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Property Cases - 1

Western Equipment vs. Reyes


GR 27897, 2 December 1927; En Banc, Johns (J)
Facts: In 1925, Western Equipment and Supply Co. applied for the issuance of a license to engage in businessin the Philippines.
On the other hand, Western Electric Co. has never been licensed to engage in business, nor has it ever engaged in
business in the Philippines. Western Equipment, since the issuance of its license, engaged in the
importation and sale of electrical and telephone apparatus and supplies manufactured by Western Electric. A
local corporation, Electric Supply Co. Inc. has been importing the same products in the Philippines. In 1926, Electric Supplys
president, Henry Herman, along with other persons sought to organize a corporation to be known as Western Electric Co. Inc.
Western Equipment, et al. filed against Herman to prevent them from organizing said corporation.
The trial court ruled in favor of Western Equipment, holding that the purpose of the incorporation of the proposed corporation is
illegal or void.
Issue:
Whether the foreign corporation Western Electric Co. Inc. has right of action to prevent an officer ofthe government from issuing
a certificate of incorporation to Philippine residents who attempt to pirate thecorporate name of the foreign corporation and
engage in the same business.
Held: Yes. A trademark acknowledges no territorial boundaries of municipalities, states or nations, but
extends to every market where the traders goods have become known and identified by the use of the mark.
Rights to the use of its corporate name or trade name is a property right, a right in rem, which it may assert and protect against
the whole world, in any of the courts in 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. The trial court was correct in holding
that the purpose of the proposed corporation by Herman, et. al. as fraudulent and contrary to law, as it attempts to
unjustly compete with the real Western Electric Co. Inc. and deceive Filipinos into thinking that the goods they
propose to sell are goods of manufacture of the real Western Electric Co.

G.R. No. L-27897 December 2, 1927


WESTERN EQUIPMENT AND SUPPLY COMPANY, WESTERN ELECTRIC COMPANY, INC., W. Z. SMITH and FELIX C.
REYES, plaintiffs-appellees,
vs.
FIDEL A. REYES, as Director of the Bureau of Commerce and Industry, HENRY HERMAN, PETER O'BRIEN, MANUEL B.
DIAZ, FELIPE MAPOY and ARTEMIO ZAMORA, defendants-appellants.
J. W. Ferrier for appellants.
DeWitt, Perkins and Bradly for appellees.
STATEMENT
October 23, 1926, in the Court of First Instance of Manila, plaintiffs filed the following complaint against the defendants:
Now come the plaintiffs in the above entitled case, by the undersigned their attorneys, and to this Honorable Court
respectfully show:
I. That the Western Equipment and Supply Company is a foreign corporation organized under the laws of the State of
Nevada, United States of America; that the Western Electric Company, Inc., is likewise a foreign corporation organized
under the laws of the State of New York, United States of America; and that the plaintiffs W. Z. Smith and Felix C.
Reyes are both of lawful age and residents of the City of Manila, Philippine Islands.

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II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the Bureau of Commerce and
Industry and as such Director is charged with the duty of issuing and denying the issuance of certificates of
incorporation to persons filing articles of incorporation with the Bureau of Commerce and Industry.
III. That the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora are all of
lawful age and are residents of the City of Manila, Philippines Islands.
IV. That on or about May 4, 1925, the plaintiff the Western Equipment and Supply Company applied to the defendant
Director of the Bureau of Commerce and Industry for the issuance of a license to engage in business in the Philippine
Islands and, accordingly, on May 20, 1926, a provisional license was by said defendant issued in its favor, which
license was made permanent on August 23, 1926.
V. That from and since the issuance of said provisional license of May 20,. 1926, said plaintiff Western Equipment and
Supply Company has been and still is engaged in importing and selling in the Philippine Islands the electrical and
telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc., its offices in the City of
Manila being at No. 600 Rizal Avenue, in the charge and management of the plaintiff Felix C. Reyes, its resident agent
in the Philippine Islands.
VI. That the electric and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company,
Inc., have been sold in foreign and interstate commerce and have become well and thoroughly known to the trade in all
countries of the world for the past fifty years; that at present time the greater part of all telephone equipment used in
Manila and elsewhere in the Philippine Islands was manufactured by the said Western Electric Company, Inc., and sold
by it in commerce between the United States and the Philippine Islands; that about three fourths of such equipment in
use throughout the world are of the manufacture of said "Western Electric Company, Inc.," and bear its corporate
name; and that these facts are well known to the defendant Henry Herman who for many years up to May 20, 1926,
has himself been buying said products from the plaintiff Western Electric Company, Inc., and selling them in the
Philippine Islands.
VII. That the name `Western Electric Company, Inc., has been registered as a trade-mark under the provisions of the
Act of Congress of February 20, 1905, in the office of the Commissioner of Patents, at Washington, District of
Columbia, and said trade-mark remains in force to this date.
VIII. That on or about . . ., the defendants Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio
Zamora filed articles of incorporation with the defendant Director of the Bureau of Commerce and Industry with the
intention of organizing a domestic corporation to be known as the "Western Electric Company, Inc.," for the purpose
principally of manufacturing, buying, selling and generally dealing in electrical and telephone apparatus and supplies.
IX. That the purpose of said defendant in attempting to incorporate under the corporate name of plaintiff Western
Electric Company, Inc., is to profit and trade upon the plaintiff's business and reputation, by misleading and deceiving
the public into purchasing the goods manufactured or sold by them as those of plaintiff Western Electric Company, Inc.,
in violation of the provisions of Act No. 666 of the Philippine Commission, particularly section 4 thereof.
X. That on October 20, 1926, plaintiff W. Z. Smith was authorized by the Board of Directors of the Western Electric
Company, Inc., to take all necessary steps for the issuance of a license to said company to engage in business in the
Philippine Islands and to accept service of summons and process in all legal proceedings against said company, and
on October 21, 1926, said plaintiff W. Z. Smith filed a written application for the issuance of such license with the
defendant Director of Bureau of Commerce and Industry, which application, however, has not yet been acted upon by
said defendant.

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XI. That on October 18, 1926, the plaintiff W. Z. Smith formally lodged with the defendant Director of the Bureau of
Commerce and Industry his protest, and opposed said attempted incorporation, by the defendants Henry Herman,
Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, of the `Western Electric Company, Inc.,' as a
domestic corporation, upon the ground among others, that the corporate name by which said defendants desire to be
known, being identical with that of the plaintiff Western Equipment and Supply Company, will deceive and mislead the
public purchasing electrical and telephone apparatus and supplies. A copy of said protest is hereunto annexed, and
hereby made a part hereof, marked Exhibit A.
XII. That the defendant Fidel A. Reyes, Director of the Bureau of Commerce and Industry has announced to these
plaintiffs his intention to overrule the protest of plaintiffs, and to issue to the other defendants a certificate of
incorporation constituting said defendants a body politic and corporate under the name "Western Electric Company,
Inc.," unless restrained by this Honorable Court.
XIII. That the issuance of a certificate of incorporation in favor of said defendants under said name of "Western Electric
Company, Inc.," would, under the circumstances hereinbefore stated, constitute a gross abuse of the discretionary
powers conferred by law upon the defendant Director of the Bureau of Commerce and Industry.
XIV. That the issuance of said certificate of incorporation would, if carried out, be in violation of plaintiff's rights and
would cause them irreparable injury which could not be compensated in damages, and from which petitioner would
have no appeal or any plain, speedy and adequate remedy at law, other than that herein prayed for.
They prayed for a temporary injunction, pending the final decision of the court when it should be made permanent, restraining the
issuance of the certificate of incorporation in favor of the defendants under the name of Western Electric Company, Inc., or the
use of that name for any purpose in the exploitation and sale of electric apparatus and supplies. The preliminary writ was issued.
For answer the defendant Fidel A. Reyes, as Director of the Bureau of Commerce and Industry, admits the allegations of
paragraphs 1, 2, 3 and 4 of the complaint, and as to paragraphs 5, 6 and 7, he alleges that he has no information upon which to
form a belief, and therefore denies them. He admits the allegations of paragraph 8, and denies paragraph 9. He denies the first
part of paragraph 10, but admits that an application for a license to do business was filed by the Western Electric Company, Inc.,
as alleged. He admits paragraphs 11 and 12, and denies paragraphs 13 and 14, and further alleges that the present action is
prematurely brought, in that it is an attempt to coerce his discretion, and that the mere registration of the articles of incorporation
of the locally organized Western Electric Company, Inc., cannot in any way injure the plaintiffs, and prays that the complaint be
dismissed.
For answer the defendants Herman, O' Brien, Diaz, Mapoy and Zamora admit the allegations of paragraphs 1, 2, 3, 4 and 5 of
the complaint, and deny paragraph 7, but allege that on October 15, 1926, the articles of incorporation in question were
presented to the Director of the Bureau of Commerce and Industry for registration. They deny paragraphs 9 and 10, except as to
the filing of the application. They admit the allegations made in paragraph 11, but alleged that W. Z. Smith was without any right
or authority. Admit the allegations of paragraph 12, but deny the allegations of paragraphs 13 and 14, and allege that the
Western Electric Company, Inc., has never transacted business in the Philippine Islands; that its foreign business has been
turned over to the International Standard Electric Corporation; that the action is prematurely brought; and that the registration of
the articles of incorporation in question cannot in any way injure plaintiffs.
Wherefore, such defendants pray that the preliminary injunction be dissolved, and plaintiffs' cause of action be dismissed, with
costs.
The case was tried and submitted upon the following stipulated facts:

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Now come the parties plaintiff and defendants in the above entitled cause, by their respective undersigned attorneys,
and for the purpose of this action, agree that the following facts are true:
I. That the Western Equipment and Supply Company is a foreign corporation, organized under the laws of the State of
Nevada, United States of America; that the Western Electric Company, Inc., is likewise a foreign corporation organized
under the laws of the State of New York, United States of America; and that the plaintiff W. Z. Smith and Felix C.
Reyes, are both of lawful age and residents of the City of Manila, Philippine Islands.
II. That the defendant Fidel A. Reyes is the duly appointed and qualified Director of the Bureau of Commerce and
Industry and as such Director is charge with the duty of issuing and/or denying the issuance of certificates of
incorporation to persons filing articles of incorporation with the Bureau of Commerce and Industry.
III. That the defendants, Henry Herman, Peter O' Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora are all of
lawful age and all residents of the City of Manila, Philippine Islands.
IV. That on or about May 4, 1925, the plaintiff, the Western Equipment and Supply Company, through its duly
authorized agent, the plaintiff, Felix C. Reyes, applied to the defendant Director of the Bureau of Commerce and
Industry for the issuance of a license to engage in business in the Philippine Islands and on May 20, 1926, said
defendant issued in favor of said plaintiff a provisional license for that purpose which was permanent on August 23,
1926.
V. That the plaintiff, Western Electric Company, Inc., has ever been licensed to engage in business in the Philippine
Islands, and has never engaged in business therein.
VI. That from and since the issuance of said provisional license of May 20, 1926, to the plaintiff, Western Equipment
and Supply Company, said plaintiff has been and still is engaged in importing and selling in the Philippine Islands
electrical and telephone apparatus and supplies manufactured by the plaintiff Western Electric Company, Inc. (as well
as those manufactured by other factories), said Western Equipment and Supply Company's offices in the City of Manila
being at No. 600 Rizal Avenue, and at the time of the filing of the complaint herein was under the charge and
management of the plaintiff, Felix C. Reyes, its then resident agent in the Philippine Islands.
VII. That the electrical and telephone apparatus and supplies manufactured by the plaintiff, Western Electric Company,
Inc., have been sold in foreign and interstate commerce for the past fifty years, and have acquired high trade
reputation throughout the world; that at the present time the greater part of all telephone equipment used in Manila,
and elsewhere in the Philippine Islands, was manufactured by the said plaintiff, Western Electric Company, Inc., and
sold by it for exportation to the Philippine Islands; that such equipment, manufactured by the said Western Electric
Company, Inc., and bearing its trade-mark "Western Electric" or its corporate name is generally sold and used
throughout the world; that a Philippine Corporation known as the `Electric Supply Company, Inc.,' has been importing
the manufactures of the plaintiff, Western Electric Company, Inc., into the Philippine Islands for the purpose of selling
the same therein, and that the defendant Henry Herman, is the President and General Manager of said corporation.
VIII. That the words `Western Electric' have been registered by the plaintiff, Electric Company, Inc., as a trade-mark
under the provisions of the Act of Congress of February 20, 1905, in the office of the Commissioner of the Patents at
Washington, District of Columbia, and said trade-mark remains in force as the property of said plaintiff to this date.
IX. That the plaintiff, Western Electric Company, Inc., is advertising its manufacturers in its own name by means of
advertising its manufactures in its own name by means of advertisements inserted in periodicals which circulate
generally throughout the English and Spanish speaking portions of the world, and has never abandoned its corporate

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name or trade-mark, but, on the contrary, all of its output bears said corporate name and trade-mark, either directly
upon the manufactured article or upon its container, including that sold and used in the Philippine Islands.
X. That on October 15, 1926, the defendants Henry Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio
Zamora signed and filed articles of incorporation with the defendant, Fidel A. Reyes, as Director of the Bureau of
Commerce and Industry, with the intention of organizing a domestic corporation under the Philippine Corporation Law
to be known as the "Western Electric Company, Inc.," for the purpose, among other things or manufacturing, buying,
selling and dealing generally in electrical and telephone apparatus and supplies; that said defendants Peter O'Brien,
Felipe Mapoy and Artemio Zamora are employees of the said Electrical Supply Company, of which said defendant,
Henry Herman, is and has been, during the period covered by this stipulation, the president and principal stockholder;
and that they, together with the said defendant Herman, signed said articles of incorporation for the incorporation of a
domestic company to be known and the "Western Electric Company, Inc.," with full knowledge of the existence of the
plaintiff Western Electric Company, Inc., of its corporate name, of its trade-mark, "Western Electric," and of the fact that
the manufactures of said plaintiff bearing its trade-mark or corporate name are in general use in the Philippine Islands
and in the United States.
XI. That on October 20, 1926, the plaintiff, W. Z. Smith, was authorized by the Board of Directors of the plaintiff,
Western Electric Company, Inc., to take all necessary steps for the issuance of a license to said company to engage in
business in the Philippine Islands, and to accept service of summons and process in all legal proceedings against said
company, and on October 21, 1926, said plaintiff, W. Z. Smith, filed a written application for the issuance of such
license with the defendant Director of the Bureau of Commerce and Industry, which application, however, has not yet
been acted upon by said defendant.
XII. That on October 18, 1926, the Philippine Telephone and Telegraph Co., by its general manager, the plaintiff W. Z.
Smith. lodged with the defendant Director of the registration of the proposed corporation by the defendants Henry
Herman, Peter O'Brien, Manuel B. Diaz, Felipe Mapoy and Artemio Zamora, to be known as the Western Electric
Company, Inc., as a domestic corporation under the Philippine Corporation Law. A copy of said protest, marked Exhibit
A, hereunto attached and is hereby made a part of this stipulation.
XIII. That the defendant, Fidel A. Reyes, Director of the Bureau of Commerce and Industry, announced his intention of
overrule said protest and will, unless judicially restrained therefrom, issue to the other defendants herein a certificate of
incorporation, constituting said defendants a Philippine body politic and corporate under the name of "Western Electric
Company, Inc."
XIV. That the defendant, Henry Herman, acting in behalf of said corporation, Electrical Supply Company, Inc., has
written letters to Messrs. Fisher, DeWitt, Perkins & Brady, acting as attorneys for plaintiff, Western Electric Company,
Inc., copies of which are hereunto annexed and hereby made a part hereof, marked Exhibits B, C and D.
XV. That the defendants, while admitting the facts set out in paragraph VII and IX regarding the business done,
merchandise sold and advertisements made throughout the world by the plaintiff Western Electric Company, Inc., insist
and maintain that said allegations of fact are immaterial and irrelevant to the issues in the present case, contending
that such issued should be determined upon the facts as they exist in the Philippine Islands alone.
To which were attached Exhibits A, B, C and D.
The lower court rendered judgment for the plaintiffs as prayed for in their complaint, and made the temporary injunction
permanent, from which the defendants appeal and assign the following errors:

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The lower court erred:
(1) When it granted the writ of preliminary injunction (pages 9 and 10, record; 12 to 14, B. of E.).
(2) When it held that the Western Electric Co., Inc., a foreign corporation, had a right to bring the present suit in courts
of the Philippine Islands, wherein it is unregistered and unlicensed, as was done in the decision upon the petition for a
preliminary injunction (pages 97 to 115 record), and in repeating such holding in the final decision herein (pages 51
and 52, B. of E.), as well as in basing such holding upon the decision of this Honorable Supreme Court in MarshallWells Co. vs. Henry W. Elser & Co. (46 Phil., 70.)
(3) When it found that the plaintiff, the Western Electric Co., Inc., has any such standing in the Philippine Islands or
before the courts thereof as to authorize it to maintain an action therein under the present case.
(4) When it found that the other plaintiffs herein have any rights in the present controversy or any legal standing
therein.lawphi1.net
(5) In ordering the issuance of a permanent injunction restraining the defendant Fidel A. Reyes, as Director of the
Bureau of Commerce and Industry, from issuing a certificate of incorporation in favor of the other defendants under the
name of "Western Electric Co., Inc.," or any similar name, and restraining the other defendants from using the name
"Western Electric Co., Inc.," or any like name, in the manufacture of sale of electrical and telephone apparatus and
supplies or as a business name or style in the Philippine Islands.
(6) In finding that the purpose of the defendants, other than the defendant Fidel A. Reyes, in seeking to secure the
registration of a local corporation under the name of "Western Electric Co., Inc.," was "certainly not an innocent one,"
thereby imputing to said defendants a fraudulent and wrongful intent.
(7) In failing to dismiss plaintiffs' complaint with costs against the plaintiffs.
(8) In overruling and denying defendants' motion for a new trial.

JOHNS, J.:
The appellants say that the two questions presented are:
Has a foreign corporation, which has never done business in the Philippine Islands, and which is unlicensed and
unregistered therein, any right to maintain an action to restrain residents and inhabitants of the Philippine Islands from
organizing a corporation therein bearing the same name as such foreign corporation?
Has such foreign corporation a legal right to restrain an officer of the Government of the Philippine Islands, i. e., the
Director of the Bureau of Commerce and Industry from exercising his discretion, and from registering a corporation so
organized by residents and inhabitants of the Philippine Islands?
As to the first question, the appellees say that it should be revised, so as to read as follows:
Has a foreign corporation which has never done business in the Philippine Islands, and which is unlicensed and
unregistered therein, any right to maintain an action to restrain residents and inhabitants of the Philippine Islands from

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organizing a corporation therein bearing the same name as such foreign corporation, when said residents and
inhabitants have knowledge of the existence of such foreign corporation, having dealt with it, and sold its
manufactures, and when said foreign corporation is widely and favorably known in the Philippine Islands through the
use therein of its products bearing its corporate and trade name, and when the purpose of the proposed domestic
corporation is to deal in precisely the same goods as those of the foreign corporation?
As to the second, the appellees say that the question as propounded by the appellants is not fully and fairly stated, in that it
overlooks and disregards paragraphs 12 and 13 of the stipulation of facts, and that the second question should be revised to
read as follows:
Has an unregistered corporation which has not transacted business in the Philippine Islands, but which has acquired a
valuable goodwill and high reputation therein, through the sale, by importers, and the extensive use within the Islands
of products bearing either its corporate name, or trade-mark consisting of its corporate name, a legal right to restrain
an officer of the Commerce and Industry, with knowledge of those facts, from issuing a certificate of incorporation to
residents of the Philippine Islands who attempt to organize a corporation for the purpose of pirating the corporate name
of such foreign corporation, of engaging in the same business as such foreign corporation, and of defrauding the public
into thinking that its goods are those of such foreign corporation, and of defrauding such foreign corporation and its
local dealers of their legitimate trade?
We agree with the revisions of both questions as made by the appellees, for the reason that they are more in accord with the
stipulated facts. First, it is stipulated that the Western Electric Company, Inc., "has never engaged in business in the Philippine
Islands."
In the case of Marshall-Wells Co. vs. Henry W. Elser & Co. (46 Phil., 70, 76), this court held:
The noncompliance of a foreign corporation with the statute may be pleaded as an affirmative defense. Thereafter, it
must appear from the evidence, first, that the plaintiff is a foreign corporation, second, that it is doing business in the
Philippines, and third, that it has not obtained the proper license as provided by the statute.
If it had been stipulated that the plaintiff, Western Electric Company, Inc., had been doing business in the Philippine Islands
without first obtaining a license, another and a very different question would be presented. That company is not here seeking to
enforce any legal or contract rights arising from, or growing out of, any business which it has transacted in the Philippine Islands.
The sole purpose of the action:
"Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through
the natural development of its trade, established themselves." And it contends that its rights to the use of its corporate and trade
name:
Is a property right, a right in rem, which 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 Trade-Marks and cases cited; secs. 21-22, Hopkins on
Trade-Marks, Trade Names and Unfair Competition and cases cited." That point is sustained by the authorities, and is well stated
in Hanover Star Milling Co. vs. Allen and Wheeler Co. (208 Fed., 513), in which they syllabus says:
Since it is the trade and not the mark that is to be protect, a trade-mark acknowledges no territorial boundaries of
municipalities or states or nations, but extends to every market where the trader's goods have become known and
identified by the use of the mark.

