AIR PHILIPPINLS CORPORA1ION v.

PLNNSWLLL, INC
G.R. No. J7283S, J3 December 2007, Chico-Nazario, J.(1hird Division)


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;v.tice.

On a number o occasions, Pennswell, Inc deliered and sold to Air Philippines
Corporation sundry goods in trade leading to an outstanding obligation by Air Philippines
Corporation. Air Philippines, on the other hand, ailed to pay obligation which prompted
Pennswell, Inc to ile a complaint or a sum o money. Air Philippines contends that it was
derauded by Pennswell`s misrepresentation o the goods in trade as belonging to a new line,
but identical with the products preiously purchased by Air Philippines which eentually
resulted to their non-payment. During the course o the trial, Air Philippines iled a motion
to compel Pennswell to gie a detailed list o the ingredients and chemical components to
some o their sundry goods.

1he trial court ordered Pennswell to gie the detailed list but upon reconsideration, it
reersed itsel contending that Pennswell cannot be compelled to disclose the chemical
components sought because the matter was conidential and what was inquired upon
constituted a trade secret which Pennswell cannot be orced to diulge. 1he Court o
Appeals airmed the decision o the trial court. lence, this petition.

ISSUL:

\hether or not the chemical components or ingredients o Pennswell`s products are
trade secrets or industrial secrets that are not subject to compulsory disclosure

HLLD:

Petition DLNILD.
Rule 2 o the Rules o Court permits parties to inspect documents or things upon a
showing o good cause beore the court in which an action is pending. It sets an
unequiocal proiso that the documents, papers, books, accounts, letters, photographs,
objects or tangible things that may be produced and inspected should not be privileged.
1he documents must not be priileged against disclosure. On the ground o public policy,
the rules proiding or production and inspection o books and papers do not authorize the
production or inspection o priileged matter, that is, books and papers which, because o
their conidential and priileged character, could not be receied in eidence. Such a
condition is in addition to the requisite that the items be speciically described, and must
constitute or contain eidence material to any matter inoled in the action and which are in
the party`s possession, custody or control.

Section 24 o Rule 130 draws the types o disqualiication by reason o priileged
communication, to wit: ,a, communication between husband and wie, ,b, communication
between attorney and client, ,c, communication between physician and patient, ,d,
communication between priest and penitent, and ,e, public oicers and public interest.
1here are, however, other privileged matters that are not mentioned by Rule J30.
Among them are the ollowing: ,a, editors may not be compelled to disclose the source o
published news, ,b, oters may not be compelled to disclose or whom they oted, ,c, trade
secrets, ,d, inormation contained in tax census returns, and ,d, bank deposits.

A trade secret is deined as a plan or process, tool, mechanism or compound known
only to its owner and those o his employees to whom it is necessary to conide it. 1he
deinition also extends to a secret ormula or process not patented, but known only to
certain indiiduals using it in compounding some article o trade haing a commercial alue.
A trade secret may consist o any ormula, pattern, deice, or compilation o inormation
that: ,1, is used in one's business, and ,2, gies the employer an opportunity to obtain an
adantage oer competitors who do not possess the inormation. Generally, a trade secret is
a process or deice intended or continuous use in the operation o the business, or
example, a machine or ormula, but can be a price list or catalogue or specialized customer
list. It is indubitable that trade secrets constitute proprietary rights. 1he inentor, discoerer,
or possessor o a trade secret or similar innoation has rights therein which may be treated
as property, and ordinarily an injunction will be granted to preent the disclosure o the
trade secret by one who obtained the inormation "in conidence" or through a "conidential
relationship."

Indeed, the priilege is not absolute, the trial court may compel disclosure where it is
indispensable or doing justice. 1he Court does not, howeer, ind reason to except
Penswell`s trade secrets rom the application o the rule on priilege. 1he reelation o
Penswell`s trade secrets seres no better purpose or the disposition o the main case
pending with the R1C. As can be gleaned rom the acts, Air Philippines receied Penswell`s
goods in trade in the normal course o business. 1o be sure, there are deenses under the
laws o contracts and sales aailable to Air Philippines. On the other hand, the greater
interest o justice ought to aor Penswell as the holder o trade secrets. 1rade secrets
should receive greater protection from discovery, because they derive economic value
from being generally unknown and not readily ascertainable by the public. 1o the
mind o this Court, Air Philippines was not able to show a compelling reason or us to lit
the eil o conidentiality which shields Penswell`s trade secrets.

Air Philippines` inocation o the proisions o Republic Act No. 8203 or the Special
Law on Countereit Drugs, requiring the disclosure o the actie ingredients o a drug is also
on aulty ground. Penswell`s products are outside the scope o the cited law. 1hey do not
come within the puriew o a drug which, as deined therein, reers to any chemical
compound or biological substance, other than ood, that is intended or use in the treatment,
preention or diagnosis o disease in man or animals. \hat is clear is that the chemical
ormulation o Penswell`s products is not known to the general public and is unique only to
it.