FOR SAID GOODS. C) PETITIONER IS ALSO ENTITLED TO THE RIGHT TO EXCLUSIVELY USE CANON TO PREVENT CONFUSION OF BUSINESS. D) PETITIONER IS ALSO ENTITLED TO THE EXCLUSIVE USE OF CANON BECAUSE IT FORMS PART OF ITS CORPORATE NAME, PROTECTED BY THE PARIS CONVENTION.2 The BPTTT and the Court of Appeals share the opinion that the trademark "CANON" as used by petitioner for its paints, chemical products, toner, and dyestuff, can be used by private respondent for its sandals because the products of these two parties are dissimilar. Petitioner protests the appropriation of the mark CANON by private respondent on the ground that petitioner has used and continues to use the trademark CANON on its wide range of goods worldwide. Allegedly, the corporate name or tradename of petitioner is also used as its trademark on diverse goods including footwear and other related products like shoe polisher and polishing agents. To lend credence to its claim, petitioner points out that it has branched out in its business based on the various goods carrying its trademark CANON3, including footwear which petitioner contends covers sandals, the goods for which private respondent sought to register the mark CANON. For petitioner, the fact alone that its trademark CANON is carried by its other products like footwear, shoe polisher and polishing agents should have precluded the BPTTT from giving due course to the application of private respondent. We find the arguments of petitioner to be unmeritorious. Ordinarily, the ownership of a trademark or tradename is a property right that the owner is entitled to protect4 as mandated by the Trademark Law.5 However, when a trademark is used by a party for a product in which the other party does not deal, the use of the same trademark on the latter's product cannot be validly objected to.6 A review of the records shows that with the order of the BPTTT declaring private respondent in default for failure to file its answer, petitioner had every opportunity to present ex-parte all of its evidence to prove that its certificates of registration for the trademark CANON cover footwear. The certificates of registration for the trademark CANON in other countries and in the Philippines as presented by petitioner, clearly showed that said certificates of registration cover goods belonging to class 2 (paints, chemical products, toner, dyestuff). On this basis, the BPTTT correctly ruled that since the certificate of registration of petitioner for the trademark CANON covers class 2 (paints, chemical products, toner, dyestuff), private respondent can use the trademark CANON for its goods classified as class 25 (sandals). Clearly, there is a world of difference between the paints, chemical products, toner, and dyestuff of petitioner and the sandals of private respondent. Petitioner counters that notwithstanding the dissimilarity of the products of the parties, the trademark owner is entitled to protection when the use of by the junior user "forestalls the normal expansion of his business".7Petitioner's opposition to the registration of its trademark CANON by private respondent rests upon petitioner's insistence that it would be precluded from using the mark CANON for various kinds of footwear, when in fact it has earlier used said mark for said goods. Stretching this argument, petitioner claims that it is possible that the public could presume that petitioner would also produce a wide variety of footwear considering the diversity of its products marketed worldwide. We do not agree. Even in this instant petition, except for its bare assertions, petitioner failed to attach evidence that would convince this Court that petitioner has also embarked in the production of footwear products. We quote with approval the observation of the Court of Appeals that:

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"The herein petitioner has not made known that it intends to venture into the business of producing sandals. This is clearly shown in its Trademark Principal Register (Exhibit "U") where the products of the said petitioner had been clearly and specifically described as "Chemical products, dyestuffs, pigments, toner developing preparation, shoe polisher, polishing agent". It would be taxing one's credibility to aver at this point that the production of sandals could be considered as a possible "natural or normal expansion" of its business operation".8 In Faberge, Incorporated vs. Intermediate Appellate Court,9 the Director of patents allowed the junior user to use the trademark of the senior user on the ground that the briefs manufactured by the junior user, the product for which the trademark BRUTE was sought to be registered, was unrelated and non-competing with the products of the senior user consisting of after shave lotion, shaving cream, deodorant, talcum powder, and toilet soap. The senior user vehemently objected and claimed that it was expanding its trademark to briefs and argued that permitting the junior user to register the same trademark would allow the latter to invade the senior user's exclusive domain. In sustaining the Director of Patents, this Court said that since "(the senior user) has not ventured in the production of briefs, an item which is not listed in its certificate of registration, (the senior user), cannot and should not be allowed to feign that (the junior user) had invaded (the senior user's) exclusive domain."10 We reiterated the principle that the 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.11 Thus, the exclusive right of petitioner in this case to use the trademark CANON is limited to the products covered by its certificate of registration. Petitioner further argues that the alleged diversity of its products all over the world makes it plausible that the public might be misled into thinking that there is some supposed connection between private respondent's goods and petitioner. Petitioner is apprehensive that there could be confusion as to the origin of the goods, as well as confusion of business, if private respondent is allowed to register the mark CANON. In such a case, petitioner would allegedly be immensely prejudiced if private respondent would be permitted to take "a free ride on, and reap the advantages of, the goodwill and reputation of petitioner Canon".12 In support of the foregoing arguments, petitioner invokes the rulings in Sta. Ana vs. Maliwat13 , Ang vs. Teodoro14 and Converse Rubber Corporation vs. Universal Rubber Products, Inc.15. The likelihood of confusion of goods or business is a relative concept, to be determined only according to the particular, and sometimes peculiar, circumstances of each case.16 Indeed, in trademark law cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case.17 Contrary to petitioner's supposition, the facts of this case will show that the cases of Sta. Ana vs. Maliwat,, Ang vs. Teodoro and Converse Rubber Corporation vs. Universal Rubber Products, Inc. are hardly in point. The just cited cases involved goods that were confusingly similar, if not identical, as in the case of Converse Rubber Corporation vs. Universal Rubber Products, Inc. Here, the products involved are so unrelated that the public will not be misled that there is the slightest nexus between petitioner and the goods of private respondent. In cases of confusion of business or origin, the question that usually arises is whether the respective goods or services of the senior user and the junior user are so related as to likely cause confusion of business or origin, and thereby render the trademark or tradenames confusingly similar. 18 Goods are related when they belong to the same class or have the same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture or quality. 19 They may also be related because they serve the same purpose or are sold in grocery stores.20 Thus, in Esso Standard Eastern, Inc. vs. Court of Appeals, this Court ruled that the petroleum products on which the petitioner therein used the trademark ESSO, and the product of respondent, cigarettes are "so foreign to each other as to make it unlikely that purchasers would think that petitioner is the manufacturer of respondent's goods"21. Moreover, the fact that the goods involved therein flow through different channels of trade highlighted their dissimilarity, a factor explained in this wise: "The products of each party move along and are disposed through different channels of distribution. The (petitioner's) products are distributed principally through gasoline service and lubrication stations, automotive shops and hardware stores. On the other hand, the (respondent's) cigarettes are sold in sari-sari stores, grocery store, and other small distributor outlets. (Respondnet's) cigarettes are even peddled in the streets while (petitioner's) 'gasul' burners are not. Finally, there is a marked distinction between oil and tobacco, as well as between petroleum and cigarettes. Evidently, in kind and nature the products of (respondent) and of (petitioner) are poles apart."22 Undoubtedly, the paints, chemical products, toner and dyestuff of petitioner that carry the trademark CANON are unrelated to sandals, the product of private respondent. We agree with the BPTTT, following the Esso doctrine, when it noted that the two classes of products in this case flow through different trade channels. The products of petitioner are sold through special chemical stores or distributors while the products of private respondent are sold in grocery stores, sari-sari stores and department stores.23 Thus, the evident disparity of the products of the parties in the case at bar renders unfounded the apprehension of petitioner that confusion of business or origin might occur if private respondent is allowed to use the mark CANON.

33
In its bid to bar the registration of private respondent of the mark CANON, petitioner invokes the protective mantle of the Paris Convention. Petitioner asserts that it has the exclusive right to the mark CANON because it forms part of its corporate name or tradename, protected by Article 8 of the Paris Convention, to wit: "A tradename shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark." Public respondents BPTTT and the Court of Appeals allegedly committed an oversight when they required petitioner to prove that its mark is a well-known mark at the time the application of private respondent was filed. Petitioner questions the applicability of the guidelines embodied in the Memorandum of then Minister of Trade and Industry Roberto Ongpin (Ongpin) dated October 25, 1983 which according to petitioner implements Article 6bis of the Paris Convention, the provision referring to the protection of trademarks. The memorandum reads: "a) the mark must be internationally known; b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar class of goods; d) the person claiming must be the owner of the mark." According to petitioner, it should not be required to prove that its trademark is well-known and that the products are not similar as required by the quoted memorandum. Petitioner emphasizes that the guidelines in the memorandum of Ongpin implement Article 6bis of the Paris Convention, the provision for the protection of trademarks, not tradenames. Article 6bis of the Paris Convention states: (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks or used in bad faith." Petitioner insists that what it seeks is the protection of Article 8 of the Paris Convention, the provision that pertains to the protection of tradenames. Petitioner believes that the appropriate memorandum to consider is that issued by the then Minister of Trade and Industry, Luis Villafuerte, directing the Director of patents to: "reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than the original owners or users." As far as petitioner is concerned, the fact that its tradename is at risk would call for the protection granted by Article 8 of the Paris Convention. Petitioner calls attention to the fact that Article 8, even as embodied in par. 6, sec. 37 of RA 166, mentions no requirement of similarity of goods. Petitioner claims that the reason there is no mention of such a requirement, is "because there is a difference between the referent of the name and that of the mark"24 and that "since Art. 8 protects the tradename in the countries of the Union, such as Japan and the Philippines, Petitioner's tradename should be protected here."25 We cannot uphold petitioner's position. The term "trademark" is defined by RA 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them for those manufactured, sold or dealt in by others."26 Tradename is defined by the same law as including "individual names and surnames, firm names, tradenames, devices or words used by manufacturers, industrialists, merchants, agriculturists, and others to identify their business, vocations, or occupations; the names or titles lawfully adopted and used by natural or juridical persons, unions, and any manufacturing, industrial, commercial, agricultural or other organizations engaged in trade or commerce."27 Simply put, a trade name refers to the business and its goodwill; a trademark refers to the goods.28

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The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, of which both the Philippines and Japan, the country of petitioner, are signatories29, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition.30 We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate Court.31As pointed out by the BPTTT: "Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic protection afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local entity. In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held that: 'The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. To illustrate if a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename "Rapid Transportation", it does not necessarily follow that "Rapid" can no longer be registered in Uganda, Fiji, or the Philippines. This office is not unmindful that in the Treaty of Paris for the Protection of Intellectual Property regarding well-known marks and possible application thereof in this case. Petitioner, as this office sees it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in this country at the time the then application of NSR Rubber was filed. However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the Director of Patents, a set of guidelines in the implementation of Article 6bis (sic) of the Treaty of Paris. These conditions are: a) the mark must be internationally known; b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar kinds of goods; and d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985)' From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third requirement of the said memorandum that is the mark must be for use in the same or similar kinds of goods. The Petitioner is using the mark "CANON" for products belonging to class 2 (paints, chemical products) while the Respondent is using the same mark for sandals (class 25). Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark should fail. "32 Petitioner assails the application of the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court to this case. Petitioner points out that in the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court, petitioner therein was found to have never at all conducted its business in the Philippines unlike herein petitioner who has extensively conducted its business here and also had its trademark registered in this country. Hence, petitioner submits that this factual difference renders inapplicable our ruling in the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court that Article 8 of the Paris Convention does not automatically extend protection to a tradename that is in danger of being infringed in a country that is also a signatory to said treaty. This contention deserves scant consideration. Suffice it to say that the just quoted pronouncement in the case of Kabushi Kaisha Isetan vs. Intermediate Appellate Court, was made independent of the factual finding that petitioner in said case had not conducted its business in this country. WHEREFORE, in view of the foregoing, the instant petition for review on certiorari is DENIED for lack of merit. SO ORDERED. Melo, (Chairman), Vitug, Panganiban, and Pursima, JJ., concur.

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Footnotes Penned by Justice Serafin V.C. Guingona and concurred in by Justices Corona Ibay-Somera and Bennie Adefuin-De la Cruz of the former Special Eighth Division.
1 2

Rollo, p. 14.

Petitioner Canon claims that its trademark CANON has been used and continues to be used in the Philippines and in other parts of the world in its business over a wide range of goods such as, chemical products, photographic and cinematographic instruments and parts and electrical instruments like electric motors and switches; lenses and electrical exposure meters; lighting apparatus, flash gun and flash bulbs; electric and magnetic measuring instruments, household electric appliances, electric communication machinery and apparatus; industrial machinery and implements, prime movers and implements (excluding motors), pneumatic and hydraulic machinery and implements, office machines and equipment (excluding those belonging to applied electronic machinery and apparatus), other machinery and equipment not belonging to any other class; bags, pouches; footwear, umbrellas and parasols, canes, their parts and accessories (excluding shoe brushes and similar goods thereof); toys, dolls, recreation equipment, sporting goods, fishing tackles, musical instruments, gramophone (excluding electric photograph), records, their parts and accessories, smoker's articles; tobaccos and matches as well as dyestuffs, pigments, toner developing preparation, shoe polisher and polishing agents (Petitioner's Memorandum, pp. 9-10)
3 4

Converse Rubber Corporation vs. Universal Rubber Products, Inc. 147 SCRA 154, (1987),p. 160.

RA 166, 20. Certificate of registration prima facie evidence of validity.A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or tradename, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein.
5 6

Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336, (1982), p. 345. Rollo, p. 18, citing Sta. Ana vs. Maliwat, 24 SCRA 1018 (1968), p. 1025. Ibid., p. 38. Faberge, Incorporated vs. Intermediate Appellate Court, 215 SCRA 326 (1992) Ibid., p. 325. Ibid., p. 326. Rollo, p. 23. Supra. 74 Phil 50 (1942) Supra.. Esso Standard Eastern, Inc. vs. Court of Appeals, 116 SCRA 336 (1982), p, 341. Ibid. RUBEN E. AGPALO, TRADEMARK LAW AND PRACTICE IN THE PHILIPPINES, (1990), p. 54. Esso Standard Eastern, Inc. vs. Court of Appeals, supra, p, 342. Ibid. Ibid., p. 344. Ibid., p. 345. Records, p. 20.

10

11

12

13

14

15

16

17

18

19

20

21

22

23

36
24

Rollo, p. 28. Ibid., p.29. 38. Ibid. AGPALO, supra, p. 5. Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203 SCRA 583, p. 586. Mirpuri vs. Court of Appeals, G. R. No. 114508, November 19, 1999. Supra. Records, pp. 21-22.
Republic of the Philippines SUPREME COURT Manila

25

26

27

28

29

30

31

32

EN BANC

DECISION

June 30, 1960 G.R. No. L-13947 CUANCHOW SOY & CANNING CO., petitioner, vs. THE DIRECTOR OF PATENTS and ROSARIO VILLAPANIA, respondents. Jose W. Diokno for petitioner. Agbayani, Galla and Abalos for respondents. Montemayor, J.: This is a petition to review the decision of the Director of Patents, dated May 16, 1958, dismissing the opposition of petitioner Chuanchow Soy & Canning Co. to the application of respondent Rosario Villapania to register the trademark "Bangos Brand", on the ground "that the trademark BANGOS and the trademark CARP and the representation of a Carp fish do not resemble each other as to be likely to cause confusion, mistake or to deceive the purchaser." The facts in the case are simple and not disputed. Both petitioner Chuanchow Soy & Canning Co. and respondent Rosario Villapania are engaged in the manufacture and sale of soy sauce. Since 1950, petitioner had been using as trade mark the words "Carp Brand Soy", printed in a distinctive style of lettering above the drawing of a fish to distinguish its product, on labels affixed directly to the bottles containing soy sauce, and on tissue paper in which these bottles were wrapped (Exhibits B and C). In 1953, the Patent Office issued Trademark Registration Certificate 4384 to it for its aforesaid trademark. Respondent Villapania since 1956 had been using as trademark of her soy sauce the name of "Bangos Brand" written in the same distinctive style of lettering as that of the petitioner's "Carp Brand", above the drawing of the fish similar to the fish drawing on the trademark of petitioner, on labels also attached to the bottles containing her soy sauce, and the bottles were wrapped also in tissue paper bearing a similar design (Exhibits D and E). On October 12, 1956, Villapania applied for registration of her trademark as above-described. Upon examination of the trademark, the examiner of the Office of the Director of Patents made the following

37
ruling: 1. Examiner has taken into consideration a previously registered mark: CARP BRAND & fish representation for soy sauce of the Chuanchow Soy & Caning Co., Reg. No. 4384 dated October 27, 1953, and found that the fish representation closely resembles to applicant's mark as presented in the drawing. In view thereof, the applicant must submit new drawings and facsimiles for the word: "BANGOS BRAND" only as shown in the labels submitted, excluding SOY and fish representation. Complying with said ruling, respondent Villapania submitted a drawing of the word "Bangos Brand" only, the same was published in the Official Gazette. However, she continued and is supposedly still continuing to use the labels and wrappers Exhibits D and E on the bottles containing her product, which as already stated, included not only "Bangos Brand" but also the word "Soy" above the drawing of the fish. So, on October 9, 1957, petitioner company filed its opposition to respondent's application. The case was submitted on a stipulation of facts made verbally by them during the hearing. On May 16, 1958, respondent Director of Patents rendered a decision dismissing petitioner's opposition to the application above-stated, which decision is now on appeal. The similarity and resemblance or lack of the same between the two trademarks can be best appreciated by examining the same as they appear in the record, particularly, the first page of the petition for review. We have carefully and painstakingly examined the trademark or label of petitioner, Exhibit B, and the trademark or label, Exhibit D, which respondent Villapania sought to register, placed them side by side, and compared them, and we note and observe a very close resemblance between the two not only in the style of lettering of the words "Carp" and "Brand" on Exhibit B and the words "Bangos Brand" on Exhibit D, not only in the style of lettering, but also in the size of the letters, as well as the word "Soy" and the Chinese characters underneath the said three words, including the letters beneath the two fishes, all of which words are correspondingly in the same color, to say nothing of the similarity of the two fishes not only in their size but even in the length and position of their respective tails and fins; so that we are fully convinced of the intention and design of the respondent to imitate as much as possible in her label, Exhibit D, that of petitioner's, Exhibit B, evidently to confuse, even to deceive prospective purchasers of soy sauce and thereby take advantage of and appropriate to herself the goodwill previously acquired by petitioner in the sale of its product. When two competing labels are placed together for inspection and still they may confuse an ordinary person, specially cooks and maids, who as a rule are the one in charge of buying such household article as soy sauce, there would be more confusion and doubt when the two labels are not placed together for comparison and the prospective purchaser is guided only by his memory or recollection that the soy sauce he or she is planning to buy has as its label the drawing of a fish with letters and Chinese characters, written in a certain style of lettering and color. When, as in the present case, one applies for the registration of a trademark or label which is almost the same or 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 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. There should be no halfway measures, as was done in this case by the ruling of the examiner who directed the respondent to amend or modify the labelor trademark she sought to register by eliminating some portions thereof. As a result, although the word "Soy" and the drawing of a fish were eliminated, still, the word "Bangos" and the word "Brand" which are similar to the style of lettering of the corresponding words in the label, Exhibit B, of petitioner, could still create confusion or doubt in the mind of prospective purchasers, to say nothing of the fact that the words "Carp" and "Bangos" both indicate fish, and the additional fact that both trademarks and labels refer or advertise the same product, namely, soy sauce vwbULGAEA. In the case of Lim Hoa vs. Director of Patents, 101 Phil. 214; 52 O.G. (17) 7259, we had occasion to say the following: The danger of confusion in trademarks and brands which are similar may not be so great in the case of commodities or articles of relatively great value, such as, radio and television sets, air conditioning units, machinery etc., for the prospective buyer, generally the head of the family or a businessman, before making the purchase, reads the pamphlets and all literature available, describing the article he is planning to buy, and perhaps even makes comparisons with similar articles in the market. He is not likely to be deceived by similarity in the trademarks because he makes a more or less thorough study of the same and may even consult his friends about the relative merit and performance of the article or machinery, as compared to others also for sale. But in the sale of food seasoning product a kitchen article of everyday

38
consumption, the circumstances are far different. Said product is generally purchased by cooks and household help, sometimes illiterate, who are guided by pictorial representations and the sound of the word descriptive of said representation. The two roosters appearing in the trademark of the applicant and the hen appearing on the trademark of the oppositor, although of different sexes, belong to the same family of the chicken, known as manok in all the principal dialects of the Philippines, and when a cook or a household help or even a housewife buys a food seasoning products for the kitchen, the brand of "Manok" or "Marca Manok" would most likely be uppermost in her mind and would influence her in selecting the product, regardless of whether the brand pictures a hen or a rooter or two roosters. To her, they are all manok. Therein lies the confusion, even deception. We do not see why applicant could not have stretched his imagination even a little and extended his choice to other members of the animal kingdom, as a brand to differentiate his product from similar products in the market. . . . Why the respondent in the present case could not have selected as the principal figure in her label some animal living in the surface of the earth, like a dog, cat, monkey, etc., or an article or furniture, like a table, chair, or if she was determined to select a creature living in the sea, that of a crab, lobster, or octopus, is hard to understand. She had to select fish, which as already stated, she pictured in her label similar in size, shape and form as that appearing in the already used and registered label of petitioner. The Director of Patents should as much as possible discourage all attempts at imitation of labels already used and registered, as already stated, to avoid confusion, to protect the public from purchasing the wrong article or brand and also to give protection to those who have established goodwill, reputation and name in the manufacture and the sale of their products by means of a label of long standing and use and duly registered. Another circumstance against the registration of the trademark or label of respondent is that she would appear not to have used the amended or modified label she presented for registration, but continued to use the original label or trademark which was refused registration by the Director of Patents. This indicates not only her desire to continue taking advantage of the goodwill acquired and established by the petitioner, but it equally shows that she had not used the label or trademark now being applied for by her, despite the fact that the law requires at least two months previous use prior to application for registration.1 In view of the foregoing, the appealed decision is hereby reversed; the opposition of petitioner to respondents application is hereby sustained and respondent's application for registration is denied, with costs against respondent. Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Barrera, and Gutierrez David, JJ., concur. Footnotes 1 Sec. 2, Rep. Act No. 166, as amended by Rep. Act No. 865. .
SECOND DIVISION [G.R. No. 154491, November 14, 2008] COCA-COLA BOTTLERS, PHILS., INC. (CCBPI), NAGA PLANT, PETITIONER, VS. QUINTIN J. GOMEZ, A.K.A. "KIT" GOMEZ AND DANILO E. GALICIA, A.K.A. "DANNY GALICIA," RESPONDENTS. DECISION
BRION, J.: Is the hoarding of a competitor's product containers punishable as unfair competition under the Intellectual Property Code (IP Code, Republic Act No. 8293) that would entitle the aggrieved party to a search warrant against the hoarder? This is the issue we grapple with in this petition for review on certiorari involving two rival multinational softdrink giants; petitioner Coca-Cola Bottlers, Phils., Inc. (Coca-Cola) accuses Pepsi Cola Products Phils., Inc. (Pepsi), represented by the respondents, of hoarding empty Coke bottles in bad faith to discredit its business and to sabotage its operation in Bicolandia. BACKGROUND

39
The facts, as culled from the records, are summarized below. On July 2, 2001, Coca-Cola applied for a search warrant against Pepsi for hoarding Coke empty bottles in Pepsi's yard in Concepcion Grande, Naga City, an act allegedly penalized as unfair competition under the IP Code. Coca-Cola claimed that the bottles must be confiscated to preclude their illegal use, destruction or concealment by the respondents.[1] In support of the application, Coca-Cola submitted the sworn statements of three witnesses: Naga plant representative Arnel John Ponce said he was informed that one of their plant security guards had gained access into the Pepsi compound and had seen empty Coke bottles; acting plant security officer Ylano A. Regaspi said he investigated reports that Pepsi was hoarding large quantities of Coke bottles by requesting their security guard to enter the Pepsi plant and he was informed by the security guard that Pepsi hoarded several Coke bottles; security guard Edwin Lirio stated that he entered Pepsi's yard on July 2, 2001 at 4 p.m. and saw empty Coke bottles inside Pepsi shells or cases.[2] Municipal Trial Court (MTC) Executive Judge Julian C. Ocampo of Naga City, after taking the joint deposition of the witnesses, issued Search Warrant No. 2001-01[3] to seize 2,500 Litro and 3,000 eight and 12 ounces empty Coke bottles at Pepsi's Naga yard for violation of Section 168.3 (c) of the IP Code.[4] The local police seized and brought to the MTC's custody 2,464 Litro and 4,036 eight and 12 ounces empty Coke bottles, 205 Pepsi shells for Litro, and 168 Pepsi shells for smaller (eight and 12 ounces) empty Coke bottles, and later filed with the Office of the City Prosecutor of Naga a complaint against two Pepsi officers for violation of Section 168.3 (c) in relation to Section 170 of the IP Code.[5] The named respondents, also the respondents in this petition, were Pepsi regional sales manager Danilo E. Galicia(Galicia) and its Naga general manager Quintin J. Gomez, Jr. (Gomez). In their counter-affidavits, Galicia and Gomez claimed that the bottles came from various Pepsi retailers and wholesalers who included them in their return to make up for shortages of empty Pepsi bottles; they had no way of ascertaining beforehand the return of empty Coke bottles as they simply received what had been delivered; the presence of the bottles in their yard was not intentional nor deliberate; Ponce and Regaspi's statements are hearsay as they had no personal knowledge of the alleged crime; there is no mention in the IP Code of the crime of possession of empty bottles; and that the ambiguity of the law, which has a penal nature, must be construed strictly against the State and liberally in their favor. Pepsi security guards Eduardo E. Miral and Rene Acebuche executed a joint affidavit stating that per their logbook, Lirio did not visit or enter the plant premises in the afternoon of July 2, 2001. The respondents also filed motions for the return of their shells and to quash the search warrant. They contended that no probable cause existed to justify the issuance of the search warrant; the facts charged do not constitute an offense; and their Naga plant was in urgent need of the shells. Coca-Cola opposed the motions as the shells were part of the evidence of the crime, arguing that Pepsi used the shells in hoarding the bottles. It insisted that the issuance of warrant was based on probable cause for unfair competition under the IP Code, and that the respondents violated R.A. 623, the law regulating the use of stamped or marked bottles, boxes, and other similar containers. THE MTC RULINGS On September 19, 2001, the MTC issued the first assailed order[6] denying the twin motions. It explained there was an exhaustive examination of the applicant and its witnesses through searching questions and that the Pepsi shells are prima facieevidence that the bottles were placed there by the respondents. In their motion for reconsideration, the respondents argued for the quashal of the warrant as the MTC did not conduct a probing and exhaustive examination; the applicant and its witnesses had no personal knowledge of facts surrounding the hoarding; the court failed to order the return of the "borrowed" shells; there was no crime involved; the warrant was issued based on hearsay evidence; and the seizure of the shells was illegal because they were not included in the warrant. On November 14, 2001, the MTC denied the motion for reconsideration in the second assailed order,[7] explaining that the issue of whether there was unfair competition can only be resolved during trial. The respondents responded by filing a petition for certiorari under Rule 65 of the Revised Rules of Court before the Regional Trial Court (RTC) of Naga City on the ground that the subject search warrant was issued without probable cause and that the empty shells were neither mentioned in the warrant nor the objects of the perceived crime. THE RTC RULINGS On May 8, 2002, the RTC voided the warrant for lack of probable cause and the non-commission of the crime of unfair competition, even as it implied that other laws may have been violated by the respondents. The RTC, though, found no grave abuse of discretion on the part of the issuing MTC judge.[8] Thus, Accordingly, as prayed for, Search Warrant No. 2001-02 issued by the Honorable Judge Julian C. Ocampo III on July 2, 2001 is ANNULLED and SET ASIDE. The Orders issued by the Pairing Judge of Br. 1, MTCC of Naga City dated September 19, 2001 and November 14, 2001 are also declared VOID and SET ASIDE. The City Prosecutor of Naga City and SPO1 Ernesto Paredes are directed to return to the Petitioner the properties seized by virtue of Search Warrant No. 2001-02. No costs. SO ORDERED.[9]

40
In a motion for reconsideration, which the RTC denied on July 12, 2002, the petitionerstressed that the decision of the RTC was contradictory because it absolved Judge Ocampo of grave abuse of discretion in issuing the search warrant, but at the same time nullified the issued warrant. The MTC should have dismissed the petition when it found out that Judge Ocampo did not commit any grave abuse of discretion. Bypassing the Court of Appeals, the petitioner asks us through this petition for review on certiorari under Rule 45 of the Rules of Court to reverse the decision of the RTC. Essentially, the petition raises questions against the RTC's nullification of the warrant when it found no grave abuse of discretion committed by the issuing judge. THE PETITION and THE PARTIES' POSITIONS In its petition, the petitioner insists the RTC should have dismissed the respondents' petition for certiorari because it found no grave abuse of discretion by the MTC in issuing the search warrant. The petitioner further argues that the IP Code was enacted into law to remedy various forms of unfair competition accompanying globalization as well as to replace the inutile provision of unfair competition under Article 189 of the Revised Penal Code. Section 168.3(c) of the IP Code does not limit the scope of protection on the particular acts enumerated as it expands the meaning of unfair competition to include "other acts contrary to good faith of a nature calculated to discredit the goods, business or services of another." The inherent element of unfair competition is fraud or deceit, and that hoarding of large quantities of a competitor's empty bottles is necessarily characterized by bad faith. It claims that its Bicol bottling operation was prejudiced by the respondents' hoarding and destruction of its empty bottles. The petitioner also argues that the quashal of the search warrant was improper because it complied with all the essential requisites of a valid warrant. The empty bottles were concealed in Pepsi shells to prevent discovery while they were systematically being destroyed to hamper the petitioner's bottling operation and to undermine the capability of its bottling operations in Bicol. The respondents counter-argue that although Judge Ocampo conducted his own examination, he gravely erred and abused his discretion when he ignored the rule on the need of sufficient evidence to establish probable cause; satisfactory and convincing evidence is essential to hold them guilty of unfair competition; the hoarding of empty Coke bottles did not cause actual or probable deception and confusion on the part of the general public; the alleged criminal acts do not show conduct aimed at deceiving the public; there was no attempt to use the empty bottles or pass them off as the respondents' goods. The respondents also argue that the IP Code does not criminalize bottle hoarding, as the acts penalized must always involve fraud and deceit. The hoarding does not make them liable for unfair competition as there was no deception or fraud on the end-users. THE ISSUE Based on the parties' positions, the basic issue submitted to us for resolution is whether the Naga MTC was correct in issuing Search Warrant No. 2001-01 for the seizure of the empty Coke bottles from Pepsi's yard for probable violation of Section 168.3 (c) of the IP Code. This basic issue involves two sub-issues, namely, the substantive issue of whether the application for search warrant effectively charged an offense, i.e., a violation of Section 168.3 (c) of the IP Code; and the procedural issue of whether the MTC observed the procedures required by the Rules of Court in the issuance of search warrants. OUR RULING We resolve to deny the petition for lack of merit. We clarify at the outset that while we agree with the RTC decision, our agreement is more in the result than in the reasons that supported it. The decision is correct in nullifying the search warrant because it was issued on an invalid substantive basis - the acts imputed on the respondents do not violate Section 168.3 (c) of the IP Code. For this reason, we deny the present petition. The issuance of a search warrant[10] against a personal property[11] is governed by Rule 126 of the Revised Rules of Court whose relevant sections state: Section 4. Requisites for issuing search warrant. A search warrant shall not issue except 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. Section 5. Examination of complainant; record. The judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath, the complainant and the witnesses he may produce on facts personally known to them and attach to the record their sworn statements together with the affidavits submitted. Section 6. Issuance and form of search warrant. If the judge is satisfied of the existence of facts upon which the application is based or that there is probable cause to believe that they exist, he shall issue the warrant, which must be substantially in the form prescribed by these Rules. [Emphasis supplied]

41
To paraphrase this rule, a search warrant may be issued only if there is probable cause in connection with a specific offense alleged in an application based on the personal knowledge of the applicant and his or her witnesses. This is the substantive requirement in the issuance of a search warrant. Procedurally, the determination of probable cause is a personal task of the judge before whom the application for search warrant is filed, as he has to examine under oath or affirmation the applicant and his or her witnesses in the form of "searching questions and answers" in writing and under oath. The warrant, if issued, must particularly describe the place to be searched and the things to be seized. We paraphrase these requirements to stress that they have substantive and procedural aspects. Apparently, the RTC recognized this dual nature of the requirements and, hence, treated them separately; it approved of the way the MTC handled the procedural aspects of the issuance of the search warrant but found its action on the substantive aspect wanting. It therefore resolved to nullify the warrant, without however expressly declaring that the MTC gravely abused its discretion when it issued the warrant applied for. The RTC's error, however, is in the form rather than the substance of the decision as the nullification of the issued warrant for the reason the RTC gave was equivalent to the declaration that grave abuse of discretion was committed. In fact, we so rule as the discussions below will show. Jurisprudence teaches us that probable cause, as a condition for the issuance of a search warrant, is such reasons supported by facts and circumstances as will warrant a cautious man in the belief that his action and the means taken in prosecuting it are legally just and proper. Probable cause requires facts and circumstances that would lead a reasonably prudent man to believe that an offense has been committed and the objects sought in connection with that offense are in the place to be searched.[12]Implicit in this statement is the recognition that an underlying offense must, in the first place, exist. In other words, the acts alleged, taken together, must constitute an offense and that these acts are imputable to an offender in relation with whom a search warrant is applied for. In the context of the present case, the question is whether the act charged - alleged to be hoarding of empty Coke bottles constitutes an offense under Section 168.3 (c) of the IP Code. Section 168 in its entirety states: 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. 168.2. Any 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, shall be guilty of unfair competition, and shall be subject to an action therefor. 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 of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. 168.4. The remedies provided by Sections 156, 157 and 161 shall apply mutatis mutandis. (Sec. 29, R.A. No. 166a) The petitioner theorizes that the above section does not limit the scope of protection on the particular acts enumerated as it expands the meaning of unfair competition to include "other acts contrary to good faith of a nature calculated to discredit the goods, business or services of another." Allegedly, the respondents' hoarding of Coca Cola empty bottles is one such act. We do not agree with the petitioner's expansive interpretation of Section 168.3 (c). "Unfair competition," previously defined in Philippine jurisprudence in relation with R.A. No. 166 and Articles 188 and 189 of the Revised Penal Code, is now covered by Section 168 of the IP Code as this Code has expressly repealed R.A. No. 165 and R.A. No. 166, and Articles 188 and 189 of the Revised Penal Code. Articles 168.1 and 168.2, as quoted above, provide the concept and general rule on the definition of unfair competition. The law does not thereby cover every unfair act committed in the course of business; it covers only acts characterized by "deceptionor any other means contrary to good faith" in the passing off of goods and services as those of another who has established goodwill in relation with these goods or services, or any other act calculated to produce the same result. What unfair competition is, is further particularized under Section 168.3 when it provides specifics of what unfair competition

42
is "without in any way limiting the scope of protection against unfair competition." Part of these particulars is provided under Section 168.3(c) which provides the general "catch-all" phrase that the petitioner cites. Under this phrase, a person shall be guilty of unfair competition "who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another." From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. It formulated the "true test" of unfair competition: whether the acts of defendant are such as are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions which prevail in the particular trade to which the controversy relates.[13] One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive must be shown before the right to recover can exist.[14] The advent of the IP Code has not significantly changed these rulings as they are fully in accord with what Section 168 of the Code in its entirety provides. Deception, passing off and fraud upon the public are still the key elements that must be present for unfair competition to exist. The act alleged to violate the petitioner's rights under Section 168.3 (c) is hoarding which we gather to be the collection of the petitioner's empty bottles so that they can be withdrawn from circulation and thus impede the circulation of the petitioner's bottled products. This, according to the petitioner, is an act contrary to good faith - a conclusion that, if true, is indeed an unfair act on the part of the respondents. The critical question, however, is not the intrinsic unfairness of the act of hoarding; what is critical for purposes of Section 168.3 (c) is to determine if the hoarding, as charged, "is of a nature calculated to discredit the goods, business or services" of the petitioner. We hold that it is not. Hoarding as defined by the petitioner is not even an act within the contemplation of the IP Code. The petitioner's cited basis is a provision of the IP Code, a set of rules that refer to a very specific subject - intellectual property. Aside from the IP Code's actual substantive contents (which relate specifically to patents, licensing, trademarks, trade names, service marks, copyrights, and the protection and infringement of the intellectual properties that these protective measures embody), the coverage and intent of the Code is expressly reflected in its "Declaration of State Policy" which states: Section 2. Declaration of State Policy. The State recognizes that an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, attracts foreign investments, and ensures market access for our products. It shall protect and secure the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and creations, particularly when beneficial to the people, for such periods as provided in this Act. The use of intellectual property bears a social function. To this end, the State shall promote the diffusion of knowledge and information for the promotion of national development and progress and the common good. It is also the policy of the State to streamline administrative procedures of registering patents, trademarks and copyright, to liberalize the registration on the transfer of technology, and to enhance the enforcement of intellectual property rights in the Philippines. (n) "Intellectual property rights" have furthermore been defined under Section 4 of the Code to consist of: a) Copyright and Related Rights; b) Trademarks and Service Marks; c) Geographic Indications; d) IndustrialDesigns; e) Patents; f) LayoutDesigns (Topographies) of Integrated Circuits; and g)Protection of Undisclosed Information. Given the IP Code's specific focus, a first test that should be made when a question arises on whether a matter is covered by the Code is to ask if it refers to an intellectual property as defined in the Code. If it does not, then coverage by the Code may be negated. A second test, if a disputed matter does not expressly refer to an intellectual property right as defined above, is whether it falls under the general "unfair competition" concept and definition under Sections 168.1 and 168.2 of the Code. The question then is whether there is "deception" or any other similar act in "passing off" of goods or services to be those of another who enjoys established goodwill. Separately from these tests is the application of the principles of statutory construction giving particular attention, not so much to the focus of the IP Code generally, but to the terms of Section 168 in particular. Under the principle of"noscitur a sociis," when a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of words in which it is found or with which it is associated.[15] As basis for this interpretative analysis, we note that Section 168.1 speaks of a person who has earned goodwill with respect to his goods and services and who is entitled to protection under the Code, with or without a registered mark. Section 168.2, as previously discussed, refers to the general definition of unfair competition.Section 168.3, on the other hand, refers to the specific instances of unfair competition, with Section 168.1 referring to the sale of goods given the appearance of the goods of another; Section 168.2, to the inducement of belief that his or her goods or services are that of another who has earned goodwill; while the disputedSection 168.3 being a "catch all" clause whose coverage the parties now dispute. Under all the above approaches, we conclude that the "hoarding" - as defined and charged by the petitioner - does not fall

43
within the coverage of the IP Code and of Section 168 in particular. It does not relate to any patent, trademark, trade name or service mark that the respondents have invaded, intruded into or used without proper authority from the petitioner. Nor are the respondents alleged to be fraudulently "passing off" their products or services as those of the petitioner. The respondents are not also alleged to be undertaking any representation or misrepresentation that would confuse or tend to confuse the goods of the petitioner with those of the respondents, or vice versa. What in fact the petitioner alleges is an act foreign to the Code, to the concepts it embodies and to the acts it regulates; as alleged, hoarding inflicts unfairness by seeking to limit the opposition's sales by depriving it of the bottles it can use for these sales. In this light, hoarding for purposes of destruction is closer to what another law - R.A. No. 623 - covers, to wit: SECTION 1. Persons engaged or licensed to engage in the manufacture, bottling or selling of soda water, mineral or aerated waters, cider, milk, cream, or other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other similar containers, with their names or the names of their principals or products, or other marks of ownership stamped or marked thereon, may register with the Philippine Patent Office a description of the names or are used by them, under the same conditions, rules, and regulations, made applicable by law or regulation to the issuance of trademarks. SECTION 2. It shall be unlawful for any person, without the written consent of the manufacturer, bottler or seller who has successfully registered the marks of ownership in accordance with the provisions of the next preceding section, to fill such bottles, boxes, kegs, barrels, or other similar containers so marked or stamped, for the purpose of sale, or to sell, dispose of, buy, or traffic in, or wantonly destroy the same, whether filled or not, or to use the same for drinking vessels or glasses or for any other purpose than that registered by the manufacturer, bottler or seller. Any violation of this section shall be punished by a fine or not more than one hundred pesos or imprisonment of not more than thirty days or both. As its coverage is defined under Section 1, the Act appears to be a measure that may overlap or be affected by the provisions of Part II of the IP Code on "The Law on Trademarks, Service Marks and Trade Names." What is certain is that the IP Code has not expressly repealed this Act. The Act appears, too, to have specific reference to a special type of registrants - the manufacturers, bottlers or sellers of soda water, mineral or aerated waters, cider, milk, cream, or other lawful beverages in bottles, boxes, casks, kegs, or barrels, and other similar containers - who are given special protection with respect to the containers they use. In this sense, it is in fact a law of specific coverage and application, compared with the general terms and application of the IP Code. Thus, under its Section 2, it speaks specifically of unlawful use of containers and even of the unlawfulness of their wanton destruction - a matter that escapes the IP Code's generalities unless linked with the concepts of "deception" and "passing off" as discussed above. Unfortunately, the Act is not the law in issue in the present case and one that the parties did not consider at all in the search warrant application. The petitioner in fact could not have cited it in its search warrant application since the "one specific offense" that the law allows and which the petitioner used was Section 168.3 (c). If it serves any purpose at all in our discussions, it is to show that the underlying factual situation of the present case is in fact covered by another law, not by the IP Code that the petitioner cites. Viewed in this light, the lack of probable cause to support the disputed search warrant at once becomes apparent. Where, as in this case, the imputed acts do not violate the cited offense, the ruling of this Court penned by Mr. Justice Bellosillo is particularly instructive: In the issuance of search warrants, the Rules of Court requires a finding of probable cause in connection with one specific offense to be determined personally by the judge after examination of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the things to be seized. Hence,since there is no crime to speak of, the search warrant does not even begin to fulfill these stringent requirements and is therefore defective on its face. The nullity of the warrant renders moot and academic the other issues raised in petitioners' Motion to Quash and Motion for Reconsideration. Since the assailed search warrant is null and void, all property seized by virtue thereof should be returned to petitioners in accordance with established jurisprudence.[16] Based on the foregoing, we conclude that the RTC correctly ruled that the petitioner's search warrant should properly be quashed for the petitioner's failure to show that the acts imputed to the respondents do not violate the cited offense. There could not have been any probable cause to support the issuance of a search warrant because no crime in the first place was effectively charged. This conclusion renders unnecessary any further discussion on whether the search warrant application properly alleged that the imputed act of holding Coke empties was in fact a "hoarding" in bad faith aimed to prejudice the petitioner's operations, or whether the MTC duly complied with the procedural requirements for the issuance of a search warrant under Rule 126 of the Rules of Court. WHEREFORE, we hereby DENY the petition for lack of merit. Accordingly, we confirm that Search Warrant No. 2001-01, issued by the Municipal Trial Court, Branch 1, Naga City, is NULL and VOID. Costs against the petitioner. SO ORDERED. Quisumbing, (Acting C.J.), Carpio-Morales, Tinga, and Velasco, Jr., JJ., concur.

[1]

See Paragraph 3 of the Application; records, p. 96. Id., pp. 98-101.

[2]

44
[3]

Id., pp. 108-109. Sec. 168. Unfair Competition, Rights, Regulations and Remedies. -

[4]

xxx xxx xxx Sec. 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: xxx (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 service of another. Sec. 170. Penalties. - Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two years to five years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and Subsection 169.1.
[5] [6]

Penned by Pairing Judge Irma Isidora M. Boncodin, MTC, Branch 1, Naga; records, p. 23. Penned by Acting Presiding Judge Jose P. Nacional, MTC, Branch 1, Naga; id, p. 22. Decision penned by Judge Ramon A. Cruz, RTC, Branch 21; id., pp. 202-211. Id., p. 210.

[7]

[8]

[9]

Rule 126, Section 1. Search warrant defined. A search warrant is an order in writing issued in the name of the People of the Philippines, signed by a judge and directed to a peace officer, commanding him to search for personal property described therein and bring it before the court.
[10]

Rule 126, Section 3. Personal property to be seized. A search warrant may be issued for the search and seizure of personal property: (a) Subject of the offense;
[11]

(b) Stolen or embezzled and other proceeds or fruits of the offense; or (c) Used or intended to be used as the means of committing an offense. [12] La Chemise Lacoste, S. A. v. Judge Fernandez, G.R. Nos. 63796-97, May 21, 1984, 129 SCRA 373.
[13]

Alhambra Cigar & Cigarette Manufacturing Co v. Mojica, 27 Phil. 266 (1914). Compania General de Tabacos de Filipinas v. Alhambra Cigar & Cigarette Manufacturing Co., 33 Phil. 485 (1916).

[14]

Agpalo, Statutory Construction, 3rd (1995) Ed., at p. 159, citing Co Kim Chan v. Valdez Tan Keh, 75 Phil 371, and Soriano v. Sandiganbayan, G.R. No. 65952, July 1, 1984, among others.
[15] [16]

Supra note 12, pp. 705-706.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 110318 August 28, 1996 COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, UNITED ARTISTS CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY, and WARNER BROTHERS, INC., petitioners, vs. COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A. PELINDARIO, respondents.

REGALADO, J.:p

45
Before us is a petition for review on certiorari of the decision of the Court of Appeals 1 promulgated on July 22, 1992 and its resolution 2 of May 10, 1993 denying petitioners' motion for reconsideration, both of which sustained the order 3 of the Regional Trial Court, Branch 133, Makati, Metro Manila, dated November 22, 1988 for the quashal of Search Warrant No. 87-053 earlier issued per its own order 4 on September 5, 1988 for violation of Section 56 of Presidential Decree No. 49, as amended, otherwise known as the "Decree on the Protection of Intellectual Property." The material facts found by respondent appellate court are as follows: Complainants thru counsel lodged a formal complaint with the National Bureau of Investigation for violation of PD No. 49, as amended, and sought its assistance in their anti-film piracy drive. Agents of the NBI and private researchers made discreet surveillance on various video establishments in Metro Manila including Sunshine Home Video Inc. (Sunshine for brevity), owned and operated by Danilo A. Pelindario with address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila. On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a search warrant with the courta quo against Sunshine seeking the seizure, among others, of pirated video tapes of copyrighted films all of which were enumerated in a list attached to the application; and, television sets, video cassettes and/or laser disc recordings equipment and other machines and paraphernalia used or intended to be used in the unlawful exhibition, showing, reproduction, sale, lease or disposition of videograms tapes in the premises above described. In the hearing of the application, NBI Senior Agent Lauro C. Reyes, upon questions by the court a quo, reiterated in substance his averments in his affidavit. His testimony was corroborated by another witness, Mr. Rene C. Baltazar. Atty. Rico V. Domingo's deposition was also taken. On the basis of the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Rene C. Baltazar and Atty. Rico V. Domingo, Search Warrant No. 87-053 for violation of Section 56 of PD No. 49, as amended, was issued by the court a quo. The search warrant was served at about 1:45 p.m. on December 14, 1987 to Sunshine and/or their representatives. In the course of the search of the premises indicated in the search warrant, the NBI Agents found and seized various video tapes of duly copyrighted motion pictures/films owned or exclusively distributed by private complainants, and machines, equipment, television sets, paraphernalia, materials, accessories all of which were included in the receipt for properties accomplished by the raiding team. Copy of the receipt was furnished and/or tendered to Mr. Danilo A. Pelindario, registered owner-proprietor of Sunshine Home Video. On December 16, 1987, a "Return of Search Warrant" was filed with the Court. A "Motion To Lift the Order of Search Warrant" was filed but was later denied for lack of merit (p. 280, Records). A Motion for reconsideration of the Order of denial was filed. The court a quo granted the said motion for reconsideration and justified it in this manner:
It is undisputed that the master tapes of the copyrighted films from which the pirated films were allegedly copies (sic), were never presented in the proceedings for the issuance of the search warrants in question. The orders of the Court granting the search warrants and denying the urgent motion to lift order of search warrants were, therefore, issued in error. Consequently, they must be set aside. (p. 13, Appellant's Brief) 5

Petitioners thereafter appealed the order of the trial court granting private respondents' motion for reconsideration, thus lifting the search warrant which it had theretofore issued, to the Court of Appeals. As stated at the outset, said appeal was dismissed and the motion for reconsideration thereof was denied. Hence, this petition was brought to this Court particularly challenging the validity of respondent court's retroactive application of the ruling in 20th Century Fox Film Corporation vs. Court of Appeals, et al., 6 in dismissing petitioners' appeal and upholding the quashal of the search warrant by the trial court. I Inceptively, we shall settle the procedural considerations on the matter of and the challenge to petitioners' legal standing in our courts, they being foreign corporations not licensed to do business in the Philippines. Private respondents aver that being foreign corporations, petitioners should have such license to be able to maintain an action in Philippine courts. In so challenging petitioners' personality to sue, private respondents point to the fact that petitioners are the copyright owners or owners of exclusive rights of distribution in the Philippines of copyrighted motion pictures or films, and also to the appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being constitutive of "doing business in the Philippines" under Section 1 (f)(1) and (2), Rule 1 of the Rules of the Board of Investments. As foreign corporations doing business in the

46
Philippines, Section 133 of Batas Pambansa Blg. 68, or the Corporation Code of the Philippines, denies them the right to maintain a suit in Philippine courts in the absence of a license to do business. Consequently, they have no right to ask for the issuance of a search warrant. 7 In refutation, petitioners flatly deny that they are doing business in the Philippines, 8 and contend that private respondents have not adduced evidence to prove that petitioners are doing such business here, as would require them to be licensed by the Securities and Exchange Commission, other than averments in the quoted portions of petitioners' "Opposition to Urgent Motion to Lift Order of Search Warrant" dated April 28, 1988 and Atty. Rico V. Domingo's affidavit of December 14, 1987. Moreover, an exclusive right to distribute a product or the ownership of such exclusive right does not conclusively prove the act of doing business nor establish the presumption of doing business. 9 The Corporation Code provides: Sec. 133. Doing business without a license. No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. The obtainment of a license prescribed by Section 125 of the Corporation Code is not a condition precedent to the maintenance of any kind of action in Philippine courts by a foreign corporation. However, under the aforequoted provision, no foreign corporation shall be permitted to transact business in the Philippines, as this phrase is understood under the Corporation Code, unless it shall have the license required by law, and until it complies with the law intransacting business here, it shall not be permitted to maintain any suit in local courts. 10 As thus interpreted, any foreign corporation not doing business in the Philippines may maintain an action in our courts upon any cause of action, provided that the subject matter and the defendant are within the jurisdiction of the court. It is not the absence of the prescribed license but "doing business" in the Philippines without such license which debars the foreign corporation from access to our courts. In other words, although a foreign corporation is without license to transact business in the Philippines, it does not follow that it has no capacity to bring an action. Such license is not necessary if it is not engaged in business in the Philippines. 11 Statutory provisions in many jurisdictions are determinative of what constitutes "doing business" or "transacting business" within that forum, in which case said provisions are controlling there. In others where no such definition or qualification is laid down regarding acts or transactions failing within its purview, the question rests primarily on facts and intent. It is thus held that all the combined acts of a foreign corporation in the State must be considered, and every circumstance is material which indicates a purpose on the part of the corporation to engage in some part of its regular business in the State. 12 No general rule or governing principles can be laid down as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged in the light of its own peculiar environmental circumstances. 13 The true tests, however, seem to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired from it and turned it over to another. 14 As a general proposition upon which many authorities agree in principle, subject to such modifications as may be necessary in view of the particular issue or of the terms of the statute involved, it is recognized that a foreign corporation is "doing," "transacting," "engaging in," or "carrying on" business in the State when, and ordinarily only when, it has entered the State by its agents and is there engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual, sporadic, or occasional transactions and isolated acts. 15 The Corporation Code does not itself define or categorize what acts constitute doing or transacting business in the Philippines. Jurisprudence has, however, held that the term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to or in progressive prosecution of the purpose and subject of its organization. 16 This traditional case law definition has evolved into a statutory definition, having been adopted with some qualifications in various pieces of legislation in our jurisdiction. For instance, Republic Act No. 5455 17 provides: Sec. 1. Definitions and scope of this Act. (1) . . . ; and the phrase "doing business" shall include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or

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branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. Presidential Decree No. 1789, 18 in Article 65 thereof, defines "doing business" to include soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity of commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. The implementing rules and regulations of said presidential decree conclude the enumeration of acts constituting "doing business" with a catch-all definition, thus: Sec. 1(g). "Doing Business" shall be any act or combination of acts enumerated in Article 65 of the Code. In particular "doing business" includes: xxx xxx xxx (10) Any other act or acts which imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and object of the business organization. Finally, Republic Act No. 7042 19 embodies such concept in this wise: Sec. 3. Definitions. As used in this Act: xxx xxx xxx (d) the phrase "doing business shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eight(y) (180) days or more; participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. Based on Article 133 of the Corporation Code and gauged by such statutory standards, petitioners are not barred from maintaining the present action. There is no showing that, under our statutory or case law, petitioners are doing, transacting, engaging in or carrying on business in the Philippines as would require obtention of a license before they can seek redress from our courts. No evidence has been offered to show that petitioners have performed any of the enumerated acts or any other specific act indicative of an intention to conduct or transact business in the Philippines. Accordingly, the certification issued by the Securities and Exchange Commission 20 stating that its records do not show the registration of petitioner film companies either as corporations or partnerships or that they have been licensed to transact business in the Philippines, while undeniably true, is of no consequence to petitioners' right to bring action in the Philippines. Verily, no record of such registration by petitioners can be expected to be found for, as aforestated, said foreign film corporations do not transact or do business in the Philippines and, therefore, do not need to be licensed in order to take recourse to our courts. Although Section 1(g) of the Implementing Rules and Regulations of the Omnibus Investments Code lists, among others

