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FIRST DIVISION
[G.R. Nos. 63796-97. May 21, 1984.]
LA CHEMISE LACOSTE, S. A., Petitioner, v. HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region, Manila and GOBINDRAM
HEMANDAS, Respondents.
[G.R. No. 65659. May 21, 1984.]
GOBINDRAM HEMANDAS SUJANANI, Petitioner, v. 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.
Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.
Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.
SYLLABUS
1. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; FOREIGN CORPORATION ACTING THROUGH A MIDDLEMAN TRANSACTING IN OWN NAME DEEMED NOT "DOING
BUSINESS" IN THE PHILIPPINES; CASE AT BAR. In the present case, the petitioner is a foreign corporation. 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. Applying Rule I Section 1 (g) of 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, 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.
2. REMEDIAL LAW; ACTIONS; PARTIES TO AN ACTION; CAPACITY TO SUE; FOREIGN CORPORATION NOT DOING BUSINESS IN THE PHILIPPINES NEEDS NO LICENSE TO SUE BEFORE
PHILIPPINE COURTS FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION. 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 (Western Equipment and Supply Co. v. Reyes, 51 Phil. 115). 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.
3. ID.; CRIMINAL PROCEDURE; PROSECUTION OF CRIMINAL CASES IS IN THE NAME OF THE STATE, NOT FOREIGN CORPORATION WHICH FILES COMPLAINT. 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.
Petitioners capacity to sue would become, therefore, of not much significance in the main case. We cannot allow 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.
4. MERCANTILE LAW; CORPORATION LAW; FOREIGN CORPORATIONS; RIGHT TO SUE IN PHILIPPINE COURTS; ACCORDED BY PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL
PROPERTY TO WHICH PHILIPPINES AND FRANCE ARE PARTIES. 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.
5. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH WARRANTS; PROBABLE CAUSE, ESSENTIAL TO ISSUANCE. 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).
6. ID.; ID.; ID.; PROBABLE CAUSE, DEFINED. 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 commission, violating a given provision of our

criminal laws."cralaw virtua1aw library


7. ID.; ID.; ID.; DETERMINATION OF PROBABLE CAUSE, NO FIXED RULE. The question of whether or not a 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 countrys abide to by international commitments is at stake.
8. ID.; ID.; ID.; ID.; MOTION TO QUASH WARRANT; GRANT THEREOF IN CASE AT BAR CONSTITUTES GRAVE ABUSE OF DISCRETION. The respondent court, therefore, complied with the
constitutional and statutory requirements 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 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 criminal prosecution. Moreover, an application for 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.
9. MERCANTILE LAW; PATENTS OFFICE; CERTIFICATE OF REGISTRATION IN THE SUPPLEMENTAL REGISTER; NOT A PRIMA FACIE EVIDENCE OF REGISTRANTS RIGHT. A certificate of
registration in the Supplemental Register is not a prima facie evidence of the validity of registration, of the registrants exclusive right to use the same in connection with the goods, business, or services
specified in the certificate. Such a certificate of registration can not 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, Vol. 2, pp. 513-515).
10. ID.; ID.; ID.; PURPOSE. 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.
11. REMEDIAL LAW; CRIMINAL ACTION; PROSECUTION OF CIVIL ACTION; PREJUDICIAL QUESTION; CASE AT BAR, NOT A CASE OF. The case which suspends a criminal prosecution under Section
5, Rule 111 of the Revised Rules of Court on prejudicial questions 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 respondents innocence of the charges
against him (Flordelis v. Castillo, 58 SCRA 301).
12. MERCANTILE LAW; LAW ON TRADEMARKS AND TRADENAMES; PURPOSE OF LAW PROTECTING TRADEMARKS. The purpose of the law protecting a trademark can not 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 a 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.
Modem trade and commerce demands that depredations on legitimate trademarks 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).
13. ID.; ID.; LAW THEREOF BASED ON THE PRINCIPLE OF BUSINESS INTEGRITY AND COMMON JUSTICE. 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 anothers business by fraud, deceit, trickery or unfair methods of any sort. This necessarily precludes the trading by one dealer upon the good name and reputation built by
another (Baltimore v. Moses, 182 Md 229, 34 A(2d) 338).
14. ID.; ID.; ID.; CASE AT BAR. The records show that the goodwill and reputation of the petitioners 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.
DECISION
GUTIERREZ, JR., J.:

It is among this Courts 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.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
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.chanrobles law library
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 respondents 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:chanrob1es virtual 1aw library
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". . . 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." cralaw virtua1aw library
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 petitioners 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.
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.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
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:jgc:chanrobles.com.ph
"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) Lacostes 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:chanrob1es virtual 1aw library
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:jgc:chanrobles.com.ph
"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."cralaw virtua1aw library
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 foreign corporation and Philippine-American Drug Co., the formers
exclusive distributing agent in the Philippines filed a complaint for infringement of trademark and unfair competition against the Mangalimans.chanrobles virtual lawlibrary
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 latters name or for the latters 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 corporation 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."cralaw virtua1aw library
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: jgc:chanrobles.com.ph
"(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."cralaw virtua1aw library
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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 respondents 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:chanrob1es virtual 1aw library
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". . . 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:jgc:chanrobles.com.ph
"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:jgc:chanrobles.com.ph
"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 well stated in Hanover Star Mining Co. v. Allen and Wheeler Co. (208 Fed., 513), in which the syllabus
says:jgc:chanrobles.com.ph
"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 traders 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.chanrobles.com : virtual law library
More important is the nature of the case which led to this petition. What preceded this petition forcertiorari 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. Petitioners capacity to sue would become, therefore, of not much significance in the main case. We cannot allow 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:chanrob1es virtual 1aw library


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.
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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.
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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, 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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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.
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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.
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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 10bis.
"(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.
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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).
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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:jgc:chanrobles.com.ph
" [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
nations 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
nationals 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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". . . 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."cralaw virtua1aw library
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 respondents trademark is different
from the petitioners 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.chanroblesvirtualawlibrary
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."cralaw virtua1aw library
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 countrys
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.chanrobles virtual lawlibrary
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 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.chanrobles virtual lawlibrary
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 registrants 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. 513-515).
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: chanrob1es virtual 1aw library
x

"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 registered on the principal
register."cralaw virtua1aw library
x

The reason is explained by a leading commentator on Philippine Commercial Laws:jgc:chanrobles.com.ph

"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) registrants ownership of the mark; and (3)
registrants 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 registrants 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. 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). chanrobles
virtual lawlibrary
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:jgc:chanrobles.com.ph
"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." cralaw
virtua1aw library
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 respondents innocence of the charges against him.
In Flordelis v. Castillo (58 SCRA 301), we held that:jgc:chanrobles.com.ph
"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 pend 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."cralaw virtua1aw library
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 courts 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,

10

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.chanrobles law library : red
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 S.A. the owner of the disputed trademark and crocodile or alligator device. The
Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza stated:jgc:chanrobles.com.ph
"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 Industrial Property Office.
x

"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."cralaw virtua1aw library
The issue of due process was raised and fully discussed in the appellate courts 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 petitioners trademark 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).chanrobles virtual lawlibrary
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 anothers 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 petitioners 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.

11

We now proceed to the consideration of the petition in Gobindram Hemandas Sujanani v. 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:jgc:chanrobles.com.ph
"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 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."cralaw virtua1aw library
On December 5, 1983, we issued the following resolution:jgc:chanrobles.com.ph
"Considering the allegations contained, issues raised and the arguments adduced in the petition for review, the respondents comment thereon, and petitioners 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."cralaw virtua1aw library
The second case of Gobindram Hemandas v. La Chemise Lacoste, S.A., Et. Al. (G.R. No. 63928-29) prayed for the following: jgc:chanrobles.com.ph
"I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:jgc:chanrobles.com.ph
"1. 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 petitioners products are FAKE
pending proceedings hereof; and
"3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further threatening letters to petitioners customers unjustly stating that petitioners products they are dealing in are
FAKE and threatening them with confiscation and seizure thereof.
"II. On the main petition, judgment be rendered:jgc:chanrobles.com.ph
"1. 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."cralaw virtua1aw library
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:jgc:chanrobles.com.ph

12

"MEMORANDUM:chanrob1es virtual 1aw library


FOR: THE DIRECTOR OF PATENTS
Philippine Patent Office
"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 bis thereof, as follows:jgc:chanrobles.com.ph
"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:jgc:chanrobles.com.ph
"(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: jgc:chanrobles.com.ph
"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.;
"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.