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In Walter E. Olsen & Co. vs. Lambert (42 Phil., 633, 640), this court said:
In order that competition in business should be unfair in the sense necessary to justify the granting of an injunction to
restrain such competition it must appear that there has been, or is likely to be, a diversion of trade from the business of
the complainant to that of the wrongdoer, or methods generally recognized as unfair; . . . In most, if not all, of the cases
in which relief has hitherto been granted against unfair competition the means and methods adopted by the wrongdoer
in order to divert the coveted trade from his rival have been such as were calculated to deceive and mislead the public
into thinking that the goods or business of the wrongdoer are the goods or business of the rival. Diversion of trade is
really the fundamental thing here, and if diversion of trade be accomplished by any means which according to
accepted legal canons are unfair, the aggrieved party is entitled to relief.
In Shaver vs. Heller & Merz Co. (48 C.C. A., 48; 108 Fed., 821; 65 L. R. A., 878,. 881), it is said:
The contention of counsel for the appellants here is a confusion of the bases of two classes of suits, those for
infringements of trade-marks, and those for unfair competition in trade. . . . In the former, title to the trade-marks is
indispensable to a good cause of action; in the latter, no proprietary interest in the words, names, or means by which
the fraud is perpetrated is requisite to maintain a suit to enjoin it. It is sufficient that the complainant is entitled to the
custom the goodwill of a business, and that this goodwill is injured, or is about to be injured, by the palming off of
the goods of another as his.
The remaining question as to the jurisdiction of the courts over the defendant Reyes, as Director of the Bureau of Commerce and
Industry, has been adversely decided to his contention in the case of Asuncion vs. De Yriarte (28 Phil., 67), in which, among
other things, it is said:
If, therefore, the defendant erred in determining the question presented when the articles were offered for registration,
then that error will be corrected by this court in this action and he will be compelled to register the articles as offered. If,
however, he did not commit an error, but decided that question correctly, then, of course, his action will be affirmed to
the extent that we will deny the relief prayed for.
It is very apparent that the purpose and intent of Herman and his associates in seeking to incorporate under the name of
Western Electric Company, Inc., was to unfairly and unjustly compete in the Philippine Islands with the Western Electric
Company, Inc., in articles which are manufactured by, and bear the name of, that company, all of which is prohibited by Act No.
666, and was made known to the defendant Reyes by the letter known in the record to the defendant Reyes by the letter known
in the record as Exhibit A.
As appellees say:
These defendant, Herman and his associates, are actually asking the Government of the Philippine Island to permit
them to pirate the name of the Western Electric Company, Inc., by incorporating thereunder, so that they may deceive
the people of the Philippine Islands into thinking that the goods they propose to sell are goods of the manufacture of
the real Western Electric Company. It would be a gross prostitution of the powers of government to utilize those powers
in such a way as to authorize such a fraud upon the people governed. It would be the grossest abuse of discretion to
permit these defendants to usurp the corporate mane of the plaintiff, and to trade thereupon in these Islands, in fraud
of the Philippine public and of the true owners of the name and the goodwill incidental thereto.
The plaintiff, Western Electric Company, Inc., has been in existence as a corporation for over fifty years, during which time it has
established a reputation all over the world including the Philippine Islands, for the kind and quality of its manufactured articles,
and it is very apparent that the whole purpose and intent of Herman and his associates in seeking to incorporate another

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corporation under the identical name of Western Electric Company, Inc., and for the same identical purpose as that of the
plaintiff, is to trespass upon and profit by its good name and business reputation. The very fact that Herman and his associates
have sought the use of that particular name for that identical purpose is conclusive evidence of the fraudulent intent with which it
is done.
The judgment of the lower court is affirmed, with costs. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Villamor, Ostrand and Villa-Real, JJ., concur
Sterling Products Vs. Farbenfabriken Bayer
GR L-19906, 30 April 1969; En Banc, Sanchez (J).
Facts: The Bayer Cross in circle trademark was registered in Germany in 1904 to Farbenfabriken
vorm.Friedr. Bayer (FFB), successor to the original Friedr. Bauyer et. Comp., and predecessor to FarbenfabrikenBayer
aktiengessel craft (FB2).
The Bayer, and Bayer Cross in circle trademarks were acquired by sterlingDrug Inc. when it acquired FFBs subsidiary
Bayer Co. of New York as a result of the sequestration of its assets by the US Alien Property Custodian
during World War I. Bayer products have been known in Philippines by the close of the 19thcentury. Sterling Drugs,
Inc., however, owns the trademarks Bayer in relation to medicine. FBA attempted to register its chemical
products with the Bayer Cross in circle "trademarks. Sterling Products International and FBA seek to exclude each other
from use of the trademarks in the Philippines.
The trial court sustained SPIs right to use the Bayer trademark for medicines and directedFBA to add distinctive word(s) in their
mark to indicate their products come from Germany. Both appealed.
Issue: Whether SPIs ownership of the trademarks extends to products not related to medicine.
Held:
No. SPIs certificates of registration as to the Bayer trademarks registered in the Philippines cover medicines only. Nothing in the
certificates include chemicals or insecticides. SPI thus may not claim first use of the trademarks prior to the registrations thereof
on any product other than medicines. For if otherwise held, a situation may arise whereby an applicant may be
tempte3d to register a trademark on any and all goods which his mind may conceive even if he had never intended to
use the trademark for the said goods. Omnibus registration is not contemplated by the Trademark Law. The net result of the
decision is that SPI may hold on its Bayer trademark for medicines and FBA may continue using the same
trademarks for insecticide and other chemicals, not medicine. The formula fashioned by the lower court avoids the mischief of
confusion of origin, and does not visit FBA with reprobation and condemnation. A statement that its product
came from Germany anyhow is but a statement of fact,

G.R. No. L-19906

April 30, 1969

STERLING PRODUCTS INTERNATIONAL, INCORPORATED, plaintiff-appellant,


vs.
FARBENFABRIKEN BAYER AKTIENGESELLSCHAFT, and ALLIED MANUFACTURING AND TRADING CO.,
INC., defendant-appellants.
SANCHEZ, J.:

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In this, a case for trademark infringement and unfair competition, each of the principal suitors, namely, plaintiff Sterling
Products International, Inc.,1 and defendant Farbenfabriken Bayer Aktiengesellschaft,2 seeks to exclude the other from use in the
Philippines of the trademarks BAYER and BAYER CROSS IN CIRCLE. SPI asks this Court to strike down FBA's registration of
BAYER CROSS IN CIRCLE covering industrial and agricultural products insecticides and other chemicals, not medicines
from the supplemental register. FBA, for its part, prays for the cancellation from the principal register of SPI's certificates of
registration of the trademarks aforesaid for medicines.
Contending parties are doing business in the Philippines. SPI markets Bayer Aspirin, Aspirin for Children and Cafiaspirina.
The BAYER and BAYER CROSS IN CIRCLE are being used by SPI in the Philippines only for said products Bayer Aspirin,
Cafiaspirina and Bayer Aspirin for Children. On the containers (bottles or printed celophane strips, which, in turn, are placed in
cardboard boxes) of Bayer Aspirin, Aspirin for Children and Cafiaspirina, SPI features the trademarks BAYER and BAYER
CROSS IN CIRCLE. FBA thru Allied Manufacturing & Trading Co., Inc. 3 distributes "Folidol" and other industrial and agricultural
chemicals. FBA's "Folidol" (in steel or fiber drums or aluminum containers) displays a replica of SPI's trademark BAYER CROSS
IN CIRCLE; on the tin cap and label of the container.
The conflict apparent, suit followed.
The trial court declared itself "in favor of the solution that favors division of the market rather than monopoly." But to avoid
confusion, it directed defendants "to add a distinctive word, or words in their mark to indicate that their products come from
Germany." The judgment below reads:
IN VIEW WHEREOF, both complaint and counterclaim are dismissed without costs; the Court sustains plaintiff's right to
use the Bayer trademark for its medicines, and defendants' right to use it for chemicals, insecticides, and other products not
medicines, but the Court orders defendants to add a distinctive word or words in their mark to indicate that their products come
from Germany.4
Both parties appealed: Plaintiff, insofar as the judgment "dismisses plaintiff's complaint and sustains defendants' right to
use the BAYER trademark for their chemicals, insecticides, and other products not medicines"; 5 and defendants, from the
portions of the aforementioned decision particularly those which dismiss the counterclaim of the defendants for the cancellation
of the registrations by the plaintiff of the trademarks Bayer and Bayer Cross and which allow the plaintiff "to continue using the
Bayer trademarks for medicines."6
And now to the facts.
The word BAYER was the surname of Friedrich Bayer, a German, who, on August 1, 1868, organized a drug company
bearing his name Friedr Bayer et comp. at Barmen, Germany. The company was at first engaged in the manufacture and
sale of chemicals. At about the year 1888 it started to manufacture pharmaceutical preparations also. A change of name from
Friedr Bayer to Farbenfabriken vorm. Friedr. Bayer & Co. (FFB, for short) effective July 1, 1881 was followed in 1912 by a
change of principal place of business from Elberfeld to Luverkusen, Germany. 7 Its products came to be known outside Germany.
With the discovery in 1899 of the Bayer Aspirin, the mark BAYER acquired prestige. The time was ripe to register the trademarks.
The record, however, does not clearly show when the word BAYER was registered as a trademark in Germany. The BAYER
CROSS IN CIRCLE trademark was registered in Germany on January 6, 1904 No. 65777. 8 It was intended to be used on
"medicines for human beings and animals, disinfectants preservatives, tar dyestuffs and chemical preparations for dyes and for
photographic purposes."9 This registered trademark consists of the BAYER CROSS encircled by the company's name
Farbenfabriken vorm. Friedr. Bayer & Co. Elberfeld.
When the company was merged with other German companies in 1925 to form the I.G. Farbenindustrie, the name of the
former company was deleted from the trademark and what remained was the present BAYER CROSS IN CIRCLE. A new

Property Cases - 11
registration was effected on June 17, 1929 in Germany and for which it was issued a certificate with serial no. 404341. The
trademark BAYER CROSS IN CIRCLE was registered by FFB and its subsidiaries in other parts of the world, viz, in Norway,
England, Denmark, and Argentina in 1904; in Japan and the United States in 1908; in Spain in 1911; in Peru in 1913.
Sometime in 1895, FFB established a subsidiary in New York, United States. It was named Farbenfabriken of Elberfeld Co.
Its purpose was to sell FFB's products in the United States and Canada. It was this subsidiary that registered the trademarks
BAYER and BAYER CROSS IN CIRCLE in the United States between the years 1907-1908.
Sometime in 1913, FFB organized another subsidiary The Bayer Co., Inc. of New York. This new subsidiary was
authorized by FFB to negotiate for and acquire the trademarks, goodwill, assets and property of Farbenfabriken of Elberfeld Co.
By an agreement dated June 12, 1913 (Exh. 106) Bayer of New York purchased for the sum of US $750,000.00 Farbenfabriken
of Elberfeld Co.'s "right for the sale in the United States and Canada of the drugs, chemicals, pharmaceuticals and any and all
other products and articles manufactured and (or) controlled by Leverkusen" (FFB) and its "trademarks, good will and other
assets and property."
On April 6, 1917,10 the United States declared war on Germany. Pursuant to the provisions of the Trading with the Enemy
Act, the Alien Property Custodian classified The Bayer Co., Inc. of New York as an enemy-controlled corporation. Hence, the
Alien Property Custodian seized its assets about the early part of 1918. Between December 1918 and January 1919, all the
assets of The Bayer Co., Inc. of New York were sold by the Alien Property Custodian to Sterling Drug, Inc. for the sum of US
$5,310,000.00. The Bayer Co., Inc. of New York then became a subsidiary of Sterling Drug, Inc. Winthrop Chemical Co., Inc. was
later organized as a new subsidiary of Sterling Drug, Inc. to manufacture and sell the physicians' drugs which had been
acquired" by the purchase of the Bayer Co., Inc. Winthrop's operation was evidently hampered because 'the Germans had kept
manufacturing processes secret, so that the manufacture of physicians' drugs on a commercial scale became an almost
insoluble problem.11
Sterling Drug, Inc. secured registrations of the BAYER trademarks in different countries of the world. 12
It would appear that the trademark BAYER for medicines was known in the Philippines about the close of the 19th century.
This appears on page 88 of the Revista Farmaceutica de Filipinos Ao I, Numero 7, 3 de Julio de 1893. Before World War I,
BAYER products entering the Philippines came from Germany.
In 1922, a worldwide conflict of interests occurred between Farbenfabriken vorm. Friedrich Bayer & Co. and The Bayer
Co., Inc. of New York, in reference to the trademarks BAYER and BAYER CROSS IN CIRCLE as they were applied to various
products.
Two agreements resolved this conflict, both executed on April 9, 1923 in London, England: one, between FFB and
Winthrop Chemical Co., Inc. (Exh. 66), and the other between FFB and Bayer New York (Exh. WWW). Under the terms of the
agreement with Winthrop Chemical Co., Inc., FFB stipulated, amongst others: (1) not to contest anymore Winthrop's right over
the trademarks BAYER and BAYER CROSS IN CIRCLE; (2) to discontinue the use of said trademarks in the United States which
was understood to include the Philippines under par. 16 of said agreement; and (3) to disclose all secrets of other processes
relating to the manufacture of pharmaceuticals.
Paragraph 26 of the FFB Bayer New York agreement reads
26. NEW YORK (The Bayer Company, Inc. of New York) agree that they will not sell or offer for sale any goods other than
hereunder or those they may market for Winthrop as hereinbefore provided and other than Aspirin and compounds of Aspirin
which New York shall continue to market for their own account in the United States of America, Puerto Rico, the Philippines and
Hawaiian Islands and the Panama Zone.13

Property Cases - 12
In 1925, Farbenfabriken vorm. Friedrich Bayer & Co. became I.G. Farbenindustrie, AG. This necessitated a new
agreement incorporating Exh. 66 with modifications. Said new agreement was signed on November 15, 1926 between I.G.
Farbenindustrie and Winthrop.
On September 5, 1941, in the anti-trust suits against Sterling Drug, Inc., Winthrop Chemicals Co. and The Bayer Co., of
New York, two consent decrees [Exh. 68 (No. 15-363) and Exh. 69: (No. 15-364)] were promulgated by the U.S. District Court for
Southern New York. Said consent decrees declared the April 9 1923, cartel agreements violative of the U.S. anti-trust laws. One
reason given is that the German company, FFB (later I.G. Farbenindustrie) FBA's predecessors was excluded from the
U.S. pharmaceutical market. The sentence, however, contains a saving clause, thus
The Bayer contract of 1923, the Bayer contract of 1926, and any and all amendments or supplements thereto are declared
and adjudged to be unlawful under the Anti-Trust Laws of the United States, and the defendants Bayer and Sterling, and their
respective successors an subsidiaries, or any of them, be and they are hereby enjoined and restrained from carrying out or
enforcing any of the aforesaid contracts, or any supplements, amendments or modifications thereof, or from paying to I.G.
Farben, its subsidiaries, successors, or assigns, any royalties or share of profits pursuant to said contracts with respect to sales
following the effective date of this decree.
Provided, however, that nothing herein contained in this Sec. III shall:lawphi1.nt
xxx

xxx

xxx

Affect in any way the rights or title of the defendant Bayer, its successors, subsidiaries or assigns, in or to the name
"Bayer" and the "Bayer Cross" mark or registrations thereof, or
Affect or diminish any right, title or interest of said defendants, their successor subsidiaries or assigns, in or to or under any
heretofore acquired and presently existing patents, patent applications, patent licenses, trade-marks, trade-names (such as the
name "Bayer" and the "Bayer Cross" mark and registrations thereof), processes or formulae relating to the manufacturing,
processing, use or sale of aspirin, aspirin compounds, pharmaceutical or other drug or chemical products, or impair any rights or
remedies of said defendants, their successors, subsidiaries or assigns, provided by statute or convention, and by suits for
damages, injunction or other remedy with respect to any such patents, patent applications, patent licenses or trademarks.... 14
Meanwhile, in 1935, plaintiff Sterling Products International, Inc. (SPI) a Delaware corporation, a subsidiary of Sterling
Drug, Inc. of New York, was issued a license to do business in the Philippines. 15 The trademarks BAYER and BAYER CROSS IN
CIRCLE were then registered in the Philippines under the old Trademark Law (Act 666) by The Bayer Co., Inc.; the BAYER
CROSS IN CIRCLE trademark on April 18, 1939 for which it was issued Certificate of Registration No. 13081; the BAYER
trademark on April 22, 1939 for which it was issued Registration Certificate No. 13089. These trademark rights were assigned to
SPI on December 30, 1942 and the assignment was recorded in the Philippines Patent Office on March 5, 1947. With the
passage of Republic Act 166 repealing the old Trademark Law (Act 666), SPI was issued by the Philippines Patent Office on
June 18, 1948 two new certificates of registration: No. 1260-S for BAYER CROSS IN CIRCLE; No. 1262-S for BAYER. The
registration of these trademarks was only for "Medicines".
Came World War II. I.G. Farbenindustrie AG. was seized by the allied powers. In 1945, after World War II, I.G.
Farbenindustrie AG. was decartelized by the Allied High Commission. The unit known as Farbenfabriken Bayer was transferred
in 1953 to Farbenfabriken Bayer Aktiengesellschaft (FBA), one of the defendants in this case, which was organized in 1951.
Sometime in 1958, defendant Allied Manufacturing & Trading Co., Inc. (AMATCO) started selling FBA's products especially
"Folidol" a chemical insecticide which bears the BAYER CROSS IN CIRCLE trademark. 16

Property Cases - 13
On November 18, 1959, FBA applied for the registration of the BAYER CROSS IN CIRCLE trademark with the Philippines
Patent Office for animal and plant destroying agents. The examiner's report dated December 17, 1959 stated that the subject
mark appears to be similar to SPI's registered BAYER trademarks as covered by Certificates of Registration Nos. 1260-S and
1262-S. He concluded that "[r]egistration of applicant's mark is proscribed by Section 4-d of the Statute because it would cause
confusion or mistake or [to] deceive purchasers."17 This action of the Philippines Patent Office drew a reply from FBA. In its letter
dated February 1, 1960 applicant FBA, thru counsel, said that it "offers no question or objection to the assertion of the Examiner
that the registrant's mark and that of the applicant are similar to each other. It emphasized the fact that it was seeking registration
in the Supplemental Register. Its concluding statement runs thus:.
Being aware of the duties and obligations of a trademark user in the Philippines and the penalties provided for in the
pertinent law on tradermarks and being aware also that Supplemental Registration is not a prima facie evidence of ownership of
mark but merely a recordation of the use as in fact the mark is actually being used by the applicant in the Philippines, it is
respectfully urged that this [application] be given due course. 18
On February 25, 1960, FBA was issued a certificate of registration in the Supplemental Register, SR-304.
We now grapple with the problems raised in the separate appeals.
1. A rule widely accepted and firmly entrenched because it has come down through the years is that actual use in
commerce or business is a prerequisite to the acquisition of the right of ownership over a trademark. This rule is spelled out in
our. Trademark Law thus:
SEC. 2-A. Ownership of trade-marks, trademark names and service-mark; how acquired. Anyone who lawfully produces
or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by
actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his, exclusive use a
trademark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business, or service
from the merchandise, business or service of others. The ownership or possession of a trademark, trade-name, service mark,
heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to
the same extent as are other property rights known to the law. (As inserted by Section 1 of Republic Act 638)
It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right grows out of
their actual use."19 Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but
these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that
Purchasers have come to understand the mark as indicating the origin of the wares. 20 Flowing from this is the trader's right to
protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a
trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however,
perfect a trademark right.
The BAYER trademarks registered in the Philippines to which plaintiff SPI may lay claim, as correctly stated in the decision
below, are those which cover medicines only. For, it was on said goods that the BAYER trademarks were actually used by it in
the Philippines. Therefore, the certificates of registration for medicines issued by the Director of Patents upon which the
protection is enjoyed are only for medicines. Nothing in those certificates recited would include chemical or insecticides.
But plaintiff insists that the statement of the applicant (The Bayer Co., Inc.) in its registrations of the BAYER marks states
that "the merchandise for which the trademark is appropriated is d. Chemicals, Medicines and Pharmaceutical Preparations."
Plaintiff's position is that such statement determines the goods for which said marks had been registered. Validity does not attach
to this proposition. First, the statement itself admits that "the particular description of the articles comprised in said class (d) on
which the trademark is used is Medicines."21 It is not used forchemicals.