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(1) Soliciting orders, purchases (sales) or service contracts. Concrete and specific solicitations by a foreign firm, or by an agent of such foreign firm, not acting independently of the foreign firm amounting to negotiations or fixing of the terms and conditions of sales or service contracts, regardless of where the contracts are actually reduced to writing, shall constitute doing business even if the enterprise has no office or fixed place of business in the Philippines. The arrangements agreed upon as to manner, time and terms of delivery of the goods or the transfer of title thereto is immaterial. A foreign firm which does business through the middlemen acting in their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines. (2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the name or for the account of a principal. Thus, where a foreign firm is represented in the Philippines by a person or local company which does not act in its name but in the name of the foreign firm, the latter is doing business in the Philippines. as acts constitutive of "doing business," the fact that petitioners are admittedly copyright owners or owners of exclusive distribution rights in the Philippines of motion pictures or films does not convert such ownership into an indicium of doing business which would require them to obtain a license before they can sue upon a cause of action in local courts. Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of petitioners, with express authority pursuant to a special power of attorney, inter alia
To lay criminal complaints with the appropriate authorities and to provide evidence in support of both civil and criminal proceedings against any person or persons involved in the criminal infringement of copyright or concerning the unauthorized importation, duplication, exhibition or distribution of any cinematographic work(s) films or video cassettes of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such cinematographic work(s), to initiate and prosecute on behalf of . . . criminal or civil actions in the Philippines against any person or persons unlawfully distributing, exhibiting, selling or offering for sale any films or video cassettes of which . . . is the owner of copyright or the owner of exclusive rights of distribution in the Philippines pursuant to any agreement(s) between . . . and the respective owners of copyright in such works. 21

tantamount to doing business in the Philippines. We fail to see how exercising one's legal and property rights and taking steps for the vigilant protection of said rights, particularly the appointment of an attorney-infact, can be deemed by and of themselves to be doing business here. As a general rule, a foreign corporation will not be regarded as doing business in the State simply because it enters into contracts with residents of the State, where such contracts are consummated outside the State. 22 In fact, a view is taken that a foreign corporation is not doing business in the State merely because sales of its product are made there or other business furthering its interests is transacted there by an alleged agent, whether a corporation or a natural person, where such activities are not under the direction and control of the foreign corporation but are engaged in by the alleged agent as an independent business.23 It is generally held that sales made to customers in the State by an independent dealer who has purchased and obtained title from the corporation to the products sold are not a doing of business by the corporation.24 Likewise, a foreign corporation which sells its products to persons styled "distributing agents" in the State, for distribution by them, is not doing business in the State so as to render it subject to service of process therein, where the contract with these purchasers is that they shall buy exclusively from the foreign corporation such goods as it manufactures and shall sell them at trade prices established by it. 25 It has moreover been held that the act of a foreign corporation in engaging an attorney to represent it in a Federal court sitting in a particular State is not doing business within the scope of the minimum contact test.26 With much more reason should this doctrine apply to the mere retainer of Atty. Domingo for legal protection against contingent acts of intellectual piracy. In accordance with the rule that "doing business" imports only acts in furtherance of the purposes for which a foreign corporation was organized, it is held that the mere institution and prosecution or defense of a suit, particularly if the transaction which is the basis of the suit took place out of the State, do not amount to the doing of business in the State. The institution of a suit or the removal thereof is neither the making of a contract nor the doing of business within a constitutional provision placing foreign corporations licensed to do business in the State under the same regulations, limitations and liabilities with respect to such acts as domestic corporations. Merely engaging in litigation has been considered as not a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign corporation. 27

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As a consideration aside, we have perforce to comment on private respondents' basis for arguing that petitioners are barred from maintaining suit in the Philippines. For allegedly being foreign corporations doing business in the Philippines without a license, private respondents repeatedly maintain in all their pleadings that petitioners have thereby no legal personality to bring an action before Philippine Courts. 28 Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue 29 and that the complaint states no cause of action. 30 Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation he claims.31 On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party in interest, hence grounded on failure to state a cause of action. 32 The term "lack of capacity to sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiff's general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party in interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; 33 whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. 34 Applying the above discussion to the instant petition, the ground available for barring recourse to our courts by an unlicensed foreign corporation doing or transacting business in the Philippines should properly be "lack of capacity to sue," not "lack of personality to sue." Certainly, a corporation whose legal rights have been violated is undeniably such, if not the only, real party in interest to bring suit thereon although, for failure to comply with the licensing requirement, it is not capacitated to maintain any suit before our courts. Lastly, on this point, we reiterate this Court's rejection of the common procedural tactics of erring local companies which, when sued by unlicensed foreign corporations not engaged in business in the Philippines, invoke the latter's supposed lack of capacity to sue. The doctrine of lack of capacity to sue based on failure to first acquire a local license is based on considerations of public policy. It was never intended to favor nor insulate from suit unscrupulous establishments or nationals in case of breach of valid obligations or violation of legal rights of unsuspecting foreign firms or entities simply because they are not licensed to do business in the country. 35 II We now proceed to the main issue of the retroactive application to the present controversy of the ruling in20th Century Fox Film Corporation vs. Court of Appeals, et al., promulgated on August 19, 1988, 36 that for the determination of probable cause to support the issuance of a search warrant in copyright infringement cases involving videograms, the production of the master tape for comparison with the allegedly pirate copies is necessary. Petitioners assert that the issuance of a search warrant is addressed to the discretion of the court subject to the determination of probable cause in accordance with the procedure prescribed therefore under Sections 3 and 4 of Rule 126. As of the time of the application for the search warrant in question, the controlling criterion for the finding of probable cause was that enunciated in Burgos vs. Chief of Staff 37 stating that: Probable cause for a search warrant is defined as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched. According to petitioners, after complying with what the law then required, the lower court determined that there was probable cause for the issuance of a search warrant, and which determination in fact led to the issuance and service on December 14, 1987 of Search Warrant No. 87-053. It is further argued that any search warrant so issued in accordance with all applicable legal requirements is valid, for the lower court could not possibly have been expected to apply, as the basis for a finding of probable cause for the issuance of a search warrant in copyright infringement cases involving videograms, a pronouncement which was not existent at the time of such determination, on December 14, 1987, that is, the doctrine in the 20th Century Fox case that was promulgated only on August 19, 1988, or over eight months later. Private respondents predictably argue in support of the ruling of the Court of Appeals sustaining the quashal of the search warrant by the lower court on the strength of that 20th Century Fox ruling which, they claim, goes into the very essence of probable cause. At the time of the issuance of the search warrant involved here, although the 20th Century Fox case had not yet been decided, Section 2, Article III of the Constitution and Section 3, Rule 126 of the 1985 Rules on Criminal Procedure embodied the prevailing and governing law on the matter. The ruling in 20th Century Fox was merely an application of the law on probable cause. Hence, they posit that there was no law that was retrospectively applied, since the law had been there all along. To refrain from applying the 20th Century Fox ruling, which had supervened as a doctrine promulgated at the time of the resolution of private respondents' motion for reconsideration seeking the

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quashal of the search warrant for failure of the trial court to require presentation of the master tapes prior to the issuance of the search warrant, would have constituted grave abuse of discretion. 38 Respondent court upheld the retroactive application of the 20th Century Fox ruling by the trial court in resolving petitioners' motion for reconsideration in favor of the quashal of the search warrant, on this renovated thesis: And whether this doctrine should apply retroactively, it must be noted that in the 20th Century Fox case, the lower court quashed the earlier search warrant it issued. On certiorari, the Supreme Court affirmed the quashal on the ground among others that the master tapes or copyrighted films were not presented for comparison with the purchased evidence of the video tapes to determine whether the latter is an unauthorized reproduction of the former.
If the lower court in the Century Fox case did not quash the warrant, it is Our view that the Supreme Court would have invalidated the warrant just the same considering the very strict requirement set by the Supreme Court for the determination of "probable cause" in copyright infringement cases as enunciated in this 20th Century Fox case. This is so because, as was stated by the Supreme Court in the said case, the master tapes and the pirated tapes must be presented for comparison to satisfy the requirement of "probable cause."So it goes back to the very existence of probable cause. . . . 39

Mindful as we are of the ramifications of the doctrine of stare decisis and the rudiments of fair play, it is our considered view that the 20th Century Fox ruling cannot be retroactively applied to the instant case to justify the quashal of Search Warrant No. 87-053. Herein petitioners' consistent position that the order of the lower court of September 5, 1988 denying therein defendants' motion to lift the order of search warrant was properly issued, there having been satisfactory compliance with the then prevailing standards under the law for determination of probable cause, is indeed well taken. The lower court could not possibly have expected more evidence from petitioners in their application for a search warrant other than what the law and jurisprudence, then existing and judicially accepted, required with respect to the finding of probable cause. Article 4 of the Civil Code provides that "(l)aws shall have no retroactive effect, unless the contrary is provided. Correlatively, Article 8 of the same Code declares that "(j)udicial decisions applying the laws or the Constitution shall form part of the legal system of the Philippines." Jurisprudence, in our system of government, cannot be considered as an independent source of law; it cannot create law. 40 While it is true that judicial decisions which apply or interpret the Constitution or the laws are part of the legal system of the Philippines, still they are not laws. Judicial decisions, though not laws, are nonetheless evidence of what the laws mean, and it is for this reason that they are part of the legal system of the Philippines. 41 Judicial decisions of the Supreme Court assume the same authority as the statute itself. 42 Interpreting the aforequoted correlated provisions of the Civil Code and in light of the above disquisition, this Court emphatically declared in Co vs. Court of Appeals, et al. 43 that the principle of prospectivity applies not only to original or amendatory statutes and administrative rulings and circulars, but also, and properly so, to judicial decisions. Our holding in the earlier case of People vs. Jabinal 44 echoes the rationale for this judicial declaration, viz.: Decisions of this Court, although in themselves not laws, are nevertheless evidence of what the laws mean, and this is the reason why under Article 8 of the New Civil Code, "Judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system." The interpretation upon a law by this Court constitutes, in a way, a part of the law as of the date that the law was originally passed, since this Court's construction merely establishes the contemporaneous legislative intent that the law thus construed intends to effectuate. The settled rule supported by numerous authorities is a restatement of the legal maxim "legis interpretatio legis vim obtinet" the interpretation placed upon the written law by a competent court has the force of law. . . . , but when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively, and should not apply to parties who had relied on the old doctrine and acted on the faith thereof . . . . (Emphasis supplied). This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et al., 45 where the Court expounded: . . . . But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and

51
hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. . . . . The reasoning behind Senarillos vs. Hermosisima 46 that judicial interpretation of a statute constitutes part of the law as of the date it was originally passed, since the Court's construction merely establishes the contemporaneous legislative intent that the interpreted law carried into effect, is all too familiar. Such judicial doctrine does not amount to the passage of a new law but consists merely of a construction or interpretation of a pre-existing one, and that is precisely the situation obtaining in this case. It is consequently clear that a judicial interpretation becomes a part of the law as of the date that law was originally passed, subject only to the qualification that when a doctrine of this Court is overruled and a different view is adopted, and more so when there is a reversal thereof, the new doctrine should be applied prospectively and should not apply to parties who relied on the old doctrine and acted in good faith. 47 To hold otherwise would be to deprive the law of its quality of fairness and justice then, if there is no recognition of what had transpired prior to such adjudication. 48 There is merit in petitioners' impassioned and well-founded argumentation: The case of 20th Century Fox Film Corporation vs. Court of Appeals, et al., 164 SCRA 655 (August 19, 1988) (hereinafter 20th Century Fox) was inexistent in December of 1987 when Search Warrant 87-053 was issued by the lower court. Hence, it boggles the imagination how the lower court could be expected to apply the formulation of 20th Century Fox in finding probable cause when the formulation was yet non-existent. xxx xxx xxx In short, the lower court was convinced at that time after conducting searching examination questions of the applicant and his witnesses that "an offense had been committed and that the objects sought in connection with the offense (were) in the place sought to be searched" (Burgos v. Chief of Staff, et al., 133 SCRA 800). It is indisputable, therefore, that at the time of the application, or on December 14, 1987, the lower court did not commit any error nor did it fail to comply with any legal requirement for the valid issuance of search warrant. . . . (W)e believe that the lower court should be considered as having followed the requirements of the law in issuing Search Warrant No. 87-053. The search warrant is therefore valid and binding. It must be noted that nowhere is it found in the allegations of the Respondents that the lower court failed to apply the law as then interpreted in 1987. Hence, we find it absurd that it is (sic) should be seen otherwise, because it is simply impossible to have required the lower court to apply a formulation which will only be defined six months later. Furthermore, it is unjust and unfair to require compliance with legal and/or doctrinal requirements which are inexistent at the time they were supposed to have been complied with. xxx xxx xxx
. . . If the lower court's reversal will be sustained, what encouragement can be given to courts and litigants to respect the law and rules if they can expect with reasonable certainty that upon the passage of a new rule, their conduct can still be open to question? This certainly breeds instability in our system of dispensing justice. For Petitioners who took special effort to redress their grievances and to protect their property rights by resorting to the remedies provided by the law, it is most unfair that fealty to the rules and procedures then obtaining would bear but fruits of injustice. 49

Withal, even the proposition that the prospectivity of judicial decisions imports application thereof not only to future cases but also to cases still ongoing or not yet final when the decision was promulgated, should not be countenanced in the jural sphere on account of its inevitably unsettling repercussions. More to the point, it is felt that the reasonableness of the added requirement in 20th Century Fox calling for the production of the master tapes of the copyrighted films for determination of probable cause in copyright infringement cases needs revisiting and clarification. It will be recalled that the 20th Century Fox case arose from search warrant proceedings in anticipation of the filing of a case for the unauthorized sale or renting out of copyrighted films in videotape format in violation of Presidential Decree No. 49. It revolved around the meaning of probable cause within the context of the constitutional provision against illegal searches and seizures, as applied to copyright infringement cases involving videotapes. Therein it was ruled that

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The presentation of master tapes of the copyrighted films from which the pirated films were allegedly copied, was necessary for the validity of search warrants against those who have in their possession the pirated films. The petitioner's argument to the effect that the presentation of the master tapes at the time of application may not be necessary as these would be merely evidentiary in nature and not determinative of whether or not a probable cause exists to justify the issuance of the search warrants is not meritorious. The court cannot presume that duplicate or copied tapes were necessarily reproduced from master tapes that it owns. The application for search warrants was directed against video tape outlets which allegedly were engaged in the unauthorized sale and renting out of copyrighted films belonging to the petitioner pursuant to P.D. 49. The essence of a copyright infringement is the similarity or at least substantial similarity of the purported pirated works to the copyrighted work. Hence, the applicant must present to the court the copyrighted films to compare them with the purchased evidence of the video tapes allegedly pirated to determine whether the latter is an unauthorized reproduction of the former. This linkage of the copyrighted films to the pirated films must be established to satisfy the requirements of probable cause. Mere allegations as to the existence of the copyrighted films cannot serve as basis for the issuance of a search warrant. For a closer and more perspicuous appreciation of the factual antecedents of 20th Century Fox, the pertinent portions of the decision therein are quoted hereunder, to wit: In the instant case, the lower court lifted the three questioned search warrants against the private respondents on the ground that it acted on the application for the issuance of the said search warrants and granted it on the misrepresentations of applicant NBI and its witnesses that infringement of copyright or a piracy of a particular film have been committed. Thus the lower court stated in its questioned order dated January 2, 1986: According to the movant, all three witnesses during the proceedings in the application for the three search warrants testified of their own personal knowledge. Yet, Atty. Albino Reyes of the NBI stated that the counsel or representative of the Twentieth Century Fox Corporation will testify on the video cassettes that were pirated, so that he did not have personal knowledge of the alleged piracy. The witness Bacani also said that the video cassettes were pirated without stating the manner it was pirated and that it was Atty. Domingo that has knowledge of that fact. On the part of Atty. Domingo, he said that the re-taping of the allegedly pirated tapes was from master tapes allegedly belonging to the Twentieth Century Fox, because, according to him it is of his personal knowledge. At the hearing of the Motion for Reconsideration, Senior NBI Agent Atty. Albino Reyes testified that when the complaint for infringement was brought to the NBI, the master tapes of the allegedly pirated tapes were shown to him and he made comparisons of the tapes with those purchased by their man Bacani. Why the master tapes or at least the film reels of the allegedly pirated tapes were not shown to the Court during the application gives some misgivings as to the truth of that bare statement of the NBI agent on the witness stand. Again as the application and search proceedings is a prelude to the filing of criminal cases under PD 49, the copyright infringement law, and although what is required for the issuance thereof is merely the presence of probable cause, that probable cause must be satisfactory to the Court, for it is a time-honored precept that proceedings to put a man to task as an offender under our laws should be interpreted in strictissimi juris against the government and liberally in favor of the alleged offender. xxx xxx xxx This doctrine has never been overturned, and as a matter of fact it had been enshrined in the Bill of Rights in our 1973 Constitution. So that lacking in persuasive effect, the allegation that master tapes were viewed by the NBI and were compared to the purchased and seized video tapes from the respondents' establishments, it should be dismissed as not supported by competent evidence and for that matter the probable cause hovers in that grey debatable twilight zone between black and white resolvable in favor of respondents herein.

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But the glaring fact is that "Cocoon," the first video tape mentioned in the search warrant, was not even duly registered or copyrighted in the Philippines. (Annex C of Opposition p. 152 record.) So, that lacking in the requisite presentation to the Court of an alleged master tape for purposes of comparison with the purchased evidence of the video tapes allegedly pirated and those seized from respondents, there was no way to determine whether there really was piracy, or copying of the film of the complainant Twentieth Century Fox. xxx xxx xxx The lower court, therefore, lifted the three (3) questioned search warrants in the absence of probable cause that the private respondents violated P.D. 49. As found out by the court, the NBI agents who acted as witnesses did not have personal knowledge of the subject matter of their testimony which was the alleged commission of the offense by the private respondents. Only the petitioner's counsel who was also a witness during the application for the issuance of the search warrants stated that he had personal knowledge that the confiscated tapes owned by the private respondents were pirated tapes taken from master tapes belonging to the petitioner. However, the lower court did not give much credence to his testimony in view of the fact that the master tapes of the allegedly pirated tapes were not shown to the court during the application (Emphasis ours). The italicized passages readily expose the reason why the trial court therein required the presentation of the master tapes of the allegedly pirated films in order to convince itself of the existence of probable cause under the factual milieu peculiar to that case. In the case at bar, respondent appellate court itself observed:
We feel that the rationale behind the aforequoted doctrine is that the pirated copies as well as the master tapes, unlike the other types of personal properties which may be seized, were available for presentation to the court at the time of the application for a search warrant to determine the existence of the linkage of the copyrighted films with the pirated ones. Thus, there is no reason not the present them (Emphasis supplied ).50

In fine, the supposed pronunciamento in said case regarding the necessity for the presentation of the master tapes of the copyrighted films for the validity of search warrants should at most be understood to merely serve as a guidepost in determining the existence of probable cause in copyright infringement caseswhere there is doubt as to the true nexus between the master tape and the pirated copies. An objective and careful reading of the decision in said case could lead to no other conclusion than that said directive was hardly intended to be a sweeping and inflexible requirement in all or similar copyright infringement cases. Judicial dicta should always be construed within the factual matrix of their parturition, otherwise a careless interpretation thereof could unfairly fault the writer with the vice of overstatement and the reader with the fallacy of undue generalization. In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for search warrant with the lower court following a formal complaint lodged by petitioners, judging from his affidavit 51 and his deposition, 52 did testify on matters within his personal knowledge based on said complaint of petitioners as well as his own investigation and surveillance of the private respondents' video rental shop. Likewise, Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his affidavit 53 and further expounded in his deposition 54 that he personally knew of the fact that private respondents had never been authorized by his clients to reproduce, lease and possess for the purpose of selling any of the copyrighted films. Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene C. Baltazar, a private researcher retained by Motion Pictures Association of America, Inc. (MPAA, Inc.), who was likewise presented as a witness during the search warrant proceedings. 55 The records clearly reflect that the testimonies of the abovenamed witnesses were straightforward and stemmed from matters within their personal knowledge. They displayed none of the ambivalence and uncertainty that the witnesses in the 20th Century Fox case exhibited. This categorical forthrightness in their statements, among others, was what initially and correctly convinced the trial court to make a finding of the existence of probable cause. There is no originality in the argument of private respondents against the validity of the search warrant, obviously borrowed from 20th Century Fox, that petitioners' witnesses NBI Agent Lauro C. Reyes, Atty. Rico V. Domingo and Rene C. Baltazar did not have personal knowledge of the subject matter of their respective testimonies and that said witnesses' claim that the video tapes were pirated, without stating the manner by which these were pirated, is a conclusion of fact without basis. 56 The difference, it must be pointed out, is that the records in the present case reveal that (1) there is no allegation of misrepresentation, much less a finding thereof by the lower court, on the part of petitioners' witnesses; (2) there is no denial on the part of private respondents that the tapes seized were illegitimate copies of the copyrighted ones not have they shown that they were given any authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer for sale, lease, distribution or circulation the said video tapes; and (3) a discreet but extensive surveillance of the suspected area was undertaken by petitioners' witnesses sufficient to enable

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them to execute trustworthy affidavits and depositions regarding matters discovered in the course thereof and of which they have personal knowledge. It is evidently incorrect to suggest, as the ruling in 20th Century Fox may appear to do, that in copyright infringement cases, the presentation of master tapes of the copyrighted films is always necessary to meet the requirement of probable cause and that, in the absence thereof, there can be no finding of probable cause for the issuance of a search warrant. It is true that such master tapes are object evidence, with the merit that in this class of evidence the ascertainment of the controverted fact is made through demonstrations involving the direct use of the senses of the presiding magistrate. 57 Such auxiliary procedure, however, does not rule out the use of testimonial or documentary evidence, depositions, admissions or other classes of evidence tending to prove the factum probandum, 58 especially where the production in court of object evidence would result in delay, inconvenience or expenses out of proportion to its evidentiary value. 59 Of course, as a general rule, constitutional and statutory provisions relating to search warrants prohibit their issuance except on a showing of probable cause, supported by oath or affirmation. These provisions prevent the issuance of warrants on loose, vague, or doubtful bases of fact, and emphasize the purpose to protect against all general searches. 60 Indeed, Article III of our Constitution mandates in Sec. 2 thereof that no search warrant shall issue except upon probable cause 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; and Sec. 3 thereof provides that any evidence obtained in violation of the preceding section shall be inadmissible for any purpose in any proceeding. These constitutional strictures are implemented by the following provisions of Rule 126 of the Rules of Court: Sec. 3. Requisites for issuing search warrant. A search warrant shall not issue but 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. Sec. 4. Examination of complainant; record. The judge must, before issuing the warrant, personally examine in the form of searching questions and answers, in writing and under oath the complainant and any witnesses he may produce on facts personally known to them and attach to the record their sworn statements together with any affidavits submitted. Sec. 5. Issuance and form of search warrant. If the judge is thereupon satisfied of the existence of facts upon which the application is based, or that there is probable cause to believe that they exist, he must issue the warrant, which must be substantially in the form prescribed by these Rules. The constitutional and statutory provisions of various jurisdictions requiring a showing of probable cause before a search warrant can be issued are mandatory and must be complied with, and such a showing has been held to be an unqualified condition precedent to the issuance of a warrant. A search warrant not based on probable cause is a nullity, or is void, and the issuance thereof is, in legal contemplation, arbitrary. 61 It behooves us, then, to review the concept of probable cause, firstly, from representative holdings in the American jurisdiction from which we patterned our doctrines on the matter. Although the term "probable cause" has been said to have a well-defined meaning in the law, the term is exceedingly difficult to define, in this case, with any degree of precision; indeed, no definition of it which would justify the issuance of a search warrant can be formulated which would cover every state of facts which might arise, and no formula or standard, or hard and fast rule, may be laid down which may be applied to the facts of every situation. 62 As to what acts constitute probable cause seem incapable of definition. 63 There is, of necessity, no exact test. 64 At best, the term "probable cause" has been understood to mean a reasonable ground of suspicion, supported by circumstances sufficiently strong in themselves to warrant a cautious man in the belief that the person accused is guilty of the offense with which he is charged; 65 or the existence of such facts and circumstances as would excite an honest belief in a reasonable mind acting on all the facts and circumstances within the knowledge of the magistrate that the charge made by the applicant for the warrant is true. 66 Probable cause does not mean actual and positive cause, nor does it import absolute certainty. The determination of the existence of probable cause is not concerned with the question of whether the offense charged has been or is being committed in fact, or whether the accused is guilty or innocent, but only whether the affiant has reasonable grounds for his belief. 67 The requirement is less than certainty or proof, but more than suspicion or possibility. 68

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In Philippine jurisprudence, probable cause has been uniformly defined as such facts and circumstances which would lead a reasonable, discreet and prudent man to believe that an offense has been committed, and that the objects sought in connection with the offense are in the place sought to be searched. 69 It being the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as practicable after the application therefor is filed, 70 the facts warranting the conclusion of probable cause must be assessed at the time of such judicial determination by necessarily using legal standards then set forth in law and jurisprudence, and not those that have yet to be crafted thereafter. As already stated, the definition of probable cause enunciated in Burgos, Sr. vs. Chief of Staff, et al., supra,vis-a-vis the provisions of Sections 3 and 4 of Rule 126, were the prevailing and controlling legal standards, as they continue to be, by which a finding of probable cause is tested. Since the propriety of the issuance of a search warrant is to be determined at the time of the application therefor, which in turn must not be too remote in time from the occurrence of the offense alleged to have been committed, the issuing judge, in determining the existence of probable cause, can and should logically look to the touchstones in the laws theretofore enacted and the decisions already promulgated at the time, and not to those which had not yet even been conceived or formulated. It is worth noting that neither the Constitution nor the Rules of Court attempt to define probable cause, obviously for the purpose of leaving such matter to the court's discretion within the particular facts of each case. Although the Constitution prohibits the issuance of a search warrant in the absence of probable cause, such constitutional inhibition does not command the legislature to establish a definition or formula for determining what shall constitute probable cause. 71 Thus, Congress, despite its broad authority to fashion standards of reasonableness for searches and seizures, 72 does not venture to make such a definition or standard formulation of probable cause, nor categorize what facts and circumstances make up the same, much less limit the determination thereof to and within the circumscription of a particular class of evidence, all in deference to judicial discretion and probity. 73 Accordingly, to restrict the exercise of discretion by a judge by adding a particular requirement (the presentation of master tapes, as intimated by 20th Century Fox) not provided nor implied in the law for a finding of probable cause is beyond the realm of judicial competence or statesmanship. It serves no purpose but to stultify and constrict the judicious exercise of a court's prerogatives and to denigrate the judicial duty of determining the existence of probable cause to a mere ministerial or mechanical function. There is, to repeat, no law or rule which requires that the existence of probable cause is or should be determined solely by a specific kind of evidence. Surely, this could not have been contemplated by the framers of the Constitution, and we do not believe that the Court intended the statement in 20th Century Fox regarding master tapes as the dictum for all seasons and reasons in infringement cases. Turning now to the case at bar, it can be gleaned from the records that the lower court followed the prescribed procedure for the issuance of a search warrant: (1) the examination under oath or affirmation of the complainant and his witnesses, with them particularly describing the place to be searched and the things to be seized; (2) an examination personally conducted by the judge in the form of searching questions and answers, in writing and under oath of the complainant and witnesses on facts personally known to them; and, (3) the taking of sworn statements, together with the affidavits submitted, which were duly attached to the records. Thereafter, the court a quo made the following factual findings leading to the issuance of the search warrant now subject of this controversy: In the instant case, the following facts have been established: (1) copyrighted video tapes bearing titles enumerated in Search Warrant No. 87-053 were being sold, leased, distributed or circulated, or offered for sale, lease, distribution, or transferred or caused to be transferred by defendants at their video outlets, without the written consent of the private complainants or their assignee; (2) recovered or confiscated from defendants' possession were video tapes containing copyrighted motion picture films without the authority of the complainant; (3) the video tapes originated from spurious or unauthorized persons; and (4) said video tapes were exact reproductions of the films listed in the search warrant whose copyrights or distribution rights were owned by complainants. The basis of these facts are the affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Atty. Rico V. Domingo, and Rene C. Baltazar. Motion Pictures Association of America, Inc. (MPAA) thru their counsel, Atty. Rico V. Domingo, filed a complaint with the National Bureau of Investigation against certain video establishments one of which is defendant, for violation of PD No. 49 as amended by PD No. 1988. Atty. Lauro C. Reyes led a team to conduct discreet surveillance operations on said video establishments. Per information earlier gathered by Atty. Domingo, defendants were engaged in the illegal sale, rental, distribution, circulation or public exhibition of copyrighted films of MPAA without its written authority or its members. Knowing that defendant Sunshine Home Video and its proprietor, Mr. Danilo Pelindario, were not authorized by MPAA to reproduce, lease, and possess for the purpose of selling any of its copyrighted motion pictures, instructed his researcher, Mr. Rene Baltazar to rent two video cassettes from said defendants on

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October 21, 1987. Rene C. Baltazar proceeded to Sunshine Home Video and rented tapes containing Little Shop of Horror. He was issued rental slip No. 26362 dated October 21, 1987 for P10.00 with a deposit of P100.00. Again, on December 11, 1987, the returned to Sunshine Home Video and rented Robocop with rental slip No. 25271 also for P10.00: On the basis of the complaint of MPAA thru counsel, Atty. Lauro C. Reyes personally went to Sunshine Home Video at No. 6 Mayfair Center, Magallanes Commercial Center, Makati. His last visit was on December 7, 1987. There, he found the video outlet renting, leasing, distributing video cassette tapes whose titles were copyrighted and without the authority of MPAA. Given these facts, a probable cause exists. . . . 74 The lower court subsequently executed a volte-face, despite its prior detailed and substantiated findings, by stating in its order of November 22, 1988 denying petitioners' motion for reconsideration and quashing the search warrant that
. . . The two (2) cases have a common factual milieu; both involve alleged pirated copyrighted films of private complainants which were found in the possession or control of the defendants. Hence, the necessity of the presentation of the master tapes from which the pirated films were allegedly copied is necessary in the instant case, to establish the existence of probable cause. 75

Being based solely on an unjustifiable and improper retroactive application of the master tape requirement generated by 20th Century Fox upon a factual situation completely different from that in the case at bar, and without anything more, this later order clearly defies elemental fair play and is a gross reversible error. In fact, this observation of the Court in La Chemise Lacoste, S.A. vs. Fernandez, et al., supra, may just as easily apply to the present case: A review of the grounds invoked . . . in his motion to quash the search warrants reveals the fact that they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the case. . . . As correctly pointed out by petitioners, a blind espousal of the requisite of presentation of the master tapes in copyright infringement cases, as the prime determinant of probable cause, is too exacting and impracticable a requirement to be complied with in a search warrant application which, it must not be overlooked, is only an ancillary proceeding. Further, on realistic considerations, a strict application of said requirement militates against the elements of secrecy and speed which underlie covert investigative and surveillance operations in police enforcement campaigns against all forms of criminality, considering that the master tapes of a motion picture required to be presented before the court consists of several reels contained in circular steel casings which, because of their bulk, will definitely draw attention, unlike diminutive objects like video tapes which can be easily concealed. 76 With hundreds of titles being pirated, this onerous and tedious imposition would be multiplied a hundredfold by judicial fiat, discouraging and preventing legal recourses in foreign jurisdictions. Given the present international awareness and furor over violations in large scale of intellectual property rights, calling for transnational sanctions, it bears calling to mind the Court's admonition also in La Chemise Lacoste, supra, that . . . . Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties. III The amendment to Section 56 of Presidential Decree No. 49 by Presidential Decree No. 1987, 77 which should here be publicized judicially, brought about the revision of its penalty structure and enumerated additional acts considered violative of said decree on intellectual property, namely, (1) directly or indirectly transferring or causing to be transferred any sound recording or motion picture or other audio-visual works so recorded with intent to sell, lease, publicly exhibit or cause to be sold, leased or publicly exhibited, or to use or cause to be used for profit such articles on which sounds, motion pictures, or other audio-visual works are so transferred without the written consent of the owner or his assignee; (2) selling, leasing, distributing, circulating, publicly exhibiting, or offering for sale, lease, distribution, or possessing for the purpose of sale, lease, distribution, circulation or public exhibition any of the abovementioned articles, without the written consent of the owner or his assignee; and, (3) directly or indirectly offering or making available for a fee, rental, or any other form of compensation any equipment, machinery, paraphernalia or any material with the knowledge that such equipment, machinery, paraphernalia or material will be used by another to reproduce, without the consent of the owner, any phonograph record, disc, wire, tape, film or

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other article on which sounds, motion pictures or other audio-visual recordings may be transferred, and which provide distinct bases for criminal prosecution, being crimes independently punishable under Presidential Decree No. 49, as amended, aside from the act of infringing or aiding or abetting such infringement under Section 29. The trial court's finding that private respondents committed acts in blatant transgression of Presidential Decree No. 49 all the more bolsters its findings of probable cause, which determination can be reached even in the absence of master tapes by the judge in the exercise of sound discretion. The executive concern and resolve expressed in the foregoing amendments to the decree for the protection of intellectual property rights should be matched by corresponding judicial vigilance and activism, instead of the apathy of submitting to technicalities in the face of ample evidence of guilt. 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. 78 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 what works he was indirectly copying, or 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 determining the question of infringement, the amount of matter copied from the copyrighted work is an important consideration. To constitute infringement, it is not necessary that the whole or even a large portion of the work shall have been copied. If so much is taken that the value of the original is sensibly diminished, or the labors of the original author are substantially and to an injurious extent appropriated by another, that is sufficient in point of law to constitute a piracy. 79 The question of whether there has been an actionable infringement of a literary, musical, or artistic work in motion pictures, radio or television being one of fact, 80 it should properly be determined during the trial. That is the stage calling for conclusive or preponderating evidence, and not the summary proceeding for the issuance of a search warrant wherein both lower courts erroneously require the master tapes. In disregarding private respondent's argument that Search Warrant No. 87-053 is a general warrant, the lower court observed that "it was worded in a manner that the enumerated seizable items bear direct relation to the offense of violation of Sec. 56 of PD 49 as amended. It authorized only the seizur(e) of articles used or intended to be used in the unlawful sale, lease and other unconcerted acts in violation of PD 49 as amended. . . . 81 On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al., 82 instructs and enlightens: A search warrant may be said to particularly describe the things to be seized when the description therein is as specific as the circumstances will ordinarily allow (People vs. Rubio, 57 Phil. 384); or when the description expresses a conclusion of fact not of law by which the warrant officer may be guided in making the search and seizure (idem., dissent of Abad Santos, J.,); or when the things described are limited to those which bear direct relation to the offense for which the warrant is being issued (Sec 2, Rule 126, Revised Rules of Court). . . . If the articles desired to be seized have any direct relation to an offense committed, the applicant must necessarily have some evidence, other than those articles, to prove the said offense; and the articles subject of search and seizure should come in handy merely to strengthen such evidence. . . . On private respondents' averment that the search warrant was made applicable to more than one specific offense on the ground that there are as many offenses of infringement as there are rights protected and, therefore, to issue one search warrant for all the movie titles allegedly pirated violates the rule that a search warrant must be issued only in connection with one specific offense, the lower court said:
. . . . As the face of the search warrant itself indicates, it was issued for violation of Section 56, PD 49 as amended only. The specifications therein (in Annex A) merely refer to the titles of the copyrighted motion pictures/films belonging to private complainants which defendants were in control/possession for sale, lease, distribution or public exhibition in contravention of Sec. 56, PD 49 as amended. 83

That there were several counts of the offense of copyright infringement and the search warrant uncovered several contraband items in the form of pirated video tapes is not to be confused with the number of offenses charged. The search warrant herein issued does not violate the one-specific-offense rule. It is pointless for private respondents to insist on compliance with the registration and deposit requirements under Presidential Decree No. 49 as prerequisites for invoking the court's protective mantle in copyright infringement cases. As explained by the court below:

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Defendants-movants contend that PD 49 as amended covers only producers who have complied with the requirements of deposit and notice (in other words registration) under Sections 49 and 50 thereof. Absent such registration, as in this case, there was no right created, hence, no infringement under PD 49 as amended. This is not well-taken. As correctly pointed out by private complainants-oppositors, the Department of Justice has resolved this legal question as far back as December 12, 1978 in its Opinion No. 191 of the then Secretary of Justice Vicente Abad Santos which stated that Sections 26 and 50 do not apply to cinematographic works and PD No. 49 "had done away with the registration and deposit of cinematographic works" and that "even without prior registration and deposit of a work which may be entitled to protection under the Decree, the creator can file action for infringement of its rights". He cannot demand, however, payment of damages arising from infringement. The same opinion stressed that "the requirements of registration and deposit are thus retained under the Decree, not as conditions for the acquisition of copyright and other rights, but as prerequisites to a suit for damages". The statutory interpretation of the Executive Branch being correct, is entitled (to) weight and respect. xxx xxx xxx
Defendants-movants maintain that complainant and his witnesses led the Court to believe that a crime existed when in fact there was none. This is wrong. As earlier discussed, PD 49 as amended, does not require registration and deposit for a creator to be able to file an action for infringement of his rights. These conditions are merely pre-requisites to an action for damages. So, as long as the proscribed acts are shown to exist, an action for infringement may be initiated. 84

Accordingly, the certifications 85 from the Copyright Section of the National Library, presented as evidence by private respondents to show non-registration of some of the films of petitioners, assume no evidentiary weight or significance whatsoever. Furthermore, a closer review of Presidential Decree No. 49 reveals that even with respect to works which are required under Section 26 thereof to be registered and with copies to deposited with the National Library, such as books, including composite and cyclopedic works, manuscripts, directories and gazetteers; and periodicals, including pamphlets and newspapers; lectures, sermons, addresses, dissertations prepared for oral delivery; and letters, the failure to comply with said requirements does not deprive the copyright owner of the right to sue for infringement. Such non-compliance merely limits the remedies available to him and subjects him to the corresponding sanction. The reason for this is expressed in Section 2 of the decree which prefaces its enumeration of copyrightable works with the explicit statement that "the rights granted under this Decree shall, from the moment of creation, subsist with respect to any of the following classes of works." This means that under the present state of the law, the copyright for a work is acquired by an intellectual creator from the moment of creation even in the absence of registration and deposit. As has been authoritatively clarified:
The registration and deposit of two complete copies or reproductions of the work with the National Library within three weeks after the first public dissemination or performance of the work, as provided for in Section 26 (P.D. No. 49, as amended), is not for the purpose of securing a copyright of the work, but rather to avoid the penalty for non-compliance of the deposit of said two copies and in order to recover damages in an infringement suit. 86

One distressing observation. This case has been fought on the basis of, and its resolution long delayed by resort to, technicalities to a virtually abusive extent by private respondents, without so much as an attempt to adduce any credible evidence showing that they conduct their business legitimately and fairly. The fact that private respondents could not show proof of their authority or that there was consent from the copyright owners for them to sell, lease, distribute or circulate petitioners' copyrighted films immeasurably bolsters the lower court's initial finding of probable cause. That private respondents are licensed by the Videogram Regulatory Board does not insulate them from criminal and civil liability for their unlawful business practices. What is more deplorable is that the reprehensible acts of some unscrupulous characters have stigmatized the Philippines with an unsavory reputation as a hub for intellectual piracy in this part of the globe, formerly in the records of the General Agreement on Tariffs and Trade and, now, of the World Trade Organization. Such acts must not be glossed over but should be denounced and repressed lest the Philippines become an international pariah in the global intellectual community. WHEREFORE, the assailed judgment and resolution of respondent Court of Appeals, and necessarily inclusive of the order of the lower court dated November 22, 1988, are hereby REVERSED and SET ASIDE. The order of the court a quo of September 5, 1988 upholding the validity of Search Warrant No. 87-053 is hereby REINSTATED, and said court is DIRECTED to take and expeditiously proceed with such appropriate proceedings as may be called for in this case. Treble costs are further assessed against private respondents.

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SO ORDERED. Narvasa, C.J., Padilla, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco, Hermosisima, Jr., Panganiban and Torres, Jr., JJ., concur. Bellosillo, J., took no part. Footnotes 1 Rollo, CA-G.R. CV No. 20622, 155-158; Justice Quirino D. Abad-Santos, Jr., ponente, with Justices Luis A. Javellana and Eduardo R. Bengson concurring; Rollo, 36-40. 2 Ibid., 184; ibid., 42. 3 Rollo, 50-51; Original Record, 327-328. 4 Ibid., 43-49; ibid., 274-280; per Judge Buenaventura J. Guerrero. 5 Ibid., 36-37; Rollo, CA-G.R. CV No. 20622, 155-156. 6 G.R. Nos. 76649-51, August 19, 1988, 164 SCRA 655. 7 Original Record, 236-239; Rollo, 83-85, 188-190. 8 Ibid., 267-268; ibid., 124; ibid., 114-115, 169-170. 9 Rollo, 114-115, 169-170. 10 Marshall-Wells Co. vs. Henry W. Elser & Co., 46 Phil. 71 (1924). 11 Martin, T.C., Commentaries and Jurisprudence on Philippine Commercial Laws, Vol. 4, 1986 rev. ed., 371-372, citing Pacific Vegetable Oil Corporation vs. Singzon, L-7917, April 29, 1955, 96 Phil. 986 (unrep.) and Eastbound Navigation, Ltd. vs. Juan Ysmael and Co., Inc., 102 Phil. 1 (1957); La Chemise Lacoste, S.A. vs. Fernandez, etc., et al., G.R. Nos. 63795-97, May 21, 1984, 129 SCRA 373; Antam Consolidated, Inc., et al. vs. Court of Appeals, et al., G.R. No. 61523, July 31, 1986, 143 SCRA 288; Converse Rubber Corporation vs. Universal Rubber Products, Inc., et al., L-27906, January 8, 1987, 147 SCRA 154; Puma Sportschuhfabriken Rudolf Dassler, K.G. vs. Intermediate Appellate Court, et al., G.R. No. 75067, February 26, 1988, 158 SCRA 233; Merill Lynch Futures, Inc. vs. Court of Appeals, et al., G.R. No. 97816, July 24, 1992, 211 SCRA 824; Philip Morris, Inc., et al. vs. Court of Appeals, et al., G.R. No. 91332, July 16, 1993, 224 SCRA 576; Signetics Corporation vs. Court of Appeals, et al., G.R. No. 105141, August 31, 1993, 225 SCRA 737, Georg Grotjahn GMBH & Co. vs. Isnani, et al., G.R. No. 109272, August 10, 1994, 235 SCRA 216. 12 Lopez, R.N., Corporation Code of the Philippines Annonated, Vol. 3, 1994 ed., 1152-1153, citing Com. v. Wilkesbarre & H.R. Co., 251 Pa 6, 95 Atl. 915. 13 36 Am. Jur. 2d, Foreign Corporations, Sec. 317, 312-313; National Sugar Trading Corporation, et al. vs. Court of Appeals, et al., G.R. No. 110910, July 17, 1995, 246 SCRA 465. 14 Martin, T.C., op. cit., 373, citing Tracton Co. v. Collector of Internal Revenue, 223 F. 984. 15 Ibid., id., id., 314-315. 16 Mentholatum Co., Inc. vs. Mangaliman, 92 Phil. 524 (1941). 17 An Act to Require that the Making of Investments and the Doing of Business Within the Philippines by Foreigners or Business Organizations Owned in Whole or in Part by Foreigners Should Contribute to the Sound and Balanced Development of the National Economy on a Self-Sustaining Basis, and for Other Purposes; Enacted without executive approval, September 30, 1968. 18 A Decree to Revise, Amend and Codify the Investment, Agricultural and Export Incentives Acts to be Known as the Omnibus Investments Code, effective January 16, 1981. See also Art. 44 of the Omnibus Investments Code of 1987 (Executive Order No. 226, effective July 16, 1987).

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19 An Act to Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises Doing Business in the Philippines, and for Other Purposes; Approved, June 13, 1991. 20 Exhibit I; Original Record, 257. 21 Original Record, 268. 22 36 Am. Jur. 2d, Foreign Corporations, Sec. 335, 336. 23 Ibid., id., Sec. 362, 375-376. 24 Cannon Mfg. Co. v. Cudahy Packing Co., 267 US 333, 69 L ed 634, 45 S Ct 250; Hessig-Ellis Drug Co. v. Sly, 83 Kan 60, 109 P 770; Barnes v. Maxwell Motor Sales Corporation, 172 Ky 409, 89 SW 444; Harrell v. Peters Cartridge Co., 36 Okla 684, 129 P 872. 25 Gottschalk Co. v. Distilling & Cattle Feeding Co. (CC Md.), 50 F 681. 26 O'Brien v. Lanpar Co. (Tex Civ App) 391 SW 2d 483. 27 36 Am. Jur. 2d., Foreign Corporation, Sec. 337, 339. 28 Original Record, 236-237, 281-284; Rollo, CA-G.R. CV No. 20622, 100-102; Rollo, 83-85, 188-190. 29 Sec. 1(d), Rule 16. 30 Sec. 1(g), id. 31 Lunsod vs. Ortega, 46 Phil. 664 (1921); Recreation and Amusement Association of the Philippines vs. City of Manila, et al., 100 Phil. 950 (1957). 32 Casimiro vs. Roque, et al., 98 Phil. 880 (1956); Gonzales, et al. vs. Alegarbes, 99 Phil. 213 (1956). 33 Calano vs. Cruz, 91 Phil. 247 (1952). See also Arguelles vs. Syyap, 22 Phil. 442 (1912); Leviton Industries, et al. vs. Salvador, etc., et al., L-40163, June 19, 1982, 114 SCRA 420; Bulakhidas vs. Navarro, etc., et al., L-49695, April 7, 1986, 142 SCRA 1; Acain vs. Intermediate Appellate Court, et al., G.R. No. 72706, October 27, 1987, 155 SCRA 100; Pilipinas Shell Petroleum Corporation vs. Dumlao, etc., et al., L44888, February 7, 1992, 206 SCRA 40. 34 Sustiguer, et al. vs. Tamayo, et al., L-29341, August 21, 1989, 176 SCRA 579. See Annotations on Legal Capacity to Sue by Severino S. Tabios, following the published decision in La Chemise Lacoste, S.A. vs. Fernandez, etc., et al., supra, fn. 11. 35 Facilities Management Corporation vs. De la Osa, et al., L-38649, March 26, 1979, 89 SCRA 131; Antam Consolidated, Inc., et al. vs. Court of Appeals, et al., and cases cited therein supra, fn. 11; Signetics Corporation vs. Court of Appeals, et al., supra, fn. 11; National Sugar Trading Corporation, et al. vs. Court of Appeals, et al., supra, fn. 13. 36 164 SCRA 655, fn. 6. 37 G.R. No. 64261, December 26, 1984, 133 SCRA 800. 38 Rollo, 80-81. 39 Ibid., 39-40. 40 Tolentino, A.M., Commentaries and Jurisprudence on The Civil Code of the Philippines, Vol. I, 1990 ed., 36. 41 Paras, E.L., Civil Code of the Philippines Annotated, 12th ed., 57. 42 Caltex (Philippines), Inc. vs. Palomar, etc., L-19650, September 29, 1966, 18 SCRA 247; Floresca, et al., vs. Philex Mining Corporation, et al., L-30642, April 30, 1985, 136 SCRA 141. 43 G.R. No. 100716, October 28, 1993, 227 SCRA 444, and cases cited therein.

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44 L-30061, February 27, 1974, 55 SCRA 607. 45 G.R. No. 97998, January 27, 1992, 205 SCRA 515. 46 100 Phil. 501 (1956). See also People vs. Licera, L-39990, July 22, 1975, 65 SCRA 270. 47 People vs. Jabinal, supra, fn. 44; Unciano Paramedical College, Inc., et al. vs. Court of Appeals, et al., G.R. No. 100335, April 7, 1993, 221 SCRA 285; Taada, et al. vs. Guingona, Jr., etc., et al., G.R. No. 113888, August 19, 1994, 235 SCRA 507. 48 De Agbayani vs. Philippine National Bank, et al., L-23127, April 29, 1971, 38 SCRA 429. 49 Rollo, 21-24, 159-163. 50 Rollo, 35. 51 Original Record, 4-7. 52 Ibid., 155-156. 53 Ibid., 12-15. 54 Ibid., 157-158. 55 Ibid., 9-10, 159-160. 56 Rollo, 85-86. 57 City of Manila vs. Cabangis, 10 Phil. 151 (1908); Kabase v. State, 31 Ala. App. 77, 12 So. 2nd, 758, 764. 58 See Phil. Movie Workers Association vs. Premiere Productions, Inc., 92 Phil. 843 (1953). 59 See 3 Jones on Evidence, Sec. 1400. 60 47 Am. Jur. 2d, Searches and Seizures, Sec. 21, 576. 61 79 CJS, Searches and Seizures, Sec. 74, 862. 62 Ibid., id., id., 863. 63 Lucich v. State, Md., 71 A. 2d 432; Smith v. State, 62 A. 2d 287, 191 Md. 329, 5 A.L.R. 2d, 386. 64 U.S. v. Nichols, D.C. Ark., 89 F. Supp. 953, 955. 65 Silver v. State, 110 Tex Crim. Rep. 512, 8 SW (2d) 144, 9 SW (2d) 358, 60 A.L.R. 290. 66 Goodman v. State, 11 A. 2d 635, 639, 178 Md. I. 67 47 Am. Jur. 2d, Searches and Seizures, Sec. 22, 516; Brinegar v. United States, 338 U.S. 160 (1949). 68 79 CJS, Search and Seizures, Sec. 74, 865. 69 Burgos, Sr., et al. vs. Chief of Staff, et al., supra, fn. 37; Quintero vs. National Bureau of Investigation, et al., L-35149, June 23, 1988, 162 SCRA 467; MHP Garments, Inc., et al. vs. Court of Appeals, et al., G.R. No. 86720, September 2, 1994, 236 SCRA 227. 70 State v. Perkins, 285 S.W. 1021, 220 Mo. App. 349. 71 State v. Norris, 109 So. 787, 161 La 988. 72 G.M. Leasing Corp. v. United States, 429 U.S. 338, 97 S Ct. 619, 50 L. Ed. 2d 530. 73 See Central Bank of the Philippines vs. Morfe, et al., L-20119, June 30, 1967, 20 SCRA 507; Luna vs. Plaza, etc., et al., L-27511, November 29, 1968, 26 SCRA 310.

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74 Original Record, 277-278; Rollo, 46-47. 75 Ibid., 328; ibid., 51. 76 Rollo, CA-G.R. CV No. 20622, 177-178. 77 Promulgated on October 5, 1985. 78 18 CJS, Copyright and Literary Property, Sec. 90, 212; 18 Am Jur 2d, Copyright and Literary Property, Sec. 106, 391-392. 79 Ibid., id., Sec. 94, 217, 218. 80 Universal Pictures Co. v. Harold Lloyd Corp. (CA9 Cal), 162 F2d 354; Arnstein v. Porter (CA2 Ny), 154 F2d 464. 81 Original Record, 278; Rollo 47. 82 L-32409, February 27, 1971, 37 SCRA 823. 83 Original Record, 279; Rollo, 47. 84 Ibid., 275, 278; ibid., 44, 45. 85 Exhbit Nos. 1, 2, 3 and 4; Original Record, 174-178. 86 Martin, T.C., op cit., Vol. 2, 366. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-10251 February 10, 1916

COMPAIA GENERAL DE TABACOS DE FILIPINAS, plaintiff-appellee, vs. ALHAMBRA CIGAR & CIGARETTE MANUFACTURING CO., defendant-appellant. Rohde and Wright for appellant. Gilbert, Haussermann, Cohn and Fisher for appellee. MORELAND, J.: The plaintiff claims to have appropriated and to own the exclusive right to use the word "Isabela" on cigarettes. Sometime before the commencement of this action defendant began the manufacture of cigarettes, offering them to the public in packages on the front side of each of which appeared the words "Alhambra Isabelas." Judgment was for plaintiff and defendant appealed. The complaint contains two counts, one for the violation or infringement of the trade-name "Isabela," and the other, claims the plaintiff, for unfair competition arising out of the use by the defendant of the word "Isabelas" on its cigarettes in the manner already stated. The trial court dismissed the count based on unfair competition, saying, "we doubt that the facts established, under the circumstances of the case, justify the inference of actual intention on defendant's part to deceive the public and defraud a competitor, and can, therefore, not find the defendant guilty of unfair competition." Although neither count in the complaint was based on the infringement or violation of a trademark, and plaintiff, during the trial, offered no evidence on the subject, and, accordingly, no issue was framed thereon either by the pleadings or on the trial (Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep., 504,), nevertheless the court, in its decision for plaintiff, treated the action as one for the infringement of a trade-mark under the first four sections of Act No. 666." The court then cited those section of the Act relative to trade-marks, discussed them at some length, and finally founded its judgment thereon. Plaintiff did not appeal from that portion of the judgment finding the defendant not guilty of unfair competition; while the defendant appealed from that part founded on the violation of trade-mark and decreeing a perpetual injunction.