13

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, neckties, etc. the
list is quite lengthy and pay good money relying on the brand name as guarantee of its quality and genuine nature only to explode in bitter frustration and 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.chanrobles law library
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 made 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.

FIRST DIVISION
[G.R. No. 78325. January 25, 1990.]
DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, Petitioners, v. COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, Respondents.
Bito, Misa & Lozada, for Petitioners.
Reynaldo F. Singson for Private Respondent.
DECISION
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.chanroblesvirtualawlibrary
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. SR913 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.

14

Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Montes, 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 defendants
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 forcertiorari 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:chanrob1es virtual 1aw library
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 trade-name in
connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as
to the source or origin of such goods or services or identity of such business; or 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 at all of the remedies herein provided.
Sec. 29 of the same law states as follows:chanrob1es virtual 1aw library
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 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:chanrob1es virtual 1aw library
(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 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.
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 ones 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:chanrob1es virtual 1aw library

15

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 predominant 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:chanrob1es virtual 1aw library
In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit:chanrob1es virtual 1aw library
1. As to the shape of label or make:chanrob1es virtual 1aw library
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:chanrob1es virtual 1aw library
Del Monte: Tomato catsup mark.
Sunshine: Fruit catsup.
3. As to the words or lettering on label or mark:chanrob1es virtual 1aw library
Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines.
Sunshine: Surshine 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:chanrob1es virtual 1aw library
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:chanrob1es virtual 1aw library
Del Monte: In the shape of a tomato.
Sunshine: Entirely different in shape.
6. As to label below the cap:chanrob1es virtual 1aw library
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."cralaw virtua1aw library
7. As to the color of the products:chanrob1es virtual 1aw library
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 preoccupied with
the details that they have not seen the total picture.

16

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 petitioners 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.cralawnad
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 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. 22 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. 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 red-orange, 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.25cralaw:red
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:chanrob1es virtual 1aw library
(1) Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrants 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.

17

Registration in the Principal Register is constructive notice of the registrants 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 bottles 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 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 respondents bad faith and its intention to capitalize on the latters 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 companys
malicious intent to imitate petitioners 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 registrants 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:chanrob1es virtual 1aw library
(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 Sunshines label is an infringement of the Del Montes trademark, law and equity call for the cancellation of the private respondents registration and withdrawal of all its products bearing the questioned label
from the market. With regard to the use of Del Montes bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles. chanrobles virtual
lawlibrary
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: chanrob1es
virtual 1aw library
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:chanrob1es virtual 1aw library
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.
Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of P1,000.00.

18

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 respondents Certificate of Registration 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 P1,000.00, and the costs of the suit.chanrobles law library : red
SO ORDERED.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

EN BANC
[G.R. No. 103543. July 5, 1993.]
ASIA BREWERY, INC., Petitioner, v. THE HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, Respondents.
Abad Santos & Associates and Sycip, Salazar, Hernandez and Gatmaitan for Petitioner.
Roco, Bunag, Kapunan Law Office for Private Respondent.
SYLLABUS
1. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF COURT OF APPEALS CONCLUSIVE AND BINDING ON SUPREME COURT; EXCEPTIONS; CASE AT BAR. 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 petitioners 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 v. Court of Appeals, 169 SCRA 220, 223 citing, Mendoza v. Court of Appeals, 156 SCRA 597; Manlapaz v. Court of Appeals, 147
SCRA 238; Sacay v. Sandiganbayan, 142 SCRA 593, 609; Guita v. CA, 139 SCRA 576; Casanayan v. Court of Appeals, 198 SCRA 333, 336; also Apex Investment and Financing Corp. v. IAC, 166 SCRA 458
[citing Tolentino v. De Jesus, 56 SCRA 167; Carolina Industries, Inc. v. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero v. CA, 102 SCRA 817; and Moran, Jr. v. 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. v. IAC, 191 SCRA 411, 420.) Where findings of the Court
of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. (Cruz v. 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.
2. COMMERCIAL LAW; TRADEMARK LAW (REPUBLIC ACT NO. 166); INFRINGEMENT; DEFINED; NATURE THEREOF. Infringement of trademark is a form of unfair competition (Clarke v. 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 trade-name in connection with the sale, offering for sale, or advertising of any goods,
business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such
business; or 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.
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 elses registered