Property Cases - 14
Then, Section 11 of the Trademark Law requires that the certificate of registration state "the particular goods . . . for which
it is registered." This is controlling. Under Section 11 aforesaid, likewise to be entered in the certificate of registration is "the date
of the first use in commerce or business. SPI may not claim "first use" of the trademarks prior to the registrations thereof on any
product other than medicines.
Besides, Section 7 of the same Trademark Act directs that upon the filing of the application and the payment of the
required fee, the "Director [of Patents] shall cause an examination of the application" for registration of the trademark "to be
made, and, if on such examination it shall appear that the applicant is entitled to registration, the Director . . . shall cause the
mark . . . to be published in the Official Gazette." This examination, it would seem to us, is necessary in order that the Director of
Patents may be satisfied that the application conforms to the requirement ofactual use in commerce of the trademark in Section
2 and 2-A of the Trademark Law; and that the statement in said application as to the "first use" thereof and "the goods . . . in
connection with which the mark . . . is used" (Section 5) is true.
Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may
arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he
had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by
our Trademark Law.
Because of this and of the fact that the Bayer trademarks were never used in the Philippines by plaintiff except for
medicines Aspirin, Aspirin for Children and Cafiaspirina we find ourselves unwilling to draw a hard and fast rule which
would absolutely and under all circumstances give unqualified protection to plaintiff against the use of said trademarks by all
others on goods other than medicines.
2. Neither will the 1927 registration in the United States of the BAYER trademark for insecticides serve plaintiff any. The
United States is not the Philippines. Registration in the United States is not registration in the Philippines. At the time of the
United States registration in 1927, we had our own Trademark Law, Act No. 666 aforesaid of the Philippine Commission, which
provided for registration here of trademarks owned by persons domiciled in the United States.
What is to be secured from unfair competition in a given territory is the trade which one has in that particular territory.
There is where his business is carried on; where the goodwill symbolized by the trademark has immediate value; where the
infringer may profit by infringement.
There is nothing new in what we now say. Plaintiff itself concedes 22 that the principle of territoriality of the Trademark Law
has been recognized in the Philippines, citing Ingenohl vs. Walter E. Olsen, 71 L. ed. 762. As Callmann puts it, the law of
trademarks "rests upon the doctrine of nationality or territoriality." 23
Accordingly, the 1927 registration in the United States of the BAYER trademark would not of itself afford plaintiff protection
for the use by defendants in the Philippines of the same trademark for the same or different products.
3. A question basic in the field of trademarks and unfair competition is the extent to which a registrant of a trademark
covering one product may invoke the right to protection against the use by other(s) of the same trademark to identify
merchandise different from those for which the trademark has been appropriated.
Plaintiff's trenchant claim is that it should not be turned away because its case comes within the protection of theconfusion
of origin rule. Callmann notes two types of confusion. The first is the confusion of goods "in which event the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was purchasing the other." In which case, "defendant's
goods are then bought as the plaintiff's, and the poorer quality of the former reflects adversely on the plaintiff's reputation." The
other is the confusion of business: "Here though the goods of the parties are different, the defendant's product is such as might

Property Cases - 15
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." 24
A judicial test giving the scope of the rule of confusion of origin is Ang vs. Teodoro (December 14, 1942), 74 Phil. 50.
Briefly, the facts of the just cited case are as follows: Toribio Teodoro, at first in partnership with Juan Katindig and later as sole
proprietor, had continuously used "Ang Tibay" both as trademark and as tradename in the manufacture and sale of slippers,
shoes and indoor baseballs since 1910. He formally registered it as a trademark on September 29, 1915 and as a tradename on
January 3, 1933. Ana L. Ang registered the same trademark "Ang Tibay" for pants and shirts on April 11, 1932 and established a
factory for the manufacture of said articles in 1937. Suit was lodged by Teodoro against Ang to cancel the latter's registration of
the trademark "Ang Tibay" and to perpetually enjoin her from using the said trademark on goods manufactured and sold by her.
The judgment of the trial court absolved defendant (Ana L. Ang) from the complaint with costs against the plaintiff. The Court of
Appeals reversed. On appeal by certiorari, we affirmed the judgment of the Court of Appeals. We there said:
"In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test employed
by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the
goods of the second user. Although two noncompeting articles may be classified under two different classes by the Patent Office
because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to
belong to the same class if the simultaneous use on them of identical or closely similar trademarks would be likely to cause
confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the
same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first
user made the second user's goods.
Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that
there can be unfair competition or unfair trading even if the goods are noncompeting, and that such unfair trading can cause
injury or damage to the first user of a given trademark, first, by prevention of the natural expansion of his business and, second,
by having his business reputation confused with and put at the mercy of the second user. When noncompetitive products are
sold under the mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by
its first user, inevitably results. The original owner is entitled to the preservation of the vauable link between him and the public
that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a wellknown trademark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation
and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection
between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the
same or similar mark. As trade has developed and commercial changes have come about, the law of unfair competition has
expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. The
owner of a trademark or trade-name has a property right in which he is entitled to protection, since there is damage to him from
confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give
emphasis to the unfairness of the acts and to classify and treat the issue as a fraud. 25
The thoughts expressed in Ang Tibay command respect Conduct of business should conform to ethical business
standards. Unfairness is proscribed. The invocation of equity is bottomed upon the injunction that no one should "reap where he
has not sown."26
Nonetheless, "[i]t has been emphasized that each case presents a unique problem which must be answered by weighing
the conflicting interests of the litigants."27 With this in mind, we are convinced that the case before us is not to be analogized with
Ang Tibay. The factual setting is different. His Honor, Judge Magno S. Gatmaitan (now Associate Justice of the Court of
Appeals), the trial judge, so found. He reached a conclusion likewise different. And the reasons, so well stated by His Honor, are
these:

Property Cases - 16
1st). It was not plaintiff's predecessor but defendant's namely Farbenfabriken or Bayer Germany that first introduced
the medical products into the Philippine market and household with the Bayer mark half a century ago; this is what the
Court gathers from the testimony of Frederick Umbreit and this is the implication even of Exhs. 48, 49, 66 and as
already shown a few pages back;28
2nd). There is thus reason plausible enough for defendant' plea that as Sterling was not the "originator" of the Bayer
mark, the rule in Ang vs. Teodoro, supra, is not applicable; and this is correct notwithstanding Exhs. 106 and 63 and
even giving unto these documents full force and virtue, because purchase of the assets of Elberfeld, defendants'
previous affiliate in New York, by Bayer of New York, even if that were to be held to include purchase of the Bayer
mark, did not make the purchaser Bayer of New York the originator of the mark; especially since Bayer of New York
was only another subsidiary of Bayer Germany or Farbenfabriken which was the real originator;
3rd). The Court is also impelled to believe that the evidence establishes that among the common people of the
Philippines the "Bayer" medicines come from Germany; this the Court deduces from the testimony of witness Florisa
Pestano who only reproduced the belief of her grandmother; the Court might as well say that plaintiff itself has not
discouraged that belief because the drug and its literature that came from the plaintiff and its affiliate would show that it
represented its medicines to have come from defendant 29 and were manufactured in Germany with that Bayer mark;
thus Exh. 7030 which is the price list of 1928 of Botica de Sta. Cruz on page 6 indicates that Winthrop Chemical
Company of New York, plaintiff's subsidiary was a distributor of I.G. Farbenindustrie, A.G. Leverkusen Germany;
Exh. 8031 which is a medical diary published by Winthrop for 1934 on page 148 manifested that the journal, "Practical
Therapeutics" was published by I.G. Farbenindustrie Aktiengesellachaft for Winthrop Chemical Company, Inc.; "with
particular reference to the pharmacological products, sera and vaccines originated and prepared in the laboratories of
the I.G. Farbenindustrie A.G."; and Exh. 79 a, b, c, d and e which are prospectuses for the medicines, Mitigal, Afridol,
Aspirins, Novalgina and My-Salvarsan32 showed that these products were manufactured for Winthrop by I.G.
Farbenindustrie; and then Exh. 81 the Revista Boie of 1928 would show that Winthrop represented itself as the
distributor of the products of Bayer of Germany otherwise known as I.G. Farbenindustrie, "segun la alta calidad de la
marca original";33 the Court being also impelled to add in this connection that it has to take judicial notice of a belief of
long standing common among the people in the Philippines that German products are of very high quality and it is only
natural for a distributor or a retailer to take advantage of that, and as it is not debated that "Bayer" is a German
surname, (see plaintiff's rebuttal Exh. QQQQ, see also p. 7 plaintiff's reply memorandum wherein it is said that this
surname is a "pretty common one among members of the Germany race") it is all so very easy to associate the Bayer
trademark with products that come from Germany and to believe that they are of high quality;
4th). The rationale of the doctrine in Ang vs. Teodoro, supra being that:
The Courts have come to realize that there can be unfair competition or unfair trading even if the goods are noncompeting, and that such unfair trading can cause injury or damage to the first user of a given trade mark, first, by prevention of
the natural expansion of his business, and second, by having his business reputation confused with and put at the mercy of the
second user. 74 Phil. 55-56;
and the Court having found out that the 'first user' was Bayer Germany and it was this that had built up the Bayer mark and
plaintiff apparently having itself encouraged that belief even after it had acquired the Bayer mark in America, thru forced sale, of
defendant's subsidiary there in 1918, Exhs. 79, 80, 81, to apply the Ang Tibay rule in the manner advocated by Sterling would,
the Court fears, produce the reverse result and the consequence would be not equity but injustice. 34
It would seem to us that the fact that plaintiff rode on the German reputation in the Bayer trademark has diluted the
rationally of its exclusionary claim. Not that the free ride in the name of defendant's German predecessor was sporadic. It is
continuing. Proof of this is the label on the box used by plaintiff (Exhibit U) in the distribution of Bayer Aspirin. This box bears

Property Cases - 17
prominently on the front part the legend "Genuine" in red color and two arrows: the first pointing to BAYER CROSS IN CIRCLE,
and the second, to BAYER Aspirin. At the back thereof in big letters are the words "BAYER ASPIRIN", followed in small letters
"Used since 1900" and down below the small words "Mfd. in the Phil. by Winthrop Stearns, Inc. for STERLING PRODUCTS
INTERNATIONAL, INCORPORATED." In plaintiff's prospectus (Exhibit 1) found in the box of Bayer Aspirin tablets, children's
size, there is the significant statement: "GENUINE BAYER Each Children's Size Bayer Aspirin tablet is stamped with the
Bayer Cross, the trademark of the genuine Bayer product. This means that your child is getting the same gentle-to-the-system
Bayer Aspirin that has been used for over 50 years by millions of normal people without ill effect."
With the background of prior use in the Philippines of the word BAYER by FBA's German predecessor and the prior
representations that plaintiff's medicines sold in the Philippines were manufactured in Germany, the facts just recited hammer on
the mind of the public that the Aspirin. Cafiaspirina and Aspirin for Children being marketed for plaintiff in the Philippines come
from the same source the German source and in use since 1900. That this view is far from far-fetched, is illustrated by the
testimony of plaintiff's own witness, Dr. Antonio Vasquez, viz:
Q. Have you ever heard of a pharmaceutical company of Bayer of Germany, or a company in Germany named Bayer?
A. Yes, sir.
Q. Since when have you heard of this pharmaceutical company in Germany with the name Bayer, since when have
you heard of that?
A. I have always taken the name Bayer as associated with Winthrop & Stearns.
Q. But, you said a while ago....
Witness.
.... Yes .....
xxx

xxx

xxx

Q. ... that you have heard of a pharmaceutical company with the name of Bayer in Germany?
A. Yes, sir.
Q. Do you know if this Winthrop & Stearns you mentioned has ever been connected with Bayer Company of Germany?
A. I have always understood that they were distributing drugs of Bayer & Company. 35
4. The Ang Tibay doctrine, we believe, is not to be read as shunting aside the time-honored teaching that he who comes
into equity must do so with clean hands.36 Plaintiff cannot now say that the present worth of its BAYER trademarks it owes solely
to its own efforts; it is not insulated from the charge that as it marketed its medicines it did so with an eye to the goodwill as to
quality that defendants' predecessor had established.
There is no whittling away of the identity of plaintiff's trademarks. Plaintiff is not the first user thereof in the Philippines. The
trademarks do not necessarily link plaintiff with the public. Plaintiff must show injury; it has not. On the contrary, representations
as to the place of manufacture of plaintiff's medicines were untrue, misleading. Plaintiff could still be tagged with the same
deception "which (it) complains of in the defendant(s)." 37 Appropriate it is to recall here our observation in the Ang Tibay opinion,

Property Cases - 18
viz: "On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of
another but builds one of his own."38
Plaintiff, the owner in this country of the trademarks BAYER for medicines, has thus forfeited its right to protection from the
use of the same trademarks by defendants for products different therefrom insecticides and other chemicals.
5. But defendants ask us to delist plaintiff's BAYER trademarks for medicines from the Principal Register, claiming right
thereto for said use. Said trademarks had been registered since 1939 by plaintiff's predecessor. The Bayer Co., Inc.
Defendants' claim is stale; it suffers from the defect of non-use. 39 While it is conceded that FBA's predecessors first
introduced medical products with the BAYER trademarks in the Philippine market, it is equally true that, after World War I, no
definite evidence there is that defendants or their professors traded in the Philippines in medicines with the BAYER trademarks
thereafter. FBA did not seasonably voice its objection. Lack of protest thereto connoted acquiescence. And this; notwithstanding
the fact that the 1923 and 1926 agreements were set aside in the anti-trust suits. Defendants did use the marks; but it was much
later, i.e., in 1958 and on chemicals and insecticides not on medicines. FBA only bestirred itself and challenged plaintiff's
right to the trademarks on medicines when this suit was filed. Vigilantibus non dormientibus equitas subvenit. 40
The net result is that, as the trial court aptly observed, plaintiff may hold on to its BAYER trademarks for medicines. And
defendants may continue using the same trademarks for insecticides and other chemicals, not medicines.
6. Defendants balk at the ruling below which directs them "to add a distinctive word or words in their mark to indicate that
their products come from Germany."41
We are left under no doubt as to the reasonableness of the formula thus fashioned. It avoids the mischief of confusion of
origin defendant FBA's product would not be mistaken for those of plaintiff. It reduces friction. We perceive of no prejudice to
defendants. The order does not visit defendant FBA with reprobation or condemnation. Rather, said defendant would be
enhancing the value of and would be sponsoring its own products. Anyway, a statement that its products come from Germany is
but a statement of fact.
FOR THE REASONS GIVEN, the judgment under review is hereby affirmed. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Castro, J., is on leave.

La Chemise Lacoste vs. Fernandez


GR 63796-97, 21 May 1984; First Division, Gutierrez Jr. (J)
Facts:
La chemise Lacoste is a French corporation and the actual owner of the trademarks Lacoste,Chemise
Lacoste, Crocodile Device and a composite mark consisting of the word Lacoste and a re presentation of a
crocodile/alligator, used on clothing's and other goods sold in many parts of the world and which has been marketed in the
Philippines (notably by Rustans) since 1964.
In 1975 and 1977, Hemandas Q. Co. was issued certificate of registration for the trademark Chemise Lacoste and Q Crocodile
Device "both in the supplemental and Principal Registry. In 1980, La Chemise Lacoste SA filed for the registration of the
Crocodile device and Lacoste.
Games and Garments (Gobindram Hemandas, assignee of HemandasQ.Co.) opposed the registration of Lacoste.

Property Cases - 19

In 1983, La Chemise Lacoste filed with the NBI a letter-complaint alleging acts of unfair competition
committed by Hemandas and requesting the agencys assistance.
A search warrant was issued by the trial court. Various goods and articles were seized upon the execution of the warrants.
Hemandas filed motion toquash the warrants, which the court granted. The search warrants were recalled, and the goods
ordered to bereturned. La Chemise Lacoste filed a petition for certiorari.
Issue: Whether the proceedings before the patent office is a prejudicial question that need to be resolved
before the criminal action for unfair competition may be pursued.

Held: No. The proceedings pending before the Patent Office do not partake of the nature of a prejudicial question which must
first be definitely resolved. The case which suspends the criminal action must be a civil case, not a mere administrative case,
which is determinative of the innocence or guilt of the accused. The issue whether a trademark used is different from anothers
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. Inasmuch as the goodwill and reputation of La Chemise
Lacoste products date back even before 1964, H e m a n d a s c a n n o t b e a l l o w e d t o c o n t i n u e t h e
t r a d e m a r k L a c o s t e f o r t h e r e a s o n t h a t h e w a s t h e f i r s t registrant in the Supplemental Register of a
trademark used in international commerce. Registration in the Supplemental Register cannot be given a posture as if the
registration is in the Principal Register. It must be noted that one may be declared an unfair competitor even if his
competing trademark is registered. La Chemise Lacoste is world renowned mark, and by virtue of the 20
November 1980 Memorandum of the Minister of Trade to the director of patents in compliance with the
Paris Convention for the protection of industrial property, effectively cancels the registration of contrary claimants to the
enumerated marks, which include Lacoste.
-----------------------------------------------------------------------------------------------------------------------------------------G.R. No. L-63796-97 May 2, 1984
LA CHEMISE LACOSTE, S. A., petitioner,
vs.
HON. OSCAR C. FERNANDEZ, Presiding Judge of Branch XLIX, Regional Trial Court, National Capital Judicial Region,
Manila and GOBINDRAM HEMANDAS, respondents.
G.R. No. L-65659 May 2l, 1984
GOBINDRAM HEMANDAS SUJANANI, petitioner,
vs.
HON. ROBERTO V. ONGPIN, in his capacity as Minister of Trade and Industry, and HON. CESAR SAN DIEGO, in his
capacity as Director of Patents, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners in 63796-97.
Ramon C. Fernandez for private respondent in 63796-97 and petitioner in 65659.