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Therefore the question involving unfair competition is not really before us, that count of the complaint founded thereon having been in effect dismissed by the trial court and no appeal having been taken from that dismissal. While the court founded its judgment solely on the theory of a violation of a trade-mark and, although the defendant insisted from the very beginning that the action as set out in the complaint in no possible way involved the question of a trade-mark, nevertheless, the court, as we have already seen, proceeded to try and resolve the case on that theory and based its judgment exclusively thereon. Defendant now contends that, if it appears that the action was not for a violation of a trade-mark, the judgment should be reversed as it was wholly misled in its defense and would be seriously prejudiced by the change necessarily resulting. We regard the action, however, as we necessarily must under the statute, as one for the violation of a trade-name and not one for the violation of a trade-mark or for unfair competition. But, inasmuch as we find for the defendant on the whole case and reverse the judgment against it, we do not stop to dispose of the question as to whether the theory of the action was change during or after trial or on appeal, so long as the parties have agreed on certain questions which they have submitted and discussed, which questions include all those which can arise whether the action be for the violation of a trade-name or for unfair competition. We prefer to decide the case so as to end the litigation once for all. Inasmuch as the plaintiff did not appeal from the judgment dismissing the complaint as to unfair competition, we would be justified in holding that that question is not before us, and, accordingly, in deciding the case from the single viewpoint of a violation of a trade-name. But for the reasons just expressed we take up both alleged causes of action and decide all the questions presented by both. Plaintiff's claim is this: It has trade-name rights in the word "Isabela." The defendant has violated those rights. Plaintiff is entitled to damages on the theory of violation of a trade name, or unfair competition, or both. Can it recover? We hold that none of these claims have been sustained and that plaintiff is not entitled to recover on any theory mentioned. We proceed to show why. Rights of action for the violation of a trade-mark or trade-name or to restrain unfair competition are conferred by statute. Without such a statute right of action would not exist in those cases. In deciding this appeal, therefore, we must be governed by the provisions of the statute. The Act is No. 666 of the Philippine Commission and confers a right of action in three cases (1) for the violation of a trade-mark, (2) a trade-name, and (3) to restrain unfair competition. The statute founds the cause of action in the first two cases exclusively on the invasion of the right of property which the statute gives in the trade-mark or trade-name. These actions are not based on fraud nor is the right given on the theory of unfair competition. It is founded solely in the property which the statute creates in the trade-mark or trade-name. These two cases are dealt with somewhat on the theory of patents, giving the owner of the trade-mark or trade-name a right in the thingsimilar to the right created by a patent. As a necessary consequence, an action for a violation or infringement of a trademark or trade-name does not proceed primarily on the theory that either the plaintiff or the public has been or will be defrauded, although that may be in effect, the result; but on the hypothesis that plaintiff's right in the mark or the name has been invaded and that he is entitled to the damages resulting from the invasion. In either case an action may be maintained without proof of anything more than the right to the exclusive use of the mark or name and that the defendant has violated it. No allegation or proof of fraud or intent to defraud is necessarily. On the other hand, the action to prevent unfair competition is based exclusively on fraud; and it would seem from the wording of the statute that it refers to the fraud committed on the public rather than to the fraud committed on theplaintiff the fraud against the plaintiff being only an incident the means by which the fraud is perpetrated on the public. No right of property in the appearance which plaintiff gives to his goods is required, if the word "property" may be used in such a connection, and none needs to be alleged or proved. In such an action plaintiff, to recover, must prove that the defendant, in selling his goods, gave them the same general appearance of the goods of the plaintiff either in the wrapping of the package in which they were contained or in the devices of words thereon or in some other feature of their appearance which would be likely to influence purchasers to believe that the goods offered for sale by defendant were those of the plaintiff; and that the defendant clothed his goods with such appearance for the purpose of deceiving the public and of defrauding the plaintiff of his legitimate trade. The statute expressly requires that the plaintiff prove the intent to deceive the public and defraud a competitor before he can recover; and, while such intent may be inferred from the similarity in the appearance of the goods as packed or offered for sale, such an inference is not a necessary one, it being legally possible that such similarity exist and there still be no intent to deceive. Fraud, then, is the essence of an action of unfair competition; right in property the essence of the other two. From these observations it is a necessary deduction that an action for the violation of a trade-name cannot be carried on in conjunction with an action of unfair competition based on a similarity to the plaintiff's trade-name. If an action on the trade-name will lie, then an action of unfair competition based on similarity to the trade-name is impossible; whereas, on the other hand, if an action of unfair competition is the proper action, then one for the violation of a trade-name based on the same facts will not lie. The facts which will support an action for the violation of a trade-name will not support an action of unfair competition. The same is true of an action for the violation of a trade-mark except where such an action fails for the reason that the trade-mark is invalid because it consists of a word or words which, in law, are not capable of appropriation as a trade-mark. In such case, by express provision of the statute (section 7), an action of unfair competition will lie. No such exception is made in favor of a trade-name; and if the plaintiff fails to establish his right of property therein, his failure is irremediable. He cannot fall back on the action of unfair competition. We apprehend that the reason why this privilege was not extended to a plaintiff in an

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action for the violation of a trade-name was that an action of unfair competition is based exclusively on the appearance of the goods as they are exposed for sale; while, under the statute, the trade-name; unlike the trademark, applies exclusively to the business, profession, trade or occupation of the plaintiff and, as a consequence, it is not essential that the trade-name appear on plaintiff's goods or go into the market with them. (Section 5). It is clear that, if the action of unfair competition is based on the appearance of the goods as they exposed for sale, the facts necessary to support an action for the violation of a trade-name will not sustain it, as neither the trade-name of the plaintiff nor of the defendant need go into the market at all, and, as consequence, the similarity of appearance between the goods of plaintiff and defendant, a fact necessary to sustain an action of unfair competition, may not exist. Another principle of the law of trade-marks, trade-names and unfair competition of importance in this case, and one which naturally follows from what has already been said is that there can be no secondary meaning, as that term is understood in the American law of trade-marks and trade-names, with respect to a trade-name. It must be borne in mind, as we stated at the outset, that the only rights existing in this jurisdiction with respect to trade-marks and trade-names, as well as unfair competition, are conferred by Act No. 666; and, accordingly, they are limited by the provisions of the Act. The statute prohibits the registration of a trade-name when that trade-name represents the geographical place of production or origin of the products or goods to which the trade-name refers, or when it is merely the name, quality, or description of the merchandise with respect to which the trade-name is to be used. In such cases, therefore, no trade-name can exist. The statute prescribes what a trade-name may be and then gives a right of action to protect the owner of that trade-name. If it is not a trade-name defined by statute, it does not carry with it the right of action granted by the statute. No trade-name can legally exist except that prescribed by the Act. If it can exist, it can be enforced as, and only as, the rights in trade-names are enforced under the statute. If it cannot exist as a trade-name, i. e., as a property right, or on the theory of unfair competition based on the doctrine of secondary meaning. Of course, if the trade-name is not recognized in law, it can have no secondary meaning. Moreover, the doctrine of secondary meaning as it is known in the United States, is carried into effect on the theory of unfair competition and not on the theory of property in the trade-name. Indeed, the necessity of basing the action on the theory of unfair competition negatives the existence at the time of the trade-name in its primary meaning. In this jurisdiction that necessity in emphasized by the fact that, as we have seen, the statute makes a sharp distinction between actions for the violation of a trade-mark or trade-name and those based on unfair competition, the former being founded in a property right and the latter on the fact that fraud has been or will be committed on the public. Furthermore, if the action of unfair competition based on the similarity of plaintiff's and defendant's trade-names cannot be maintained in this jurisdiction, as we have seen that it cannot, then the fundamental basis of the doctrine of secondary meaning disappears. We might add that the statute does not seem to have dealt with trade-names as it has with trade-marks; for, with respect to the latter, it expressly confers, as we have seen (sec. 7), a right of action for unfair competition even though the trade-mark, as such, is illegal and unregistered by reason of being the name of the geographical place of production or origin of the goods to which it is affixed, or the name, quality or description of the merchandise on which it is placed. In a other words, the statute seems to create with regard to a trade-mark a right which is, in many aspects, the equivalent of that springing from the doctrine of secondary meaning, and where the trade-mark, though illegal and unregistered under the Act, has been used by the plaintiff for such a length of time that it has ceased to be used and understood in its primary meaning, the owner will be protected on the theory of unfair competition. The statute does not confer a right on the owner of a tradename under similar circumstances. The trial court was, therefore, correct in dismissing that count of the complaint based on unfair competition. The statute, as we have already observed, does not permit these two action to be maintained on the same facts. We might say, however, that the ownership of a trade-name does not necessarily prevent the owner from bringing an action of unfair competition founded on the appearance of the goods of defendant as exposed for sale, which appearance is not based on similarity to the owner's trade-name. Such an action would have to be based on the general appearance of the package, its form, color, style, adornment, and matters of that character; and would not lie on appearance arising from the similarity of plaintiff's and defendant's trade-names. The effect of these observations and conclusions would necessarily be to end the case at this point if we were disposed to leave the other questions presented for resolution unsettled; for, if there can attach to a trade-name no secondary meaning, plaintiff's action must fail. It is based exclusively on the secondary signification of the word "Isabela" which it has acquired by long association with plaintiff's cigarettes, by virtue of which it no longer means to the trade and the public generally when used in connection with tobacco products, a province of Luzon or the tobacco grown in that province, but simply and solely the products of plaintiff's factory. In other words, the claim is that it has completely lost its primary signification and come to have a secondary meaning exclusively when used in connection with manufactured tobacco. The action being based entirely on the theory of secondary meaning, and the statute giving no right of action in cases of that character, it is evident that the action cannot be maintained. In spite of the fact, however, that we might have reverse the judgment on the grounds, already stated, we prefer, in the interests of the parties, the bar and the public generally, to decide the other questions presented, some of them being extremely important and of public interest and they having been fully argued on the appeal. (Lichaucovs. Limjuco and Gonzalo, 19 Phil. Rep., 12.) It is admitted all through this case, in fact it is alleged in plaintiff's complaint and is set out in all parts of its brief filed on this appeal, that plaintiff's trade-name, as evidenced by the certificate issued under the Spanish regime,

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consists solely of the words "La Flor de la Isabela." Plaintiff does not claim that the word "Isabela" has been registered by it as a trade-name or that it has a title from any source conferring on it the exclusive right to use that word. The certificate offered in evidence plaintiff to show its right to the exclusive use of the phrase "La Flor de la Isabela" grants two rights: One in a trade-mark consisting of a rectangular shield, surmounted by a crown and divided into four equal parts, in the right hand upper corner of which is a full rigged sailing ship at sea, in the left hand upper corner a growing tobacco plant, in the lower right hand corner a field of sugar cane with a pool of water in the foreground, and in the lower left hand corner a factory in operation; the other, a right in the trade-name "La Flor de la Isabela." As we have already seen, there is no claim here based on the infringement or violation of the trade-mark just described, nor is there contention or claim of any kind that the use of the word "Isabela" is a violation or an infringement of the trade-name "La Flor de la Isabela." The action is not for the violation of the trade-name "La Flor de la Isabela," but for the violation of an entirely different trade-name, namely, "Isabela." The exclusive right to use this name, plaintiff claims arises from two causes: First, the contraction of the phrase "La Flor de la Isabela" into the word "Isabela" by popular expression and use and second, the use for more than twenty years of the word "Isabela." In view of the fact that there is no claim of an infringement of the trade name "La Flor de la Isabela," these two claims are identical; for, there could have been no contraction brought about by popular expression except after long lapse of time. The contraction of the phrase into the word would create no rights, there being no registration, unless it resulted from long use. Therefore, to establish a right in the word, the contraction must be shown to have existed for a length of time equivalent to that which would be necessary to give the word "Isabela" the dignity and legal status of a trade-name. If therefore, it results from the evidence in this action that the word "Isabela" has not been used by the plaintiff for a period of time sufficient to give it the special value necessary to bring it within the law relating to trade-names (if it be admitted for the moment that that could be done), then the plaintiff must fail, whether it base its action on contraction, or use, or both. There is another ground on which plaintiff would fail in his action. If it should appear in the case that the word "Isabela" was a word which, at the time of its adoption by plaintiff and at all times since, was the name of the geographical place of production or origin or was ordinarily and generally used as the name, quality or description of the merchandise to which it related, plaintiff would fail, as such name would not be capable of being registered as a trade-name (secs. 2 and 13) and could not, for that reason, be appropriated by plaintiff as such. That being so, no action for a violation thereof could be maintained, as none is granted by the statute in such case. (Secs. 3, 5, and 7.) Before entering on the discussion of the facts of the case, it may be well to set down certain things that appear to be uncontroverted: 1. There is a province in the Island of Luzon known as Isabela Province. In that province grows tobacco of a class and quality not grown in any other province or place in the Philippine Islands. 2. That tobacco is known commercially and to the trade as Isabela tobacco and the expression "Isabela tobacco" has in the Philippine Islands a meaning as definite, certain and clear as the expression "Havanna tobacco" or "Virginia tobacco" in the United States. 3. The defendant has used on its cigarettes the words "Alhambra Isabela" with a statement that the cigarettes inclosed in the package are composed exclusively of Isabela tobacco. Aside from "Isabela" no other word or phrase or character is used on defendant's packages which it is claimed is in violation of plaintiff's rights. 4. There is absolutely no resemblance between the packages of cigarettes manufactured and sold by the plaintiff and those manufactured and sold by the defendant, except in the word "Isabela." 5. The phrase "La Flor de la Isabela" means in English, giving it a free translation, "The best tobacco grown in Isabela Province," or "The finest tobacco grown in Isabela Province," or "The finest quality of tobacco grown in Isabela Province." The phrase, in its primary sense, conveys the idea that the products on which it is placed are composed of the best tobacco grown in the Province of Isabela. 6. Plaintiff's cigarettes marked with the design "La Flor de la Isabela," and referred to in this case, are not manufactured or composed, either wholly or in part, of tobacco grown in Isabela Province. 7. The cigarettes manufactured and sold by defendant as "Alhambra Isabelas" are composed exclusively of tobacco grown in Isabela Province. 8. The word "Isabela," when used in connection with tobacco, cigars or cigarettes, signifies in its primary sense that the tobacco itself, or that composing the cigars or cigarettes, is Isabela tobacco. We are of the opinion that the plaintiff must fail in this action for the reason that, in the first place, it has not proved that the word "Isabela" has been used in the manner and form alleged in the complaint; and, in the second place, for the reason that it is the name of the geographical place of production or origin of the material composing the article to which it is affixed and that it is the name, quality and description thereof. The burden is on plaintiff to prove the use of word "Isabela" for such a length of time and under such circumstances as to give it the right to its exclusive

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use. Reviewing the evidence of record, we are of the opinion that the overwhelming weight thereof is contrary to plaintiff's contention. It shows that in not a single instance in the history of the plaintiff corporation, so far as is disclosed by the record, has a package of its cigarettes gone into the market, either at wholesale or retail, with the word "Isabela" alone or the package as a separate or distinct word or name. In every instance, so far as the documentary evidence goes, the packages have been marked by the phrase "La Flor de la Isabela." There is not an exhibit of any probative value on the issues involved which does not tend affirmatively to establish that the word was never used as a separate and distinct word and to negative any intention on the part of the plaintiff to use it as much. As far back as the time when the plaintiff obtained the right to use the trade-name "La Flor de la Isabela" the exhibit filed in its application for registration of that trade-name demonstrate, as they naturally must, that the tradename which plaintiff desired to secure was "La Flor de la Isabela" and not "Isabela." These exhibits are the wrappers which inclose plaintiff's cigarettes as they are found exposed for sale and have on them the words, designs and devices to the exclusive use of which plaintiff claims to be entitled. Every one of them contains the phrase "La Flor de la Isabela" and not one of them the word "Isabela." In all of them the word "Flor" is almost equally conspicuous with the word "Isabela" and from them we can see no intent to emphasize the word "Isabela" more than the word "Flor." So far as the record shows, plaintiff nowhere advertised or advertises its cigarettes as "Isabela" cigarettes and we find nothing in the exhibits which shows that the plaintiff has or ever had the slightest intention to use the word "Isabela" as a trade-name. Much stress is laid by plaintiff on the fact that the wholesale packages of cigarettes, that is, the packages containing a number of the small retail packages, have printed on the two edges in large letters "Isabela Cortos," "Isabela Largos," and "Isabela Entrelargos," as the case may be. But it is to be noted that it appears from the exhibits themselves that plaintiff's trade-name "La Flor de la Isabela," in conspicuous letters, is also attached to both ends of each of such packages; and each of the small packages inclosed in the larger carries the phrase "La Flor de la Isabela" and we said at the outset, that not a single package of plaintiff's cigarettes has ever gone into the market in the Philippine Islands with the word "Isabela" alone thereon as a trade-name. Much importance is attached by plaintiff to a letter dated April 8, 1914, received from one of its employees in America. While this letter is of doubtful competency as evidence for plaintiff, it is in the record, and inasmuch as so much stress is laid on a portion of it, and it appears to be competent evidence as against plaintiff, we refer to it. The sentence in the letter to which reference is particularly made in this : "Furthermore, the trade here knows the cigars as 'Isabela' pure and simple." As is seen, this letter refers to cigars and not cigarettes; but, be that as it may, we believe that the plaintiff has quite overlooked the real nature of the letter as evidence. In its attempt to demonstrate that its tobacco products are known in America as "Isabela" products, it overlooked the first part of the letter which, to us, is the most significant part of it. The writer says: Ehrman Bros. and Co. have asked us to have the paster "La Flor de la Isabela," which goes on the end of the boxes, as per sample we inclose herewith, changed as follows: Make the strip about half as wide again as the inclosed sample, and instead of the words "La Flor de la Isabela," put on just the one word "Isabela" in large letters. Ehram Bros. say their customers claim that the lettering on this strip is too small for the customers to notice it readily behind the counter, whereas a large lettering of the word "Isabela" will be much more attractive and more noticeable. This portion of the letter demonstrates conclusively that the plaintiff has never advertised its cigars in America as "Isabela" cigars. It has persisted always in advertising them as "La Flor de la Isabela;" and the precise objection made by the dealers handling plaintiff's cigars in the United States is that plaintiff insists on advertising its goods as "La Flor de la Isabela" instead of "Isabela;" and it is clear from the letter that if, as the writer says, its cigars are known to the trade in America as "Isabela" cigars, it is not by reason of plaintiff's efforts but in spite of them. Plaintiff itself has put forth no effort, as far as we can see from the record, to create a right in the word "Isabela." All of its money has been spent and all its energy used in the advertisement of the phrase "La Flor de la Isabela." A price list of the products of the plaintiff company has been introduced in evidence, on the tenth and eleventh pages of which appear the words "Isabela Cortos," "Isabela Largos" and "Isabela Entrelargos," together with the price. We do not regard this price list as indicating anything more that the fact that the limited space (the price list is printed in very small letters) forbade the use of the phrase "La Flor de la Isabela." But we note then, in extremely large letters, comparatively speaking, on the front page of the price list, are found the words "La Flor de la Isabela," while on each package of cigarettes which, in the price list, are called "Isabela Cortos," "Isabela Largos," and "Isabela Entrelargos," is found, in more than one place, the phrase "La Flor de la Isabela." Moreover, under the word "remarks" found at the close of the price list, are these words: "When the Spanish Government abolished the tobacco monopoly in the Philippine Islands this company acquired the exclusive right to use the marks Cavite, Malabon, Princesa, and Meisic which were formerly the property of the Government." Nothing is said about the word "Isabela." No rights are claimed by that advertisement in that name. The documentary evidence introduce by plaintiff is fully corroborated by the evidence of defendant. The testimony of Mr. Olsen, one of the leading tobacco manufacturers of the Philippine Islands, is to the effect that the products of plaintiff's factory are generally known in the Philippine Islands as Tabacalera products, sometimes as "La Flor de la Isabela" products, but not as "Isabela" products. He states that the cigarettes which plaintiff calls "Isabela Cortos" and "Isabela Largos" are generally known to the trade as "Tabacalera Cortos" and "Tabacalera Largos." The clerk of the Court of First Instance in which the action was tried, being called as a witness for the defendant, testified that he

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smoked cigarettes of the Tabacalera and Insular factories and that he had never heard of "Isabela" cigarettes before the defendant began the manufacture of its cigarettes; but that he had frequently heard of the factory "La Flor de la Isabela." Mr. Blanco, the interpreter of the court, testified that he had smoked cigarettes for forty or fifty years and that he had not heard of "Isabela" cigarettes. While some of the witnesses for the plaintiff testified that the public knew the products of plaintiff's factory as "Isabela" products, that testimony was in part contradicted by other witnesses for the plaintiff and is entirely at variance with its documentary evidence. It appearing from the record in the case that the plaintiff has always insisted on the ownership of the trade-name "La Flor de la Isabela" and has invariably sent it into the market with its products both in the Philippine Islands and in the United States, and that whatever effort and money plaintiff has expended in securing a trade-name have been spent with respect to "La Flor de la Isabela" and not "Isabela," we are driven to the conclusion that, as a matter of fact, the word "Isabela" has never been used by the plaintiff as a trade-name in such a way as to give it any exclusive right therein. Moreover, the persistent use of the trade-name "La Flor de la Isabela" denies the possibility of any single word in that phrase being a trade-name. It being kept in mind that there is no contention on the part of the plaintiff that the use of the word "Isabela" by the defendant is an infringement of the trade-name "La Flor de la Isabela," it is clear that the use of "La Flor de la Isabela" has given the plaintiff no right to the use of the word "Isabela." Furthermore, plaintiff denies that it has abandoned the trade-name "La Flor de la Isabela," but maintains that its rights therein are now in full force and effect. Admitting, even for the sake of argument, that there can exist a tradename unless it has used it for a sufficient length of time to give it a special value. But plaintiff's effort has been directed exclusively to the trade-name "La Flor de la Isabela," has, by plaintiff's efforts, received any special value in connection with plaintiff's products. We might say, in concluding this branch of the subject, that, even admitting that the word "Isabela" may have been appropriable by plaintiff as a trade-name at the time it began to use it, the evidence showing that is had been exclusively appropriated by the plaintiff would have to be very strong to establish the fact of appropriation and the right to exclusive use. The law as it now stands as his stood since the Royal Decree of 1888 prohibits the use of a geographical name as a trade-name. Act No. 666 of prohibits the use not only of a geographical name but also of a word which is either the name, quality, or the description of the article to which the trade-name refers. Even if appropriation were possible, it would require the clearest of proof to permit the appropriation of a word as a tradename the use of which in that connection the law expressly declines to sanction. Furthermore, we are of the opinion that, even if plaintiff had proved a right to the exclusive use of the word "Isabela," we would be forced to conclude that its use by the defendant in connection with the word "Alhambra," which is made equally conspicuous with the word "Isabela," would be a sufficient effort on the part of defendant to distinguish its cigarettes from those of plaintiff; particularly in view of the fact that the word "Isabela" is the name of a province and also the commercial name of the tobacco grown in that province. We do not believe, however, that the word "Isabela" can be appropriated or could be appropriated at the time plaintiff claimed that it began to use that word as descriptive of its products. The Royal Decree of 1888 prohibited the use of a geographical name as trade-name or trade-mark and that decree was in force before the use of the word "Isabela" began, even under plaintiff's claim. At least if had not been used for a sufficient length of time to give it a property right therein, it never having been registered as a trade-name either under that decree or Act No. 666. From the date of that decree to the present time it has been unlawful to select the word "Isabela" as a trade-name, and it would have been impossible during that time for plaintiff to have obtained a right therein, no matter how much the word might have been used or to what extent it had been advertised. While Act No. 666, as we have seen, expressly permits the appropriation of a trade-mark, although it may be a geographical or descriptive name, it does not permit the appropriation of a trade-name under the same circumstance. We accordingly repeat, from the Royal Decree of 1888 to the present time, the word "Isabela" has not been appropriable by anybody as a trade-name. For these reasons and for the further reason that we regard the case of Baxter vs. Zuazua (5 Phil. Rep., 160), as decisive of the main questions involved in this case, we are of the opinion that the judgment must be reversed. The judgment appealed from is reversed and the perpetual injunction issued thereon is dissolved. Without costs in this instance. So ordered. Arellano, C.J. and Torres, J., concur. Carson and Trent, JJ., concur in the result. Johnson, J., dissents. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

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G.R. Nos. L-27425 & L-30505 April 28, 1980

CONVERSE RUBBER CORPORATION and EDWARDSON MANUFACTURING CORPORATION,plaintiffs-appellants,


vs. JACINTO RUBBER & PLASTICS CO., INC., and ACE RUBBER & PLASTICS CORPORATION, defendantsappellants. Sycip, Salazar, Luna & Associates plaintiff-appellants. Juan R. David for defendants-appellants.

BARREDO, J.: Direct appeal in G.R. No. L-27425 by both plaintiffs and defendants from the decision of the Court of First Instance of Rizal in its Civil Case No. 9380, a case alleged unfair competition, the dispositive part of which reads: Upon the foregoing, judgment is hereby rendered: 1. Permanently restraining the defendants, their agents, employees and other persons acting in their behalf from manufacturing and selling in the Philippines rubber shoes having the same or confusingly similar appearance as plaintiff Converse Rubber's Converse Chuck Taylor All Star' rubber shoes, particularly from manufacturing and selling in the Philippines rubber Shoes with (a) ankle patch with a five-pointed blue star against a white background, (b) red and blue bands, (c) white toe patch with raised diamond shaped areas, and (d) brown sole of the same or similar design as the sole of "Converse Chuck Taylor All Star" rubber-soled canvas footwear; 2. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to change the design and appearance of "Custombuilt" shoes in accordance with the sketch submitted by defendant Jacinto Rubber to plaintiff Converse Rubber on October 3, 1964 and to desist from using a star both as a symbol and as a word; 3. Ordering defendant Jacinto Rubber & Plastics Company, Inc. to pay plaintiffs the sum of P160,000.00 as compensatory damages for the years 1962 to 1965 plus 5% of the gross sales of "Custombuilt" shoes from 1966 until defendant Jacinto Rubber & Plastics Company, Inc. stop selling "Custombuilt" shoes of the present design and appearance; 4. Ordering defendants jointly and severally to pay plaintiffs P10,000.00 as attorney's fees. SO ORDERED. (Pages 228-229, Record on Appeal.) plaintiffs praying for a bigger amount of damages and defendants asking that the decision be declared null and void for lack of jurisdiction, or, alternatively, that the same be reversed completely by dismissing the complaint; and another direct appeal, in G. R. No. L-30505 by above defendant Jacinto Rubber & Plastics Co., Inc. and, a new party, Philippine Marketing and Management Corporation from the same trial court's order in the same main civil case finding them in contempt of court "in disregarding the permanent injunction" contained in the appealed decision. RE G. R. NO L-27425 Being comprehensive and well prepared, We consider it sufficient to quote the following portions of the impugned decision as basis for the resolution of the conflicting appeals aforementioned: This is an action for unfair competition. Plaintiff Converse Rubber Corporation, (is) an American Corporation, manufacturer (of) canvas rubber shoes under the trade name "Converse Chuck Taylor All Star"; in the Philippines, it has an exclusive licensee, plaintiff Edwardson Manufacturing Corporation, for the manufacture and sale in the Philippines of its product. Plaintiff Converse is the owner of trademarks and patent, registered with United States Patent Office, covering the words. "All Star", the representation and design of a five-pointed star, and the design of the sole. The trademark "Chuck Taylor" was registered by plaintiff Converse with the Philippines Patent Office on March 3, 1966. Since 1946, "Chuck Taylor" is being sold in the Philippines. It has been used exclusively by Philippine basketball teams competing in international competitions. It is also popular among players in various basketball leagues, like the MICAA and the NCAA, because of its high quality and attractive style. "Chuck Taylor" currently retails at P46.00 per pair.

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Defendant Jacinto Rubber & Plastics Company, Inc., a local corporation, likewise, manufactures and sells canvas rubber shoes. It sells its product under the trade names "Custombuilt Viscount", "Custombuilt Challenger", and "Custombuilt Jayson's". Its trademark "Custombuilt Jayson's" was registered by the Philippines Patent Office on November 29, 1957. The gross sales from 1962 to 1965 of "Custombuilt" shoes total P16,474,103.76."Custombuilt" is retailed at P11.00. In 1963, plaintiff Converse and defendant Jacinto entered into protracted negotiations for a licensing agreement whereby defendant Jacinto would be the exclusive license of plaintiff Converse in the Philippines for the manufacture and sale of "Chuck Taylor" shoes but with the right to continue manufacturing and selling its own products. One of the points taken up by parties was the design and general appearance of "Custombuilt" shoes. Plaintiff Converse insisted on the condition that defendant Jacinto change the design of "Custombuilt" shoes so as to give "Custombuilt" a general appearance different from "Chuck Taylor." After an extensive discussion, defendant Jacinto gave into to the demand of plaintiff Converse; it submitted to plaintiff Converse for the latter's approval a sketch of a new design for "Custombuilt". This design was accepted by plaintiff Converse. Defendant Jacinto Rubber then proposed that the licensing agreement be made in favor of its affiliates, defendant Ace Rubber. On January 22, 1965, defendant Ace Rubber signed the licensing agreement while defendant Jacinto Rubber and Arturo Jacinto signed the guarantee agreement to secure the performance by defendant Ace Rubber of its obligations under the licensing agreement. Both documents, it should be noted, contained the following covenants: 9. (a) Ace acknowledges that Converse is the exclusive owner of the said Converse names and design, as used in connection with the manufacture, advertising and sale of footwear: that Converse has the exclusive right to use said Converse names in such connection throughout the world. subject to the terms of this Agreement; and that neither Ace nor any person acting by, through or under Ace will, at anytime, question or dispute said ownership or the exclusive rights of Converse with respect thereto (b) Nothing herein shall be deemed to constitute a warranty by Converse as to the non-existence of infringements of Converse-names in the Republic of the Philippines. The term "infringement"as used in this Agreement shall include practices which give rise to a cause of action for damages or to injunctive relief under Sections 23 and 29 of R. A. No. 166 of the Republic of the Philippines or any other applicable law of said Republic. During the term thereof, Ace at its expense shall diligently investigate all infringements of the use of said Converse-names, whether or not such infringements violate laws pertaining to the registration of trademarks or trade names, and shall notify Converse promptly as to any infringements of said Converse names within said territory, and shall at its expense use its best efforts to prevent such infringements by an reasonable means, including the prosecution of litigation where necessary or advisable. Any award for damages which Ace may recover in such litigation shall accrue to the benefit of, and shall be owned and retained by Ace. 14. Ace shall not,during the term hereof, manufacture or sell footwear which would, by reason of its appearance and/or design, be likely, or tend, to be confused by the public with any of the Conversenamed products to be manufactured and sold hereunder, or shall in any manner, infringe Converse designs. If at any time and from time to time the manufacture of footwear under Converse-names for sale hereunder does not fully utilize Ace's production capacity, Ace shalt on Converse's order, within the limits of such surplus capacity, manufacture footwear of kinds and in amounts specified by Converse, at a price no higher than the lowest price at which similar footwear has been sold to customer of Ace during the period of one (1) year immediately preceding the date of such order, and upon no less favorable discounts and terms of sale than similar footwear is customarily offered by Ace to its most favored customer, payable in United States funds, if the earned royalty hereunder is then so payable, otherwise in Republic of the Philippines funds. 20. It being the mutual intention of the parties that Converse's exclusive property interests in the Converse-names shall at all times be protected to the full extent of the law, Ace agrees that it will execute all amendments to this Agreement which may be proposed from time to time by Converse for the purpose of fully protecting said interests. However, the licensing agreement did not materialize, because Hermogenes Jacinto refused to sign the guarantee. Plaintiff Converse and plaintiff Edwardson then executed licensing agreement, making plaintiff Edwardson the exclusive Philippine licensee for the manufacture and sale of "Chuck Taylor." On June 18, 1966, plaintiffs sent a written demand to defendants to stop manufacturing and selling "Custombuilt" shoes of Identical appearance as "Chuck Taylor". Defendants did not reply to plaintiffs' letter. Hence, this suit.

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Plaintiffs contend that "Custombuilt" shoes are Identical in design and General appearance to "Chuck Taylor" and, claiming prior Identification of "Chuck Taylor" in the mind of the buying public in the Philippines, they contend that defendants are guilty of unfair competition by selling "Custombuilt" of the design and with the general appearance of "Chuck Taylor". The design and appearance of both products, as shown by the samples and photographs of both products, are not disputed. Defendants insist that (a) there is no similarity in design and general appearance between "Custombuilt" and "Chuck Taylor", pointing out that "Custombuilt" is readily Identifiable by the tradename "Custombuilt" appearing on the ankle patch, the heel patch, and on the sole. It is also vigorously contended by defendants that the registration of defendant Jacinto Rubber's trademark "Custombuilt" being prior to the registration in the Philippines of plaintiff Converse Rubber's trademark "Chuck Taylor", plaintiffs have no cause of action. It appears that defendant started to manufacture and sell "Custombuilt" of its present design and with its present appearance in 1962. On the other hand, as earlier mentioned, "Chuck Taylor" started to be sold in the Philippines in 1946 and has been enjoying a reputation for quality among basketball players in the Philippines. The Court sees no difficulty in finding that the competing products are Identical in appearance except for the trade names. The respective designs, the shapes and the color of the ankle patch, the bands, the toe patch and the sole of the two products are exactly the same. At a distance of a few meters, it is impossible to distinguish Custombuilt' from "Chuck Taylor". The casual buyer is thus liable to mistake one for the other. Only by a close-examination and by paying attention to the trade names will the ordinary buyer be able to tell that the product is either "Custombuilt" or "Chuck Taylor", as the case may be. Even so, he will most likely think that the competing products, because they are strikingly Identical in design and appearance are manufactured by one and the same manufacturer. Clearly, this case satisfied the test of unfair competition. Priority in registration in the Philippines of a trademark is not material in an action for unfair competition as distinguished from an action for infringement of trademark. The basis of an action for unfair competition is confusing and misleading similarity in general appearance, not similarity of trademarks. The Court is not impressed by defendants' good faith in claiming that they have the right to continue manufacturing "Custombuilt" of Identical design and appearance as "Chuck Taylor". While it is true that the licensing agreement between plaintiff Converse and defendant did not materialize, the execution of the documents by the defendants constitute an admission on the part of plaintiff Converse Rubber's property right in design and appearance of "Chuck Taylor". The covenants, quoted above, show that defendants acknowledged that plaintiff Converse Rubber "is the exclusive owner of the said Converse-names and design." Defendants further covenanted not to "manufacture or sell footwear which would by reason of its appearance and/or design, be likely, or tend, to be confused by the public with any of the Converse-named products ... or shall, in any manner, infringe Converse designs". That defendants are fully aware that "Custombuilt" is Identical in design and appearance to "Chuck Taylor" has conclusively been admitted by them in their correspondence with plaintiff Converse leading to the submission by defendants to plaintiff Converse of a sketch of a new design that should give "Custombuilt" an appearance different from that of "Chuck Taylor". Aside from the written admission of defendants, the facts clearly indicate that defendants copied the design of "Chuck Taylor" with intent to gain "Chuck Taylor", as has been noted earlier, was ahead ot Custombuilt' in the Philippines market and has been enjoining a high reputation for quality and style. Even defendants' own exhibits leave no room for doubt that defendants copied the design and appearance of "Chuck Taylor" for the purpose of cashing in on the reputation of "Chuck Taylor". The samples of defendants' product show, indeed, as announced by defendants' counsel the "metamorphosis" of defendants' product. In the beginning, the design of defendants' product was entirely different from its present design and the design of "Chuck Taylor". It was only in 1962, or 16 years after "Chuck Taylor" has been in the market, that defendants adopted the present design of "Custombuilt". It is also noteworthy that "Custombuilt" sells at P35 less than "Chuck Taylor"; thus the casual buyer is led to believe that he is buying the same product at a lower price. Not surprisingly, the volume of sales of "Custombuilt" increased from 35% to 75% of defendants' total sales after they incorporated in their product the design and appearance of "Chuck Taylor". It is thus clear that defendants are guilty of unfair competition by giving "Custombuilt" the same general appearance as "Chuck Taylor". It is equally clear that defendants in so doing are guilty of bad faith. There remains for the Court to consider the damages that defendants should be liable for to plaintiffs. Plaintiffs claim compensatory damages equivalent to 30% of the gross sales of "Custombuilt" and attorney's fees in the amount of P25,000.00. By defendants' own evidence, the gross sales of "Custombuilt" from 1962, the year defendants adopted the present design of their product, to 1965 total P16,474,103.76. If the Court should grant plaintiffs' prayer for compensatory damages equivalent to 30% of defendants' gross sales, the compensatory damages would amount to P4,942,231.13. Considering the amount of gross sales of "Custombuilt", an award to plaintiffs for 30% of defendants' annual gross sales would seriously ripple, if not bankrupt, defendant companies. The Court is aware that defendants' investment is substantial and that defendants support a substantial number of employees and laborers. This being so, the Court is of the opinion that

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plaintiffs are entitled to only one (1) per cent of annual gross sales of "Custombuilt" shoes of current design. As for attorney s fees, the Court is of the opinion that, P10,000.00 is reasonable. (Pages 217-228, Record on Appeal.) Defendants-appellants have assigned the following alleged errors: I THE COURT A QUO ERRED IN ASSUMING JURISDICTION OVER THE COMPLAINT OF PLAINTIFFS-APPELLEES. II THE COURT A QUO ERRED IN ARRIVING AT THE CONCLUSION THAT THE DEFENDANTS ARE GUILTY OF UNFAIR COMPETITION WHEN DEFENDANT JACINTO RUBBER & PLASTICS CO., INC., MANUFACTURED AND SOLD RUBBER-SOLED CANVASS SHOES UNDER ITS REGISTERED TRADE MARK "CUSTOMBUILT". III THE COURT A QUO ERRED IN ADJUDICATING IN FAVOR OF THE PLAINTIFF THE SUM OF P160,000.00 AS COMPENSATORY DAMAGES AND P10,000.00 AS ATTORNEY'S FEES. (Pp. A & B, Brief for Defendants-Appellants.) We have carefully gone over the records and reviewed the evidence to satisfy Ourselves of the similarity of the shoes manufactured and sold by plaintiffs with those sold by defendants, and We find the conclusions of the trial court to be correct in all respects. In fact, in their brief, defendants do not contest at all the findings of the trial court insofar as material Identity between the two kinds of shoes in question is concerned. We have Ourselves examined the exhibits in detail, particularly, the comparative pictures and other representations if the shoes in question, and We do not hesitate in holding that he plaintiffs complaint of unfair competition is amply justified. From said examination, We find the shoes manufactured by defendants to contain, as found by the trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for heir respective brands, of course. We fully agree with the trial court that "the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch and the soles of the two products are exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish "Custombuilt" from "Chuck Taylor". These elements are more than sufficient to serve as basis for a charge of unfair competition. Even if not all the details just mentioned were Identical, with the general appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and discriminating customer could be deceived, and, therefore, Custombuilt could easily be passed off for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must be held liable. In R. F. & J. Alexander & Co. Ltd. et al. vs. Ang et al., 97 Phil. 157, at p. 160, this Court held: By "purchasers" and "public" likely to be deceived by the appearance of the goods, the statute means the "ordinary purchaser". And although this Court apparently shifted its position a bit in Dy Buncio vs. Tan Tiao Bok, 42 Phil. 190, by referring to simulations likely to mislead "the ordinarily intelligent buyer", it turned to the general accepted doctrine in E. Spinner & Co. vs. Neuss Hesslein, 54 Phil. 224, where it spoke of "the casual purchasers" "who knows the goods only by name." It stands to reason that when the law speaks of purchasers' it generally refers to ordinary or average purchasers. ... in cases of unfair competition, while the requisite degree of resemblance or similarity between the names, brands, or other indicia is not capable of exact definition, it may be stated generally that the similarity must be such, but need only be such, as is likely to mislead purchasers of ordinary caution and prudence; or in other words, the ordinary buyer, into the belief that the goods or wares are those, or that the name or business is that, of another producer or tradesman. It is not necessary in either case that the resemblance be sufficient to deceive experts, dealers, or other persons specially familiar with the trademark or goods involved. Nor is it material that a critical inspection and comparison would disclose differences, or that persons seeing the trademarks or articles side by side would not be deceived (52 Am. Jur. pp. 600-601). (Brief for Plaintiffs as Appellees, pp. 28-29, p. 71, Record.)

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Indeed, the very text of the law on unfair competition in this country is clear enough. It is found in Chapter VI of Republic Act 166 reading thus: SEC. 29. Unfair competition, rights and remedies. - 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 mark or trade name 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. Such a person shall have the remedies provided in section twenty-three, Chapter V hereof. Any 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 of those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has Identified such services in the mind of the public; 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. It is the theory of defendants-appellants, however, that plaintiffs-appellees have failed to establish a case of unfair competition because "inasmuch as the former (Converse Chuck Taylor) was not sold in the local markets from 1949 to 1967, no competition, fair or unfair, could have been offered to it by the latter product (Custombuilt Challenger) during the said period." While the argument, it may be conceded, makes sense as a proposition in practical logic, as indeed, it served as a legal defense in jurisprudence in the past, the modern view, as contended by plaintiffs "represents a tendency to mold, and even to expand; legal remedies in this field to conform to ethical practices." (Brief of Plaintiffs as Appellees, pp. 16-17.) As a matter of fact, in Ang vs. Toribio, 74 Phil. 129, this Court aptly pointed out: ... As trade has developed and commercial changes have come about, the law of unfair competition has expanded to keep pace with the times and the elements of strict competition in itself has ceased to be the determining factor. The owner of a trademark or trade-name has property right in which he is entitled to protection, since there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as fraud. Additionally, We quote with approval counsel's contention thus: In no uncertain terms, the statute on unfair competition extends protection to the goodwill of a manufacturer or dealer. It attaches no fetish to the word "competition". In plain language it declares that a "person who has Identified in the public the goods he manufactures or deals in, his business or services from those of others, whether or not a 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." It denominates as "unfair competition" "any acts" calculated to result in the passing off of other goods "for those of the one having established such goodwill." Singularly absent is a requirement that the goodwill sought to be protected in an action for unfair competition must have been established in an actual competitive situation. Nor does the law require that the deception or other means contrary to good faith or any acts calculated to pass off other goods for those of one who has established a goodwill must have been committed in an actual competitive situation. To read such conditions, as defendants-appellants seek to do, in the plain prescription of the law is to re-construct it. Indeed, good-will established in other than a competitive milieu is no less a property right that deserves protection from unjust appropriation or injury. This, to us, is precisely the

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clear sense of the law when it declares without equivocation that 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, 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." Plaintiffs-appellees have a established goodwill. This goodwill, the trial court found, defendantsappellants have pirated in clear bad faith to their unjust enrichment. It is strange that defendantsappellants now say that they should be spared from the penalty of the law, because they were not really in competition with plaintiffs-appellees. (Pp. 21-22, Id.) In a desperate attempt to escape liability, in their first assigned error, defendants-appellants assail the jurisdiction of the trial court, contending that inasmuch as Converse Rubber Corporation is a non-resident corporation, it has no legal right to sue in the courts of the Philippines, citing Marshall-Wells Co. vs. Elser & C., 46 Phil. 70 andCommissioner of Internal Revenue vs. United States Lines Co., G. R. No. L-16850, May 30, 1962 (5 SCRA 175) and, furthermore, that plaintiff Edwardson Manufacturing Corporation, although "a domestic corporation, is nothing but a licensee of Converse Rubber Corporation in the local manufacturing, advertisement, sale and distribution of the rubber-soled footwear", hence, it is equally without such personality. (p. 18, Brief of Defendants-Appellants). We are not impressed. The easy and, We hold to be correct, refutation of defendants' position is stated adequately and understandably in plaintiffs' brief as appellees as follows: The disability under Section 69 of the Corporation Law of an unlicensed foreign corporation refers to transacting business in the Philippines and maintaining a "suit for the recovery of any debt, claim, or demand whatever" arising from its transacting business in the Philippines. In Marshall-Wells, this Court precisely rejected a reading of Section 69 of the Corporation Law as "would give it a literal meaning", i.e., "No foreign corporation shall be permitted by itself or assignee any suit for the recovery of any deed, claim, or demand unless it shall have the license prescribed by Section 68 of the Law." "The effect of the statute," declared this Court, "preventing foreign corporations from doing business and from bringing actions in the local courts, except on compliance with elaborate requirements, must not be unduly extended or improperly applied (at page 75). In Commissioner of Internal Revenue v. United States Lines Company, this Court did not hold that an unlicensed foreign corporation may not sue in the Philippines. The Court simply held that a foreign shipping company, represented by a local agent, is doing business in the Philippines so as to subject it to the "operation of our revenue and tax." Western Equipment and Supply Co. v. Reyes, 51 Phil. 115, made clear that the disability of a foreign corporation from suing in the Philippines is limited to suits "to enforce any legal or contract rights arising from, or growing out, of any business which it has transacted in thePhilippine Islands." ... On the other hand, where the purpose of a suit is "to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves," an unlicensed foreign corporation may sue in the Philippines (at page 128). So interpreted by the Supreme Court, it is clear that Section 69 of the Corporation Law does not disqualify plaintiff-appellee Converse Rubber, which does not have a branch office in any part of the Philippines and is not "doing business" in the Philippines (Record on Appeal, pp. 190-191), from filing and prosecuting this action for unfair competition. The futility of the error assigned by defendants-appellants becomes more evident in light of the explicit provision of Section 21 (a) of Republic Act No. 166, as amended, that a foreign corporation, whether or not licensed to transact business in the Philippines may bring an action for unfair competition provided the country of which it "is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to juristic persons in the Philippines." The Convention of Paris for the Protection of Industrial Property, to which the Philippines adheres, provides, on a reciprocal basis that citizens of a union member may file an action for unfair competition and infringement of trademarks, patents, etc. (610. G. 8010) in and of the union members. The United States of America, of which Converse Rubber is a citizen, is also a signatory to this Convention. Section 1126 (b) and (h) of Public Law 489 of the United States of America allows corporations organized under the laws of the Philippines to file an action for unfair competition in the United States of America, whether or not it is licensed to do business in the United States. (Annex "H" of Partial Stipulation of Facts, Record on Appeal, p. 192). As regards the other plaintiff-appellee, Edwardson Manufacturing Corporation, it is indisputable that it has a direct interest in the success of this action: as exclusive licensee of Converse Rubber in the manufacture and sale of "Chuck Taylor" shoes in the Philippines, naturally it would be directly affected by the continued manufacture and sale by defendants-appellants of shoes that are confusingly Identical in appearance and design with "Chuck Taylor." (Brief of Plaintiffs as Appellees, pp. 11-14.)

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As can be seen, what is actually the only controversial matter in this case is that which refers to the assessment ot damages by the trial court, which both plaintiffs and defendants consider erroneous, defendants maintaining, of course, that it is excessive, even baseless, while, on the other hand, plaintiffs posit that it is far short from what the law and the relevant circumstances require. Under Section 29 of the Republic Act 166, aforequoted, it will be observed that the first paragraph thereof refers to the property rights in goodwill of a "person who has Identified in the mind of the public goods he manufactures or deals in, his business or offices from those of others, whether or not a mark or trade name is employed", while the second paragraph speaks of "any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him ... for those of the one having established such goodwill." This second paragraph, which may be read together with the first paragraph, makes the deceiver or imitator "guilty of unfair competition and shall be subjected to an action therefore", meaning what the first paragraph refers to as the "remedies provided in Section twenty-three, Chapter V" of the Act. It is implicit in the decision of the trial court and the briefs of the parties that everyone here concerned has acted on the basis of the assumptions just stated. Now, Section 23 reads: Actions, and damages and injunction for infringement. - Any person entitled to the exclusive use of a registered mark or trade name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing, may also be granted injunction. In the light of the foregoing provision, We find difficulty in seeing the basis of the trial court for reducing the 30%, claimed by plaintiffs, of the gross earnings of defendants from the sale of Custombuilt from 1962 to merely 1% as the measure of compensatory damages to which plaintiffs are entitled for that period. Perhaps, as His Honor pessimistically argued, defendants would suffer crippling of their business. But it is quite clear from the circumstances surrounding their act of deliberately passing off the rubber shoes produced by them for those over which plaintiffs had priorly established goodwill, that defendants had tremendously increased their volume of business and profits in the imitated shoes and have precisely incurred, strictly speaking, the liability of the damages to be paid by them be doubled, per the last sentence of Section 23. We are of the considered opinion that the trial court was overly liberal to the defendants-appellants. The P160,000.00 awarded by His Honor as compensatory damages for the years 1962 to 1965 are utterly inadequate. Even the 5% of the gross sales of "Custombuilt" shoes from 1966 until its injunction is fully obeyed are short of what the law contemplates in cases of this nature. We hold that considering that the gross sales of defendants-appellants increased to P16,474,103.76, (as admitted in defendants-appellants' own brief, p. 2), only 75% of which, plaintiffsappellants generously assert corresponded to Custombuilt sales, it would be but fair and just to award plaintiffsappellants 15% of such 75% as compensatory damages from 1962 up to the finality of this decision. In other words, 75% of P16,474,103.76 would be P12,355,577.82 and 15% of this last amount would be P1,853,336.67, which should be awarded to plaintiffs-appellants for the whole period already stated, without any interest, without prejudice to plaintiffs-appellants seeking by motion in the trial court in this same case any further damage should defendantsappellants continue to disobey the injunction herein affirmed after the finality of this decision. We feel that this award is reasonable. It is not farfetched to assume that the net profit of the imitator which, after all is what the law contemplates as basis for damages if it were only actually ascertainable, in the manufacture of rubber shoes should not be less than 20 to 25% of the gross sales. Regrettably, neither of the parties presented positive evidence in this respect, and the Court is left to use as basis its own projection in the light of usual business practices. We could, to be sure, return this case to the lower court for further evidence on this point, but, inasmuch as this litigation started way back about fourteen years ago and it would take more years before any final disposition is made hereof should take the course, We are convinced that the above straight computation, without any penalty of interest, is in accordance with the spirit of the law governing this case. In re G. R. No. L-30505 The subject matter of this appeal is the order of the trial court, incident to its main decision We have just reviewed above, dismissing "for lack 6f jurisdiction the contempt charge filed by plaintiffs against defendant Jacinto Rubber & Plastics Co. Inc., Ace Rubber & Plastics Corporation; Philippine & Management Corporation and their respective corporate officers.

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Importantly, it is necessary to immediately clear up the minds of appellees in regard to some aspects of the argument on double jeopardy discussed by their distinguished counsel in his preliminary argument in his brief (pp. 9-13). It is contended therein that inasmuch as the denial orders of August 23, 1967, December 29, 1967 and January 24, 1968 have the character of acquittals, contempt proceedings being criminal in nature, this appeal subjects appellees to double jeopardy. Such contention misses, however, the important consideration that the said denial orders, were, as explained by His Honor himself in his last two orders, based on the assumption that he had lost jurisdiction over the incident by virtue of the earlier perfection of the appeals of both parties from the decision on the merits. It is thus the effect of this assumption, revealed later by the trial judge, on the first order of August 23, 1967 that needs clarificatory disquisition, considering that the said first order was exclusively based on "the interests of justice" and "lack of merit" and made no reference at all to jurisdiction. If indeed the trial court had lost jurisdiction, it would be clear that said order could have no legal standing, and the argument of double jeopardy would have no basis. But after mature deliberation, and in the light of Cia General de Tabacos de Filipinas vs. Alhambra Cigar & Cigarette Manufacturing Co., 33 Phil. 503, cited by appellant's counsel in his brief, We are convinced that the trial court in the case at bar had jurisdiction to entertain and decide the motion for contempt in question. Indeed, the enforcement of either final or preliminary-made-final injunctions in decisions of trial courts are immediately executory. The reason for this rule lies in the nature itself of the remedy. If a preliminary injunction, especially one issued after a hearing is enforceable immediately to protect the rights of the one asking for it, independently of the pendency of the main action, there is no reason why when that preliminary injunction is made final after further and fuller hearing the merits of the plaintiff's cause of action, its enforceability should lesser, force. The same must be true with stronger basis in the case of a permanent injunction issued as part ot the judgment. The aim is to stop the act complained of immediately because the court has found it necessary to serve the interests of justice involved in the litigation already resolve by it after hearing and reception of the evidence of both parties. As a matter ot fact, it is quite obvious that an action for unfair competition with prayer for an injunction partakes of the nature of an action for injunction within the contemplation of Section 4 of Rule 39, and this cited provision states explicitly that "unless otherwise ordered by the court, a judgment in an action for injunction - shall not be stayed after its rendition and before an appeal is taken or during the pendency of an appeal." In the above-mentioned case of Cia. General de Tabacos, the Court held: The applicant contends here: First, that the injunction is indefinite and uncertain to such an extent that a person of ordinary intelligence would be unable to comply with it and still protect his acknowledged rights; second, that the injunction is void for the reason that the judgment of the court on which it 's based is not responsive to the pleadings or to the evidence in the case and has nothing in the record to support it; third, that the court erred in assuming jurisdiction and fining defendant after an appeal had been taken from the judgment of the court and the perpetual injunction issued thereon. There are other objections that need no particular discussion. Discussing these questions generally it may be admitted, as we stated in our decision in the main case (G. R No. 10251, ante p. 485) that, while the complaint set forth an action on a trade-name and for unfair competition, accepting the plaintiff's interpretation of it, the trial court based its judgment on the violation of a trade-mark, although the complaint contained no allegation with respect to a trademark and no issue was joined on that subject by the pleadings and no evidence was introduced on the trial with respect thereto. There Aas however, some evidence in the case with respect to the plaintiff's ownership of the trade-name "Isabela," for the violation of which the plaintiff was suing, and there was some evidence which might support an action of unfair competition, if such an action could be sustained under the statute. Therefore, although the judgment of the trial court was based on the violation of a trade-mark, there was some evidence to sustain the judgment if it had been founded on a violation of the trade-name or on unfair competition. The judgment, as we have already found in the main case, was erroneous and was reversed for that reason; but having some evidence to sustain it, it was not void and the injunction issued in that action was one which the court had power to issue. Although the judgment was clearly erroneous and without basis in law, it was, nevertheless a judgment of a court of competent jurisdiction which had authority to render that particular judgment and to issue a permanent injunction thereon. xxx xxx xxx ... The question is not was the judgment correct on the law and the facts, but was it a valid judgment? If so, and if the injunction issued thereon was definite and certain and was within the subject matter of the judgment, the defendant was bound to obey it, however erroneous it may have been. (Pp. 505-506, 506, 33 Phil.) It is interesting to note that while the trial court was of the opinion that it had lost jurisdiction over the motion for contempt, upon insistence of the plaintiffs, in its order of January 24, 1968, it made the following findings of fact:

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It is not controverted on December 14, 1966, the Philippine Marketing and Management sold to Virginia Ventures 12 pairs of "Custombuilt" rubber shoes bearing an Identical design and general appearance as that prohibited in the injunction. It is likewise not controverted that subsequent to December 14, 1966 the sale of the said rubber shoes was advertised by Philippine Marketing and Management Corporation in several metropolitan newspapers even during the pendency of the contempt proceedings. The only issue of fact is whether or not in selling and advertising the sale of the prescribed shoes the Philippine Marketing and Management Corporation conspired with the defendants, particularly defendant Jacinto Rubber, or acted as its agent, employee or in any other capacity with knowledge of the issuance of the said permanent injunction. On this point, the evidence of the plaintiffs shows that Hermogenes Jacinto, Arturo Jacinto, Fernando Jacinto and Milagros J. Jose constitute the majority of the board of directors of the Philippine Marketing and Management Corporation; that Hermogenes Jacinto is the president, Arturo Jacinto is the vice-president, and Fernando Jacinto and Milagros J. Jose are directors, of defendant Jacinto Rubber; that Milagros J. Jose is the treasurer of the Philippine Marketing and Management Corporation; and that Ramon V. Tupas, corporate secretary of the Philippine Marketing and Management Corporation, actively assisted by Atty. Juan T. David, counsel of record of the defendants, in defending the defendants in this case. It also appears from the different advertisements published in the metropolitan papers that Philippine Marketing and Management Corporation is the exclusive distributor of the questioned "Custombuilt" rubber shoes. Moreover, during the trial of this case on the merits the defendants admitted that the Philippine Marketing and Management Corporation is a sister corporation of defendant Jacinto Rubber, both corporations having Identical stockholders, and Hermogenes Jacinto and Fernando Jacinto are stockholders and incorporators of the Philippine Marketing and Management Corporation. On the other hand, the defendants, particularly defendant Jacinto Rubber, presented no evidence to disprove its intra-corporate relationship with the Philippine Marketing and Management Corporation. Instead it presented, over the objection of the plaintiffs, the affidavit of its executive vice-president, Geronimo Jacinto, who affirmed that defendant Jacinto Rubber had no knowledge of, or participation in, the acts complained of in the motion to declare them in contempt of Court and that it has not in any way violated any order of this Court. On its part, the Philippine Marketing and Management Corporation presented as a witness its general manager, Aniceto Tan, who testified that the Philippine Marketing and Management Corporation is not an agent or sister corporation of defendant Jacinto Rubber; that he came to know of the pendency of this case and the issuance of the permanent injunction only on December 19, 1966 when served with a copy of plaintiffs' motion; and that the Philippine Marketing and Management Corporation buys the "Custombuilt Rubber" shoes from defendant Jacinto Rubber which it resells to the general public. It is noteworthy, however, that this particular witness made several admissions in the course of his testimony which shed light on the question at issue. Thus, he admitted that prior to the formal organization of the Philippine Marketing and Management Corporation in January 1966 he was the sales manager of defendant Jacinto Rubber; that after the organization of the said corporation, he was informed that defendant Jacinto Rubber would discontinue its sales operations and instead give the exclusive distribution of the shoes to the Philippine Marketing and Management Corporation; and that he was then offered the position of sales manager of Philippine Marketing and Management because of his extensive experience in the distribution of "Custombuilt" rubber shoes. Also, he testified that the subscribed capital stock of the Philippine Marketing and Management Corporation is only P100,000.00 out of which P25,000.00 has been paid whereas its average monthly purchases of "Custombuilt" rubber shoes is between P300,000.00 to P400,000.00 or between P4,000,000.00 to P5,000,000.00 annually. Such huge purchases Philippine Marketing and Management Corporation is able to make, in spite of its meager capital, because defendant Jacinto Rubber allows it to buy on credit. Considering the substantial Identity of the responsible corporate officers of the defendant Jacinto Rubber and the Philippine Marketing and Management Corporation, the huge volume of alleged purchases of "Custombuilt" shoes by the Philippine Marketing and Management Corporation compared to its paid in capital, and the cessation of the sales operations of defendant Jacinto Rubber after the organization of the former, the Court is convinced beyond reasonable doubt that the Philippine Marketing and Management Corporation is the selling arm or branch of defendant Jacinto Rubber and that both corporations are controlled by substantially the same persons, the Jacinto family. The contention of the Philippine Marketing and Management Corporation that it sold the 12 pairs of "Custombuilt" shoes on December 14, 1966 without knowledge of the issuance of the injunction is belied by its conduct of continuing the sale and the advertisement of said shoes even during the pendency of the contempt proceedings. This conduct clearly reveals the wilfulness and contumacy with which it had disregarded the injunction. Besides, it is inherently improbable that defendant Jacinto Rubber and Atty. Ramon B. Tupas did not inform the Philippine Marketing and Management Corporation of the issuance of the injunction, a fact which undoubtedly has a material adverse effect on its business.