19

trademark, trade name or service mark is unauthorized, hence, actionable, if it is done "without the consent of the registrant."cralaw virtua1aw library
3. ID.; ID.; HOW QUESTION OF INFRINGEMENT OF TRADEMARK DETERMINED; QUESTION AT ISSUE IN CASES OF INFRINGEMENT. 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 v. Director of Patents, 95 Phil. 1, 4 (1954); reiterated in Lim Hoa v. 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; not 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 While Lead Co., v. 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 v. Honover Rubber Co., 107 F. 2d 588; . . .)" In Forbes, Munn & Co. (Ltd.) v. 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. v. Standard Brands Inc., 65 SCRA
575, the court was more specific: the test is "similarity in the dominant features of the trademarks."cralaw virtua1aw library
4. ID.; ID.; ID.; ID.; CASE AT BAR. The dominant feature of SMCs 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 ABIs 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 SMCs trademark, just as the
words "SAM MIGUEL" do not appear in ABIs 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.
5. ID.; ID.; GENERIC OR DESCRIPTIVE AND PRIMARILY GEOGRAPHICALLY DESCRIPTIVE WORDS NON-REGISTRABLE AND NOT APPROPRIABLE; REASON THEREFOR; CASE AT BAR. The fact
that the words pale pilsen are part of ABIs trademark does not constitute an infringement of SMCs 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. (Websters Third New
International Dictionary of the English Language, Unabridged. Edited by Philip Babcock Gove. Springfield, Mass.: G & C Merriam Co.,) 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 distinguished 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: . . ." (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." 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. In Masso Hermanos, S.A. v. 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 v. Director of Patents, 96 Phil. 673, 676 [1955]).
6. ID.; ID.; UNFAIR COMPETITION; DEFINED. 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 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.)
7. ID.; ID.; ID.; TEST TO DETERMINE EXISTENCE THEREOF. The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one mans 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 defendants practices must always appear." (Shell Co. of the
Philippines, Ltd. v. Insular Petroleum Refining Co. Ltd. Et. Al., 120 Phil. 434, 439.) . . . 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
double-decked 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."cralaw virtua1aw library
8. ID.; ID.; PROTECTION AGAINST IMITATION PROPERLY LIMITED TO NONFUNCTIONAL FEATURES; CASE AT BAR. The petitioners contention that bottle size, shape and color may not be the
exclusive property of any one beer manufacturer is well taken. SMCs 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 v. Tan Tiao Bok, 42 Phil. 190, 194-195.) . . . ABI does not use
SMCs steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat bulging neck to differentiate it from SMCs bottle. The amber color is a functional feature of the beer bottle. As

20

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 v. 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 SMCs bottle but 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 ABIs bottle; it is also the most economical to use on labels, and the easiest to "bake" in the furnace. 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 from the others.
9. ID.; ID.; TRADEMARK ALLEGEDLY INFRINGED CONSIDERED AS A WHOLE AND NOT AS DISSECTED; DOCTRINE ENUNCIATED IN DEL MONTE CORPORATION v. COURT OF APPEALS AND
SUNSHINE SAUCE MANUFACTURING INDUSTRIES, 181 SCRA 410, 419, NOT APPLICABLE TO CASE AT BAR. Our decision in this case will not diminish our ruling in "Del Monte Corporation v. Court of
Appeals and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, 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 is 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 Montes label, we held that there was infringement of Del Montes trademark and unfair competition by Sunshine. Our ruling in Del Monte would not apply to
beer which is not usually picked up from a store shelf but ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant.
CRUZ, J., dissenting:chanrob1es virtual 1aw library
1. COMMERCIAL LAW; TRADEMARK LAW (REPUBLIC ACT NO. 166); INFRINGEMENT; TOUCHSTONE IN DETERMINATION OF EXISTENCE THEREOF; TO DETERMINE WHETHER TRADEMARK HAS
BEEN INFRINGED, THE MARK IS CONSIDERED AS A WHOLE AND NOT AS DISSECTED. The question is not whether the two articles are distinguishable by their labels 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. 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 petitioners 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.
DECISION
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 latters BEER PALE PILSEN or
BEER NA BEER product which has been competing with SMCs SAN MIGUEL PALE PILSEN for a share of the local beer market. (San Miguel Corporation v. 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 SMCs complaint because ABI "has not committed trademark infringement or unfair
competition against" SMC (p. 189, Rollo).chanrobles.com : virtual law library
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:jgc:chanrobles.com.ph
"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: jgc:chanrobles.com.ph
"(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