Property Cases - 20
GUTIERREZ, JR., J.:
It is among this Court's concerns that the Philippines should not acquire an unbecoming reputation among the manufacturing and
trading centers of the world as a haven for intellectual pirates imitating and illegally profiting from trademarks and tradenames
which have established themselves in international or foreign trade.
Before this Court is a petition for certiorari with preliminary injunction filed by La Chemise Lacoste, S.A., a well known European
manufacturer of clothings and sporting apparels sold in the international market and bearing the trademarks "LACOSTE"
"CHEMISE LACOSTE", "CROCODILE DEVICE" and a composite mark consisting of the word "LACOSTE" and a representation
of a crocodile/alligator. The petitioner asks us to set aside as null and void, the order of judge Oscar C. Fernandez, of Branch
XLIX, Regional Trial Court, National Capital Judicial Region, granting the motion to quash the search warrants previously issued
by him and ordering the return of the seized items.
The facts are not seriously disputed. The petitioner is a foreign corporation, organized and existing under the laws of France and
not doing business in the Philippines, It is undeniable from the records that it is the actual owner of the abovementioned
trademarks used on clothings and other goods specifically sporting apparels sold in many parts of the world and which have
been marketed in the Philippines since 1964, The main basis of the private respondent's case is its claim of alleged prior
registration.
In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No. SR-2225 (SR stands for
Supplemental Register) for the trademark "CHEMISE LACOSTE & CROCODILE DEVICE" by the Philippine Patent Office for use
on T-shirts, sportswear and other garment products of the company. Two years later, it applied for the registration of the same
trademark under the Principal Register. The Patent Office eventually issued an order dated March 3, 1977 which states that:
xxx xxx xxx
... Considering that the mark was already registered in the Supplemental Register in favor of herein
applicant, the Office has no other recourse but to allow the application, however, Reg. No. SR-2225 is now
being contested in a Petition for Cancellation docketed as IPC No. 1046, still registrant is presumed to be the
owner of the mark until after the registration is declared cancelled.
Thereafter, Hemandas & Co. assigned to respondent Gobindram Hemandas all rights, title, and interest in the trademark
"CHEMISE LACOSTE & DEVICE".
On November 21, 1980, the petitioner filed its application for registration of the trademark "Crocodile Device" (Application Serial
No. 43242) and "Lacoste" (Application Serial No. 43241).The former was approved for publication while the latter was opposed
by Games and Garments in Inter Partes Case No. 1658. In 1982, the petitioner filed a Petition for the Cancellation of Reg. No.
SR-2225 docketed as Inter Partes Case No. 1689. Both cases have now been considered by this Court in Hemandas v. Hon.
Roberto Ongpin (G.R. No. 65659).
On March 21, 1983, the petitioner filed with the National Bureau of Investigation (NBI) a letter-complaint alleging therein the acts
of unfair competition being committed by Hemandas and requesting their assistance in his apprehension and prosecution. The
NBI conducted an investigation and subsequently filed with the respondent court two applications for the issuance of search
warrants which would authorize the search of the premises used and occupied by the Lacoste Sports Center and Games and
Garments both owned and operated by Hemandas.
The respondent court issued Search Warrant Nos. 83-128 and 83-129 for violation of Article 189 of the Revised Penal Code, "it
appearing to the satisfaction of the judge after examining under oath applicant and his witnesses that there are good and

Property Cases - 21
sufficient reasons to believe that Gobindram Hemandas ... has in his control and possession in his premises the ... properties
subject of the offense," (Rollo, pp. 67 and 69) The NBI agents executed the two search warrants and as a result of the search
found and seized various goods and articles described in the warrants.
Hemandas filed a motion to quash the search warrants alleging that the trademark used by him was different from petitioner's
trademark and that pending the resolution of IPC No. 1658 before the Patent Office, any criminal or civil action on the same
subject matter and between the same parties would be premature.
The petitioner filed its opposition to the motion arguing that the motion to quash was fatally defective as it cited no valid ground
for the quashal of the search warrants and that the grounds alleged in the motion were absolutely without merit. The State
Prosecutor likewise filed his opposition on the grounds that the goods seized were instrument of a crime and necessary for the
resolution of the case on preliminary investigation and that the release of the said goods would be fatal to the case of the People
should prosecution follow in court.
The respondent court was, however, convinced that there was no probable cause to justify the issuance of the search warrants.
Thus, in its order dated March 22, 1983, the search warrants were recalled and set aside and the NBI agents or officers in
custody of the seized items were ordered to return the same to Hemandas. (Rollo, p. 25)
The petitioner anchors the present petition on the following issues:
Did respondent judge act with grave abuse of discretion amounting to lack of jurisdiction,
(i) in reversing the finding of probable cause which he himself had made in issuing the search warrants, upon
allegations which are matters of defense and as such can be raised and resolved only upon trial on the
merits; and
(ii) in finding that the issuance of the search warrants is premature in the face of the fact that (a) Lacoste's
registration of the subject trademarks is still pending with the Patent Office with opposition from Hemandas;
and (b) the subject trademarks had been earlier registered by Hemandas in his name in the Supplemental
Register of the Philippine Patent Office?
Respondent, on the other hand, centers his arguments on the following issues:
I
THE PETITIONER HAS NO CAPACITY TO SUE BEFORE PHILIPPINE COURTS.
II
THE RESPONDENT JUDGE DID NOT COMMIT A GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF
JURISDICTION IN ISSUING THE ORDER DATED APRIL 22, 1983.
Hemandas argues in his comment on the petition for certiorari that the petitioner being a foreign corporation failed to allege
essential facts bearing upon its capacity to sue before Philippine courts. He states that not only is the petitioner not doing
business in the Philippines but it also is not licensed to do business in the Philippines. He also cites the case of Leviton
Industries v. Salvador (114 SCRA 420) to support his contention The Leviton case, however, involved a complaint for unfair
competition under Section 21-A of Republic Act No. 166 which provides:

Property Cases - 22
Sec. 21 A. Any foreign corporation or juristic person to which a mark or tradename has been registered or
assigned under this Act may bring an action hereunder for infringement, for unfair competition, or false
designation of origin and false description, whether or not it has been licensed to do business in the
Philippines under Act numbered Fourteen Hundred and Fifty-Nine, as amended, otherwise known as the
Corporation Law, at the time it brings the complaint; Provided, That the country of which the said foreign
corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or law, grants a
similar privilege to corporate or juristic persons of the Philippines.
We held that it was not enough for Leviton, a foreign corporation organized and existing under the laws of the State of New York,
United States of America, to merely allege that it is a foreign corporation. It averred in Paragraph 2 of its complaint that its action
was being filed under the provisions of Section 21-A of Republic Act No. 166, as amended. Compliance with the requirements
imposed by the abovecited provision was necessary because Section 21-A of Republic Act No. 166 having explicitly laid down
certain conditions in a specific proviso, the same must be expressly averred before a successful prosecution may ensue. It is
therefore, necessary for the foreign corporation to comply with these requirements or aver why it should be exempted from them,
if such was the case. The foreign corporation may have the right to sue before Philippine courts, but our rules on pleadings
require that the qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded.
In contradistinction, the present case involves a complaint for violation of Article 189 of the Revised Penal Code.
The Leviton case is not applicable.
Asserting a distinctly different position from the Leviton argument, Hemandas argued in his brief that the petitioner was doing
business in the Philippines but was not licensed to do so. To support this argument, he states that the applicable ruling is the
case of Mentholatum Co., Inc. v. Mangaliman: (72 Phil. 524) where Mentholatum Co. Inc., a foreign corporation and PhilippineAmerican Drug Co., the former's exclusive distributing agent in the Philippines filed a complaint for infringement of trademark and
unfair competition against the Mangalimans.
The argument has no merit. The Mentholatum case is distinct from and inapplicable to the case at bar. Philippine American Drug
Co., Inc., was admittedly selling products of its principal Mentholatum Co., Inc., in the latter's name or for the latter's account.
Thus, this Court held that "whatever transactions the Philippine-American Drug Co., Inc. had executed in view of the law, the
Mentholatum Co., Inc., did it itself. And, the Mentholatum Co., Inc., being a foreign doing business in the Philippines without the
license required by Section 68 of the Corporation Law, it may not prosecute this action for violation of trademark and unfair
competition."
In the present case, however, the petitioner is a foreign corporation not doing business in the Philippines. The marketing of its
products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation The latter is an independent
entity which buys and then markets not only products of the petitioner but also many other products bearing equally well-known
and established trademarks and tradenames. in other words, Rustan is not a mere agent or conduit of the petitioner.
The rules and regulations promulgated by the Board of Investments pursuant to its rule-making power under Presidential Decree
No. 1789, otherwise known as the Omnibus Investment Code, support a finding that the petitioner is not doing business in the
Philippines. Rule I, Sec. 1 (g) of said rules and regulations defines "doing business" as one" which includes, inter alia:
(1) ... A foreign firm which does business through middlemen acting on their own names, such as indentors,
commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But
such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing
business in the Philippines.

Property Cases - 23
(2) Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or
distributor has an independent status, i.e., it transacts business in its name and for its account, and not in the
name or for the account of a principal Thus, where a foreign firm is represented by a person or local
company which does not act in its name but in the name of the foreign firm the latter is doing business in the
Philippines.
xxx xxx xxx
Applying the above provisions to the facts of this case, we find and conclude that the petitioner is not doing business in the
Philippines. Rustan is actually a middleman acting and transacting business in its own name and or its own account and not in
the name or for the account of the petitioner.
But even assuming the truth of the private respondent's allegation that the petitioner failed to allege material facts in its petition
relative to capacity to sue, the petitioner may still maintain the present suit against respondent Hemandas. As early as 1927, this
Court was, and it still is, of the view that a foreign corporation not doing business in the Philippines needs no license to sue
before Philippine courts for infringement of trademark and unfair competition. Thus, in Western Equipment and Supply Co. v.
Reyes(51 Phil. 115), this Court held that a foreign corporation which has never done any business in the Philippines and which is
unlicensed and unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of
its products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the
residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign corporation, when
it appears that they have personal knowledge of the existence of such a foreign corporation, and it is apparent that the purpose
of the proposed domestic corporation is to deal and trade in the same goods as those of the foreign corporation.
We further held:
xxx xxx xxx
... That company is not here seeking to enforce any legal or control rights arising from, or growing out of, any
business which it has transacted in the Philippine Islands. The sole purpose of the action:
Is to protect its reputation, its corporate name, its goodwill, whenever that reputation, corporate name or
goodwill have, through the natural development of its trade, established themselves.' And it contends that its
rights to the use of its corporate and trade name:
Is a property right, a right in rem, which it may assert and protect against all the world, in any of the courts of
the world-even in jurisdictions where it does not transact business-just the same as it may protect its tangible
property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and
TradeMarks and cases cited; secs. 21-22, Hopkins on TradeMarks, Trade Names and Unfair Competition
and cases cited.' That point is sustained by the authorities, and is well stated in Hanover Star Mining Co. v.
Allen and Wheeler Co. (208 Fed., 513). in which the syllabus says:
Since it is the trade and not the mark that is to be protected, a trade-mark acknowledges no territorial
boundaries of municipalities or states or nations, but extends to every market where the trader's goods have
become known and Identified by the use of the mark.
Our recognizing the capacity of the petitioner to sue is not by any means novel or precedent setting. Our jurisprudence is replete
with cases illustrating instances when foreign corporations not doing business in the Philippines may nonetheless sue in our
courts. In East Board Navigation Ltd, v. Ysmael and Co., Inc.(102 Phil. 1), we recognized a right of foreign corporation to sue on

Property Cases - 24
isolated transactions. In General Garments Corp. v. Director of Patents (41 SCRA 50), we sustained the right of Puritan
Sportswear Corp., a foreign corporation not licensed to do and not doing business in the Philippines, to file a petition for
cancellation of a trademark before the Patent Office.
More important is the nature of the case which led to this petition. What preceded this petition 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. Petitioner's capacity to sue would become, therefore, of not much significance in the main case. We
cannot snow a possible violator of our criminal statutes to escape prosecution upon a far-fetched contention that the aggrieved
party or victim of a crime has no standing to sue.
In upholding the right of the petitioner to maintain the present suit before our courts for unfair competition or infringement of
trademarks of a foreign corporation, we are moreover recognizing our duties and the rights of foreign states under the Paris
Convention for the Protection of Industrial Property to which the Philippines and France are parties. We are simply interpreting
and enforcing a solemn international commitment of the Philippines embodied in a multilateral treaty to which we are a party and
which we entered into because it is in our national interest to do so.
The Paris Convention provides in part that:
ARTICLE 1
(1) The countries to which the present Convention applies constitute themselves into a Union for the
protection of industrial property.
(2) The protection of industrial property is concerned with patents, utility models, industrial designs,
trademarks service marks, trade names, and indications of source or appellations of origin, and the
repression of unfair competition.
xxx xxx xxx
ARTICLE 2
(2) Nationals of each of the countries of the Union shall as regards the protection of industrial property, enjoy
in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter
grant, to nationals, without prejudice to the rights specially provided by the present Convention.
Consequently, they shall have the same protection as the latter, and the same legal remedy against any
infringement of their rights, provided they observe the conditions and formalities imposed upon nationals.
xxx xxx xxx
ARTICLE 6
(1) The countries of the Union undertake, either administratively if their legislation so permits, or at the
request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark
which constitutes a reproduction, imitation or translation, liable to create confusion, of a mark considered by
the competent authority of the country of registration or use to be well-known in that country as being already

Property Cases - 25
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.
xxx xxx xxx
ARTICLE 8
A trade name shall be protected in all the countries of the Union without the obligation of filing or registration,
whether or not it forms part of a trademark.
xxx xxx xxx
ARTICLE 10bis
(1) The countries of the Union are bound to assure to persons entitled to the benefits of the Union effective
protection against unfair competition.
xxx xxx xxx
ARTICLE 10ter
(1) The countries of the Union undertake to assure to nationals of the other countries of the Union
appropriate legal remedies to repress effectively all the acts referred to in Articles 9, 10 and l0bis.
(2) They undertake, further, to provide measures to permit syndicates and associations which represent the
industrialists, producers or traders concerned and the existence of which is not contrary to the laws of their
countries, to take action in the Courts or before the administrative authorities, with a view to the repression of
the acts referred to in Articles 9, 10 and 10bis, in so far as the law of the country in which protection is
claimed allows such action by the syndicates and associations of that country.
xxx xxx xxx
ARTICLE 17
Every country party to this Convention undertakes to adopt, in accordance with its constitution, the measures
necessary to ensure the application of this Convention.
It is understood that at the time an instrument of ratification or accession is deposited on behalf of a country;
such country will be in a position under its domestic law to give effect to the provisions of this Convention.
(61 O.G. 8010)
xxx xxx xxx
In Vanity Fair Mills, Inc. v. T Eaton Co. (234 F. 2d 633) the United States Circuit Court of Appeals had occasion to comment on
the extraterritorial application of the Paris Convention It said that:

Property Cases - 26
[11] The International Convention is essentially a compact between the various member countries to accord
in their own countries to citizens of the other contracting parties trademark and other rights comparable to
those accorded their own citizens by their domestic law. The underlying principle is that foreign nationals
should be given the same treatment in each of the member countries as that country makes available to its
own citizens. In addition, the Convention sought to create uniformity in certain respects by obligating each
member nation 'to assure to nationals of countries of the Union an effective protection against unfair
competition.'
[12] The Convention is not premised upon the Idea that the trade-mark and related laws of each member
nation shall be given extra-territorial application, but on exactly the converse principle that each nation's law
shall have only territorial application. Thus a foreign national of a member nation using his trademark in
commerce in the United States is accorded extensive protection here against infringement and other types of
unfair competition by virtue of United States membership in the Convention. But that protection has its
source in, and is subject to the limitations of, American law, not the law of the foreign national's own
country. ...
By the same token, the petitioner should be given the same treatment in the Philippines as we make available to our own
citizens. We are obligated to assure to nationals of "countries of the Union" an effective protection against unfair competition in
the same way that they are obligated to similarly protect Filipino citizens and firms.
Pursuant to this obligation, the Ministry of Trade on November 20, 1980 issued a memorandum addressed to the Director of the
Patents Office directing the latter:
xxx xxx xxx
... to reject all pending applications for Philippine registration of signature and other world famous trademarks
by applicants other than its original owners or users.
The conflicting claims over internationally known trademarks involve such name brands as Lacoste,
Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin
Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.
It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be
asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by
the trademarks' foreign or local owners or original users.
The memorandum is a clear manifestation of our avowed adherence to a policy of cooperation and amity with all nations. It is
not, as wrongly alleged by the private respondent, a personal policy of Minister Luis Villafuerte which expires once he leaves the
Ministry of Trade. For a treaty or convention is not a mere moral obligation to be enforced or not at the whims of an incumbent
head of a Ministry. It creates a legally binding obligation on the parties founded on the generally accepted principle of
international law of pacta sunt servanda which has been adopted as part of the law of our land. (Constitution, Art. II, Sec. 3). The
memorandum reminds the Director of Patents of his legal duty to obey both law and treaty. It must also be obeyed.
Hemandas further contends that the respondent court did not commit grave abuse of discretion in issuing the questioned order of
April 22, 1983.
A review of the grounds invoked by Hemandas in his motion to quash the search warrants reveals the fact that they are not
appropriate for quashing a warrant. They are matters of defense which should be ventilated during the trial on the merits of the

Property Cases - 27
case. For instance, on the basis of the facts before the Judge, we fail to understand how he could treat a bare allegation that the
respondent's trademark is different from the petitioner's trademark as a sufficient basis to grant the motion to quash. We will treat
the issue of prejudicial question later. Granting that respondent Hemandas was only trying to show the absence of probable
cause, we, nonetheless, hold the arguments to be untenable.
As a mandatory requirement for the issuance of a valid search warrant, the Constitution requires in no uncertain terms the
determination of probable cause by the judge after examination under oath or affirmation of the complainant and the witnesses
he may produce (Constitution, Art. IV, Sec. 3). Probable cause has traditionally meant such facts and circumstances antecedent
to the issuance of the warrant that are in themselves sufficient to induce a cautious man to rely upon them and act in pursuance
thereof (People v. Sy Juco, 64 Phil. 667).
This concept of probable cause was amplified and modified by our ruling in Stonehill v. Diokno, (20 SCRA 383) that probable
cause "presupposes the introduction of competent proof that the party against whom it is sought has performed particular acts, or
committed specific omissions, violating a given provision of our criminal laws."
The question of whether or not probable cause exists is one which must be decided in the light of the conditions obtaining in
given situations (Central Bank v. Morfe, 20 SCRA 507). We agree that there is no general formula or fixed rule for the
determination of the existence of probable cause since, as we have recognized in Luna v. Plaza (26 SCRA 310), the existence
depends to a large degree upon the finding or opinion of the judge conducting the examination. However, the findings of the
judge should not disregard the facts before him nor run counter to the clear dictates of reason. More so it is plain that our
country's ability to abide by international commitments is at stake.
The records show that the NBI agents at the hearing of the application for the warrants before respondent court presented three
witnesses under oath, sworn statements, and various exhibits in the form of clothing apparels manufactured by Hemandas but
carrying the trademark Lacoste. The respondent court personally interrogated Ramon Esguerra, Samuel Fiji, and Mamerto
Espatero by means of searching questions. After hearing the testimonies and examining the documentary evidence, the
respondent court was convinced that there were good and sufficient reasons for the issuance of the warrant. And it then issued
the warrant.
The respondent court, therefore, complied with the constitutional and statutory requirements for the issuance of a valid search
warrant. At that point in time, it was fully convinced that there existed probable cause. But after hearing the motion to quash and
the oppositions thereto, the respondent court executed a complete turnabout and declared that there was no probable cause to
justify its earlier issuance of the warrants.
True, the lower court should be given the opportunity to correct its errors, if there be any, but the rectification must, as earlier
stated be based on sound and valid grounds. In this case, there was no compelling justification for the about face. The allegation
that vital facts were deliberately suppressed or concealed by the petitioner should have been assessed more carefully because
the object of the quashal was the return of items already seized and easily examined by the court. The items were alleged to be
fake and quite obviously would be needed as evidence in the criminal prosecution. Moreover, an application for a search warrant
is heard ex parte. It is neither a trial nor a part of the trial. Action on these applications must be expedited for time is of the
essence. Great reliance has to be accorded by the judge to the testimonies under oath of the complainant and the witnesses.
The allegation of Hemandas that the applicant withheld information from the respondent court was clearly no basis to order the
return of the seized items.
Hemandas relied heavily below and before us on the argument that it is the holder of a certificate of registration of the trademark
"CHEMISE LACOSTE & CROCODILE DEVICE". Significantly, such registration is only in the Supplemental Register.