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Upon the foregoing, the Court is convinced that defendants and Philippine Marketing and Management Corporation are guilty of contempt of court in disregarding the permanent injunction issued by this Court in its decision on the merits of the main case. However, for the reasons stated in the Order of December 29, 1967, the Court maintains that it has lost jurisdiction over the case. (Pp. 115-120, Record on Appeal.) Stated differently, since the trial court had jurisdiction to take cognizance of the motion, its findings of facts should as a rule bind the parties, and, in this connection, appellees do not seriously challenge said findings. And since We are holding that the trial court had jurisdiction, the above findings may be determinative of the factual issues among the parties herein. We are thus faced with the following situations: The first order of dismissal of August 23, 1967, albeit issued with jurisdiction, was incomplete because it contained no statements of facts and law on which it was based in violation of the pertinent constitutional precept. It could not stand as it was. The second of December 29, 1967 was still incomplete, with the added flaw that his Honor declared himself therein as having lost jurisdiction. On other hand, while the third order of January 24, 1968 filled the ommissions of the first two orders, it, however, the reiterated the erroneous ruling of the second order regarding lost of jurisdiction of the court over the incident. Combining the three orders, it can be seen that the result is that the trial court found from the evidence that its injunction had been violated, but it erroneously considered itself devoid of authority to impose the appropriate penalty, for want of jurisdiction. Upon these premises, We hold that the factual findings of the trial court in its third order may well stand as basis tor the imposition of the proper penalty. To be sure, appellees are almost in the right track in contending that the first denial order of the trial court found them not guilty. What they have overlooked however is that such a finding cannot be equated with an acquittal in a criminal case that bars a subsequent jeopardy. True it is that generally, contempt proceedings are characterized as criminal in nature, but the more accurate juridical concept is that contempt proceedings may actually be either civil or criminal, even if the distinction between one and the other may be so thin as to be almost imperceptible. But it does exist in law. It is criminal when the purpose is to vindicate the authority of the court and protect its outraged dignity. It is civil when there is failure to do something ordered by a court to be done for the benefit of a party. (3 Moran, Rules of Court, pp. 343-344, 1970 ed; see also Perkins vs. Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81 Phil. 741.) And with this distinction in mind, the fact that the injunction in the instant case is manifestly for the benefit of plaintiffs makes of the contempt herein involved civil, not criminal. Accordingly, the conclusion is inevitable that appellees have been virtually found by the trial court guilty of civil contempt, not criminal contempt, hence the rule on double jeopardy may not be invoked. WHEREFORE, judgment is hereby rendered - in G. R. No. L-27425 - affirming the decision of the trial court with the modification of the amount of the damages awarded to plaintiffs in the manner hereinabove indicated; and in G.R. No. L-30505 - the three orders of dismissal of the trial court of the contempt charges against appellees are all hereby reversed, and on the basis of the factual findings made by said court in its last order of January 24, 1968, appellees are hereby declared in contempt of court and the records of the contempt proceedings (G. R. No. L30505) are ordered returned to the trial court for further proceedings in line with the above opinion, namely for the imposition of the proper penalty, its decision being incomplete in that respect. Costs against appellees in G. R. No. L-27425, no costs in G. R. No. L-30505. These decisions may be executed separately. Concepcion Jr., Guerrero and De Castro, JJ., concur. Antonio, J., is on leave. Aquino, J., concur in the result. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-78325 January 25, 1990 DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners, vs. COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents.

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Bito, Misa & Lozada for petitioners. Reynaldo F. Singson for private respondent.

CRUZ, J.: The petitioners are questioning the decision of the respondent court upholding the dismissal by the trial court of their complaint against the private respondent for infringement of trademark and unfair competition. Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not engaged in business in the Philippines. Both the Philippines and the United States are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition. Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the Philippines various agricultural products, including catsup, under the Del Monte trademark and logo. On October 27,1965, Del Monte authorized Philpack to register with the Philippine Patent Office the Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1 On November 20, 1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its logo. 2 Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by the Bureau of Domestic Trade on April 17,1980, to engage in the manufacture, packing, distribution and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup. 3 This logo was registered in the Supplemental Register on September 20, 1983. 4 The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the private respondent bought from the junk shops for recycling. Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Monte's, Philpack warned it to desist from doing so on pain of legal action. Thereafter, claiming that the demand had been ignored, Philpack and Del Monte filed a complaint against the private respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of a writ of preliminary injunction. 5 In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo was substantially different from the Del Monte logo and would not confuse the buying public to the detriment of the petitioners. 6 After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were substantial differences between the logos or trademarks of the parties; that the defendant had ceased using the petitioners' bottles; and that in any case the defendant became the owner of the said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed to establish the defendant's malice or bad faith, which was an essential element of infringement of trademark or unfair competition. 7 This decision was affirmed in toto by the respondent court, which is now faulted in this petition for certiorari under Rule 45 of the Rules of Court. Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part as follows: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services or identity of such business; or reproduce, counterfeit copy 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. Sec. 29 of the same law states as follows:

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Sec. 29. Unfair competition, rights and remedies. 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 mark or tradename 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. Such a person shall have the remedies provided in section twenty- three, Chapter V hereof. Any 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, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs ally other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. To arrive at a proper resolution of this case, it is important to bear in mind the following distinctions between infringement of trademark and unfair competition. (1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another. (2) In infringement of trademark fraudulent intent is unnecessary whereas in unfair competition fraudulent intent is essential.
(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. 8

In the challenged decision, the respondent court cited the following test laid down by this Court in a number of cases:
In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predorninant words but also on the other features appearing on both labels. 9

and applying the same, held that there was no colorable imitation of the petitioners' trademark and logo by the private respondent. The respondent court agreed with the findings of the trial court that: In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit: 1. As to the shape of label or make: Del Monte: Semi-rectangular with a crown or tomato shape design on top of the rectangle. Sunshine: Regular rectangle. 2. As to brand printed on label:

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Del Monte: Tomato catsup mark. Sunshine: Fruit catsup. 3. As to the words or lettering on label or mark: Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines. Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro Manila. 4. As to color of logo: Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in white. Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow. 5. As to shape of logo: Del Monte: In the shape of a tomato. Sunshine: Entirely different in shape. 6. As to label below the cap: Del Monte: Seal covering the cap down to the neck of the bottle, with picture of tomatoes with words "made from real tomatoes." Sunshine: There is a label below the cap which says "Sunshine Brand." 7. As to the color of the products: Del Monte: Darker red. Sunshine: Lighter than Del Monte. While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so pre-occupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. 10 Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. The question is not whether the two articles are distinguishable by their label when set side by side but whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious and off his guard, is such as to likely result in his confounding it with the original. 11 As observed in several cases, the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone. 12 It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. 13 The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. 14 Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. 15 The court therefore should be guided by its first impression, 16 for a buyer acts quickly and is

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governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17 It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. 18 The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. 19 Well has it been said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of difference to confuse the courts. 20 We also note that the respondent court failed to take into consideration several factors which should have affected its conclusion, to wit: age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased . 21 Among these, what essentially determines the attitude of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. 22Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. 23 In this latter category is catsup. At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label are green and redorange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato. As previously stated, the person who infringes a trade mark does not normally copy out but only makes colorable changes, employing enough points of similarity to confuse the public with enough points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product, he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine chose, without a reasonable explanation, to use the same colors and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is that it was done deliberately to deceive . 24 It has been aptly observed that the ultimate ratio in cases of grave doubt is the rule that as between a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest dealing has already achieved favor with the public, any doubt should be resolved against the newcomer inasmuch as the field from which he can select a desirable trademark to indicate the origin of his product is obviously a large one. 25 Coming now to the second issue, we find that the private respondent is not guilty of infringement for having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26 we declared that: (1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark and his right to the exclusive use thereof. There is no such presumption in the registration in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein on the issue of ownership which may be contested through opposition or interference proceedings or, after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claim of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. It is not subject to opposition although it may be cancelled after the issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement while registration in the Supplemental Register is not. (3) In applications for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registrations in the Supplemental Register. It can be inferred from the foregoing that although Del Monte has actual use of the bottle's configuration, the petitioners cannot claim exclusive use thereof because it has not been registered in the Principal Register. However, we find that Sunshine, despite the many choices available to it and notwithstanding that the caution "Del

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Monte Corporation, Not to be Refilled" was embossed on the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces. This clearly shows the private respondent's bad faith and its intention to capitalize on the latter's reputation and goodwill and pass off its own product as that of Del Monte. The Court observes that the reasons given by the respondent court in resolving the case in favor of Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label was not improper because the Bureau of Patent presumably considered other trademarks before approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27 where this Court declared that selling oil in containers of another with markings erased, without intent to deceive, was not unfair competition. Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the Principal Register but only in the Supplemental Register where the presumption of the validity of the trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent. Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated that since registration was only in the Supplemental Register, this did not vest the registrant with the exclusive right to use the label nor did it give rise to the presumption of the validity of the registration. On the argument that no unfair competition was committed, the Shell Case is not on all fours with the case at bar because: (1) In Shell, the absence of intent to deceive was supported by the fact that the respondent therein, before marketing its product, totally obliterated and erased the brands/mark of the different companies stenciled on the containers thereof, except for a single isolated transaction. The respondent in the present case made no similar effort. (2) In Shell, what was involved was a single isolated transaction. Of the many drums used, there was only one container where the Shell label was not erased, while in the case at hand, the respondent admitted that it made use of several Del Monte bottles and without obliterating the embossed warning. (3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a general rule, dealers are well acquainted with the manufacturer from whom they make their purchases and since they are more experienced, they cannot be so easily deceived like the inexperienced public. There may well be similarities and imitations which deceive all, but generally the interests of the dealers are not regarded with the same solicitude as are the interests of the ordinary consumer. For it is the form in which the wares come to the final buyer that is of significance. 28 As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the cancellation of the private respondent's registration and withdrawal of all its products bearing the questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles. The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides: Sec. 23. Actions and damages and injunction for infringement. Any person entitled to the exclusive use of a registered mark or trade name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty the court may award as damages reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing may also be granted injunction. Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code, which provides: Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Art. 1157, or in every case where any property right has been invaded.

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Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of Pl,000.00. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24, 1986 and the Resolution dated April 27,1987, are REVERSED and SET ASIDE and a new judgment is hereby rendered: (1) Canceling the private respondent's Certificate of Register No. SR-6310 and permanently enjoining the private respondent from using a label similar to that of the petitioners. (2) Prohibiting the private respondent from using the empty bottles of the petitioners as containers for its own products. (3) Ordering the private respondent to pay the petitioners nominal damages in the amount of Pl,000.00, and the costs of the suit. SO ORDERED. Narvasa Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Footnotes 1 Original Records, pp. 29-30. 2 Ibid., Annex 2 pp. 8-9; Annex 3, pp. 16-17. 3 Id., Annex A. p. 41. 4 Id., Annex B, pp. 42-43. 5 Id., pp. 1-6. 6 Id., pp. 38-40. 7 Id., pp. 166-168. Decision penned by Judge Roque A. Tamayo, affirmed in the Court of Appeals by Coquia, J., ponente, with Luciano and Cui, JJ., concurring. 8 Jose C. Vitug, Pandect of Commercial Law & Jurisprudence, l st ed., p. 291 citing Compania General de Tabacos v. de Aljambra Cigar and Cigarette Manufacturing Co., 33 Phil 485; Ogura v. Chua, 59 Phil. 471: Parke Davies & Co. v. Kiu Foo & Co., 60 Phil. 928. 9 Mead Johnson Co. v. N.V.J. Von Dorp. Ltd., 7 SCRA 768; Bristol Myers Co. v. Director of Patents, 17 SCRA 128. 10 Stuart v. F.G. Stewart Co., 91 F 243. 11 Notaseme Hosiery v. Strauss 201 F 99. 12 McLean v. Fleming 96 US 245; Fischer v. Blank, 138 N.Y. 244; Tillman Bendel v. California Packing Corporation, 63 F 2d 498. 13 Martini & Rossi v. Consumer's People's Products, 57 F 2d 599. 14 Stuart v. F. G. Stewart Co., 91 F 243. 15 Helmet Co. v. Wm Wrigley Jr. Co., 245 F 842; Pennzoil Co. v. Pennsylvania Petroleum Co., 159 M.D. 187, 16 William Waltke & Co. v. Geo H. Schafer, 49 App. D.C. 294; Ward Baking Co. v. Potter Wrintington, 298 F 398. 17 Vortex Mfg. Co. v. Ply-Rite Contracting Co., 33 F 2d 302. 18 Hilton v. Hilton, 90 N.J. Eq 564.

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19 Bickmore Gall Cure Co. v. Karns, 134 F 833-1 J.C. Penny Co. v. H.D. Lee Merchantile Co., 120 F 2d 949. 20 Baker and Master Printers Union of New Jersey, 34 F. Supp. 808. 21 11 H.D. Nims, The Law of Unfair Competition and Trademark, 1947, p. 1027. 22 Ibid., p. 1030. 23 11 Rudolf Callman, The Law of Unfair Competition and Trademark, 1945, pp. 1137, 1136. 24 Ibid., Vol. 111, 2nd ed. pp. 1527-1528 cited in Converse Rubber Corporation v. Universal Rubber Product Inc., 147 SCRA 155. 25 William Waltke & Co. v. Geo H. Schafer & Co., 49 App. D.C. 294; Standard Oil v. Michie 34 F 2d 802. 26 154 SCRA 723. 27 11 SCRA 436. 26 Supra., p. 1141. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 184850 October 20, 2010

E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, Petitioners, vs. SHEN DAR ELECTRICITY AND MACHINERY CO., LTD., Respondent. DECISION VELASCO, JR., J.: The Case This Petition for Review on Certiorari under Rule 45 seeks to nullify and reverse the February 21, 2008 Decision1and the October 6, 2008 Resolution2 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 99356 entitled Shen Dar Electricity and Machinery Co., Ltd. v. E.Y. Industrial Sales, Inc. and Engracio Yap. The assailed decision reversed the Decision dated May 25, 20073 issued by the Director General of the Intellectual Property Office (IPO) in Inter Partes Case No. 14-2004-00084. The IPO Director General upheld Certificate of Registration (COR) No. 4-1999-005393 issued by the IPO for the trademark "VESPA" in favor of petitioner E.Y. Industrial Sales, Inc. (EYIS), but ordered the cancellation of COR No. 4-1997-121492, also for the trademark "VESPA," issued in favor of respondent Shen Dar Electricity and Machinery Co., Ltd. (Shen Dar). The Decision of the IPO Director General, in effect, affirmed the Decision dated May 29, 20064 issued by the Director of the Bureau of Legal Affairs (BLA) of the IPO. The Facts EYIS is a domestic corporation engaged in the production, distribution and sale of air compressors and other industrial tools and equipment.5 Petitioner Engracio Yap is the Chairman of the Board of Directors of EYIS.6 Respondent Shen Dar is a Taiwan-based foreign corporation engaged in the manufacture of air compressors.7 Both companies claimed to have the right to register the trademark "VESPA" for air compressors. From 1997 to 2004, EYIS imported air compressors from Shen Dar through sales contracts. In the Sales Contract dated April 20, 2002,8 for example, Shen Dar would supply EYIS in one (1) year with 24 to 30 units of 40-ft. containers worth of air compressors identified in the Packing/Weight Lists simply as SD-23, SD-29, SD-31, SD-32,

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SD-39, SD-67 and SD-68. In the corresponding Bill of Ladings, the items were described merely as air compressors.9 There is no documentary evidence to show that such air compressors were marked "VESPA." On June 9, 1997, Shen Dar filed Trademark Application Serial No. 4-1997-121492 with the IPO for the mark "VESPA, Chinese Characters and Device" for use on air compressors and welding machines.10 On July 28, 1999, EYIS filed Trademark Application Serial No. 4-1999-005393, also for the mark "VESPA," for use on air compressors.11 On January 18, 2004, the IPO issued COR No. 4-1999-005393 in favor of EYIS.12Thereafter, on February 8, 2007, Shen Dar was also issued COR No. 4-1997-121492.13 In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation of EYIS COR with the BLA.14 In the Petition, Shen Dar primarily argued that the issuance of the COR in favor of EYIS violated Section 123.1 paragraphs (d), (e) and (f) of Republic Act No. (RA) 8293, otherwise known as the Intellectual Property Code (IP Code), having first filed an application for the mark. Shen Dar further alleged that EYIS was a mere distributor of air compressors bearing the mark "VESPA" which it imported from Shen Dar. Shen Dar also argued that it had prior and exclusive right to the use and registration of the mark "VESPA" in the Philippines under the provisions of the Paris Convention.15 In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true owners of the mark "VESPA" being the sole assembler and fabricator of air compressors since the early 1990s. They further alleged that the air compressors that Shen Dar allegedly supplied them bore the mark "SD" for Shen Dar and not "VESPA." Moreover, EYIS argued that Shen Dar, not being the owner of the mark, could not seek protection from the provisions of the Paris Convention or the IP Code.16 Thereafter, the Director of the BLA issued its Decision dated May 29, 2006 in favor of EYIS and against Shen Dar, the dispositive portion of which reads: WHEREFORE, premises considered, the Petition for Cancellation is, as it is hereby, DENIED. Consequently, Certificate of Registration No. 4-1999-[005393] for the mark "VESPA" granted in the name of E.Y. Industrial Sales, Inc. on 9 January 2007 is hereby upheld. Let the filewrapper of VESPA subject matter of this case be forwarded to the Administrative, Financial and Human Resource Development Services Bureau for issuance and appropriate action in accordance with this DECISION and a copy thereof furnished to the Bureau of Trademarks for information and update of its records. SO ORDERED.17 Shen Dar appealed the decision of the BLA Director to the Director General of the IPO. In the appeal, Shen Dar raised the following issues: 1. Whether the BLA Director erred in ruling that Shen Dar failed to present evidence; 2. Whether the registration of EYIS application was proper considering that Shen Dar was the first to file an application for the mark; and 3. Whether the BLA Director correctly ruled that EYIS is the true owner of the mark.18 Later, the IPO Director General issued a Decision dated May 25, 2007 upholding the COR issued in favor of EYIS while cancelling the COR of Shen Dar, the dispositive portion of which reads: WHEREFORE, premises considered, the appeal is DENIED. Certificate of Registration No. 4-1999-005393 for the mark VESPA for air compressor issued in favor of Appellee is hereby upheld. Consequently, Certificate of Registration No. 4-1997-121492 for the mark VESPA, Chinese Characters & Device for goods air compressor and spot welding machine issued in favor of Appellant is hereby ordered cancelled. Let a copy of this Decision as well as the records of this case 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, Financial and Human Resources Development Services Bureau, and the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes.19 Shen Dar appealed the above decision of the IPO Director General to the CA where Shen Dar raised the following issues: 1. Whether Shen Dar is guilty of forum shopping; 2. Whether the first-to-file rule applies to the instant case;

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3. Whether Shen Dar presented evidence of actual use; 4. Whether EYIS is the true owner of the mark "VESPA"; 5. Whether the IPO Director General erred in cancelling Shen Dars COR No. 4-1997-121492 without a petition for cancellation; and 6. Whether Shen Dar sustained damages.20 In the assailed decision, the CA reversed the IPO Director General and ruled in favor of Shen Dar. The dispositive portion states: WHEREFORE, premises considered, the petition is GRANTED. Consequently, the assailed decision of the Director General of the Intellectual Property Office dated May 25, 2007 is hereby REVERSED and SET ASIDE. In lieu thereof, a new one is entered: a) ordering the cancellation of Certificate of Registration No. 4-1999-005393 issued on January 19, 2004 for the trademark VESPA in favor of E.Y. Industrial Sales, Inc.; b) ordering the restoration of the validity of Certificate of Registration No. 4-1997-121492 for the trademark VESPA in favor of Shen Dar Electricity and Machinery Co., Ltd. No pronouncement as to costs. SO ORDERED.21 In ruling for Shen Dar, the CA ruled that, despite the fact that Shen Dar did not formally offer its evidence before the BLA, such evidence was properly attached to the Petition for Cancellation. As such, Shen Dars evidence may be properly considered. The CA also enunciated that the IPO failed to properly apply the provisions of Sec. 123.1(d) of RA 8293, which prohibits the registration of a trademark in favor of a party when there is an earlier filed application for the same mark. The CA further ruled that Shen Dar should be considered to have prior use of the mark based on the statements made by the parties in their respective Declarations of Actual Use. The CA added that EYIS is a mere importer of the air compressors with the mark "VESPA" as may be gleaned from its receipts which indicated that EYIS is an importer, wholesaler and retailer, and therefore, cannot be considered an owner of the mark.22 EYIS filed a motion for reconsideration of the assailed decision which the CA denied in the assailed resolution. Hence, the instant appeal. Issues EYIS and Yap raise the following issues in their petition: A. Whether the Director General of the IPO correctly upheld the rights of Petitioners over the trademark VESPA. B. Whether the Director General of the IPO can, under the circumstances, order the cancellation of Respondents certificate of registration for VESPA, which has been fraudulently obtained and erroneously issued. C. Whether the Honorable Court of Appeals was justified in reversing the findings of fact of the IPO, which affirm the rights of Petitioner EYIS over the trademark VESPA and when such findings are supported by the evidence on record. D. Whether this Honorable Court may review questions of fact considering that the findings of the Court of Appeals and the IPO are in conflict and the conclusions of the appellee court are contradicted by the evidence on record.23 The Ruling of the Court The appeal is meritorious. First Issue: Whether this Court may review the questions of fact presented Petitioners raise the factual issue of who the true owner of the mark is. As a general rule, this Court is not a trier of facts. However, such rule is subject to exceptions. In New City Builders, Inc. v. National Labor Relations Commission,24 the Court ruled that:

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We are very much aware that the rule to the effect that this Court is not a trier of facts admits of exceptions. As we have stated in Insular Life Assurance Company, Ltd. vs. CA: [i]t is a settled rule that in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. (Emphasis supplied.) In the instant case, the records will show that the IPO and the CA made differing conclusions on the issue of ownership based on the evidence presented by the parties. Hence, this issue may be the subject of this Courts review. Second Issue: Whether evidence presented before the BLA must be formally offered Preliminarily, it must be noted that the BLA ruled that Shen Dar failed to adduce evidence in support of its allegations as required under Office Order No. 79, Series of 2005, Amendments to the Regulations on Inter Partes Proceedings, having failed to formally offer its evidence during the proceedings before it. The BLA ruled: At the outset, we note petitioners failure to adduce any evidence in support of its allegations in the Petition for Cancellation. Petitioner did not file nor submit its marked evidence as required in this Bureaus Order No. 2006-157 dated 25 January 2006 in compliance with Office Order No. 79, Series of 2005, Amendments to the Regulations on Inter Partes Proceedings.25 x x x In reversing such finding, the CA cited Sec. 2.4 of BLA Memorandum Circular No. 03, Series of 2005, which states: Section 2.4. In all cases, failure to file the documentary evidences in accordance with Sections 7 and 8 of the rules on summary proceedings shall be construed as a waiver on the part of the parties. In such a case, the original petition, opposition, answer and the supporting documents therein shall constitute the entire evidence for the parties subject to applicable rules. The CA concluded that Shen Dar needed not formally offer its evidence but merely needed to attach its evidence to its position paper with the proper markings,26 which it did in this case. The IP Code provides under its Sec. 10.3 that the Director General of the IPO shall establish the procedure for the application for the registration of a trademark, as well as the opposition to it: Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall have the following functions: xxxx 10.3. The Director General may by Regulations establish the procedure to govern the implementation of this Section. Thus, the Director General issued Office Order No. 79, Series of 2005 amending the regulations on Inter Partes Proceedings, Sec. 12.1 of which provides: Section 12. Evidence for the Parties 12.1. The verified petition or opposition, reply if any, duly marked affidavits of the witnesses, and the documents submitted, shall constitute the entire evidence for the petitioner or opposer. The verified answer, rejoinder if any, and the duly marked affidavits and documents submitted shall constitute the evidence for the respondent. Affidavits, documents and other evidence not submitted and duly marked in accordance with the preceding sections shall not be admitted as evidence.

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The preceding sections referred to in the above provision refer to Secs. 7.1, 8.1 and 9 which, in turn, provide: Section 7. Filing of Petition or Opposition 7.1. The petition or opposition, together with the affidavits of witnesses and originals of the documents and other requirements, shall be filed with the Bureau, provided, that in case of public documents, certified copies shall be allowed in lieu of the originals. The Bureau shall check if the petition or opposition is in due form as provided in the Regulations particularly Rule 3, Section 3; Rule 4, Section 2; Rule 5, Section 3; Rule 6, Section 9; Rule 7, Sections 3 and 5; Rule 8, Sections 3 and 4. For petition for cancellation of layout design (topography) of integrated circuits, Rule 3, Section 3 applies as to the form and requirements. The affidavits, documents and other evidence shall be marked consecutively as "Exhibits" beginning with the letter "A". Section 8. Answer 8.1. Within three (3) working days from receipt of the petition or opposition, the Bureau shall issue an order for the respondent to file an answer together with the affidavits of witnesses and originals of documents, and at the same time shall notify all parties required to be notified in the IP Code and these Regulations, provided, that in case of public documents, certified true copies may be submitted in lieu of the originals. The affidavits and documents shall be marked consecutively as "Exhibits" beginning with the number "1". Section 9. Petition or Opposition and Answer must be verified Subject to Rules 7 and 8 of these regulations, the petition or opposition and the answer must be verified. Otherwise, the same shall not be considered as having been filed. In other words, as long as the petition is verified and the pieces of evidence consisting of the affidavits of the witnesses and the original of other documentary evidence are attached to the petition and properly marked in accordance with Secs. 7.1 and 8.1 abovementioned, these shall be considered as the evidence of the petitioner. There is no requirement under the abovementioned rules that the evidence of the parties must be formally offered to the BLA. In any case, as a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the Regulations on Inter Partes Proceedings, the BLA is not bound by technical rules of procedure. The evidence attached to the petition may, therefore, be properly considered in the resolution of the case. Third Issue: Whether the IPO Director General can validly cancel Shen Dars Certificate of Registration In his Decision, the IPO Director General stated that, despite the fact that the instant case was for the cancellation of the COR issued in favor of EYIS, the interests of justice dictate, and in view of its findings, that the COR of Shen Dar must be cancelled. The Director General explained: Accordingly, while the instant case involves a petition to cancel the registration of the Appellees trademark VESPA, the interest of justice requires that Certificate of Registration No. 4-1997-121492 be cancelled. While the normal course of proceedings should have been the filing of a petition for cancellation of Certificate of Registration No. 41997-121492, that would involve critical facts and issues that have already been resolved in this case. To allow the Applicant to still maintain in the Trademark Registry Certificate of Registration No. 4-1997-121492 would nullify the exclusive rights of Appellee as the true and registered owner of the mark VESPA and defeat the purpose of the trademark registration system.27 Shen Dar challenges the propriety of such cancellation on the ground that there was no petition for cancellation as required under Sec. 151 of RA 8293. Office Order No. 79, Series of 2005, provides under its Sec. 5 that: Section 5. Rules of Procedure to be followed in the conduct of hearing of Inter Partes cases.The rules of procedure herein contained primarily apply in the conduct of hearing of Inter Partes cases. The Rules of Court may be applied suppletorily. The Bureau shall not be bound by strict technical rules of procedure and evidence but may adopt, in the absence of any applicable rule herein, such mode of proceedings which is consistent with the requirements of fair play and conducive to the just, speedy and inexpensive disposition of cases, and which will give the Bureau the greatest possibility to focus on the contentious issues before it. (Emphasis supplied.)

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The above rule reflects the oft-repeated legal principle that quasi-judicial and administrative bodies are not bound by technical rules of procedure. Such principle, however, is tempered by fundamental evidentiary rules, including due process. Thus, we ruled in Aya-ay, Sr. v. Arpaphil Shipping Corp.:28 That administrative quasi-judicial bodies like the NLRC are not bound by technical rules of procedure in the adjudication of cases does not mean that the basic rules on proving allegations should be entirely dispensed with. A party alleging a critical fact must still support his allegation with substantial evidence. Any decision based on unsubstantiated allegation cannot stand as it will offend due process. x x x The liberality of procedure in administrative actions is subject to limitations imposed by basic requirements of due process. As this Court said in Ang Tibay v. CIR, the provision for flexibility in administrative procedure "does not go so far as to justify orders without a basis in evidence having rational probative value." More specifically, as held in Uichico v. NLRC: It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases. However, this procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules. This was later reiterated in Lepanto Consolidated Mining Company v. Dumapis:29 While it is true that administrative or quasi-judicial bodies like the NLRC are not bound by the technical rules of procedure in the adjudication of cases, this procedural rule should not be construed as a license to disregard certain fundamental evidentiary rules. The evidence presented must at least have a modicum of admissibility for it to have probative value. Not only must there be some evidence to support a finding or conclusion, but the evidence must be substantial. Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Thus, even though technical rules of evidence are not strictly complied with before the LA and the NLRC, their decision must be based on evidence that must, at the very least, be substantial. The fact that no petition for cancellation was filed against the COR issued to Shen Dar does not preclude the cancellation of Shen Dars COR. It must be emphasized that, during the hearing for the cancellation of EYIS COR before the BLA, Shen Dar tried to establish that it, not EYIS, was the true owner of the mark "VESPA" and, thus, entitled to have it registered. Shen Dar had more than sufficient opportunity to present its evidence and argue its case, and it did. It was given its day in court and its right to due process was respected. The IPO Director Generals disregard of the procedure for the cancellation of a registered mark was a valid exercise of his discretion. Fourth Issue: Whether the factual findings of the IPO are binding on the CA Next, petitioners challenge the CAs reversal of the factual findings of the BLA that Shen Dar and not EYIS is the prior user and, therefore, true owner of the mark. In arguing its position, petitioners cite numerous rulings of this Court where it was enunciated that the factual findings of administrative bodies are given great weight if not conclusive upon the courts when supported by substantial evidence. We agree with petitioners that the general rule in this jurisdiction is that the factual findings of administrative bodies deserve utmost respect when supported by evidence. However, such general rule is subject to exceptions. In Fuentes v. Court of Appeals,30 the Court established the rule of conclusiveness of factual findings of the CA as follows: Jurisprudence teaches us that "(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals x x x is limited to the review and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed conclusive. As such this Court is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below. This rule, however, is not without exceptions." The findings of fact of the Court of Appeals, which are as a general rule deemed conclusive, may admit of review by this Court: (1) when the factual findings of the Court of Appeals and the trial court are contradictory; (2) when the findings are grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is grave abuse of discretion in the appreciation of facts;

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(5) when the appellate court, in making its findings, goes beyond the issues of the case, and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record. (Emphasis supplied.) Thereafter, in Villaflor v. Court of Appeals,31 this Court applied the above principle to factual findings of quasi-judicial bodies, to wit: Proceeding by analogy, the exceptions to the rule on conclusiveness of factual findings of the Court of Appeals, enumerated in Fuentes vs. Court of Appeals, can also be applied to those of quasi-judicial bodies x x x. (Emphasis supplied.) Here, the CA identified certain material facts that were allegedly overlooked by the BLA and the IPO Director General which it opined, when correctly appreciated, would alter the result of the case. An examination of the IPO Decisions, however, would show that no such evidence was overlooked. First, as to the date of first use of the mark by the parties, the CA stated: To begin with, when respondents-appellees filed its application for registration of the VESPA trademark on July 28, 1999, they stated under oath, as found in their DECLARATION OF ACTUAL USE, that their first use of the mark was on December 22, 1998. On the other hand, [Shen Dar] in its application dated June 09, 1997 stated, likewise under oath in their DECLARATION OF ACTUAL USE, that its first use of the mark was in June 1996. This cannot be made any clearer. [Shen Dar] was not only the first to file an application for registration but likewise first to use said registrable mark.32 Evidently, the CA anchors its finding that Shen Dar was the first to use the mark on the statements of the parties in their respective Declarations of Actual Use. Such conclusion is premature at best. While a Declaration of Actual Use is a notarized document, hence, a public document, it is not conclusive as to the fact of first use of a mark. The declaration must be accompanied by proof of actual use as of the date claimed. In a declaration of actual use, the applicant must, therefore, present evidence of such actual use. The BLA ruled on the same issue, as follows: More importantly, the private respondents prior adoption and continuous use of the mark VESPA on air compressors is bolstered by numerous documentary evidence consisting of sales invoices issued in the name of E.Y. Industrial and Bill of Lading (Exhibits 4 to 375). Sales Invoice No. 12075 dated March 27, 1995 antedates petitioners date of first use on January 1, 1997 indicated in its trademark application filed on June 9, 1997 as well as the date of first use in June of 1996 as indicated in the Declaration of Actual Use submitted on December 3, 2001 (Exhibit 385). The use by respondent registrant in the concept of owner is shown by commercial documents, sales invoices unambiguously describing the goods as "VESPA" air compressors. Private respondents have sold the air compressors bearing the "VESPA" to various locations in the Philippines, as far as Mindanao and the Visayas since the early 1990s. We carefully inspected the evidence consisting of three hundred seventy-one (371) invoices and shipment documents which show that VESPA air compressors were sold not only in Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City, to name a few. There is no doubt that it is through private respondents efforts that the mark "VESPA" used on air compressors has gained business goodwill and reputation in the Philippines for which it has validly acquired trademark rights. Respondent E.Y. Industrials right has been preserved until the passage of RA 8293 which entitles it to register the same. 33 Comparatively, the BLAs findings were founded upon the evidence presented by the parties. An example of such evidence is Invoice No. 12075 dated March 29, 199534 where EYIS sold four units of VESPA air compressors to Veteran Paint Trade Center. Shen Dar failed to rebut such evidence. The truth, as supported by the evidence on record, is that EYIS was first to use the mark. Moreover, the discrepancy in the date provided in the Declaration of Actual Use filed by EYIS and the proof submitted was appropriately considered by the BLA, ruling as follows:

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On the contrary, respondent EY Industrial was able to prove the use of the mark "VESPA" on the concept of an owner as early as 1991. Although Respondent E.Y. indicated in its trademark application that its first use was in December 22, 1998, it was able to prove by clear and positive evidence of use prior to such date. In Chuang Te v. Ng Kian-Guiab and Director of Patents, L-23791, 23 November 1966, the High Court clarified: Where an applicant for registration of a trademark states under oath the date of his earliest use, and later on he wishes to carry back his first date of use to an earlier date, he then takes on the greater burden of presenting "clear and convincing evidence" of adoption and use as of that earlier date. (B.R. Baker Co. vs. Lebrow Bros., 150 F. 2d 580.)35 The CA further found that EYIS is not a manufacturer of air compressors but merely imports and sells them as a wholesaler and retailer. The CA reasoned: Conversely, a careful perusal of appellees own submitted receipts shows that it is not manufacturer but an importer, wholesaler and retailer. This fact is corroborated by the testimony of a former employee of appellees. Admittedly too, appellees are importing air compressors from [Shen Dar] from 1997 to 2004. These matters, lend credence to [Shen Dars] claim that the letters SD followed by a number inscribed in the air compressor is only to describe its type, manufacturer business name and capacity. The VESPA mark is in the sticker which is attached to the air compressors. The ruling of the Supreme Court, in the case of UNNO Commercial Enterprises, Inc. vs. General Milling Corporation et al., is quite enlightening, thus We quote: "The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other mark of ownership, unless such importer is actually the owner thereof in the country from which the goods are imported. Thus, this Court, has on several occasions ruled that where the applicants alleged ownership is not shown in any notarial document and the applicant appears to be merely an importer or distributor of the merchandise covered by said trademark, its application cannot be granted."36 This is a non sequitur. It does not follow. The fact that EYIS described itself in its sales invoice as an importer, wholesaler and retailer does not preclude its being a manufacturer. Sec. 237 of the National Internal Revenue Code states: Section 237. Issuance of Receipts or Sales or Commercial Invoices.All persons subject to an internal revenue tax shall, for each sale and transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sale or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That where the receipt is issued to cover payment made as rentals, commissions, compensation or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client. The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of three (3) years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period. The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section. (Emphasis supplied.) Correlatively, in Revenue Memorandum No. 16-2003 dated May 20, 2003, the Bureau of Internal Revenue defined a Sales Invoice and identified its required information as follows: Sales Invoices (SI)/Cash Invoice (CI) is written account of goods sold or services rendered and the prices charged therefor used in the ordinary course of business evidencing sale and transfer or agreement to sell or transfer of goods and services. It contains the same information found in the Official Receipt. Official Receipt (OR) is a receipt issued for the payment of services rendered or goods sold. It contains the following information: a. Business name and address; b. Taxpayer Identification Number; c. Name of printer (BIR Permit No.) with inclusive serial number of booklets and date of issuance of receipts.

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There is no requirement that a sales invoice should accurately state the nature of all the businesses of the seller. There is no legal ground to state that EYIS "declaration" in its sales invoices that it is an importer, wholesaler and retailer is restrictive and would preclude its being a manufacturer. From the above findings, there was no justifiable reason for the CA to disregard the factual findings of the IPO. The rulings of the IPO Director General and the BLA Director were supported by clear and convincing evidence. The facts cited by the CA and Shen Dar do not justify a different conclusion from that of the IPO. Hence, the findings of the BLA Director and the IPO Director General must be deemed as conclusive on the CA. Fifth Issue: Whether EYIS is the true owner of the mark "VESPA" In any event, given the length of time already invested by the parties in the instant case, this Court must write finis to the instant controversy by determining, once and for all, the true owner of the mark "VESPA" based on the evidence presented. RA 8293 espouses the "first-to-file" rule as stated under Sec. 123.1(d) which states: Section 123. Registrability. - 123.1. 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. (Emphasis supplied.) Under this provision, the registration of a mark is prevented with the filing of an earlier application for registration. This must not, however, be interpreted to mean that ownership should be based upon an earlier filing date. While RA 8293 removed the previous requirement of proof of actual use prior to the filing of an application for registration of a mark, proof of prior and continuous use is necessary to establish ownership of a mark. Such ownership constitutes sufficient evidence to oppose the registration of a mark. Sec. 134 of the IP Code provides that "any person who believes that he would be damaged by the registration of a mark x x x" may file an opposition to the application. The term "any person" encompasses the true owner of the markthe prior and continuous user. Notably, the Court has ruled that the prior and continuous use of a mark may even overcome the presumptive ownership of the registrant and be held as the owner of the mark. As aptly stated by the Court in Shangri-la International Hotel Management, Ltd. v. Developers Group of Companies, Inc.:37 Registration, without more, does not confer upon the registrant an absolute right to the registered mark. The certificate of registration is merely a prima facie proof that the registrant is the owner of the registered mark or trade name. Evidence of prior and continuous use of the mark or trade name by another can overcome the presumptive ownership of the registrant and may very well entitle the former to be declared owner in an appropriate case. xxxx Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade or commerce. As between actual use of a mark without registration, and registration of the mark without actual use thereof, the former prevails over the latter. For a rule widely accepted and firmly entrenched, because it has come down through the years, is that actual use in commerce or business is a pre-requisite to the acquisition of the right of ownership. xxxx By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply for registration of the same. Registration merely creates a prima facie presumption of the validity of the registration, of the registrants ownership of the trademark and of the exclusive right to the use thereof. Such presumption, just like the presumptive regularity in the performance of official functions, is rebuttable and must give way to evidence to the contrary.

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Here, the incontrovertible truth, as established by the evidence submitted by the parties, is that EYIS is the prior user of the mark. The exhaustive discussion on the matter made by the BLA sufficiently addresses the issue: Based on the evidence, Respondent E.Y. Industrial is a legitimate corporation engaged in buying, importing, selling, industrial machineries and tools, manufacturing, among others since its incorporation in 1988. (Exhibit "1"). Indeed private respondents have submitted photographs (Exhibit "376", "377", "378", "379") showing an assembly line of its manufacturing or assembly process.
1avvphi1

More importantly, the private respondents prior adoption and continuous use of the mark "VESPA" on air compressors is bolstered by numerous documentary evidence consisting of sales invoices issued in the name of respondent EY Industrial and Bills of Lading. (Exhibits "4" to "375"). Sales Invoice No. 12075 dated March 27, 1995 antedates petitioners date of first use in January 1, 1997 indicated in its trademark application filed in June 9, 1997 as well as the date of first use in June of 1996 as indicated in the Declaration of Actual Use submitted on December 3, 2001 (Exhibit "385"). The use by respondent-registrant in the concept of owner is shown by commercial documents, sales invoices unambiguously describing the goods as "VESPA" air compressors. Private respondents have sold the air compressors bearing the "VESPA" to various locations in the Philippines, as far as Mindanao and the Visayas since the early 1990s. We carefully inspected the evidence consisting of three hundred seventy one (371) invoices and shipment documents which show that "VESPA" air compressors were sold not only in Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City, Cagayan de Oro City, Davao City to name a few. There is no doubt that it is through private respondents efforts that the mark "VESPA" used on air compressors has gained business goodwill and reputation in the Philippines for which it has validly acquired trademark rights. Respondent EY Industrials right has been preserved until the passage of RA 8293 which entitles it to register the same. x x x38 On the other hand, Shen Dar failed to refute the evidence cited by the BLA in its decision. More importantly, Shen Dar failed to present sufficient evidence to prove its own prior use of the mark "VESPA." We cite with approval the ruling of the BLA: [Shen Dar] avers that it is the true and rightful owner of the trademark "VESPA" used on air compressors. The thrust of [Shen Dars] argument is that respondent E.Y. Industrial Sales, Inc. is a mere distributor of the "VESPA" air compressors. We disagree. This conclusion is belied by the evidence. We have gone over each and every document attached as Annexes "A", "A" 1-48 which consist of Bill of Lading and Packing Weight List. Not one of these documents referred to a "VESPA" air compressor. Instead, it simply describes the goods plainly as air compressors which is type "SD" and not "VESPA". More importantly, the earliest date reflected on the Bill of Lading was on May 5, 1997. (Annex "A"-1). [Shen Dar] also attached as Annex "B" a purported Sales Contract with respondent EY Industrial Sales dated April 20, 2002. Surprisingly, nowhere in the document does it state that respondent EY Industrial agreed to sell "VESPA" air compressors. The document only mentions air compressors which if genuine merely bolsters respondent Engracio Yaps contention that [Shen Dar] approached them if it could sell the "Shen Dar" or "SD" air compressor. (Exhibit "386") In its position paper, [Shen Dar] merely mentions of Bill of Lading constituting respondent as consignee in 1993 but never submitted the same for consideration of this Bureau. The document is also not signed by [Shen Dar]. The agreement was not even drafted in the letterhead of either [Shen Dar] nor [sic] respondent registrant. Our only conclusion is that [Shen Dar] was not able to prove to be the owner of the VESPA mark by appropriation. Neither was it able to prove actual commercial use in the Philippines of the mark VESPA prior to its filing of a trademark application in 9 June 1997.39 As such, EYIS must be considered as the prior and continuous user of the mark "VESPA" and its true owner. Hence, EYIS is entitled to the registration of the mark in its name. WHEREFORE, the petition is hereby GRANTED. The CAs February 21, 2008 Decision and October 6, 2008 Resolution in CA-G.R. SP No. 99356 are hereby REVERSED and SET ASIDE. The Decision dated May 25, 2007 issued by the IPO Director General in Inter Partes Case No. 14-2004-00084 and the Decision dated May 29, 2006 of the BLA Director of the IPO are hereby REINSTATED. No costs. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice WE CONCUR: RENATO C. CORONA Chief Justice Chairperson

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TERESITA J. LEONARDO-DE CASTRO Associate Justice MARIANO C. DEL CASTILLO Associate Justice

JOSE PORTUGAL PEREZ Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Chief Justice

Footnotes Rollo, pp. 56-70. Penned by Associate Justice Enrico A. Lanzanas and concurred in by Associate Justices Remedios Salazar-Fernando (Chairperson) and Rosalinda Asuncion-Vicente.
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Id. at 71-78. Id. at 231-241. Id. at 218-229. Id. at 12. Id. at 58. Id. at 12. Id. at 88. Id. at 169-173. Id. at 57. Id. at 234. Id. at 57. Id. Id. Id. at 58. Id. at 59-60. Id. at 60-61. Id. at 61. Id. at 56-57. Id. at 63. Id. at 69-70. Id. at 66-67.

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Id. at 18. G.R. No. 149281, June 15, 2005, 460 SCRA 220, 227. Rollo, p. 225. Id. at 68. Id. at 241. G.R. No. 155359, January 31, 2006, 481 SCRA 282, 296-297. G.R. No. 163210, August 13, 2008, 562 SCRA 103, 113-114. G.R. No. 109849, February 26, 1997, 268 SCRA 703, 708-709. G.R. No. 95694, October 9, 1997, 280 SCRA 297, 330-331. Rollo, pp. 66-67. Id. at 228. Id. at 173. Id. at 227. Id. at 67-68. G.R. No. 159938, March 31, 2006, 486 SCRA 405, 419-421. Rollo, p. 228. Id. at 226. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

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G.R. No. 100098 December 29, 1995 EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC., respondents.

KAPUNAN, J.: In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald Garment Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29 November 1990 in CA-G.R. SP No. 15266 declaring petitioner's trademark to be confusingly similar to that of private respondent and the resolution dated 17 May 1991 denying petitioner's motion for reconsideration. The record reveals the following antecedent facts: On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized under the laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for Cancellation of Registration No. SR 5054 (Supplemental Register) for the trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued

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on 27 October 1980 in the name of petitioner Emerald Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine laws. The petition was docketed as Inter Partes Case No. 1558. 1 Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris Convention for the Protection of Industrial Property, averred that petitioner's trademark "so closely resembled its own trademark, 'LEE' as previously registered and used in the Philippines, and not abandoned, as to be likely, when applied to or used in connection with petitioner's goods, to cause confusion, mistake and deception on the part of the purchasing public as to the origin of the goods." 2 In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and unmistakably different from that of private respondent and that its certificate of registration was legally and validly granted. 3 On 20 February 1984, petitioner caused the publication of its application for registration of the trademark "STYLISTIC MR. LEE" in the Principal Register." 4 On 27 July 1984, private respondent filed a notice of opposition to petitioner's application for registration also on grounds that petitioner's trademark was confusingly similar to its "LEE" trademark. 5 The case was docketed as Inter Partes Case No. 1860. On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985, issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common question of law was involved. 6 On 19 July 1988, the Director of Patents rendered a decision granting private respondent's petition for cancellation and opposition to registration. The Director of Patents found private respondent to be the prior registrant of the trademark "LEE" in the Philippines and that it had been using said mark in the Philippines. 7 Moreover, the Director of Patents, using the test of dominancy, declared that petitioner's trademark was confusingly similar to private respondent's mark because "it is the word 'Lee' which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. It is undeniably the dominant feature of the mark." 8 On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that the same would cause it great and irreparable damage and injury. Private respondent submitted its opposition on 22 August 1988. 9 On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioner's motion to stay execution subject to the following terms and conditions: 1. That under this resolution, Respondent-Registrant is authorized only to dispose of its current stock using the mark "STYLISTIC MR. LEE"; 2. That Respondent-Registrant is strictly prohibited from further production, regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock; 3. That this relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals and, if the Respondent's appeal loses, all goods bearing the mark "STYLISTIC MR. LEE" shall be removed from the market, otherwise such goods shall be seized in accordance with the law.
SO ORDERED. 10

On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the Director of Patents dated 19 July 1988 in all respects. 11 In said decision the Court of Appeals expounded, thus: xxx xxx xxx Whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; that duplication or imitation is not necessary, a similarity in the dominant features of the trademark would be sufficient.

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The word "LEE" is the most prominent and distinctive feature of the appellant's trademark and all of the appellee's "LEE" trademarks. It is the mark which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. While it is true that there are other words such as "STYLISTIC", printed in the appellant's label, such word is printed in such small letters over the word "LEE" that it is not conspicuous enough to draw the attention of ordinary buyers whereas the word "LEE" is printed across the label in big, bold letters and of the same color, style, type and size of lettering as that of the trademark of the appellee. The alleged difference is too insubstantial to be noticeable. Even granting arguendo that the word "STYLISTIC" is conspicuous enough to draw attention, the goods may easily be mistaken for just another variation or line of garments under the ap appelle's "LEE" trademarks in view of the fact that the appellee has registered trademarks which use other words in addition to the principal mark "LEE" such as "LEE RIDERS", "LEESURES" and "LEE LEENS". The likelihood of confusion is further made more probable by the fact that both parties are engaged in the same line of business. It is well to reiterate that the determinative factor in ascertaining whether or not the marks are confusingly similar to each other is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. xxx xxx xxx The appellee has sufficiently established its right to prior use and registration of the trademark "LEE" in the Philippines and is thus entitled to protection from any infringement upon the same. It is thus axiomatic that one who has identified a peculiar symbol or mark with his goods thereby acquires a property right in such symbol or mark, and if another infringes the trademark, he thereby invokes this property right.
The merchandise or goods being sold by the parties are not that expensive as alleged to be by the appellant and are quite ordinary commodities purchased by the average person and at times, by the ignorant and the unlettered. Ordinary purchasers will not as a rule examine the small letterings printed on the label but will simply be guided by the presence of the striking mark "LEE". Whatever difference there may be will pale in insignificance in the face of an evident similarity in the dominant features and overall appearance of the labels of the parties. 12

xxx xxx xxx On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision of the Court of Appeals. Private respondent opposed said motion on 8 January 1991 on grounds that it involved an impermissible change of theory on appeal. Petitioner allegedly raised entirely new and unrelated arguments and defenses not previously raised in the proceedings below such as laches and a claim that private respondent appropriated the style and appearance of petitioner's trademark when it registered its "LEE" mark under Registration No. 44220. 13 On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's motion for reconsideration and ruled thus: xxx xxx xxx A defense not raised in the trial court cannot be raised on appeal for the first time. An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. The object of requiring the parties to present all questions and issues to the lower court before they can be presented to this Court is to have the lower court rule upon them, so that this Court on appeal may determine whether or not such ruling was erroneous. The purpose is also in furtherance of justice to require the party to first present the question he contends for in the lower court so that the other party may not be taken by surprise and may present evidence to properly meet the issues raised. Moreover, for a question to be raised on appeal, the same must also be within the issues raised by the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided based upon such theory presented in the court below, he will not be permitted to change his theory on appeal. To permit him to do so would be unfair to the adverse party. A question raised for the first time on appeal, there having opportunity to raise them in the court of origin constitutes a change of theory which is not permissible on appeal.