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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
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 attorneys fees in the amount of P250,000.00 plus costs of this suit." (p. 90, Rollo.)
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: chanrob1es virtual 1aw
library
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: chanrob1es virtual 1aw library
(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 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 attorneys 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 SMCs 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: chanrob1es virtual 1aw library
(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 petitioners 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 v. Court of Appeals, 169 SCRA 220, 223 citing,
Mendoza v. Court of Appeals, 156 SCRA 597; Manlapaz v. Court of Appeals, 147 SCRA 238; Sacay v. Sandiganbayan, 142 SCRA 593, 609; Guita v. CA, 139 SCRA 576; Casanayan v. Court of Appeals, 198

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SCRA 333, 336; also Apex Investment and Financing Corp. v. IAC, 166 SCRA 458 [citing Tolentino v. De Jesus, 56 SCRA 167; Carolina Industries, Inc. v. CMS Stock Brokerage, Inc., 97 SCRA 734; Manero v.
CA, 102 SCRA 817; and Moran, Jr. v. 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. v. IAC, 191 SCRA 411, 420.) Where
findings of the Court of Appeals and trial court are contrary to each other, the Supreme Court may scrutinize the evidence on record. (Cruz v. 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 v. Manila Candy Co., 36 Phil. 100, 106). Sec. 22 of Republic Act No. 166, otherwise known as the Trademark Law, defines what constitutes
infringement:chanrob1es virtual 1aw library
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 trade-name in
connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as
to the source or origin of such goods or services, or identity of such business; or 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 elses 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:jgc:chanrobles.com.ph
"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):jgc:chanrobles.com.ph
". . . 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; Italics supplied.)
On the other hand, ABIs trademark, as described by the trial court, consists of:jgc:chanrobles.com.ph
". . . 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; Italics supplied.)
Does ABIs BEER PALE PILSEN label or "design" infringe upon SMCs SAN MIGUEL PALE PILSEN WITH RECTANGULAR MALT AND HOPS DESIGN? The answer is "No."cralaw virtua1aw library
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 v. Director of Patents, 95
Phil. 1, 4 (1954); reiterated in Lim Hoa v. Director of Patents, 100 Phil. 214, 216-217 (1956), thus:jgc:chanrobles.com.ph
"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 Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., v. 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 v. Honover Rubber Co., 107 F. 2d 588; . . .)" (Emphasis supplied.)
In Forbes, Munn & Co. (Ltd.) v. 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."cralaw virtua1aw library

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In Phil. Nut Industry Inc. v. Standard Brands Inc., 65 SCRA 575, the court was more specific: the test is "similarity in the dominant features of the trademarks." cralaw virtua1aw library
What are the dominant features of the competing trademarks before us?
There is hardly any dispute that the dominant feature of SMCs 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 ABIs 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 SMCs trademark, just as the words "SAN MIGUEL" do not appear in ABIs 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:chanrob1es virtual 1aw library
(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 SMCs label are printed in bold and laced letters along a diagonal band, whereas the words "pale pilsen" on ABIs bottle are half the size and printed in slender block letters on a
straight horizontal band. (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." cralaw virtua1aw
library
(4) On the back of ABIs bottle is printed in big, bold letters, under a row of flower buds and leaves, its copyrighted slogan:jgc:chanrobles.com.ph
"BEER NA BEER!"
Whereas SMCs 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." cralaw virtua1aw library
(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.
The fact that the words pale pilsen are part of ABIs trademark does not constitute an infringement of SMCs 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. (Websters 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:jgc:chanrobles.com.ph
"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:chanrob1es virtual 1aw library