Property Cases - 28
A certificate of registration in the Supplemental Register is not prima facie evidence of the validity of registration, of the
registrant's exclusive right to use the same in connection with the goods, business, or services specified in the certificate. Such a
certificate of registration cannot be filed, with effect, with the Bureau of Customs in order to exclude from the Philippines, foreign
goods bearing infringement marks or trade names (Rule 124, Revised Rules of Practice Before the Phil. Pat. Off. in Trademark
Cases; Martin, Philippine Commercial Laws, 1981, Vol. 2, pp. 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:
xxx xxx xxx
The certificates of registration for marks and trade names registered on the supplemental register shall be
conspicuously different from certificates issued for marks and trade names on the principal register.
xxx xxx xxx
The reason is explained by a leading commentator on Philippine Commercial Laws:
The registration of a mark upon the supplemental register is not, as in the case of the principal register, prima
facie evidence of (1) the validity of registration; (2) registrant's ownership of the mark; and (3) registrant's
exclusive right to use the mark. It is not subject to opposition, although it may be cancelled after its issuance.
Neither may it be the subject of interference proceedings. Registration on the supplemental register is not
constructive notice of registrant's claim of ownership. A supplemental register is provided for the registration
of marks which are not registrable on the principal register because of some defects (conversely, defects
which make a mark unregistrable on the principal register, yet do not bar them from the supplemental
register.) (Agbayani, II Commercial Laws of the Philippines, 1978, p. 514, citing Uy Hong Mo v. Titay & Co.,
et al., Dec. No. 254 of Director of Patents, Apr. 30, 1963);
Registration in the Supplemental Register, therefore, serves as notice that the registrant is using or has appropriated the
trademark. By the very fact that the trademark cannot as yet be entered in the Principal Register, all who deal with it should be
on guard that there are certain defects, some obstacles which the user must Still overcome before he can claim legal ownership
of the mark or ask the courts to vindicate his claims of an exclusive right to the use of the same. It would be deceptive for a party
with nothing more than a registration in the Supplemental Register to posture before courts of justice as if the registration is in
the Principal Register.
The reliance of the private respondent on the last sentence of the Patent office action on application Serial No. 30954 that
"registrant is presumed to be the owner of the mark until after the registration is declared cancelled" is, therefore, misplaced and
grounded on shaky foundation, The supposed presumption not only runs counter to the precept embodied in Rule 124 of the
Revised Rules of Practice before the Philippine Patent Office in Trademark Cases but considering all the facts ventilated before
us in the four interrelated petitions involving the petitioner and the respondent, it is devoid of factual basis. And even in cases
where presumption and precept may factually be reconciled, we have held that the presumption is rebuttable, not conclusive,
(People v. Lim Hoa, G.R. No. L10612, May 30, 1958, Unreported). One may be declared an unfair competitor even if his
competing trademark is registered (Parke, Davis & Co. v. Kiu Foo & Co., et al., 60 Phil. 928; La Yebana Co. v. Chua Seco & Co.,
14 Phil. 534).
By the same token, the argument that the application was premature in view of the pending case before the Patent Office is
likewise without legal basis.

Property Cases - 29
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:
A petition for the suspension of the criminal action based upon the pendency of a pre-judicial question in a
civil case, may only be presented by any party before or during the trial of the criminal action.
The case which suspends the criminal prosecution must be a civil case which is determinative of the innocence or, subject to the
availability of other defenses, the guilt of the accused. The pending case before the Patent Office is an administrative proceeding
and not a civil case. The decision of the Patent Office cannot be finally determinative of the private respondent's innocence of the
charges against him.
In Flordelis v. Castillo (58 SCRA 301), we held that:
As clearly delineated in the aforecited provisions of the new Civil Code and the Rules of Court, and as
uniformly applied in numerous decisions of this Court, (Berbari v. Concepcion, 40 Phil. 837 (1920); Aleria v.
Mendoza, 83 Phil. 427 (1949); People v. Aragon, 94 Phil. 357 (1954); Brito-Sy v. Malate Taxicab & Garage,
Inc., 102 Phil 482 (1957); Mendiola v. Macadael, 1 SCRA 593; Benitez v. Concepcion, 2 SCRA 178; Zapante
v. Montesa, 4 SCRA 510; Jimenez v. Averia, 22 SCRA 1380.) In Buenaventura v. Ocampo (55 SCRA 271) the
doctrine of prejudicial question was held inapplicable because no criminal case but merely an administrative
case and a civil suit were involved. The Court, however, held that, in view of the peculiar circumstances of
that case, the respondents' suit for damages in the lower court was premature as it was filed during the
pendency of an administrative case against the respondents before the POLCOM. 'The possibility cannot be
overlooked,' said the Court, 'that the POLCOM may hand down a decision adverse to the respondents, in
which case the damage suit will become unfounded and baseless for wanting in cause of action.') the
doctrine of pre-judicial question comes into play generally in a situation where a civil action and a criminal
action both penned and there exists in the former an issue which must be preemptively resolved before the
criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be
determinative juris et de jure of the guilt or innocence of the accused in the criminal case.
In the present case, no civil action pends nor has any been instituted. What was pending was an administrative case before the
Patent Office.
Even assuming that there could be an administrative proceeding with exceptional or special circumstances which render a
criminal prosecution premature pending the promulgation of the administrative decision, no such peculiar circumstances are
present in this case.
Moreover, we take note of the action taken by the Patents Office and the Minister of Trade and affirmed by the Intermediate
Appellate Court in the case of La Chemise Lacoste S. A. v. Ram Sadhwani (AC-G.R. No. SP-13356, June 17, 1983).
The same November 20, 1980 memorandum of the Minister of Trade discussed in this decision was involved in the appellate
court's decision. The Minister as the "implementing authority" under Article 6bis of the Paris Convention for the protection of
Industrial Property instructed the Director of Patents to reject applications for Philippine registration of signature and other world
famous trademarks by applicants other than its original owners or users. The brand "Lacoste" was specifically cited together with
Jordache, Gloria Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar dela Renta, Calvin Klein, Givenchy, Ralph
Laurence, Geoffrey Beene, Lanvin, and Ted Lapidus. The Director of Patents was likewise ordered to require Philippine

Property Cases - 30
registrants of such trademarks to surrender their certificates of registration. Compliance by the Director of Patents was
challenged.
The Intermediate Appellate Court, in the La Chemise Lacoste S.A. v. Sadhwani decision which we cite with approval sustained
the power of the Minister of Trade to issue the implementing memorandum and, after going over the evidence in the
records, affirmed the decision of the Director of Patents declaring La Chemise Lacoste &A. the owner of the disputed trademark
and crocodile or alligator device. The Intermediate Appellate Court speaking through Mr. Justice Vicente V. Mendoza stated:
In the case at bar, the Minister of Trade, as 'the competent authority of the country of registration,' has found
that among other well-known trademarks 'Lacoste' is the subject of conflicting claims. For this reason,
applications for its registration must be rejected or refused, pursuant to the treaty obligation of the
Philippines.
Apart from this finding, the annexes to the opposition, which La Chemise Lacoste S.A. filed in the Patent
Office, show that it is the owner of the trademark 'Lacoste' and the device consisting of a representation of a
crocodile or alligator by the prior adoption and use of such mark and device on clothing, sports apparel and
the like. La Chemise Lacoste S.A, obtained registration of these mark and device and was in fact issued
renewal certificates by the French National Industry Property Office.
xxx xxx xxx
Indeed, due process is a rule of reason. In the case at bar the order of the Patent Office is based not only on
the undisputed fact of ownership of the trademark by the appellee but on a prior determination by the
Minister of Trade, as the competent authority under the Paris Convention, that the trademark and device
sought to be registered by the appellant are well-known marks which the Philippines, as party to the
Convention, is bound to protect in favor of its owners. it would be to exalt form over substance to say that
under the circumstances, due process requires that a hearing should be held before the application is acted
upon.
The appellant cites section 9 of Republic Act No. 166, which requires notice and hearing whenever an
opposition to the registration of a trademark is made. This provision does not apply, however, to situations
covered by the Paris Convention, where the appropriate authorities have determined that a well-known
trademark is already that of another person. In such cases, the countries signatories to the Convention are
obliged to refuse or to cancel the registration of the mark by any other person or authority. In this case, it is
not disputed that the trademark Lacoste is such a well-known mark that a hearing, such as that provided in
Republic Act No. 166, would be superfluous.
The issue of due process was raised and fully discussed in the appellate court's decision. The court ruled that due process was
not violated.
In the light of the foregoing it is quite plain that the prejudicial question argument is without merit.
We have carefully gone over the records of all the cases filed in this Court and find more than enough evidence to sustain a
finding that the petitioner is the owner of the trademarks "LACOSTE", "CHEMISE LACOSTE", the crocodile or alligator device,
and the composite mark of LACOSTE and the representation of the crocodile or alligator. Any pretensions of the private
respondent that he is the owner are absolutely without basis. Any further ventilation of the issue of ownership before the Patent
Office will be a superfluity and a dilatory tactic.

Property Cases - 31
The issue of whether or not the trademark used by the private respondent is different from the petitioner's trade mark is a matter
of defense and will be better resolved in the criminal proceedings before a court of justice instead of raising it as a preliminary
matter in an administrative proceeding.
The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin or ownership
of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of
merchandise, the fruit of his industry and skill, and to prevent fraud and imposition (Etepha v. Director of Patents, 16 SCRA 495).
The legislature has enacted laws to regulate the use of trademarks and provide for the protection thereof. Modern trade and
commerce demands that depredations on legitimate trade marks of non-nationals including those who have not shown prior
registration thereof should not be countenanced. The law against such depredations is not only for the protection of the owner of
the trademark but also, and more importantly, for the protection of purchasers from confusion, mistake, or deception as to the
goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General Garments Corporation v. Director of Patents, 41
SCRA 50).
The law on trademarks and tradenames is based on the principle of business integrity and common justice' This law, both in
letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims to foster, and not to hamper,
competition, no one, especially a trader, is justified in damaging or jeopardizing another's business by fraud, deceipt, trickery or
unfair methods of any sort. This necessarily precludes the trading by one dealer upon the good name and reputation built up by
another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338).
The records show that the goodwill and reputation of the petitioner's products bearing the trademark LACOSTE date back even
before 1964 when LACOSTE clothing apparels were first marketed in the Philippines. To allow Hemandas to continue using the
trademark Lacoste for the simple reason that he was the first registrant in the Supplemental Register of a trademark used in
international commerce and not belonging to him is to render nugatory the very essence of the law on trademarks and
tradenames.
We now proceed to the consideration of the petition in Gobindram Hemandas Suianani u. Hon. RobertoV Ongpin, et al. (G.R.
No. 65659).
Actually, three other petitions involving the same trademark and device have been filed with this Court.
In Hemandas & Co. v. Intermediate Appellate Court, et al. (G.R. No. 63504) the petitioner asked for the following relief:
IN VIEW OF ALL THE FOREGOING, it is respectfully prayed (a) that the Resolutions of the respondent Court
of January 3, 1983 and February 24, 1983 be nullified; and that the Decision of the same respondent Court
of June 30, 1983 be declared to be the law on the matter; (b) that the Director of Patents be directed to issue
the corresponding registration certificate in the Principal Register; and (c) granting upon the petitioner such
other legal and equitable remedies as are justified by the premises.
On December 5, 1983, we issued the following resolution:
Considering the allegations contained, issues raised and the arguments adduced in the petition for review,
the respondent's comment thereon, and petitioner's reply to said comment, the Court Resolved to DENY the
petition for lack of merit.
The Court further Resolved to CALL the attention of the Philippine Patent Office to the pendency in this Court
of G.R. No. 563796-97 entitled 'La Chemise Lacoste, S.A. v. Hon. Oscar C. Fernandez and Gobindram

Property Cases - 32
Hemandas' which was given due course on June 14, 1983 and to the fact that G.R. No. 63928-29 entitled
'Gobindram Hemandas v. La Chemise Lacoste, S.A., et al.' filed on May 9, 1983 was dismissed for lack of
merit on September 12, 1983. Both petitions involve the same dispute over the use of the trademark
'Chemise Lacoste'.
The second case of Gobindram Hemandas vs. La Chemise Lacoste, S.A., et al. (G.R. No. 63928-29) prayed for the following:
I. On the petition for issuance of writ of preliminary injunction, an order be issued after due hearing:
l. Enjoining and restraining respondents Company, attorneys-in-fact, and Estanislao Granados from further
proceedings in the unfair competition charges pending with the Ministry of Justice filed against petitioner;
2. Enjoining and restraining respondents Company and its attorneys-in-fact from causing undue publication
in newspapers of general circulation on their unwarranted claim that petitioner's products are FAKE pending
proceedings hereof; and
3. Enjoining and restraining respondents Company and its attorneys-in-fact from sending further threatening
letters to petitioner's customers unjustly stating that petitioner's products they are dealing in are FAKE and
threatening them with confiscation and seizure thereof.
II. On the main petition, judgment be rendered:
l. Awarding and granting the issuance of the Writ of Prohibition, prohibiting, stopping, and restraining
respondents from further committing the acts complained of;
2. Awarding and granting the issuance of the Writ of Mandamus, ordering and compelling respondents
National Bureau of Investigation, its aforenamed agents, and State Prosecutor Estanislao Granados to
immediately comply with the Order of the Regional Trial Court, National Capital Judicial Region, Branch
XLIX, Manila, dated April 22, 1983, which directs the immediate return of the seized items under Search
Warrants Nos. 83-128 and 83-129;
3. Making permanent any writ of injunction that may have been previously issued by this Honorable Court in
the petition at bar: and
4. Awarding such other and further relief as may be just and equitable in the premises.
As earlier stated, this petition was dismissed for lack of merit on September 12, 1983. Acting on a motion for reconsideration, the
Court on November 23, 1983 resolved to deny the motion for lack of merit and declared the denial to be final.
Hemandas v. Hon. Roberto Ongpin (G.R. No. 65659) is the third petition.
In this last petition, the petitioner prays for the setting aside as null and void and for the prohibiting of the enforcement of the
following memorandum of respondent Minister Roberto Ongpin:
MEMORANDUM:
FOR: THE DIRECTOR OF PATENTS

Property Cases - 33
Philippine Patent Office
xxx xxx xxx
Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rule-making and adjudicatory powers of the
Minister of Trade and Industry and provides inter alia, that 'such rule-making and adjudicatory powers should be revitalized in
order that the Minister of Trade and Industry can ...apply more swift and effective solutions and remedies to old and new
problems ... such as the infringement of internationally-known tradenames and trademarks ...'and in view of the decision of the
Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. Sp. No. 13359
(17) June 1983] which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980
confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the
Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with
our obligations under said convention in general, and, more specifically, to honor our commitment under Section 6 bisthereof, as
follows:
1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging
to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine
Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any
combination thereof:
(a) a declaration by the Minister of Trade and Industry that' the trademark being considered is already wellknown 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

Property Cases - 34
outlined above, by remanding applications filed by one not entitled to such protection for final disallowance
by the Examination Division.
5. All pending applications for Philippine registration of signature and other world famous trademarks filed by
applicants other than their original owners or users shall be rejected forthwith. Where such applicants have
already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law,
they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for
immediate cancellation proceedings.
6. Consistent with the foregoing, you are hereby directed to expedite the hearing and to decide without delay
the following cases pending before your Office:
1. INTER PARTES CASE NO. 1689-Petition filed by La Chemise Lacoste, S.A. for the cancellation of
Certificate of Registration No. SR-2225 issued to Gobindram Hemandas, assignee of Hemandas and
Company;
2. INTER PARTES CASE NO. 1658-Opposition filed by Games and Garments Co. against the registration of
the trademark Lacoste sought by La Chemise Lacoste, S.A.;
3. INTER PARTES CASE NO. 1786-Opposition filed by La Chemise Lacoste, S.A. against the registration of
trademark Crocodile Device and Skiva sought by one Wilson Chua.
Considering our discussions in G.R. Nos. 63796-97, we find the petition in G.R. No. 65659 to be patently without merit and
accordingly deny it due course.
In complying with the order to decide without delay the cases specified in the memorandum, the Director of Patents shall limit
himself to the ascertainment of facts in issues not resolved by this decision and apply the law as expounded by this Court to
those facts.
One final point. It is essential that we stress our concern at the seeming inability of law enforcement officials to stem the tide of
fake and counterfeit consumer items flooding the Philippine market or exported abroad from our country. The greater victim is not
so much the manufacturer whose product is being faked but the Filipino consuming public and in the case of exportations, our
image abroad. No less than the President, in issuing Executive Order No. 913 dated October 7, 1983 to strengthen the powers of
the Minister of Trade and Industry for the protection of consumers, stated that, among other acts, the dumping of substandard,
imitated, hazardous, and cheap goods, the infringement of internationally known tradenames and trademarks, and the unfair
trade practices of business firms has reached such proportions as to constitute economic sabotage. We buy a kitchen appliance,
a household tool, perfume, face powder, other toilet articles, watches, brandy or whisky, and items of clothing like jeans, T-shirts,
neck, ties, etc. the list is quite length and pay good money relying on the brand name as guarantee of its quality and
genuine nature only to explode in bitter frustration and genuine nature on helpless anger because the purchased item turns out
to be a shoddy imitation, albeit a clever looking counterfeit, of the quality product. Judges all over the country are well advised to
remember that court processes should not be used as instruments to, unwittingly or otherwise, aid counterfeiters and intellectual
pirates, tie the hands of the law as it seeks to protect the Filipino consuming public and frustrate executive and administrative
implementation of solemn commitments pursuant to international conventions and treaties.
WHEREFORE, the petition in G.R. NOS. 63797-97 is hereby GRANTED. The order dated April 22, 1983 of the respondent
regional trial court is REVERSED and SET ASIDE. Our Temporary Restraining Order dated April 29, 1983 is ma(i.e.
PERMANENT. The petition in G.R. NO. 65659 is DENIED due course for lack of merit. Our Temporary Restraining Order dated
December 5, 1983 is LIFTED and SET ASIDE, effective immediately.