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In the instant case, appellant's main defense pleaded in its answer dated March 23, 1982 was that there was "no confusing similarity between the competing trademark involved. On appeal, the appellant raised a single issue, to wit: The only issue involved in this case is whether or not respondent-registrant's trademark "STYLISTIC MR. LEE" is confusingly similar with the petitioner's trademarks "LEE or LEERIDERS, LEE-LEENS and LEE-SURES." Appellant's main argument in this motion for reconsideration on the other hand is that the appellee is estopped by laches from asserting its right to its trademark. Appellant claims although belatedly that appellee went to court with "unclean hands" by changing the appearance of its trademark to make it identical to the appellant's trademark. Neither defenses were raised by the appellant in the proceedings before the Bureau of Patents. Appellant cannot raise them now for the first time on appeal, let alone on a mere motion for reconsideration of the decision of this Court dismissing the appellant's appeal.
While there may be instances and situations justifying relaxation of this rule, the circumstance of the instant case, equity would be better served by applying the settled rule it appearing that appellant has not given any reason at all as to why the defenses raised in its motion for reconsideration was not invoked earlier. 14

xxx xxx xxx Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors: I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE OF A FOURTH "LEE" TRADEMARK IMITATING THAT OF THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN EIGHT MONTHS AFTER THE BUREAU OF PATENT'S DECISION DATED JULY 19, 1988. II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF ESTOPPEL BY LACHES MUST BE RAISED IN THE PROCEEDINGS BEFORE THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER.
III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE RESPONDENT'S PRIOR REGISTRATION OF ITS TRADEMARK AND DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO PROVE COMMERCIAL USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION. 15

In addition, petitioner reiterates the issues it raised in the Court of Appeals: I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONER'S TRADEMARK SYTLISTIC MR. LEE, IS CONFUSINGLY SIMILAR WITH THE PRIVATE RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEE-LEENS AND LEE-SURES. II. PETITIONER'S EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER AND ITS TRADEMARK IS DIFFERENT FROM THAT OF THE PRIVATE RESPONDENT. III. PETITIONER'S TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE RESPONDENT'S AND THE REGISTRATION OF ITS TRADEMARK IS PRIMA FACIE EVIDENCE OF GOOD FAITH.
IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK CANNOT BE CONFUSED WITH PRIVATE RESPONDENT'S LEE TRADEMARK. 16

Petitioner contends that private respondent is estopped from instituting an action for infringement before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A of R.A. No. 166, otherwise known as the Law on Trademarks, Trade-names and Unfair Competition: Sec. 9-A. Equitable principles to govern proceedings. In opposition proceedings and in all other inter partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and acquiescence, where applicable, may be considered and applied. Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE" since 1 May 1975, yet, it was only on 18 September 1981 that private respondent filed a petition for cancellation of petitioner's certificate of registration for

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the said trademark. Similarly, private respondent's notice of opposition to petitioner's application for registration in the principal register was belatedly filed on 27 July 1984. 17 Private respondent counters by maintaining that petitioner was barred from raising new issues on appeal, the only contention in the proceedings below being the presence or absence of confusing similarity between the two trademarks in question. 18 We reject petitioner's contention. Petitioner's trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that "marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette." 19 The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, 20 the date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to petitioner. It was only on the date of publication and issuance of the registration certificate that private respondent may be considered "officially" put on notice that petitioner has appropriated or is using said mark, which, after all, is the function and purpose of registration in the supplemental register. 21 The record is bereft of evidence that private respondent was aware of petitioner's trademark before the date of said publication and issuance. Hence, when private respondent instituted cancellation proceedings on 18 September 1981, less than a year had passed. Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of opposition to petitioner's application for registration in the principal register since said application was published only on 20 February 1984. 22 From the time of publication to the time of filing the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. 23 More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently contends that its trademark "STYLISTIC MR. LEE" is entirely different from and not confusingly similar to private respondent's "LEE" trademark. Private respondent maintains otherwise. It asserts that petitioner's trademark tends to mislead and confuse the public and thus constitutes an infringement of its own mark, since the dominant feature therein is the word "LEE." The pertinent provision of R.A. No. 166 (Trademark Law) states thus: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitable 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. Practical application, however, of the aforesaid provision is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v. Court of Appeals, 24 we held: . . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. It is unquestionably true that, as stated inCoburn vs. Puritan Mills, Inc.: "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case." xxx xxx xxx Likewise, it has been observed that:
In determining whether a particular name or mark is a "colorable imitation" of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container;

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the character of the product's purchasers; location of the business; the likelihood of deception or the mark or name's tendency to confuse; etc. 25

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." 26
Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article. 27

In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals 28 and other cases 29 and the Holistic Test developed in Del Monte Corporation v. Court of Appeals 30 and its proponent cases. 31 As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. xxx xxx xxx
. . . If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. 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; . . .) 32

xxx xxx xxx On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. xxx xxx xxx
In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. 33

xxx xxx xxx Applying the foregoing tenets to the present controversy and taking into account the factual circumstances of this case, we considered the trademarks involved as a whole and rule that petitioner's "STYLISTIC MR. LEE" is not confusingly similar to private respondent's "LEE" trademark. Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its label the word "LEE" is prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of the following variables that must be factored in. First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soysauce or soap which are of minimal cost. Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, 34 we noted that: . . . Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as

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he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care. . . . Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted. Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved. The definition laid down in Dy Buncio v. Tan Tiao Bok 35 is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase." There is no cause for the Court of Appeal's apprehension that petitioner's products might be mistaken as "another variation or line of garments under private respondent's 'LEE' trademark". 36 As one would readily observe, private respondent's variation follows a standard format "LEERIDERS," "LEESURES" and "LEELEENS." It is, therefore, improbable that the public would immediately and naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another variation under private respondent's "LEE" mark. As we have previously intimated the issue of confusing similarity between trademarks is resolved by considering the distinct characteristics of each case. In the present controversy, taking into account these unique factors, we conclude that the similarities in the trademarks in question are not sufficient as to likely cause deception and confusion tantamount to infringement. Another way of resolving the conflict is to consider the marks involved from the point of view of what marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4 (e): CHAPTER II-A. The Principal Register (Inserted by Sec. 2, Rep. Act No. 638.) Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx xxx xxx (e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (Emphasis ours.) xxx xxx xxx "LEE" is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term.
. . . It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, "Wellington" is a surname, and its first user has no cause of action against the junior user of "Wellington" as it is incapable of exclusive appropriation. 37

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In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) which explicitly provides that: CHAPTER II. Registration of Marks and Trade-names. Sec. 2. What are registrable. Trade-marks, trade-names, and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships, or associations domiciled in any foreign country may be registered in accordance with the provisions of this act: Provided, That said trade-marks, trade-names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And Provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended.) (Emphasis ours.) Sec. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired. Anyone who lawfully produces or deals in merchandise of any kind or who engages in lawful business, or who renders any lawful service in commerce, by actual use hereof in manufacture or trade, in business, and in the service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or services from others. The ownership or possession of trade-mark, trade-name, service-mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights to the law. (As amended.) (Emphasis ours.) The provisions of the 1965 Paris Convention for the Protection of Industrial Property 38 relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) 39 were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals: 40 xxx xxx xxx Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments. xxx xxx xxx In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the question of whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to protection due to absence of actual use of the emblem in the local market. xxx xxx xxx Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEERIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969 to 1973. 41 However, registration alone will not suffice. In Sterling Products International, Inc. v.Farbenfabriken Bayer Aktiengesellschaft, 42 we declared: xxx xxx xxx

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A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite in the acquisition of the right of ownership over a trademark. xxx xxx xxx It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. (Emphasis ours.) xxx xxx xxx To augment its arguments that it was, not only the prior registrant, but also the prior user, private respondent invokes Sec. 20 of the Trademark Law, thus: Sec. 20. Certificate of registration prima facie evidence of validity. A certificate of registration of a mark or tradename shall be a prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. Moreover, the aforequoted provision applies only to registrations in the principal register. 43 Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of marks which are not registrable on the principal register due to some defects. 44 The determination as to who is the prior user of the trademark is a question of fact and it is this Court's working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Courtprovided they are supported by substantial evidence. 45 In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark "LEE" which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its "LEE" mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines 46 based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. 47Similarly, we give little weight to the numerous vouchers representing various advertising expenses in the Philippines for "LEE" products. 48 It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May 1981. 49 On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its "STYLISTIC MR. LEE" trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. 50 Our rulings in Pagasa Industrial Corp. v. Court of Appeals 51 and Converse Rubber Corp. v. Universal Rubber Products, Inc., 52 respectively, are instructive: The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value." The evidence for respondent must be clear, definite and free from inconsistencies. "Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by law. Respondent did

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not expect income from such "samples." There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. xxx xxx xxx The sales invoices provide the best proof that there were actual sales of petitioner's product in the country and that there was actual use for a protracted period of petitioner's trademark or part thereof through these sales. For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for infringement must necessarily fail. WHEREFORE, premises considered, the questioned decision and resolution are hereby REVERSED and SET ASIDE. SO ORDERED. Bellosillo and Hermosisima, Jr., JJ., concur.

Separate Opinions PADILLA, J., dissenting: I dissent. I vote deny the petition; I agree with BPTTT and the CA that petitioner's trademark "STYLISTIC MR. LEE" is confusingly similar to private respondent's earlier registered trademarks "LEE" or "LEE RIDER, LEE-LEENS and LEE-SURES" such that the trademark "STYLISTIC MR. LEE" is an infringement of the earlier registered trademarks. Separate Opinions PADILLA, J., dissenting: I dissent. I vote deny the petition; I agree with BPTTT and the CA that petitioner's trademark "STYLISTIC MR. LEE" is confusingly similar to private respondent's earlier registered trademarks "LEE" or "LEE RIDER, LEE-LEENS and LEE-SURES" such that the trademark "STYLISTIC MR. LEE" is an infringement of the earlier registered trademarks. Footnotes 1 Rollo, pp. 3, 27, 53. 2 Id., at 27, 55. 3 Id., at 27, 54. 4 Id., at 3, 27. 5 Id., at 54. 6 Ibid. 7 Id., at 39. 8 Id., at 38. 9 Id., at 4. 10 Id., at 42. 11 Id., at 33.

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12 Id., at 31-33. 13 Id., at 175. 14 Id., at 23-25. 15 Id., at 7, 14-15. 16 Ibid. 17 Id., at 12, 158. 18 Id., at 193. 19 The whole paragraph reads as follows: Chapter IV-A. The supplemental register. Sec. 19-A. xxx xxx xxx Marks and trade-names for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette. Whenever any person believes that he is or will be damaged by the registration of a mark or trade-name on this register, he may at any time apply to the director to cancel such registration. Upon receiving the application, the director shall give notice thereof to the registrant. If it is found after a hearing that the registrant was not entitled to register the mark at the time of his application for registration thereof, or that the mark was not used by the registrant or has been abandoned, the registration shall be cancelled by the director. 20 Supra, see Note 1. 21 Sec. 19-A, R.A. No. 166; La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984). 22 Supra, see Note 4. 23 Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p. 32, citing La Insular v. Jao Oge, 47 Phil. 75, (1924); La Insular v. Yu So, 45 Phil. 398 (1923). 24 116 SCRA 336 (1982). 25 Jaime N. Salazar, Trademarks and Tradenames, 55 SCRA 422 (1974); See also Colorable Imitation of Trademarks, Tradenames, Labels, Packages, Wrappers, etc., 16 SCRA 502 (1966). 26 Etepha v. Director of Patents, 16 SCRA 495 (1966). 27 Ruben Agpalo, Trademark Law & Practice in the Philippines, 1990, p. 41. 28 224 SCRA 437 (1993). 29 Co Tiong v. Director of Patents, 95 Phil. 1 (1954); Lim Hoa v. Director of Patents, 100 Phil. 214 (1956); American Wire & Cable Co. v. Director of Patents, 31 SCRA 544 (1970); Phil. Nut Industry, Inc. v. Standard Brands, Inc., 65 SCRA 575 (1975); Converse Rubber Corp. v. Universal Rubber Products, Inc., 147 SCRA 154 (1987). 30 181 SCRA 410 (1990). 31 Mead Johnson & Co. v. N.V.J. Van Dorp, Ltd., 7 SCRA 771 (1963); Bristol Myers Co. v. Director of Patents, 17 SCRA 128 (1966); Fruit of the Loom, Inc. v. CA, 133 SCRA 405 (1984). 32 Supra, see note 28. 33 Fruit of the Loom, Inc. v. CA, supra, see note 31.

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34 Supra, see note 30. 35 42 Phil. 190 (1921). 36 Supra, see note 12. 37 Ruben Agpalo, Trademark Law and Practice in the Philippines, 1990, p. 18, citing Ang Si Heng v. Wellington Dept. Store, Inc., 92 Phil. 448 (1953). 38 The Philippines became a signatory thereto on 27 September 1965. The Paris Convention is essentially a compact among the various member countries to accord in their own countries to citizens of the other contracting parties trademark and other rights comparable to those accorded their own citizens by their domestic laws. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its own citizens. In addition the Convention sought to create uniformity in certain respects by obligating each nation assure to nationals of countries of the Union an effective protection against unfair competition. (Ruben Agpalo, Trademark Law And Practice in the Philippines, 1990, pp. 200-201.) 39 Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or assigned under this Act may bring an action hereinunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act Numbered Fourteen hundred and fifty-nine, as amended, otherwise known as the Corporation Law, at the time it brings complaint: Provided, That the country of which the said foreign or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines. (As amended.) 40 224 SCRA 576 (1993). 41 Rollo, p. 170; Exhibits A, B, C, & C-1. 42 27 SCRA 1214 (1969); Reiterated in Kabushi Kaisha Isetan v. Intermediate Appellate Court, 203 SCRA 583 (1991). 43 La Chemise Lacoste, S.A. v. Fernandez, 129 SCRA 373 (1984). 44 Ibid. 45 Unno Commercial Enterprises, Inc. v. General Milling Corp., 120 SCRA 804 (1983); Kabushi Kaisha Isetan v. Intermediate Appellate Court, 203 SCRA 583 (1991). 46 Rollo, p. 177. 47 Original Records, p. 52. 48 Exhibits F-1 to F-59. 49 Exhibit E. 50 Exhibits 1-e to 1-o. 51 118 SCRA 526 (1982). 52 147 SCRA 154 (1987). Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-29971 August 31, 1982

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ESSO STANDARD EASTERN, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS ** and UNITED CIGARETTE CORPORATION, respondents. & TEEHANKEE, J.:
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The Court affirms on the basis of controlling doctrine the appealed decision of the Court of Appeals reversing that of the Court of First Instance of Manila and dismissing the complaint filed by herein petitioner against private respondent for trade infringement for using petitioner's trademark ESSO, since it clearly appears that the goods on which the trademark ESSO is used by respondent is non-competing and entirely unrelated to the products of petitioner so that there is no likelihood of confusion or deception on the part of the purchasing public as to the origin or source of the goods. Petitioner Esso Standard Eastern, Inc., 1 then a foreign corporation duly licensed to do business in the Philippines, is engaged in the sale of petroleum products which are Identified with its trademark ESSO (which as successor of the defunct Standard Vacuum Oil Co. it registered as a business name with the Bureaus of Commerce and Internal Revenue in April and May, 1962). Private respondent in turn is a domestic corporation then engaged in the manufacture and sale of cigarettes, after it acquired in November, 1963 the business, factory and patent rights of its predecessor La Oriental Tobacco Corporation, one of the rights thus acquired having been the use of the trademark ESSO on its cigarettes, for which a permit had been duly granted by the Bureau of Internal Revenue. Barely had respondent as such successor started manufacturing cigarettes with the trademark ESSO, when petitioner commenced a case for trademark infringement in the Court of First Instance of Manila. The complaint alleged that the petitioner had been for many years engaged in the sale of petroleum products and its trademark ESSO had acquired a considerable goodwill to such an extent that the buying public had always taken the trademark ESSO as equivalent to high quality petroleum products. Petitioner asserted that the continued use by private respondent of the same trademark ESSO on its cigarettes was being carried out for the purpose of deceiving the public as to its quality and origin to the detriment and disadvantage of its own products. In its answer, respondent admitted that it used the trademark ESSO on its own product of cigarettes, which was not Identical to those produced and sold by petitioner and therefore did not in any way infringe on or imitate petitioner's trademark. Respondent contended that in order that there may be trademark infringement, it is indispensable that the mark must be used by one person in connection or competition with goods of the same kind as the complainant's. The trial court, relying on the old cases of Ang vs. Teodoro 2 and Arce & Sons, Inc. vs. Selecta Biscuit Company, 3referring to related products, decided in favor of petitioner and ruled that respondent was guilty of infringement of trademark. On appeal, respondent Court of Appeals found that there was no trademark infringement and dismissed the complaint. Reconsideration of the decision having been denied, petitioner appealed to this Court by way of certiorari to reverse the decision of the Court of Appeals and to reinstate the decision of the Court of First Instance of Manila. The Court finds no ground for granting the petition. The law defines infringement as the use without consent of the trademark owner of any "reproduction, counterfeit, copy or colorable limitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or Identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable limitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services." 4 Implicit in this definition is the concept that the goods must be so related that there is a likelihood either of confusion of goods or business. 5 But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. 6 It is unquestionably true that, as stated in Coburn vs. Puritan Mills, Inc. 7 "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case. It is undisputed that the goods on which petitioner uses the trademark ESSO, petroleum products, and the product of respondent, cigarettes, are non-competing. But as to whether trademark infringement exists depends for the most part upon whether or not the goods are so related that the public may be, or is actually, deceived and misled that they came from the same maker or manufacturer. For non-competing goods may be those which, though they are not in actual competition, are so related to each other that it might reasonably be assumed that they originate from one manufacturer. Non-competing goods may also be those which, being entirely unrelated, could notreasonably be assumed to have a common source. in the former case of related goods, confusion of business could arise out of the use of similar marks; in the latter case of non-related goods, it could not. 8 The vast majority of courts today

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follow the modern theory or concept of "related goods" 9 which the Court has likewise adopted and uniformly recognized and applied. 10 Goods are related when they belong to the same class or have the same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture or quality. They may also be related because they serve the same purpose or are sold in grocery stores. 11 Thus, biscuits were held related to milk because they are both food products. 12 Soap and perfume, lipstick and nail polish are similarly related because they are common household items now a days. 13 The trademark "Ang Tibay" for shoes and slippers was disallowed to be used for shirts and pants because they belong to the same general class of goods. 14 Soap and pomade although non- competitive, were held to be similar or to belong to the same class, since both are toilet articles. 15 But no confusion or deception can possibly result or arise when the name "Wellington" which is the trademark for shirts, pants, drawers and other articles of wear for men, women and children is used as a name of a department store. 16 Thus, in Acoje Mining Co., Inc. vs. Director of Patents, 17 the Court, through now Chief Justice Fernando, reversed the patent director's decision on the question of "May petitioner Acoje Mining Company register for the purpose of advertising its product, soy sauce, the trademark LOTUS, there being already in existence one such registered in favor of the Philippine Refining Company for its product, edible oil, it being further shown that the trademark applied for is in smaller type, colored differently, set on a background which is dissimilar as to yield a distinct appearance?" and ordered the granting of petitioner's application for registration ruling that "there is quite a difference between soy sauce and edible oil. If one is in the market for the former, he is not likely to purchase the latter just because of the trademark LOTUS" and "when regard is had for the principle that the two trademarks in their entirety as they appear in their respective labels should be considered in relation to the goods advertised before registration could be denied, the conclusion is inescapable that respondent Director ought to have reached a different conclusion. " By the same token, in the recent case of Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents, 18 the Court upheld the patent director's registration of the same trademark CAMIA for therein respondent's product of ham notwithstanding its already being used by therein petitioner for a wide range of products: lard butter, cooking oil, abrasive detergents, polishing materials and soap of all kinds. The Court, after noting that the same CAMIA trademark had been registered by two other companies, Everbright Development Company and F. E. Zuellig, Inc. for their respective products of thread and yarn (for the former) and textiles, embroideries and laces (for the latter) ruled that "while ham and some of the products of petitioner are classified under Class 47 (Foods and Ingredients of Food), this alone cannot serve as the decisive factor in the resolution of whether or not they are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics." The Court, therefore, concluded that "In fine, We hold that the businesses of the parties are non-competitive and their products so unrelated that the use of Identical trademarks is not likely to give rise to confusion, much less cause damage to petitioner." In the situation before us, the goods are obviously different from each other with "absolutely no iota of similitude"19 as stressed in respondent court's judgment. They are so foreign to each other as to make it unlikely that purchasers would think that petitioner is the manufacturer of respondent's goods. The mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different kind. 20
t@lF

Petitioner uses the trademark ESSO and holds certificate of registration of the trademark for petroleum products, including aviation gasoline, grease, cigarette lighter fluid and other various products such as plastics, chemicals, synthetics, gasoline solvents, kerosene, automotive and industrial fuel, bunker fuel, lubricating oil, fertilizers, gas, alcohol, insecticides and the ESSO Gasul" burner, while respondent's business is solely for the manufacture and sale of the unrelated product of cigarettes. The public knows too well that petitioner deals solely with petroleum products that there is no possibility that cigarettes with ESSO brand will be associated with whatever good name petitioner's ESSO trademark may have generated. Although petitioner's products are numerous, they are of the same class or line of merchandise which are non-competing with respondent's product of cigarettes, which as pointed out in the appealed judgment is beyond petitioner's "zone of potential or natural and logical expansion" 21When a trademark is used by a party for a product in which the other party does not deal, the use of the same trademark on the latter's product cannot be validly objected to. 22 Another factor that shows that the goods involved are non-competitive and non-related is the appellate court's finding that they flow through different channels of trade, thus: "The products of each party move along and are disposed through different channels of distribution. The (petitioner's) products are distributed principally through gasoline service and lubrication stations, automotive shops and hardware stores. On the other hand, the (respondent's) cigarettes are sold in sari-sari stores, grocery stores, and other small distributor outlets. (Respondent's) cigarettes are even peddled in the streets while (petitioner's) 'gasul' burners are not. Finally, there is a marked distinction between oil and tobacco, as well as between petroleum and cigarettes. Evidently, in kind and nature the products of (respondent) and of (petitioner) are poles apart." 23 Respondent court correctly ruled that considering the general appearances of each mark as a whole, the possibility of any confusion is unlikely. A comparison of the labels of the samples of the goods submitted by the parties shows a great many differences on the trademarks used. As pointed out by respondent court in its appealed decision, "(A)

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witness for the plaintiff, Mr. Buhay, admitted that the color of the "ESSO" used by the plaintiff for the oval design where the blue word ESSO is contained is the distinct and unique kind of blue. In his answer to the trial court's question, Mr. Buhay informed the court that the plaintiff never used its trademark on any product where the combination of colors is similar to the label of the Esso cigarettes," and "Another witness for the plaintiff, Mr. Tengco, testified that generally, the plaintiff's trademark comes all in either red, white, blue or any combination of the three colors. It is to be pointed out that not even a shade of these colors appears on the trademark of the appellant's cigarette. The only color that the appellant uses in its trademark is green." 24 Even the lower court, which ruled initially for petitioner, found that a "noticeable difference between the brand ESSO being used by the defendants and the trademark ESSO of the plaintiff is that the former has a rectangular background, while in that of the plaintiff the word ESSO is enclosed in an oval background." In point of fact and time, the Court's dismissal of the petition at bar was presaged by its Resolution of May 21, 1979 dismissing by minute resolution the petition for review for lack of merit in the Identical case of Shell Company of the Philippines, Ltd vs. Court of Appeals 25, wherein the Court thereby affirmed the patent office's registration of the trademark SHELL as used in the cigarettes manufactured by therein respondent Fortune Tobacco Corporation notwithstanding the therein petitioner Shell Company's opposition thereto as the prior registrant of the same trademark for its gasoline and other petroleum trademarks, on the strength of the controlling authority of Acoje Mining Co. vs. Director of Patents, Supra, and the same rationale that "(I)n the Philippines, where buyers of appellee's (Fortune Corp.'s) cigarettes, which are low cost articles, can be more numerous compared to buyers of the higher priced petroleum and chemical products of appellant (Shell Co.) and where appellant (Shell) is known to be in the business of selling petroleum and petroleum-based chemical products, and no others, it is difficult to conceive of confusion in the minds of the buying public in the sense it can be thought that appellant (Shell) is the manufacturer of appellee's (Fortune's) cigarettes, or that appellee (Fortune) is the manufacturer or processor of appellant's (Shell's) petroleum and chemical products." 26 ACCORDINGLY, the petition is dismissed and the decision of respondent Court of Appeals is hereby affirmed. Melencio-Herrera, Plana, Relova and Gutierrez, Jr., JJ., concur. Makasiar, J., is on leave. Vasquez, J., took no part. & Footnotes
1wph1.t 1wph1.t

* First Division then cmposed of Villamor, Presiding Justice, ponente, Concepcion, Jr. and Mojica, JJ. 1 On December 31, 1969, by virtue of an "Agreement of Exchange and Transfer," the businesses, properties and other assets in the Philippines of Esso Standard Eastern, Inc. were transferred to Esso Philippines, Inc. Its petition to be substituted by Esso Philippines, Inc. as party petitioner was denied in a resolution of this Court dated April 7, 1970, pursuant to the then Solicitor General's opposition "because of the possible legal consequence that may arise under the provisions of the Laurel-Langley Act and other related laws. 2 74 Phil. 50. 3 1 SCRA 253. 4 Sec. 22, Trademark Law. 5 2 Callman, Unfair Competition and Trademarks, p. 1324. 6 Ibid, p. 1123. 7 108 F. 2d 377, 378. 8 2 Callman, Unfair Competition and Trademarks, p. 1336. 9 2 McCarthy, Trademarks and Unfair Competition, p. 119. 10 Vide: Arce vs. Selecta, 1 SCRA 253 (1961); Chua Che vs. Phil. Patents Office, 13 SCRA 67 (1965); Ang vs. Teodoro, 74 Phil. 50; Khe vs. Lever Bros. Co., 49 O.G. 3891 (1941); Ang Si Heng &

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Dee vs. Wellington Dept. Store, 92 Phil. 448; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480 (1971). 11 2 Callman Unfair Competition & Trade Marks, p. 1257. 12 Arce vs. Selecta, supra. 13 Chua Che vs. Phils. Patent Office, supra. 14 Ang vs. Teodoro, supra. 15 Khe vs. Lever Bros. Co., supra. 16 Ang Si Heng & Dee vs. Wellington Department Store, supra. 17 38 SCRA 480(1971). 18 G.R. No. L-26676, July 30, 1982 (2nd Division); see also Leviton Industries vs, Salvador, G. R. L40163, June 19, 1982. 19 Record, p. 128. 20 American Foundries vs. Robertson, 269 US 372,381. 21 Record at page 138. 22 George W. Luft Co., Inc. vs. Ngo Guan, 18 SCRA 944 (1966). 23 Record at pages 135-136. 24 Record at pages 137-138. 25 G.R. No. L-49145, petition for review denied May 21, 1979 and judgment entered June 28, 1979. 26 Idem, separate opinion of Court of Appeals Justice Corazon Juliano Agrava; Rec Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-20635 March 31, 1966

ETEPHA, A.G., petitioner, vs. DIRECTOR OF PATENTS and WESTMONT PHARMACEUTICALS, INC., respondents. McClure, Salas and Gonzalez, for petitioner. Sycip, Salazar, Manalo, Luna and Associates, for respondent. SANCHEZ, J.: To the question: May trademark ATUSSIN be registered, given the fact that PERTUSSIN, another trademark, had been previously registered in the Patent Office? the Director of Patents answered affirmatively. Hence this appeal. On April 23, 1959, respondent Westmont Pharmaceuticals, Inc., a New York corporation, sought registration of trademark "Atussin" placed on its "medicinal preparation of expectorant antihistaminic, bronchodilator sedative, ascorbic acid (Vitamin C) used in the treatment of cough". The trademark is used exclusively in the Philippines since January 21, 1959.1 Petitioner, Etepha, A. G., a Liechtenstin (principality) corporation, objected. Petitioner claims that it will be damaged because Atussin is so confusedly similar to its Pertussin (Registration No. 6089, issued on September 25, 1957)

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used on a preparation for the treatment of coughs, that the buying public will be misled into believing that Westmont's product is that of petitioner's which allegedly enjoys goodwill. 1. The objects of a trademark are "to point out distinctly the origin or ownership of the articles to which it is affixed, to secure to him who has been instrumental in bringing into market a superior article or merchandise the fruit of his industry and skill, and to prevent fraud and imposition."2 Our over-all task then is to ascertain whether or not Atussin so resembles Pertussin "as to be likely, when applied to or used in connection with the goods ... of the applicant, to cause confusion or mistake or to deceive purchasers".3 And, we are to be guided by the rule that the validity of a cause for infringement is predicated upon colorable imitation. The phrase "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, and to cause him to purchase the one supposing it to be the other."4 2. That the word "tussin" figures as a component of both trademarks is nothing to wonder at. The Director of Patents aptly observes that it is "the common practice in the drug and pharmaceutical industries to 'fabricate' marks by using syllables or words suggestive of the ailments for which they are intended and adding thereto distinctive prefixes or suffixes".5 And appropriately to be considered now is the fact that, concededly, the "tussin" (in Pertussin and Atussin) was derived from the Latin root-word "tussis" meaning cough. 6 "Tussin" is merely descriptive; it is generic; it furnishes to the buyer no indication of the origin of the goods; it is open for appropriation by anyone. It is accordingly barred from registration as trademark. With jurisprudence holding the line, we feel safe in making the statement that any other conclusion would result in "appellant having practically a monopoly"7 of the word "tussin" in a trademark.8 While "tussin" by itself cannot thus be used exclusively to identify one's goods, it may properly become the subject of a trademark "by combination with another word or phrase".9 And this union of words is reflected in petitioner's Pertussin and respondent's Atussin, the first with prefix "Per" and the second with Prefix "A".
1wph1.t

3. A practical approach to the problem of similarity or dissimilarity is to go into the whole of the two trademarks pictured in their manner of display. Inspection should be undertaken from the viewpoint of a prospective buyer. The trademark complained of should be compared and contrasted with the purchaser's memory (not in juxtaposition) of the trademark said to be infringed. 10 Some such factors as "sound; appearance; form, style, shape, size or format; color; ideas connoted by marks; the meaning, spelling, and pronunciation, of words used; and the setting in which the words appear" may be considered. 11 For, indeed, trademark infringement is a form of unfair competition. 12 We take a casual look at the two labels without spelling out the details bearing in mind the easy-toremember earmarks thereof. Respondent's label underscores the trademark Atussin in bold, block letters horizontally written. In petitioner's, on the other hand, Pertussin is printed diagonally upwards and across in semiscript style with flourishes and with only the first letter "P" capitalized. Each label plainly shows the source of the medicine: petitioner's at the foot bears "Etepha Ltd. Schaan Fl", and on top, "Apothecary E. Taeschner's"; respondent's projects "Westmont Pharmaceuticals, Inc. New York, USA" at the bottoms, and on the lower left side the word "Westmont" upon a white diamond shaped enclosure and in red ink a color different from that of the words above and below it. Printed prominently along the left, bottom and right edges of petitioner's label are indications of the use: "for bronchial catarrh whopping-cough coughs and asthma". Respondent's for its part briefly represents what its produce actually is - a "cough syrup". The two labels are entirely different in colors, contents, arrangement of words thereon, sizes, shapes and general appearance. The contrasts in pictorial effects and appeals to the eye is so pronounced that the label of one cannot be mistaken for that of the other, not even by persons unfamiliar with the two trademarks. 13 On this point the following culled from a recent decision of the United States Court of Customs and Patent Appeals (June 15, 1956) is persuasive: 14 Confusion is likely between trademarks, however, only if their over-all presentations in any of the particulars of sound, appearance, or meaning are such as would lead the purchasing public into believing that the products to which the marks are applied emanated from the same source. In testing this issue, fixed legal rules exist if not in harmony, certainly in abundance but, in the final analysis, the application of these rules in any given situation necessarily reflects a matter of individual judgment largely predicated on opinion. There is, however, and can be no disagreement with the rule that the purchaser is confused, if at all, by the marks as a whole. 4. We now consider exclusively the two words Pertussin and Atussin as they appear on the respective labels. As previously adverted to, these words are presented to the public in different styles of writing and methods of design. The horizontal plain, block letters of Atussin and the diagonally and artistically upward writing of Pertussin leave distinct visual impressions. One look is enough to denude the mind of that illuminating similarity so essential for a trademark infringement case to prosper.

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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 the 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". Appeals to the ear are disimilar. 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. 15 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". 6. In the solution of a trademark infringement problem, regard too should be given to the class of persons who buy the particular product and the circumstances ordinarily attendant to its acquisition. 16 The medicinal preparation clothed with the trademarks in question, are unlike articles of everyday use such as candies, ice cream, milk, soft drinks and the like which may be freely obtained by anyone, anytime, anywhere. Petitioner's and respondent's products are to be dispensed upon medical prescription. The respective labels say so. An intending buyer must have to go first to a licensed doctor of medicine; he receives instructions as to what to purchase; he reads the doctor's prescription; he knows what he is to buy. He is not of the incautious, unwary, unobservant or unsuspecting type; he examines the product sold to him; he checks to find out whether it conforms to the medical prescription. The common trade channel is the pharmacy or the drugstore. Similarly, the pharmacist or druggist verifies the medicine sold. The margin of error in the acquisition of one for the other is quite remote. We concede the possibility that buyers might be able to obtain Pertussin or Attusin without prescription. When this happens, then the buyer must be one throughly familiar with what he intends to get, else he would not have the temerity to ask for a medicine specifically needed to cure a given ailment. In which case, the more improbable it will be to palm off one for the other. For a person who purchases with open eyes is hardly the man to be deceived. For the reasons given, the appealed decision of the respondent Director of Patents giving due course to the application for the registration of trademark ATTUSIN is hereby affirmed. Costa against petitioner. So ordered. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala, Makalintal, Bengzon, J. P., and Zaldivar, JJ., concur. Dizon, J., took no part. Footnotes Section 2 of the Trademark Law requires actual use in the Philippines of not less than two months before application may be filed.
1 2

52 Am. Jur., p. 508, citing cases. Section 4(d), Trade Mark Law. 87 Corpuz Juris Secundum, p. 287.

The Director of Patents cites the following: "NUMOTOZINE" (Reg. No. 1990-S, renewed under Reg. No. 7461-R) for treatment of pneumonia, bronchitis, pleurisy, etc.; "ASCARICIDOL" (Reg. No. 6090) and "ASCAROL" (Reg. No. 4114), both for expelling intestinal worms such as ascaris; "DIARROL" (Reg. No. 5864) for treatment of diarrhea, dysentery and intestinal disorders; "ASMAKOL" (Reg. No. SR-104), "ASMADREN" (Reg. No. 4353), "ASMOL" (Reg. No. 5379), all for treatment of asthma.
5 6

Webster's Third International Dictionary, 1964 ed., p. 2470.

Miles Laboratories, Inc. vs. Pepsodent Co., 104 F(2d), 205, 207. Here the marks pepso-seltzer and alkaseltzer were involved. The U.S. Court of Customs and Patent Appeals held that "seltzer" was descriptive, and could not be appropriated.
7

In Dixi-Cola Laboratories, Inc., et al. vs. Coca-Cola Co., 117 F (2d), 352, 360, the Circuit Court of Appeals in refusing to enjoin use of Dixi-Cola, held that "Cola" is descriptive and generic. See also Coca-Cola Co. vs. Carlisle Bottling Works, 43 F (2d) 101, 103, where "Cola" was held to be descriptive, so that "Roxa Kola" is not an infringement of "Coca-Cola".
8 9

Annotations, Lawyers' Reports, Annotated, 1918 A, p. 966. 87 Corpus Juris Secundum, pp. 288-291.

10

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11

87 Corpus Juris Secundum, pp. 291-292. Clarke vs. Manila Candy Co., 36 Phil. 100, 106; Co Tiong Sa vs. Director of Patents, 95 Phil. 1, 4.

12

Mead Jonhson & Co. vs. N.V.J. Van Dorp, Ltd., et al., G.R. No. L-17501. April 27, 1963. In this case, this Court held that thetrademark ALASKA does not infringed the registered trademark ALACTA. This court, after comparing the sizes of the containers and the color pattern, was impressed more by the dissimilarities ( in the labels attached to the containers) than by the similarities appearing thereon. The present case, we believe, is within the coverage of Mead Johnson decision.
13 14

Lekas & Drivas, Inc. vs. Tenth Avenue Trading Corp., 223 F (2d), pp. 294, 296; emphasis supplied. The Upjohn Co. vs. Schwartz, etc., 246 F(2d), pp. 254, 262. 87 Corpus Juris Secundum, p. 295. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

15

16

G.R. No. 71189 November 4, 1992 FABERGE, INCORPORATED, petitioner, vs. THE INTERMEDIATE APPELLATE COURT and CO BENG KAY, respondents.

MELO, J.: The Director of Patents authorized herein private respondent Co Beng Kay to register the trademark "BRUTE" for the briefs manufactured and sold by his Corporation in the domestic market vis-a-vis petitioner's opposition grounded on similarity of said trademark with petitioner's own symbol "BRUT" which it previously registered for after shave lotion, shaving cream, deodorant, talcum powder, and toilet soap. Thereafter, respondent court, through Justice Gopengco with Justices Patajo and Racela, Jr. concurring, was initially persuaded by petitioner's plea for reversal directed against the permission granted by the Director of Patents, but the decision of the Second Special Cases Division handed down on April 29, 1983 was later reconsidered in favor of herein private respondent (pp. 4654; pp. 34-36, Rollo). Hence, the petition at bar assailing the action of respondent court in affirming the ruling of the Director of Patents (Page 7, Petition; Page 16, Rollo). In essence, it appears that in the course of marketing petitioner's "BRUT" products and during the pendency of its application for registration of the trademark "BRUT 33 and DEVICE" for antiperspirant, personal deodorant, cream shave, after shave/shower lotion, hair spray, and hair shampoo (page 236, Rollo), respondent Co Beng Kay of Webengton Garments Manufacturing applied for registration of the disputed emblem "BRUTE" for briefs. Opposition raised by petitioner anchored on similarity with its own symbol and irreparable injury to the business reputation of the first user was to no avail. When the legal tussle was elevated to respondent court, Justice Gopengco remarked that: Indeed, a look at the marks "BRUT," "BRUT 33" and "BRUTE" shows that such marks are not only similar in appearance but they are even similar in sound and in the style of presentation. It is reasonable to believe that this similarity is sufficient to cause confusion and even mistake and deception in the buying public as to the origin for source of the goods bearing such trademarks. It should be considered that, although the mark "BRUTE" was applied for, only for briefs, yet such product has the same outlet such as department stores and haberdashery stores in the Philippines as the goods covered by the trademarks "BRUT" and "BRUTE 33" so that such confusion, mistake or deception is not unlikely to occur. The argument of appellee, that in modern marketing, goods of similar use are grouped in one section of the supermarket and thus it is unlikely that cosmetics be mixed with textile or wearing apparel, is hardly convincing enough, for a look at the modern department stores shows that merchandise intended for the use of men are now placed in a section which is then labelled "Men's Accessories." It is not unlikely, therefore, that in said

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section, appellant's products, which are cosmetics for men's use, be placed beside appellee's product, and cause such confusion or mistake as to the source of the goods displayed in the section. To avoid this, the Director of Patents held: The marks KEYSTON (on shirts) and KEYSTONE (on shoes and slippers), the latter having been previously registered are clearly similar in sound and appearance that confusion or mistake, or deception among purchasers as to origin and source of goods is likely to occur. Shirts and shoes are both wearing apparel and there is no gainsaying the truth that these items are ordinarily displayed in the same manner and sold through the same retail outlets such as department and haberdashery stores in the Philippines. (Ex-Parte Keystone Garment Manufacturing Co., Decision No. 245 of the Director of Patents, January 25, 1963.) It is also not disputed that on account of the considerable length of time that appellant has marketed its products bearing the trademarks "BRUT" and "BRUT 33," and its maintenance of high quality of its products through the years, appellant has earned and established immense goodwill among its customers. We agree with appellant that should appellee be allowed to use the trademark "BRUTE" on the briefs manufactured by him, appellee would be cashing in on the goodwill already established by appellant, because, as already stated above, appellant's cosmetics and appellee's briefs are not entirely unrelated since both are directed to the fashion trade and in the marketing process, they may find themselves side by side in the "Men's Accessories Section" of the market, thus easily leading the buying public to believe that such briefs come from the same source as appellant's cosmetics, and be induced to buy said briefs, to the undue advantage of appellee. Again, if after purchasing such briefs, the public finds them to be of non-competitive quality, or not of the high quality expected of appellant's products, then appellant's reputation and goodwill will be ruined, to its damage and prejudice. Thus, for the protection of the goodwill already established by a party, the Supreme Court held: When one applies for the registration of a trademark or label which is almost the same or 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 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. (Chuanchow Soy & Canning Co. vs. Dir. of Patents and Villapanta, 108 Phil. 833, 836.) The test of confusing similarity which would preclude the registration of a trademark is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. In short, the law does not require that the competing marks must be so identical as to produce actual error or mistakes. It would be sufficient, for purposes of the law, that the similarity between the two labels be such that there is a possibility or likelihood of the purchaser of the older brand mistaking the newer brand for it. (Gopengco, Mercantile Law Compendium, 1983 ed., p. 684; Acoje Mining Co., Inc. vs. Director of Patents, 38 SCRA 480). (pp. 3-6, Decision; pp. 48-51, Rollo). On June 5, 1984, respondent's Motion for Reconsideration merited the nod of approval of the appellate court brought about by private respondent's suggestion that the controlling ruling is that laid down in Philippine Refining Co., Inc. vs. Ng Sam (115 SCRA 472 [1982]), ESSO Standard Eastern, Inc. vs. Court of Appeals (116 SCRA 336 [1982]); Hickok Manufacturing Co., Inc. vs. CA (116 SCRA 378 [1982]), and Acoje Mining Co., Inc. vs. Director of Patents (38 SCRA 480 [1971], to the effect that the identical trademark can be used by different manufacturers for products that are non-competing and unrelated. (pp. 34-36, Rollo) Petitioner is of the impression that respondent court could not have relied on the rulings of this Court in the ESSOand the PRC cases when the original decision was reconsidered since respondent court already expressed the opinion in the text of the previous discourse that the facts in said cases "are not found in the case at bar" (Page 12, Brief for the Petitioner, Page 202, Rollo). Petitioner likewise emphasis American jurisprudential doctrines to the effect that sale of cosmetics and wearing apparel under similar marks is likely to cause confusion. Instead of applying the ESSO, PRC and Hickok cases, petitioner continues to asseverate, the rule as announced in Ang vs.Teodoro (74 Phil. 50 [1942]) as reiterated in Sta. Ana vs. Maliwat and Evalle (24 SCRA (1968) 101) should be applied. In additional, it seems that petitioner would want this Court to appreciate petitioner's alleged application for registration of the trademark "BRUT 33 DEVICE" for briefs as an explicit proof that petitioner intended to expand its mark "BRUT" to other goods, following the sentiment expressed by Justice J.B.L. Reyes in the Sta. Ana case (supra, at page 1025) that relief is available where the junior user's goods are not remote from any product that the senior user would be likely to make or sell (Pages 26-27, Brief for the Petitioner).

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Besides, petitioner insists that in view of the repeal of Republic Act No. 166 (which advocated the related goods theory) by Republic Act No. 666 which deleted the phrase found in the old law that the merchandise must be substantially the same descriptive properties, respondent Court should have heeded the pronouncement in theAng case that there can be unfair competition even if the goods are noncompeting (supra, at page 54). On the other hand, private respondent echoes the glaring difference in physical appearance of its products with petitioner's own goods by stressing the observations of the Director of Patents on May 3, 1978: Considered in their entireties as depicted in the parties' sample box and can containers, the involved trademarks are grossly different in their overall appearance that even at a distance a would-be purchaser could easily distinguish what is BRUTE brief and what is BRUT after shave lotion, lotion and the like. Opposer's mark BRUT or BRUT 33, as shown in Exhibit "6", is predominantly colored green with a blue and white band at the middle portion of the container. Also appearing therein in bold letters is opposer's name "FABERGE" and a notation "Creme Shave". On the other hand, respondent's mark as shown in Exh. "4-A" prominently displays the representation of a muscular man, underneath of which appears the trademark BRUTE with a notation "Bikini Brief" . . . Equally visible at the other portions of respondent's labels are the pictorial representation of "briefs" which unmistakably suggest that the product contained in the box container is that of a man's brief. The fact therefore is obvious that the goods upon which the conflicting trademarks are used are clearly different and the intended purpose of such goods are likewise not the same. Accordingly, a purchaser who is out in the market for the purpose of buying respondent's BRUTE brief would definitely be not mistaken or misled into buying instead opposer's BRUT after shave lotion or deodorant. Additional, the meaning or connotation of the bare word marks of opposer, BRUT, and BRUTE of respondent, are clearly different and not likely to be confused with each other. BRUT simply means "dry", and also, "to browse"; while BRUTE means "ferocious, sensual", and in Latin, it signifies "heavy". Gleaned from the respective meanings of the two marks in question, they both suggest the resultant effects of the application of the products, upon which the said trademarks are employed, which fact all the more renders confusion or deception of purchasers a remote possibility. The products covered by petitioner's trademarks "BRUT" and "BRUT 33 & Device" enjoying its socalled "goodwill" are after-shave lotion, shaving cream, deodorant, talcum powder, toilet soap, antiperspirant, personal deodorant, cream shave, after shave/shower lotion, hair spray and hair shampoo. Petitioner has never applied for, registered nor used its trademarks for briefs in commerce or trade in the Philippines. Private respondent seeks to register his trademark "BRUTE" only for briefs which is a product non-competitive to and entirely unrelated with petitioner's aforementioned products. (pp. 3-4, Brief for the Respondent) in order to impress upon Us that the controlling norm is the comparison of the trademarks in their entirely as they appear in their labels to determine whether there is confusing similarity. Moreover, private respondent asserts that briefs and cosmetics do not belong to the same class nor do they have the same descriptive properties such that the use of a trademark on one's goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different nature in line with the ruling of this Court in Hickok Manufacturing Co., Inc. vs. Court of Appeals (116 SCRA 387 [1982]). Furthermore, respondent belies petitioner's claim that the latter had applied for registration of the trademark "BRUT 33 DEVICE" for briefssince the documents on file with the Director of Patents attached to respondent's legal Brief does not include the so-called application by petitioner of the alleged trademark for briefs. To the legal query of whether private respondent may appropriate the trademark "BRUTE" for the briefs it manufactures and sells to the public albeit petitioner had previously registered the symbol "BRUT" and "BRUT 33" for its own line of times, it is but apropos to shift Our attention to the pertinent provisions of the new Civil Code vis-avis Republic Act No. 166, as amended, the special law patterned after the United States Trademark Act of 1946 (Director of Patents, Circular Release No. 36, 45 O.G. 3704; Martin, Commentaries and Jurisprudence on the Philippine Commercial Laws, 1986 Revised Edition, Volume 2, page 489), thus: Art. 520. A trade-mark or trade-name duly registered in the proper government bureau or office is owned by and pertains to the person, corporation, or firm registering the same, subject to the provisions of special laws. Art. 521. The goodwill of a business is property, and may be transferred together with the right to use the name under which the business is conducted. Art. 522. Trade-marks and trade-names are governed by special laws. xxx xxx xxx

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Sec. 2. What are registrable. Trade-marks, trade-names, and service-marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act; Provided, That said trade-marks, trade-names, or service-marks, are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the Republic of the Philippines. (As amended by Rep. Act No. 865). Sec. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired. Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or services of others. The ownership or possession of a trade-mark, trade-name, service-mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As inserted by Sec. 1 of Rep. Act 638). xxx xxx xxx Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. . . . The owner of trademark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have right to register the same on the principal register, unless it: xxx xxx xxx 4(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers. xxx xxx xxx Sec. 11. Issuance and contents of the certificate. Certificates of registration shall be issued in the name of the Republic of the Philippines under the seal of the Patent Office, and shall be signed by the Director, and a record thereof together with a copy of the specimen or facsimile and the statement of the applicant, shall be kept in books for that purpose. The certificate shall reproduce the specimen or facsimile of the mark or trade-name, contain the statement of the applicant and state that the mark or trade-name is registered under this Act, the date of the first use in commerce or business, the particular goods or services for which it is registered, the number and date of the registration, the term thereof, the date on which the application for registration was received in the Patent Office, a statement of the requirement that in order to maintain the registration, periodical affidavits of use within the specified times hereinafter in section twelve provided, shall be filed, and such other data as the rules and regulations may from time to time prescribe. xxx xxx xxx Sec. 20. Certificate of registration prima facie evidence of validity. A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. Having thus reviewed the laws applicable to the case before Us, it is not difficult to discern from the foregoing statutory enactments that private respondent may be permitted to register the trademark "BRUTE" for briefs produced by it notwithstanding petitioner's vehement protestations of unfair dealings in marketing its own set of items which are limited to: after-shave lotion, shaving cream, deodorant, talcum powder and toilet soap. In as much as petitioner has not ventured in the production of briefs, an item which is not listed in its certificate of registration, petitioner can not and should not be allowed to feign that private respondent had invaded petitioner's exclusive domain. To be sure, it is significant that petitioner failed to annex in its Brief the so-called "eloquent proof that petitioner indeed intended to expand its mark "BRUT" to other goods" (Page 27, Brief for the Petitioner; Page 202,Rollo). Even then, a mere application by petitioner in this aspect does not suffice and may not vest an exclusive

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right in its favor that can ordinarily be protected by the Trademark Law. In short, paraphrasing Section 20 of the Trademark Law as applied to the documentary evidence adduced by petitioner, the certificate of registration issued by the Director of Patents can confer upon petitioner the exclusive right to use its own symbol only to those goods specified in the certificate, subject to any conditions and limitations stated therein. This basic point is perhaps the unwritten rationale of Justice Escolin in Philippine Refining Co., Inc. vs. Ng Lam (115 SCRA 472 [1982]), when he stressed the principle enunciated by the United States Supreme Court in American Foundries vs. Robertson (269 U.S. 372, 381, 70 L ed 317, 46 Sct. 160) that one who has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by other for products which are of different description. Verily, this Court had the occasion to observe in the 1966 case of George W. Luft Co., Inc. vs. Ngo Guan (18 SCRA 944 [1966]) that no serious objection was posed by the petitioner therein since the applicant utilized the emblem "Tango" for no other product than hair pomade in which petitioner does not deal. This brings Us back to the incidental issue raised by petitioner which private respondent sought to belie as regards petitioner's alleged expansion of its business. It may be recalled that petitioner claimed that it has a pending application for registration of the emblem "BRUT 33" for briefs (page 25, Brief for the Petitioner; page 202, Rollo) to impress upon Us the Solomonic wisdom imparted by Justice JBL Reyes in Sta. Ana vs. Maliwat (24 SCRA 1018 [1968]), to the effect that dissimilarity of goods will not preclude relief if the junior user's goods are not remote from any other product which the first user would be likely to make or sell (vide, at page 1025). Commenting on the former provision of the Trademark Law now embodied substantially under Section 4(d) of Republic Act No. 166, as amended, the erudite jurist opined that the law in point "does not require that the articles of manufacture of the previous user and late user of the mark should possess the same descriptive properties or should fall into the same categories as to bar the latter from registering his mark in the principal register." (supraat page 1026). Yet, it is equally true that as aforesaid, the protective mantle of the Trademark Law extends only to the goods used by the first user as specified in the certificate of registration following the clear message conveyed by section 20. How do We now reconcile the apparent conflict between Section 4(d) which was relied upon by Justice JBL Reyes in the Sta. Ana case and Section 20? It would seem that Section 4(d) does not require that the goods manufactured by the second user be related to the goods produced by the senior user while Section 20 limits the exclusive right of the senior user only to those goods specified in the certificate of registration. But the rule has been laid down that the clause which comes later shall be given paramount significance over an anterior proviso upon the presumption that it expresses the latest and dominant purpose. (Graham Paper Co. vs. National Newspaper Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchant's L. Ins. Co., 87 Okl. 42; State ex nel Atty. Gen.vs. Toledo, 26 N.E., p. 1061; cited by Martin, Statutory Construction Sixth ed., 1980 Reprinted, p. 144). It ineluctably follows that Section 20 is controlling and, therefore, private respondent can appropriate its symbol for the briefs it manufactures because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs.Farbenfabriken Bayer (27 SCRA 1214 [1969]): Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law. (1226) Withal, judging from the physical attributes of petitioner's and private respondent's products, there can be no doubt that confusion or the likelihood of deception to the average purchaser is unlikely since the goods are non-competing and unrelated. In upholding registration of the brand "ESSO for cigarettes inspite previous appropriation of the same mark "ESSO" for petroleum products, then Justice, later Chief Justices Teehankee inEsso Standard Eastern, Inc. vs. Court of Appeals (116 SCRA 336 [1982] said: The Court affirms on the basis of controlling doctrine the appealed decision of the Court of Appeals reversing that of the Court of First Instance of Manila and dismissing the complaint filed by herein petitioner against private respondent for trade infringement for using petitioner's trademark ESSO, since it clearly appears that the goods on which the trademark ESSO is used by respondent is noncompeting and entirely unrelated to the products of petitioner so that there is no likelihood of confusion or deception on the part of the purchasing public as to the origin or source of the goods. xxx xxx xxx The trial court, relying on the old cases of Ang vs. Teodoro and Arce & Sons, Inc. vs. Selecta Biscuit Company, referring to related products, decided in favor of petitioner and ruled that respondent was guilty of infringement of trademark. On appeal, respondent Court of Appeals found that there was no trademark infringement and dismissed the complaint. Reconsideration of the decision having been denied, petitioner appealed to this court by way of certiorari to reverse the decision of the Court of Appeals and to reinstate the decision of the Court of First Instance of Manila. The Court finds no ground for granting the petition.