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"(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
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. In Masso Hermanos, S.A. v. 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 v. Director of Patents, 96 Phil. 673, 676 [1955]):jgc:chanrobles.com.ph
"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. v. 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 SMCs charge that ABI dishonestly and fraudulently intends to palm off its BEER PALE PILSEN as SMCs 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 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:jgc:chanrobles.com.ph
"Sec. 29. . . .
"In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition: jgc:chanrobles.com.ph
"(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."cralaw virtua1aw library

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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 SMCs beer, or whether ABI is passing off its BEER PALE PILSEN as SMCs
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 mans 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 defendants practices must always appear." (Shell Co. of the Philippines, Ltd. v. Insular Petroleum Refining Co. Ltd. Et. Al.,
120 Phil. 434, 439.)
The use by ABI of the steinie bottle, similar but not identical to the SAN MIGUEL PALE PILSEN bottle, is not unlawful. As pointed out by ABIs 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 57D, 57-E.) The trial court found no infringement of SMCs bottle
"The court agrees with defendant that there is no infringement of plaintiffs bottle, firstly, because according to plaintiffs 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 Manufacturers 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 defendants bottle is much larger and has a distinct bulge in its uppermost part." (p. 186, Rollo.)
The petitioners contention that bottle size, shape and color may not be the exclusive property of any one beer manufacturer is well taken. SMCs 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 v. 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 SMCs steinie bottle. Neither did ABI copy it. ABI makes its own steinie bottle which has a fat bulging neck to differentiate it from SMCs bottle. The amber color is a functional feature of the
beer bottle. As 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 v. 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 SMCs bottle but 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 ABIs 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 from the others.chanrobles.com.ph : virtual law library
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 double-decked 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:jgc:chanrobles.com.ph
". . . 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."cralaw virtua1aw library
The main thrust of SMCs complaint is not infringement of its trademark, but unfair competition arising from the allegedly "confusing similarity" in the general appearance or trade dress of ABIs BEER PALE
PILSEN beside SMCs 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

26

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 SMCs
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 SMCs 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 SMCs 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 standard 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 ABIs BEER PALE PILSEN is sold, like SMCs SAN
MIGUEL PALE PILSEN in amber steinie bottles.chanrobles.com : virtual law library
The record does not bear out SMCs 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 ABIs 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.)
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 ABIs 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 v. Court of Appeals and Sunshine Sauce Manufacturing Industries," 181 SCRA 410, 419, 3 that: jgc:chanrobles.com.ph
". . . 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."cralaw virtua1aw library
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 Montes label, we held that there was infringement of Del Montes trademark and unfair
competition by Sunshine.
Our ruling in Del Monte would not apply to beer which is not usually picked up from a store shelf but ordered by brand by the beer drinker himself from the storekeeper or waiter in a pub or restaurant.
Moreover, SMCs brand or trademark: "SAN MIGUEL PALE PILSEN" is not infringed by ABIs mark: "BEER NA BEER" or "BEER PALE PILSEN." ABI makes its own bottle with a bulging neck to differentiate it
from SMCs bottle, and prints ABIs name in three (3) places on said bottle (front, back and bottle cap) to prove that it has no intention to pass off its "BEER" as "SAN MIGUEL." cralaw virtua1aw library
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.
Petition ABI has neither infringed SMCs trademark nor committed unfair competition with the latters SAN MIGUEL PALE PILSEN product. While its BEER PALE PILSEN admittedly competes with the latter in
the open market, the competition is neither unfair nor fraudulent. Hence, we must deny SMCs 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.

27

Narvasa, C.J., Bidin, Regalado, Romero, Nocon, Bellosillo and Melo, JJ., concur.
Feliciano, J., no part. One party represented by my former firm.
Padilla, J., no part, in view of substantial interest in SMC.
Separate Opinions
CRUZ, J., dissenting:chanrob1es virtual 1aw library
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 own ponencia in Del Monte Corporation v. Court of Appeals, 181 SCRA 410, concurred in by Justices Narvasa, Gancayco, Grio-Aquino and Medialdea, where we declared: chanrob1es virtual 1aw library
While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement 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 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. 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 petitioners 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.
Davide, Jr., dissents.