Property Cases - 35
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Relova and De la Fuente, JJ., concur.
Wells Fargo vs. Collector of Internal RevenueGR 46720, 28 June 1940
First Division, Moran (J): 4 concur, 1 concur in result
Facts:
Birdie Lillian Eye died on 16 September 1932, at Los Angeles, California, the place of her alleged last residence and domicile.
Among the properties she left was her 1/2 conjugal shares of stock in the Benguet Consolidated Mining Co., an anonymous
partnership (sociedad anonima), organized under the laws of the Philippines. She left a will duly admitted to probate
in California where her estate was administered and settled. Wells Fargo bank and Union Trust Co. was duly
appointed trustee of the trust by the said will. The Federal and California States inheritance taxes due thereon have been duly
paid. The Collector of Internal Revenue in the Philippines, however, sought to subject the shares of stock to inheritance tax, to
which Wells Fargo objected.
Issue:
Whether the shares of stock are subject to Philippine inheritance tax considering that the decedent was domiciled in California.
Held:
Originally, the settled law in the United States is that intangibles have only one situs for the purpose of inheritance tax, and such
situs is in the domicile of the decedent at the time of his or her death. But the rule has been relaxed. The maxim mobila
sequuntur personam, upon which the rule rests, has been decried as a mere fiction of law having its origin in considerations of
general convenience and public policy, and cannot be applied to limit or control teh right of the State to tax property within its
jurisdiction and must yield to established fact of legal ownership, actual presence and control elsewhere, and cannot be applied
if to do so whould result in inescapable and patent injustice. The relaxation of the original rule rests on either of two
fundamental considerations: (1) upon the recognition of the inherent power of each government to
taxpersons, properties, and rights within its jurisdiction and enjoying, thus, the protection of its laws; and (2)upon the principle
that as to intangibles, a single location in space is hardly possible, considering the multiple, distinct relationships which may be
entered into with respect thereto. Herein, the actual situs of the shares of stock is in the Philippines, the corporation being
domiciled therein. The certificates of stock remained in the Philippines up to the time when the deceased died in California, and
they were in possession of one Syrena McKee, secretary of the corporation, to whom they
h a v e b e e n delivered and indorsed in blank. McKee had the legal title to the certificates of stock held in trust for the
trueo w n e r t h e r e o f . T h e o w n e r r e s i d i n g i n C a l i f o r n i a h a s e x t e n d e d h e r e h e r a c t i v i t i e s w i t h r e s
pect to herintangibles so as to avail hereself of the protection and benefit of Philippine law
s . A c c o r d i n g l y, t h e jurisdiction of the Philippine Government to tax must be upheld.
-------------------------------------------------------------------------------------------------------------------------------------------------------G.R. No. L-46720

June 28, 1940

WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,


vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
De Witt, Perkins and Ponce Enrile for appellant.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee.
Ross, Lawrence, Selph and Carrascoso, James Madison Ross and Federico Agrava as amici curi.
MORAN, J.:

Property Cases - 36
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles, California, the place of her alleged last
residence and domicile. Among the properties she left her one-half conjugal share in 70,000 shares of stock in the Benguet
Consolidated Mining Company, an anonymous partnership (sociedad anonima), organized and existing under the laws of the
Philippines, with is principal office in the City of Manila. She left a will which was duly admitted to probate in California where her
estate was administered and settled. Petitioner-appellant, Wells Fargo Bank & Union Trust Company, was duly appointed trustee
of the created by the said will. The Federal and State of California's inheritance taxes due on said shares have been duly paid.
Respondent Collector of Internal Revenue sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax,
to which petitioner-appellant objected. Wherefore, a petition for a declaratory judgment was filed in the lower court, with the
statement that, "if it should be held by a final declaratory judgment that the transfer of the aforesaid shares of stock is legally
subject to the Philippine inheritance tax, the petitioner will pay such tax, interest and penalties (saving error in computation)
without protest and will not file to recover the same; and the petitioner believes and therefore alleges that it should be held that
such transfer is not subject to said tax, the respondent will not proceed to assess and collect the same." The Court of First
Instance of Manila rendered judgment, holding that the transmission by will of the said 35,000 shares of stock is subject to
Philippine inheritance tax. Hence, this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon transmission by inheritance
(Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as to real and tangible personal property of a non-resident
decedent, located in the Philippines, the Philippine inheritance tax may be imposed upon their transmission by death, for the selfevident reason that, being a property situated in this country, its transfer is, in some way, defendant, for its effectiveness, upon
Philippine laws. It is contended, however, that, as to intangibles, like the shares of stock in question, their situs is in the domicile
of the owner thereof, and, therefore, their transmission by death necessarily takes place under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every transmission by virtue of inheritance of any share
issued by any corporation of sociedad anonima organized or constituted in the Philippines, is subject to the tax therein provided.
This provision has already been applied to shares of stock in a domestic corporation which were owned by a British subject
residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See alsoGibbs vs. Government of P. I., G. R. No.
35694.) Petitioner, however, invokes the rule laid down by the United States Supreme Court in four cases (Farmers Loan & Trust
Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S., 586; 74 Law. ed., 1056,
Beidler vs. South Carolina Tax Commission 282 U. S., 1; 75 Law. ed., 131; First National Bank of Boston vs. Maine, 284 U. S.,
312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A. L. R., 1401), to the effect that an inheritance tax can be imposed with respect to
intangibles only by the State where the decedent was domiciled at the time of his death, and that, under the due-process clause,
the State in which a corporation has been incorporated has no power to impose such tax if the shares of stock in such
corporation are owned by a non-resident decedent. It is to be observed, however, that in a later case (Burnet vs. Brooks, 288 U.
S., 378; 77 Law. ed., 844), the United States Supreme Court upheld the authority of the Federal Government to impose an
inheritance tax on the transmission, by death of a non-resident, of stock in a domestic (America) corporation, irrespective of the
situs of the corresponding certificates of stock. But it is contended that the doctrine in the foregoing case is not applicable,
because the due-process clause is directed at the State and not at the Federal Government, and that the federal or national
power of the United States is to be determined in relation to other countries and their subjects by applying the principles of
jurisdiction recognized in international relations. Be that as it may, the truth is that the due-process clause is "directed at the
protection of the individual and he is entitled to its immunity as much against the state as against the national government."
(Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed, the rule laid down in the four cases relied upon by
the appellant was predicated on a proper regard for the relation of the states of the American Union, which requires that property
should be taxed in only one state and that jurisdiction to tax is restricted accordingly. In other words, the application to the states
of the due-process rule springs from a proper distribution of their powers and spheres of activity as ordained by the United States
Constitution, and such distribution is enforced and protected by not allowing one state to reach out and tax property in another.
And these considerations do not apply to the Philippines. Our status rests upon a wholly distinct basis and no analogy, however
remote, cam be suggested in the relation of one state of the Union with another or with the United States. The status of the

Property Cases - 37
Philippines has been aptly defined as one which, though a part of the United States in the international sense, is, nevertheless,
foreign thereto in a domestic sense. (Downes vs. Bidwell, 182 U. S., 244, 341.)
At any rate, we see nothing of consequence in drawing any distinct between the operation and effect of the due-process clause
as it applies to the individual states and to the national government of the United States. The question here involved is
essentially not one of due-process, but of the power of the Philippine Government to tax. If that power be conceded, the guaranty
of due process cannot certainly be invoked to frustrate it, unless the law involved is challenged, which is not, on considerations
repugnant to such guaranty of due process of that of the equal protection of the laws, as, when the law is alleged to be arbitrary,
oppressive or discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs for the purpose of inheritance tax, and that
such situs is in the domicile of the decedent at the time of his death. But this rule has, of late, been relaxed. The maxim mobilia
sequuntur personam, upon which the rule rests, has been described as a mere "fiction of law having its origin in consideration of
general convenience and public policy, and cannot be applied to limit or control the right of the state to tax property within its
jurisdiction" (State Board of Assessors vs. Comptoir National D'Escompte, 191 U. S., 388, 403, 404), and must "yield to
established fact of legal ownership, actual presence and control elsewhere, and cannot be applied if to do so result in
inescapable and patent injustice." (Safe Deposit & Trust Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a marked shift from
artificial postulates of law, formulated for reasons of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original rule rests on either of two fundamental
considerations: (1) upon the recognition of the inherent power of each government to tax persons, properties and rights within its
jurisdiction and enjoying, thus, the protection of its laws; and (2) upon the principle that as o intangibles, a single location in
space is hardly possible, considering the multiple, distinct relationships which may be entered into with respect thereto. It is on
the basis of the first consideration that the case of Burnet vs. Brooks, supra, was decided by the Federal Supreme Court,
sustaining the power of the Government to impose an inheritance tax upon transmission, by death of a non-resident, of shares of
stock in a domestic (America) corporation, regardless of the situs of their corresponding certificates; and on the basis of the
second consideration, the case of Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the federal estate tax is precluded by the dueprocess clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other consideration raised by confiscatory or
arbitrary legislation inconsistent with the fundamental conceptions of justice which are embodied in the due-process
clause for the protection of life, liberty, and property of all persons citizens and friendly aliens alike. Russian
Volunteer Fleet vs. United States, 282 U. S., 481, 489; 75 Law ed., 473, 476; 41 S. Ct., 229; Nicholas vs. Coolidge,
274 U. S., 531; 542, 71 Law ed., 1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326;
76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal Government had jurisdiction to impose the tax,
there is manifestly no ground for assailing it. Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct.,
747; MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1 Ann. Cas., 561; Flint vs. Stone
Tracy Co., 220 U.S., 107, 153, 154; 55 Law. ed., 389, 414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312;
Brushaber vs. Union p. R. Co., 240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann. Cas,
1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439, 496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its borders, wherever its owner may have been
domiciled at the time of his death, the court ruled:

Property Cases - 38
. . . There does not appear, a priori, to be anything contrary to the principles of international law, or hurtful to the polity
of nations, in a State's taxing property physically situated within its borders, wherever its owner may have been
domiciled at the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based on distinct grounds the citizenship
of the owner, his domicile, the source of income, the situs of the property efforts have been made to preclude
multiple taxation through the negotiation of appropriate international conventions. These endeavors, however, have
proceeded upon express or implied recognition, and not in denial, of the sovereign taxing power as exerted by
governments in the exercise of jurisdiction upon any one of these grounds. . . . (See pages 396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of Alabama and Tennessee may each
constitutionally impose death taxes upon the transfer of an interest in intangibles held in trust by an Alabama trustee but passing
under the will of a beneficiary decedent domiciles in Tennessee, sustained the power of each State to impose the tax. In arriving
at this conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his domicile it has been found convenient
to substitute a rule for a reason, cf. New York ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57
S. Ct., 466; 108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law. ed., 1061, 1065; 57
S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are taxed at their situs and not elsewhere, or perhaps less
artificially, by invoking the maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72 Law. ed., 749;
S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed., 1056; 50 S. Ct., 436; 72 A. L. R., 1303, supra,
which means only that it is the identify owner at his domicile which gives jurisdiction to tax. But when the taxpayer
extends his activities with respect to his intangibles, so as to avail himself of the protection and benefit of the laws of
another state, in such a way as to bring his person or properly within the reach of the tax gatherer there, the reason for
a single place of taxation no longer obtains, and the rule even workable substitute for the reasons may exist in any
particular case to support the constitutional power of each state concerned to tax. Whether we regard the right of a
state to tax as founded on power over the object taxed, as declared by Chief Justice Marshall in
McCulloch vs. Maryland, 4 Wheat., 316; 4 Law. ed., 579, supra, through dominion over tangibles or over persons
whose relationships are source of intangibles rights, or on the benefit and protection conferred by the taxing
sovereignty, or both, it is undeniable that the state of domicile is not deprived, by the taxpayer's activities elsewhere, of
its constitutional jurisdiction to tax, and consequently that there are many circumstances in which more than one state
may have jurisdiction to impose a tax and measure it by some or all of the taxpayer's intangibles. Shares or corporate
stock be taxed at the domicile of the shareholder and also at that of the corporation which the taxing state has created
and controls; and income may be taxed both by the state where it is earned and by the state of the recipient's domicile.
protection, benefit, and power over the subject matter are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in every case to the mere mechanical
operation of locating at a single place, and there taxing, every legal interest growing out of all the complex legal
relationships which may be entered into between persons. This is the case because in point of actuality those interests
may be too diverse in their relationships to various taxing jurisdictions to admit of unitary treatment without discarding
modes of taxation long accepted and applied before the Fourteen Amendment was adopted, and still recognized by
this Court as valid. (P. 1351.)
We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the issue here involved is controlled by
those doctrines. In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled
therein. And besides, the certificates of stock have remained in this country up to the time when the deceased died in California,
and they were in possession of one Syrena McKee, secretary of the Benguet Consolidated Mining Company, to whom they have
been delivered and indorsed in blank. This indorsement gave Syrena McKee the right to vote the certificates at the general

Property Cases - 39
meetings of the stockholders, to collect dividends, and dispose of the shares in the manner she may deem fit, without prejudice
to her liability to the owner for violation of instructions. For all practical purposes, then, Syrena McKee had the legal title to the
certificates of stock held in trust for the true owner thereof. In other words, the owner residing in California has extended here her
activities with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the
jurisdiction of the Philippine Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
Avancea, C.J., Imperial, Diaz and Concepcion, JJ., concur.
Wells Fargo vs. Collector of Internal RevenueGR 46720, 28 June 1940
First Division, Moran (J): 4 concur, 1 concur in result
Facts:
Birdie Lillian Eye died on 16 September 1932, at Los Angeles, California, the place of her alleged last residence and domicile.
Among the properties she left was her 1/2 conjugal shares of stock in the Benguet Consolidated Mining Co., an anonymous
partnership (sociedad anonima), organized under the laws of the Philippines. She left a will duly admitted to probate
in California where her estate was administered and settled. Wells Fargo bank and Union Trust Co. was duly
appointed trustee of the trust by the said will. The Federal and California States inheritance taxes due thereon have been duly
paid. The Collector of Internal Revenue in the Philippines, however, sought to subject the shares of stock to inheritance tax, to
which Wells Fargo objected.
Issue:
Whether the shares of stock are subject to Philippine inheritance tax considering that the decedent was domiciled in California.
Held:
Originally, the settled law in the United States is that intangibles have only one situs for the purpose of inheritance tax, and such
situs is in the domicile of the decedent at the time of his or her death. But the rule has been relaxed. The maxim mobila
sequuntur personam, upon which the rule rests, has been decried as a mere fiction of law having its origin in considerations of
general convenience and public policy, and cannot be applied to limit or control teh right of the State to tax property within its
jurisdiction and must yield to established fact of legal ownership, actual presence and control elsewhere, and cannot be applied
if to do so whould result in inescapable and patent injustice. The relaxation of the original rule rests on either of two
fundamental considerations: (1) upon the recognition of the inherent power of each government to
taxpersons, properties, and rights within its jurisdiction and enjoying, thus, the protection of its laws; and (2)upon the principle
that as to intangibles, a single location in space is hardly possible, considering the multiple, distinct relationships which may be
entered into with respect thereto. Herein, the actual situs of the shares of stock is in the Philippines, the corporation being
domiciled therein. The certificates of stock remained in the Philippines up to the time when the deceased died in California, and
they were in possession of one Syrena McKee, secretary of the corporation, to whom they
h a v e b e e n delivered and indorsed in blank. McKee had the legal title to the certificates of stock held in trust for the
trueo w n e r t h e r e o f . T h e o w n e r r e s i d i n g i n C a l i f o r n i a h a s e x t e n d e d h e r e h e r a c t i v i t i e s w i t h r e s
pect to herintangibles so as to avail hereself of the protection and benefit of Philippine law
s . A c c o r d i n g l y, t h e jurisdiction of the Philippine Government to tax must be upheld.
-------------------------------------------------------------------------------------------------------------------------------------------------------G.R. No. L-46720

June 28, 1940

WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,


vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.

Property Cases - 40
De Witt, Perkins and Ponce Enrile for appellant.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee.
Ross, Lawrence, Selph and Carrascoso, James Madison Ross and Federico Agrava as amici curi.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles, California, the place of her alleged last
residence and domicile. Among the properties she left her one-half conjugal share in 70,000 shares of stock in the Benguet
Consolidated Mining Company, an anonymous partnership (sociedad anonima), organized and existing under the laws of the
Philippines, with is principal office in the City of Manila. She left a will which was duly admitted to probate in California where her
estate was administered and settled. Petitioner-appellant, Wells Fargo Bank & Union Trust Company, was duly appointed trustee
of the created by the said will. The Federal and State of California's inheritance taxes due on said shares have been duly paid.
Respondent Collector of Internal Revenue sought to subject anew the aforesaid shares of stock to the Philippine inheritance tax,
to which petitioner-appellant objected. Wherefore, a petition for a declaratory judgment was filed in the lower court, with the
statement that, "if it should be held by a final declaratory judgment that the transfer of the aforesaid shares of stock is legally
subject to the Philippine inheritance tax, the petitioner will pay such tax, interest and penalties (saving error in computation)
without protest and will not file to recover the same; and the petitioner believes and therefore alleges that it should be held that
such transfer is not subject to said tax, the respondent will not proceed to assess and collect the same." The Court of First
Instance of Manila rendered judgment, holding that the transmission by will of the said 35,000 shares of stock is subject to
Philippine inheritance tax. Hence, this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon transmission by inheritance
(Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as to real and tangible personal property of a non-resident
decedent, located in the Philippines, the Philippine inheritance tax may be imposed upon their transmission by death, for the selfevident reason that, being a property situated in this country, its transfer is, in some way, defendant, for its effectiveness, upon
Philippine laws. It is contended, however, that, as to intangibles, like the shares of stock in question, their situs is in the domicile
of the owner thereof, and, therefore, their transmission by death necessarily takes place under his domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every transmission by virtue of inheritance of any share
issued by any corporation of sociedad anonima organized or constituted in the Philippines, is subject to the tax therein provided.
This provision has already been applied to shares of stock in a domestic corporation which were owned by a British subject
residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No. 42967. See alsoGibbs vs. Government of P. I., G. R. No.
35694.) Petitioner, however, invokes the rule laid down by the United States Supreme Court in four cases (Farmers Loan & Trust
Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S., 586; 74 Law. ed., 1056,
Beidler vs. South Carolina Tax Commission 282 U. S., 1; 75 Law. ed., 131; First National Bank of Boston vs. Maine, 284 U. S.,
312; 52 S. Ct., 174, 76 Law. ed., 313; 77 A. L. R., 1401), to the effect that an inheritance tax can be imposed with respect to
intangibles only by the State where the decedent was domiciled at the time of his death, and that, under the due-process clause,
the State in which a corporation has been incorporated has no power to impose such tax if the shares of stock in such
corporation are owned by a non-resident decedent. It is to be observed, however, that in a later case (Burnet vs. Brooks, 288 U.
S., 378; 77 Law. ed., 844), the United States Supreme Court upheld the authority of the Federal Government to impose an
inheritance tax on the transmission, by death of a non-resident, of stock in a domestic (America) corporation, irrespective of the
situs of the corresponding certificates of stock. But it is contended that the doctrine in the foregoing case is not applicable,
because the due-process clause is directed at the State and not at the Federal Government, and that the federal or national
power of the United States is to be determined in relation to other countries and their subjects by applying the principles of
jurisdiction recognized in international relations. Be that as it may, the truth is that the due-process clause is "directed at the
protection of the individual and he is entitled to its immunity as much against the state as against the national government."

Property Cases - 41
(Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed, the rule laid down in the four cases relied upon by
the appellant was predicated on a proper regard for the relation of the states of the American Union, which requires that property
should be taxed in only one state and that jurisdiction to tax is restricted accordingly. In other words, the application to the states
of the due-process rule springs from a proper distribution of their powers and spheres of activity as ordained by the United States
Constitution, and such distribution is enforced and protected by not allowing one state to reach out and tax property in another.
And these considerations do not apply to the Philippines. Our status rests upon a wholly distinct basis and no analogy, however
remote, cam be suggested in the relation of one state of the Union with another or with the United States. The status of the
Philippines has been aptly defined as one which, though a part of the United States in the international sense, is, nevertheless,
foreign thereto in a domestic sense. (Downes vs. Bidwell, 182 U. S., 244, 341.)
At any rate, we see nothing of consequence in drawing any distinct between the operation and effect of the due-process clause
as it applies to the individual states and to the national government of the United States. The question here involved is
essentially not one of due-process, but of the power of the Philippine Government to tax. If that power be conceded, the guaranty
of due process cannot certainly be invoked to frustrate it, unless the law involved is challenged, which is not, on considerations
repugnant to such guaranty of due process of that of the equal protection of the laws, as, when the law is alleged to be arbitrary,
oppressive or discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs for the purpose of inheritance tax, and that
such situs is in the domicile of the decedent at the time of his death. But this rule has, of late, been relaxed. The maxim mobilia
sequuntur personam, upon which the rule rests, has been described as a mere "fiction of law having its origin in consideration of
general convenience and public policy, and cannot be applied to limit or control the right of the state to tax property within its
jurisdiction" (State Board of Assessors vs. Comptoir National D'Escompte, 191 U. S., 388, 403, 404), and must "yield to
established fact of legal ownership, actual presence and control elsewhere, and cannot be applied if to do so result in
inescapable and patent injustice." (Safe Deposit & Trust Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a marked shift from
artificial postulates of law, formulated for reasons of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original rule rests on either of two fundamental
considerations: (1) upon the recognition of the inherent power of each government to tax persons, properties and rights within its
jurisdiction and enjoying, thus, the protection of its laws; and (2) upon the principle that as o intangibles, a single location in
space is hardly possible, considering the multiple, distinct relationships which may be entered into with respect thereto. It is on
the basis of the first consideration that the case of Burnet vs. Brooks, supra, was decided by the Federal Supreme Court,
sustaining the power of the Government to impose an inheritance tax upon transmission, by death of a non-resident, of shares of
stock in a domestic (America) corporation, regardless of the situs of their corresponding certificates; and on the basis of the
second consideration, the case of Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the federal estate tax is precluded by the dueprocess clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other consideration raised by confiscatory or
arbitrary legislation inconsistent with the fundamental conceptions of justice which are embodied in the due-process
clause for the protection of life, liberty, and property of all persons citizens and friendly aliens alike. Russian
Volunteer Fleet vs. United States, 282 U. S., 481, 489; 75 Law ed., 473, 476; 41 S. Ct., 229; Nicholas vs. Coolidge,
274 U. S., 531; 542, 71 Law ed., 1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326;
76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal Government had jurisdiction to impose the tax,
there is manifestly no ground for assailing it. Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct.,
747; MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1 Ann. Cas., 561; Flint vs. Stone
Tracy Co., 220 U.S., 107, 153, 154; 55 Law. ed., 389, 414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312;