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The law defines infringement as the use without consent of the trademark owner of any "reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorable imitate any director's decision on the question of "May petitioner Acoje Mining Company register for the purpose of advertising its product, soy sauce, the trademark LOTUS, there being already in existence one such registered in favor of the Philippine Refining Company for its product, edible oil, it being further shown that the trademark applied for is in smaller type, colored differently, set on a background which is dissimilar as to yield a distinct appearance?" and ordered the granting of petitioner's application for registration ruling that "there is quite a difference between soy sauce and edible oil. If one is in the market for the former, he is not likely to purchase the latter just because of the trademarks LOTUS" and "when regard is had for the principle that the two trademark in their entirely as they appear in their respective labels should be considered in relation to the goods advertised before registration could be denied, the conclusion is inescapable that respondent Director ought to have reached a different conclusion." By the same token, in the recent case of Philippine Refining Co., Inc. v. Ng Sam and Director of Patents, the Court upheld the patent director's registration of the same trademark CAMIA for therein respondent's product of ham notwithstanding its already being used by therein petitioner for a wide range of products: lard; butter, cooking oil, abrasive detergents, polishing material and soap of all kinds. The Court, after noting that the same CAMIA trademark had been registered by two other companies, Everbright Development Company and F.E. Zuellig, Inc. for their respective products of thread and yarn (for the former) and textiles, embroideries and laces (for the latter) ruled that "while ham and some of the products of petitioner are classified under Class 47 (Foods and Ingredients of Food), this alone cannot serve as the decisive factor in the resolution of whether or not they are related goods. Emphasis should be on the similarity of the arbitrary classification or general description of their properties or characteristics. The Court, therefore, concluded that "In fine, We hold that the businesses of the parties are noncompetitive and their products so unrelated that the use of identical trademarks is not likely to give rise to confusion, much less cause damage to petitioner. In the situation before us, the goods are obviously different from each other with "absolutely no iota of similitude" as stressed in respondent court's judgment. They are so foreign to each other as to make it unlikely that purchasers would think that petitioner is the manufacturer of respondent' goods. The mere fact that one person has adopted and used a trademark on his goods does not prevent the adoption and use of the same trademark by others on unrelated articles of a different kind. Petitioner uses the trademark ESSO and holds certificate registration of the trademark for petroleum products, including aviation gasoline, grease, cigarette lighter fluid and other various products such as plastics, chemicals, synthetics, gasoline solvents, kerosene, automotive and industrial fuel, bunker fuel, lubricating oil, fertilizers, gas alcohol, insecticides and the "ESSO Gasul" burner, while respondent's business is solely for the manufacture and sale of the unrelated product of cigarettes. The public knows too well that petitioner deals solely with petroleum products that there is no possibility that cigarettes with ESSO brand will be associated with whatever good name petitioner's ESSO trademark may have generated. Although petitioner's products are numerous, they are of the same class or line of merchandise which are non-competing with respondent's product of cigarettes, which as pointed out in the appealed judgment is beyond petitioner's "zone of potential or natural and logical expansion." When a trademark is used by a party for a product in which the other party does not deal, the use of the same trademark on the latter's product cannot be validly objected to. xxx xxx xxx Respondent court correctly ruled that considering the general appearances of each mark as a whole, the possibility of any confusion is unlikely. A comparison of the labels of the samples of the goods submitted by the parties shows a great many differences on the trademark used. As pointed out by respondent court in its appealed decision, "(A) witness for the plaintiff, Mr. Buhay, admitted that the color of the "ESSO" used by the plaintiff for the oval design where the blue word ESSO is contained is the distinct and unique kind of blue. In his answer to the trial court's question, Mr. Buhay informed the court that the plaintiff never used its trademark on any product where the combination of colors is similar to the label of the Esso cigarettes," and "Another witness for the plaintiff, Mr. Tengco, testified that generally, the plaintiff's trademark comes all in either red, white, blue or any combination of the three colors. It is to be pointed out that not even a shade of these colors appears on the trademark of the appellant's cigarette. The only color that the appellant uses in its trademark is green. (339; 341-346)

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The glaring discrepancies between the two products had been amply portrayed to such an extent that indeed, "a purchaser who is out in the market for the purpose of buying respondent's BRUTE brief would definitely be not mistaken or misled into buying BRUT after shave lotion or deodorant" as categorically opined in the decision of the Director of Patents relative to the inter-partes case. (supra, at page 7). Petitioner's bid to persuade Us into accepting the doctrines announced in the aforementioned cases of Sta. Ana vs. Maliwat and Ang vs. Teodoro hardly inspire belief. In Sta Ana, it was admitted that the marks were confusingly similar which is not so in the case at bar. In the 1942 case of Ang vs. Teodoro, Justice Ozaeta noted that pants and shirts are similar to shoes and slippers within the meaning of Sections 3, 7, 11, 13 and 20 of Act No. 666 which was the old Trademark Law enacted on March 6, 1903 prior to the present law. Obviously, the conclusion reached by the ponente in the Ang case may not now be utilized by analogy to the case at bar due to variance in the factual and legal milieu. Neither can we agree with petitioner that the ruling in La Chemise Lacoste, S.A. vs.Fernandez (129 SCRA 373 [1984]) is applicable to the controversy at hand. The case adverted to by petitioner involved the same mark for the same class of shirts manufactured by the parties therein. It would appear that as a consequence of this discourse, there still remains hanging in mid-air the unanswered puzzle as to why an aspiring commercial enterprise, given the infinite choices available to it of names for the intend product, would select a trademark or tradename which somewhat resembles an existing emblem that had established goodwill. Our opinion hereinbefore expressed could even open the floodgates to similar incursions in the future when we interpreted Section 20 of the Trademark Law as an implicit permission to a manufacturer to venture into the production of goods and allow that producer to appropriate the brand name of the senior registrant on goods other than those stated in the certificate of registration. But these nagging and disturbing points cannot win the day for petitioner, although We must hasten to add that in the final denouement, Our apprehensions in this regard are not entirely irreversible since Section 4(d) and 20 of the law in question may still be subjected to legislative modification in order to protect the original user of the symbol. WHEREFORE, the petition is hereby DISMISSED without pronouncement as to costs. SO ORDERED. Gutierrez, Jr., Bidin, Davide, Jr., and Romero, JJ., concur. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 185917 June 1, 2011

FREDCO MANUFACTURING CORPORATION Petitioner, vs. PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), Respondents. DECISION CARPIO, J.: The Case Before the Court is a petition for review1 assailing the 24 October 2008 Decision2 and 8 January 2009 Resolution3of the Court of Appeals in CA-G.R. SP No. 103394. The Antecedent Facts On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and existing under the laws of the Philippines, filed a Petition for Cancellation of Registration No. 56561 before the Bureau of Legal Affairs of the Intellectual Property Office (IPO) against respondents President and Fellows of Harvard College (Harvard University), a corporation organized and existing under the laws of Massachusetts, United States of America. The case was docketed as Inter Partes Case No. 14-2005-00094. Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for the mark "Harvard Veritas Shield Symbol" for decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs under Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and Services. Fredco alleged that the mark "Harvard" for t-shirts, polo shirts, sandos, briefs, jackets and slacks was first used in the Philippines on 2

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January 1982 by New York Garments Manufacturing & Export Co., Inc. (New York Garments), a domestic corporation and Fredcos predecessor-in-interest. On 24 January 1985, New York Garments filed for trademark registration of the mark "Harvard" for goods under Class 25. The application matured into a registration and a Certificate of Registration was issued on 12 December 1988, with a 20-year term subject to renewal at the end of the term. The registration was later assigned to Romeo Chuateco, a member of the family that owned New York Garments. Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9 November 1995 and had since then handled the manufacture, promotion and marketing of "Harvard" clothing articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard University, New York Garments had already registered the mark "Harvard" for goods under Class 25. Fredco alleged that the registration was cancelled on 30 July 1998 when New York Garments inadvertently failed to file an affidavit of use/non-use on the fifth anniversary of the registration but the right to the mark "Harvard" remained with its predecessor New York Garments and now with Fredco. Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark "Harvard" in numerous countries worldwide, including the Philippines. Among the countries where Harvard University has registered its name and mark "Harvard" are: 1. Argentina 2. Benelux4 3. Brazil 4. Canada 5. Chile 6. China P.R. 7. Colombia 8. Costa Rica 9. Cyprus 26. South Korea 27. Malaysia 28. Mexico 29. New Zealand 30. Norway 31. Peru 32. Philippines 33. Poland 34. Portugal

10. Czech Republic 35. Russia 11. Denmark 12. Ecuador 13. Egypt 14. Finland 15. France 16. Great Britain 17. Germany 18. Greece 19. Hong Kong 20. India 21. Indonesia 22. Ireland 23. Israel 24. Italy 25. Japan 36. South Africa 37. Switzerland 38. Singapore 39. Slovak Republic 40. Spain 41. Sweden 42. Taiwan 43. Thailand 44. Turkey 45. United Arab Emirates 46. Uruguay 47. United States of America 48. Venezuela 49. Zimbabwe 50. European Community5

The name and mark "Harvard" was adopted in 1639 as the name of Harvard College6 of Cambridge, Massachusetts, U.S.A. The name and mark "Harvard" was allegedly used in commerce as early as 1872. Harvard University is over 350 years old and is a highly regarded institution of higher learning in the United States and throughout the world. Harvard University promotes, uses, and advertises its name "Harvard" through various publications, services, and products in foreign countries, including the Philippines. Harvard University further alleged that the name and the mark have been rated as one of the most famous brands in the world, valued between US $750,000,000 and US $1,000,000,000.

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Harvard University alleged that in March 2002, it discovered, through its international trademark watch program, Fredcos website www.harvard-usa.com. The website advertises and promotes the brand name "Harvard Jeans USA" without Harvard Universitys consent. The websites main page shows an oblong logo bearing the mark "Harvard Jeans USA," "Established 1936," and "Cambridge, Massachusetts." On 20 April 2004, Harvard University filed an administrative complaint against Fredco before the IPO for trademark infringement and/or unfair competition with damages.
lawphi1

Harvard University alleged that its valid and existing certificates of trademark registration in the Philippines are: 1. Trademark Registration No. 56561 issued on 25 November 1993 for "Harvard Veritas Shield Design" for goods and services in Classes 16, 18, 21, 25 and 28 (decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs) of the Nice International Classification of Goods and Services; 2. Trademark Registration No. 57526 issued on 24 March 1994 for "Harvard Veritas Shield Symbol" for services in Class 41; Trademark Registration No. 56539 issued on 25 November 1998 for "Harvard" for services in Class 41; and 3. Trademark Registration No. 66677 issued on 8 December 1998 for "Harvard Graphics" for goods in Class 9. Harvard University further alleged that it filed the requisite affidavits of use for the mark "Harvard Veritas Shield Symbol" with the IPO. Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for "Harvard Medical International & Shield Design" for services in Classes 41 and 44. In 1989, Harvard University established the Harvard Trademark Licensing Program, operated by the Office for Technology and Trademark Licensing, to oversee and manage the worldwide licensing of the "Harvard" name and trademarks for various goods and services. Harvard University stated that it never authorized or licensed any person to use its name and mark "Harvard" in connection with any goods or services in the Philippines. In a Decision7 dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal Affairs, IPO cancelled Harvard Universitys registration of the mark "Harvard" under Class 25, as follows: WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED. Consequently, Trademark Registration Number 56561 for the trademark "HARVARD VE RI TAS SHIELD SYMBOL" issued on November 25, 1993 to PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY) should be CANCELLED only with respect to goods falling under Class 25. On the other hand, considering that the goods of Respondent-Registrant falling under Classes 16, 18, 21 and 28 are not confusingly similar with the Petitioners goods, the Respondent-Registrant has acquired vested right over the same and therefore, should not be cancelled. Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for the trademark "HARVARD VE RI TAS SHIELD SYMBOL", subject matter of this case together with a copy of this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action. SO ORDERED.8 Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision9 dated 21 April 2008, the Office of the Director General, IPO reversed the decision of the Bureau of Legal Affairs, IPO. The Director General ruled that more than the use of the trademark in the Philippines, the applicant must be the owner of the mark sought to be registered. The Director General ruled that the right to register a trademark is based on ownership and when the applicant is not the owner, he has no right to register the mark. The Director General noted that the mark covered by Harvard Universitys Registration No. 56561 is not only the word "Harvard" but also the logo, emblem or symbol of Harvard University. The Director General ruled that Fredco failed to explain how its predecessor New York Garments came up with the mark "Harvard." In addition, there was no evidence that Fredco or New York Garments was licensed or authorized by Harvard University to use its name in commerce or for any other use. The dispositive portion of the decision of the Office of the Director General, IPO reads: WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed decision is hereby REVERSED and SET ASIDE. 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 and the Administrative, Financial 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.10

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Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director General. The Decision of the Court of Appeals In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General of the IPO. The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter correctly set aside the cancellation by the Director of the Bureau of Legal Affairs of Harvard Universitys trademark registration under Class 25. The Court of Appeals ruled that Harvard University was able to substantiate that it appropriated and used the marks "Harvard" and "Harvard Veritas Shield Symbol" in Class 25 way ahead of Fredco and its predecessor New York Garments. The Court of Appeals also ruled that the records failed to disclose any explanation for Fredcos use of the name and mark "Harvard" and the words "USA," "Established 1936," and "Cambridge, Massachusetts" within an oblong device, "US Legend" and "Europes No. 1 Brand." Citing Shangri-La International Hotel Management, Ltd. v. Developers Group of Companies, Inc.,11 the Court of Appeals ruled: One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be coming to court with unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely take advantage of the goodwill established by the true owner.12 The dispositive portion of the decision of the Court of Appeals reads: WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated April 21, 2008 of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes Case No. 14-2005-00094 is hereby AFFIRMED. SO ORDERED.13 Fredco filed a motion for reconsideration. In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of merit. Hence, this petition before the Court. The Issue The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of the Office of the Director General of the IPO. The Ruling of this Court The petition has no merit. There is no dispute that the mark "Harvard" used by Fredco is the same as the mark "Harvard" in the "Harvard Veritas Shield Symbol" of Harvard University. It is also not disputed that Harvard University was named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge, Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark "Harvard" in commerce since 1872. It is also established that Harvard University has been using the marks "Harvard" and "Harvard Veritas Shield Symbol" for Class 25 goods in the United States since 1953. Further, there is no dispute that Harvard University has registered the name and mark "Harvard" in at least 50 countries. On the other hand, Fredcos predecessor-in-interest, New York Garments, started using the mark "Harvard" in the Philippines only in 1982. New York Garments filed an application with the Philippine Patent Office in 1985 to register the mark "Harvard," which application was approved in 1988. Fredco insists that the date of actual use in the Philippines should prevail on the issue of who has the better right to register the marks. Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be registered, it must have been actually used in commerce for not less than two months in the Philippines prior to the filing of an application for its registration. While Harvard University had actual prior use of its marks abroad for a long time, it did not have actual prior use in the Philippines of the mark "Harvard Veritas Shield Symbol" before its application for registration of the mark "Harvard" with the then Philippine Patents Office. However, Harvard Universitys registration of the name "Harvard" is based on home registration which is allowed under Section 37 of R.A. No. 166.15 As pointed out by Harvard University in its Comment: Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that the applicant thereof must prove that the same has been actually in use in commerce or services for not less than two (2) months in the Philippines before the application for registration is filed, where the trademark sought to be registered has

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already been registered in a foreign country that is a member of the Paris Convention, the requirement of proof of use in the commerce in the Philippines for the said period is not necessary. An applicant for registration based on home certificate of registration need not even have used the mark or trade name in this country.16 Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard Universitys registration "is based on home registration for the mark Harvard Veritas Shield for Class 25."17 In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293),18 "[m]arks registered under Republic Act No. 166 shall remain in force but shall be deemed to have been granted under this Act x x x," which does not require actual prior use of the mark in the Philippines. Since the mark "Harvard Veritas Shield Symbol" is now deemed granted under R.A. No. 8293, any alleged defect arising from the absence of actual prior use in the Philippines has been cured by Section 239.2.19 In addition, Fredcos registration was already cancelled on 30 July 1998 when it failed to file the required affidavit of use/non-use for the fifth anniversary of the marks registration. Hence, at the time of Fredcos filing of the Petition for Cancellation before the Bureau of Legal Affairs of the IPO, Fredco was no longer the registrant or presumptive owner of the mark "Harvard." There are two compelling reasons why Fredcos petition must fail. First, Fredcos registration of the mark "Harvard" and its identification of origin as "Cambridge, Massachusetts" falsely suggest that Fredco or its goods are connected with Harvard University, which uses the same mark "Harvard" and is also located in Cambridge, Massachusetts. This can easily be gleaned from the following oblong logo of Fredco that it attaches to its clothing line: Fredcos registration of the mark "Harvard" should not have been allowed because Section 4(a) of R.A. No. 166 prohibits the registration of a mark "which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x." Section 4(a) of R.A. No. 166 provides: Section 4. Registration of trade-marks, trade-names and service- marks on the principal register. There is hereby established a register of trade-mark, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, a trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: (a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute; (b) x x x (emphasis supplied) Fredcos use of the mark "Harvard," coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a false connection with Harvard University. On this ground alone, Fredcos registration of the mark "Harvard" should have been disallowed. Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in 1936, or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of Appeals or to the IPO why it used the mark "Harvard" on its oblong logo with the words "Cambridge, Massachusetts," "Established in 1936," and "USA." Fredco now claims before this Court that it used these words "to evoke a lifestyle or suggest a desirable aura of petitioners clothing lines." Fredcos belated justification merely confirms that it sought to connect or associate its products with Harvard University, riding on the prestige and popularity of Harvard University, and thus appropriating part of Harvard Universitys goodwill without the latters consent. Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act,20 the trademark law of the United States. These provisions are intended to protect the right of publicity of famous individuals and institutions from commercial exploitation of their goodwill by others.21 What Fredco has done in using the mark "Harvard" and the words "Cambridge, Massachusetts," "USA" to evoke a "desirable aura" to its products is precisely to exploit commercially the goodwill of Harvard University without the latters consent. This is a clear violation of Section 4(a) of R.A. No. 166. Under Section 17(c)22 of R.A. No. 166, such violation is a ground for cancellation of Fredcos registration of the mark "Harvard" because the registration was obtained in violation of Section 4 of R.A. No. 166. Second, the Philippines and the United States of America are both signatories to the Paris Convention for the Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state: ARTICLE 6bis (i) The countries of the Union undertake either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a

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reproduction, imitation or translation, liable to create confusion or a mark considered by the competent authority of the country as being already the mark of a person entitled to the benefits of the present Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. ARTICLE 8 A trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark. (Emphasis supplied) Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine nationals.23 Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows: Section 37. Rights of foreign registrants. Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. xxxx Trade-names of persons described in the first paragraph of this section shall be protected without the obligation of filing or registration whether or not they form parts of marks.24 x x x x (Emphasis supplied) Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name forms part of a trademark, is protected "without the obligation of filing or registration." "Harvard" is the trade name of the world famous Harvard University, and it is also a trademark of Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its trade name "Harvard" even without registration of such trade name in the Philippines. This means that no educational entity in the Philippines can use the trade name "Harvard" without the consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark "Harvard," that its products or services are authorized, approved, or licensed by, or sourced from, Harvard University without the latters consent. Article 6bis of the Paris Convention has been administratively implemented in the Philippines through two directives of the then Ministry (now Department) of Trade, which directives were upheld by this Court in several cases.25 On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued a Memorandum directing the Director of Patents to reject, pursuant to the Paris Convention, all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners.26 The Memorandum states: Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than its original owners or users. The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus. It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks foreign or local owners or original users. You are also required to submit to the undersigned a progress report on the matter. For immediate compliance.27 In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of Patents to implement measures necessary to comply with the Philippines obligations under the Paris Convention, thus:

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1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the dates of such registration; (d) that the trademark has been long established and obtained goodwill and general international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers. 3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY. x x x x28 (Emphasis supplied) In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is that the trademark to be protected must be "well-known" in the country where protection is sought.29 The Court declared that the power to determine whether a trademark is well-known lies in the competent authority of the country of registration or use.30 The Court then stated that the competent authority would either be the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before the courts.31 To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need not be registered or used in the Philippines.32 All that is required is that the mark is well-known internationally and in the Philippines for identical or similar goods, whether or not the mark is registered or used in the Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:33 The fact that respondents marks are neither registered nor used in the Philippines is of no moment. The scope of protection initially afforded by Article 6bis of the Paris Convention has been expanded in the 1999Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a well-known mark should be protected in a country even if the mark is neither registered nor used in that country. Part I, Article 2(3) thereof provides: (3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for determining whether a mark is a well-known mark: (i) that the mark has been used in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, the Member State: (ii) that the mark is well known in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, any jurisdiction other than the Member State; or (iii) that the mark is well known by the public at large in the Member State.34 (Italics in the original decision; boldface supplied) Indeed, Section 123.1(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

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is registered here," cannot be registered by another in the Philippines. Section 123.1(e) does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines. Moreover, Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, which implement R.A. No. 8293, provides: Rule 102. Criteria for determining whether a mark is well-known. In determining whether a mark is well-known, the following criteria or any combination thereof may be taken into account: (a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; (b) the market share, in the Philippines and in other countries, of the goods and/or services to which the mark applies; (c) the degree of the inherent or acquired distinction of the mark; (d) the quality-image or reputation acquired by the mark; (e) the extent to which the mark has been registered in the world; (f) the exclusivity of registration attained by the mark in the world; (g) the extent to which the mark has been used in the world; (h) the exclusivity of use attained by the mark in the world; (i) the commercial value attributed to the mark in the world; (j) the record of successful protection of the rights in the mark; (k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and (l) the presence or absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. (Emphasis supplied) Since "any combination" of the foregoing criteria is sufficient to determine that a mark is well-known, it is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally well-known marks are the exceptions to this rule. In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found that: Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard University, a recognized and respected institution of higher learning located in Cambridge, Massachusetts, U.S.A. Initially referred to simply as "the new college," the institution was named "Harvard College" on 13 March 1639, after its first principal donor, a young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard bequeathed about four hundred books in his will to form the basis of the college library collection, along with half his personal wealth worth several hundred pounds. The earliest known official reference to Harvard as a "university" rather than "college" occurred in the new Massachusetts Constitution of 1780. Records also show that the first use of the name HARVARD was in 1638 for educational services, policy courses of instructions and training at the university level. It has a Charter. Its first commercial use of the name or mark HARVARD for Class 25 was on 31 December 1953 covered by UPTON Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that the Appellate may have used the mark HARVARD in the Philippines ahead of the Appellant, it still cannot be denied that the Appellants use thereof was decades, even centuries, ahead of the Appellees. More importantly, the name HARVARD was the name of a person whose deeds were considered to be a cornerstone of the university. The Appellants logos, emblems or symbols are owned by Harvard University. The name HARVARD and the logos, emblems or symbols are endemic and cannot be separated from the institution.35 Finally, in its assailed Decision, the Court of Appeals ruled: Records show that Harvard University is the oldest and one of the foremost educational institutions in the United States, it being established in 1636. It is located primarily in Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to the college his books and half of his estate.

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The mark "Harvard College" was first used in commerce in the United States in 1638 for educational services, specifically, providing courses of instruction and training at the university level (Class 41). Its application for registration with the United States Patent and Trademark Office was filed on September 20, 2000 and it was registered on October 16, 2001. The marks "Harvard" and "Harvard Ve ri tas Shield Symbol" were first used in commerce in the the United States on December 31, 1953 for athletic uniforms, boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant jackets, leather jackets, night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications for registration with the USPTO were filed on September 9, 1996, the mark "Harvard" was registered on December 9, 1997 and the mark "Harvard Ve ri tas Shield Symbol" was registered on September 30, 1997.36 We also note that in a Decision37 dated 18 December 2008 involving a separate case between Harvard University and Streetward International, Inc.,38 the Bureau of Legal Affairs of the IPO ruled that the mark "Harvard" is a "wellknown mark." This Decision, which cites among others the numerous trademark registrations of Harvard University in various countries, has become final and executory. There is no question then, and this Court so declares, that "Harvard" is a well-known name and mark not only in the United States but also internationally, including the Philippines. The mark "Harvard" is rated as one of the most famous marks in the world. It has been registered in at least 50 countries. It has been used and promoted extensively in numerous publications worldwide. It has established a considerable goodwill worldwide since the founding of Harvard University more than 350 years ago. It is easily recognizable as the trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A., internationally known as one of the leading educational institutions in the world. As such, even before Harvard University applied for registration of the mark "Harvard" in the Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention. Again, even without applying the Paris Convention, Harvard University can invoke Section 4(a) of R.A. No. 166 which prohibits the registration of a mark "which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x." WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 103394. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: ANTONIO EDUARDO B. NACHURA Associate Justice DIOSDADO M. PERALTA Associate Justice JOSE C. MENDOZA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Chief Justice ROBERTO A. ABAD Associate Justice

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Footnotes
1

Under Rule 45 of the 1997 Rules of Civil Procedure.

Rollo, pp. 103-116. Penned by Associate Justice Remedios A. Salazar-Fernando with Associate Justices Rosalinda Asuncion-Vicente and Ramon M. Bato, Jr., concurring.
2

Id. at 118-119. Penned by Associate Justice Remedios A. Salazar-Fernando with Associate Justices Arcangelita M. Romilla-Lontok and Ramon M. Bato, Jr., concurring.
3 4

Belgium, the Netherlands and Luxembourg. Exhibits "5" to "5-r." Rollo, pp. 288-306. Originally called "New College," founded in 1636. Rollo, p. 129. Id. at 135-156. Id. at 156. Id. at 121-133. Penned by Director General Adrian S. Cristobal, Jr. Id. at 133. G.R. No. 159938, 31 March 2006, 486 SCRA 405. Rollo, p. 114. Id. at 115-116.

10

11

12

13

An Act to Provide for the Registration and Protection of Trade-Marks, Trade-Names and Service- Marks, Defining Unfair Competition and False Markings and Providing Remedies Against the Same, and For Other Purposes.
14 15

Decision of the Bureau of Legal Affairs, rollo, p. 154; Decision of the Director General, rollo, p. 122. Id. at 157. Id. at 122. Intellectual Property Code.

16

17

18

Harvard University filed Affidavits of Use for the 5th and 10th Anniversaries of Registration No. 56561. Decision of the Director General, rollo, p. 132.
19

Roger E. Schechter and John R.Thomas, INTELLECTUAL PROPERTY: THE LAW OF COPYRIGHTS, PATENTS AND TRADEMARKS (2003), p. 603.
20 21

Id. at 263.

Section 17(c) of R.A. No. 166, as amended, provides: "Grounds for cancellation. Any person, who believes that he is or will be damaged by the registration of a mark or trade-name, may, upon the payment of the prescribed fee, apply to cancel said registration upon any of the following grounds:
22

(a) x x x xxxx (c) That the registration was obtained fraudulently or contrary to the provisions of section four, Chapter II hereof; x x x." (Emphasis supplied)
23

See La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., 214 Phil. 332 (1984).

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24

The original version of R.A. No. 166 already contains this provision.

Mirpuri v. Court of Appeals, 376 Phil. 628 (1999); Puma Sportschuhfabriken Rudolf Dassler, K.G. v. IAC, 241 Phil. 1029 (1988); La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., supra note 23.
25 26

Mirpuri v. Court of Appeals, id. Id. at 656-657. Id. at 658-659. Also cited in La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al., supra note 23. Id. at 656. Id. Id. Sehwani, Incorporated v. In-N-Out Burger, Inc., G.R. No. 171053, 15 October 2007, 536 SCRA 225. Id. Id. at 240. Rollo, pp. 129-130. Id. at 112-113. Id. at 1251-1263. Penned by Bureau of Legal Affairs Director Estrellita Beltran-Abelardo. IPC No. 14-2008-00107; Decision No. 2008-232. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

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29

30

31

32

33

34

35

36

37

38

G.R. No. L-32747 November 29, 1984 FRUIT OF THE LOOM, INC., petitioner, vs. COURT OF APPEALS and GENERAL GARMENTS CORPORATION, respondents. Lichauco, Picazo & Agcaoli Law Office for petitioner.

MAKASIAR, J.: This is a petition for review on certiorari of the decision dated October 8, 1970 of the former Court of Appeals reversing the decision of the defunct Court of First Instance of Manila, Branch XIV, ordering the cancellation of private respondent's registration of the trademark FRUIT FOR EVE, enjoining it permanently from using trademark and ordering it to pay herein petitioner P10,000.00 as attorney's fees. Petitioner, a corporation duly organized and existing under the laws of the State of Rhode Island, United States of America, is the registrant of a trademark, FRUIT OF THE LOOM, in the Philippines Patent Office and was issued two Certificates of Registration Nos. 6227 and 6680, on November 29, 1957 and July 26, 1958, respectively. The classes of merchandise covered by Registration Certificate No. 6227 are, among others, men's, women's and children's underwear, which includes women's panties and which fall under class 40 in the Philippine Patent Office's classification of goods. Registration Certificate No. 6680 covers knitted, netted and textile fabrics. Private respondent, a domestic corporation, is the registrant of a trademark FRUIT FOR EVE in the Philippine Patent Office and was issued a Certificate of Registration No. 10160, on January 10, 1963 covering garments similar to petitioner's products like women's panties and pajamas.

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On March 31, 1965 petitioner filed before the lower court, a complaint for infringement of trademark and unfair competition against the herein private respondent. Petitioner principally alleged in the complaint that private respondent's trademark FRUIT FOR EVE is confusingly similar to its trademark FRUIT OF THE LOOM used also on women's panties and other textile products. Furthermore, it was also alleged therein that the color get-up and general appearance of private respondent's hang tag consisting of a big red apple is a colorable imitation to the hang tag of petitioner. On April 19, 1965, private respondent filed an answer invoking the special defense that its registered trademark is not confusingly similar to that of petitioner as the latter alleged. Likewise, private respondent stated that the trademark FRUIT FOR EVE is being used on ladies' panties and pajamas only whereas petitioner's trademark is used even on men's underwear and pajamas. At the pre-trial on May 5, 1965, the following admissions were made: (1) That the trademark FRUIT OF THE LOOM has been registered with the Bureau of Patents and it does not bear the notice 'Reg. Phil. Patent Off.', and (2) That the trademark FRUIT FOR EVE has been registered with the Bureau of Patents and it bears the notice "Reg. Phil. Patent Off." and (3) That at the time of its registration, plaintiff filed no opposition thereto. After trial, judgment was rendered by the lower court in favor of herein petitioner, the dispositive portion of which reads as follows: Judgment is, therefore, rendered ordering the Bureau of Patents to cancel the registration of the Trademark "Fruit for Eve", permanently enjoining Defendant from using the trademark "Fruit for Eve", ordering Defendant to pay plaintiff the sum of P10,000.00 as attorney's fees and to pay the costs. Both parties appealed to the former Court of Appeals, herein petitioner's appeal being centered on the failure of the trial court to award damages in its favor. Private respondent, on the other hand, sought the reversal of the lower court's decision. On October 8, 1970, the former Court of Appeals, as already stated, rendered its questioned decision reversing the judgment of the lower court and dismissing herein petitioner's complaint. Petitioner's motion for reconsideration having been denied, the present petition was filed before this Court. The first and second arguments advanced by petitioner are that the respondent court committed an error in holding that the word FRUIT, being a generic word, is not capable of exclusive appropriation by petitioner and that the registrant of a trademark is not entitled to the exclusive use of every word of his mark. Otherwise stated, petitioner argues that the respondent court committed an error in ruling that petitioner cannot appropriate exclusively the word FRUIT in its trademark FRUIT OF THE LOOM. The third and fourth arguments submitted by petitioner which We believe is the core of the present controversy, are that the respondent court erred in holding that there is no confusing similarity in sound and appearance between the two trademarks in question. According to petitioner, the prominent and dominant features in both of petitioner's and private respondent's trademark are the word FRUIT and the big red apple design; that ordinary or average purchasers upon seeing the word FRUIT and the big red apple in private respondent's label or hang tag would be led to believe that the latter's products are those of the petitioner, The resolution of these two assigned errors in the negative will lay to rest the matter in litigation and there is no need to touch on the other issues raised by petitioner. Should the said questions be resolved in favor of petitioner, then the other matters may be considered. Petitioner, on its fifth assigned error, blames the former Court of Appeals for not touching the question of the fraudulent registration of private respondent's trademark FRUIT FOR EVE. As may be gleaned from the questioned decision, respondent court did not pass upon the argument of petitioner that private respondent obtained the registration of its trademark thru fraud or misrepresentation because of the said court's findings that there is no confusing similarity between the two trademarks in question. Hence, said court has allegedly nothing to determine as to who has the right to registration because both parties have the right to have their respective trademarks registered. Lastly, petitioner asserts that respondent court should have awarded damages in its favor because private respondent had clearly profited from the infringement of the former's trademark. The main issue involved in this case is whether or not private respondent's trademark FRUIT FOR EVE and its hang tag are confusingly similar to petitioner's trademark FRUIT OF THE LOOM and its hang tag so as to constitute an infringement of the latter's trademark rights and justify the cancellation of the former. In cases involving infringement of trademark brought before this Court it has been consistently held that there is infringement of trademark when the use of the mark involved would be likely to cause confusion or mistake in the mind of the public or to deceive purchasers as to the origin or source of the commodity (Co Tiong Sa vs. Director of

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Patents, 95 Phil. 1; Alhambra Cigar & Cigarette Co. vs. Mojica, 27 Phil. 266; Sapolin Co. vs. Balmaceda, 67 Phil. 705; La Insular vs. Jao Oge, 47 Phil. 75). In cases of this nature, there can be no better evidence as to whether there is a confusing similarity in the contesting trademarks than the labels or hang tags themselves. A visual presentation of the labels or hang tags is the best argument for one or the other, hence, We are reproducing hereunder pictures of the hang tags of the products of the parties to the case. The pictures below are part of the documentary evidence appearing on page 124 of the original records. Petitioner asseverates in the third and fourth assignment of errors, which, as We have said, constitute the main argument, that the dominant features of both trademarks is the word FRUIT. In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other (Bristol Myers Co. vs. Director of Patents, 17 SCRA 131). In the trademarks FRUIT OF THE LOOM and FRUIT FOR EVE, the lone similar word is FRUIT. WE agree with the respondent court that by mere pronouncing the two marks, it could hardly be said that it will provoke a confusion, as to mistake one for the other. Standing by itself, FRUIT OF THE LOOM is wholly different from FRUIT FOR EVE. WE do not agree with petitioner that the dominant feature of both trademarks is the word FRUIT for even in the printing of the trademark in both hang tags, the word FRUIT is not at all made dominant over the other words. As to the design and coloring scheme of the hang tags, We believe that while there are similarities in the two marks like the red apple at the center of each mark, We also find differences or dissimilarities which are glaring and striking to the eye such as: 1. The shape of petitioner's hang tag is round with a base that looks like a paper rolled a few inches in both ends; while that of private respondent is plain rectangle without any base. 2. The designs differ. Petitioner's trademark is written in almost semi-circle while that of private respondent is written in straight line in bigger letters than petitioner's. Private respondent's tag has only an apple in its center but that of petitioner has also clusters of grapes that surround the apple in the center. 3. The colors of the hang tag are also very distinct from each other. Petitioner's hang tag is fight brown while that of respondent is pink with a white colored center piece. The apples which are the only similarities in the hang tag are differently colored. Petitioner's apple is colored dark red, while that of private respondent is light red. The similarities of the competing trademarks in this case are completely lost in the substantial differences in the design and general appearance of their respective hang tags. WE have examined the two trademarks as they appear in the hang tags submitted by the parties and We are impressed more by the dissimilarities than by the similarities appearing therein. WE hold that the trademarks FRUIT OF THE LOOM and FRUIT FOR EVE do not resemble each other as to confuse or deceive an ordinary purchaser. The ordinary purchaser must be thought of as having, and credited with, at least a modicum of intelligence (Carnation Co. vs. California Growers Wineries, 97 F. 2d 80; Hyram Walke and Sons vs. Penn-Maryland Corp., 79 F. 2d 836) to be able to see the obvious differences between the two trademarks in question. Furthermore, We believe that a person who buys petitioner's products and starts to have a liking for it, will not get confused and reach out for private respondent's products when she goes to a garment store. These findings in effect render immaterial the other errors assigned by petitioner which are premised on the assumption that private respondent's trademark FRUIT FOR EVE had infringed petitioner's trademark FRUIT OF THE LOOM. WHEREFORE, THE DECISION APPEALED FROM IS AFFIRMED. COSTS AGAINST PETITIONER. SO ORDERED. Aquino, Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

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G.R. No. 179127 December 24, 2008

IN-N-OUT BURGER, INC., petitioner, vs. SEHWANI, INCORPORATED AND/OR BENITAS FRITES, INC., respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision2dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition. Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. 3 Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.4 On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for "IN-N-OUT" and "IN-N-OUT Burger & Arrow Design." Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark "IN N OUT (the inside of the letter "O" formed like a star)."5 By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated. Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) "IN-N-OUT"; (2) "INN-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger Logo." These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use.6 Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioners products.7 Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark "IN-N-OUT" and to voluntarily cancel its trademark registration. In a letter-reply dated 23 October 2000, respondents refused to accede to petitioner demand, but expressed willingness to surrender the registration of respondent Sehwani, Incorporated of the "IN N OUT" trademark for a fair and reasonable consideration. 8 Petitioner was able to register the mark "Double Double" on 4 July 2002, based on their application filed on 2 June 1997.9 It alleged that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that respondent Benitas receipts bore the phrase, "representing IN-N-OUT Burger." 10 It should be noted that that although respondent Sehwahi, Incorporated registered a mark which appeared as "IN N OUT (the inside of the letter "O" formed like a star)," respondents used the mark "IN-N-OUT."11 To counter petitioners complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted therein that they had been using the mark "IN N OUT" in the Philippines since 15 October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the mark "IN N OUT (the inside of the letter "O" formed like a star)." Upon approval of its application, a certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, "IN N OUT." Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark "IN N OUT," should be accorded the presumption of a valid registration of its mark with the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for the cancellation of a certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never operated in the Philippines.12 Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003,13 in favor of petitioner. According to said Decision, petitioner had the legal capacity to sue in the

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Philippines, since its country of origin or domicile was a member of and a signatory to the Convention of Paris on Protection of Industrial Property. And although petitioner had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its corporate and trade name. Petitioners marks are internationally well-known, given the world-wide registration of the mark "IN-N-OUT," and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case that "In-N-Out Burger and Arrow Design" was an internationally well-known mark. Given these circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and mark "IN-N-OUT" in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark "IN N OUT" in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon petitioners goodwill by copying the mark "IN-N-OUT Burger" exactly. The inside of the letter "O" in the mark used by respondents formed a star. In addition, the simple act of respondent Sehwani, Incorporated of inquiring into the existence of a pending application for registration of the "IN-N-OUT" mark was not deemed fraudulent. The dispositive part of the Decision of the IPO Director for Legal Affairs reads: With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark "IN-N-OUT" (the inside of the letter "O" formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benitas Frites are hereby ordered to permanently cease and desist from using the mark "IN-N-OUT" and "IN-N-OUT BURGER LOGO" on its goods and in its business. With regards the mark "Double-Double," considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown by evidence, Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently cease and desist from using the mark Double-Double. NO COSTS. 14 Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents Motion for Reconsideration15 and petitioners Motion for Partial Reconsideration16 were denied by the IPO Director for Legal Affairs in Resolution No. 2004-1817 dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,18 respectively. Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the case at bar. G.R. No. 171053 On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal. Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-200400004 ON A MERE TECHNICALITY THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENTS CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE. Respondents thus prayed: WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order the Office of the Director General of the Intellectual Property Office to reinstate and give due course to [respondent]s Appeal No. 14-2004-00004. Other reliefs, just and equitable under the premises, are likewise prayed for. On 21 October 2005, the Court of Appeals rendered a Decision denying respondents Petition in CA-G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that respondents appeal before the IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal

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Affairs was likewise affirmed. On 10 November 2005, respondents moved for the reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration. Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.19 This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,20 finding that herein respondents failed to file their Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008. G.R. No. 179127 Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005. During the pendency of petitioners appeal before the IPO Director General, the Court of Appeals already rendered on 21 October 2005 its Decision dismissing respondents Petition in CA-G.R. SP No. 88004. In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioners appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite respondents claims that they had been using the mark since 1982, they only started constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark "IN-N-OUT." Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter "O," a minor difference which still deceived purchasers. Respondents were not even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief over the respondents reasoning for the non-use of the star symbol. The IPO Director General also considered respondents use of petitioners registered mark "Double-Double" as a sign of bad faith and an intent to mislead the public. Thus, the IPO Director General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents acts of unfair competition, exemplary damages, and attorneys fees.21 The fallo of the Decision reads: WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED as follows: [Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]: 1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28); 2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00); 3. Attorneys fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00). All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside the channels of commerce. Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and Technology Transfer Bureau for their information and records purposes.22 Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the appellate court on the following grounds:

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THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO PAY DAMAGES AND ATTORNEYS FEES TO RESPONDENTS THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIRS DECISION (1) CANCELLING PETITIONERS CERTIFICATE OF REGISTRATION FOR THE MARK "IN-N-OUT," AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent; hence, they should not be held liable for damages. They argued that petitioner had never entered into any transaction involving its goods and services in the Philippines and, therefore, could not claim that its goods and services had already been identified in the mind of the public. Respondents added that the disputed mark was not well-known. Finally, they maintained that petitioners complaint was already barred by laches.23 At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer: WHEREFORE, [respondents herein] respectfully pray that this Honorable Court: (a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO Director Generals Decision dated 23 December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from this Honorable Court. (b) after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 and to maintain the status quo ante pending the resolution of the merits of this petition; and (c) after giving due course to this petition: (i) reverse and set aside the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 finding the [respondents] guilty of unfair competition and awarding damages and attorneys fees to the respondent (ii) in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December 2003 and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it finds [respondents] not guilty of unfair competition and hence not liable to the [petitioner] for damages and attorneys fees; (iii) reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it upheld [petitioner]s legal capacity to sue; that [petitioner]s trademarks are well-known; and that respondent has the exclusive right to use the same; and (iv) make the injunction permanent. [Respondents] also pray for other reliefs, as may deemed just or equitable.24 On 18 July 2006, the Court of Appeals promulgated a Decision25 in CA-G.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the IPO Director General. The Court of Appeals, in its Decision, initially addressed petitioners assertion that respondents had committed forum shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping, distinguishing between the respondents two Petitions. The subject of Respondents Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO Director General dismissing respondents appeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents Petition in CAG.R. SP No. 92785 sought the review of the 23 December 2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and the awarding of actual and exemplary damages, as well as attorneys fees, to petitioner.

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The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks. Consequently, the IPO Director General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of these provisions of the Intellectual Property Code. In the end, the Court of Appeals decreed: WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-01 is REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondents claims in its Complaint docketed as IPV No. 10-2001-00004 are hereby DISMISSED.26 The Court of Appeals, in a Resolution dated 31 July 2007,27 denied petitioners Motion for Reconsideration of its aforementioned Decision. Hence, the present Petition, where petitioner raises the following issues: I WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS; II WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND III WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM SHOPPING PROPER.28 As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision29 in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director Generals dismissal of respondents appeal for being filed beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks. Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other. Formal Defects of the Petition Respondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition. Respondents point out that the Secretarys Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers of Villaraza and Angangco to represent it in the present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretarys Certificate reads: Subscribed and sworn to me this 20th day of August 2007 in Irving California. Rachel A. Blake (Sgd.) Notary Public30 Respondents aver that the said Secretarys Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state that: (1)

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petitioners Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.31 Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty. Barandas Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of attorneys number and the IBP membership number; and (4) a statement that the Verification/Certification was notarized within the notary publics territorial jurisdiction, as required under the 2004 Rules on Notarial Practice. 32 Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements enumerated therein refer to documents which require an acknowledgement, and not a mere jurat. A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually declares to the notary that the executor of a document has attested to the notary that the same is his/her own free act and deed.33 A Secretarys Certificate, as that executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only requires a jurat.34 Even assuming that the Secretarys Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. 35 The party itself need not sign the verification. A partys representative, lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the verification.36 Atty. Barranda, as petitioners counsel, was in the position to verify the truth and correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such. Moreover, the Court deems it proper not to focus on the supposed technical infirmities of Atty. Barandas Verification. It must be borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and non-compliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for compelling reasons.37 The vital issues raised in the instant Petition on the jurisdiction of the IPO Director for Legal Affairs and the IPO Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due course and resolve the same on the merits. This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their jurats or notarial certificates. Parties and their counsel should take care not to abuse the Courts zeal to resolve cases on their merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in their proper form before presenting said documents before Philippine courts. Forum Shopping Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their earlier filing of the Petition in CA-G.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting to the Court of Appeals a patently false Certification of Non-forum Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004. Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues.38 Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under consideration.39

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After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would at first seem that respondents are guilty of forum shopping. There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that "[T]he Bureau of Legal Affairs (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-N-OUT and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business are contrary to law and/or is (sic) not supported by evidence."40 The same ground was again invoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows: "The IPO Director General committed grave error in affirming the Bureau of Legal Affairs (sic) Decision (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark "IN-N-OUT," and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business."41 Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle of res judicata. Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner. In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals. True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional.42 Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances. The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances. The Jurisdiction of the IPO The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision: Section 163. Jurisdiction of Court.All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws. The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation. The Court disagrees with the Court of Appeals. Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus:

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Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall have the following functions: 10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents; 10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings. (b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties: (i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order; (ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following: (1) An assurance to comply with the provisions of the intellectual property law violated; (2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation (3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce; and (4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the Bureau of Legal Affairs. The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to guarantee compliance of his undertaking. (iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale, donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other goods, or any combination thereof, under such guidelines as he may provide; (iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of the offense; (v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each day of continuing violation; (vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable which shall not exceed one (1) year; (vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from the Office; (viii) The assessment of damages; (ix) Censure; and (x) Other analogous penalties or sanctions. 10.3 The Director General may by Regulations establish the procedure to govern the implementation of this Section.43 (Emphasis provided.)

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Unquestionably, petitioners complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani, Incorporated, and damages for violation of petitioners intellectual property rights, falls within the jurisdiction of the IPO Director of Legal Affairs. The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of the IPO Director of Legal Affairs, to wit: Section 7. The Director General and Deputies Director General. 7.1 Fuctions.The Director General shall exercise the following powers and functions: xxxx b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau shall be appealable to the Secretary of Trade and Industry; The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts. Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read: Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action.Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws. xxxx Section 170. Penalties.Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section168, and Subsection169.1. Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioners administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs. Unfair Competition The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark "IN-N-OUT" and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,44 ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the "IN-N-OUT" trademarks vis--vis respondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same.45 Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner.

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The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown. 46 In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair competition in this case, viz: The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter "O" Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark INN-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioners] registered mark Double-Double for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioners] IN-N-OUT Burgers name and trademark IN-N-OUT with Arrow design. There is no evidence that the [respondents] were authorized by the [petitioner] to use the latters marks in the business. [Respondents] explanation that they are not using their own registered trademark due to the difficulty in printing the "star" does not justify the unauthorized use of the [petitioners] trademark instead. Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x. xxxx [Respondents] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit "GG," which shows the business establishment of [respondents] illustrates the imitation of [petitioners] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held: "We also note that In-N-Out Burger is likewise, [petitioners] corporate name. It has used the "IN-NOUT" Burger name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has the exclusive right to use the tradenems "In-N-Out" Burger in the Philippines and the respondents are unlawfully using and appropriating the same." The Office cannot give credence to the [respondents] claim of good faith and that they have openly and continuously used the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason of respondents practices must always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable. In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not. [Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] even indicate "representing IN-N-OUT." These acts cannot be considered acts in good faith. 47 Administrative proceedings are governed by the "substantial evidence rule." A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.48 As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition.

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With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner: Section 156. Actions, and Damages and Injunction for Infringement.156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by applying the reasonable percentage of 30% to the respondents gross sales, and then doubling the amount thereof on account of respondents actual intent to mislead the public or defraud the petitioner, 49 thus, arriving at the amount of actual damages of P212,574.28. Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action.50 While there is no hard and fast rule in determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered.51 Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded. In accordance with Article 2208(1) of the Civil Code, attorneys fees may likewise be awarded to petitioner since exemplary damages are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven years, despite the respondents failure to present countervailing evidence. Considering moreover the reputation of petitioners counsel, the actual attorneys fees paid by petitioner would far exceed the amount that was awarded to it.52 IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED. The Decision of the IPO Director General, dated 23 December 2005, is hereby REINSTATED IN PART, with the modification that the amount of exemplary damages awarded be reduced to P250,000.00. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MA. ALICIA AUSTRIA-MARTINEZ Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice

RUBEN T. REYES Associate Justice

ATTESTATION

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I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice

Footnotes Penned by Associate Justice Magdangal M. de Leon with Associate Justices Godardo A. Jacinto and Marina L. Buzon, concurring. Rollo, pp. 51-74.
1 2

Penned by IPO Director General Adrian S. Cristobal, Jr. Rollo, pp. 116-131. Rollo, p. 139. Id. at 166. Id. at 144-145. Id. at 140-144. Id. at 148-158. Id. at 53. Id. at 15. Id. at 19-20. Id. at 430. Id. at 166-174. Id. at 178-195. Id. at 195. Id. at 697-704 Id. at 705-722. Id. at 619. Id. at 727-731. Id. at 619. Sehwani, Incorporated v. In-N-Out Burger, Inc., 536 SCRA 225.

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Rollo, pp. 120-130. Id. at 130-131. Id. at 75-108. Id. at 106-107. Id. at 51-73. Id. at 73. Id. at 363-364. Id. at 981. Sehwani, Incorporated v. In-N-Out Burger, Inc., supra note 20. This Court notes that Section 8202 of the Government Code of the State of California provides that:

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8202(a) When executing a jurat, a notary shall administer an oath or affirmation to the affiant and shall determine, from satisfactory evidence as described in Section 1185 of the Civil Code, that the affiant is the person executing the document. The affiant shall sign the document in the presence of the notary. (b) To any affidavit subscribed and sworn to before a notary, these shall be attached a jurat in the following form: State of California County of ____________ Subscribed and sworn to (or affirmed) before me on this ___ day of ______, 20__, by ________________, proved to me on the basis of satisfactory evidence to be the person(s) who appeared before me. Seal__________________ Signature______________
31

G.R. No. 164948, 27 June 2006, 493 SCRA 415. Rule 8, Section 2 and Rule 3, Section 11 of the 2004 Rules on Notarial Practice state that: SEC. 2. Contents of the Concluding Part of the Notarial Certificate. - The notarial certificate shall include the following: (a) the name of the notary public as exactly indicated in the commission; (b) the serial number of the commission of the notary public; (c) the words "Notary Public" and the province or city where the notary public is commissioned, the expiration date of the commission, the office address of the notary public; and (d) the roll of attorney's number, the professional tax receipt number and the place and date of issuance thereof, and the IBP membership number. SEC. 11. Jurisdiction and Term. - A person commissioned as notary public may perform notarial acts in any place within the territorial jurisdiction of the commissioning court for a period of two (2) years commencing the first day of January of the year in which the commissioning is made, unless earlier revoked or the notary public has resigned under these Rules and the Rules of Court.

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See Azuela v. Court of Appeals, G.R. No. 122880, 12 April 2006, 487 SCRA 119, 143. Agpalo, Legal Forms (2006), pp. 71-72.

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LDP Marketing, Inc v. Monter, G.R. No. 159653, 25 January 2006, 480 SCRA 137, 141. Pajuyo v. Court of Appeals, G.R. No. 146364, 3 June 2004, 430 SCRA 492, 509.

36

Torres v. Specialized Packaging Development Corporation, G.R. No. 149634, 6 July 2004, 433 SCRA 455, 463-464.
37 38

MSF Tire and Rubber, Inc. v. Court of Appeals, 370 Phil. 824, 832 (1999). La Campana Development Corporation v. See, G.R. No. 149195, 26 June 2006, 492 SCRA 584, 588-589. Sehwani, Incorporated v. In-N-Out Burger, Inc., supra note 20 at 232-233. Rollo, p. 83. See Ateneo de Naga University v. Manalo, G.R. No. 160455, 9 May 2005, 458 SCRA 325, 336-337. Aguilar, THE INTELLECTUAL PROPERTY CODE (1st ed., 2004), pp. 7-9. Supra note 20. Oropeza Marketing Corporation v. Allied Banking Corporation, 441 Phil. 551, 564 (2002).

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41

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45

McDonalds Corporation v. L.C. Big Mak Burger, Inc., G.R. No. 143993,18 August 2004, 437 SCRA 10, 37.
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Rollo, pp. 121-124. Office of the Ombudsman v. Santos, G.R. No. 166116, 31 March 2006, 486 SCRA 463, 470. Section 156.3 of the Intellectual Property Code states that:

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156.3 In cases where actual intent to mislead the public or defraud the complainant is shown, in the discretion of the court, the damages may be doubled. Lamis v. Ong, G.R. No. 148923, 11 August 2005, 466 SCRA 510, 519-520 and Cebu Country Club, Inc. v. Elizagaque, G.R. No. 160273, 18 January 2008, 542 SCRA 65, 75-76.
50 51

Del Rosario v. Court of Appeals, 334 Phil. 812, 827-829 (1997).

Pilipinas Shell Petroleum Corporation v. John Bordman Ltd. of Iloilo, Inc., G.R. No. 159831, 14 October 2005, 473 SCRA 151, 175.
52

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-75420 November 15, 1991 KABUSHI KAISHA ISETAN, also known and trading as ISETAN CO., LTD., petitioner, vs. THE INTERMEDIATE APPELLATE COURT, THE DIRECTOR OF PATENTS, and ISETANN DEPARTMENT STORE, INC., respondents.

GUTIERREZ, JR., J.:p This is a petition for review on certiorari which seeks to set aside - (1) the decision of the Court of Appeals dated June 2, 1986 in AC-G.R. SP No. 008873 entitled "Kabushi Kaisha Isetan, also known and trading as Isetan Company Limited v. Isetann Department Store, Inc." dismissing the petitioner's appeal from the decision of the Director of Patents; and (2) the Resolution dated July 11, 1986 denying the petitioner's motion for reconsideration.

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As gathered from the records, the facts are as follows: Petitioner Kabushi Kaisha Isetan is a foreign corporation organized and existing under the laws of Japan with business address at 14-1 Shinjuku, 3-Chrome, Shinjuku, Tokyo, Japan. It is the owner of the trademark "Isetan" and the "Young Leaves Design". The petitioner alleges that it first used the trademark Isetan on November 5, 1936. It states that the trademark is a combination of "Ise" taken from "Iseya" the first name of the rice dealer in Kondo, Tokyo in which the establishment was first located and "Tan" which was taken from "Tanji Kosuge the First". The petitioner claims to have expanded its line of business internationally from 1936 to 1974. The trademark "Isetan" and "Young Leaves Design" were registered in Japan covering more than 34 classes of goods. On October 3, 1983, the petitioner applied for the registration of "Isetan" and "Young Leaves Design" with the Philippine Patent Office under Permanent Serial Nos. 52422 and 52423 respectively. (Rollo, p. 43) Private respondent, Isetann Department Store, on the other hand, is a domestic corporation organized and existing under the laws of the Philippines with business address at 423-430 Rizal Avenue, Sta. Cruz, Manila, Philippines. It claims that it used the word "Isetann" as part of its corporated name and on its products particularly on shirts in Joymart Department Store sometime in January 1979. The suffix "Tann" means an altar, the place of offering in Chinese and this was adopted to harmonize the corporate name and the corporate logo of two hands in cup that symbolizes the act of offering to the Supreme Being for business blessing. On May 30, 1980 and May 20, 1980, the private respondent registered "Isetann Department Store, Inc." and Isetann and Flower Design in the Philippine Patent Office under SR. Reg. No. 4701 and 4714, respectively, as well as with the Bureau of Domestic Trade under Certificate of Registration No. 32020. (Rollo, pp. 43-44) On November 28, 1980, the petitioner filed with the Phil. Patent Office two (2) petitions for the cancellation of Certificates of Supplemental Registration Nos. SR-4714 and SR-4701 stating among others that: . . . except for the additional letter "N" in the word "Isetan", the mark registered by the registrant is exactly the same as the trademark ISETAN owned by the petitioner and that the young leaves registered by the registrant is exactly the same as the young leaves design owned by the petitioner. The petitioner further alleged that private respondent's act of registering a trademark which is exactly the same as its trademark and adopting a corporate name similar to that of the petitioner were with the illegal and immoral intention of cashing in on the long established goodwill and popularity of the petitioner's reputation, thereby causing great and irreparable injury and damage to it (Rollo, p. 521). It argued that both the petitioner's and respondent's goods move in the same channels of trade, and ordinary people will be misled to believe that the products of the private respondent originated or emanated from, are associated with, or are manufactured or sold, or sponsored by the petitioner by reason of the use of the challenged trademark. The petitioner also invoked the Convention of Paris of March 20, 1883 for the Protection of Industrial Property of which the Philippines and Japan are both members. The petitioner stressed that the Philippines' adherence to the Paris Convention committed to the government to the protection of trademarks belonging not only to Filipino citizens but also to those belonging to nationals of other member countries who may seek protection in the Philippines. (Rollo, p. 522) The petition was docketed as Inter Partes Cases Nos. 1460 and 1461 (Rollo, p. 514) Meanwhile, the petitioner also filed with the Securities and Exchange Commission (SEC) a petition to cancel the mark "ISETAN" as part of the registered corporate name of Isetann Department Store, Inc. which petition was docketed as SEC Case No. 2051 (Rollo, p. 524) On May 17, 1985, this petition was denied in a decision rendered by SEC's Hearing Officer, Atty. Joaquin C. Garaygay. On appeal, the Commission reversed the decision of the Hearing Officer on February 25, 1986. It directed the private respondent to amend its Articles of Incorporation within 30 days from finality of the decision. On April 15, 1986, however, respondent Isetann Department Store filed a motion for reconsideration. (Rollo, pp. 325-353). And on September 10, 1987, the Commission reversed its earlier decision dated February 25, 1986 thereby affirming the decision rendered by the Hearing Officer on May 17, 1985. The Commission stated that since the petitioner's trademark and tradename have never been used in commerce on the petitioner's products marketed in the Philippines, the trademark or tradename have not acquired a reputation and goodwill deserving of protection from usurpation by local competitors. (Rollo, p. 392). This SEC decision which denied and dismissed the petition to cancel was submitted to the Director of Patents as part of the evidence for the private respondent.