FIRST DIVISION
[G.R. NO. 143993 : August 18, 2004]

28

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., Petitioners, v. 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 Review 1 of the Decision dated 26 November 1999 of the Court of Appeals 2 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 Decision 3of
the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.
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." 6 McDonald'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 items 8 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 todesist 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. 17Respondents sought damages in their counterclaim.

29

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
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 locatedalong busy streets or highways. But the thing is that what is being sold by bothcontending 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 outlet thereof. 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?chanroblesvirtualawlibrary
The answer is in the affirmative. xxxx
The xxx provision of the law concerning unfair competition is broader and more inclusive than the law concerning 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:

30

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 theamount of P400,000.00, 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
as for insufficiency of evidence.20
Respondents appealed to the Court of Appeals.
The Ruling of the Court of Appeals
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 ofdefendants-appellants 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 thatmore 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, defendantsappellants' corporate or business name appearing in the food packages and signages are written in silhouette red-orange 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 defendantsappellants' 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 accommodate additional 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 isnecessary 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

31

Anent the allegation that defendants-appellants are guilty of unfair competition, Welikewise 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' trademark is notsufficient 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 plaintiffs-appellees to prove bad faith on the part ofdefendants-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 OFTRADEMARK 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 ANINDICATION 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.

32

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 Appeals 27 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
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, 32 defines trademark infringement as follows:
Infringement, what constitutes. - Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection
with the sale, offering for sale, or advertising of anygoods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the
source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by
the registrant for any or all of the remediesherein provided.33

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 4 36 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 a kind 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 Principal Register, 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."52 Thus, 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

34

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)cralawlibrary
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 tothe 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)cralawlibrary
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.
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 low-end 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:

35

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)cralawlibrary
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, indetermining confusing
similarity.
The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use ofrespondents' "Big Mak" mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals ruled that
"it is not sufficient that a similarity exists in both name(s), but that more importantly, the overallpresentation, 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 the adoption of the dominant features of the registered mark,
disregarding minordifferences.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 bedetermined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the
competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place . Duplication or imitation is
not necessary; nor is it necessarythat the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. v. Pflugh (CC)
180 Fed. 579). The question at issue in cases of infringement of trademarks is whetherthe 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 v. 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 are encountered in the realities of the marketplace. (Emphasis supplied)cralawlibrary
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."

36

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 ofboth 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 indetermining 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 withinthe
purview of the idem sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-Up" and "Lemon-Up". In Co Tiong v. Director of Patents, this Court unequivocally said that
"Celdura" and "Cordura" are confusingly similar in sound; this Court held in Sapolin Co. v. 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)cralawlibrary
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. This increases 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:
[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 equal number 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 alleged sentiment-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 requiresthe less
stringent standard of "likelihood of confusion" only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential. 72

37

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 anyacts 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 shallcommit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.
(Emphasis supplied)cralawlibrary
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 alsoactual or probable deception on the public because of the general appearance of the goods. There can be
trademark infringement without unfair competition 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)cralawlibrary

38

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 words that 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 withoutthe
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. 82 Respondents, 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
The RTC also did not err in awarding exemplary damages by way of correction for the public good 85 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.

SECOND DIVISION

39

[G.R. NO. 154491 : November 14, 2008]


COCA-COLA BOTTLERS, PHILS., INC. (CCBPI), Naga Plant, Petitioner, v. 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 onCertiorari 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
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. 5The 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

40

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 facie evidence 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, 7explaining 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
In a motion for reconsideration, which the RTC denied on July 12, 2002, the petitioner stressed 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 Certiorariunder 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 forcertiorari 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.

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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 warrant10 against a personal property11 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]
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. 12Implicit 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.

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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 "deception or 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 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

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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) Layout-Designs (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 disputed Section 168.3 being a "catch all" clause whose coverage the parties now dispute.

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Under all the above approaches, we conclude that the "hoarding" - as defined and charged by the petitioner - does not fall 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.