Property Cases - 42
Brushaber vs. Union p. R. Co., 240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann. Cas,
1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439, 496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its borders, wherever its owner may have been
domiciled at the time of his death, the court ruled:
. . . There does not appear, a priori, to be anything contrary to the principles of international law, or hurtful to the polity
of nations, in a State's taxing property physically situated within its borders, wherever its owner may have been
domiciled at the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based on distinct grounds the citizenship
of the owner, his domicile, the source of income, the situs of the property efforts have been made to preclude
multiple taxation through the negotiation of appropriate international conventions. These endeavors, however, have
proceeded upon express or implied recognition, and not in denial, of the sovereign taxing power as exerted by
governments in the exercise of jurisdiction upon any one of these grounds. . . . (See pages 396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of Alabama and Tennessee may each
constitutionally impose death taxes upon the transfer of an interest in intangibles held in trust by an Alabama trustee but passing
under the will of a beneficiary decedent domiciles in Tennessee, sustained the power of each State to impose the tax. In arriving
at this conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his domicile it has been found convenient
to substitute a rule for a reason, cf. New York ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57
S. Ct., 466; 108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law. ed., 1061, 1065; 57
S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are taxed at their situs and not elsewhere, or perhaps less
artificially, by invoking the maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72 Law. ed., 749;
S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed., 1056; 50 S. Ct., 436; 72 A. L. R., 1303, supra,
which means only that it is the identify owner at his domicile which gives jurisdiction to tax. But when the taxpayer
extends his activities with respect to his intangibles, so as to avail himself of the protection and benefit of the laws of
another state, in such a way as to bring his person or properly within the reach of the tax gatherer there, the reason for
a single place of taxation no longer obtains, and the rule even workable substitute for the reasons may exist in any
particular case to support the constitutional power of each state concerned to tax. Whether we regard the right of a
state to tax as founded on power over the object taxed, as declared by Chief Justice Marshall in
McCulloch vs. Maryland, 4 Wheat., 316; 4 Law. ed., 579, supra, through dominion over tangibles or over persons
whose relationships are source of intangibles rights, or on the benefit and protection conferred by the taxing
sovereignty, or both, it is undeniable that the state of domicile is not deprived, by the taxpayer's activities elsewhere, of
its constitutional jurisdiction to tax, and consequently that there are many circumstances in which more than one state
may have jurisdiction to impose a tax and measure it by some or all of the taxpayer's intangibles. Shares or corporate
stock be taxed at the domicile of the shareholder and also at that of the corporation which the taxing state has created
and controls; and income may be taxed both by the state where it is earned and by the state of the recipient's domicile.
protection, benefit, and power over the subject matter are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in every case to the mere mechanical
operation of locating at a single place, and there taxing, every legal interest growing out of all the complex legal
relationships which may be entered into between persons. This is the case because in point of actuality those interests
may be too diverse in their relationships to various taxing jurisdictions to admit of unitary treatment without discarding
modes of taxation long accepted and applied before the Fourteen Amendment was adopted, and still recognized by
this Court as valid. (P. 1351.)

Property Cases - 43
We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the issue here involved is controlled by
those doctrines. In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled
therein. And besides, the certificates of stock have remained in this country up to the time when the deceased died in California,
and they were in possession of one Syrena McKee, secretary of the Benguet Consolidated Mining Company, to whom they have
been delivered and indorsed in blank. This indorsement gave Syrena McKee the right to vote the certificates at the general
meetings of the stockholders, to collect dividends, and dispose of the shares in the manner she may deem fit, without prejudice
to her liability to the owner for violation of instructions. For all practical purposes, then, Syrena McKee had the legal title to the
certificates of stock held in trust for the true owner thereof. In other words, the owner residing in California has extended here her
activities with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the
jurisdiction of the Philippine Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
Avancea, C.J., Imperial, Diaz and Concepcion, JJ., concur.
G.R. No. 91332 July 16, 1993
PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES OF TABAC REUNIES, S.A., petitioners
vs.
THE COURT OF APPEALS AND FORTUNE TOBACCO CORPORATION, respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco Law Office for petitioners.
Teresita Gandionco-Oledan for private respondent.

MELO, J.:
In the petition before us, petitioners Philip Morris, Inc., Benson and Hedges (Canada), Inc., and Fabriques of Tabac Reunies,
S.A., are ascribing whimsical exercise of the faculty conferred upon magistrates by Section 6, Rule 58 of the Revised Rules of
Court when respondent Court of Appeals lifted the writ of preliminary injunction it earlier had issued against Fortune Tobacco
Corporation, herein private respondent, from manufacturing and selling "MARK" cigarettes in the local market.
Banking on the thesis that petitioners' respective symbols "MARK VII", "MARK TEN", and "LARK", also for cigarettes, must be
protected against unauthorized appropriation, petitioners twice solicited the ancillary writ in the course the main suit for
infringement but the court of origin was unpersuaded.
Before we proceed to the generative facts of the case at bar, it must be emphasized that resolution of the issue on the propriety
of lifting the writ of preliminary injunction should not be construed as a prejudgment of the suit below. Aware of the fact that the
discussion we are about to enter into involves a mere interlocutory order, a discourse on the aspect infringement must thus be
avoided. With these caveat, we shall now shift our attention to the events which spawned the controversy.
As averred in the initial pleading, Philip Morris, Incorporated is a corporation organized under the laws of the State of Virginia,
United States of America, and does business at 100 Park Avenue, New York, New York, United States of America. The two other
plaintiff foreign corporations, which are wholly-owned subsidiaries of Philip Morris, Inc., are similarly not doing business in the
Philippines but are suing on an isolated transaction. As registered owners "MARK VII", "MARK TEN", and "LARK" per certificates
of registration issued by the Philippine Patent Office on April 26, 1973, May 28, 1964, and March 25, 1964, plaintiffs-petitioners

Property Cases - 44
asserted that defendant Fortune Tobacco Corporation has no right to manufacture and sell cigarettes bearing the allegedly
identical or confusingly similar trademark "MARK" in contravention of Section 22 of the Trademark Law, and should, therefore, be
precluded during the pendency of the case from performing the acts complained of via a preliminary injunction (p. 75, Court of
Appeals Rollo in AC-G.R. SP No. 13132).
For its part, Fortune Tobacco Corporation admitted petitioners' certificates of registration with the Philippine Patent Office subject
to the affirmative and special defense on misjoinder of party plaintiffs. Private respondent alleged further that it has been
authorized by the Bureau of Internal Revenue to manufacture and sell cigarettes bearing the trademark "MARK", and that
"MARK" is a common word which cannot be exclusively appropriated (p.158, Court of Appeals Rollo in A.C.-G.R. SP No. 13132).
On March 28, 1983, petitioners' prayer for preliminary injunction was denied by the Presiding Judge of Branch 166 of the
Regional Trial Court of the National Capital Judicial Region stationed at Pasig, premised upon the following propositions:
Plaintiffs admit in paragraph 2 of the complaint that ". . . they are
not doing business in the Philippines and are suing on an isolated transaction . . .". This simply means that
they are not engaged in the sale, manufacture, importation, expor[t]ation and advertisement of their cigarette
products in the Philippines. With this admission, defendant asks: ". . . how could defendant's "MARK"
cigarettes cause the former "irreparable damage" within the territorial limits of the Philippines?" Plaintiffs
maintain that since their trademarks are entitled to protection by treaty obligation under Article 2 of the Paris
Convention of which the Philippines is a member and ratified by Resolution No. 69 of the Senate of the
Philippines and as such, have the force and effect of law under Section 12, Article XVII of our Constitution
and since this is an action for a violation or infringement of a trademark or trade name by defendant, such
mere allegation is sufficient even in the absence of proof to support it. To the mind of the Court, precisely, this
is the issue in the main case to determine whether or not there has been an invasion of plaintiffs' right of
property to such trademark or trade name. This claim of plaintiffs is disputed by defendant in paragraphs 6
and 7 of the Answer; hence, this cannot be made a basis for the issuance of a writ of preliminary injunction.
There is no dispute that the First Plaintiff is the registered owner of trademar[k] "MARK VII" with Certificate of
Registration No. 18723, dated April 26,1973 while the Second Plaintiff is likewise the registered owner of
trademark "MARK TEN" under Certificate of Registration No. 11147, dated May 28, 1963 and the Third
Plaintiff is a registrant of trademark "LARK" as shown by Certificate of Registration No. 10953 dated March
23, 1964, in addition to a pending application for registration of trademark "MARK VII" filed on November 21,
1980 under Application Serial No. 43243, all in the Philippine Patent Office. In same the manner, defendant
has a pending application for registration of the trademark "LARK" cigarettes with the Philippine Patent Office
under Application Serial No. 44008. Defendant contends that since plaintiffs are "not doing business in the
Philippines" coupled the fact that the Director of Patents has not denied their pending application for
registration of its trademark "MARK", the grant of a writ of preliminary injunction is premature. Plaintiffs
contend that this act(s) of defendant is but a subterfuge to give semblance of good faith intended to deceive
the public and patronizers into buying the products and create the impression that defendant's goods are
identical with or come from the same source as plaintiffs' products or that the defendant is a licensee of
plaintiffs when in truth and in fact the former is not. But the fact remains that with its pending application,
defendant has embarked in the manufacturing, selling, distributing and advertising of "MARK" cigarettes. The
question of good faith or bad faith on the part of defendant are matters which are evidentiary in character
which have to be proven during the hearing on the merits; hence, until and unless the Director of Patents has
denied defendant's application, the Court is of the opinion and so holds that issuance a writ of preliminary
injunction would not lie.
There is no question that defendant has been authorized by the Bureau of Internal Revenue to manufacture
cigarettes bearing the trademark "MARK" (Letter of Ruben B. Ancheta, Acting Commissioner addressed to

Property Cases - 45
Fortune Tobacco Corporation dated April 3, 1981, marked as Annex "A", defendant's "OPPOSITION, etc."
dated September 24, 1982). However, this authority is qualified . . . that the said brands have been accepted
and registered by the Patent Office not later than six (6) months after you have been manufacturing the
cigarettes and placed the same in the market." However, this grant ". . . does not give you protection against
any person or entity whose rights may be prejudiced by infringement or unfair competition in relation to your
indicated trademarks/brands". As aforestated, the registration of defendant's application is still pending in the
Philippine Patent Office.
It has been repeatedly held in this jurisdiction as well as in the United States that the right or title of the
applicant for injunction remedy must be clear and free from doubt. Because of the disastrous and painful
effects of an injunction, Courts should be extremely careful, cautious and conscionable in the exercise of its
discretion consistent with justice, equity and fair play.
There is no power the exercise of which is more delicate which requires greater caution,
deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than
the issuing of an injunction; it is the strong arm of equity that never ought to be extended
unless to cases of great injury, where courts of law cannot afford an adequate or
commensurate remedy in damages. The right must be clear, the injury impending or
threatened, so as to be averted only by the protecting preventive process of injunction.
(Bonaparte v. Camden, etc. N. Co., 3 F. Cas. No. 1, 617, Baldw. 205, 217.)
Courts of equity constantly decline to lay down any rule which injunction shall be granted
or withheld. There is wisdom in this course, for it is impossible to foresee all exigencies of
society which may require their aid to protect rights and restrain wrongs. (Merced M. Go
v. Freemont, 7 Gal. 317, 321; 68 Am. Dec. 262.)
It is the strong arm of the court; and to render its operation begin and useful, it must be
exercised with great discretion, and when necessary requires it. (Attorney-General v.
Utica Inc. Co., P. John Ch. (N.Y.) 371.)
Having taken a panoramic view of the position[s] of both parties as viewed from their pleadings, the picture
reduced to its minimum size would be this: At the crossroads are the two (2) contending parties, plaintiffs
vigorously asserting the rights granted by law, treaty and jurisprudence to restrain defendant in its activities of
manufacturing, selling, distributing and advertising its "MARK" cigarettes and now comes defendant who
countered and refused to be restrained claiming that it has been authorized temporarily by the Bureau of
Internal Revenue under certain conditions to do so as aforestated coupled by its pending application for
registration of trademark "MARK" in the Philippine Patent Office. This circumstance in itself has created a
dispute between the parties which to the mind of the Court does not warrant the issuance of a writ of
preliminary injunction.
It is well-settled principle that courts of equity will refuse an application for the injunctive
remedy where the principle of law on which the right to preliminary injunction rests is
disputed and will admit of doubt, without a decision of the court of law establishing such
principle although satisfied as to what is a correct conclusion of law upon the facts. The
fact, however, that there is no such dispute or conflict does not in itself constitute a
justifiable ground for the court to refuse an application for the injunctive relief.
(Hackensack Impr. Commn. v. New Jersey Midland P. Co., 22 N.J. Eg. 94.)

Property Cases - 46
Hence, the status quo existing between the parties prior to the filing of this case should be maintained. For
after all, an injunction, without reference to the parties, should be violent, vicious nor even vindictive. (pp.
338-341, Rollo in G.R. No. 91332.)
In the process of denying petitioners' subsequent motion for reconsideration of the order denying issuance of the requested writ,
the court of origin took cognizance of the certification executed on January 30, 1984 by the Philippine Patent Office attesting to
the fact that private respondent's application for registration is still pending appropriate action. Apart from this communication,
what prompted the trial court judge to entertain the idea of prematurity and untimeliness of petitioners' application for a writ of
preliminary injunction was the letter from the Bureau of Internal Revenue date February 2, 1984 which reads:
MRS. TERESITA GANDIONGCO OLEDAN
Legal Counsel
Fortune Tobacco Corporation
Madam:
In connection with your letter dated January 25, 1984, reiterating your query as to whether your label
approval automatically expires or becomes null and void after six (6) months if the brand is not accepted and
by the patent office, please be informed that no provision in the Tax Code or revenue regulation that requires
an applicant to comply with the aforementioned condition order that his label approved will remain valid and
existing.
Based on the document you presented, it shows that registration of this particular label still pending
resolution by the Patent Office. These being so , you may therefore continue with the production said brand
of cigarette until this Office is officially notified that the question of ownership of "MARK" brand is finally
resolved.
Very truly yours,
TEODORO D. PAREO
Chief, Manufactured Tobacco
Tax Division
TAN-P6531-D2830-A-6
(p. 348, Rollo.)
It appears from the testimony of Atty. Enrique Madarang, Chief of the Trademark Division of the then Philippine Patent Office that
Fortune's application for its trademark is still pending before said office (p. 311, Rollo).
Petitioners thereafter cited supervening events which supposedly transpired since March 28, 1983, when the trial court first
declined issuing a writ of preliminary injunction, that could alter the results of the case in that Fortune's application had been
rejected, nay, barred by the Philippine Patent Office, and that the application had been forfeited by abandonment, but the trial
court nonetheless denied the second motion for issuance of the injunctive writ on April 22, 1987, thus:
For all the prolixity of their pleadings and testimonial evidence, the plaintiffs-movants have fallen far short of
the legal requisites that would justify the grant of the writ of preliminary injunction prayed for. For one, they
did not even bother to establish by competent evidence that the products supposedly affected adversely by
defendant's trademark now subject of an application for registration with the Philippine Patents Office, are in

Property Cases - 47
actual use in the Philippines. For another, they concentrated their fire on the alleged abandonment and
forfeiture by defendant of said application for registration.
The Court cannot help but take note of the fact that in their complaint plaintiffs included a prayer for issuance
preliminary injunction. The petition was duly heard, and thereafter matter was assiduously discussed
lengthily and resolved against plaintiffs in a 15-page Order issued by the undersigned's predecessor on
March 28, 1983. Plaintiffs' motion for reconsideration was denied in another well-argued 8 page Order issued
on April 5, 1984,, and the matter was made to rest.
However, on the strength of supposed changes in the material facts of this case, plaintiffs came up with the
present motion citing therein the said changes which are: that defendant's application had been rejected and
barred by the Philippine Patents Office, and that said application has been deemed abandoned and forfeited.
But defendant has refiled the same.
Plaintiffs' arguments in support of the present motion appear to be a mere rehash of their stand in the first
above-mentioned petition which has already been ruled upon adversely against them. Granting that the
alleged changes in the material facts are sufficient grounds for a motion seeking a favorable grant of what
has already been denied, this motion just the same cannot prosper.
In the first place there is no proof whatsoever that any of plaintiffs' products which they seek to protect from
any adverse effect of the trademark applied for by defendant, is in actual use and available for commercial
purposes anywhere in the Philippines. Secondly as shown by plaintiffs' own evidence furnished by no less
than the chief of Trademarks Division of the Philippine Patent Office, Atty. Enrique Madarang, the
abandonment of an application is of no moment, for the same can always be refiled. He said there is no
specific provision in the rules prohibiting such refiling (TSN, November 21, 1986, pp. 60 & 64, Raviera). In
fact, according to Madarang, the refiled application of defendant is now pending before the Patents Office.
Hence, it appears that the motion has no leg to stand on. (pp. 350-351, Rollo in G. R. No. 91332.)
Confronted with this rebuff, petitioners filed a previous petition for certiorari before the Court, docketed as G.R. No. 78141, but
the petition was referred to the Court of Appeals.
The Court of Appeals initially issued a resolution which set aside the court of origin's order dated April 22, 1987, and granted the
issuance of a writ of preliminary injunction enjoining Fortune, its agents, employees, and representatives, from manufacturing,
selling, and advertising "MARK" cigarettes. The late Justice Cacdac, speaking for the First Division of the Court of Appeals in CAG.R. SP No. 13132, remarked:
There is no dispute that petitioners are the registered owners of the trademarks for cigarettes "MARK VII",
"MARK TEN", and "LARK".(Annexes B, C and D, petition). As found and reiterated by the Philippine Patent
Office in two (2) official communications dated April 6, 1983 and January 24, 1984, the trademark "MARK" is
"confusingly similar" to the trademarks of petitioners, hence registration was barred under Sec. 4 (d) of Rep.
Act. No. 166, as amended (pp. 106, 139, SCA rollo). In a third official communication dated April 8, 1986, the
trademark application of private respondent for the "MARK" under Serial No. 44008 filed on February 13,
1981 which was declared abandoned as of February 16, 1986, is now deemed forfeited, there being no
revival made pursuant to Rule 98 of the Revised Rules of Practitioners in Trademark Cases." (p. 107,
CA rollo). The foregoing documents or communications mentioned by petitioners as "the changes in material
facts which occurred after March 28, 1983", are not also questioned by respondents.

Property Cases - 48
Pitted against the petitioners' documentary evidence, respondents pointed to (1) the letter dated January 30,
1979 (p. 137, CA rollo) of Conrado P. Diaz, then Acting Commissioner of Internal Revenue, temporarily
granting the request of private respondent for a permit to manufacture two (2) new brands of cigarettes one
of which is brand "MARK" filter-type blend, and (2) the certification dated September 26, 1986 of Cesar G.
Sandico, Director of Patents (p. 138, CA rollo) issued upon the written request of private respondents'
counsel dated September 17, 1986 attesting that the records of his office would show that the "trademark
MARK" for cigarettes is now the subject of a pending application under Serial No. 59872 filed on September
16, 1986.
Private respondent's documentary evidence provides the reasons neutralizing or weakening their probative
values. The penultimate paragraph of Commissioner Diaz' letter of authority reads:
Please be informed further that the authority herein granted does not give you protection
against any person or entity whose rights may be prejudiced by infringement or unfair
competition in relation to your above-named brands/trademark.
while Director Sandico's certification contained similar conditions as follows:
This Certification, however, does not give protection as against any person or entity
whose right may be prejudiced by infringement or unfair competition in relation to the
aforesaid trademark nor the right to register if contrary to the provisions of the Trademark
Law, Rep. Act No. 166 as amended and the Revised Rules of Practice in Trademark
Cases.
The temporary permit to manufacture under the trademark "MARK" for cigarettes and the acceptance of the
second application filed by private respondent in the height of their dispute in the main case were evidently
made subject to the outcome of the said main case or Civil Case No. 47374 of the respondent Court. Thus,
the Court has not missed to note the absence of a mention in the Sandico letter of September 26, 1986 of
any reference to the pendency of the instant action filed on August 18, 1982. We believe and hold that
petitioners have shown a prima facie case for the issuance of the writ of prohibitory injunction for the
purposes stated in their complaint and subsequent motions for the issuance of the prohibitory writ. (Buayan
Cattle Co. vs. Quintillan, 125 SCRA 276)
The requisites for the granting of preliminary injunction are the existence of the right protected and the facts
against which the injunction is to be directed as violative of said right. (Buayan Cattle Co. vs.
Quintillan, supra; Ortigas & Co. vs. Ruiz, 148 SCRA 326). It is a writ framed according to the circumstances
of the case commanding an act which the Court regards as essential to justice and restraining an act it
deems contrary to equity and good conscience (Rosauro vs. Cuneta, 151 SCRA 570). If it is not issued, the
defendant may, before final judgment, do or continue the doing of the act which the plaintiff asks the court to
restrain, and thus make ineffectual the final judgment rendered afterwards granting the relief sought by the
plaintiff (Calo vs. Roldan, 76 Phil. 445). Generally, its grant or denial rests upon the sound discretion of the
Court except on a clear case of abuse (Belish Investment & Finance Co. vs. State House, 151 SCRA 636).
Petitioners' right of exclusivity to their registered trademarks being clear and beyond question, the
respondent court's denial of the prohibitive writ constituted excess of jurisdiction and grave abuse discretion.
If the lower court does not grant preliminary injunction, the appellate court may grant the same. (Service
Specialists, Inc. vs. Sheriff of Manila, 145 SCRA 139). (pp. 165-167, Rollo in G.R. No. 91332.)