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On January 24, 1986, the Director of Patents after notice and hearing rendered a joint decision in Inter Partes Cases Nos. 1460 and 1461, the dispositive portion of which reads: WHEREFORE, all the foregoing considered, this Office is constrained to hold that the herein Petitioner has not successfully made out a case of cancellation. Accordingly, Inter Partes Cases Nos. 1460 and 1461 are, as they are hereby, DISMISSED. Hence, Respondent's Certificate of Supplemental Registration No. 4714 issued on May 20, 1980 covering the tradename "ISETANN DEPT. STORE, INC. & FLOWER DESIGN" are, as they are hereby, ordered to remain in full force and effect for the duration of their term unless sooner or later terminated by law. The corresponding application for registration in the Principal Register of the Trademark and of the tradename aforesaid are hereby given due course. Let the records of these cases be transmitted to the Trademark Examining Division for appropriate action in accordance with this Decision. On February 21, 1986, Isetan Company Limited moved for the reconsideration of said decision but the motion was denied on April 2, 1986 (Rollo, pp. 355-359). From this adverse decision of the Director of Patents, the petitioner appealed to the Intermediate Appellate Court (now Court of Appeals). On June 2, 1986, the IAC dismissed the appeal on the ground that it was filed out of time. The petitioner's motion for reconsideration was likewise denied in a resolution dated July 11, 1986. Hence, this petition. Initially, the Court dismissed the petition in a resolution dated July 8, 1987, on the ground that it was filed fourteen (14) days late. However, on motion for reconsideration, whereby the petitioner appealed to this Court on equitable grounds stating that it has a strong and meritorious case, the petition was given due course in a resolution dated May 19, 1988 to enable us to examine more fully any possible denial of substantive justice. The parties were then required to submit their memoranda. (Rollo, pp. 2-28; Resolution, pp. 271; 453) After carefully considering the records of this case, we reiterate our July 8, 1987 resolution dismissing the petition. There are no compelling equitable considerations which call for the application of the rule enunciated in Serrano v. Court of Appeals (139 SCRA 179 [1985]) and Orata v. Intermediate Appellate Court, et al. (185 SCRA 148 [1990]) that considerations of substantial justice manifest in the petition may relax the stringent application of technical rules so as not to defeat an exceptionally meritorious petition. There is no dispute and the petitioner does not question the fact that the appeal was filed out of time. Not only was the appeal filed late in the Court of Appeals, the petition for review was also filed late with us. In common parlance, the petitioner's case is "twice dead" and may no longer be reviewed. The Court of Appeals correctly rejected the appeal on the sole ground of late filing when it ruled: Perfection of an appeal within the time provided by law is jurisdictional, and failure to observe the period is fatal. The decision sought to be appealed is one rendered by the Philippine Patent Office, a quasijudicialbody. Consequently, under Section 23(c) of the Interim Rules of Court, the appeal shall be governed by the provisions of Republic Act No. 5434, which provides in its Section 2; Sec. 2. Appeals to Court of Appeals. - Appeals to the Court of Appeals shall be filed within fifteen (15) days from notice of the ruling, award, order, decision or judgment or from the date of its last publication, if publication is required by law for its effectivity; or in case a motion for reconsideration is filed within that period of fifteen (15) days, then within ten (10) days from notice or publication, when required by law, of the resolution denying the motion for reconsideration. No more than one motion for reconsideration shall be allowed any party. If no appeal is filed within the periods here fixed, the ruling, award, order, decision or judgment shall become final and may be executed as provided by existing law. Attention is invited to that portion of Section 2 which states that in case a motion for reconsideration is filed, an appeal should be filed within ten (10) days from notice of the resolution denying the motion for reconsideration.

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The petitioner received a copy of the Court of Appeals' resolution denying and received by us on August 8, 1986, its motion for reconsideration on July 17, 1986. It had only up to August 1, 1986 to file a petition for review with us. The present petition was posted on August 2, 1986. There is no question that it was, again, filed late because the petitioner filed an ex-parte motion for admission explaining the delay. The decision of the Patent Office has long become final and executory. So has the Court of Appeal decision. Regarding the petitioner's claims of substantial justice which led us to give due course, we decline to disturb the rulings of the Patent Office and the Court of Appeals. A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a prerequisite to the acquisition of ownership over a trademark or a tradename. The trademark Law, Republic Act No. 166, as amended, under which this case heard and decided provides: SEC. 2. What are registrable.- Trademark, tradenames and service marks owned by persons, corporation, partnerships or associations domiciled in the Philippines and by persons, corporations, partnerships or associations domicided in any foreign country may be registered in accordance with the provisions of this Act: Provided, That said trademarks, tradenames, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. (As amended by R.A. No. 865). SEC. 2-A. Ownership of trademarks, tradenames and service marks; how acquired. - Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a tradename, or a service mark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or service of others. The ownership or possession of a trademark, tradename, service mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to the law. (As amended by R.A. No. 638)" These provisions have been interpreted in Sterling Products International, Inc. v. Farbenfabriken Bayer Actiengesellschaft (27 SCRA 1214 [1969]) in this way: A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. xxx xxx xxx ... Adoption alone of a trademark would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One way make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use.For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. ... In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce. We ruled in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]): 3. The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. - There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value". The evidence for respondent must be clear, definite and free from incosistencies. (Sy Ching v. Gaw Lui. 44 SCRA 148-149) "Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by the law. Respondent did not expect income from such "samples". "There were no receipts to establish sale, and no proof were

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presented to show that they were subsequently sold in the Philippines." (Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 [1982]; Emphasis Supplied) The records show that the petitioner has never conducted any business in the Philippines. It has never promoted its tradename or trademark in the Philippines. It has absolutely no business goodwill in the Philippines. It is unknown to Filipinos except the very few who may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine government. Under the law, it has no right to the remedy it seeks. There can be no question from the records that the petitioner has never used its tradename or trademark in the Philippines. The petitioner's witnesses, Mr. Mayumi Takayama and Mr. Hieoya Murakami, admitted that: 1) The petitioner's company is not licensed to do business in the Philippines; 2) The petitioner's trademark is not registered under Philippine law; and 3) The petitioner's trademark is not being used on products in trade, manufacture, or business in the Philippines. It was also established from the testimony of Atty. Villasanta, petitioner's witness, that the petitioner has never engaged in promotional activities in the Philippines to popularize its trademark because not being engaged in business in the Philippines, there is no need for advertising. The claim of the petitioner that millions of dollars have been spent in advertising the petitioner's products, refers to advertising in Japan or other foreign places. No promotional activities have been undertaken in the Philippines, by the petitioner's own admission. Any goodwill, reputation, or knowledge regarding the name Isetann is purely the work of the private respondent. Evidence was introduced on the extensive promotional activities of the private respondent. It might be pertinent at this point to stress that what is involved in this case is not so much a trademark as a tradename. Isetann Department Store, Inc. is the name of a store and not of product sold in various parts of the country. This case must be differentiated from cases involving products bearing such familiar names as "colgate", "Singer". "Toyota", or "Sony" where the products are marketed widely in the Philippines. There is not product with the name "Isetann" popularized with that brand name in the Philippines. Unless one goes to the store called Isetann in Manila, he would never know what the name means. Similarly, until a Filipino buyer steps inside a store called "Isetan" in Tokyo or Hongkong, that name would be completely alien to him. The records show that among Filipinos, the name cannot claim to be internationally well-known. The rule is that the findings of facts of the Director of Patents are conclusive on the Supreme Court, provided they are supported by substantial evidence. (Chua Che v. Phil. Patent Office, 13 SCRA 67 [1965]; Chung Te v. Ng Kian Giab, 18 SCRA 747 [1966]; Marvex Commercial Co., Inc. v. Petra Hawpia & Co., 18 SCRA 1178 [1966]; Lim Kiah v. Kaynee, Co. 25 SCRA 485 [1968]; Kee Boc v. Dir. of Patents, 34 SCRA 570 [1970]). The conclusions of the Director of Patents are likewise based on applicable law and jurisprudence: What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory. There is where his business is carried on where the goodwill symbolized by the trademark has immediate value; where the infringer may profit by infringement. There is nothing new in what we now say. Plaintiff itself concedes (Brief for Plaintiff-Appellant, p. 88) that the principle of territoriality of the Trademark Law has been recognized in the Philippines, citing Ingenohl v. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of trademarks "rests upon the doctrine of nationality or territoriality." (2 Callmann, Unfair Competition and Trademarks, 1945 ed., p. 1006) (Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellachaft, 27 SCRA 1214 [1969]; Emphasis supplied) The mere origination or adoption of a particular tradename without actual use thereof in the market is insufficient to give any exclusive right to its use (Johnson Mfg. Co. v. Leader Filling Stations Corp. 196 N.E. 852, 291 Mass. 394), even though such adoption is publicly declared, such as by use of the name in advertisements, circulars, price lists, and on signs and stationery. (Consumers Petrolum Co. v. Consumers Co. of ILL. 169 F 2d 153) The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. To illustrate - If a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename "Rapid Transportation", it does not necessarily follow that "Rapid" can no longer be registered in Uganda, Fiji, or the Philippines.

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As stated by the Director of Patents Indeed, the Philippines is a signatory to this Treaty and, hence, we must honor our obligation thereunder on matters concerning internationally known or well known marks. However, this Treaty provision clearly indicated the conditions which must exist before any trademark owner can claim and be afforded rights such as the Petitioner herein seeks and those conditions are that: a) the mark must be internationally known or well known; b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar kinds of goods; and d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris Convention. Article by Dr. Bogach, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985) The respondent registered its trademark in 1979. It has continuously used that name in commerce. It has established a goodwill through extensive advertising. The people who buy at Isetann Store do so because of Isetann's efforts. There is no showing that the Japanese firm's registration in Japan or Hongkong has any influence whatsoever on the Filipino buying public. WHEREFORE, premises considered, the petition is hereby DISMISSED. SO ORDERED. Fernan, C.J., Paras and Bidin, JJ., concur.

Separate Opinions

PADILLA, J., separate opinion: It appears that on 28 November 1980, petitioner filed with the Philippines Patent Office two (2) petitions for cancellation of Certificates of Supplemental Registration Nos. SR-4717 and SR-4701, docketed therein as inter Partes Cases Nos. 1460 and 1461. On 24 January 1986, the Director of Patents rendered a joint decision dismissing the petitions in the aforesaid cases. Petitioner moved for reconsideration on 21 February 1986 but the motion was denied on 2 April 1986. Petitioner appealed to the Intermediate Appellate Court (now Court of Appeals), the appeal docketed therein as ACG.R. SP NO. 08873. On 2 June 1986, the appellate court rendered a decision dismissing the appeal for having been filed out of time. It held: In the case at bar, appellant admits that it received on April 11, 1986, a copy of the Resolution dated April 2, 1986, denying its motion for reconsideration. Under the law, therefore, appellant had only up to April 21, 1986 within which to file its notice of appeal to this Court. Upon these premises, it becomes all but too obvious that the notice of appeal which was filed only on May 5, 1986, was filed when the decision sought to be appealed had already become final. The notice of appeal was in fact filed 24 days after receipt of the Resolution denying appellant's motion for reconsideration, which period is beyong the original period of 15 days provided for under Section 2 of Republic Act No. 5434 and, of course, also of the 15 days provided under Batas Pambansa Bilang 129. Petitioner moved for reconsideration but its motion was denied in the resolution of the Court of Appeals dated 11 July 1986. Hence, the present petition for review on certiorari.

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In Bello vs. Fernando, G.R. No. L-16970, 30 January 1962, 4 SCRA 135, the Court speaking thru Mr. Justice J.B.L. Reyes held: The right to appeal is not a natural right nor a part of due process; it is merely a statutory privilege, and may be exercised onlu in the manner and in accordance with the provisions of the law (Aguila v. Navarro, 55 Phil, 898; Santiago v. Valenzuela, 78 Phil. 397) ...; and compliance with the (this) period for appeal is considered absolutely indispensable for the prevention of needless delays and to the orderly and speedy discharge of judicial business (Altavas Conlu v. C.A., L-14027, January 29, 1960), so that if said period is not complied with, the judgment becomes final and executory and the appellate court does not acquire jurisdiction over the appeal (Layda v. Legaspi, 38 Phil. 83; Pampolina v. Suiza, 12 Phil. 99; Caisip v. Cabangon, L-14684, Aug. 26, 1960). "Indeed, this Court had ruled, time and again, that compliance with the reglementary period for perfecting an appeal is not merely mandatory, but jurisdictional." (Aguilar vs. Blanco, G.R. No. L-32392, 31 August 1988, 165 SCRA 180). The perfection of an appeal within the reglementary period is not, therefore, a mere technicality but mandatory and jurisdictional. Since petitioner's appeal to the Court of Appeals from the decision of the Director of Patents was admittedly filed out of time, and there was no compelling reason given as to why the appeal was filed out of time, the appellate court acquired no jurisdiction over said appeal and the decision of the Director of Patents had become final and executory. I see, therefore, no need or reason to go into the merits of the abortive appeal. The decision of the Court of Appeals dismissing the peititioner's appeal should, therefore, be AFFIRMED and the present petition should be DISMISSED.

Separate Opinions

PADILLA, J., separate opinion: It appears that on 28 November 1980, petitioner filed with the Philippines Patent Office two (2) petitions for cancellation of Certificates of Supplemental Registration Nos. SR-4717 and SR-4701, docketed therein as inter Partes Cases Nos. 1460 and 1461. On 24 January 1986, the Director of Patents rendered a joint decision dismissing the petitions in the aforesaid cases. Petitioner moved for reconsideration on 21 February 1986 but the motion was denied on 2 April 1986. Petitioner appealed to the Intermediate Appellate Court (now Court of Appeals), the appeal docketed therein as ACG.R. SP NO. 08873. On 2 June 1986, the appellate court rendered a decision dismissing the appeal for having been filed out of time. It held: In the case at bar, appellant admits that it received on April 11, 1986, a copy of the Resolution dated April 2, 1986, denying its motion for reconsideration. Under the law, therefore, appellant had only up to April 21, 1986 within which to file its notice of appeal to this Court. Upon these premises, it becomes all but too obvious that the notice of appeal which was filed only on May 5, 1986, was filed when the decision sought to be appealed had already become final. The notice of appeal was in fact filed 24 days after receipt of the Resolution denying appellant's motion for reconsideration, which period is beyong the original period of 15 days provided for under Section 2 of Republic Act No. 5434 and, of course, also of the 15 days provided under Batas Pambansa Bilang 129. Petitioner moved for reconsideration but its motion was denied in the resolution of the Court of Appeals dated 11 July 1986. Hence, the present petition for review on certiorari. In Bello vs. Fernando, G.R. No. L-16970, 30 January 1962, 4 SCRA 135, the Court speaking thru Mr. Justice J.B.L. Reyes held: The right to appeal is not a natural right nor a part of due process; it is merely a statutory privilege, and may be exercised onlu in the manner and in accordance with the provisions of the law (Aguila v. Navarro, 55 Phil, 898; Santiago v. Valenzuela, 78 Phil. 397) ...; and compliance with the (this) period for appeal is considered absolutely indispensable for the prevention of needless delays and to the orderly and speedy discharge of judicial business (Altavas Conlu v. C.A., L-14027, January 29,

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1960), so that if said period is not complied with, the judgment becomes final and executory and the appellate court does not acquire jurisdiction over the appeal (Layda v. Legaspi, 38 Phil. 83; Pampolina v. Suiza, 12 Phil. 99; Caisip v. Cabangon, L-14684, Aug. 26, 1960). "Indeed, this Court had ruled, time and again, that compliance with the reglementary period for perfecting an appeal is not merely mandatory, but jurisdictional." (Aguilar vs. Blanco, G.R. No. L-32392, 31 August 1988, 165 SCRA 180). The perfection of an appeal within the reglementary period is not, therefore, a mere technicality but mandatory and jurisdictional. Since petitioner's appeal to the Court of Appeals from the decision of the Director of Patents was admittedly filed out of time, and there was no compelling reason given as to why the appeal was filed out of time, the appellate court acquired no jurisdiction over said appeal and the decision of the Director of Patents had become final and executory. I see, therefore, no need or reason to go into the merits of the abortive appeal. The decision of the Court of Appeals dismissing the peititioner's appeal should, therefore, be AFFIRMED and the present petition should be DISMISSED. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 115758 March 19, 2002

ELIDAD C. KHO, doing business under the name and style of KEC COSMETICS LABORATORY, petitioner, vs. HON. COURT OF APPEALS, SUMMERVILLE GENERAL MERCHANDISING and COMPANY, and ANG TIAM CHAY, respondents. DE LEON, JR., J.: Before us is a petition for review on certiorari of the Decision1 dated May 24, 1993 of the Court of Appeals setting aside and declaring as null and void the Orders2 dated February 10, 1992 and March 19, 1992 of the Regional Trial Court, Branch 90, of Quezon City granting the issuance of a writ of preliminary injunction. The facts of the case are as follows: On December 20, 1991, petitioner Elidad C. Kho filed a complaint for injunction and damages with a prayer for the issuance of a writ of preliminary injunction, docketed as Civil Case No. Q-91-10926, against the respondents Summerville General Merchandising and Company (Summerville, for brevity) and Ang Tiam Chay. The petitioner's complaint alleges that petitioner, doing business under the name and style of KEC Cosmetics Laboratory, is the registered owner of the copyrights Chin Chun Su and Oval Facial Cream Container/Case, as shown by Certificates of Copyright Registration No. 0-1358 and No. 0-3678; that she also has patent rights onChin Chun Su & Device and Chin Chun Su for medicated cream after purchasing the same from Quintin Cheng, the registered owner thereof in the Supplemental Register of the Philippine Patent Office on February 7, 1980 under Registration Certificate No. 4529; that respondent Summerville advertised and sold petitioner's cream products under the brand name Chin Chun Su, in similar containers that petitioner uses, thereby misleading the public, and resulting in the decline in the petitioner's business sales and income; and, that the respondents should be enjoined from allegedly infringing on the copyrights and patents of the petitioner. The respondents, on the other hand, alleged as their defense that Summerville is the exclusive and authorized importer, re-packer and distributor of Chin Chun Su products manufactured by Shun Yi Factory of Taiwan; that the said Taiwanese manufacturing company authorized Summerville to register its trade name Chin Chun Su Medicated Cream with the Philippine Patent Office and other appropriate governmental agencies; that KEC Cosmetics Laboratory of the petitioner obtained the copyrights through misrepresentation and falsification; and, that the authority of Quintin Cheng, assignee of the patent registration certificate, to distribute and market Chin Chun Su products in the Philippines had already been terminated by the said Taiwanese Manufacturing Company. After due hearing on the application for preliminary injunction, the trial court granted the same in an Order dated February 10, 1992, the dispositive portion of which reads: ACCORDINGLY, the application of plaintiff Elidad C. Kho, doing business under the style of KEC Cosmetic Laboratory, for preliminary injunction, is hereby granted. Consequentially, plaintiff is required to file with the Court a bond executed to defendants in the amount of five hundred thousand pesos (P500,000.00) to the

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effect that plaintiff will pay to defendants all damages which defendants may sustain by reason of the injunction if the Court should finally decide that plaintiff is not entitled thereto. SO ORDERED.3 The respondents moved for reconsideration but their motion for reconsideration was denied by the trial court in an Order dated March 19, 1992.4 On April 24, 1992, the respondents filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 27803, praying for the nullification of the said writ of preliminary injunction issued by the trial court. After the respondents filed their reply and almost a month after petitioner submitted her comment, or on August 14 1992, the latter moved to dismiss the petition for violation of Supreme Court Circular No. 28-91, a circular prohibiting forum shopping. According to the petitioner, the respondents did not state the docket number of the civil case in the caption of their petition and, more significantly, they did not include therein a certificate of non-forum shopping. The respondents opposed the petition and submitted to the appellate court a certificate of non-forum shopping for their petition. On May 24, 1993, the appellate court rendered a Decision in CA-G.R. SP No. 27803 ruling in favor of the respondents, the dispositive portion of which reads: WHEREFORE, the petition is hereby given due course and the orders of respondent court dated February 10, 1992 and March 19, 1992 granting the writ of preliminary injunction and denying petitioners' motion for reconsideration are hereby set aside and declared null and void. Respondent court is directed to forthwith proceed with the trial of Civil Case No. Q-91-10926 and resolve the issue raised by the parties on the merits. SO ORDERED.5 In granting the petition, the appellate court ruled that: The registration of the trademark or brandname "Chin Chun Su" by KEC with the supplemental register of the Bureau of Patents, Trademarks and Technology Transfer cannot be equated with registration in the principal register, which is duly protected by the Trademark Law.
1wphi1.nt

xxx

xxx

xxx

As ratiocinated in La Chemise Lacoste, S.S. vs. Fernandez, 129 SCRA 373, 393: "Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be on guard and there are certain defects, some obstacles which the use must still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register. The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that 'registrants is presumed to be the owner of the mark until after the registration is declared cancelled' is, therefore, misplaced and grounded on shaky foundation. The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. As even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L-10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil 928; La Yebana Co. v. chua Seco & Co., 14 Phil 534)."6 The petitioner filed a motion for reconsideration. This she followed with several motions to declare respondents in contempt of court for publishing advertisements notifying the public of the promulgation of the assailed decision of the appellate court and stating that genuine Chin Chun Su products could be obtained only from Summerville General Merchandising and Co. In the meantime, the trial court went on to hear petitioner's complaint for final injunction and damages. On October 22, 1993, the trial court rendered a Decision7 barring the petitioner from using the trademark Chin Chun Su and upholding the right of the respondents to use the same, but recognizing the copyright of the petitioner over the oval shaped container of her beauty cream. The trial court did not award damages and costs to any of the parties but to

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their respective counsels were awarded Seventy-Five Thousand Pesos (P75,000.00) each as attorney's fees. The petitioner duly appealed the said decision to the Court of Appeals. On June 3, 1994, the Court of Appeals promulgated a Resolution8 denying the petitioner's motions for reconsideration and for contempt of court in CA-G.R. SP No. 27803. Hence, this petition anchored on the following assignment of errors: I RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON PETITIONER'S MOTION TO DISMISS. II RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN REFUSING TO PROMPTLY RESOLVE PETITIONER'S MOTION FOR RECONSIDERATION. III IN DELAYING THE RESOLUTION OF PETITIONER'S MOTION FOR RECONSIDERATION, THE HONORABLE COURT OF APPEALS DENIED PETITIONER'S RIGHT TO SEEK TIMELY APPELLATE RELIEF AND VIOLATED PETITIONER'S RIGHT TO DUE PROCESS. IV RESPONDENT HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO CITE THE PRIVATE RESPONDENTS IN CONTEMPT.9 The petitioner faults the appellate court for not dismissing the petition on the ground of violation of Supreme Court Circular No. 28-91. Also, the petitioner contends that the appellate court violated Section 6, Rule 9 of the Revised Internal Rules of the Court of Appeals when it failed to rule on her motion for reconsideration within ninety (90) days from the time it is submitted for resolution. The appellate court ruled only after the lapse of three hundred fifty-four (354) days, or on June 3, 1994. In delaying the resolution thereof, the appellate court denied the petitioner's right to seek the timely appellate relief. Finally, petitioner describes as arbitrary the denial of her motions for contempt of court against the respondents. We rule in favor of the respondents. Pursuant to Section 1, Rule 58 of the Revised Rules of Civil Procedure, one of the grounds for the issuance of a writ of preliminary injunction is a proof that the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, either for a limited period or perpetually. Thus, a preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded.10 This is the reason why we have ruled that it must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable, and, that there is an urgent and paramount necessity for the writ to prevent serious damage.11 In the case at bar, the petitioner applied for the issuance of a preliminary injunctive order on the ground that she is entitled to the use of the trademark on Chin Chun Su and its container based on her copyright and patent over the same. We first find it appropriate to rule on whether the copyright and patent over the name and container of a beauty cream product would entitle the registrant to the use and ownership over the same to the exclusion of others. Trademark, copyright and patents are different intellectual property rights that cannot be interchanged with one another. A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods.12 In relation thereto, a trade name means the name or designation identifying or distinguishing an enterprise.13 Meanwhile, the scope of a copyright is confined to literary and artistic works which are original intellectual creations in the literary and artistic domain protected from the moment of their creation.14 Patentable inventions, on the other hand, refer to any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable.15

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Petitioner has no right to support her claim for the exclusive use of the subject trade name and its container. The name and container of a beauty cream product are proper subjects of a trademark inasmuch as the same falls squarely within its definition. In order to be entitled to exclusively use the same in the sale of the beauty cream product, the user must sufficiently prove that she registered or used it before anybody else did. The petitioner's copyright and patent registration of the name and container would not guarantee her the right to the exclusive use of the same for the reason that they are not appropriate subjects of the said intellectual rights. Consequently, a preliminary injunction order cannot be issued for the reason that the petitioner has not proven that she has a clear right over the said name and container to the exclusion of others, not having proven that she has registered a trademark thereto or used the same before anyone did. We cannot likewise overlook the decision of the trial court in the case for final injunction and damages. The dispositive portion of said decision held that the petitioner does not have trademark rights on the name and container of the beauty cream product. The said decision on the merits of the trial court rendered the issuance of the writ of a preliminary injunction moot and academic notwithstanding the fact that the same has been appealed in the Court of Appeals. This is supported by our ruling in La Vista Association, Inc. v. Court of Appeals16, to wit: Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs xxx and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits xxx the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiff's right thereto, that is, after the same issue has been decided on the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final xxx. Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its nonexistence ceases to have any force and effect. (italics supplied) La Vista categorically pronounced that the issuance of a final injunction renders any question on the preliminary injunctive order moot and academic despite the fact that the decision granting a final injunction is pending appeal. Conversely, a decision denying the applicant-plaintiff's right to a final injunction, although appealed, renders moot and academic any objection to the prior dissolution of a writ of preliminary injunction. The petitioner argues that the appellate court erred in not dismissing the petition for certiorari for non-compliance with the rule on forum shopping. We disagree. First, the petitioner improperly raised the technical objection of noncompliance with Supreme Court Circular No. 28-91 by filing a motion to dismiss the petition for certiorari filed in the appellate court. This is prohibited by Section 6, Rule 66 of the Revised Rules of Civil Procedure which provides that "(I)n petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of Section 2, Rule 56, shall be observed. Before giving due course thereto, the court may require the respondents to file their comment to, and not a motion to dismiss, the petition xxx (italics supplied)". Secondly, the issue was raised one month after petitioner had filed her answer/comment and after private respondent had replied thereto. Under Section 1, Rule 16 of the Revised Rules of Civil Procedure, a motion to dismiss shall be filed within the time for but before filing the answer to the complaint or pleading asserting a claim. She therefore could no longer submit a motion to dismiss nor raise defenses and objections not included in the answer/comment she had earlier tendered. Thirdly, substantial justice and equity require this Court not to revive a dissolved writ of injunction in favor of a party without any legal right thereto merely on a technical infirmity. The granting of an injunctive writ based on a technical ground rather than compliance with the requisites for the issuance of the same is contrary to the primary objective of legal procedure which is to serve as a means to dispense justice to the deserving party. The petitioner likewise contends that the appellate court unduly delayed the resolution of her motion for reconsideration. But we find that petitioner contributed to this delay when she filed successive contentious motions in the same proceeding, the last of which was on October 27, 1993, necessitating counter-manifestations from private respondents with the last one being filed on November 9, 1993. Nonetheless, it is well-settled that nonobservance of the period for deciding cases or their incidents does not render such judgments ineffective or void.17 With respect to the purported damages she suffered due to the alleged delay in resolving her motion for reconsideration, we find that the said issue has likewise been rendered moot and academic by our ruling that she has no right over the trademark and, consequently, to the issuance of a writ of preliminary injunction.
1wphi1.nt

Finally, we rule that the Court of Appeals correctly denied the petitioner's several motions for contempt of court. There is nothing contemptuous about the advertisements complained of which, as regards the proceedings in CAG.R. SP No. 27803 merely announced in plain and straightforward language the promulgation of the assailed Decision of the appellate court. Moreover, pursuant to Section 4 of Rule 39 of the Revised Rules of Civil Procedure, the said decision nullifying the injunctive writ was immediately executory. WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals dated May 24, 1993 and June 3, 1994, respectively, are hereby AFFIRMED. With costs against the petitioner.

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SO ORDERED. Bellosillo, Mendoza, Quisumbing, and Buena, JJ., concur.

Footnote Penned by Associate Justice Ricardo P. Galvez, and concurred in by Associate Justices Manuel M. Herrera and Asaali S. Isnani, Ninth Division; Rollo, pp. 36-40.
1 2

Penned by Judge Abraham P. Vera; CA Rollo, pp. 12-18. CA Rollo, pp. 12-17. CA Rollo, p. 18. Rollo, p. 39. Rollo, pp. 38-39. Rollo, pp. 19, 241. Rollo, pp. 42-43. Rollo, p. 21. Section 4, Rule 58, Revised Rules of Civil Procedure. Sy v. Court of Appeals, 313 SCRA 328 (1999). Section 121.1, Republic Act No. 8293. Section 121.3, Republic Act. No. 8293. Section 172, Republic Act No. 8293. Section 21, Republic Act No. 8293.

10

11

12

13

14

15

278 SCRA 498, 506 quoting Solid Homes, Inc. v. LA Vista, G.R. No. 71150 dated April 20, 1988 (unpublished).
16 17

De Roma v. Court of Appeals, 152 SCRA 205, 209 (1987). Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. L-63796-97 May 2, 1984 LA CHEMISE LACOSTE, S. A., petitioner, vs. HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAM HEMANDAS, respondents. G.R. No. L-65659 May 2l, 1984 GOBINDRAM HEMANDAS SUJANANI, petitioner, vs. HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR SAN DIEGO, in his capacity as Director of Patents, respondents.

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Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97. Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.

GUTIERREZ, JR., J.: It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among the manufacturing and trading centers of the world as a haven for intellectual pirates imitating and illegally profiting from trademarks and tradenames which have established themselves in international or foreign trade. Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A., a well known European manufacturer of clothings and sporting apparels sold in the international market and bearing the trademarks "LACOSTE" "CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the word "LACOSTE" and a representation of a crocodile/alligator. The petitioner asks us to set aside as null and void, the order of judge Oscar C. Fernandez, of Branch XLIX, Regional Trial Court, National Capital Judicial Region, granting the motion to quash the search warrants previously issued by him and ordering the return of the seized items. The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the laws of France and not doing business in the Philippines, It is undeniable from the records that it is the actual owner of the abovementioned trademarks used on clothings and other goods specifically sporting apparels sold in many parts of the world and which have been marketed in the Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior registration. In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company. Two years later, it applied for the registration of the same trademark under the Principal Register. The Patent Office eventually issued an order dated March 3, 1977 which states that: xxx xxx xxx ... Considering that the mark was already registered in the Supplemental Register in favor of herein applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is now being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is presumed to be the owner of the mark until after the registration is declared cancelled. Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE". On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device" (Application Serial No. 43242) and "Lacoste" (Application Serial No. 43241).The former was approved for publication while the latter was opposed by Games and Garments in Inter Partes Case No. 1658. In 1982, the petitioner filed a Petition for the Cancellation of Reg. No. SR-2225 docketed as Inter Partes Case No. 1689. Both cases have now been considered by this Court in Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659). On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition being committed by Hemandas and requesting their assistance in his apprehension and prosecution. The NBI conducted an investigation and subsequently filed with the respondent court two applications for the issuance of search warrants which would authorize the search of the premises used and occupied by the Lacoste Sports Center and Games and Garments both owned and operated by Hemandas. The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised Penal Code, "it appearing to the satisfaction of the judge after examining under oath applicant and his witnesses that there are good and sufficient reasons to believe that Gobindram Hemandas ... has in his control and possession in his premises the ... properties subject of the offense," (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a result of the search found and seized various goods and articles described in the warrants. Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different from petitioner's trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any criminal or civil action on the same subject matter and between the same parties would be premature.

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The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no valid ground for the quashal of the search warrants and that the grounds alleged in the motion were absolutely without merit. The State Prosecutor likewise filed his opposition on the grounds that the goods seized were instrument of a crime and necessary for the resolution of the case on preliminary investigation and that the release of the said goods would be fatal to the case of the People should prosecution follow in court. The respondent court was, however, convinced that there was no probable cause to justify the issuance of the search warrants. Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the NBI agents or officers in custody of the seized items were ordered to return the same to Hemandas. (Rollo, p. 25) The petitioner anchors the present petition on the following issues: Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction, (i) in reversing the finding of probable cause which he himself had made in issuing the search warrants, upon allegations which are matters of defense and as such can be raised and resolved only upon trial on the merits; and (ii) in finding that the issuance of the search warrants is premature in the face of the fact that (a) Lacoste's registration of the subject trademarks is still pending with the Patent Office with opposition from Hemandas; and (b) the subject trademarks had been earlier registered by Hemandas in his name in the Supplemental Register of the Philippine Patent Office? Respondent, on the other hand, centers his arguments on the following issues: I THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS. II THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983. Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation failed to allege essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is the petitioner not doing business in the Philippines but it also is not licensed to do business in the Philippines. He also cites the case of Leviton Industries v. Salvador (114 SCRA 420) to support his contention The Leviton case, however, involved a complaint for unfair competition under Section 21-A of Republic Act No. 166 which provides: Sec. 21 A. Any foreign corporation or juristic person to which a mark or tradename has been registered or assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false designation of origin and false description, whether or not it has been licensed to do business in the Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the Corporation Law, at the time it brings the complaint; Provided, That the country of which the said foreign corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege to corporate or juristic persons of the Philippines. We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the State of New York, United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of its complaint that its action was being filed under the provisions of Section 21-A of Republic Act No. 166, as amended. Compliance with the requirements imposed by the abovecited provision was necessary because Section 21-A of Republic Act No. 166 having explicitly laid down certain conditions in a specific proviso, the same must be expressly averred before a successful prosecution may ensue. It is therefore, necessary for the foreign corporation to comply with these requirements or aver why it should be exempted from them, if such was the case. The foreign corporation may have the right to sue before Philippine courts, but our rules on pleadings require that the qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded. In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code. The Leviton case is not applicable. Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner was doing business in the Philippines but was not licensed to do so. To support this argument, he states that the applicable ruling is the case of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a

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foreign corporation and Philippine-American Drug Co., the former's exclusive distributing agent in the Philippines filed a complaint for infringement of trademark and unfair competition against the Mangalimans. The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar. Philippine American Drug Co., Inc., was admittedly selling products of its principal Mentholatum Co., Inc., in the latter's name or for the latter's account. Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc. had executed in view of the law, the Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines without the license required by Section 68 of the Corporation Law, it may not prosecute this action for violation of trademark and unfair competition." In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The marketing of its products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation The latter is an independent entity which buys and then markets not only products of the petitioner but also many other products bearing equally well-known and established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of the petitioner. The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the petitioner is not doing business in the Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing business" as one" which includes, inter alia: (1) ... A foreign firm which does business through middlemen acting on their own names, such as indentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines. (2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or distributor has an independent status, i.e., it transacts business in its name and for its account, and not in the name or for the account of a principal Thus, where a foreign firm is represented by a person or local company which does not act in its name but in the name of the foreign firm the latter is doing business in the Philippines. xxx xxx xxx Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business in the Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its own account and not in the name or for the account of the petitioner. But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material facts in its petition relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. As early as 1927, this Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue before Philippine courts for infringement of trademark and unfair competition. Thus, in Western Equipment and Supply Co. v. Reyes (51 Phil. 115), this Court held that a foreign corporation which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation. We further held: xxx xxx xxx ... That company is not here seeking to enforce any legal or control rights arising from, or growing out of, any business which it has transacted in the Philippine Islands. The sole purpose of the action: Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the natural development of its trade, established themselves.' And it contends that its rights to the use of its corporate and trade name: Is a property right, a right in rem, which it may assert and protect against all the world, in any of the courts of the world-even in jurisdictions where it does not transact business-just the same as it may protect its tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and Unfair Competition and cases cited.' That point is sustained by the authorities, and is

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well stated in Hanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed., 513). in which the syllabus says: Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorial boundaries of municipalities or states or nations, but extends to every market where the trader's goods have become known and Identified by the use of the mark. Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our jurisprudence is replete with cases illustrating instances when foreign corporations not doing business in the Philippines may nonetheless sue in our courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc. (102 Phil. 1), we recognized a right of foreign corporation to sue on isolated transactions. In General Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right of Puritan Sportswear Corp., a foreign corporation not licensed to do and not doing business in the Philippines, to file a petition for cancellation of a trademark before the Patent Office. More important is the nature of the case which led to this petition. What preceded this petition for certiorari was a letter complaint filed before the NBI charging Hemandas with a criminal offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the preliminary investigation being conducted by the Special Prosecutor the information shall be in the name of the People of the Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is essentially an act against the State. It is the latter which is principally the injured party although there is a private right violated. Petitioner's capacity to sue would become, therefore, of not much significance in the main case. We cannot snow a possible violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved party or victim of a crime has no standing to sue. In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are simply interpreting and enforcing a solemn international commitment of the Philippines embodied in a multilateral treaty to which we are a party and which we entered into because it is in our national interest to do so. The Paris Convention provides in part that: ARTICLE 1 (1) The countries to which the present Convention applies constitute themselves into a Union for the protection of industrial property. (2) The protection of industrial property is concerned with patents, utility models, industrial designs, trademarks service marks, trade names, and indications of source or appellations of origin, and the repression of unfair competition. xxx xxx xxx ARTICLE 2 (2) Nationals of each of the countries of the Union shall as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals, without prejudice to the rights specially provided by the present Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided they observe the conditions and formalities imposed upon nationals. xxx xxx xxx ARTICLE 6 (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of the present Convention and used for Identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.

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xxx xxx xxx ARTICLE 8 A trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark. xxx xxx xxx ARTICLE 10bis (1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective protection against unfair competition. xxx xxx xxx ARTICLE 10ter (1) The countries of the Union undertake to assure to nationals of the other countries of the Union appropriate legal remedies to repress effectively all the acts referred to in Articles 9, 10 and l0bis. (2) They undertake, further, to provide measures to permit syndicates and associations which represent the industrialists, producers or traders concerned and the existence of which is not contrary to the laws of their countries, to take action in the Courts or before the administrative authorities, with a view to the repression of the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in which protection is claimed allows such action by the syndicates and associations of that country. xxx xxx xxx ARTICLE 17 Every country party to this Convention undertakes to adopt, in accordance with its constitution, the measures necessary to ensure the application of this Convention. It is understood that at the time an instrument of ratification or accession is deposited on behalf of a country; such country will be in a position under its domestic law to give effect to the provisions of this Convention. (61 O.G. 8010) xxx xxx xxx In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion to comment on the extraterritorial application of the Paris Convention It said that: [11] The International Convention is essentially a compact between the various member countries to accord in their own countries to citizens of the other contracting parties trademark and other rights comparable to those accorded their own citizens by their domestic law. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its own citizens. In addition, the Convention sought to create uniformity in certain respects by obligating each member nation 'to assure to nationals of countries of the Union an effective protection against unfair competition.' [12] The Convention is not premised upon the Idea that the trade-mark and related laws of each member nation shall be given extra-territorial application, but on exactly the converse principle that each nation's law shall have only territorial application. Thus a foreign national of a member nation using his trademark in commerce in the United States is accorded extensive protection here against infringement and other types of unfair competition by virtue of United States membership in the Convention. But that protection has its source in, and is subject to the limitations of, American law, not the law of the foreign national's own country. ... By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our own citizens. We are obligated to assure to nationals of "countries of the Union" an effective protection against unfair competition in the same way that they are obligated to similarly protect Filipino citizens and firms. Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum addressed to the Director of the Patents Office directing the latter:

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xxx xxx xxx ... to reject all pending applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users. The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus. It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users. The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with all nations. It is not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the Ministry of Trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the whims of an incumbent head of a Ministry. It creates a legally binding obligation on the parties founded on the generally accepted principle of international law of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed. Hemandas further contends that the respondent court did not commit grave abuse of discretion in issuing the questioned order of April 22, 1983. A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals the fact that they are not appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the case. For instance, on the basis of the facts before the Judge, we fail to understand how he could treat a bare allegation that the respondent's trademark is different from the petitioner's trademark as a sufficient basis to grant the motion to quash. We will treat the issue of prejudicial question later. Granting that respondent Hemandas was only trying to show the absence of probable cause, we, nonetheless, hold the arguments to be untenable. As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no uncertain terms the determination of probable cause by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce (Constitution, Art. IV, Sec. 3). Probable cause has traditionally meant such facts and circumstances antecedent to the issuance of the warrant that are in themselves sufficient to induce a cautious man to rely upon them and act in pursuance thereof (People v. Sy Juco, 64 Phil. 667). This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20 SCRA 383) that probable cause "presupposes the introduction of competent proof that the party against whom it is sought has performed particular acts, or committed specific omissions, violating a given provision of our criminal laws." The question of whether or not probable cause exists is one which must be decided in the light of the conditions obtaining in given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there is no general formula or fixed rule for the determination of the existence of probable cause since, as we have recognized in Luna v. Plaza(26 SCRA 310), the existence depends to a large degree upon the finding or opinion of the judge conducting the examination. However, the findings of the judge should not disregard the facts before him nor run counter to the clear dictates of reason. More so it is plain that our country's ability to abide by international commitments is at stake. The records show that the NBI agents at the hearing of the application for the warrants before respondent court presented three witnesses under oath, sworn statements, and various exhibits in the form of clothing apparels manufactured by Hemandas but carrying the trademark Lacoste. The respondent court personally interrogated Ramon Esguerra, Samuel Fiji, and Mamerto Espatero by means of searching questions. After hearing the testimonies and examining the documentary evidence, the respondent court was convinced that there were good and sufficient reasons for the issuance of the warrant. And it then issued the warrant. The respondent court, therefore, complied with the constitutional and statutory requirements for the issuance of a valid search warrant. At that point in time, it was fully convinced that there existed probable cause. But after hearing the motion to quash and the oppositions thereto, the respondent court executed a complete turnabout and declared that there was no probable cause to justify its earlier issuance of the warrants. True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification must, as earlier stated be based on sound and valid grounds. In this case, there was no compelling justification for the about face. The allegation that vital facts were deliberately suppressed or concealed by the petitioner should have been assessed more carefully because the object of the quashal was the return of items already seized and easily examined by the court. The items were alleged to be fake and quite obviously would be needed as evidence in the

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criminal prosecution. Moreover, an application for a search warrant is heard ex parte. It is neither a trial nor a part of the trial. Action on these applications must be expedited for time is of the essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and the witnesses. The allegation of Hemandas that the applicant withheld information from the respondent court was clearly no basis to order the return of the seized items. Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of registration of the trademark "CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such registration is only in the Supplemental Register. A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration, of the registrant's exclusive right to use the same in connection with the goods, business, or services specified in the certificate. Such a certificate of registration cannot be filed, with effect, with the Bureau of Customs in order to exclude from the Philippines, foreign goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp.513515). Section 19-A of Republic Act 166 as amended not only provides for the keeping of the supplemental register in addition to the principal register but specifically directs that: xxx xxx xxx The certificates of registration for marks and trade names registered on the supplemental register shall be conspicuously different from certificates issued for marks and trade names on the principal register. xxx xxx xxx The reason is explained by a leading commentator on Philippine Commercial Laws: The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3) registrant's exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after its issuance. Neither may it be the subject of interference proceedings. Registration on the supplemental register is not constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration of marks which are not registrable on the principal register because of some defects (conversely, defects which make a mark unregistrable on the principal register, yet do not bar them from the supplemental register.) (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co., et al., Dec. No. 254 of Director of Patents, Apr. 30, 1963); Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the trademark. By the very fact that the trademark cannot as yet be entered in the Principal Register, all who deal with it should be on guard that there are certain defects, some obstacles which the user must Still overcome before he can claim legal ownership of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in the Principal Register. The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that "registrant is presumed to be the owner of the mark until after the registration is declared cancelled" is, therefore, misplaced and grounded on shaky foundation, The supposed presumption not only runs counter to the precept embodied in Rule 124 of the Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. And even in cases where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive, (People v. Lim Hoa, G.R. No. L10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La Yebana Co. v. Chua Seco & Co., 14 Phil. 534). By the same token, the argument that the application was premature in view of the pending case before the Patent Office is likewise without legal basis. The proceedings pending before the Patent Office involving IPC Co. 1658 do not partake of the nature of a prejudicial question which must first be definitely resolved. Section 5 of Rule 111 of the Rules of Court provides that:

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A petition for the suspension of the criminal action based upon the pendency of a pre-judicial question in a civil case, may only be presented by any party before or during the trial of the criminal action. The case which suspends the criminal prosecution must be a civil case which is determinative of the innocence or, subject to the availability of other defenses, the guilt of the accused. The pending case before the Patent Office is an administrative proceeding and not a civil case. The decision of the Patent Office cannot be finally determinative of the private respondent's innocence of the charges against him. In Flordelis v. Castillo (58 SCRA 301), we held that: As clearly delineated in the aforecited provisions of the new Civil Code and the Rules of Court, and as uniformly applied in numerous decisions of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v. Mendoza, 83 Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage, Inc., 102 Phil 482 (1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178; Zapante v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In Buenaventura v. Ocampo (55 SCRA 271) the doctrine of prejudicial question was held inapplicable because no criminal case but merely an administrative case and a civil suit were involved. The Court, however, held that, in view of the peculiar circumstances of that case, the respondents' suit for damages in the lower court was premature as it was filed during the pendency of an administrative case against the respondents before the POLCOM. 'The possibility cannot be overlooked,' said the Court, 'that the POLCOM may hand down a decision adverse to the respondents, in which case the damage suit will become unfounded and baseless for wanting in cause of action.') the doctrine of pre-judicial question comes into play generally in a situation where a civil action and a criminal action both penned and there exists in the former an issue which must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. In the present case, no civil action pends nor has any been instituted. What was pending was an administrative case before the Patent Office. Even assuming that there could be an administrative proceeding with exceptional or special circumstances which render a criminal prosecution premature pending the promulgation of the administrative decision, no such peculiar circumstances are present in this case. Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed by the Intermediate Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17, 1983). The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was involved in the appellate court's decision. The Minister as the "implementing authority" under Article 6bis of the Paris Convention for the protection of Industrial Property instructed the Director of Patents to reject applications for Philippine registration of signature and other world famous trademarks by applicants other than its original owners or users. The brand "Lacoste" was specifically cited together with Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph Laurence, Geoffrey Beene, Lanvin, and Ted Lapidus. The Director of Patents was likewise ordered to require Philippine registrants of such trademarks to surrender their certificates of registration. Compliance by the Director of Patents was challenged. The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with approval sustained the power of the Minister of Trade to issue the implementing memorandum and, after going over the evidence in the records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste &A. the owner of the disputed trademark and crocodile or alligator device. The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza stated: In the case at bar, the Minister of Trade, as 'the competent authority of the country of registration,' has found that among other well-known trademarks 'Lacoste' is the subject of conflicting claims. For this reason, applications for its registration must be rejected or refused, pursuant to the treaty obligation of the Philippines. Apart from this finding, the annexes to the opposition, which La Chemise Lacoste S.A. filed in the Patent Office, show that it is the owner of the trademark 'Lacoste' and the device consisting of a representation of a crocodile or alligator by the prior adoption and use of such mark and device on clothing, sports apparel and the like. La Chemise Lacoste S.A, obtained registration of these mark and device and was in fact issued renewal certificates by the French National Industry Property Office.

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xxx xxx xxx Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is based not only on the undisputed fact of ownership of the trademark by the appellee but on a prior determination by the Minister of Trade, as the competent authority under the Paris Convention, that the trademark and device sought to be registered by the appellant are well-known marks which the Philippines, as party to the Convention, is bound to protect in favor of its owners. it would be to exalt form over substance to say that under the circumstances, due process requires that a hearing should be held before the application is acted upon. The appellant cites section 9 of Republic Act No. 166, which requires notice and hearing whenever an opposition to the registration of a trademark is made. This provision does not apply, however, to situations covered by the Paris Convention, where the appropriate authorities have determined that a well-known trademark is already that of another person. In such cases, the countries signatories to the Convention are obliged to refuse or to cancel the registration of the mark by any other person or authority. In this case, it is not disputed that the trademark Lacoste is such a well-known mark that a hearing, such as that provided in Republic Act No. 166, would be superfluous. The issue of due process was raised and fully discussed in the appellate court's decision. The court ruled that due process was not violated. In the light of the foregoing it is quite plain that the prejudicial question argument is without merit. We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence to sustain a finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or alligator device, and the composite mark of LACOSTE and the representation of the crocodile or alligator. Any pretensions of the private respondent that he is the owner are absolutely without basis. Any further ventilation of the issue of ownership before the Patent Office will be a superfluity and a dilatory tactic. The issue of whether or not the trademark used by the private respondent is different from the petitioner's trade mark is a matter of defense and will be better resolved in the criminal proceedings before a court of justice instead of raising it as a preliminary matter in an administrative proceeding. The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin or ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition (Etepha v. Director of Patents, 16 SCRA 495). The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern trade and commerce demands that depredations on legitimate trade marks of non-nationals including those who have not shown prior registration thereof should not be countenanced. The law against such depredations is not only for the protection of the owner of the trademark but also, and more importantly, for the protection of purchasers from confusion, mistake, or deception as to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. Director of Patents, 41 SCRA 50). The law on trademarks and tradenames is based on the principle of business integrity and common justice' This law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims to foster, and not to hamper, competition, no one, especially a trader, is justified in damaging or jeopardizing another's business by fraud, deceipt, trickery or unfair methods of any sort. This necessarily precludes the trading by one dealer upon the good name and reputation built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338). The records show that the goodwill and reputation of the petitioner's products bearing the trademark LACOSTE date back even before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allow Hemandas to continue using the trademark Lacoste for the simple reason that he was the first registrant in the Supplemental Register of a trademark used in international commerce and not belonging to him is to render nugatory the very essence of the law on trademarks and tradenames. We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon. Roberto V Ongpin,et al. (G.R. No. 65659). Actually, three other petitions involving the same trademark and device have been filed with this Court. In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for the following relief: IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the respondent Court of January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the

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same respondent Court of June 30, 1983 be declared to be the law on the matter; (b) that the Director of Patents be directed to issue the corresponding registration certificate in the Principal Register; and (c) granting upon the petitioner such other legal and equitable remedies as are justified by the premises. On December 5, 1983, we issued the following resolution: Considering the allegations contained, issues raised and the arguments adduced in the petition for review, the respondent's comment thereon, and petitioner's reply to said comment, the Court Resolved to DENY the petition for lack of merit. The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in this Court of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and Gobindram Hemandas' which was given due course on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled 'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for lack of merit on September 12, 1983. Both petitions involve the same dispute over the use of the trademark 'Chemise Lacoste'. The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the following: I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing: l. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao Granados from further proceedings in the unfair competition charges pending with the Ministry of Justice filed against petitioner; 2. Enjoining and restraining respondents Company and its attorneys-in-fact from causing undue publication in newspapers of general circulation on their unwarranted claim that petitioner's products are FAKE pending proceedings hereof; and 3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further threatening letters to petitioner's customers unjustly stating that petitioner's products they are dealing in are FAKE and threatening them with confiscation and seizure thereof. II. On the main petition, judgment be rendered: l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping, and restraining respondents from further committing the acts complained of; 2. Awarding and granting the issuance of the Writ of Mandamus, ordering and compelling respondents National Bureau of Investigation, its aforenamed agents, and State Prosecutor Estanislao Granados to immediately comply with the Order of the Regional Trial Court, National Capital Judicial Region, Branch XLIX, Manila, dated April 22, 1983, which directs the immediate return of the seized items under Search Warrants Nos. 83-128 and 83-129; 3. Making permanent any writ of injunction that may have been previously issued by this Honorable Court in the petition at bar: and 4. Awarding such other and further relief as may be just and equitable in the premises. As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for reconsideration, the Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the denial to be final. Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition. In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the enforcement of the following memorandum of respondent Minister Roberto Ongpin: MEMORANDUM: FOR: THE DIRECTOR OF PATENTS Philippine Patent Office

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xxx xxx xxx Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that 'such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can ...apply more swift and effective solutions and remedies to old and new problems ... such as the infringement of internationally-known tradenames and trademarks ...'and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359 (17) June 1983] which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations under said convention in general, and, more specifically, to honor our commitment under Section 6 bisthereof, as follows: 1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that' the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the dates of such registration; (d) that the trademark has been long established and obtained goodwill and general international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for Identification and recognition by consumers. 3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY. 4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6 bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division. 5. All pending applications for Philippine registration of signature and other world famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings. 6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide without delay the following cases pending before your Office: 1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for the cancellation of Certificate of Registration No. SR-2225 issued to Gobindram Hemandas, assignee of Hemandas and Company; 2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co. against the registration of the trademark Lacoste sought by La Chemise Lacoste, S.A.;

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3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A. against the registration of trademark Crocodile Device and Skiva sought by one Wilson Chua. Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without merit and accordingly deny it due course. In complying with the order to decide without delay the cases specified in the memorandum, the Director of Patents shall limit himself to the ascertainment of facts in issues not resolved by this decision and apply the law as expounded by this Court to those facts. One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to stem the tide of fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our image abroad. No less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to strengthen the powers of the Minister of Trade and Industry for the protection of consumers, stated that, among other acts, the dumping of substandard, imitated, hazardous, and cheap goods, the infringement of internationally known tradenames and trademarks, and the unfair trade practices of business firms has reached such proportions as to constitute economic sabotage. We buy a kitchen appliance, a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts, neck, ties, etc. the list is quite length and pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and genuine nature on helpless anger because the purchased item turns out to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges all over the country are well advised to remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative implementation of solemn commitments pursuant to international conventions and treaties. WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of the respondent regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29, 1983 is ma(i.e. PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit. Our Temporary Restraining Order dated December 5, 1983 is LIFTED and SET ASIDE, effective immediately. SO ORDERED. Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 143993 August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners, vs. L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, respondents.