Property Cases - 49
After private respondent Fortune's motion for reconsideration was rejected, a motion to dissolve the disputed writ of preliminary
injunction with offer to post a counterbond was submitted which was favorably acted upon by the Court of Appeals, premised on
the filing of a sufficient counterbond to answer for whatever perjuicio petitioners may suffer as a result thereof, to wit:
The private respondent seeks to dissolve the preliminary injunction previously granted by this Court with an
offer to file a counterbond. It was pointed out in its supplemental motion that lots of workers employed will be
laid off as a consequence of the injunction and that the government will stand to lose the amount of specific
taxes
being
paid
by
the
private respondent. The specific taxes being paid is the sum total of P120,120, 295.98 from January to July
1989.
The petitioners argued in their comment that the damages caused by the infringement of their trademark as
well as the goodwill it generates are incapable of pecuniary estimation and monetary evaluation and not even
the counterbond could adequately compensate for the damages it will incur as a result of the dissolution of
the bond. In addition, the petitioner further argued that doing business in the Philippines is not relevant as the
injunction pertains to an infringement of a trademark right.
After a thorough re-examination of the issues involved and the arguments advanced by both parties in the
offer to file a counterbond and the opposition thereto, WE believe that there are sound and cogent reasons
for US to grant the dissolution of the writ of preliminary injunction by the offer of the private respondent to put
up a counterbond to answer for whatever damages the petitioner may suffer as a consequence of the
dissolution of the preliminary injunction.
The petitioner will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the
preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with
the trademark in question and the filing of the counterbond will amply answer for such damages.
While the rule is that an offer of a counterbond does not operate to dissolve an injunction previously granted,
nevertheless, it is equally true that an injunction could be dissolved only upon good and valid grounds subject
to the sound discretion of the court. As WE have maintained the view that there are sound and good reasons
to lift the preliminary injunction, the motion to file a counterbond is granted. (pp. 53-54, Rollo in G.R. No.
91332.)
Petitioners, in turn, filed their own motion for re-examination geared towards reimposition of the writ of preliminary injunction but
to no avail (p. 55, Rollo in G.R. No. 91332).
Hence, the instant petition casting three aspersions that respondent court gravely abused its discretion tantamount to excess of
jurisdiction when:
I. . . . it required, contrary to law and jurisprudence, that in order that petitioners may suffer irreparable injury
due to the lifting of the injunction, petitioners should be using actually their registered trademarks in
commerce in the Philippines;
II. . . . it lifted the injunction in violation of section 6 of Rule 58 of the Rules of Court; and
III. . . . after having found that the trial court had committed grave abuse of discretion and exceeded its
jurisdiction for having refused to issue the writ of injunction to restrain private respondent's acts that are
contrary to equity and good conscience, it made a complete about face for legally insufficient grounds and

Property Cases - 50
authorized the private respondent to continue performing the very same acts that it had considered contrary
to equity and good conscience, thereby ignoring not only the mandates of the Trademark Law, the
international commitments of the Philippines, the judicial admission of private respondent that it will have no
more right to use the trademark "MARK" after the Director of Patents shall have rejected the application to
register it, and the admonitions of the Supreme Court. (pp. 24-25, Petition; pp. 25-26, Rollo.)
To sustain a successful prosecution of their suit for infringement, petitioners, as foreign corporations not engaged in local
commerce, rely on section 21-A of the Trademark Law reading as follows:
Sec. 21-A. Any foreign corporation or juristic person to which a mark or trade-name has been registered or
assigned under this act may bring an action 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 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. (As inserted by Sec. 7 of Republic Act No.
638.)
to drive home the point that they are not precluded from initiating a cause of action in the Philippines on
account of the principal perception that another entity is pirating their symbol without any lawful authority to
do so. Judging from a perusal of the aforequoted Section 21-A, the conclusion reached by petitioners is
certainly correct for the proposition in support thereof is embedded in the Philippine legal jurisprudence.
Indeed, it was stressed in General Garments Corporation vs. Director of Patents (41 SCRA 50 [1971]) by then Justice (later Chief
Justice) Makalintal that:
Parenthetically, it may be stated that the ruling in the Mentholatum case was subsequently derogated when
Congress, purposely to "counteract the effects" of said case, enacted Republic Act No. 638, inserting Section
21-A in the Trademark Law, which allows a foreign corporation or juristic person to bring an action in
Philippine courts for infringement of a mark or tradename, for unfair competition, or false designation of origin
and false description, "whether or not it has been licensed to do business in the Philippines under Act
Numbered Fourteen hundred and fifty-nine, as amended, otherwise known as the Corporation Law, at the
time it brings complaint."
Petitioner argues that Section 21-A militates against respondent's capacity to maintain a suit for cancellation,
since it requires, before a foreign corporation may bring an action, that its trademark or tradename has been
registered under the Trademark Law. The argument misses the essential point in the said provision, which is
that the foreign corporation is allowed thereunder to sue "whether or not it has been licensed to do business
in the Philippines" pursuant to the Corporation Law (precisely to counteract the effects of the decision in the
Mentholatum case). (at p. 57.)
However, on May, 21, 1984, Section 21-A, the provision under consideration, was qualified by this Court in La Chemise Lacoste
S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign corporation not doing business in the Philippines may
have the right to sue before Philippine Courts, but existing adjective axioms require that qualifying circumstances necessary for
the assertion of such right should first be affirmatively pleaded (2 Agbayani Commercial Laws of the Philippines, 1991 Ed., p.
598; 4 Martin, Philippine Commercial Laws, Rev. Ed., 1986, p. 381). Indeed, it is not sufficient for a foreign corporation suing
under Section 21-A to simply allege its alien origin. Rather, it must additionally allege its personality to sue. Relative to this
condition precedent, it may be observed that petitioners were not remiss in averring their personality to lodge a complaint for

Property Cases - 51
infringement (p. 75, Rollo in AC-G.R. SP No. 13132) especially so when they asserted that the main action for infringement is
anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co.,
Inc., 17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p. 103).
Another point which petitioners considered to be of significant interest, and which they desire to impress upon us is the protection
they enjoy under the Paris Convention of 1965 to which the Philippines is a signatory. Yet, insofar as this discourse is concerned,
there is no necessity to treat the matter with an extensive response because adherence of the Philippines to the 1965
international covenant due to pact sunt servanda had been acknowledged in La Chemise (supra at page 390).
Given these confluence of existing laws amidst the cases involving trademarks, there can be no disagreement to the guiding
principle in commercial law that foreign corporations not engaged in business in the Philippines may maintain a cause of action
for infringement primarily because of Section 21-A of the Trademark Law when the legal standing to sue is alleged, which
petitioners have done in the case at hand.
In assailing the justification arrived at by respondent court when it recalled the writ of preliminary injunction, petitioners are of the
impression that actual use of their trademarks in Philippine commercial dealings is not an indispensable element under Article 2
of the Paris Convention in that:
(2) . . . . no condition as to the possession of a domicile or establishment in the country where protection is
claimed may be required of persons entitled to the benefits of the Union for the enjoyment of any industrial
property of any industrial property rights. (p. 28, Petition; p. 29, Rollo in G.R. No. 91332.)
Yet petitioners' perception along this line is nonetheless resolved by Sections 2 and 2-A of the Trademark Law which speak
loudly, about necessity of actual commercial use of the trademark in the local forum:
Sec. 2. What are registrable. Trademarks, tradenames and service marks owned by persons,
corporations, partnerships or associations domiciled in the Philippines and by persons, corporations,
partnerships or associations domiciled in any foreign country may be registered in accordance with the
provisions of this Act;Provided, That said trademarks, tradenames, or service marks are actually in use in
commerce and services not less than two months in the Philippines before the time the applications for
registration are filed; And provided, further, That the country of which the applicant for registration is a citizen
grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified,
with a certified true copy of the foreign law translated into the English language, by the government of the
foreign country to the Government of the Republic of the Philippines. (As amended by R.A. No. 865).
Sec. 2-A. Ownership of trademarks, tradenames and service marks; how acquired. Anyone who lawfully
produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any
lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service
rendered, may appropriate to his exclusive use a trademark, a tradename, or a service mark not so
appropriated by another, to distinguish his merchandise, business or service from the merchandise, business
or service of others. The ownership or possession of a trademark, tradename, service mark, heretofore or
hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner
and to the same extent as are other property rights known to the law. (As amended by R.A. No. 638).
(Kabushi Kaisha Isetan vs. Intermediate Appellate Court, 203 SCRA 583 [1991], at pp. 589-590; emphasis
supplied.)
Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the
Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal

Property Cases - 52
tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law
and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does
not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of
incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national
legislative enactments (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 16).
The aforequoted basic provisions of our Trademark Law, according to Justice Gutierrez, Jr., in Kabushi Kaisha Isetan vs.
Intermediate Appellate Court (203 SCRA 583 [1991]), have been construed in this manner:
A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines is a
pre-requisite to the acquisition of ownership over a trademark or a tradename.
xxx xxx xxx
These provisions have been interpreted in Sterling Products International, Inc. v. Farbenfabriken Bayer
Actiengesellschaft (27 SCRA 1214 [1969]) in this way:
A rule widely accepted and firmly entrenched because it has come down through the
years is that actual use in commerce or business is a prerequisite to the acquisition of
the right of ownership over a trademark.
xxx xxx xxx
. . . Adoption alone of a trademark would not give exclusive right thereto. Such right
grows out of their actual use. Adoption is not use. One may make advertisements, issue
circulars, give out price lists on certain goods; but these alone would not give exclusive
right of use. For trademark is a creation of use. The underlying reason for all these is that
purchasers have come to understand the mark as indicating the origin of the wares.
Flowing from this is the trader's right to protection in the trade he has built up and the
goodwill he has accumulated from use of the trademark. . . .
In fact, a prior registrant cannot claim exclusive use of the trademark unless it uses it in commerce.
We rule[d] in Pagasa Industrial Corporation v. Court of Appeals (118 SCRA 526 [1982]):
3. The Trademark law is very clear. It requires actual commercial use of the mark prior to its registration.
There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its
claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it
with exclusive, continuous adoption of the trademark which should consist among others, of considerable
sales since its first use. The invoices (Exhibits 7, 7-a, and 8-b) submitted by respondent which were dated
way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no
commercial value". The evidence for respondent must be clear, definite and free from inconsistencies. (Sy
Ching v. Gaw Lui, 44 SCRA 148-149) "Samples" are not for sale and therefore, the fact of exporting them to
the Philippines cannot be considered to be equivalent to the "use" contemplated by the law. Respondent did
not expect income from such "samples". There were no receipts to establish sale, and no proof were
presented to show that they were subsequently sold in the Philippines. (Pagasa Industrial Corp. v. Court of
Appeals, 118 SCRA 526 [1982]; Emphasis Supplied)

Property Cases - 53
The records show that the petitioner has never conducted any business in the Philippines. It has never
promoted its tradename or trademark in the Philippines. It is unknown to Filipino except the very few who
may have noticed it while travelling abroad. It has never paid a single centavo of tax to the Philippine
government. Under the law, it has no right to the remedy it seeks. (at pp. 589-591.)
In other words, petitioners may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines
on account of Section 21-A of the Trademark Law but the question whether they have an exclusive right over their symbol as to
justify issuance of the controversial writ will depend on actual use of their trademarks in the Philippines in line with Sections 2
and 2-A of the same law. It is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do
business in Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce in the
Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may not necessarily be
entitled to protection due to absence of actual use of the emblem in the local market.
Going back to the first assigned error, we can not help but notice the manner the ascription was framed which carries with it the
implied but unwarranted assumption of the existence of petitioners' right to relief. It must be emphasized that this aspect of
exclusive dominion to the trademarks, together with the corollary allegation of irreparable injury, has yet to be established by
petitioners by the requisite quantum of evidence in civil cases. It cannot be denied that our reluctance to issue a writ of
preliminary injunction is due to judicial deference to the lower courts, involved as there is mere interlocutory order (Villarosa vs.
Teodoro, Sr., 100 Phil. 25 [1956]). In point of adjective law, the petition has its roots on a remedial measure which is but ancillary
to the main action for infringement still pending factual determination before the court of origin. It is virtually needless to stress
the obvious reality that critical facts in an infringement case are not before us more so when even Justice Feliciano's opinion
observes that "the evidence is scanty" and that petitioners "have yet to submit copies or photographs of their registered marks as
used in cigarettes" while private respondent has not, for its part, "submitted the actual labels or packaging materials used in
selling its "Mark" cigarettes." Petitioners therefore, may not be permitted to presume a given state of facts on their so called right
to the trademarks which could be subjected to irreparable injury and in the process, suggest the fact of infringement. Such a ploy
would practically place the cart ahead of the horse. To our mind, what appears to be the insurmountable barrier to petitioners'
portrayal of whimsical exercise of discretion by the Court of Appeals is the well-taken remark of said court that:
The petitioner[s] will not be prejudiced nor stand to suffer irreparably as a consequence of the lifting of the
preliminary injunction considering that they are not actually engaged in the manufacture of the cigarettes with
the trademark in question and the filing of the counterbond will amply answer for such damages. (p.
54. Rollo in G.R. No. 91332.)
More telling are the allegations of petitioners in their complaint (p. 319, Rollo G.R. No. 91332) as well as in the very petition filed
with this Court (p. 2, Rollo in G.R. No. 91332) indicating that they are not doing business in the Philippines, for these frank
representations are inconsistent and incongruent with any pretense of a right which can breached (Article 1431, New Civil Code;
Section 4, Rule 129; Section 3, Rule 58, Revised Rules of Court). Indeed, to be entitled to an injunctive writ, petitioner must show
that there exists a right to be protected and that the facts against which injunction is directed are violative of said right (Searth
Commodities Corporation vs. Court of Appeals, 207 SCRA 622 [1992]). It may be added in this connection that albeit petitioners
are holders of certificate of registration in the Philippines of their symbols as admitted by private respondent, the fact of exclusive
ownership cannot be made to rest solely on these documents since dominion over trademarks is not acquired by the mere fact of
registration alone and does not perfect a trademark right (Unno Commercial Enterprises, Inc. vs. General Milling Corporation,
120 SCRA 804 [1983]).
Even if we disregard the candid statements of petitioners anent the absence of business activity here and rely on the remaining
statements of the complaint below, still, when these averments are juxtaposed with the denials and propositions of the answer
submitted by private respondent, the supposed right of petitioners to the symbol have thereby been controverted. This is not to
say, however, that the manner the complaint was traversed by the answer is sufficient to tilt the scales of justice in favor of

Property Cases - 54
private respondent. Far from it. What we are simply conveying is another basic tenet in remedial law that before injunctive relief
may properly issue, complainant's right or title must be undisputed and demonstrated on the strength of one's own title to such a
degree as to unquestionably exclude dark clouds of doubt, rather than on the weakness of the adversary's evidence, inasmuch
as the possibility of irreparable damage, without prior proof of transgression of an actual existing right, is no ground for injunction
being meredamnum absque injuria (Talisay-Silay Milling Co., Inc. vs. CFI of Negros Occidental, 42 SCRA 577 [1971]; Francisco,
Rules of Court, Second ed., 1985, p. 225; 3 Martin, Rules of Court, 1986 ed., p. 82).
On the economic repercussion of this case, we are extremely bothered by the thought of having to participate in throwing into the
streets Filipino workers engaged in the manufacture and sale of private respondent's "MARK" cigarettes who might be
retrenched and forced to join the ranks of the many unemployed and unproductive as a result of the issuance of a simple writ of
preliminary injunction and this, during the pendency of the case before the trial court, not to mention the diminution of tax
revenues represented to be close to a quarter million pesos annually. On the other hand, if the status quo is maintained, there
will be no damage that would be suffered by petitioners inasmuch as they are not doing business in the Philippines.
With reference to the second and third issues raised by petitioners on the lifting of the writ of preliminary injunction, it cannot be
gainsaid that respondent court acted well within its prerogatives under Section 6, Rule 58 of the Revised Rules of Court:
Sec. 6. Grounds for objection to, or for motion of dissolution of injunction. The injunction may be refused
or, if granted ex parte, may be dissolved, upon the insufficiency of the complaint as shown by the complaint
itself, with or without notice to the adverse party. It may also be refused or dissolved on other grounds upon
affidavits on the part of the defendants which may be opposed by the plaintiff also by affidavits. It may further
be refused or, if granted, may be dissolved, if it appears after hearing that although the plaintiff is entitled to
the injunction, the issuance or continuance thereof, as the case may be, would cause great damage to the
defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant
files a bond in an amount fixed by the judge conditioned that he will pay all damages which the plaintiff may
suffer by the refusal or the dissolution of the injunction. If it appears that the extent of the preliminary
injunction granted is too great, it must be modified.
Under the foregoing rule, injunction may be refused, or, if granted, may be dissolved, on the following instances:
(1) If there is insufficiency of the complaint as shown by the allegations therein. Refusal or dissolution may be
granted in this case with or without notice to the adverse party.
(2) If it appears after hearing that although the plaintiff is entitled to the injunction, the issuance or
continuance thereof would cause great damage to the defendant, while the plaintiff can be fully compensated
for such damages as he may suffer. The defendant, in this case, must file a bond in an amount fixed by the
judge conditioned that he will pay all damages which plaintiff may suffer by the refusal or the dissolution of
the injunction.
(3) On the other grounds upon affidavits on the part of the defendant which may be opposed by the plaintiff
also affidavits.
Modification of the injunction may also be ordered by the court if it appears that the extent of the preliminary
injunction granted is too great. (3 Martin, Rules of Court, 1986 ed., p. 99; Francisco, supra, at p. 268.)
In view of the explicit representation of petitioners in the complaint that they are not engaged in business in the Philippines, it
inevitably follows that no conceivable damage can be suffered by them not to mention the foremost consideration heretofore
discussed on the absence of their "right" to be protected. At any rate, and assuming in gratia argumenti that respondent court

Property Cases - 55
erroneously lifted the writ it previously issued, the same may be cured by appeal and not in the form of a petition
for certiorari (Clark vs. Philippine Ready Mix Concrete Co., 88 Phil. 460 [1951]). Verily, and mindful of the rule that a writ of
preliminary injunction is an interlocutory order which is always under the control of the court before final judgment, petitioners'
criticism must fall flat on the ground, so to speak, more so when extinction of the previously issued writ can even be made
without previous notice to the adverse party and without a hearing (Caluya vs. Ramos, 79 Phil. 640 [1974]; 3 Moran, Rules of
Court, 1970 ed., p. 81).
WHEREFORE, the petition is hereby DISMISSED and the Resolutions of the Court of Appeals dated September 14, 1989 and
November 29, 1989 are hereby AFFIRMED.
SO ORDERED.