DECISION

CARPIO, J.: The Case This is a petition for review1 of the Decision dated 26 November 1999 of the Court of Appeals2 finding respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying reconsideration. The Court of Appeals' Decision reversed the 5 September 1994 Decision3 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

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The Facts Petitioner McDonald's Corporation ("McDonald's") is a corporation organized under the laws of Delaware, United States. McDonald's operates, by itself or through its franchisees, a global chain of fast-food restaurants. McDonald's4 owns a family of marks5 including the "Big Mac" mark for its "double-decker hamburger sandwich."6McDonald's registered this trademark with the United States Trademark Registry on 16 October 1979.7 Based on this Home Registration, McDonald's applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology ("PBPTT"), now the Intellectual Property Office ("IPO"). Pending approval of its application, McDonald's introduced its "Big Mac" hamburger sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed registration of the "Big Mac" mark in the Principal Register based on its Home Registration in the United States. Like its other marks, McDonald's displays the "Big Mac" mark in items8 and paraphernalia9 in its restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonald's spent P10.5 million in advertisement for "Big Mac" hamburger sandwiches alone.10 Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's Philippine franchisee.11 Respondent L.C. Big Mak Burger, Inc. ("respondent corporation") is a domestic corporation which operates fast-food outlets and snack vans in Metro Manila and nearby provinces.12 Respondent corporation's menu includes hamburger sandwiches and other food items.13 Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto ("private respondents") are the incorporators, stockholders and directors of respondent corporation.14 On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big Mak" mark for its hamburger sandwiches. McDonald's opposed respondent corporation's application on the ground that "Big Mak" was a colorable imitation of its registered "Big Mac" mark for the same food products. McDonald's also informed respondent Francis Dy ("respondent Dy"), the chairman of the Board of Directors of respondent corporation, of its exclusive right to the "Big Mac" mark and requested him to desist from using the "Big Mac" mark or any similar mark. Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional Trial Court of Makati, Branch 137 ("RTC"), for trademark infringement and unfair competition. In its Order of 11 July 1990, the RTC issued a temporary restraining order ("TRO") against respondents enjoining them from using the "Big Mak" mark in the operation of their business in the National Capital Region.15 On 16 August 1990, the RTC issued a writ of preliminary injunction replacing the TRO.16 In their Answer, respondents admitted that they have been using the name "Big Mak Burger" for their fast-food business. Respondents claimed, however, that McDonald's does not have an exclusive right to the "Big Mac" mark or to any other similar mark. Respondents point out that the Isaiyas Group of Corporations ("Isaiyas Group") registered the same mark for hamburger sandwiches with the PBPTT on 31 March 1979. One Rodolfo Topacio ("Topacio") similarly registered the same mark on 24 June 1983, prior to McDonald's registration on 18 July 1985.Alternatively, respondents claimed that they are not liable for trademark infringement or for unfair competition, as the "Big Mak" mark they sought to register does not constitute a colorable imitation of the "Big Mac" mark. Respondents asserted that they did not fraudulently pass off their hamburger sandwiches as those of petitioners' Big Mac hamburgers.17 Respondents sought damages in their counterclaim. In their Reply, petitioners denied respondents' claim that McDonald's is not the exclusive owner of the "Big Mac" mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the "Big Mac" mark ahead of McDonald's, the Isaiyas Group did so only in the Supplemental Register of the PBPTT and such registration does not provide any protection. McDonald's disclosed that it had acquired Topacio's rights to his registration in a Deed of Assignment dated 18 May 1981.18 The Trial Court's Ruling On 5 September 1994, the RTC rendered judgment ("RTC Decision") finding respondent corporation liable for trademark infringement and unfair competition. However, the RTC dismissed the complaint against private respondents and the counterclaim against petitioners for lack of merit and insufficiency of evidence. The RTC held: Undeniably, the mark "B[ig] M[ac]" is a registered trademark for plaintiff McDonald's, and as such, it is entitled [to] protection against infringement. xxxx There exist some distinctions between the names "B[ig] M[ac]" and "B[ig] M[ak]" as appearing in the respective signages, wrappers and containers of the food products of the parties. But infringement goes

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beyond the physical features of the questioned name and the original name. There are still other factors to be considered. xxxx Significantly, the contending parties are both in the business of fast-food chains and restaurants. An average person who is hungry and wants to eat a hamburger sandwich may not be discriminating enough to look for a McDonald's restaurant and buy a "B[ig] M[ac]" hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into his pocket and order a "B[ig] M[ak]" hamburger sandwich. Plaintiff McDonald's fast-food chain has attained wide popularity and acceptance by the consuming public so much so that its air-conditioned food outlets and restaurants will perhaps not be mistaken by many to be the same as defendant corporation's mobile snack vans located along busy streets or highways. But the thing is that what is being sold by both contending parties is a food item a hamburger sandwich which is for immediate consumption, so that a buyer may easily be confused or deceived into thinking that the "B[ig] M[ak]" hamburger sandwich he bought is a food-product of plaintiff McDonald's, or a subsidiary or allied outletthereof. Surely, defendant corporation has its own secret ingredients to make its hamburger sandwiches as palatable and as tasty as the other brands in the market, considering the keen competition among mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence, the trademark "B[ig] M[ac]" has been infringed by defendant corporation when it used the name "B[ig] M[ak]" in its signages, wrappers, and containers in connection with its food business. xxxx Did the same acts of defendants in using the name "B[ig] M[ak]" as a trademark or tradename in their signages, or in causing the name "B[ig] M[ak]" to be printed on the wrappers and containers of their food products also constitute an act of unfair competition under Section 29 of the Trademark Law? The answer is in the affirmative. xxxx The xxx provision of the law concerning unfair competition is broader and more inclusive than the lawconcerning the infringement of trademark, which is of more limited range, but within its narrower range recognizes a more exclusive right derived by the adoption and registration of the trademark by the person whose goods or services are first associated therewith. xxx Notwithstanding the distinction between an action for trademark infringement and an action for unfair competition, however, the law extends substantially the same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No. 166) Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. The choice of "B[ig] M[ak]" as tradename by defendant corporation is not merely for sentimental reasons but was clearly made to take advantage of the reputation, popularity and the established goodwill of plaintiff McDonald's. For, as stated in Section 29, a person is guilty of unfair competition who in selling his goods shall give them the general appearance, of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs have established their valid cause of action against the defendants for trademark infringement and unfair competition and for damages. 19 The dispositive portion of the RTC Decision provides: WHEREFORE, judgment is rendered in favor of plaintiffs McDonald's Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows: 1. The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent; 2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount ofP400,000.00, exemplary damages in the amount of P100,000.00, and attorney's fees and expenses of litigation in the amount of P100,000.00; 3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed for lack of merit as well asfor insufficiency of evidence.20 Respondents appealed to the Court of Appeals. The Ruling of the Court of Appeals

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On 26 November 1999, the Court of Appeals rendered judgment ("Court of Appeals' Decision") reversing the RTC Decision and ordering McDonald's to pay respondents P1,600,000 as actual and compensatory damages and P300,000 as moral damages. The Court of Appeals held: Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendantsappellants of its corporate name the whole "L.C. B[ig] M[ak] B[urger], I[nc]." which appears on their food packages, signages and advertisements is an infringement of their trademark "B[ig] M[ac]" which they use to identify [their] double decker sandwich, sold in a Styrofoam box packaging material with the McDonald's logo of umbrella "M" stamped thereon, together with the printed mark in red bl[o]ck capital letters, the words being separated by a single space. Specifically, plaintiffs-appellees argue that defendants-appellants' use of their corporate name is a colorable imitation of their trademark "Big Mac". xxxx To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the definition dictates, it is not sufficient that a similarity exists in both names, but that more importantly, the over-all presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. A careful comparison of the way the trademark "B[ig] M[ac]" is being used by plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants, would readily reveal that no confusion could take place, or that the ordinary purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-appellees' trademark is used to designate only one product, a double decker sandwich sold in a Styrofoam box with the "McDonalds" logo. On the other hand, what the defendants-appellants corporation is using is not a trademark for its food product but a business or corporate name. They use the business name "L.C. Big Mak Burger, Inc." in their restaurant business which serves diversified food items such as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendants-appellants' corporate or business name appearing in the food packages and signages are written in silhouette redorange letters with the "b" and "m" in upper case letters. Above the words "Big Mak" are the upper case letter "L.C.". Below the words "Big Mak" are the words "Burger, Inc." spelled out in upper case letters.Furthermore, said corporate or business name appearing in such food packages and signages is always accompanied by the company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper case "m" appearing therein and a blue lower garment. Finally, the defendants-appellants' food packages are made of plastic material. xxxx xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the product and the manner that the tradename "Big Mak" is being used and presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffs-appellees' trademark and defendants-appellants' corporate name. Plaintiffs-appellees' product carrying the trademark "B[ig] M[ac]" is a double decker sandwich (depicted in the tray mat containing photographs of the various food products xxx sold in a Styrofoam box with the "McDonald's" logo and trademark in red, bl[o]ck capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants' comparable food products. In order to buy a "Big Mac", a customer needs to visit an air-conditioned "McDonald's" restaurant usually located in a nearby commercial center, advertised and identified by its logo - the umbrella "M", and its mascot "Ronald McDonald". A typical McDonald's restaurant boasts of a playground for kids, a second floor to accommodateadditional customers, a drive-thru to allow customers with cars to make orders without alighting from their vehicles, the interiors of the building are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying a "B[ig] M[ac]", it is necessary to specify it by its trademark. Thus, a customer needs to look for a "McDonald's" and enter it first before he can find a hamburger sandwich which carry the mark "Big Mac". On the other hand, defendants-appellants sell their goods through snack vans xxxx Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same untenable. Unfair competition is defined as "the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or service, for those of another who has already established good will for his similar good, business or services, or any acts calculated to produce the same result" (Sec. 29, Rep. Act No. 166, as amended). To constitute unfair competition therefore it must necessarily follow that there was malice and that the entity concerned was in bad faith. In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants' corporate name with the plaintiffs-appellees'

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trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the name "M[ak]" in their corporate name was derived from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up to the plaintiffsappellees to prove bad faith on the part of defendants-appellants. It is a settled rule that the law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. 21 Petitioners sought reconsideration of the Court of Appeals' Decision but the appellate court denied their motion in its Resolution of 11 July 2000. Hence, this petition for review. Petitioners raise the following grounds for their petition: I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS' CORPORATE NAME "L.C. BIG MAK BURGER, INC." IS NOT A COLORABLE IMITATION OF THE MCDONALD'S TRADEMARK "BIG MAC", SUCH COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT. A. Respondents use the words "Big Mak" as trademark for their products and not merely as their business or corporate name. B. As a trademark, respondents' "Big Mak" is undeniably and unquestionably similar to petitioners' "Big Mac" trademark based on the dominancy test and the idem sonans test resulting inexorably in confusion on the part of the consuming public. II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN THE MARK "BIG MAK" AND THE WORD MARK "BIG MAC" AS AN INDICATION OF RESPONDENTS' INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.22 Petitioners pray that we set aside the Court of Appeals' Decision and reinstate the RTC Decision. In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises only questions of fact. On the merits, respondents contend that the Court of Appeals committed no reversible error in finding them not liable for trademark infringement and unfair competition and in ordering petitioners to pay damages. The Issues The issues are: 1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule 45. 2. On the merits, (a) whether respondents used the words "Big Mak" not only as part of the corporate name "L.C. Big Mak Burger, Inc." but also as a trademark for their hamburger products, and (b) whether respondent corporation is liable for trademark infringement and unfair competition.23 The Court's Ruling The petition has merit. On Whether the Questions Raised in the Petition are Proper for a Petition for Review A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 ("Section 1")24 raising only questions of law. A question of law exists when the doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. 25 Here, petitioners raise questions of fact and law in assailing the Court of Appeals' findings on respondent corporation's non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1.26 We took a similar course of action in Asia Brewery, Inc. v. Court of Appeals27 which also involved a suit for trademark infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting findings. On the Manner Respondents Used "Big Mak" in their Business

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Petitioners contend that the Court of Appeals erred in ruling that the corporate name "L.C. Big Mak Burger, Inc." appears in the packaging for respondents' hamburger products and not the words "Big Mak" only. The contention has merit. The evidence presented during the hearings on petitioners' motion for the issuance of a writ of preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for their hamburger sandwiches bore the words "Big Mak." The other descriptive words "burger" and "100% pure beef" were set in smaller type, along with the locations of branches.28 Respondents' cash invoices simply refer to their hamburger sandwiches as "Big Mak."29 It is respondents' snack vans that carry the words "L.C. Big Mak Burger, Inc."30 It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their hamburger sandwiches relied on by the Court of Appeals.31 Respondents' plastic wrappers and bags were identical with those petitioners presented during the hearings for the injunctive writ except that the letters "L.C." and the words "Burger, Inc." in respondents' evidence were added above and below the words "Big Mak,"respectively. Since petitioners' complaint was based on facts existing before and during the hearings on the injunctive writ, the facts established during those hearings are the proper factual bases for the disposition of the issues raised in this petition. On the Issue of Trademark Infringement Section 22 ("Section 22) of Republic Act No. 166, as amended ("RA 166"), the law applicable to this case,32defines trademark infringement as follows: Infringement, what constitutes. Any person who [1] shall use, without the consent of the registrant, anyreproduction, 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 withwhich 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 usedupon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.33 Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used, without petitioners' consent, a colorable imitation of the "Big Mac" mark in advertising and selling respondents' hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the source of the hamburgers or the identity of the business. To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in "likelihood of confusion."34 Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement.35 On the Validity of the "Big Mac"Mark and McDonald's Ownership of such Mark A mark is valid if it is "distinctive" and thus not barred from registration under Section 436 of RA 166 ("Section 4").However, once registered, not only the mark's validity but also the registrant's ownership of the mark is prima facie presumed.37 Respondents contend that of the two words in the "Big Mac" mark, it is only the word "Mac" that is valid because the word "Big" is generic and descriptive (proscribed under Section 4[e]), and thus "incapable of exclusive appropriation."38 The contention has no merit. The "Big Mac" mark, which should be treated in its entirety and not dissected word for word,39 is neither generic nor descriptive. Generic marks are commonly used as the name or description of akind of goods,40 such as "Lite" for beer41 or "Chocolate Fudge" for chocolate soda drink.42 Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists,43 such as "Arthriticare" for arthritis medication.44 On the contrary, "Big Mac" falls under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents.45 As such, it is highly distinctive and thus valid. Significantly, the trademark "Little Debbie" for snack cakes was found arbitrary or fanciful.46 The Court also finds that petitioners have duly established McDonald's exclusive ownership of the "Big Mac" mark. Although Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to McDonald's. The Isaiyas Group, on the other hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the PrincipalRegister,

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and thus not distinctive, has no real protection.47 Indeed, we have held that registration in the Supplemental Register is not even a prima facie evidence of the validity of the registrant's exclusive right to use the mark on the goods specified in the certificate.48 On Types of Confusion Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods (product confusion) and confusion of business (source or origin confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,49 the Court distinguished these two types of confusion, thus: [Rudolf] Callman notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other." xxx The other is the confusion of business: "Here though the goods of the parties are different, the 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." Under Act No. 666,50 the first trademark law, infringement was limited to confusion of goods only, when the infringing mark is used on "goods of a similar kind."51 Thus, no relief was afforded to the party whose registered mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is likely to result in confusion on "the source or origin of such goods or services, or identity of such business."52Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation.53 On Whether Confusion of Goods and Confusion of Business are Applicable Petitioners claim that respondents' use of the "Big Mak" mark on respondents' hamburgers results in confusion of goods, particularly with respect to petitioners' hamburgers labeled "Big Mac." Thus, petitioners alleged in their complaint: 1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of plaintiffs in the McDonald's Marks, particularly the mark "B[ig] M[ac]". Defendants' unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into believing that the products and services offered by defendant Big Mak Burger, and the business it is engaged in, are approved and sponsored by, or affiliated with, plaintiffs.54 (Emphasis supplied) Since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that petitioners' "Big Mac" mark is used, trademark infringement through confusion of goods is a proper issue in this case. Petitioners also claim that respondents' use of the "Big Mak" mark in the sale of hamburgers, the same business that petitioners are engaged in, results in confusion of business. Petitioners alleged in their complaint: 1.10. For some period of time, and without the consent of plaintiff McDonald's nor its licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs' exclusive right to use and/or appropriate the McDonald's marks, defendant Big Mak Burger acting through individual defendants, has been operating "Big Mak Burger", a fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food products, and has caused to be printed on the wrapper of defendant's food products and incorporated in its signages the name "Big Mak Burger", which is confusingly similar to and/or is a colorable imitation of the plaintiff McDonald's mark "B[ig] M[ac]", xxx. Defendant Big Mak Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs. xxxx 2.2 As a consequence of the acts committed by defendants, which unduly prejudice and infringe upon the property rights of plaintiffs McDonald's and McGeorge as the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the McDonald's marks, and which are likely to have caused confusion or deceived the public as to the true source, sponsorship or affiliation of defendants' food products and restaurant business, plaintiffs have suffered and continue to suffer actual damages in the form of injury to their business reputation and goodwill, and of the dilution of the distinctive quality of the McDonald's marks, in particular, the mark "B[ig] M[ac]".55 (Emphasis supplied) Respondents admit that their business includes selling hamburger sandwiches, the same food product that petitioners sell using the "Big Mac" mark. Thus, trademark infringement through confusion of business is also a proper issue in this case.

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Respondents assert that their "Big Mak" hamburgers cater mainly to the low-income group while petitioners' "Big Mac" hamburgers cater to the middle and upper income groups. Even if this is true, the likelihood of confusion of business remains, since the low-income group might be led to believe that the "Big Mak" hamburgers are the lowend hamburgers marketed by petitioners. After all, petitioners have the exclusive right to use the "Big Mac" mark.On the other hand, respondents would benefit by associating their low-end hamburgers, through the use of the "Big Mak" mark, with petitioners' high-end "Big Mac" hamburgers, leading to likelihood of confusion in the identity of business. Respondents further claim that petitioners use the "Big Mac" mark only on petitioners' double-decker hamburgers, while respondents use the "Big Mak" mark on hamburgers and other products like siopao, noodles and pizza. Respondents also point out that petitioners sell their Big Mac double-deckers in a styrofoam box with the "McDonald's" logo and trademark in red, block letters at a price more expensive than the hamburgers of respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers and plastic bags. Respondents further point out that petitioners' restaurants are air-conditioned buildings with drive-thru service, compared to respondents' mobile vans. These and other factors respondents cite cannot negate the undisputed fact that respondents use their "Big Mak" mark on hamburgers, the same food product that petitioners' sell with the use of their registered mark "Big Mac." Whether a hamburger is single, double or triple-decker, and whether wrapped in plastic or styrofoam, it remains the same hamburger food product. Even respondents' use of the "Big Mak" mark on non-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 seq; 53 Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).56 (Emphasis supplied) On Whether Respondents' Use of the "Big Mak" Mark Results in Likelihood of Confusion In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test.57 The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use of respondents' "Big Mak" mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals ruled that "it is not sufficientthat a similarity exists in both name(s), but that more importantly, the overall presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article." The holistic test considers the two marks in their entirety, as they appear on the goods with their labels and packaging. It is not enough to consider their words and compare the spelling and pronunciation of the words.58 Respondents now vigorously argue that the Court of Appeals' application of the holistic test to this case is correct and in accord with prevailing jurisprudence. This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from theadoption of the dominant features of the registered mark, disregarding minor differences.59 Courts will consider more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments. Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,60 the Court ruled: xxx It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and

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deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; xxx) (Emphasis supplied.) The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 Phil. Nut Industry, Inc. v. Standard Brands Inc.,62 Converse Rubber Corporation v. Universal Rubber Products, Inc.,63 and Asia Brewery, Inc. v. Court of Appeals.64 In the 2001 case of Societe Des Produits Nestl, S.A. v. Court of Appeals,65 the Court explicitly rejected the holistic test in this wise: [T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they areencountered in the realities of the marketplace. (Emphasis supplied) The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the "colorable imitation of a registered mark xxx 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 in "Mak" while a "k" sounds the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan." In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same. Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the features of "Big Mac." Applied to the same food product of hamburgers, the two marks will likely result in confusion in the public mind. The Court has taken into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. Thus, in Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al.,66 the Court held: The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that "SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop"; "Jantzen" and "Jass-Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-Mark Law and Practice", pp. 419-421, cities, as coming within the purview of the idem sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-Up" and "LemonUp". In Co Tiong vs. Director of Patents, this Court unequivocally said that "Celdura" and "Cordura" are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark "Sapolin", as the sound of the two names is almost the same. (Emphasis supplied) Certainly, "Big Mac" and "Big Mak" for hamburgers create even greater confusion, not only aurally but also visually. Indeed, a person cannot distinguish "Big Mac" from "Big Mak" by their sound. When one hears a "Big Mac" or "Big Mak" hamburger advertisement over the radio, one would not know whether the "Mac" or "Mak" ends with a "c" or a "k." Petitioners' aggressive promotion of the "Big Mac" mark, as borne by their advertisement expenses, has built goodwill and reputation for such mark making it one of the easily recognizable marks in the market today. Thisincreases the likelihood that consumers will mistakenly associate petitioners' hamburgers and business with those of respondents'. Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their hamburger sandwiches indicates their intent to imitate petitioners' "Big Mac" mark. Contrary to the Court of Appeals' finding, respondents' claim that their "Big Mak" mark was inspired by the first names of respondent Dy's mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

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[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative choice for a corporate name by using the names of his parents, especially since he was allegedly driven by sentimental reasons. For one, he could have put his father's name ahead of his mother's, as is usually done in this patriarchal society, and derived letters from said names in that order. Or, he could have taken an equalnumber of letters (i.e., two) from each name, as is the more usual thing done. Surely, the more plausible reason behind Respondents' choice of the word "M[ak]", especially when taken in conjunction with the word "B[ig]", was their intent to take advantage of Petitioners' xxx "B[ig] M[ac]" trademark, with their allegedsentiment-focused "explanation" merely thought of as a convenient, albeit unavailing, excuse or defense for such an unfair choice of name.67 Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was fortuitous,68 the inescapable conclusion is that respondents adopted the "Big Mak" mark to "ride on the coattails" of the more established "Big Mac" mark.69 This saves respondents much of the expense in advertising to create market recognition of their mark and hamburgers.70 Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners' claim of trademark infringement. On the Lack of Proof of Actual Confusion Petitioners' failure to present proof of actual confusion does not negate their claim of trademark infringement. As noted in American Wire & Cable Co. v. Director of Patents,71 Section 22 requires the less stringent standard of "likelihood of confusion" only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential.72 On the Issue of Unfair Competition Section 29 ("Section 29")73 of RA 166 defines unfair competition, thus: xxxx Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a 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 anysubsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. (Emphasis supplied) The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.74 The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public.75 Actual fraudulent intent need not be shown.76 Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. Trademark infringement is a form of unfair competition.77 Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception on the public because of the general appearance of the goods. There can be trademark infringement without unfair competition

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as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. 78 To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off their hamburgers as "Big Mac" hamburgers. Petitioners add that respondents' fraudulent intent can be inferred from the similarity of the marks in question.79 Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that they are buying that of his competitors.80 Thus, the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor. The RTC described the respective marks and the goods of petitioners and respondents in this wise: The mark "B[ig] M[ac]" is used by plaintiff McDonald's to identify its double decker hamburger sandwich. The packaging material is a styrofoam box with the McDonald's logo and trademark in red with block capital letters printed on it. All letters of the "B[ig] M[ac]" mark are also in red and block capital letters. On the other hand, defendants' "B[ig] M[ak]" script print is in orange with only the letter "B" and "M" being capitalized and the packaging material is plastic wrapper. xxxx Further, plaintiffs' logo and mascot are the umbrella "M" and "Ronald McDonald's", respectively, compared to the mascot of defendant Corporation which is a chubby boy called "Macky" displayed or printed between the words "Big" and "Mak."81 (Emphasis supplied) Respondents point to these dissimilarities as proof that they did not give their hamburgers the general appearance of petitioners' "Big Mac" hamburgers. The dissimilarities in the packaging are minor compared to the stark similarities in the words that give respondents' "Big Mak" hamburgers the general appearance of petitioners' "Big Mac" hamburgers. Section 29(a) expressly provides that the similarity in the general appearance of the goods may be in the "devices or words" used on the wrappings. Respondents have applied on their plastic wrappers and bags almost the same wordsthat petitioners use on their styrofoam box. What attracts the attention of the buying public are the words "Big Mak" which are almost the same, aurally and visually, as the words "Big Mac." The dissimilarities in the material and other devices are insignificant compared to the glaring similarity in the words used in the wrappings. Section 29(a) also provides that the defendant gives "his goods the general appearance of goods of another manufacturer." Respondents' goods are hamburgers which are also the goods of petitioners. If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the "Big Mak" mark would not give their goods the general appearance of petitioners' "Big Mac" hamburgers. In such case, there is only trademark infringement but no unfair competition. However, since respondents chose to apply the "Big Mak" mark on hamburgers, just like petitioner's use of the "Big Mac" mark on hamburgers, respondents have obviously clothed their goods with the general appearance of petitioners' goods. Moreover, there is no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." Respondents introduced during the trial plastic wrappers and bags with the words "L.C. Big Mak Burger, Inc." to inform the public of the name of the seller of the hamburgers. However, petitioners introduced during the injunctive hearings plastic wrappers and bags with the "Big Mak" mark without the name "L.C. Big Mak Burger, Inc." Respondents' belated presentation of plastic wrappers and bags bearing the name of "L.C. Big Mak Burger, Inc." as the seller of the hamburgers is an after-thought designed to exculpate them from their unfair business conduct. As earlier stated, we cannot consider respondents' evidence since petitioners' complaint was based on facts existing before and during the injunctive hearings. Thus, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak Burger, Inc." and not those of petitioners who have the exclusive right to the "Big Mac" mark. This clearly shows respondents' intent to deceive the public. Had respondents' placed a notice on their plastic wrappers and bags that the hamburgers are sold by "L.C. Big Mak Burger, Inc.", then they could validly claim that they did not intend to deceive the public. In such case, there is only trademark infringement but no unfair competition. 82Respondents, however, did not give such notice. We hold that as found by the RTC, respondent corporation is liable for unfair competition. The Remedies Available to Petitioners Under Section 2383 ("Section 23") in relation to Section 29 of RA 166, a plaintiff who successfully maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of respondent corporation's gross sales for three (1988-1989 and 1991) of the six years (1984-1990) respondents have used the "Big Mak" mark.84

179
The RTC also did not err in awarding exemplary damages by way of correction for the public good85 in view of the finding of unfair competition where intent to deceive the public is essential. The award of attorney's fees and expenses of litigation is also in order.86 WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November 1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition. SO ORDERED. Davide, C.J. (Chairman), Quisumbing, Ynares-Santiago and Azcuna, JJ., concur.

Footnotes
1

Under Rule 45 of the 1997 Rules of Civil Procedure.

Penned by Associate Justice Eloy R. Bello, Jr. with Presiding Justice Jainal D. Rasul and Associate Justice Ruben T. Reyes concurring.
2 3

Penned by Judge Santiago Ranada, Jr. Itself a registered service mark.

Some of McDonald's registered marks representing food items (f) and services (s) are: McDONALD'S HAMBURGERS (s); McDONALD'S (f); RONALD McDONALD (s); McDONALDLAND (s); McCHEESE & DESIGN (f); EGG McMUFFIN (s); EGG McMUFFIN (f); McDONALDLAND (f); McDONALD'S & ARCHES (s); McFEAST (f); McCHICKEN (f); McDONALD'S & ARCHES (f); McDONUTS (f); McPIZZA (f); McPIZZA (s); McHAPPY DAY (s); MINI MAC (s); McDOUBLE (f); TOGETHER-McDONALD'S & YOU (s); CHICKEN McNUGGETS (f); McDONALD'S & YOU (s); SUPER MAC (f); McSNACK (s); MAC FRIES (f); McRIB (f); MAPLE McCRISP (f); LITE MAC (f); BIG MAC (s); CHICKEN McSWISS (f); McMUFFIN (f); McD.L.T. (f). (McDonald's Corporation v. McBagel's, Inc., 649 F.Supp. 1268 [1986]).
5

Aside from Big Mac sandwiches, McDonald's menu includes cheeseburgers, special sandwiches, fried french potatoes, chicken nuggets, fried fish sandwiches, shakes, hot pies, sundaes, softdrinks, and other beverages.
6 7

Certificate of Registration No. 1,126,102. Table napkins, tray liners, cups and food wrappers. Labels, promotional items and packages. TSN (Arlene Manalo), 26 July 1990, pp. 34-35. McDonald's and petitioner McGeorge are referred to as petitioners. Rizal, Laguna, Bulacan and Quezon.

10

11

12

E.g. pizzas, noodles, siopaos, hotdog sandwiches, ham sandwiches, fish burgers, fruit juices, softdrinks and other beverages.
13 14

Respondent corporation and private respondents are referred to as respondents. Records, p. 37. Ibid., pp. 457-458. Ibid., pp. 414-426. Ibid., pp. 460-463.

15

16

17

18

180
19

Rollo, pp. 149-154. Records, pp. 1431-1432. Rollo, pp. 233-237 (Capitalization in the original). Ibid., p. 24.

20

21

22

While petitioners seek to hold liable respondent corporation only, the Court's opinion will refer not only to the latter but also to all the respondents as all of them filed the pleadings in this petition.
23

This provision states: "Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth."
24 25

Ramos, et al. v. Pepsi-Cola Bottling Co. of the Phils., et al., 125 Phil. 701 (1967). Ducusin, et al. v. CA, et al., 207 Phil. 248 (1983). G.R. No. 103543, 5 July 1993, 224 SCRA 437. Exhibits E-1 to 2, F-1 to 2 and G-1 to 2. Exhibits E, F and G. Exhibits L-10, L-16 to 27. Exhibits 34, 36-37.

26

27

28

29

30

31

RA 166 has been superseded by Republic Act No. 8293 ("RA 8293"), the Intellectual Property Code of the Philippines, which took effect on 1 January 1998. Section 22 is substantially identical with Section 16 of the United States' 1946 Trademark Act ("Lanham Act").
32 33

Superseded by Section 155 of RA 8293 ("Section 155"). See A & H Sportswear Co. v. Victoria's Secret Stores, Inc., 167 F.Supp.2d 770 (2001).

34

Shaley's Inc. v. Covalt, 704 F.2d 426 (1983). Also referred to as the "lynchpin" (Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 [1999]) or "touchstone" (VMG Enterprises, Inc. v. F. Quesada and Franco, Inc., 788 F. Supp. 648 [1992]) of trademark infringement.
35

This provision states: "Registration of trade-marks, trade-names and service-marks on the principal register. There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it:
36

(a) Consists of or comprises immoral, deceptive or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute; (b) Consists of or comprises the flag or coat of arms or other insignia of the Philippines or any of its political subdivisions, or of any foreign nation, or any simulation thereof; (c) Consists of or comprises a name, portrait, or signature identifying a particular living individual except by his written consent, or the name, signature, or portrait of a deceased President of the Philippines, during the life of his widow, if any, except by the written consent of the widow; (d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or a trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; or

181
(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (f) Except as expressly excluded in paragraphs (a), (b), (c) and (d) of this section nothing herein shall prevent the registration of a mark or trade-name used by the applicant which has become distinctive of the applicant's goods, business or services. The Director may accept as prima facie evidence that the mark or trade-name has become distinctive, as applied to or used in connection with the applicant's goods, business or services, proof of substantially exclusive and continuous use thereof as a mark or trade-name by the applicant in connection with the sale of goods, business or services for five years next preceding the date of the filing of the application for its registration." This has been superseded by Section 123 of RA 8293. Section 20, RA 166. This provision states: "Certificate of registration prima facie evidence of validity. A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein." This has been superseded by Section 138 of RA 8293. Neither RA 166 nor RA 8293 provides when the presumption of validity and ownership becomes indubitable. In contrast, under the Lanham Act, as amended, (15 United States Code 1065), such takes place once the trademark has become "incontestable" i.e. after the mark owner files affidavits stating that the mark is registered and has been in continuous use for five consecutive years; that there is no pending proceeding; and that there has been no adverse decision concerning the registrant's ownership or right to registration (See Luis Vuitton Malletier and Oakley, Inc. v. Veit, 211 F.Supp.2d 556 [2002]). However, both RA 166 (Section 12) and RA 8293 (Section 145) require the filing of the affidavit attesting to the continuous use of the mark for five years and, under Section 145, failure to file such affidavit will result in the removal of the mark from the Register.
37 38

Rollo, pp. 525-527.

Societe Des Produits Nestl, S.A. v. Court of Appeals, G.R. No. 112012, 4 April 2001, 356 SCRA 207; McKee Baking Co. v. Interstate Brands Corporation, 738 F. Supp. 1272 (1990).
39

Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39; Miller Brewing Co. v. Heileman Brewing Co., 561 F.2d 75 (1977).
40 41

Miller Brewing Co. v. Heileman Brewing Co., supra note 40. A. J. Canfield Co. v. Honickman, 808 F.2d 291 (1986).

42

Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39 citing 43(A) of the Lanham Act, as amended.
43 44

Bernard v. Commerce Drug Co., 964 F.2d 1338 (1992). Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366 (1980). McKee Baking Co. v. Interstate Brands Corporation, supra note 39.

45

46

See A. Miller and M. Davis, Intellectual Property, Patents, Trademarks and Copyright in a Nutshell 177178 (1983).
47

See Lorenzana v. Macagba, No. L-33773, 22 October 1987, 154 SCRA 723; La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al. 214 Phil. 332 (1984). RA 8293 no longer provides for a Supplemental Register and instead mandates a single registry system (Section 137). Under Section 239, marks registered in the Supplemental Register under RA 166 will remain in force but are no longer subject to renewal.
48 49

137 Phil. 838 (1969). Enacted on 6 March 1903.

50

Section 3 of Act No. 666 provides: "The ownership or possession of a trade-mark, heretofore or hereafter appropriated, as in the foregoing section provided, shall be recognized and protected in the same manner and to the same extent, as are other property rights known to the law. To this end any person entitled to the exclusive use of a trade-mark to designate the origin or ownership of goods he has made or deals in may
51

182
recover damages in a civil action from any person who has sold goods of a similar kind, bearing such trademark, and the measure of the damages suffered, at the option of the complaining party, shall be either the reasonable profit which the complaining party would have made had the defendant not sold the goods with the trade-mark aforesaid, or the profit which the defendant actually made out of the sale of the goods with the trade-mark, and in cases where actual intent to mislead the public or to defraud the owner of the trademark shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing, may have a preliminary injunction, restraining the defendant temporarily from use of the trade-mark pending the hearing, to be granted or dissolved in the manner provided in the Code of Civil Procedure, and such injunction upon final hearing, if the complainant's property in the trade-mark and the defendant's violation thereof shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for damages to be rendered in the same cause as above provided." (Emphasis supplied) The United States Congress had introduced the same amendment to the Lanham Act in 1946. In 1962, the US Congress again amended Section 16 of the Lanham Act ("Sec. 43(A)") by deleting the phrase "the source or origin of such goods or services, or identity of such business" in the definition of trademark infringement. This led courts in that jurisdiction to hold that post-sale confusion by the public at large (Esercizio v. Roberts, 944 F.2d 1235 [1991]. See also Koppers Company, Inc. v. Krup-Koppers, 517 F.Supp. 836 [1981]) or "subliminal confusion," defined as confusion on a subliminal or subconscious level, causing the consumer to identify the properties and reputation of one product with those of another, although he can identify the particular manufacturer of each, (Ortho Pharmaceutical Corporation v. American Cyanamid Company, 361 F.Supp. 1032 [1973]. See also Farberware, Inc. v. Mr. Coffee, Inc., 740 F.Supp. 291 (1990); Dreyfus Fund Incorporated v. Royal Bank of Canada, 525 F. Supp. 1108 [1981]) are sufficient to sustain a trademark infringement claim. Section 155 substantially reproduces Sec. 43(A).
52 53

Agpalo, The Law on Trademark, Infringement and Unfair Competition 45-46 (2000). Records, p. 5. Ibid., pp. 4, 6-7. Sta. Ana v. Maliwat, et al., 133 Phil. 1006 (1968).

54

55

56

Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39; Emerald Garment Manufacturing Corporation v. Court of Appeals, G.R. No. 100098, 29 December 1995, 251 SCRA 600.
57 58

V. Amador, Trademarks Under The Intellectual Property Code 260 (1999). Ibid., p. 263. 95 Phil. 1 (1954). 100 Phil. 214 (1956). No. L-23035, 31 July 1975, 65 SCRA 575. No. L-27906, 8 January 1987, 147 SCRA 154. Supra note 27. Supra note 39. 125 Phil. 295 (1966). Rollo, pp. 588-589. Time v. Life Television Co. of St. Paul, 123 F. Supp. 470 (1954);

59

60

61

62

63

64

65

66

67

68

Conde Nast Publications v. Vogue School of Fashion Modelling, 105 F. Supp. 325 (1952); Hanson v. Triangle Publications, 163 F.2d 74 (1947).
69 70

See Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F.3d 466 (1994). No. L-26557, 18 February 1970, 31 SCRA 544.

71

183
72

PACCAR Inc. v. Tele Scan Technologies, L.L.C., 319 F.3d 243 (2003). Reiterated in Section 168 of RA 8293. V. Amador, supra note 58 at 278.

73

74

Shell Co. of the Philippines, Ltd. v. Ins. Petroleum Refining Co., Ltd., 120 Phil. 434 (1964); "La Insular" v. Jao Oge, 42 Phil. 366 (1921).
75 76

Alhambra Cigar, etc., Co. v. Mojica, 27 Phil. 266 (1914). Co Tiong Sa v. Director of Patents, supra note 60; Clarke v. Manila Candy Co., 36 Phil. 100 (1917). See Q-Tips, Inc. v. Johnson & Johnson, 108 F.Supp 845 (1952). Rollo, pp. 40-45. Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 (1999). Rollo, pp. 148-149. See Q-Tips, Inc. v. Johnson & Johnson, supra note 78.

77

78

79

80

81

82

This provision reads: "Actions, and damages and injunction for infringement. Any person entitled to the exclusive use of a registered mark or trade-name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or trade-name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled.
83

The complaining party, upon proper showing, may also be granted injunction."
84

TSN, (Francis Dy), 15 March 1993, p. 32; TSN (Francis Dy), 22 March 1993, pp. 1-2. Article 2229, Civil Code. Article 2208(1), Civil Code.

85

86

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 114508 November 19, 1999 PRIBHDAS J. MIRPURI, petitioner, vs. COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents.

PUNO, J.: The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the Philippines bound itself to honor and enforce in this country. As to whether or not the treaty affords protection to a foreign corporation against a Philippine applicant for the registration of a similar trademark is the principal issue in this case.

184
On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri, filed an application with the Bureau of Patents for the registration of the trademark "Barbizon" for use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and selling these products under the firm name "L & BM Commercial" since March 3, 1970. Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A., opposed the application. It claimed that: The mark BARBIZON of respondent-applicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned. That opposer will be damaged by the registration of the mark BARBIZON and its business reputation and goodwill will suffer great and irreparable injury.
That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark used and owned by opposer, constitutes an unlawful appropriation of a mark previously used in the Philippines and not abandoned and therefore a statutory violation of Section 4 (d) of Republic Act No. 166, as amended. 1

This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties submitted the case for decision. On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application, thus: WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010 for the registration of the trademark BARBIZON, of respondent Lolita R. Escobar, is given due course.
IT IS SO ORDERED. 2

This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of registration for the trademark "Barbizon." The trademark was "for use in "brassieres and lady's underwear garments like panties." 3 Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under his firm name then, the "Bonito Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon" products. In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration. On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own application for registration of Escobar's trademark. Escobar later assigned her application to herein petitioner and this application was opposed by private respondent. The case was docketed as Inter Partes Case No. 2049 (IPC No. 2049). In its opposition, private respondent alleged that: (a) The Opposer has adopted the trademark BARBIZON (word), sometime in June 1933 and has then used it on various kinds of wearing apparel. On August 14, 1934, Opposer obtained from the United States Patent Office a more recent registration of the said mark under Certificate of Registration No. 316,161. On March 1, 1949, Opposer obtained from the United States Patent Office a more recent registration for the said trademark under Certificate of Registration No. 507,214, a copy of which is herewith attached as Annex "A." Said Certificate of Registration covers the following goods wearing apparel: robes, pajamas, lingerie, nightgowns and slips; (b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee design and used the said mark in various kinds of wearing apparel. On March 15, 1977, Opposer secured from the United States Patent Office a registration of the said mark under Certificate of Registration No. 1,061,277, a copy of which is herein enclosed as Annex "B." The said Certificate of Registration covers the following goods: robes, pajamas, lingerie, nightgowns and slips; (c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a Representation of a Woman and thereafter used the said trademark on various kinds of wearing apparel. Opposer obtained from the United States Patent Office registration of the said mark on April 5, 1983 under Certificate of Registration No. 1,233,666 for the following goods: wearing apparel:

185
robes, pajamas, nightgowns and lingerie. A copy of the said certificate of registration is herewith enclosed as Annex "C." (d) All the above registrations are subsisting and in force and Opposer has not abandoned the use of the said trademarks. In fact, Opposer, through a wholly-owned Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing the goods covered by said registrations and selling them to various countries, thereby earning valuable foreign exchange for the country. As a result of respondent-applicant's misappropriation of Opposer's BARBIZON trademark, Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the damage and prejudice of Opposer and its wholly-owned subsidiary. (e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries, including the Philippines, for at least 40 years and has enjoyed international reputation and good will for their quality. To protect its registrations in countries where the goods covered by the registrations are being sold, Opposer has procured the registration of the trademark BARBIZON in the following countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece, Guatemala, Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South Africa, Zambia, Egypt, and Iran, among others; (f) To enhance its international reputation for quality goods and to further promote goodwill over its name, marks and products, Opposer has extensively advertised its products, trademarks and name in various publications which are circulated in the United States and many countries around the world, including the Philippines; (g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R. Escobar under Registration No. 21920, issued on September 11, 1974, in violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent applicant acquired by assignment the "rights" to the said mark previously registered by Lolita Escobar, hence respondent-applicant's title is vitiated by the same fraud and criminal act. Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita Escobar or herein respondentapplicant, to seasonably file the statutory affidavit of use. By applying for a re-registration of the mark BARBIZON subject of this opposition, respondent-applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar.
(h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and Representation of a Woman trademarks qualify as well-known trademarks entitled to protection under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further amplified by the Memorandum of the Minister of Trade to the Honorable Director of Patents dated October 25, 1983 [sic], 4 Executive Order No. 913 dated October 7, 1963 and the Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated October 25, 1983. (i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON trademark and constitutes the dominant part of Opposer's two other marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a Woman. The continued use by respondent-applicant of Opposer's trademark BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial and criminal piracy and if allowed registration will violate not only the Trademark Law but also Article 189 of the Revised Penal Code and the commitment of the Philippines to an international treaty. 5

Replying to private respondent's opposition, petitioner raised the defense of res judicata. On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International." Petitioner registered the name with the Department of Trade and Industry (DTI) for which a certificate of registration was issued in 1987. Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of petitioner's business name. On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and declared private respondent the owner and prior user of the business name "Barbizon International." Thus:
WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior user of the business name "BARBIZON INTERNATIONAL" under Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the name of respondent, is [sic] hereby ordered revoked and cancelled. . . . .6

186
Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18, 1992, the Director rendered a decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's application for registration, to wit: WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED BARRED by res judicata and is hereby DISMISSED. Accordingly, Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE.
SO ORDERED. 7

Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686 was not barred by judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau of Patents for further proceedings, viz:
WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby remanded to the Bureau of Patents for further proceedings, in accordance with this pronouncement. No costs. 8

In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its decision. 9 Hence, this recourse. Before us, petitioner raises the following issues: 1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF, CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF PATENTS IS CONCERNED; 2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE PRINCIPLE OFRES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION NO. 53920 ON NOVEMBER 16, 1992; 3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT ON THE MERITS" REQUIRED A "HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE EVIDENCE" AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF "JUDGMENT ON THE MERITS" AS ONE OF THE REQUISITES TO CONSTITUTERES JUDICATA;
4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM NAME "BARBIZON INTERNATIONAL" AND WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049 HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A. 166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE DIRECTOR OF PATENTS. 10

Before ruling on the issues of the case, there is need for a brief background on the function and historical development of trademarks and trademark law. A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others. 11 This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods." 12 In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article as his product. 13 Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they symbolize. 14

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Symbols have been used to identify the ownership or origin of articles for several centuries. 15 As early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their flanks. 16 Archaeological discoveries of ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features which are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices for the settlement of accounts between an entrepreneur and his workmen. 17 In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper, etc. 18 Every guild had its own mark and every master belonging to it had a special mark of his own. The marks were not trademarks but police marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into an area where the guild had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the artisan. 19 For a similar reason, merchants also used merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon recovery after shipwreck or piracy. 20 With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue monopoly but to give the customer an index or guarantee of quality. 21 It was in the late 18th century when the industrial revolution gave rise to mass production and distribution of consumer goods that the mark became an important instrumentality of trade and commerce. 22 By this time, trademarks did not merely identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the consuming public. 23 Eventually, they came to symbolize the goodwill and business reputation of the owner of the product and became a property right protected by law. 24 The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the public." 25 Subsequently, England and the United States enacted national legislation on trademarks as part of the law regulating unfair trade. 26 It became the right of the trademark owner to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon the public. 27 Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective agent for the actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark actually sells the goods. 28 The mark has become the "silent salesman," the conduit through which direct contact between the trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it has become a more convincing selling point than even the quality of the article to which it refers. 29 In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the marked article has been fixed in the public mind through advertising. 30Whether in the print, broadcast or electronic communications medium, particularly on the Internet, 31 advertising has paved the way for growth and expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the whole world into one vast marketplace. This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon" products have been sold in the Philippines since 1970. Petitioner developed this market by working long hours and spending considerable sums of money on advertisements and promotion of the trademark and its products. Now, almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a conquering hero," usurps the trademark and invades petitioner's market. 32 Justice and fairness dictate that private respondent be prevented from appropriating what is not its own. Legally, at the same time, private respondent is barred from questioning petitioner's ownership of the trademark because of res judicata. 33 Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. 34 In res judicata, the judgment in the first action is considered conclusive as to every matter offered and received therein, as to any other admissible matter which might have been offered for that purpose, and all other matters that could have been adjudged therein. 35 Res judicata is an absolute bar to a subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second actions, identity of parties, of subject matter and of causes of action. 36 The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim that all the four elements of res judicata have been complied with: that the judgment in IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over the subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of a hearing was immaterial because substantial issues were raised by the parties and passed upon by the Director of Patents. 37

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The decision in IPC No. 686 reads as follows: xxx xxx xxx. Neither party took testimony nor adduced documentary evidence. They submitted the case for decision based on the pleadings which, together with the pertinent records, have all been carefully considered. Accordingly, the only issue for my disposition is whether or not the herein opposer would probably be damaged by the registration of the trademark BARBIZON sought by the respondent-applicant on the ground that it so resembles the trademark BARBIZON allegedly used and owned by the former to be "likely to cause confusion, mistake or to deceive purchasers." On record, there can be no doubt that respondent-applicant's sought-to-be-registered trademark BARBIZON is similar, in fact obviously identical, to opposer's alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable but very negligible difference lies in their respective appearances or manner of presentation. Respondent-applicant's trademark is in bold letters (set against a black background), while that of the opposer is offered in stylish script letters. It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in the Philippines prior to the date of application for the registration of the identical mark BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified notice of opposition is devoid of such material information. In fact, a reading of the text of said verified opposition reveals an apparent, if not deliberate, omission of the date (or year) when opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2, Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the identical mark by the herein respondentapplicant, since the opposer attempted neither to substantiate its claim of use in local commerce with any proof or evidence. Instead, the opposer submitted the case for decision based merely on the pleadings. On the other hand, respondent-applicant asserted in her amended application for registration that she first used the trademark BARBIZON for brassiere (or "brasseire") and ladies underwear garments and panties as early as March 3, 1970. Be that as it may, there being no testimony taken as to said date of first use, respondent-applicant will be limited to the filing date, June 15, 1970, of her application as the date of first use (Rule 173, Rules of Practice in Trademark Cases). From the foregoing, I conclude that the opposer has not made out a case of probable damage by the registration of the respondent-applicant's mark BARBIZON.
WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010, for the registration of the trademark BARBIZON of respondent Lolita R. Escobar, is given due course. 38

The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that it was not. A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections. 39 It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual hearing or arguments on the facts of the case. 40 In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was conducted, both parties filed their respective pleadings and were given opportunity to present evidence. They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on the issue of prior use, which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld. The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686 and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the same parties and the same subject matter, and have identical causes of action. Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner herein is the assignee of Escobar while private respondent is the same American corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private respondent counter-argues, however, that the two cases do not have identical causes of action. New causes of action were allegedly introduced in IPC No. 2049, such as the prior use and registration of the trademark in the United States and other countries worldwide, prior use in the Philippines, and the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private

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respondent also cited protection of the trademark under the Convention of Paris for the Protection of Industrial Property, specifically Article 6bis thereof, and the implementation of Article 6bis by two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents, as well as Executive Order (E.O.) No. 913. The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition. 41 The Convention is essentially a compact among various countries which, as members of the Union, have pledged to accord to citizens of the other member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws for an effective protection against unfair competition. 42 In short, foreign nationals are to be given the same treatment in each of the member countries as that country makes available to its own citizens. 43 Nationals of the various member nations are thus assured of a certain minimum of international protection of their industrial property. 44 The Convention was first signed by eleven countries in Paris on March 20, 1883. 45 It underwent several revisions at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, 46and at Stockholm in 1967. Both the Philippines and the United States of America, herein private respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the Philippines, through its Senate, concurred on May 10, 1965. 47 The Philippines' adhesion became effective on September 27, 1965, 48 and from this date, the country obligated itself to honor and enforce the provisions of the Convention. 49 In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the Paris Convention which reads as follows: Article 6bis (1) The countries of the Union undertake, either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be wellknown in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought.
(3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith. 50

This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the registration, and prohibit the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods. Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51 It is a self-executing provision and does not require legislative enactment to give it effect in the member country. 52 It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its ratification according to the public law of each state and the order for its execution. 53 The essential requirement under Article 6bis is that the trademark to be protected must be "well-known" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a court. 54 Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued a Memorandum to the Director of Patents. The Minister ordered the Director that: Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than its original owners or users.

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The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus. It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users. You are also required to submit to the undersigned a progress report on the matter.
For immediate compliance. 55

Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the Director of Patents, viz:
Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that "such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can . . . apply more swift and effective solutions and remedies to old and new problems . . . such as infringement of internationally-known tradenames and trademarks . . ." and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP NO. 13359 (17) June 1983] 56which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations under said Convention in general, and, more specifically, to honor our commitment under Section 6bis 57 thereof, as follows:

1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partesand ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the date of such registration; (d) that the trademark has long been established and obtained goodwill and international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers. 3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

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4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division. 5. All pending applications for Philippine registration of signature and other worldfamous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings.
xxx xxx xxx. 58

In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several internationally-known trademarks and ordered the Director of Patents to require Philippine registrants of such marks to surrender their certificates of registration. In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of Patents to observe in determining whether a trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to problems in trade and industry. 59 Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case ofLa Chemise Lacoste, S.A. v. Fernandez. 60 This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the "competent authority" to determine whether a trademark is well-known in this country. 61 The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris Convention. Article 6bis was already in effect five years before the first case was instituted. Private respondent, however, did not cite the protection of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention and the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin Memorandum were invoked by private respondent. The Solicitor General argues that the issue of whether the protection of Article 6bis of the Convention and the two Memoranda is barred by res judicata has already been answered in Wolverine Worldwide, Inc. v. Court of Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a petition for cancellation of the registration certificate of private respondent, a Filipino citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the registrant of the internationally-known trademark in the United States and other countries, and cited protection under the Paris Convention and the Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the same trademark against respondent's predecessorin-interest. The Patent Office dismissed the petitions, ordered the cancellation of registration of petitioner's trademark, and gave due course to respondent's application for registration. This decision was sustained by the Court of Appeals, which decision was not elevated to us and became final and executory. 63 Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said Memorandum and E.O. did not grant a new cause of action because it did "not amend the Trademark Law," . . . "nor did it indicate a new policy with respect to the registration in the Philippines of world-famous trademarks." 64 This conclusion was based on the finding that Wolverine's two previous petitions and subsequent petition dealt with the same issue of ownership of the trademark. 65 In other words, since the first and second cases involved the same issue of ownership, then the first case was a bar to the second case.

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In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private respondent's opposition therein was merely anchored on: (a) "confusing similarity" of its trademark with that of Escobar's; (b) that the registration of Escobar's similar trademark will cause damage to private respondent's business reputation and goodwill; and (c) that Escobar's use of the trademark amounts to an unlawful appropriation of a mark previously used in the Philippines which act is penalized under Section 4 (d) of the Trademark Law. In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows: (a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as robes, pajamas, lingerie, nightgowns and slips; (b) that the trademark "BARBIZON" was registered with the United States Patent Office in 1934 and 1949; and that variations of the same trademark, i.e., "BARBIZON" with Bee design and "BARBIZON" with the representation of a woman were also registered with the U.S. Patent Office in 1961 and 1976; (c) that these marks have been in use in the Philippines and in many countries all over the world for over forty years. "Barbizon" products have been advertised in international publications and the marks registered in 36 countries worldwide; (d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud; and this fraudulent registration was cancelled in 1979, stripping Escobar of whatsoever right she had to the said mark; (e) Private respondent's trademark is entitled to protection as a well-known mark under Article 6bis of the Paris Convention, Executive Order No. 913, and the two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents; (f) Escobar's trademark is identical to private respondent's and its use on the same class of goods as the latter's amounts to a violation of the Trademark Law and Article 189 of the Revised Penal Code. IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries, and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word and symbol "Barbizon," 66 as the first and registered user of the mark attached to its products which have been sold and advertised worldwide for a considerable number of years prior to petitioner's first application for registration of her trademark in the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res judicata does not apply to rights, claims or demands, although growing out of the same subject matter, wh